Weekly trading forecast May 20 - 24.

Risk aversion could continue weighing on the financial markets this upcoming week. Although no major central banks will meet for interest rates decisions, several heavy-weight players will publish last meeting minutes, updating the outlook for monetary policy in such regions as Europe, Australia and the United States. Lots of crucial macroeconomic reports will influence the price action in the currency exchange market, and stock indices as the upcoming series of June’s decisions might cause significant shifts in the global economy. Central banks’ officials could start expressing concerns over the latest trade war escalations, imposing protective measures for local economies and exporters, and underlining potential negative impact for economic growth. Inflation, retail sales, and GDP reports will influence the investors’ sentiment in the United Kingdom, Japan and North America. The fixed-income market should whether confirm or deny safe-haven flows as bond yields had already reached the bottom last week. Emerging markets might be vulnerable to further sell-off if the trade war tensions between the U.S. and China worsened.

Japan’s economic reports will kick the trading week off. The first-quarter Gross domestic Product headline figure is widely expected to slightly decrease compared to the previous period (0.4% versus 0.5%) quarter-on-quarter, but the annual result might drop to -0.2% versus +1.9% previously. Other components of the GDP report are also predicted to stay negative with Capital Expenditure, GDP Price Index and Industrial Production to decline further. If that confirmed, the USD/JPY currency pair could fall back below 110.00 round-figure support level and even test 109.00 lows again. In the European trading session, Germany will publish the Producer Price Index (flat reading expected), and the Eurozone will release the Current Account data. EUR/USD is still vulnerable to slide south further as the past week’s price action showed the weakness of the pair. Chicago Fed National Activity Index is the only report in the North American trading session on Monday. The volatility might drop for USD/CAD as Canadian traders will be off for a holiday. Traders will also listen to Fed Chair Powell’s speech.

The trading activity will be renewed early Tuesday as the Reserve Bank of Australia will publish recent meeting minutes. Although the regulator left the interest rates unchanged in May, the statement could bring more confirmation signals to ease the monetary policy in June, adding the selling pressure on Aussie. The AUD/USD currency pair had already tested four-month lows last week, and further losses are possible as the technical support is coming around 0.6750 mark. British Industrial CBI trend orders will be published at 11;00 AM GMT, while Inflation report hearings are tentative. Those events begin a crucial series of economic developments in the United Kingdom before the Bank of England’s meeting in June. If the data was unable to support the Sterling, GBP/USD and GBP/JPY could lose the ground as the recent price action showed that investors lost patience with the lack of any progress for the Brexit story. U.S. Existing Home Sales and Redbook survey will influence the price action for the greenback on Tuesday. FOMC Member Resergreen will speak later in the afternoon.

Retail Sales report could fuel Kiwi’s sell-off as the latest data from New Zealand was disappointing. Japan’s Trade Balance and Core Machinery Orders will have an impact on the yen crosses early Wednesday. A stronger decline is predicted so far. The only support for USD/JPY might come from global equities in case if buyers come back to the market. Otherwise, further weakness is possible. Three central bankers will speak on Wednesday: BoJ Member Harada, FOMC Member Bullard and ECB President Draghi. Currency traders should listen to them carefully as major shifts in the monetary policy might be announced in the light of the latest trader wars escalation. South African Inflation data will affect the rand’s price action. USD/ZAR was testing resistance levels above 14.4000 last week, and if the report was weak, the pair could breach long-term technical resistance and appreciate further. British Inflation will appear in the market’s focus as well. Consumer and Producer Price Indices are widely expected to enlarge the inflationary pressure and increase chances for the Bank of England to hike the interest rates. However, the regulator is not intended to make any moves until the Brexit uncertainty unveiled. Therefore, Pound’s strength could be limited and short-lived. Canadian Retail Sales and U.S. Crude Oil Inventories reports could cause more considerable volatility for USD/CAD and WTI Crude on Wednesday. FOMC Meeting minutes might be the most important event for the greenback this upcoming week.

Big Thursday could determine the fate of the single European currency for many weeks if not months. German GDP, French, German and E.U. Manufacturing, Markit Composite and Services PMI, German and Eurozone IFO Business Climate, European Financial Stability report - this is the list of the essential reports scheduled to release on Thursday. EUR/USD will definitely be vulnerable to significant volatility as the European Central Bank will get a strong background to whether to soften the monetary policy or hold off any steps and measures. ECB Meeting Minutes will be released at 11:30 AM GMT. Most likely, the Euro could drop to 1.10 versus the U.S. dollar. British Retail Sales report will be crucial for Sterling traders, and EUR/GBP might have lots of whipsaws on Wednesday. U.S. Manufacturing PMI and New Home Sales - those updates will influence the price action in the North American trading session. Four FOMC Members are due to speak about the monetary policy later in the afternoon.

New Zealand Trade Balance, Exports and Imports Volume would support NZD/USD in case of a stronger-than-expected reading. However, the Kiwi bulls should not expect for such a favourable scenario as the global economy slowed down, China’s demand for New Zealand products dropped, and emerging markets started sliding to the recession. Therefore, most of the analysts expect NZD/USD to keep sliding south. Japan’s National Core Consumer Price Index is due to release on Friday. It’s hard to expect the inflationary pressure to grow in April as the BoJ officials talked about slow internal consumption and spending, while energy prices were flat. If the data was soft again, EUR/JPY and USD/JPY could continue the downtrend. U.S. Core durable goods orders report is the only significant economic event in North America on Friday. The greenback’s price action could be affected by stock indices and Treasuries.
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