After a pretty crowded economic calendar with significant volatility in the market, last week, we head towards an equally busy week. The U.S., UK, and Germany will release their GDP growths while Japan will publish its national consumer price index. Fed’s Chair Yellen has a speech scheduled for Friday that will be closely eyed in investor, especially after the recent hawkish signals for June’s rate hike.
[B]Today [/B]is a Markit day. During the European morning, the preliminary Markit manufacturing and services PMIs for Germany, Eurozone as a whole and France will be released and both indexes will be combined for the Markit Composite PMIs for each country. All of them are expected to show an improvement in the sectors in May. Later in the day, three Fed members, Bullard, Williams, and Harker will give public speeches separately. The U.S. Manufacturing PMI will be released as well and a while later Eurozone’s preliminary consumer confidence will attract some attention among the market participants. In Australia, the CB leading indicator for March is coming out but the most important event from Australia is RBA’s Governor Glenn Stevens speech. His comments are expected to determine the short-term direction of the domestic currency.
On [B]Tuesday [/B]morning, German GDP is predicted to reveal a weak but stable economic growth in the first quarter at 0.7% qoq and 1.3% yoy. ECB’s board member Peter Praet will have a press conference and half an hour later the traders will eye the ZEW Survey for May. In Euro area, the economic sentiment is predicted to have risen to 23.4 from 21.5 before and in Germany to 12.0 from 11.2 the previous month. The German ZEW current conditions are also forecasted to have improved to 48.7 from 47.7 before.
Later in the day, a Eurogroup meeting will take place. Going to U.S., the new home sales change in April and the Richmond Fed manufacturing index are coming out. The two indicators are not expected to trigger much volatility in the market, except if we see a big difference from the market expectations. In New Zealand, the trade balance, the exports and imports for April will be released.
On [B]Wednesday[/B], the German IFO Survey for Business Climate, Expectations, and Current Assessment for May will be released. At 10:3 GMT time, the ECB Vice President Vitor Constancio will speak and a while later, an EcoFin meeting will take place. In U.S., the goods trade balance for April and the preliminary Markit services PMIs will be closely watched. The Bank of Canada will have its interest rate decision; no changes are expected to the current 0.5% benchmark interest rate, however, the BoC rate statement will attract traders’ interest.
On [B]Thursday[/B], the preliminary UK economic growth for the first quarter will be released and is forecasted to keep the same pace of growth as before at 0.4% qoq and 2.1% yoy.
Going to U.S., Fed’s Bullard will have a speech and the weekly jobless claims will be released. The durable goods orders for April are expected to have grown by 0.4% versus 0.8% the month before while the durable goods ex-transportation are expected to have grown by 0.3% from a drop of 0.2% in March. In UK, the Gfk consumer confidence for May will be released. The pending home sales are predicted to have increased by 0.5% in April compared to March that rose by 1.4%. Later in the Asian session, the Japanese national consumer price index is coming out.
Finally, on [B]Friday[/B], the U.S. GDP and the Fed Yellen’s speech will be the epicenter of the day. The analysts’ forecasted that the U.S. economy had advanced by 0.9% the first quarter from 0.5% the month before.
The flash personal consumption expenditures prices for the first quarter are coming out. The University of Michigan consumer sentiment index is coming out. At 14:30 Fed’s Chair Janet Yellen speech will be scrutinized by investors, especially after the hawkish comments for a rate hike in June.
[B]EUR/USD – Technical Outlook[/B]
The hawkish tone of the FOMC minutes kept the U.S. dollar running the previous week with the EUR/USD pair closing positive for a third consecutive week. However, the dollar retreated at the end of the week giving away some of the gains posted over the previous one, with the single currency finding some buyers around the 1.1180 region.
The pair has been trading within a well strong upward channel during the past 6 months, however, looking at the daily chart, the pair is under correction within that channel, if we consider the failed attempt above the 1.1615 level. Therefore, the overall dominant bearish correction leg that has led the pair since early May remains in place, but it seems to be slowly losing pace. The MACD lies above its trigger line confirming the recent pullback while RSI indicates oversold conditions, thus, a pullback upon the indicator’s exit, above 50, of the extreme areas should not be ruled out. With the above in mind, on the upside, resistance will be seen at the 1.1280 – 1.1300 zone and at 1.1360. Beyond here looks unlikely this week, but further gains would see a return to the 1.1400 area. On the downside, minor support will be seen at 1.1180 and then at the ascending trend line at 1.1150.
[B]USD/CAD – Technical Outlook[/B]
The CAD continues to depreciate against the USD after the U.S. Federal Reserve published the minutes from its April Federal Open Market Committee meeting on Wednesday. The pair surged more than 4% since the start of this month and is on track to snap its first positive month following a three-month streak of losses.
Technically, the greenback maintains its bullish tone and I would expect a further buying pressure in the coming days. The BoC will announce its interest rate statement on Wednesday and there are no changes expected, however, I would expect this event to create some swings to the USD/CAD pair. Further upside potential seems to be the path of least support for the pair and as we said last week there is now very little support until 1.3300. Through the way there, the bulls will need to take out the 1.3220, which I think is a minor resistance and then will see the 1.3280 level, which coincides with the 38.2% Fibonacci retracement level. On the downside, support will be seen first at the significant support level at 1.3000, a break of which would allow a run back to 1.2970. Below this, it seems unlikely this week as I consider the 1.2970 – 1.3000 a strong support area since it coincides the 23.6% Fibonacci level and the 50-SMA.