Forex Signals Brief May 22 – 28 – Major Economic Events To Watch This Week
Arslan Butt • 4 min read
Over the previous week, the U.S. dollar was placed on the back burner due to the ongoing investigations into Russia's involvement in the U.S. elections. The U.S. President, Donald Trump suggested that F.B.I. Director James Comey end his inquiry into Trump's previous National Security Adviser Michael Flynn.
However, the previous FBI Director, Comey is now likely to testify before the Senate Intelligence Committee after Memorial Day. Anyways, the situation is still increasing uncertainty among investors and ultimately hiking the demand for haven assets. Let's take a look at the important macroeconomic factors which are likely to impact the market.
The Week Ahead – What To Look For?
- FOMC Member Harker Speaks (Monday – 14:00)
- FOMC Member Kashkari Speaks (Monday – 14:30)
- FOMC Member Brainard Speaks (Monday – 23:00)
- FOMC Member Evans Speaks (Tuesday – 01:10)
- FOMC Member Kashkari Speaks (Tuesday – 13:00)
- New Home Sales (Tuesday – 14:00)
- FOMC Member Kashkari Speaks (Tuesday – 19:00)
- FOMC Member Harker Speaks (Tuesday – 21:00)
- Existing Home Sales (Wednesday- 14:00)
- Crude Oil Inventories (Wednesday- 14:30)
- FOMC Meeting Minutes (Wednesday- 18:00)
- FOMC Member Kaplan Speaks (Wednesday- 22:00)
- OPEC Meetings (Thursday- All Day)
- Unemployment Claims (Thursday- 12:30)
- FOMC Member Brainard Speaks (Thursday- 14:00)
- Core Durable Goods Orders m/m (Friday- 12:30)
- Prelim GDP q/q (Friday- 12:30)
- Durable Goods Orders m/m (Friday- 12:30)
- Revised UoM Consumer Sentiment (Friday- 14:00)
- Eurogroup Meetings (Monday -All Day)
- French Flash Manufacturing PMI (Tuesday – 07:00)
- French Flash Services PMI (Tuesday – 07:00)
- German Flash Manufacturing PMI (Tuesday – 7:30)
- German Flash Services PMI (Tuesday – 7:30)
- German Ifo Business Climate (Tuesday – 8:00)
- Flash Manufacturing PMI (Tuesday – 8:00)
- Flash Services PMI (Tuesday – 8:00)
- ECB President Draghi Speaks (Wednesday – 12:45)
- Prime Minister May Speaks (Monday – 18:00)
- Public Sector Net Borrowing (Tuesday – 8:30)
- Inflation Report Hearings (Tuesday – 9:00)
- Second Estimate GDP q/q (Thursday- 8:30)
- Prelim Business Investment q/q (Tuesday – 8:30)
- RBA Assist Gov Debelle Speaks (Monday – 17:30)
- Construction Work Done q/q (Wednesday – 01:30)
- RBA Assist Gov Debelle Speaks (Wednesday – 08:00)
- Wholesale Sales m/m (Tuesday – 12:30)
- BOC Rate Statement (Wednesday – 14:00)
- Overnight Rate (Wednesday – 14:00)
EUR/USD – The Overbought Currency Pair
The single currency Euro continued to trade higher against the greenback, as investors felt unsure about the political conditions in the United States.
Most of the gains in EUR/USD weren't caused by a stronger Euro, but due to a weaker U.S. dollar. The Buck fell to a six-month low in the previous week, however, the longer term sentiment is still unclear because U.S. economic figures are constantly improving. For instance, last week the Fed Manufacturing index rose to 38.8 in the month of May from 22.0 in February, and U.S. unemployment claims fell to 232K compared to a previous figure of 236K.
Forex Trading Signal
At the moment, the EUR/USD is trading in between the upper and lower range, with an unclear trading signal. However, the idea is to trade the range by selling at $1.1285 with a stop loss above $1.1310 and buying at $1.1085 with a stop loss below $1.1082.
EUR/USD – Sideways Trend Weekly Chart
Technical Outlook- Weekly
On the daily chart, we can see a strong bullish momentum for EUR/USD. For now, the pair has entered the overbought trading zone. Both of our momentum indicators, the RSI & Stochastic are trading above 70 & 80 respectively, demonstrating that sooner of later we may see a retracement.
However, a retracement seems unlikely until the pair reaches any significant resistance level and $1.1285 seems to be that particular trading level.
Additionally, the pair has formed a bullish engulfing candlestick pattern on the weekly chart, which signifies investor's strong buying sentiment.
USD/JPY – 38.2% Fibonacci Retracement
The safe haven asset, Japanese Yen gained dramatically against the U.S. dollar for two reasons. Firstly a weaker dollar and secondly due to boosted haven demands.
The risk on sentiment shifted to a risk-off. This resulted in the dramatic fluctuations in the market as the political turmoil in the United States drove traders out of risky assets such as stocks and indices while pushing them towards the Japanese Yen, Swiss Franc, Government Bonds and the Bullion.
The Japanese Yen & Gold are likely to continue to benefit from the ongoing political developments influencing the global markets.
Forex Trading Signal
We have two trade ideas for the Japanese Yen:
First – Take up a sell position below $111.700 with a stop loss of $111.950 and take profit of 110.500.
Second – On the flip side, take up a buy position above $111.750 with a stop loss below $111.550 and a take profit of $112.450.
USD/JPY – 38.2% Retracement Daily Chart
Technical Outlook – Weekly
On the daily chart, we can see that the USD/JPY has completed the 38.2% Fibonacci retracement at $111.630 and is consolidating below this area. The pair has managed to close below 50-periods moving average which is extending it another resistance at $111.500. The momentum indicators have come out of the oversold zone as a consequence of profit taking by sellers.
Lastly, the pair has formed several Doji and Spinning Top, which suggest that investors are fairly uncertain about the selling trend.
This week, it is best to monitor the political developments in the United States as prevailing tensions in Washington are likely to have a huge impact on investors' risk appetite. Consequently, the bullion market is likely to stay supportive and Japanese Yen may continue trading its bullish moment against the U.S. dollar.