Weekly Outlook: Sep 05 - 09; Three Policy Meetings Ahead

We are leaving behind an NFP week, however, the week ahead is also busy and is expected to be volatile. The G20 meeting will take place at the beginning of the week, a Eurogroup meeting is scheduled for Friday, Eco Fin meeting on Saturday while three major banks will have their policy meetings. The European Central Bank, Bank of Australia and Bank of Canada will review their monetary policies.

[B]Monday[/B] is a Markit day! The final Markit services and composite PMIs will be released in Germany, Eurozone area and the United Kingdom for August. The forecasts for the services PMIs of first two countries suggest the indexes remain the same as the previous ones, at 53.3 and 53.1 respectively, whilst in the U.K. is expected to rise up to 50.0 from 47.4 before. Eurozone’s retail sales for July are expected to increase 0.4% mom from 0.0% in June. In the UK, the BRC retail sales monitor for June is expected to be released. Later on, the Bank of Japan Governor Haruhiko Kuroda will give a speech and will be closely eyed by investors, as usually, Kuroda’s speeches have a direct impact on the JPY cross pairs. Overnight, the Reserve Bank of Australia will have its policy meeting and will publish its interest rate. The market forecast suggests the central bank to keep the same monetary policy following two rate cuts in 2016 that dropped the cash rate at the record low of 1.5%. Not much volatility will be caused by U.S. and Canadian dollar, as both countries are on bank holidays today.

On [B]Tuesday[/B], the first important event is in the UK, the Inflation Report Hearings at 09:00 GMT that might bring additional volatility on the markets. On the same time, Eurozone’s final Q2 GDP is coming out and the forecast is 1.6% yoy, the same with the previous quarter. U.S. ISM manufacturing index is forecasted to incline to 55.7 in August from 55.5 before. The Markit services PMI is scheduled to be released with the previous to be 50.9m while the investors will also keep a tab on the ISM non-manufacturing index. The IBD/TIPP economic optimism for September will be eyed by market participants, as a high number prompt traders to bullish dollar positions.
During the night, the focus will be on Australia Q2 GDP. The Australian economy is expected to expand 0.4% qoq from a robust expansion of 1.1% before.

On [B]Wednesday[/B], early in the morning, the industrial production in Germany will be released. In the UK, industrial production for July is estimated to have slowed 0.2% mom, from an increase of 0.1% mom in the previous month, while the nation’s manufacturing production for the same month, is forecast to fall to 0.5% mom versus a slip of 0.3% mom in June. A while later, the U.S. JOLTS job openings for July will be released as well as the U.K. NIESR GDP estimate for the three months to August.
Later on, in Canada, we have the Bank of Canada interest rate decision. The market expects the central bank to keep the benchmark interest rate unchanged at 0.5%. In the evening, the U.S. Federal Reserve will publish its latest Beige Book. Moreover, the Q2 GDP of Japan will be released and is expected to remain flat as the quarter before. Overnight, Australia will announce data on July’s trade balance which is expected to reveal a narrower deficit of AU$-2.800B from AU$-3.195B before.

On [B]Thursday[/B], all eyes will be on the European Central Bank policy meeting. ECB will announce whether they will keep the negative rate policy as it is, or ease it further to support the economy. The majority of analysts expect Mario Draghi to keep the main interest rates unchanged for now, the interest rate at 0.0% and the deposit rate at -0.4%, in order to collect more data before considering to take further actions. Traders will hang on every word of ECB President Mario Draghi speech at 12:30 GMT and the press conference to gauge the next moves of the ECB and the timing for them. Later in the day, after a few indicators from Canada regarding the capacity utilization and the housing prices, the Governor Council Member of the Bank of Canada Lane has a speech.

On [B]Friday[/B], a Eurogroup meeting is scheduled. The European trading day starts with current account data from Germany. The country’s trade balance is expected to have risen to €21.9B in July from €21.7B in June while its exports are forecasted to rise 0.35% versus an increase of 0.30% before, and the imports to rise 0.60% at a slower pace than June’s increase of 1.0%. No forecast is available for the current account. In the U.K., Consumer inflation expectations will be closely eyed. Additionally, the domestic trade balance will be announced and is forecasted to be a surplus of £-11.75B in July from £-12.41B in June. In Canada, the unemployment report for August will be released, as well as the housing starts also for August. Going to U.S., the wholesale inventories are coming out.

On [B]Saturday[/B], the finance ministers of the 27 European Union member states will have a scheduled EcoFin meeting.

[B]EUR/USD - Technical Outlook[/B]
The strength seen in the euro following the worse-than-expected U.S. employment report, which the U.S. economy added only 151,000 new jobs in August, against the 180,000 expected, held it above the key support level of 1.1050 and has suggested some signs of recovery.

The shared currency finished the week 0.4% lower against the greenback on Friday, its largest weekly losses against the U.S. dollar in four weeks. In addition, last week the pair fell for 2 weeks in a row following a negative start of the month. The direction remains unclear over the short, term and the long terms as the bulls are struggling to gain momentum above the critical level of 1.1400 while the bears are facing some hurdles below the 1.0800 – 1.0900 zone. Relying on medium-term oscillators does not seem a solid strategy since they lie near their neutral levels. Moreover, the 50-SMA moved higher, above the 200-SMA, but still not strong to provide any signal.

[B]USD/CAD - Technical Outlook[/B]
This week is an important week for Canada as the Canadian fundamentals will play a bigger role in the price action. The USD/CAD pair plummeted down to 1.2950, a fresh one-week low. In the previous week, the commodity pair had a pullback from the 1.3150 resistance level and plunged more than 1% the last four days.

During last week’s session, the pair failed to surpass above the 1.3150 barrier since the 200-daily SMA is a strong resistance obstacle. Technically, the pair is currently moving slightly above the 1.2950 strong support level which overlaps with the 100-SMA on the 4-hour chart. Therefore, a break to the downside would open the doors towards the 1.2830 support barrier or moreover, to the 1.2760 technical obstacle. Furthermore, on the 4-hour chart, the 50-SMA and 200-SMA rap out to turn bearish and now the price is moving below the three SMAs from the daily chart. Technical indicators seem to be in agreement that there remains some downside potential move. RSI is following a downward path, approaching the oversold area, while MACD is moving in a negative territory, both of which are also bearish.