Weekly trading forecast September 24 - 28

The currency market in particular and the financial markets in general will focus on the Federal Reserve next trading week. The headline event if the FOMC meeting, rate decision and statement. Although the interest rate hike for 25 basis points is priced in by the market players completely, the headline event is important for all of the financial assets because investors will try to understand the regulator’s intentions for the future steps. Any outcome of the meeting promises higher volatility and thus profits. Besides that, the economic calendar is full of important events from other regions and the volatility for the British Pound on Friday last week confirmed the importance of geopolitical negotiations.

Monday, September 24.

The first day of the trading week is expected to be calm in the financial markets as South Korea, Japan, China and South Africa are off for the holiday. Asian trading session will be ignored by traders on Monday, most probably, due to the lack of trading volume. European trading session kicks off with the important IFO business climate survey. The index is forecasted at 103.2 level, however, a negative surprise is rather possible as the recent data from Eurozone was mixed if not weak, especially EU PMI report on Friday last week. So we do not believe EUR/USD could continue going North right from the weekly start. Bank of England financial stability report and CBI trend orders are due to release at 09:30 and 11:00 AM GMT respectively in the U.K. As long as the Brexit uncertainty remains on hands, traders would keep selling the pound and no other fundamental will help GBP/USD. So, these reports might be ignored. Wholesale Sales report from Canada is the only event in the economic calendar for American trading session and we think the market volatility will be low on Monday.

Tuesday, September 25.

Bank of Japan will be in focus for currency traders again on Tuesday as the regulator published its meeting minutes and BoJ Governor Kuroda is going to speak about economical outlook at 06:35 AM GMT. This speech is more likely to come in line with the statement published last week and the main target for Kuroda is to keep supporting Japanese exporters, especially in the scope of trade tensions. European currencies will trade mostly on the overall risk-on or risk-off mode depending on the equities. The same sentiment is expected to be in American trading session with the only important report from the U.S: CB Consumer Confidence. We believe, this report won’t have any significant impact on the greenback because traders and investors will be waiting for the Federal Reserve meeting next day.

Wednesday, September 26.

This will be the key day not only for the whole trading week but also for several trading weeks ahead. Huge volatility is expected across the board and the busy trading day starts with New Zealand trade balance and business confidence to be published overnight. Kiwi traders are desperately looking for any support to stop the recent currency plunge which started two weeks ago with NZD/USD refreshed 2.5-year lows. The absence of any significant reports from Europe will determine a flat trading session, most likely, as it always happens before the Fed. Housing sector in the United States will open New York trading session, however, the report will be ignored. The real volatility in the currency market is going to start later at 07:00 PM GMT when FOMC will release its economic projections report, the Federal Reserve will announce the interest rate decision and statement regarding the future monetary policy. That will be the time when the real roller-coaster starts with all of the major currency pairs. The rate hike for 25 basis points is not an issue for traders as it has been already priced in. The biggest question is what to expect from the regulator in December? Will there be a fourth rate hike this year? Chances are 75-25 so far, but the Federal Reserve Chairman Jerome Powel have already expressed some kind of cautiousness regarding too fast tightening and concerns about trade balance and housing sector in the U.S. So, there might be a much more dovish sentiment in the statement which will push the greenback lower. Another scenario suggests the hawkish Fed and additional demand for USD assets as the result. Anyway, we underline the fact that the volatility will be enormous during several hours at that time, so small traders should stay away of that turbulence and join the party a bit later, when the situation will be much more clear.

NZD/USD
Source: Investing.com


Thursday, September 27.

Asian traders will wake up with RBNZ holding the rate decision meeting and NZD/USD volatility might accelerate even further on that event. The last time RBNZ dropped the pair to 2.5-year lows as the result of their economic forecast for New Zealand, so we might see kiwi weakening even more of that in case of dovish comments from the regulator. GFK German Consumer Climate forecast for October is set to stabilize Euro somewhat as more positive outlook is expected. But at the same time, it might add fuel to the fire in case of a soft reading. Bank of Japan Governor Kuroda is also going to speak right after the Fed just to calm down the yen volatility and support USD/JPY verbally just in case if the dovish scenario will push the pair to 111.5 support. French Consumer spending and ECB Economic bulletin - these are key events for the European trading session. German CPI is also scheduled to release but this report is traditionally in line with the forecast so the impact will be limited, we suggest. It would be interesting for pound bulls to listen to BoE MPC Member Haldane speech in order to find some bottom for GBP/USD in the worth-case scenario. The world reserve currency is coming back to the market focus on New York opening with Durable goods orders report (1.9% consensus) and the final reading of Q2 GDP report (4.2%). Both events will be considered in the light of FOMC comments but the volatility is the only thing we can guarantee for Thursday. Three more heavy-weight elephants will come out on the stage the same day: BoE Carney, ECB Draghi and FOMC Powell - all biggest players among the major central banks are going to share their ideas regarding the worldwide (and local) economy. Investors will be listening to the officials very carefully in order to understand what to expect from the largest central banks in the world.

Friday, September, 28.

Whipsaws and shadows are not expected to calm down on Friday. Besides the importance of fundamental events, there is also a factor of technicals. The reason is that Friday is the last day not only for the trading week but also for the whole month and some traders (especially the institutional ones) will be taking profits and closing current deals. That process might create additional volatility and the volume of trades is expected to rise. The economic calendar is also full of events. Japan reports Tokyo Core CPI and Industrial Production (USD/JPY), China will publish Caixin Manufacturing PMI, German Unemployment change will impact EUR/USD and British GDP report will lead to additional spikes in GBP/USD. American trading session is important for the greenback due to the PCE deflator report (which is very important for the Fed) and Canadian dollar will be influenced by the GDP and RMPI reports.


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