Weekly trading forecast December 10 - 14.

After the tough first trading week of December, investors will face several key events in the financial markets. The economic calendar is packed with important news coming in from major regions for the global economy. Some of the leading world’s countries report Gross Domestic Product. Other macroeconomic data is on the table with Retail Sales in the U.S. and a bunch of news from China, the second largest economy in the world. Two major central banks meet this week - European Central Bank and the Swiss regulator. Although the expectations are flat for the change in monetary policy, statements and press conferences following the meetings will have a huge impact on further price action for Euro and Swiss Franc. The Federal Reserve Jerome Powell is also due to speak on Wednesday in the United States. Investors will be seeking answers for tough questions regarding the economic growth and monetary policy perspective in the light of falling stock indices, signalling an upcoming recession in the world’s leading economy. Crucial macroeconomic data will be released in Japan which should influence strengthening yen as the safe-haven currency. OPEC’s final decision on production cut, as well as other giant market players - Russia and Saudi Arabia - are supposed to support falling oil prices, saving the bullish gains of the whole year. Add here geopolitics headlines with the ongoing story of U.S. - China trade war and Brexit deal vote in British Parliament, and you will get the overall picture of how many fundamental factors will be weighing on traders’ sentiment and volatility in the financial markets.

Monday, December 10.

Asian trading session will resume trading after the weekend with Japanese GDP report. The expectations are ugly with a potential decline of -1.9% year-on-year in the third quarter of 2018 compared to the previous reading of -1.2%. A slide of the report’s value is forecasted for the monthly basis as well with -0.5% compared to -0.2% previously. If that confirmed, we should expect traders to keep strengthening Japanese yen on safe-haven and repatriation flows. USD/JPY might be under the selling pressure due to the Chinese data which should be reported on Sunday. CPI and PPI inflation are forecasted to slow down in November, which is also a negative factor for yuan and other emerging markets currencies. Australia will close the Asian trading session on Monday with an insignificant Home Loans data. However, the Aussie might trade on a volatile price action amid the factors described above. European authorities will kick off the busy trading week with German Trade balance, Exports and Imports figures. A negative influence for the Eurozone GDP was noticed exactly from German exports’ decline in October. If that confirmed also for November, the single European currency could be weighed on heavy selling pressure, especially in the light of upcoming ECB rate decision. British GDP and Industrial Production will be important for the Sterling pairs, however, the impact might be limited as investors will be waiting for the Brexit vote in British Parliament with a hope that Brexit saga is finally going to an end. Housing starts in Canada and JOLT jobs openings in the United States - those are the only important event for Monday’s calendar in American trading session.

 Analysis of the American Trading Session
Source: Ester Holdings

Tuesday, December 11.

Australia will report NAB Business confidence on Tuesday, and AUD/USD traders will look for any confirmation of an optimistic outlook from Reserve Bank of Australia. An uptick in that report would signal that things aren’t that bad in Australian as it’s been previously anticipated, which should support the Aussie. British pound traders will stick to Unemployment report, Claimant count change, and which is more important for the Bank of England, Average Hourly Earnings. That data might be a supportive factor for GBP/USD, especially in the light of the greenback’s weakness. The market consensus is at 3.0% in October which is comparatively robust. If the data would be able to beat the expectations, we might see an additional demand for the pound from aggressive and impatient bulls rushing to jump in a trend before it starts. British Parliament will vote for the Brexit deal on Tuesday with a tentative schedule. The only thing to guarantee for the cable traders is enormous volatility on Tuesday. German and Eurozone ZEW economic sentiment index is due to release during the European trading session and a further decline is forecasted. Most of the traders would be expecting for Draghi’s press conference on Thursday in order to finalize the forecast for EUR/USD in the upcoming weeks, so a limited volatility might be in place on Tuesday. U.S. Producer Price index will start the crucial bunch of macroeconomic data for the Federal Reserve before the upcoming interest rate decision later in December. The greenback will be vulnerable to any change in inflation.

Wednesday, December 12.

The economic calendar is not so packed with crucial events, and intraday volatility should ease on that fact, especially given Powell’s speech which is also tentative on Wednesday. Some of the price action might be on cards after Japan will release Tertiary Industry Activity Index, South Africa will publish Consumer Price Index, Eurozone will announce Industrial Production results for October. OPEC monthly report will be a hopefully saving for oil bulls, however, an inverse scenario is possible with oil price targeting $50 per barrel psychological support. It’s impossible to underestimate the influence of U.S. Consumer price index on Federal Reserve’s action next week. Modest gains are predicted in the inflationary pressures in November and even a slight change compared to the expectations will definitely influence the greenback’s demand. The world’s reserve currency, as well as U.S. stock indices, is very vulnerable to the regulator’s monetary policy which is supposed to have a pause in the tightening cycle. That’s why Jerome Powell’s speech does not have an exact time to start. The Fed Chairman will be looking at the market’s reaction on the CPI report before starting a verbal intervention if needed.

Thursday, December 13.

The market focus will shift to Europe after a volatile trading session in the United States. All eyes will be on ECB to meet for the interest rate decision, the last time in this year. Nobody expects the regulator to make any changes in the monetary policy, deposit facility rate and the volume of liquidity injections into the financial system in the European Union. However, the upcoming press conference of ECB President Mario Draghi might have a significant impact on the market’s focus change. The story is that the economic growth started to slow down in Eurozone, as the recent macroeconomic data showed. That will add some points to Draghi’s dovish rhetoric. But the key question for the fade of financial conditions for the next year is inflation. CPI and Core CPI declined recently which gives a huge tool in the hands of Draghi and company to stop talks about an upcoming tightening by the ECB. Moreover, they would have a strong justification to keep injecting billions of euros into the financial system, prolonging the quantitative easing programme. Therefore, every single word from Super Mario will have a heavyweight for EUR/USD. In the other side of the Atlantic, the economic calendar is free of any significant data, so the price action will be determined by the European events mainly.

 Economic Calendar

Friday, December 14.

The Bank of Japan will be monitoring Tenkan survey which is traditionally important for the regulator in the scope of Manufacturing Activity. A modest slow down is forecasted with a room for positive surprise. Anyway, BoJ is not expected to make any changes in the soft monetary policy in December, so the repatriation flows might be impacting USD/JPY even more than macroeconomic data. Chinese Industrial production report is much more important with a doubt of further supportive measures by the Chinese government. Figures are expected to be flat though. European Services PMI and German Composite PMI reports will finish the trading week for EUR currency pairs. But the U.S. markets will have one more important event to happen before the weekend - Retail Sales report. Expectations for an upcoming recession might be reinforced if the report met the market consensus of 0.2% growth in November compared to 0.8% previously. The greenback would appear under the selling pressure also because of Manufacturing PMI report to be released later on Friday.
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