Start your trading week right by prepping for these top-tier catalysts and checking out my potential trade setup.
Don’t forget to review which factors drove forex market price action last week, too!
Major Economic Events:
U.S. retail sales report (Mar. 16, 12:30 pm GMT) – Both headline and core figures are expected to show a slowdown in consumer spending for February. The former is likely to print a 0.5% decline while the latter might post a meager 0.2% uptick.Keep in mind, though, that this comes after stellar gains in spending for January this year, with the headline figure surging by 5.3% and the core reading up by 5.9%.
FOMC statement (Mar. 17, 6:00 pm GMT) – No actual changes to interest rates or bond purchases are expected, but this particular announcement comes with updated staff projections on growth and inflation.
Dollar traders are also keen to find out if Powell has shifted his stance on rising bond yields, as the Fed head would likely be asked about how this affect their inflation and policy outlook during the presser.
Some analysts predict that Fed officials could consider other policy tweaks like increasing the rate paid on reserves, adjusting the rate on overnight repo operations, or reviving the infamous Operation Twist at some point.
New Zealand GDP (Mar. 17, 9:45 pm GMT) – After posting a jaw-dropping 14% economic expansion in Q3 2020, New Zealand might report a smaller 0.1% growth figure for Q4.Leading indicators paint a mixed picture, reflecting a rebound in some industries like trucking and construction while indicating a struggle in other sectors such as tourism.
BOE monetary policy statement (Mar. 18, 12:00 pm GMT) – The central bank is widely expected to sit on its hands and keep monetary policy unchanged for the time being.Recall that BOE Guv’nah Bailey mentioned during the earlier rate decision that they’re likely to keep interest rates and bond purchases at current levels until the 2% inflation target is achieved.
He did warn that they’re open to the idea of negative rates, so pound traders would likely keep their ears peeled for any more clues on that. The MPC minutes are also lined up, although this might not have much of an impact unless policymakers lean dovish this time.
BOJ monetary policy decision (Mar. 19) – No actual changes to interest rates or bond purchases are expected from the Japanese central bank as well.
What might be of particular interest to yen traders is the BOJ’s review of the central bank strategy, which might include some changes to their policy framework. Then again, Governor Kuroda has been emphasizing that they’re likely to stick to QQE with yield curve control, so there might not be any surprises here.
Forex Setup of the Week: GBP/CAD
I’m steering away from dollar pairs this week, as the FOMC might cause too much of a ruckus in the markets.Instead, I’ve got my sights set on this neat long-term range bounce on GBP/CAD, as the pair already found sellers at the resistance.
Sustained bearish pressure could take the pair all the way down to the range support that’s still around 600 pips away from current levels. However, technical indicators like the moving averages and Stochastic suggest that buyers could return soon.
I’m eyeing a possible bounce at the middle of the range in case the BOE sounds more optimistic in their policy decision, especially if Bailey highlights the vaccination progress in the U.K. and hints that negative rates are not necessary.
Meanwhile, the Loonie might take cues from overall market sentiment stemming from the FOMC decision or a possible pullback in crude oil prices after last week’s rallies.
If the moving averages hold as dynamic support around the 1.7250 minor psychological mark, this pair could recover back to the range resistance.