EURUSD Next Week Outlook - ranging to the key bearish target

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Sergey Golubev, 2015.07.24 16:27

Forex Weekly Outlook July 27-31 (based on forexcrunch article)

German Business Climate, US Durable Goods Orders, GDP data from the UK, the US and Canada, US Rate decision, FOMC statement and US Unemployment Claims. These are this week’s major market movers. Here is an outlook on these events.

Last week US jobless claims continued to surprise with a 26,000 fall in the number of new claims, reaching a seasonally adjusted 255,000. This release hit the lowest level since November 1973, indicating the US labor market continues to expand with growing number of jobs and improved employment conditions. Economists expected claims to reach 279,000 this week. The positive trend in the job market together with promising housing data suggest the Fed will raise rates very soon.

1. Eurozone German Ifo Business Climate: Monday, 8:00. German business climate index fell to 107.4 points in June from 108.5 points the prior month. The bigger than expected drop suggests that German businesses were worried about the debt crisis in Greece and its possible effect on Eurozone’s locomotive. The six month outlook measure also declined to 102 from 103.Analysts and investors were also concerned about the Greek situation. Business sentiment is expected to rise in July to 107.6.
2. US Durable Goods Orders: Monday, 12:30. The U.S. manufacturing sector lost momentum in May, new orders for long-lasting manufactured goods declined 1.8%, to $228.9 billion after April’s revised drop of 1.0%. Economists expected a smaller decline of 0.6% in orders. However, purchases of manufactured goods, excluding the volatile transportation sector, edged up 0.5% to $157.2 billion in May, following a 0.2% decline in April, while forecasted to rise 0.6%.  Nevertheless, economists believe data is stabilizing, choosing to ignore the headline figure due to volatility in the transportation sector. Orders for long-lasting manufactured goods expected to pick up by 3.2% in June, while Core orders forecasted to rise by 0.4%.
3. UK GDP: Tuesday, 8:30. The UK’s economic recovery softened in the first quarter of 2014 with GDP growth of 0.3%, according to a preliminary estimate. One of the weak points is the construction sector where output fell for the second consecutive quarter. According to The Office for National Statistics first quarter growth was the slowest since the fourth quarter of 2012. The annual rate of GDP growth declined to 2.4% from the 2.8% measured in the final quarter of 2014. The service sector which accounts for 75% of all goods and services in the economy, edged up 0.5% following 0.9% in the fourth quarter of 2014. The first estimate of growth for the second quarter is 0.7%.
4. US CB Consumer Confidence: Tuesday, 14:00. Consumer confidence strengthened in June, rising to 101.4 from 94.6 in May, suggesting the recent job gain boosted economic activity. On a yearly base consumer confidence edged up 17.4% from a year ago. Current conditions and the labor market index saw the biggest rise. Continued improvement in job market conditions and bigger wages increased optimism and consumer spending. Economists expect over 2% growth in the second quarter. Consumer confidence is expected to reach 100.1 this time.
5. US FOMC Statement: Wednesday, 18:00 The Fed’s statement from June 17 showed the economy is growing mildly after the winter plunge and is expected to increase its readiness for an interest rate hike by the end of the year. The FOMC forecasts a yearly growth of over 2%. However, Fed Chair Janet Yellen stated that the rate decision was still dependent on more decisive evidence from the labor market and stronger inflation. Economists do not forecast a rate hike just yet.
6. US GDP: Thursday, 12:30. The advance estimate of Q1 GDP, released April 29, showed the economy expanded a mere 0.2% in the first three months of 2015, well below the 1% increase forecasted by analysts. Consumer demand rose just 1.8%, less than the 2% that was expected by economists lower than initially estimated. Exports showed negative contribution as well as foreign investments, while imports increased. Analysts forecast a rebound in the second quarter with a growth estimate of over 2%. The advance release of GDP forecast for Q2 is expected to be 2.5%.
7. US Unemployment Claims: Thursday, 12:30. The number of Americans filing initial claims for unemployment benefits dropped last week to 255,000, the lowest level in more than 41-1/2 years. The sharp contraction in claims indicates the US labor market continued to strengthen in July. Job creation and stronger housing market suggest the Fed will raise rates in the near future. The four-week moving average of claims fell 4,000 to 278,500 last week. The number of claims is expected to reach 264,000 this week.
8. Canadian GDP: Friday, 12:30. Canada’s economy contracted 0.1% in April, posting the fourth consecutive month of negative growth. Economists forecasted a 0.1% growth in April. The continuous contraction raises concerns that Canada will be in recession this year. Canada’s economy shrank at annual pace of 0.6% in the first quarter, and April’s decline suggests a negative reading is probable for the second quarter. The mining, oil and gas sector shrank 2.6, contracting for the sixth consecutive month. Retail sales declined 0.2%, down for the third straight month. Manufacturing declined 0.2% declining for the fourth consecutive month.  GDP is expected to remain flat in May.

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Sergey Golubev, 2015.07.26 19:29

Crédit Agricole for Week Ahead: FOMC, GDP, Durable Goods, ECI, Cons Conf (based on efxnews article)

• "Durable goods orders are expected to rise by a sturdy 3.0% in June, boosted by a jump in non-defence aircraft orders. The bi-annual Paris air show in mid-June reported record levels of attendants and exhibitors, with over USD130bn orders announced. The strong showing was apparent in June’s Boeing aircraft orders: 161 new orders compared with 11 in May.
• We see risk of a small slip in the July consumer confidence index to 99.0, which bounced by almost 7pt in June. That rise fully reversed the April/May weakness and pushed the index close to its post-recession high of 103.8, reached in January. A likely decline in July would primarily reflect a partial reversal from the June jump.
• No rate hikes are expected in July. There are no updates to the Fed’s Summary of Economic Projections or a press conference following the meeting. Fed officials are looking for more evidence that economic growth is sufficiently strong and labour market conditions continue to firm enough to return inflation to the Committee’s longer-run 2% objective over the medium term. We believe that the FOMC will begin rate normalisation in September with a gradual, data-dependent pace of rate hikes thereafter.
• We look for Q2 real GDP to grow at a 2.5% pace in the advance release following a 0.2% contraction in Q1. The Q1 stall reflected a wide range of transitory factors, in our view. While oil and dollar impacts may continue to weigh, we expect a broad-based recovery in activity in Q2. We look for consumer spending to pick up to a 2.6% rate from 2.1% in Q1, on the back on cheap gasoline prices and a stronger labour market. The deep negative contribution of net exports in Q1 (−1.9pp) is expected to turn slightly positive as trade flows recovered from the port disruptions. We expect greater residential investment in line with robust growth in housing starts, while nonresidential investment likely recovered but remained relatively weak.
• The Q2 Employment Cost Index (ECI), a measure of total worker compensation costs, likely rose at a 0.6% pace, easing modestly from a 0.7% rate in Q1. Wages and salaries, which account for 70% of the index, are expected to rise at a slower pace, in line with the Q2 average hourly earnings growth of 0.5% on the quarter (Q1: 0.7%). We do see upside risk, however, drawing from encouraging developments in survey data.

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Sergey Golubev, 2015.07.27 09:32

SEB bank - Intraday Outlooks For EUR/USD, USD/JPY, EUR/CHF (based on efxnews article)

EUR/USD: "Testing nearby dynamic resistance. Buyers keep testing dynamic resistance at the low end of the short-term "Cloud" (at market). An "Upper Range Extension" (topside violation of the European opening hour range) would set some pressure on more resistance at 1.1075/85."

USD/JPY: "Short-term "Round-top" forming. Price action is tilted to the downside and first-hand dynamic support has been eroded. A counter-trend move lower has become increasingly likely - more so if breaking a near-term "Equality point" at 123.28 and after this not breaking back over 124.19. If this unfolds as thought, the next attraction/support below to scout is located at 122.72/45."

EUR/CHF: "An ongoing inter-range climb - Price action was bullish throughout the week last week, but little to take note of until now when a short-term "Equality point" has been violated and the early Jun high is under pressure. If not stopping here 1.0610 & 1.0650 are attraction/resistance levels to scout. In a medium-term perspective the next key level must be the Mid-Feb reaction high of 1.0811."

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Sergey Golubev, 2015.07.27 17:46

RBS - 1.05 target for EURUSD (based on forexlive article)

The Royal Bank of Scotland predicted the price for EURUSD as 1.05 1-year target, and those are the 5 key factors from RBS about why 1.05:

• "None of this has much directly to do with Greece."
• "Other factors that support some renewed fall in EUR/USD this year: faster money positioning in EUR/USD is now much cleaner than it was a few months ago, short EUR/USD is a far less crowded trade."
  
• "The German government bond market, which went into price melt-down in March, raising serious risks to other most owned positions like short EUR/USD, has stabilised."
• "Oil prices are falling again steadily."
• "Another key variable is US data and the US Federal Reserve. Informing our EUR/USD lower view is the assumption that the Federal Reserve makes its first tightening move in September his year. That is a close call. But a September rate cut is not fully priced and -if manifest - could give the Dollar a boost into Q4."