USDINR
The German Ifo Business Climate report for January is due on Monday and it should provide us with an idea of the economy’s health. The forecast is for business conditions to have improved this month to 97.1 from 96.3 in December. Then on Friday, euro zone’s second and fourth largest economies are scheduled to release their GDP reports for Q4 2019. The French economy is expected to have grown by 0.3%. Meanwhile, the Spanish economy is expected to have expanded by 0.4%.
Euro zone’s CPI will be closely-watched because of the recent comments on inflation by ECB President Lagarde. A reading higher than the consensus at 1.4% could be bullish for the euro because it may signal that inflationary pressures remain in the economy.
On the 4-hour chart of EURJPY, we can see that price has found its way back to support at the rising trend line. Positive data from the euro zone in the coming week would help EURJPY find bids above the 121.00 psychological handle. The currency pair may even rally to January 15 highs around 122.70. On the other hand, a close below January 23 lows at 120.61 could mean that EURJPY is on its way to support at 120.15.
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After the positive surprise brought about by the labor market figures from Australia, can this week’s CPI report help boost the Aussie? The fourth quarter CPI reading is seen to print at 0.6%. Meanwhile, the trimmed mean CPI which excludes volatile items, is anticipated at 0.4%.
The Aussie may also find bids on the charts if data from Australia’s largest trading partner impresses. Chinese manufacturing PMI is seen to print an expansion with the forecast at 50.1. Meanwhile, the services industry is anticipated to show stronger growth with the forecast at 53.2.
On the daily time frame, we can see that AUDUSD fell to support at the 100 SMA. Reversal candles have also materialized which suggests that the currency pair may soon trade higher to resistance at 0.6920. However, it’s worth noting that there is a head and shoulders pattern on AUDUSD. This is considered as a bearish indicator and a close below last week’s low at 0.6825 may mean that the currency pair may soon drop to its November 28 lows at 0.6765.
GBPUSD will be an interesting pair to trade next week. Aside from its technical setup, both the Fed and BOE are scheduled to make their monetary policy decisions.
There are two main events for the dollar next week. First, is the FOMC statement due on Wednesday. There are no changes expected from the Fed’s interest rate level. However, market investors will be looking forward to hear about clues as to when the central bank to raise or cut rates.
Then on Thursday, the first reading of the US GDP report for Q4 2019 is due. It is eyed at 2.2%. A better-than-expected reading could be bullish for the dollar as this would paint resilience in the economy.
The BOE rate statement is also scheduled on Thursday. There are some predictions for a rate cut given the disappointing retail sales that we saw from the UK. Additionally, a couple of BOE members have also expressed their intention to vote for further easing. However, the recent labor market data which topped forecasts could keep the central bank from cutting rates. We’ll find out next week if the employment report was indeed enough for the BOE to stand pat.
On the daily time frame, we can see that GBPUSD has been making lower highs and higher lows. Consequently, the currency pair has formed a symmetrical triangle. This chart pattern is considered neutral. However, a bearish close below the most recent low at 1.2957 would indicated that sellers are stronger. GBPUSD may soon then fall to support at the 100 SMA and 200 SMA at 1.2740. On the other hand, a bullish close above yesterday’s high at 1.3173 could indicate that the currency pair could soon rally to its December 16 high at 1.3511.
Last but not the least, Canada will be releasing its December GDP report on Friday. After contracting by 0.1% in November, the economy is expected to have erased that contraction in December with the forecast for a 0.1% uptick.
USDCAD is consolidating around the 100 SMA and 200 SMA around 1.3150. It retraced some of its losses to the 50% Fib level but it has room to move higher and still maintain its downtrend. Resistance at the falling trend line is around 1.3200. On the other hand, if sellers continue to dominate the next few weeks’ trading, USDCAD may fall to its December 2019 lows around 1.2950.