Weekly trading forecast September 17 - 21

Financial markets worldwide will focus on Bank of Japan’s meeting and rate decision in the trading week ahead. This will not be the only one central bank meeting this week as Swiss Central bank will hold the meeting as well. Such a sequence is quite unusual as Japanese regulator is trying to schedule their meeting right after the Federal Reserve. As long as the rate hike is priced in by the market players, Japanese officials can predict possible outcome and we suggest that they will keep the recent ultra-soft monetary policy to support Japanese exporters. Other assets will be also volatile due to several important economic events and geopolitical talks across all regions. A pack of European data will be released to answer the biggest question about the sustainability of the recent rebound in EUR/USD and GBP/USD. Market players will be following the ongoing situation with the emerging markets as well. Commodity currencies are forecasted to have a high volatility level.

Monday, September 17.

The trading week kicks off with the European Inflation report. Although Mario Draghi had a strong justification leaving the interest rates unchanged last week due to the lack of inflationary pressure, an increase of CPI growth in August might accelerate the market expectations for an early start of the tightening cycle by European Central Bank and that will lead to EUR/USD further strengthening. Consumer Price Index is expected to be published at 10 AM GMT and the forecast is 2.0% on yearly basis. ECB Praet’s speech is also scheduled for Monday European Session. Canadian data starts with Foreign Securities Purchases report but the impact for USD/CAD will be limited. New York Empire State Manufacturing index is set to confirm the recent growth in the business activity in the United States.

Mario Draghi
Source: Business Insider

Tuesday, September 18.

The biggest day for Japanese yen traders will start on Tuesday with the Bank of Japan press conference which is traditionally tentative. USD/JPY managed to get out of the recent tight horizontal range and breached 112.00 resistance last week. So, currency speculators will be waiting for verbal support from BoJ in the scope of support continuation form the regulator. Interest rates in Japan remain on unprecedented low levels and that creates an additional demand for capital outflows as well as supports Japanese exporters on the external markets. We suggest that Japanese yen will continue weakening versus most of the major currencies, especially versus GBP, CAD and EUR. Australian Central Bank is going to release the latest rate decision statement but we do not expect something positive from that comments and Aussie might keep being under the bearish pressure so AUD was not included in that list. Mario Draghi will speak on Tuesday morning and that speech is set to confirm the intentions of ECB to start getting the markets ready for the upcoming tightening cycle. Although, some of the comments could be slightly dovish as the ECB President has a huge lobby from German and French exporters who take the competitive advantage from the weak Euro on the external markets. Manufacturing Sales in Canada and API weekly crude oil stocks in the U.S. - these are the only reports for the North American trading session on Tuesday.

Wednesday, September 19.

New Zealand report Westpac consumer sentiment and second-quarter current account on Wednesday overnight. This data is going to support kiwi bulls who are trying to find the direction for NZD/USD. Despite the recent bullish rebound, the pair remains comparatively weak. Adjusted Trade Balance, Imports and Exports figures are due to release from Japan during the Asian trading session as well. These reports will influence pairs with Japanese Yen in a limited way because BoJ will announce the rate decision later that day. RBA officials are also due to speak on Wednesday. Emerging markets will focus on inflation figures from South Africa and the expectations are quite modest for the developing country. In case if the CPI will be released much higher, we might see further strengthening of the rand as the Central Bank will have nothing to do but to hike the interest rates to avoid further turbulence of the economy. The whole pack of inflation data is due to release in the United Kingdom as well and that will cause enormous volatility for the British pound as BoE has stated clearly its data-dependance for the future interest rates hikes. Housing data will be in focus for the U.S. traders on Wednesday.

Thursday, September 20.

New Zealand GDP report is the only economic event for the Asian trading session on Thursday which is predicted to grow at a sustainable pace of 0.8%. Any disappointment of that figure will push kiwi to test 2-year lows again. Swiss Central Bank is expected to leave the interest rates unchanged in the negative zone. Sterling bulls will be watching closely Retail Sales report in Britain. A slow down is forecasted for both monthly and yearly numbers which leave a room for a positive surprise. In case if the retail sales in the U.K. will get back into positive territory, we might see GBP/USD testing 1.33 highs in a blink of an eye. Philadelphia Manufacturing Index is the only report for the United States and the Canadian economy is going to publish ADP Employment change on Thursday NY opening. BoC tentative review might cause additional volatility for USD/CAD and we expect the pair to trade well below 1.3000 psychological resistance. Existing Home sales in the United States are supposed to target the Fed’s concerns regarding the Housing Market in the scope of upcoming rate decision on September 26.

Friday, September 21.

Japanese National Core CPI report finishes a busy trading week for Japanese yen traders. European trading session will be influenced by GDP reports from a number of EU countries: France, Germany and Spain. German Manufacturing PMI and Eurozone composite PMI - these are reported for EUR/USD bulls to watch in order to find some support for further achievements versus the greenback. Friday will be also huge for USD/CAD traders with the most important economic reports for the Bank of Canada: Core CPI and Retail Sales. Loonie bulls will be looking for strong reading in order to jump in a potential uptrend. Services and Manufacturing PMI reports will determine the American trading session for the greenback on Friday.
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