Forex Weekly Outlook – March 15-19

The dollar retreated in the past week on most fronts. Was it a temporary move? The upcoming week provides lots of American events, with Ben Bernanke’s rate decision being the highlight. Here’s an outlook for this week’s market-moving events.

In the forex industry, the proposed regulations by the CFTC are again in the news, as their decision is getting close. Also Introducing Brokers joined the fight against these proposals. We’ll probably hear more about it in the upcoming week. OK, let’s look at the market:

  1. American TIC Long-Term Purchases: Published on Monday at 13:00 GMT. Treasury International Capital Long Term Purchases represent the difference between foreign investments in the US and US investments abroad, and actually shows foreign confidence in the US economy. The figure leaped to 126 billion two months ago, but was then cut to half. This time, it’s expected to stand at 38 billion.
  2. German ZEW Economic Sentiment: Published on Tuesday at 10:00 GMT. This is a highly regarded survey that is a good indicator of the economy. It has fallen in the past months, hurting the Euro each time. A further drop from 45.1 to 43.3 points is expected this time.
  3. Housing figures: Published on Tuesday at 12:30 GMT. The housing sector had a big “contribution” to the global crisis and is now showing a small recovery. Building Permits dropped to 620K last time, and are now expected to tick down to 619K. Also note a very related figure – Housing Starts, published at the same time. They’re expected to drop from 590K to 570K.
  4. American rate decision: Published on Tuesday at 18:15 GMT. Ben Bernanke already made his move out of the usual cycle – the “mini rate hike” of the discount rate shocked the markets and signaled that the Federal Reserve will probably be more aggressive than other central banks. Will they finally drop the wording “an extended period of time” for the interest rate? As usual, the FOMC Statement will be in the limelight, as the Federal Funds Rate isn’t expected to move. Note that the statement can be very confusing.
  5. Japanese rate decision: Published on Wednesday morning. Also in Japan, no change is expected in the rock bottomOvernight Call Rate, standing at 0.1%. The statement accompanying the decision will be carefully read, and the tone voiced at the press conference has the utmost importance for the Japanese yen.
  6. British employment data: Published on Wednesday at 9:30 GMT. The number of unemployed Brits rose last month after two good months, as reflected in the Claimant Count Change. Another rise, of 8700 people, is expected this time. The unemployment rate, which relates to the previous month, is expected to follow the same line and rise from 7.8% to 7.9%.
  7. American PPI: Published on Wednesday at 12:30 GMT. The first inflation figure of the week is about producer prices, and serves a warm up for the consumer prices. After a jump of 1.4% last month, a drop of 0.2% is predicted this time. Note that Core PPI is expected to edge up by 0.1%.
  8. American CPI: Published on Thursday at 12:30 GMT. A rise in consumer prices is the key for future rate hikes. Last month the regular small changes: a rise of 0.2% in CPI and a drop of 0.1% in Core CPI. There aren’t any expectations this time – both indicators are expected to rise by 0.1%. This will be a very shaky time in the markets, as jobless claims are released at the same time.
  9. American Unemployment Claims: Published on Thursday at 12:30 GMT. After jumping to almost 500K, jobless claims are slowly dropping, reaching 462K last week. Another drop to 456K is predicted now. A drop below 430K will boost the dollar. The rise in jobless claims was clearly reflected in the recent Non-Farm Payrolls.
  10. American Philly Fed Manufacturing Index: Published on Thursday at 14:00 GMT. This important survey has been positive in the past 7 months, indicating improving economic conditions. After exceeding expectations and reaching 17.6, it’s predicted to soften to 17.3 points this time.

That’s it for the major events this week. I’ll later publish specific currency outlooks.

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EUR/USD Outlook – March 15-19

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EUR/USD chart with support and resistance lines marked. Click to enlarge:

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GBP/USD – Trend lines on a Collision Course

The Pound is trading in a narrow range, and it’s getting narrower. The trend lines are about to collide – meaning that an explosion is underway. There are a few upcoming events that will determine the direction of explosion.

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