While Russia’s war with Ukraine will continue to dominate the newswires, ECB’s decision and Uncle Sam’s inflation will likely affect the majors’ intraweek trends.
What are traders expecting this week?
Here’s what you need to know about this week’s major data releases:
Major Economic Events:
ECB monetary policy decision (Mar. 10, 12:45 GMT) – Despite ECB President Lagarde’s openness to raising interest rates this year, the central bank will want to balance the competing risks of record inflation and stagnating economic activity.
Markets don’t expect the European Central Bank (ECB) to make any policy changes this month, so focus will likely turn to the central bank’s revised economic growth and inflation estimates amidst Russia’s invasion of Ukraine.
U.S. CPI reports (Mar. 10, 1:30 pm GMT) – U.S. inflation jumped to a 40-year high of 7.5% in January as higher energy prices got mixed with labor shortages, supply disruptions, and stronger consumer demand.
Price pressures are expected to have accelerated (+7.9%) in February thanks to even higher commodity prices and supply disruptions still pushing prices higher.The CPI report is one of the last data releases before the Fed’s March meeting where markets expect at least a 25-bp rate hike. A stronger-than-expected inflation report would support expectations that March’s rate hike would only be the first in the Fed’s “series” of rate hikes in 2022.
Canada’s employment data (Mar. 11, 1:30 pm GMT) – A surge in Omicron cases caused a drop in labor participation rate, employment falling by 200K, and the unemployment rate jumping from 6.0% to 6.5% in January.
Traders expect labor market markets to improve as restrictions were lifted in February. The jobless rate could dip to 6.3% while a net of 120K workers are expected to have found jobs. Strong labor market data would support the Bank of Canada (BOC)’s rate hike last week and maybe lead to a few more in the foreseeable future.
Forex Setup of the Week: EUR/USD
EUR/USD Weekly Forex Chart
Russia going to war with Ukraine broke EUR/USD’s consolidation around the 1.1500 area and dragged the euro down to the 1.1000 levels.
I got my eyes on the 1.0600 zone that has held as support at least FOUR times since 2015!
This week, the ECB is expected to tone down its rate hike talks as Lagarde and her team weigh the impact of Russia’s invasion and sanctions. Meanwhile, analysts expect that a strong inflation reading in the U.S. would prompt the Fed to hint at more rate hikes this year.And then there are escalating tensions between Russia and Ukraine (and its allies). The longer the war goes on, the more traders will worry about its impact on the global economy. This would likely weigh on the euro and increase the demand for the safe-haven dollar.
The headlines could drag EUR/USD back to its multi-year support near 1.0600. Stochastic is on the middle ground right now, but we could see oversold levels if EUR/USD continues to print bearish weekly candlesticks.
Shorter-term traders can take advantage of EUR/USD’s current momentum and jump on the euro’s downtrend until we see more consistent buying pressure. Meanwhile, those who are looking to buy EUR/USD can look at the 1.0600 for longer-term entry opportunities.
