Weekly trading forecast March 18 - 22.

Financial market players will try to get cues about current trends from several headline events in the fundamental field this upcoming week. The main event is the Federal Open Market Committee’s meeting, rate decision, economic statement and press conference, which is supposed to answer the key question of the financial conditions and monetary policy in the world’s largest economy. Although, traders and investors have priced in almost 100% chances of an ‘unchanged’ verdict by the regulator, surprises and high volatility are still possible, as the Federal Reserve will try to explain intentions for future moves. Two more major central banks will meet this week: the Swiss National Bank and the Bank of England. Therefore, GBP/USD and USD/CHF currency pairs might be the most volatile among majors. Several important macroeconomic reports will be published in other regions, including gross domestic product and inflation reports in New Zealand and Canada. The third largest world's economy - Japan - will update investors on the trade balance, while the European Union will release PMI reports, Australia will publish the latest employment data. US Crude Oil inventories will traditionally influence the black gold market. Besides that, US-China trade talks and Brexit deal will still be affecting financial markets from the geopolitical side of things.

Monday, March 18.

The Japanese yen will be vulnerable to Exports and Imports Volume report for February. Economists predict a significant recovery in Japanese exports (-0.9%) compared to the slash of -8.4% year-over-year in January, while imports volume could decline by -5.8% compared to -0.8%. Such a scenario is rather optimistic as there were no signs of any rebound yet. The trade balance surplus is also crucial for the export-oriented Japanese economy, and analysts predict a significant improvement of 310 billion yen compared to the shocking drop of -1416 billion yen in January. If that confirmed, USD/JPY and other yen pairs could soar as the Bank of Japan would not need to implement additional supportive measures and softer monetary policy. Otherwise, investors would rush back in safety, closing short yen positions. The Eurozone trade balance is not so important for EUR/USD but it also could add selling pressure on the single European currency is the data was weak. So far, economists expect the surplus to worsen to -8.0 billion euros in January compared to +17.0 billion euros in December last year. The Canadian economy will release the recent foreign securities purchases, while the only US report will be Capital Goods Ship Non-Defence excluding Air.

Tuesday, March 19.

The Australian dollar will be in the market’s focus on Tuesday as the Reserve Bank of Australia will publish latest meeting minutes and RBA Assistant Governor Kent will host a press conference about economic prospects. The Aussie plunged after the rate decision two weeks ago and traders would be seeking some optimism to support the currency. Otherwise, another round of weakness might be on the table. British reports will be especially important in the scope of the upcoming BoE meeting later this week. Average Earnings Index is expected to slow down to 3.2% growth compared to 3.4% earlier, Claimant Count Change is predicted at the level of 13.1K, 3M/3M employment change is forecasted at 120.0 thousand jobs added in February and the unemployment rate is seen flat at the level of 4.0%. Those modest expectations leave room for a positive surprise and the British Pound might soar if the data was strong. German and EU ZEW economic sentiment index, Eurozone wages and Labour cost index will influence EUR/USD price action on Tuesday. US Factory orders report will be published in New York but the impact might be limited as traders would be expecting the FOMC rate decision next day. Oil traders could get a lift from US API Crude oil Stocks report if the demand was stable.

Wednesday, March 20.

The Bank of Japan will release its latest meeting minutes, which could affect the price action of the USD/JPY currency pair on Wednesday. German Producer Price Index is the only significant event in the Eurozone. The British economy will release another huge pack of crucial data: Consumer and Producer Price Indexes will influence Sterling’s trend as the Bank of England will monitor the inflation data closely before the interest rate decision. So far, the inflationary pressure is not expected to pick up the growth momentum significantly but if prices grew faster-than-expected in the United Kingdom in February, then Cable bulls might get sudden and additional support from the fundamental side of things, besides the Brexit optimism. If that happened, GBP/USD might rally another 200 pips at least. The large level of volatility for Sterling pairs will remain till the end of the day as another Brexit vote is scheduled in the British Parliament. But the most important event is the FOMC meeting late Wednesday. The interest rates are expected to stay at the same level but the economic statement and Powell’s press-conference are wild cards to have an unpredicted impact on the US dollar, US stock indices and Treasury yields. The only thing to guarantee is the highest volatility possible, so small traders should better stay out of the market, while large accounts will definitely have a brilliant opportunity to double-up the balance. The overall impression is that the Federal Reserve is not going to be too hawkish and the greenback should drop further but that’s really tough to predict even for market pundits.

The Bank of Japan
Source: Fortune

Thursday, March 21.

The New Zealand economy will update the GDP growth report for the fourth quarter of 2018 (final reading) and the Kiwi might be vulnerable to sudden revisions on both sides. The Asian trading session is expected to be rather volatile despite the absence of Japanese and Indian traders, who will be off for local holidays. The thing is that Asian and European traders will be absorbing news from the FOMC rate decision, and some assets might have a delayed reaction to that crucial event. Australian Employment report will add fuel to the fire as another month of decline is predicted for the labour market. The Swiss National Bank will publish interest rates decision and the Monetary Policy Assesment at 08:00 AM GMT, while the press conference will take part 30 minutes later. Britsh Retail Sales are due to release at 09:30 GMT. GBP/CHF cross rate might be the most volatile currency pair on Thursday as the Bank of England will also meet for the same purpose. Although both regulators are expected to stay pat on the financial conditions, the volatility will spike in case if regulators will manage to surprise investors by too hawkish/dovish comments. It’s also crucial for Sterling traders to know the vote split between BoE MPC members: 9/0 is forecasted for unchanged but any shifts in that data would affect GBP/USD, GBP/JPY and EUR/GBP. Philly Fed Manufacturing report will influence US equities in the post-FOMC trading session.

Friday, March 22.

Traders survived this week’s mincer will watch Japanese National Core CPI, French, German and Eurozone Manufacturing and Services PMI reports before the New York will open for the final trading session before the weekend break. The Canadian dollar will be dependant on the Canadian inflation reports and Core Retail Sales. Both figures were revised up for the previous period, therefore, a positive surprise might be forcing traders to push USD/CAD even lower. US Manufacturing PMI, Existing Home Sales and Wholesale inventories will close the wild trading week.
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