The Fed meeting on Wednesday will be keyin the coming days. A 75 basis points hike is expected, but the FOMC could be even more aggressive. USD traders will have a full stack of tier-one US data. Consumer Confidence and Advance GDP are the highlights. Elsewhere, Eurozone growth and inflation will be watched, along with Australian inflation. In LatAm, there is unemployment and the Colombian central bank rates decision.
- North America – The FOMC, along with Consumer Confidence and Advance Q2 GDP
- Europe – Eurozone inflation and Q2 GDP
- Asia – Japanese industrial production and retail sales, Australian inflation
- LatAm – Unemployment for Brazil, Mexico, Chile and Colombia, interest rates for the Colombian Central Bank
There is plenty to move USD positions this week. The Fed is the main event. A rate hike of +75 basis points is expected with a small possibility of +100bps. US GDP is expected to be positive in Q2, although not by much. Anything better than forecast would be USD positive across major forex.
We continue to prefer buying USD into weakness.
There is little on the calendar for CAD other than monthly GDP. Better than expected would be CAD positive (USD/CAD lower).
- USD/CAD - reaction to key support at 1.2820/1.2855 will be key
Recession risks are still negative for oil. Precious metals are trending lower but have shown signs of recovery in recent sessions.
- Brent Crude Oil – we favour tests of $98/$100 with key resistance growing between $107.65/$109.65.
- Gold – near term technical rally threatens. Above $1745/$1752 opens a recovery
- Silver – Resistance at $19.10/$19.48 is restricting a recovery
There is an upside bias to equities as Wall Street is so far reacting well to the Q2 corporate earnings season, with tech stocks leading the way. Bulls will hope the buying into weakness continues.
- S&P 500 futures – trading at six-week highs, holding on to support between 3875/3950 is key to continuing recovery.
- NASDAQ 100 futures – the recovery will look to test key resistance at 12,440/12,940. There is breakout support between 12,185/12,260
- Dow futures – will look to test resistance starting around 32,490 whilst breakout support is between 31,490/31,865
Eurozone growth and inflation will be key. Growth falling whilst inflation is rising means that the ECB has a difficult job just as it starts to tighten monetary policy. Last Friday’s disappointing PMIs have put the EUR back under negative pressure.
- EUR/USD - recovery is tailing off. Closing consistently below 1.0120 brings parity back into play. Resistance is at 1.0270 under 1.0350.
There is no UK data due.UK political risk is also reduced with Parliament into its summer recess.
GBP is likely to be dragged around by moves in broad risk appetite.
- GBP/USD is leaving growing resistance at 1.2055. Consistent moves below 1.1890 will add downside pressure towards 1.1760.
Equity investors are fighting hard to hang on to recent recovery gains. Resistance needs to be overcome to continue the rally.
- DAX – has to overcome resistance between 13,370/13,440 to drive the next phase of recovery. Support above 13,000 is growing.
- FTSE 100 – needs to break above 7335/7370 resistance to take the next step higher. Support at 7180/7230 also needs to hold.
Lots of Japanese economic data could drive initial volatility but JPY remains a safe haven play and will benefit from any risk aversion.
- USD/JPY – reaction to initial support at 136.50/137.00 will be a gauge this week. A break below opens 134.70
- AUD/JPY – bulls will look to buy into weakness to continue the uptrend, with support 93.00/94.00
Inflation is expected to jump sharply which will add pressure on the RBA to tighten further. AUD has been showing signs of stronger performance in recent sessions.
- AUD/USD – this could be a key week as the three-month downtrend approaches. Above resistance at 0.6965 would be strong. Support at 0.6820/0.6895 is key.
No NZ data to drive sentiment, so NZD will likely be driven by the broad outlook for risk. It is also likely to shadow AUD performance.
- NZD/USD – holding above the 0.6195/0.6260 pivot band will be key this week. A decisive break higher opens 0.6395.
Mid-month inflation is expected to rise which keeps the prospect of further rate hikes on the table
- USD/BRL – a higher low has been left around 5.4000 as BRL continues to weaken and the pair moves to six-month highs. The next resistance is at 5.6230.
Unemployment is expected to increase.This gives the central bank a problem with raising rates to tackle inflation, as it risks making the situation worse.
- USD/MXN – a higher low has been left at 20.315 as MXN weakens once more. This may now put pressure on the July high of 21.051 in the coming days.
This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. INFINOX is not authorised to provide investment advice. No opinion given in the material constitutes a recommendation by INFINOX or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.