We saw very few top-tier economic data and central bank events released this past week but the next one is going to be a particularly busy one. Here are the currencies you will need to watch out for:
It’s the first week of a new month next week which means that there’s going to be an NFP Friday. The government data is expected to show that 178k jobs were generated in February. Ahead of its release, the ISM manufacturing and non-manufacturing PMIs are due. They have employment components which are regarded as leading indicators of the NFP. Also due next week is the ADP employment report which aims to predict the official government data. While these reports are not what the Fed uses to determine the health of the labor market, they may cause some volatility on USD pairs too.
On the daily time frame, the dollar index has pulled back to the 61.8% Fib level (when you draw the Fibonacci retracement tool from the low of February 3 to the high of February 20). The index has a little room to trade lower and still maintain its uptrend. When you connect the lows of December 31, February 3, and February 20, the trend line support falls around 98.25. Reversal candles around this level could mean that the dollar could soon rally to its recent highs at 99.88. On the other hand, a strong close below the trend line would mean that support has been broken. We may soon then see USDX fall to its February lows at 97.33.
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The Bank of Canada (BOC) will make its interest rate statement next week. While there are no changes expected to its official cash rate, the Canadian dollar could become volatile. Market participants will be keeping an ear out for what policymakers think of the coronavirus and its impact on the economy. In his last speech, BOC Governor Poloz sounded optimistic and shrugged off the outbreak. Will he still be confident despite recent remarks of WHO indicating that the coronavirus may soon become a pandemic?
OPEC meetings could also affect the Canadian dollar. Oil is one of Canada’s largest exports and if the price of the commodity goes up, so does the currency. OPEC members have been mulling over how to support oil price its drastic slide in the past few weeks. Higher production cuts and commitment from its member countries would not only be bullish for oil but also for the CAD too.
Lastly, on Friday, Canada will release its employment figures for February at the same time as the US NFP report is released. As it has been in the past, this coming Friday will be action-packed for USDCAD.
The recent rally on USDCAD was enough to push the currency pair above the falling trend line. If there are enough buyers in the market, it may not take long for USDCAD to retest its recent highs at 1.3563. On the other hand, if buyers run out of steam, the currency pair could fall back to the trend line at 1.3310.
It’s going to be a particularly busy week for the Aussie. The biggest event risk for the currency is the RBA rate statement. Most analysts think that policymakers will keep rates on hold but warnings of an impending rate cut could be in the statement. Along with it, Australia’s retail sales and GDP report are due for release too.
On the daily time frame, we can see that GBPAUD is testing resistance at its recent highs at 1.9751. If it holds, the currency pair could fall to 1.9480 where the rising trend line coincides with the 61.8% Fib level (drawing the Fibonacci retracement tool from the low of February 20 to the high of February 26). On the other hand, a bullish close 1.9772 could mean that GBPAUD may soon rally to its May 2016 highs at 2.0533.