Forget The Economic Events, Wait For Reversals 24 – 28 April Weekly Forecast - Forex News by FX Leaders

Forget The Economic Events, Wait For Reversals 24 – 28 April Weekly Forecast

Posted Monday, April 24, 2017 by
Arslan Butt • 5 min read

In the early Asian session today, the market began trading with massive action and huge gaps in the prices. The volatility was to be expected due to the French Presidential elections, which we discussed in our daily reports.

This report intends to discuss the major economic events to watch for this week, as well as potential trade opportunities. I have divided this report into two sections. First, I will share the major fundamentals and second, we are going to talk about the technical side of the market along with potential trade ideas for this week.

The Week Ahead – What To Look For?

USD

  • FOMC Member Kashkari Speaks (Monday – 16:30)
  • FOMC Member Kashkari Speaks (Monday – 20:15)
  • CB Consumer Confidence (Tuesday- 15:00)
  • New Home Sales (Tuesday- 15:00)
  • Crude Oil Inventories (Wednesday- 15:30)
  • Core Durable Goods Orders m/m (Thursday – 13:30)
  • Unemployment Claims (Thursday – 13:30)
  • Durable Goods Orders m/m (Thursday – 13:30)
  • Pending Home Sales m/m (Thursday – 15:00)
  • Advance GDP q/q (Friday- 13:30)
  • Advance GDP Price Index q/q (Friday- 13:30)
  • Employment Cost Index q/q (Friday- 13:30)
  • Chicago PMI (Friday- 14:45)
  • Revised UoM Consumer Sentiment (Friday- 15:00)
  • FOMC Member Brainard Speaks (Friday- 18:15)

EUR

  • German Ifo Business Climate (Monday – 9:00)
  • German Prelim CPI m/m (Thursday – All Day)
  • Spanish Flash CPI y/y (Thursday – 8:00)
  • Spanish Unemployment Rate (Thursday – 8:00)
  • Minimum Bid Rate (Thursday – 8:00)
  • ECB Press Conference (Thursday – 13:30)
  • German Retail Sales m/m (Friday – 7:00)
  • Spanish Flash GDP q/q (Friday – 8:00)
  • M3 Money Supply y/y  (Friday – 9:00)
  • CPI Flash Estimate y/y (Friday – 10:00)
  • Core CPI Flash Estimate y/y (Friday – 10:00)

GBP

  • Public Sector Net Borrowing (Monday – 9:30)
  • Prelim GDP q/q (Friday – 9:30)

JPY

  • Monetary Policy Statement (Thursday – 4:50)
  • BOJ Outlook Report (Thursday – Tentative)
  • BOJ Policy Rate (Thursday – Tentative)
  • BOJ Press Conference (Thursday – 7:30)
  • Household Spending y/y (Friday – 0:30)

AUD

  • CPI q/q (Wednesday -2:30)
  • Trimmed Mean CPI q/q (Wednesday -2:30)
  • RBA Gov Lowe Speaks (Thursday – Tentative)

CAD

  • Wholesale Sales m/m (Monday- 13:30)
  • Core Retail Sales m/m  (Wednesday- 13:30)
  • Retail Sales m/m (Wednesday- 13:30)
  • GDP m/m (Friday- 13:30)
  • RMPI m/m (Friday- 13:30)

EUR/USD – Causes Of Gaps In the Market

As we know, the first round of the French elections resulted in a Macron victory. These results have triggered a huge gap in the single currency Euro. In the Asian session today, the EUR/USD began the week at $1.0918, marking a 5-month high.

Now, Macron is likely to encounter Le Pen in the final round of the elections, which are scheduled for May 7th. Meantime, I'm expecting the market to reverse and fill its gaps of more than 135 pips.

This week is very important for the single currency Euro. We are expecting several high impact economic events, and specifically the ECB Press Conference and the Minimum Bid Rate standouts to me.

Considering the overall economic condition of the Eurozone, I must say that things are going well for Mario Draghi however, the inflation is still not hitting its mark. Therefore, the most plausible upshot is that the ECB will move policy over to the 2nd half of 2017. Nonetheless, this meeting is unlikely to affect any significant change.

EURUSD - Daily ChartEURUSD – Daily Chart

Technical Outlook – Weekly

On the technical side, the EUR/USD is confusing us with two things. First of all, the pair has opened with a massive gap in prices. As we already know these gaps are meant to be filled on the same day or in subsequent days. As per this rule, the pair has to give back earlier gains.

Secondly, looking at the daily timeframe, the EUR/USD has broken above a double top resistance level of $1.0865. This has opened more room for buying up to $1.0966 & $1.1045. However, It's really important to pay attention to today's closing. If the market closes below $1.0855, then the probability for reversals will be much greater.

Forex Trading Signal

Investors are recommended to keep their sell positions below $1.0905 with a stop loss above $1.1000 and take profit at $1.0800.

USD/JPY – Diminished Safe Haven

The USD/JPY has also made its way to the upside with a gap of nearly 130 pips. You must be thinking, what does the Eurozone have to do with the Japanese Yen, right?

This is because over the past few weeks the market has been under pressure due to upcoming events which were causing a great deal of uncertainty and fear in the market. One of these events was the French Presidential elections. Hence, the investors boosted demand for haven assets like Bullion and Japanese Yen.

However, after the outcome of the first round of the elections, investors have gained confidence and consequently stopped their demand for haven assets. Early this morning we experienced a major sell-off.

Investors are recommended to monitor the Bank of Japan policy meeting on Thursday. The meeting is important though I'm not expecting any change in the recommended interest rate. However, we can count on the press conference to give us further clues about their upcoming plans.

USDJPY - 4 Hour ChartUSDJPY – 4 Hour Chart

Technical Outlook – Weekly

The scenario remains similiar for the USD/JPY pair. This is holding right below a major (support which became a) resistance level of $110.525. Looking at the 4-hours time frame, the pair is showing a descending trendline resistance near $110.530 which is making $110.525- $110.300, a very significant sell zone.

The RSI is overbought above 70 and is suggesting that buyers may get exhausted so we may see sellers entering the market in the New York session today. Lastly, we definitely can't ignore the 50 periods EMA in the daily chart, which is still demonstrating a selling trend in the pair.

Forex Trading Signal

Personally, I'm not comfortable in setting a buying position at the moment. Perhaps, I will look into entering a sell position below $110.525 with a stop loss above $111.750 and a take profit of $109.350, bearing in mind that it's a weekly position.

GBP/USD – The Choppy Trader

The GBP/USD moved dramatically higher on Tuesday, which was due to the call for early general elections from U.K Prime Minister Theresa May. Consequently, the Pound rallied to place a multi-month high at $1.2902. Since then, the pair has consolidated into the sideways trend with a lower range of $1.2765 and an upper range of $1.2850.

On the fundamental side, the U.K doesn't have much to release, but the GDP (Gross Domestic Product) data will be worth watching. The macroeconomic events from the United States as well as the geopolitical issues are worth watching in order to determine further trends in the pair.

GBPUSD - 4 Hour ChartGBPUSD – 4 Hour Chart

Technical Outlook – Weekly

As recommended in the 20th of April Morning Brief, the GBP/USD has completed a 38.2% Fibonacci retracement at $1.2750 and is still holding above this level. The break below this level is likely to push the market lower towards $1.2710 and $1.2652.

On the other hand, the 50 periods EMA and the RSI, are both indicating a bullish bias in the pair. Lastly, we can see a descending triangle pattern in the hourly timeframe which means the pair has a higher probability of breaking downside.

Forex Trading Signal

Choppy trades are recommended with a buying position at $1.2750 and selling position at $1.2820 with a minimum stop loss of 25- 30 pips.

Conclusion

The French presidential elections and the ECB Monetary Policy decision, are both likely to rule the market trends this week.  The GBP figures from the United States as well as from the United Kingdom will be worth watching. On the other hand, the geopolitical issues are likely to have their impact on the market. Specifically, the North Korean and the U.S conflicts are likely to boost demand for haven assets. 

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About the author

Arslan Butt // Index & Commodity Analyst
Arslan Butt is our Lead Commodities and Indices Analyst. Arslan is a professional market analyst and day trader. He holds an MBA in Behavioral Finance and is working towards his Ph.D. Before joining FX Leaders Arslan served as a senior analyst in a major brokerage firm. Arslan is also an experienced instructor and public speaker.
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