EUR/USD
[ul]
[li]We expect EUR/USD to rise gradually next week. In our opinion the reaction to last-week FOMC statement was too strong, as in our opinion the Fed’s rhetoric was rather neutral than hawkish.
[/li][li]Some macroeconomic figures from the Euro zone are scheduled for this week – final PMIs, factory orders and industrial production in Germany. Better-than-expected readings will be supportive for the common currency. Moreover, our forecasts for U.S. ISM manufacturing and non-manufacturing are slightly below the market consensus. The main event of the week is the release of Non-farm payrolls on Friday and our forecast is also slightly below the market consensus. That is why we keep our long position on the EUR/USD.
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GBP
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[li]The Bank of England makes its decision on interest rates on Thursday but the meeting should be rather a non-event. The MPC is widely expected to leave the bank rate at 0.5%. The inflation report (February 12) will be much more interesting for investors.
[/li][li]We expect Britain’s January PMIs to show a rise in economic activity which should be GBP supportive. Our short- and medium-term outlook for the GBP/USD is slightly bullish.
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AUD
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[li]This will be very important week for the AUD traders. A higher-than-expected reading on core inflation released last week prompted the market to pare back chances of an interest rate cut. However, the expectations for monetary easing strengthened again after the RBNZ’s turn towards a more dovish stance.
[/li][li]A cut by 25 bps on Tuesday cannot be excluded but it is not our baseline scenario. We expect the RBA to reiterate that “the Australian dollar remains above most estimates of its fundamental value.” We stay sideways on the AUD/USD and will be hunting for attractive levels to get long.
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CAD
[ul]
[li]There has been only one direction for the USD/CAD since the Bank of Canada surprised markets by cutting rate on January 21. Statistics Canada showed that the economy unexpectedly shrank by 0.2% in November and the USD/CAD jumped again.
[/li][li]We will watch the employment report this week. Weaker data may push the USD/CAD even near 1.3000.
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Source: Forex Trading Strategies