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
The Greenback made quite a comeback in the previous week as it was off to a strong start on Monday and was able to sustain its lead until the end. Hawkish FOMC minutes and a bit of risk aversion in the U.S. markets were being pinned as the main factors for dollar strength then.
The spotlight turns to new FOMC Chairman Powell this week as he has a speech lined up early on. Traders are eager to find out if he is likely to pick up from where former head Yellen left off or slow the tightening pace down. Read more.
Falling oil prices dragged the correlated Loonie lower for the first half of the week, and it didn’t help that Canada’s retail sales disappointed. However, bulls jumped back in before the end of the week upon seeing upbeat CPI.
There are no major reports due from Canada this week, though, so the attention could be fixed on crude oil and overall market sentiment. Read more.
EUR & CHF
Relatively hawkish ECB minutes failed to sustain the euro’s climb last week as traders paid extra close attention to concerns about the shared currency’s strength and its impact on inflation.
We’ll get more insight on this as ECB head honcho Draghi steps up to the podium for a speech early this week, just before the top economies of the region start printing their flash CPI readings for February. Read more.
The upbeat BOE Inflation Report hearings also failed to prop up the pound as traders appear to be seeing a mismatch between the central bank’s jolly assessment and actual economic data.
Only the manufacturing and construction PMIs are lined up this week, so other headlines might carry more weight. In particular, the attention could return to Brexit updates as PM May has a speech on the U.K.’s post-Brexit relationship with the EU on Friday. Read more.
Market sentiment still allowed the lower-yielding yen to catch some gains in the previous week even while dollar strength persisted. There were no major catalysts from Japan then, so the currency took its cue mostly from bond yields.
Japan’s inflation and household spending reports are on this week’s docket, so the focus could switch back to BOJ policy. Note, however, that yen pairs gapped up over the weekend to show that yen bears are eager to get started. Read more.
Risk appetite took a break in the previous week, so it’s no surprise that the higher-yielding Aussie was in the losers’ table then.
Chinese markets have reopened this week, fresh from a week-long vacation on the Lunar New Year holidays. Manufacturing and non-manufacturing PMI readings for February are up for release and might set the tone for overall market sentiment. Read more.
A drop in dairy prices and weakening risk appetite were to blame for the Kiwi’s dismal performance last week, even as quarterly retail sales data surprised to the upside.
Only the trade balance and ANZ business confidence index are due from New Zealand this week, although the Kiwi could also take some cues from the Chinese PMI releases. Read more.
Charts to Watch:
First off is this simple double top pattern visible on the 1-hour time frame of EUR/USD. The pair succumbed to dollar strength lately and barely reacted to hawkish ECB minutes as weak inflationary pressures could still be reflected in the flash CPI readings this week.
This pair is testing a long-term floor at the bottom of its ascending channel on the daily time frame. At the same time, stochastic is pulling up from oversold levels to signal a return in bullish momentum. Can Canada’s upbeat CPI release from the previous week be enough to spur a bounce?