We’ve got a bunch of mid-tier catalysts lined up this week, but the main events are likely to be the U.S. core PCE price index release and the Jackson Hole Symposium.
Don’t forget to review which factors drove forex market price action last week, too.
Major Economic Events:
Markit flash PMI readings (Aug. 23, starting 7:15 am GMT) – It’s the third week of the month, so it’s time for a fresh batch of leading indicators from France, Germany, the U.K. and the U.S.!
The French flash manufacturing PMI likely dropped from 58.0 to 57.1 while the services PMI probably fell from 56.8 to 56.2 in August, reflecting a slower pace of expansion in both industries.
The German flash manufacturing PMI is slated to have dipped from 65.9 to 65.1 while the services PMI likely fell from 61.8 to 61.0, also indicating a slowdown in growth.
These could bring the region’s flash manufacturing PMI down from 62.8 to 62.0 and the services PMI down from 59.8 to 59.6 in August.In the United Kingdom, the flash manufacturing PMI is projected to have tumbled from 60.4 to 59.5 while the flash services PMI is estimated to have dropped from 59.6 to 59.0 in the same month.
Over in the U.S., the flash manufacturing PMI probably fell from 63.4 to 62.4 while the services PMI likely slipped from 59.9 to 59.1 this month.
Jackson Hole Symposium (starting Aug. 26) – All eyes and ears might be on the upcoming pow-wow among the top central bankers, finance ministers, and economic experts later this week.
Among the key topics to be discussed include the Fed’s taper timeline, as global monetary policy authorities might take cues from Uncle Sam’s central bank.Keep in mind that Fed head Powell dropped some clues about their new policy framework in last year’s Jackson Hole Symposium, so traders will be keeping their ears peeled for fresh hints this time.
Apart from that, other stimulus efforts to keep their respective economies afloat would likely be part of the discussions, along with inflation trends.
U.S. core PCE price index (Aug. 27, 12:30 pm GMT) – Another major report worth keeping tabs on this week is the Fed’s preferred inflation measure.
For the month of July, the core PCE price index likely dipped from 0.4% to 0.3%, which might still keep it around 3.4% on a year-over-year basis.
Forex Setup of the Week: EUR/JPY
Will this pair carry on with its long-term downtrend?
EUR/JPY already broke below the neckline of its head and shoulders chart pattern on the daily time frame, signaling that a drop of the same height is due.The reversal formation spans roughly 500 pips, so we’re looking at a possible selloff until 124.50 from here!
However, technical indicators are suggesting that there’s still a chance for bulls to regain the upper hand.
For one, Stochastic is already indicating oversold conditions or exhaustion among sellers. The oscillator looks ready to head back up, so EUR/JPY might follow suit.
The 100 SMA is also above the 200 SMA to suggest that long-term bullish pressure is present. Then again, the pair has tumbled below the 200 SMA dynamic support as an early indicator of a shift in direction.
The flash PMI readings due early in the week might determine where the shared currency is headed for the next few days, as another round of downside surprises could push it further south.