The economic calendar is packed with
influential data announcements this week which are likely to provide volatile
conditions and exciting opportunities for currency traders. The headline data
release is the Non-Farm Payrolls (NFP) employment announcement from the US on
Friday, considered the most influential market mover, accompanied by the latest
unemployment rate. The jobs data has disappointed the market in recent months
and the April release has become even more critical than usual. Should the
figure be announced as less than the forecast 203,000, then this will indicate
the economy’s recovery is not as robust as Federal Chairwoman Janet Yellen
would have us believe. If it is particularly disappointing, Yellen may even be
forced to reconsider the current rate of tapering monthly asset purchases. On
the other hand, if the figure is over 250,000 this could really excite the
market, boost USD and vindicate Yellen’s decision to reduce the level of
quantitative easing.
In a rare occurrence, the Federal
Reserve is also meeting this week to decide this month’s interest rate
decision. The two day meeting on Tuesday and Wednesday is not expected to
elicit any surprises; Yellen is expected to announce interest rates stay steady
at 0.25% and that the tapering program will continue at the current rate of $10
billion per month. EUR/USD closed on Friday at 1.3826 and was trading steady in
early trading this week at 1.3820. The EUR/USD pivot point is 1.3860, with
resistance levels at 1.3883, 1.3899 and 1.3922, and support levels at 1.3844,
1.3821 and 1.3805.
The main Eurozone focus this week will
be the flash estimate CPI which is due on Wednesday. Inflation is a hot topic
with many analysts concerned that the Eurozone is at risk of deflation. This
week’s data is expected to be 0.8% which will be cheering news for the ECB and
may give them the green light to hold off on intervening in the market for the
time being. However, should there be a surprise drop in the inflation data, this
may finally force the ECB into action. The euro may also react to Tuesday’s Gfk
German Consumer Climate Index which is an indicator of consumer confidence, and
Friday’s German Manufacturing PMI. The latter is particularly important as
Germany is the manufacturing powerhouse of the Eurozone and any big changes to
German PMI can have a big impact on the strength of the euro.
Sterling continues to be the success
story of the year with the UK economy showing signs of a steady and robust
recovery; Tuesday’s preliminary GDP reading may well boost GBP further if the
expected growth rate of 0.9% proves to be a reality. Further GBP activity is
expected on Thursday when both manufacturing and construction PMI are both
expected to show positive readings further indicating the sustainability of the
UK recovery. The GBP/USD pivot point is 1.6840, with resistance levels at
1.6856, 1.6868 and 1.6884, and support levels at 1.6828, 1.6812 and 1.6800.
Demand for the Japanese yen has been
limited in early trading in advance of the latest Bank of Japan meeting
scheduled for Wednesday this week. BoJ Governor Kuroda is expected to give the
first indication of the impact of the rise in sales tax that was introduced
this month, with Bloomberg reporting that analysts are expecting Japan to add
monetary easing by July to try and boost the flagging economy. The
USD/JPY pivot point is 102.21, with resistance levels at 10.24, 102.27 and
102.30, and support levels at 102.18, 102.15 and 102.12.
The Asian markets are also expected to
be affected by the announcement of China’s manufacturing PMI on Thursday. This
figure has been hovering close to 50, which is the point which separates growth
from contraction. The latest reading is forecast to be 50.5, but if it comes
out even lower this could put a lot of pressure on China’s trading partners,
particularly Australia. AUD traders should closely monitor this announcement
and be prepared for volatility. The AUD/USD pivot point is 0.9293, with
resistance levels at 0.9302, 0.9308 and 0.9317, and support levels at 0.9287,
0.9278 and 0.9272.
What to Watch this Week:
Forex traders are spoiled for choice
this week, with the main focus being USD pairs, particularly EUR/USD, during
the NFP announcement on Friday. GBP/USD may also be an interesting pair to
watch on Thursday when the PMI data is released, and USD/JPY on Wednesday.
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