The negative rally did not end last week as most of the news that came from the US was not positive. Even the fractions that were a bit stronger than expected, did not give the USD the necessary push. The week ended on a mixed notion as the US GDP came in lower than expected (1.3%), in contrast to the GDP deflator which came in at a stronger than expected 4.0%. This caused the USD to swing around the record levels it has been floating in most of the week. The following week will be extremely important for the greenback as it will hold many news events that would be very influential on the currency’s future, and will culminate with the US Jobs Report on Friday.
The flow of US news starts today at 13:30 GMT with the Core PCE - Price Index at 13:30 GMT. The Core PCE is expected to come in at 0.1% after previously coming at 0.3%. Following will be the release of the US Personal Spending and income; both are expected to come in at 0.5% which is a bit lower then last month’s 0.6%. Closing today’s major events will be the Chicago PMI which is widely expected to weaken significantly to 54.5 from 61.7.
The rest of the week will be full with many more important events such as the ISM Manufacturing index tomorrow, the ADP Nonfarm Change on Wednesday, and the Nonfarm Payrolls release on Friday. It remains to be seen whether this week will indeed initiate the change so many people are hoping for.
After the European economy demonstrated a very impressive display of power with most of the key news events last week, it looks as if EUR appreciation could not be stopped so easily, and some are thinking that it might even reach the 1.39 before further pressures will be enforced. There are several news releases expected to come from Europe today, starting with the German Retail sales at 7:00 GMT which is expected to weaken a bit to 0.8%. Following this will be the Euro-Zone M3 Money Supply which is expected to come in at 9.8% after coming in at 10% last month. The Euro-Zone CPI will be released at 10:00 GMT with a consensus of 1.8% together with Euro-Zone Consumer Confidence that is expected to remain unchanged at -4. The UK Consumer Confidence (10:30 GMT) is expected to come in unchanged at -8 and to end the flow of European news. Tomorrow the European market will be closed for Labor Day, which will probably cause the EUR appreciation to enter a slightly more moderate pace.
After a Friday session which was full of news releases, the Japanese Market is entering the Golden Week, which means that the Japanese Markets will be closed all throughout the week, and that no news events are expected except for the Cash Earnings on Tuesday which is expected to come a bit higher then last month but still in negative territory of -0.4%. Any price shifts or high volatility sessions will most likely come from the US side as it is packed with important news, and will be building up steam for Friday’s Job Report. It is widely expected that the JPY will continue to float in a tight range, and no violent changes are expected.
After breaking the all time high of 1.3680 on Friday, the pair now consolidates around 1.3630. Although the hourlies are pointing to overbought levels, and the daily studies are neutral, it looks as if the momentum is bullish. Target price will be around 1.3720.
The pair is floating around 1.9940 which is the 62.8 Fibonacci level of the 1.9600/2.0100 move. This indicates that the correction down is very close to its end, and that the pair will be resuming its bullish trend.
The pair is trading at 119.50 which is roughly half way through the channel that is forming on the daily chart. It looks as if the hourlies are a bit overbought which makes buying on dips a preferable strategy.
The 1.2000 support seems to be withstanding any attempt of a break. Both daily and hourly studies are showing mixed signals in neutral territory, leaving the general bias slightly bullish, with a target price of 1.2120…
[B]The Wild Card
After constantly swimming in record levels the pair is showing first signs of weakness. There is a very bearish pattern forming on the daily chart, supported by a bearish cross on the slow stochastic, and giving Forex traders the opportunity to get in the correction trend on a very entry price.