The economic calendar for the trading week ahead promises a further increase in the volatility for all of the financial markets worldwide. Traders and investors will seek answers on crucial questions about the vast majority of assets across all of the sectors. How would the rising 10-year bond yields influence equities in the U.S.? Will the stock market keep plunging, having a deeper bearish retracement? Would the risk-off sentiment cause further weakness for most of the currencies versus the U.S. dollar? Shall we see another round of turbulence for emerging markets? We will try to bright some light on the next week’s key events in order to highlight top trading tips for the currency market.
Monday, October 8.
The overall trading volume could be restricted on Monday because of Holidays in Japan and Canada. However, the volatility might stay on the same level as for the previous week due to major shifts happening across several sectors in the financial markets. USD/JPY might be under the bearish pressure due to the decrease in the risk appetite among investors, especially in the equities. The U.S. stock indices finished the previous trading week with the sharpest decline since May 2018, and Asian and European investors could be influenced by the same selling mood on Monday. German Industrial Production is forecasted at a moderate pace in August, although a negative surprise could be in place, following the decline in the Service sector. EUR/USD could be under the pressure also due to the strength of the greenback as the safe-haven currency. An additional demand for U.S. dollar might also come from the 10-year bond yields which keep climbing to multi-year highs. Oil prices could also extend the recent losses due to the weekend comments of growing production in the United States and the worldwide demand concerns.
Tuesday, October 9.
The economic calendar on Tuesday is packed with important events and it starts with the Japanese Current account and Australian NAB business confidence reports. AUD/JPY declined in the past trading week and we expect the same trend to stay dominant for the upcoming week as well. European traders will watch closely Trade balance report from Germany and a moderate growth is forecasted for that data at the level of 16.4 billion euros in August. Any negative change in the surplus might cause another round of bearish price action for EUR/USD and other EUR cross-rates, especially EUR/GBP. Although British reports are not scheduled to release, Tuesday could be a huge day for the pound, as traders expect for any news from the UK - the EU negotiations in the scope of Brexit story. The deadline approaches force politicians to find a compromise as soon as possible, and any positive comments could support sterling. Technically speaking, GBP/USD is ready to reverse its downtrend in the long-term perspective. If that happens, GBP/AUD and GBP/NZD should fly high like a rocket. The Canadian dollar will be affected by the Housing sector reports on Tuesday as well as the development in the situation with the crude oil price. USD/CAD might be supported also due to the strength of the USD. BoC Council Member Wilkins will speak at 07:00 PM GMT on Tuesday and his speech will be also important for the Loonie bulls, as the interest rate hike is still widely expected.
Wednesday, October 10.
New Zealand dollar will try to find a bottom with a support from fundamentals. Electronic Card Retails Sales and Westpack Consumer Confidence reports are due to release in early Asian trading session. Although, traders could ignore these reports if the U.S. - China trade tensions would escalate. French and Italian Industrial production will be in focus for the Euro bulls, who also need any kind of support. The most interesting event for the British pound is expected on Wednesday, as the GDP report is due to release. A modest growth of 0.1% on Monthly basis is forecasted by the market players, leaving a room for a positive surprise. Industrial and Manufacturing production and Trade Balance reports will be published at the same time but their impact could be much lower. Anyway, a suggestion of the British pound’s reversal must be supported and confirmed by the fundamental part of the analysis, so any disappointment in these figures will lead to a sell-off in all sterling pairs. The most important event for the greenback will be inflation data and it starts with the PPI report to be published on Ney York opening on Wednesday. A growth of 0.2% on monthly basis is forecated with a decline of 0.1% reported earlier. Any positive revisions of these numbers will lead to the confirmation of Powell’s comments last week, and the expectation of the rate hike in December will jump, adding a fuel to the greenback’s demand.
Thursday, October 11.
Reserve Bank of Australia will try to save Aussie from falling like a rock on Thursday, as RBA Assistant Governor Ellis will speak on Thursday night. The market players would not be surprised with a verbal intervention from the official, although the regulator is restricted in its measures to support AUD/USD. Current Account and lending data will be published in Japan but yen traders will focus more on the equities in order to find the trading direction. Midweek's results are crucial for the technical analysis and Asian shares could follow the U.S. stock indices. If the equities will stop falling by Thursday, it would be an attractive moment to go long on USD/JPY. French, Spanish and EU inflation will be watched by EUR traders but the key event is the release of ECB meeting minutes on Thursday. If the hawkish sentiment will be confirmed and the prediction for ECB to start hiking the interest rates sooner rather than later, will have a background, EUR/USD could soar. Core CPI report will be the most volatile among the economic events for the whole week. Any upbeat in monthly and yearly inflation will force the Fed to hike much faster than it was priced in by the market. So, the 10-year bond yields could extend gains in that scenario, and the greenback will become even more attractive for the long-term bond investors compared to the government debt overseas. Crude Oil inventories in the United States will be the most crucial report for oil traders in the scope of supply cut from Iran. Any figure lower than 5 million barrels would lift the oil prices and the uptrend could accelerate. Otherwise, more short covering might be in place.
Friday, October 12.
Chinese reports are important not only for emerging markets in the scope of declining worldwide economy but also this data will be watched by Aussie and Kiwi traders, as these countries are dependant on Chinese imports. The market expectations are as follows: Imports growth 15% (yearly) in September, Exports 8.8%, trade balance $19.40 billion. Any stronger-than-expected readings will push AUD/USD and NZD/USD for a medium-term recovery. German CPI and European Industrial production reports will be released on Friday, influencing the final trading day of the week for EUR/USD. Export and Import Price indices together with Michigan Consumer Sentiment and Expectations reports will be the only data during the American trading session.