We’re going to have a look at the main risk events and economic data releases that can be the catalysts for some volatility and trend generator in the Forex market.
We’re going to cover all the major currencies and outline what we can expect in terms of the price action in the coming week.
We’re also going to evaluate whether the market is going to be trading, ranging or have any breakout capacity.
The markets are always moving between these three evolving types of market conditions.
We move from range to a breakout to trend and back again to range.
What determines the type of market you’re dealing with is often the fundamentals and to certain extends the key technical levels.
The greenback ended the previous week on a strong bullish note.
This week we have the possibility to return again to a partial shutdown if there is no deal or extension of the stop-gap funding by the end of the week.
This uncertainty should keep the US dollar on its toes. This will certainly inflict some volatility and keep the dollar in a range.
The dollar technical pattern is range bound between key resistance level 96.69 and the big psychological number 95.00.
A break below 95.00 is hard to be capitalized so we should expect any move to the downside to be limited.
On the US economic calendar the only notable risk event is the CPI inflation figure which should come flat at 0.2%.
We also have some high-figure Fed speakers including Chairman Powell that can give more clarity to the price action.
From the other side of the monetary policy spectrum we can note the Eurogroup meeting.
The economic output in Europe’s largest economy Germany is expected to be published on Thursday.
Based on the general consensus the German economy should contract by 0.9% versus 1.1% previous reading.
The bullish US dollar momentum looks to gain more traction against the Euro as we have more negative news event coming from Europe coupled with positive news from the US the EUR/USD looks poised to make a decisive break below the key support level 1.1290.
The British Pound is also exposed to greater volatility because there is some high profile risk events scheduled this week.
On Monday, the GDP figures for the last quarter of 2018 are expected to inch lower to 0.2% versus 0.6% previous reading.
The GDP figures are followed by the trade balance figure.
Furthermore on Wednesday we have the CPI inflation figures, which based on the market consensus, should inch lower to 2% versus 2.1% previous reading.
On top of this we also have the ongoing Brexit negotiations which will kick off on Monday when the UK Brexit minister Barclay and EU’s Barnier will discuss the Irish backstop.
Elsewhere on major currencies the RBNZ is expected to keep interest rate policy on hold at 1.75% as global risks grow.
The NZD/USD exchange rate seems trapped in a wide range between key resistance level 0.6970 and 0.6700 support level.
A dovish RBNZ can help the previous week sell off to gain more traction and possibly challenge the support level 0.6700.
The USD/JPY looks also poised to make a decisive break above the big psychological number 110.00 and open the door for a more extended rally.