Geopolitics, monetary policy talks, macroeconomic data, risk appetite renewal - those topics are more than enough to create another volatile roller coaster in the financial markets next week. Imporant technical levels can be also added to that mix of fundamental reasons influencing the price action. First of all, the markets will be focused on the G20 summit in Argentine and World Trade Organization reforms to be confirmed by industrialized countries leaders. Special attention will be dedicated to the headlines regarding the U.S. - China trade deal. Donald Trump and Xi Jingpin are going to meet during the weekend to discuss the deal conditions. By the time when markets open on Monday, there will be some preliminary results, so traders should keep an eye on geopolitical news. If leaders of two most powerful economies worldwide managed to find a compromise on deal conditions, then the risk appetite would renew financial flows in equities, high-yield assets and some of the currencies like Aussie and Kiwi. Otherwise, we might see a come back to bear market in U.S. stock indices which would reinforce the demand for the greenback as the world reserve currency.
December is important for several major central banks in the light of their meetings and rate decisions. Therefore, all of the macroeconomic data this week could change the market players’ expectations for the monetary policy. If that happened, certain major shifts might be noticed for the most popular currency pairs. Emerging markets, Europe and the U.S. regions will be in focus for the business activity consumer sentiment, and regulators’ measures will depend on those reports. Two major central banks - Reserve Bank of Australia and Bank of Canada - meet as early as this week for the interest rates decisions and economic outlook updates. We expect a higher volatility for AUD/USD and USD/CAD currency pairs. The Federal Reserve CHairman Jerome Powell and Euro Central Bank President Mario Draghi will also speak about the monetary policy forecasts this week, so currency traders will stick to the words of two most powerful officials in the financial world in order to understand their intentions for the foreseeable future.
Monday, December 3.
The trading week will kick off with an early schedule full of Australian data. The importance of those reports will be weighing on RBA decision, so the Aussie traders will monitor the data closely. AIG Manufacturing Index, Monthly M1 Inflation Gauge, Building Approvals and Company Gross Operating Profits - those are the key events for busy Monday Asian session. AUD/USD might continue its recovery towards year-high levels in case if the macroeconomic data would be positive to the regulator’s hawkish views on the Australian economy. Caixin Manufacturing PMI report is due to release at 01:45 AM GMT and emerging markets traders, as well as USD/CNY speculators, will be focused on that data in order to understand how deep the Chinese government can go with its supportive measures. An important psychological level of 7 yuan per U.S. dollar still stands as the defensive line, and most of the analysts do not see the market willing to break that level, especially in the scope of positive negotiations between two countries’ leaders to make the trade deal. The only important report in the European trading session on Monday is German Manufacturing PMI, which is expected to come in at the same level as previously - 51.6. The single European currency might continue sliding versus the greenback if the report will not be able to meet the market consensus. In contrast, British Manufacturing PMI and all of the UK data this week are not expected to have a huge impact on the Sterling pairs, as investors are still expecting the Brexit topics to clarify the situation. The U.S. trading session will be determined by ISM Manufacturing PMI and two FOMC members’ speeches - Haldane and Williams.
Tuesday, December 4.
That will be a huge day for AUD/USD and other Aussie pairs as Reserve Bank of Australia meets for the interest rate decision. Although analysts do not expect the regulator to change anything in the monetary policy, leaving the interest rates a the same level of 1.50%, currency traders will be more active than usual with a higher volume and volatility as the market conditions. RBA Rate Statement is due to release at the same time with the rate decision - at 03:30 AM GMT, so traders should be prepared for whipsaws and spikes. We suggest that buying deeps would be the best trading strategy for AUD/USD and AUD/JPY, as things look much brighter for Aussie than it’s been this summer. Both fundamental and technical outlook is in favour of the commodity currency to appreciate versus the other major currencies. British MPC Governor Carney is going to speak on Tuesday at the same time with the release of Construction PMI report. GBP/USD will be vulnerable to both events. A further slide is possible. Labour Productivity in Canada will finish the trading day.
Wednesday, December 5.
Australian Gross Domestic Product in the third quarter of 2018 will finish the pack of key events for AUD/USD. A modest slowdown is forecasted with a preliminary reading of 3.3% growth compared to the previous 3.4% in Q2. Any positive change might lift the Aussie and accelerate the bullish run. Caixin Services PMI report will be also important for the Asian trading session. Europe will focus on Draghi’s speech on Wednesday at 08:30 GMT and Services PMI reports from main European countries including Spain, Italy, France and Germany. The importance of those events will be higher in light of the previous week’s lower-than-expected inflation report in Eurozone. If Draghi confirmed trader’s assumption of a more dovish rhetoric than previously thought, then we might see EUR/USD at the bottom of the descending channel in 2018 with a potential test of 1.1200 technical support. ADP employment and ISM Services PMI will influence the U.S. trading session. Fed Chair Powell starts his testimony in Senate, talking about the economic growth in the United States. Higher volatility is expected for the greenback. Another key event on Wednesday is the Bank of Canada’s meeting and interest rate decision. Traders forecast an ‘unchanged’ verdict, however, there is a certain room for a positive surprise from BoC as Governor Poloz was hawkish recently. The chance for a hike is low though, but if that happened, USD/CAD might plunge in a blink of an eye, as the Lonnie has been oversold in October and November. Otherwise, the pair could continue climbing towards 1.3400 and above. One more key event for the financial markets will be the Crude Oil Inventories report in the U.S. Oil prices seemed to find a bottom slightly above $50 per barrel last week, however, the bears might enlarge selling pressure if the report will come in at a higher reading than the market forecast. A decline in inventories is expected at 0.769 million barrels compared to the previous level of 3.577M.
Thursday, December 6.
Asian and European economic calendars are almost empty on Thursday, so the price action will be mostly influenced by the events starting from New York opening. The U.S. trade balance is due to release with export and import figures. The Canadian dollar might continue its weakness versus the greenback during a speech of BoC Governor Poloz and Ivey PMI report. OPEC meeting results (tentative) will have an impact on oil prices. The bulls are desperately trying to find any bottom with the black gold price falling seven weeks in a row. The sell-off might continue if OPEC members would not be able to agree on the output cut, as one of the key reasons for the bear market was the oversupply issue.
Friday, December 7.
The only important data from Japan this week is Household spending to be published in early Asian trading session on Friday. Not much of the impact is expected though. German and French industrial production, as well as the French trade balance, will have a huge impact on EUR/USD. Halifax House price index is important for the housing sector in the UK which has been struggling recently due to the Brexit uncertainty. GBP/USD might have a spike in volatility during that report. Italian retail sales are not the most important event for the Eurozone, in contrast to the EU GDP in the third quarter of 2018. Analysts forecast the report to be published falt at 1.7% level. That’s also a downside risk for the single European currency as the recent European data was not too optimistic. The main event of the trading week is the Non-Farm Payrolls report in the United States. November’s main figure is seen at 200K average so far with the previous reading of 250K jobs added in October. It would be rather tough to beat the consensus and the previous result, however, November is traditionally a strong month for the job market, so we would not be surprised if the demand for the greenback will surge on Friday. The Canadian employment will be released at the same time with NFP. USD/CAD would be one of the most volatile pairs at 01:30 PM GMT.