Weekly trading forecast October 15 - 19

The economic calendar is packed by important events in the upcoming trading week. Several major economies worldwide will report their recent achievements and traders will be seeking forecasts of central banks’ next steps. Volatility and risk aversion during the past trading week would not calm down just like that, and we suggest further turbulence for the vast majority of sectors in the financial markets. The U.S. Federal Reserve and Reserve bank of Australia will publish their recent meeting minutes and investors will try to find confirmations for the latest verbal comments by the officials. An extremely important pack of data is going to be released in China. Market players’ sentiment will be influenced by whether an improvement or worsened conditions in the second largest economy worldwide in the light of recent negative projections by the International Monetary Fund. British and Canadian reports will be also crucial for GBP and CAD currency pairs in the scope of upcoming interest rates decisions by the Bank of England and the Bank of Canada. Inflation report in Eurozone is going to clarify how fast ECB will start tightening.

Monday, October 15.

The new trading week kicks off with the Reuters Tankan Index in Japan (12-00 AM GMT) and the macro-financial data from China (tentative). New Loans and M2 money stock reports will show the effectiveness of recent supportive measures by the Chinese government, trying to fuel the recovery in the second-largest economy worldwide. Japanese Industrial Production and Capacity Utilization reports will be published at 05:30 AM GMT and NIKKEI traders will try to find a bottom for the benchmark after an ugly sell-off last week. The European trading session is expected to be less volatility due to the lack of any economic data. So, EUR/USD traders will watch closely the equities’ performance to find the direction. New York trading session will open with Retail Sales report in September. The market expectations are rather optimistic - monthly change of 0.7% is forecasted. The U.S. stock indices are vulnerable for any negative data, so the sell-off might continue if the reports would not be able to beat the market consensus.

Tuesday, October 16.

Tuesday’s data will start with New Zealand inflation numbers. Consumer Price Index is expected to grow in the third quarter for 1.7% on the yearly basis while the monthly change is expected at 0.7%. Even a slightly worth reading would support NZD/USD in the scope of the weaker greenback and the fact that Kiwi has been oversold for quite a while. The same situation is for AUD/USD, as Reserve Bank of Australia will publish meeting minutes. However, nothing hawkish is expected from the regulator. Both commodity currencies, as well as Chinese Yuan, will be dependant on Inflationary reports from China. Monthly Consumer Price Index is forecasted to stagnate in September (0.7%) while the yearly Producer Price Index is set for a slowdown compared to August (3.7% is expected versus 4.1% previously). Any positive readings might support all of the three currencies. British economy kicks off its extremely important pack of data with the Average Earnings Index (2.6% consensus), Claimant Count Change (+4.5K predicted and 8.7K jobs added in August), Employment Change in three months (3.0K previously) and Unemployment Rate (4.0%). Brexit hopes could be supported by fundamentals and sterling pairs are expected to gain further strength. German ZEW Economic Sentiment index is forecasted to slow down the business activity in October (-12.3). Additional risk factors for EUR/USD might become European Trade Balance in August and EU ZEW survey, as both reports are predicted to be released in red. American trading session will be influenced by Canadian Foreign Securities Purchases and U.S. JOLT jobs openings and industrial production.

Wednesday, October 17.

British reports will come back into traders’ focus on Wednesday, as Consumer and Producer Price indices are expected to be published at 09:30 AM GMT. A modest growth in monthly CPI (0.2%) could come in at a much higher level, and such a potential spike in inflation will boost the market’s expectations for BoE to hike the interest rates one more time this year. Upside risk is likely for GBP/USD in that scenario. European CPI traditionally comes in exactly in line with the expectations, so no spikes in EUR/USD volatility are expected during that report. Building permits in the U.S. will start the New York busy trading session. The Loonie could be pressured by a possible decline in Manufacturing Sales in Canada (-0.6% is expected). Crude Oil Inventories in the U.S. will be the key event for the black gold traders, especially in the scope of the recent plunge in WTI Crude prices. A moderate growth is forecasted at 2.620 million barrels. Oil bulls will be hoping for a decline in that numbers though. Several officials are going to speak on Wednesday late afternoon: FOMC member Brainard, German Buba President Weidmann and BoE MPC member Broadbent. However, the headline event will be the FOMC meeting minutes to be published at 06:00 PM GMT. The Federal Reserve’s hawkish rhetoric might hit hard the equities markets, as investors were concerned by the regulator’s aggressive monetary policy. Otherwise, a dovish sentiment might support the U.S. stock indices and the greenback.

Crude Oil Inventories
Source: telegrafi.com

Thursday, October 18.

Japanese Adjusted Trade Balance report could become a saving background for USD/JPY. Any improvement in trade results in Japan will lift the NIKKEI index and the risk appetite which is traditionally measured by the dollar-yen currency pair. Thursday’s early Asian session will keep Aussie traders in shape, as Employment change and Quarterly Business confidence will be released in Australia. British Retail Sales report will continue the large pack of data from the UK, influencing GBP/USD. A monthly decline is expected at -0.3% in September, however, if beaten, then pound would soar. Philadelphia Fed Manufacturing Index is also expected to slow down in September. Although, that report might be ignored by the market, as traders will be watching several huge corporations’ earnings reports in the third quarter. FOMC members Bullard and Quarles, both well-known hawks, are going to speak on Thursday afternoon, commenting on the latest situation in the regulator’s sentiment whether to tighten more aggressively or to put the hikes on hold.

Friday, October 19.

Asian trading session will be extremely busy on Friday, as Japan will report National Core CPI (1.0% consensus) and China will publish several crucial reports: Fixed Asset Investments (5.3%), Gross Domestic Product (6.6%), Industrial Production (6.0%), Retail Sales (9.0%) and Unemployment Rate (5.0%). Some of the analysts were suggesting recently that most of this data might be even worse than it was widely anticipated, and the Chinese government's supportive measures do not work effectively for the economic recovery. If that confirmed, then Yuan, Aussie and Kiwi would plunge together with USD/JPY on risk aversion and possible recession woes. Canadian economy reports the pack of crucial data for BoC as well. Core CPI and Core Retail Sales are among headliners and any worse-than-expected release would weight on Loonie. Existing Home Sales report is not so crucial for the greenback, so Friday’s American trading session will be influenced by the price action in equities.
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