Start your trading prep with a quick review of last week’s forex action from my buddy Pip Diddy, an overview of catalysts lined up for the major currencies, and the charts to watch this week.
Major Currencies Overview
‘Twas yet another rocky week for the Greenback as the spotlight shifted to the U.S. government shutdown while members of Congress scrambled to get the funding bill passed.
The dollar might be poised to extend its losses if the shutdown carries on throughout this week, although the upcoming advanced GDP reading could still save the day and put the focus back on healthy U.S. data. Read more.
The Loonie also chalked up another week in the red, despite an interest rate hike and a few hawkish remarks from the BOC, as crude oil stalling from its climb and persistent NAFTA concerns were to blame.
There are two top-tier catalysts lined up from the Canadian economy this week, namely the retail sales and CPI readings. Recall that Governor Poloz hinted that they might be hiking too slowly due to a buildup in price pressures, and we’ll see if the numbers support this view. Read more.
EUR & CHF
Consolidation was the name of the game for most euro pairs in the previous week as the shared currency’s climb paused on the lack of progress in German coalition talks.
However, more recent updates signal progress as the SPD agreed to start talks with Merkel’s party, leading the euro to gap higher over the weekend. The ECB could still steal the show, though, and Draghi might have some surprises up his sleeve. Read more.
Sterling shrugged off weaker than expected U.K. data points thanks to fading domestic political worries in the U.K. and easing Brexit-related jitters.
This week, the jobs figures are due and traders are likely to pay close attention to wage growth to gauge future consumer spending and inflation outcomes. The preliminary Q4 2017 GDP is also lined up. Read more.
Risk appetite and bond yields were the primary factors driving yen price action in the previous week, but the Japanese currency faltered and trailed the U.S. dollar in the latter half.
The attention could shift to the BOJ decision early in the week as any change in tone could have a huge impact on yen pairs. Recall that the central bank made adjustments to their JGB purchases previously, so traders are on the lookout for hawkish clues. Read more.
The Aussie regained its spot as one of the top performers in the previous week, buoyed mostly by positive data from its trade BFF China.
There’s not much on the Aussie’s docket this week, though, which suggests that market sentiment could take over. Keep in mind that the U.S. government shutdown is keeping market participants on edge, which could be bullish for gold and the positively-correlated AUD. Read more.
The Kiwi tossed and turned along with shifting risk sentiment for the most part of the previous week, with the pickup in GDT dairy prices barely doing enough to provide a strong direction.
Kiw traders might take their cues from the quarterly CPI up for release this week as significantly strong results could shore up RBNZ hike expectations. Apart from that, market sentiment could also push this higher-yielding currency around. Read more.
Charts to Watch:
It could be a battle between the dollar and yen this week as both are facing major catalysts. USD/JPY is currently stuck in the middle of its long-term range but seems to be pulled down to the bottom, especially with the U.S. government shutdown in place and the BOJ seen to make a hawkish shift.
EUR/USD continues to trend higher and is being propped up by signs of progress in Germany’s coalition talks. Price is testing the top of its ascending channel on the 4-hour chart, though, so a correction could be due before more bulls join in. The ECB decision could spur a lot of volatility, so make sure you manage your risk well when trading this one!