Welcome to another week of forex trading, fellas!
This time we’ve got a couple of central bank statements and a major jobs report on deck.
But before that, ICYMI, I’ve written a quick recap of the market themes that pushed currency pairs around last week. Check it!
And now for the potential market movers this week:
Major Economic Events:
RBA interest rate statement (June 7, 4:30 am GMT) – It will be the Australian central bank’s turn to announce their monetary policy decision this week, and many are counting on a rate hike as well.An increase of 0.40% in borrowing costs is eyed, marking back-to-back interest rate increases after their previous 0.25% hike.
Recent economic data from the Land Down Under point to strong momentum in the economy and more upside pressure on inflation led by rising labor costs.
However, a smaller than expected hike would reflect caution among policymakers, as some are worried about the impact on consumer debt and the possibility of a recession in China.
ECB monetary policy decision (June 9, 11:45 am GMT) – ECB head Lagarde and her fellow policymakers will also be announcing their rate decision this week, but no major changes are eyed.
Officials would likely sit on their hands, keeping rates unchanged at 0.00% for the time being. Still, market watchers are expecting on a few more hawkish hints from policymakers, especially since a handful signaled that they’re moving closer to tightening by July.
While Lagarde could decide to temper market expectations ahead of their future decisions, any strong hints that they could proceed with a liftoff next month might mean plenty of upside for the euro.
Canadian jobs report (June 10, 12:30 pm GMT) – A pickup in Canadian employment is eyed for the month of June, with analysts pricing in a 25.5K increase in hiring versus the earlier 15.3K gain.
This should be enough to keep the jobless rate steady at 5.2%. A larger than expected rise in employment backed by strong wage growth would likely underscore the BOC’s plan to “act more forcefully” to fight inflation.
U.S. CPI (June 10, 12:30 pm GMT) – Uncle Sam will be printing the latest batch of CPI figures before the week comes to a close, possibly setting the tone for the next Fed decisions.
Headline CPI is expected to advance from 0.3% to 0.7% in May while the core version of the report could dip from 0.6% to 0.5%. Weaker than expected results would suggest that inflation has peaked, likely weighing on expectations of consecutive 0.50% hikes from the U.S. central bank.
Forex Setup of the Week: EUR/CAD
This pair is still stuck inside its range on the 4-hour time frame, but it could be bracing for a big bounce when the ECB decision comes up.EUR/CAD is closing in on the bottom of the range at the 1.3400 major psychological mark, which might keep losses in check once more. If that’s the case, price could make its way back up to the top around 1.3750 or at least until the area of interest at the middle.
Stochastic is already on the move up to suggest that buyers are regaining the upper hand and are likely to defend the floor. However, the moving averages just showed a bearish crossover that might draw more sellers in.
A break below the range support could set off a drop that’s the same height as the chart pattern, which spans roughly 350 pips. Better stay on the lookout for any dovish ECB remarks that could spur a breakdown!