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Majors, US Dollar Forecast

Forex Weekly Outlook – July 3-7 2017

The US dollar and the Japanese yen were on the back foot as optimism gripped markets Will the party continue? The first week of the second half features a full build up to the all-important Non-Farm Payrolls as well as other top-tier figures. Here are the highlights for the upcoming week.

Some say we have seen a watershed week when many central banks expressed optimism and hawkishness. Draghi talked about reflation and a removal of stimulus, sending EUR/USD to the highest in a year. Carney changed his mind after only  one week and talked about removing stimulus. The Canadian dollar also continued higher, enjoying the hawkishness and rising oil. What about the dollar? It suffered some doubts about inflation from various Fed officials. However, it did beat the yen that remains the most dovish central bank out there.

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  1. Chinese  Caixin Manufacturing PMI: Monday, 1:45. China is the world’s No. 2 economy and any changes in its growth have an impact felt all over the world. The independent measure by Caixin provides a forward-looking gauge at the Chinese economy. In the past three months, the indicator fell short of expectations, with a slide to 49.6 in May. Any figure under 50 represents contraction. A similar score is expected now: 49.9.
  2. US  ISM Manufacturing PMI: Monday, 14:00. The US manufacturing sector is relatively small but remains important. Back in May, ISM’s purchasing managers’ index showed steady growth with a score of 54.9 points. This is the first hint towards Friday’s Non-Farm Payrolls. Expectations stand at 55 points.
  3. Australian rate decision: Tuesday, 4:30. The Reserve Bank of Australia kept its interest rate unchanged since lowering it to 1.5% in August last year. No change is expected now. The focus is on the accompanying statement. Given the recent rise in the Aussie, Governor Lowe and his colleagues could try to talk down the currency.
  4. UK  Services PMI: Wednesday, 8:30. The UK economy leans heavily towards services. After a few solid months, May saw a drop of this key indicator to 53.8 points, representing more tepid growth. It goes hand in hand with the poor growth in the UK economy. A small slide to 53.5 is on the cards.
  5. US  FOMC Meeting Minutes: Wednesday, 18:00. These are the minutes from the June decision, which resulted in a hawkish hike. Yellen expressed optimism about the economy, jobs and even shrugged off inflation on “one off” figures. Since then, some members have expressed concerns over slowing inflation. Will these concerns be repeated now? It is important to remember that the document is edited until the very last moment. FOMC members know that markets are watching.
  6. US ADP Non-Farm Payrolls: Thursday, 12:15. The report is usually released on Wednesday, but it is delayed due to the 4th of July celebrations. ADP’s report for private sector jobs was very positive in May, showing a leap of 253K jobs, far better than expected. However, this was not well correlated with the actual private sector jobs gained according to the official BLS report. A gain of 181K jobs is on the cards.
  7. US jobless claims: Thursday, 12:30. The weekly barometer of jobless claims has been stable around 240K in recent weeks. It is a reminder that the number of the jobless is sliding constantly and serves as another minor indicator for the NFP on Friday. A small rise from 244K to 245K is predicted.
  8. ISM Non-Manufacturing PMI: Thursday, 14:00. The report for the services sector is a very important indicator for the NFP. Contrary to the previous month, this report is released just on time to alter expectations. Back in May, the indicator slid from 57.5 to 56.9, still showing robust growth in the biggest sector in America. Watch out for the employment component in the specific content of the jobs report. A drop from 56.9 to 56.6 is predicted.
  9. Crude Oil Inventories:  Thursday, 14:30. Also here, the report is postponed from Wednesday to Thursday. The amount of stored oil is not falling very fast or at times it is rising. The last result was a minor rise of 0.1 million. This has kept the pressure on oil prices. Apart from the immediate impact on the Canadian dollar, it has a wider impact on the greenback: there is an inverse correlation between the dollar and oil prices. Lower oil prices could help the dollar.
  10. US Non-Farm Payrolls: Friday, 12:30. The king of forex indicators is with us and wages remain no less important than job growth. Back in May, the report was very disappointing, but the Fed raised rates anyway. Only 138K jobs were gained and year over year wage growth advanced by only 2.5%, remaining stuck. While the next rate decision is not accompanied by new forecasts, it could certainly impact the tone of the Fed. This time, a gain of 175K jobs is expected. Wage growth is forecast to rise by 0.3% m/m after 0.2% last time. The unemployment rate carries expectations to repeat the 4.3% level seen last month.
  11. Canadian jobs report Friday, 12:30. Released simultaneously with the US jobs report, Canada can expect better numbers. So far in 2017, the Canadian economy gained more positions than expected and participation is rising. The report for May was a blockbuster one: 54.5K jobs gained. The unemployment rate stood at 6.8%.

*All times are GMT

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Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.