Forex Weekly Outlook – May 31 – June 4

The upcoming week is very busy: we have rate decisions from Canada and Australia, GDP from various countries and the almighty Non-Farm Payrolls to end the week with a blast. Here’s the outlook for the major events that will impact forex trading.

The markets calmed down, at least temporarily, after China denied dumping the Euro. But the debt crisis in the old continent is far from over – with a 2 trillion euro debt of Spain (recently downgraded by Fitch), Portugal and Greece to other countries, defusing the situation won’t be very easy. OK, let’s start the review:

1. Canadian GDP: Published on Monday at 12:30 GMT. Canada’s monthly GDP disappointed in February, as it didn’t keep the momentum of February and of Q4 and rose by only 0.3%, half of the previous month’s growth rate. This release for March closes the first quarter of 2010 and will receive special attention. A slightly better growth rate is predicted.
2. Australian rate decision: Published on Tuesday at 4:30 GMT. The central bank (RBA) made it clear that after the surprising firth and sixth rate hikes since the crisis, it would take a break. The hikes proved to be effective, as the real estate market calmed down. The Cash Rate is expected to remain unchanged at 4.5%, and the RBA Rate Statement will probably indicate another pause in the next decision.
3. Swiss GDP: Published on Tuesday at 5:45 GMT. Switzerland exited the recession in Q3 of 2009, and its growth accelerated to 0.7% in Q4. This positive trend will probably be continued in 2010 with the same growth rate, as all the economic indicators were positive during this quarter. The SNB even showed satisfaction and “allowed” the currency to appreciate.
4. European employment figures: Published on Tuesday at 7:55 and 9:00 GMT. Germany starts with the release of its unemployment change figure. Last month was excellent – a drop of 68,000 unemployed people, and it followed another great month beforehand. Another positive month of drops (17K is expected) will show that Germany continues to be the locomotive of the EU, carrying everyone else on its back. The second figure is the all-European unemployment rate. It’s been around 10% in the past 6 months, casting a big shadow on the Euro-zone. Note that Spain’s unemployment rate passed the 20% mark, so another rise in the all-European unemployment rate is expected now.
5. Canadian rate decision: Published on Tuesday at 13:00 GMT. In the previous rate decision, Mark Carney’s BOC made it clear that a rate hike is coming soon. The big debate is if it will be seen now, or in the next decision on July 20th. Given the recent slump, there’s a higher chance that the Canadian Overnight Rate will stay at 0.25% for one more month, although a rise to 0.5% isn’t ruled out, as USD/CAD is far from parity.
6. Australian GDP: Published on Wednesday at 1:30 GMT. Australia never dipped into recession during the financial crisis. In Q4 of 2009, Australia enjoyed a growth rate of 0.9%, the highest since 2007. The rate hikes will probably translate into a slowdown in the figure for the first quarter of 2010 – only 0.6% growth.
7. US Pending Home Sales: Published on Wednesday at 14:00 GMT. Other housing figures from the US were excellent. For example, existing home sales jumped by 7.6%. So also with pending home sales, the positive trend will probably continue. The rise of 5.3% seen last month will probably be followed by a similar rise of 4.8%, boosting the dollar.
8. American ADP Non-Farm Payrolls: Published on Thursday at 12:15 GMT. The figure from ADP isn’t too good in predicting the Non-Farm Payrolls, but always shakes the markets. This somewhat lagging indicator showed a gain in jobs in the past two months. The gain of 32K jobs in the private sector will probably be followed by a bigger rise this time – 56,000.
9. American Unemployment Claims: Published on Thursday at 12:30 GMT. This weekly barometer is usually a better indicator. During most of this month’s weeks, it stood around 440K, signalling a positive NFP. Unemployment claims stood on 460K last week. A drop below 430K will raise expectations, while a rise above 480K will be very disappointing.
10. American ISM Non-Manufacturing PMI: Published on Thursday at 14:00 GMT. After last week saw a leap in the manufacturing sector (to 63.3 points), also the services sector should experience fresh highs after stalling at 55.4 – the highest score for this purchasing managers’ index since 2007.
11. Canadian employment data: Published on Friday at 11:00 GMT. Canada’s job gain was outstanding last month – 108.7K – over 4 times the early expectations. In a previous whopping result, the loonie leaped. This totally erased the disappointment from the previous month. Also the unemployment rate surprisingly fell to 8.1%. These excellent figures will probably not be repeated, as May saw global problems. A gain of 20,700 jobs is predicted, and the unemployment rate is expected to drop to 8%.
12. Non-Farm Payrolls: Published on Friday at 12:30 GMT. The most important indicator in forex trading was superb last month – it showed that the American job market gained 290K jobs, far better than 198K that was predicted. Also the previous month’s number was upgraded to 230K. On the other hand, the unemployment rate jumped from 9.7% to 9.9%, avoiding double digits, but still causing worries. The government’s decennial census will have a strong impact this time – a gain of 500,000 jobs is expected. On the other hand, the unemployment rate will probably only edge down to 9.8%. This release always creates choppy trading that begins many hours before the release and lasts until the closing bell. I highly recommend reading my 5 notes for Non-Farm Payrolls trading.

A very busy week indeed. Stay tuned for specific currency updates, including the return of the NZD/USD outlook.

Further reading:

• \For the Euro/Dollar, look into the  EUR USD Forecast.
• For the British Pound (sterling), read the  GBP/USD forecast.
• For the Australian dollar (Aussie), check out the  AUD/USD forecast.
• For the New Zealand dollar (kiwi), read the NZD/USD forecast.
• For USD/CAD (loonie), check out the  Canadian dollar forecast.

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