Weekly trading forecast October 1 - 5

The week ahead starts the fourth quarter for the binary options market as well as the overall financial markets worldwide. Most of the currency pairs will be influenced by the same fundamental processes, as it was in the third quarter. Some of the major currencies might keep recovering after the turmoil during the Summer, while others might have a complete reversal in the trend. All that will be data-dependent as the economic calendar is getting more and more important for several central banks in order to make crucial decision whether to change their monetary policy or to keep the things at the supportive soft levels. Emerging markets will also try to pass the test of long-term investors who are interested to come back as the things are getting stabilized and the risk appetite grows. The only exception might be Italy as the financial sector there struggles from populists’ decisions, weighing on the single European currency, The next trading week will be also crucial for British pound as the Tory Party will hold a conference and major decisions have to be approved. Enlarged volatility is expected for all of the sterling assets. It would be also interesting to watch the development in the oil market, will it be able to find a replacement for the supply cut in Iran, or will it still pressure? Will the U.S. equities keep rallying? Would the United States economy continue its expansion operating at the full employment conditions? - These are the key questions for the financial markets in the trading week ahead.

Monday kicks off with the holiday in China, so the trading volume is expected to be limited. However, Japanese traders will start the active session watching the Tankan survey which will show the situation in the manufacturing sector. Expectations are rather positive but more sustainable growth here might lead to further USD/JPY strengthening and additional demand for Japanese equities. Europeans will come back from the weekend with German Retail Sales data which is expected to rise for 0.4% (monthly) in August after declining for -0.4% in July. Yearly figures are more stable with the range of 0.8/1.5%. Any stronger numbers might weigh on Super Mario to start the tightening cycle earlier than he wishes and EUR/USD might have a support. German Manufacturing PMI is predicted to be flat at 53.7 marks. European Unemployment level at 8.2% would be also stable for the region. However, the British Manufacturing PMI might give a fresh air to breathe for GBP bulls who are desperately trying to find any ground. In the other side of the Atlantic, ISM Manufacturing PMI is scheduled for release in the U.S. and FOMC Member Bostic (well-known hawk) is going to speak about the monetary policy.

Chinese National Day will keep local traders out of the terminals, but Aussie speculators will stay awake not to miss the RBA rate decision and statement (05:30 AM GMT). No changes are expected but any dovish sentiment of the regulator will push AUD/USD to the multi-months lows in the scope of additional demand for the greenback and declining prices of gold. Nationwide HPI and COnstruction PMI are not the most important reports in the U.K. next week but any good news is positive for the pound. The market players will listen carefully to the final press conference of the EU finance ministers’ meeting (tentative), especially to calm down (or accelerate?) the recent turbulence in Italy. Will the EU officials calm the markets down and stop the country’s equities collapse, or should traders get ready for a long-term recession? That’s a million-dollar question. The Federal Reserve Chairman Jerome Powell will also face tough questions during his press conference on Tuesday, especially from local doves who are not happy with increasing borrowing costs in the United States and also in the scope of enlarging external debt of the world leading economy.

Chinese National Day
Source: Chinese American Family


German trader will join Chinese colleagues celebrating national holidays, so the trading volume is expected to get to normal levels on New York opening. The only exception might be the sterling as Brexit issues and Services PMI report will impact the price action. European Markit Composite PMI, Services PMI and Retail Sales reports will be boring and in line with the market consensus, most likely (why do you think German trader will be off in the middle of the trading week?), so no major impact for EUR/USD is expected during the European trading session on Wednesday. ADP Non-Farm Employment change is not the headline report as this agency has some kind of a different calculation method for monthly payrolls change, although traders will keep an eye on it just to have an idea about the main NFP report on Friday. ISM non-manufacturing PMI is forecasted to grow (like the whole economy though). The real explosion might be caused by the Crude oil inventories report in the U.S. for WTI Crude oil market. Once the decline in stock accelerates, the price of oil will surge immediately, especially in the light of the latest troubles with supply in Iran (2 million barrels per day is missing!).

Thursday. Chinese people love to celebrate, don’t be surprised. Jokes apart, Aussie bulls have a brilliant chance to recover on Thursday with the trade balance report scheduled to release. Modest expectations of 1.4 billion dollars (Australian, of course) leaves some sort of room for a positive surprise, as the previous period reading was published at 1.551B level. Indian Central Bank is expected to hike the interest rate for another 25 basis points to 6.75% in order to support falling local currency. The Indian rupee was still under pressure recently after the emerging market collapsed in August and face a sell-off compared to the financial crisis ten years ago. Things are getting better, but the regulator must show that everything is under control and in hands of professionals. The United States report factory order and FOMC member Quarles is going to talk about the tightening cycle and its impact on the economy. Canadian Ivey PMI is important in the scope of widely expected interest rates hike by the Bank of Canada later this month.

The next Friday is the main day for the whole trading week, if not month. Why is that? Every currency trader knows that the NFP report (the U.S. unemployment figures, Non-Farm Payrolls) is scheduled for release every first Friday of the month. So traders and investors in the worldwide financial markets will be waiting for that special event and an increased volatility is forecasted, so please do not forget your helmets if you are going to trade on NFP. Talking serious, we would suggest a softer reading of the main component of the report, slightly below the market consensus of 185 K jobs added in September (with 201K in August). Any upside revision of those numbers will push the greenback to newest highs. Some of the report’s components are even more important for the Fed and thus for smart long-term traders. We mean Average Hourly Earnings (0.3% vs 0.4% monthly and 2,8% vs 2,9% yearly). Positive reading gives additional funds to Americans (they are consumers, remember? They like to spend the money) and potential acceleration of the inflationary pressures (demand-supply stuff). The craziest currency pair to trade on Friday is USD/CAD because Canadian employment report will be published at the same time with the U.S. NFP and that would be a real roller-coaster!

See also:
Weekly trading forecast December 10 - 14.
Weekly trading forecast December 10 - 14.
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