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As we look ahead to the week, several critical economic events across major economies are set to influence market movements. Here's a breakdown of what to expect:
Monday, August 19:
- Japan Machinery Orders YoY and MoM (Jun): Japan’s Machinery Orders data for June will provide insights into the country’s corporate investment trends. A strong rebound could signal confidence among Japanese businesses, potentially lifting the Yen. However, a weak read could reinforce concerns over the country's economic outlook, leading to further policy easing expectations from the Bank of Japan (BoJ).
- United States Fed Waller Speech: Federal Reserve Governor Christopher Waller's speech will be closely watched for any hints regarding the Fed's future monetary policy stance. With the US economy showing mixed signals, Waller's comments could either reinforce the current hawkish stance or hint at a potential pause in rate hikes, influencing the USD's direction.
Tuesday, August 20:
- Australia RBA Meeting Minutes: The Reserve Bank of Australia (RBA) Meeting Minutes will offer deeper insights into the central bank's decision-making process. Markets will be keen to understand the RBA’s stance on inflation and the labour market, which could drive volatility in the AUD. Hawkish tones could support the Aussie, while dovish commentary may lead to further declines.
- Canada Inflation Rate YoY (Jul): Canada’s July inflation data will be crucial for shaping expectations around the Bank of Canada's (BoC) next moves. A higher-than-expected print could reignite speculation of further rate hikes, supporting the CAD, whereas a softer reading might push the BoC towards a more cautious approach.
Wednesday, August 21:
- Japan Balance of Trade (Jul): Japan’s trade balance for July will be under scrutiny, especially considering global trade tensions and the Yen’s recent movements. A strong surplus may boost the Yen as it reflects robust export performance, while a deficit could weigh on the currency.
Thursday, August 22:
- United States FOMC Minutes: The release of the FOMC minutes will provide detailed insights into the Fed's July meeting. Traders will be looking for any signals regarding the pace and duration of future rate hikes. A more hawkish tone could bolster the USD, while signs of caution may lead to a sell-off.
- Germany HCOB Manufacturing PMI Flash (Aug): Germany's flash PMI for August will be pivotal in assessing the health of the Eurozone’s largest economy. A contraction in manufacturing activity could weigh on the Euro, especially if it underscores concerns about a broader economic slowdown in the region.
Friday, August 23:
- Japan Inflation Rate YoY (Jul): Japan’s inflation rate for July will be critical in determining the BoJ's policy trajectory. If inflation continues to rise, it could pressure the BoJ to rethink its ultra-loose monetary policy, potentially leading to Yen strength. Conversely, a subdued inflation print might reinforce the status quo, keeping the Yen under pressure.
With a heavy economic calendar this week, expect increased volatility across major currency pairs. The USD is likely to be driven by the FOMC minutes and Fed Waller’s speech, while the Yen will be in focus due to multiple data releases. The Euro and AUD will also see significant movement in response to key economic indicators.
As always, keep an eye on risk sentiment, which could sway markets depending on how these events unfold.
Key Highlights:
- USD Index: Opened the Monday morning with a fast move of -0.3%.
- Major Currencies: With the weakness of the USD the major currencies such as AUD, GBP, EUR and JPY continue to strength on the back of the greenback, EURUSD rising 0.16%, GBPUSD 0.17%, AUDUSD 0.40% and USDJPY dropping heavily for -1.19%
- Bond Yields: US10Y dropping a small percentage of -0.03% as of US02Y raising 0.15%, JP10Y up all the way to 2.63%, EU10Y down heavily at -0.35%, EU02Y -1.34%, AU10Y up a marginally 0.03% and AU02Y down -0.03%
- Commodities: Gold has reached all-time highs again after 18 July, just one month after, all time highs now on $2.509 and down for the day -0.34%, oil prices are failing with geopolitical tensions of -0.42%.
Trading Perspective:
- AUD/USD: RBA Meeting Minutes (Tuesday): The Australian Dollar could see increased volatility following the release of the RBA Meeting Minutes. If the minutes reveal a more hawkish tone, particularly concerning inflation and wage growth, AUD/USD could break higher, testing resistance around 0.6720. However, a dovish interpretation might lead to renewed selling pressure, with 0.6600 being a key support level to watch.
- USD/JPY: Japan Machinery Orders (Monday): The Yen is likely to be highly reactive to the Machinery Orders data, as a strong rebound could lead to a surge in Yen buying, pushing USD/JPY lower. Given the market's sensitivity to Japanese economic indicators, a weak reading could fuel speculation of additional BoJ easing, providing support for the USD/JPY pair. Traders should watch for a potential break below key support levels if the data surprises on the upside.
Japan Balance of Trade (Wednesday) & Inflation Rate (Friday): Both events could add further volatility to the Yen. A strong trade balance could reinforce Yen strength, while inflation data could push the BoJ towards a more hawkish stance if it shows persistent price pressures. Expect USD/JPY to remain under pressure, with a possible range between 145.50 and 148.00 throughout the week.
- EUR/USD: Germany HCOB Manufacturing PMI (Thursday): The Euro’s movement will largely depend on Germany's PMI data. A weak PMI could weigh on the Euro, potentially driving EUR/USD lower, especially if concerns about a broader Eurozone slowdown intensify. However, a stronger-than-expected PMI could provide a lift to the Euro, pushing the pair towards 1.1100.
FOMC Minutes (Thursday): The release of the FOMC minutes could be a significant driver for the USD. A hawkish tone from the Fed could see EUR/USD come under pressure, potentially revisiting support around 1.0900. Conversely, a dovish surprise could bolster the Euro, extending gains above 1.1000.
- GBP/USD: The British Pound has been benefiting from the overall weakness in the USD. Continued risk-on sentiment, coupled with any further signs of economic resilience in the UK, could see GBP/USD pushing higher, with resistance levels at 1.2950 and 1.3000. However, traders should be cautious of potential reversals if the USD strengthens following the FOMC minutes.
This content may have been written by a third party. ACY makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplies by any third-party. This content is information only, and does not constitute financial, investment or other advice on which you can rely.
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