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Next week’s Forex forecast

Sergiy Zlyvko
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Recently published data from the U.S. suggests that economic condition gradually stabilized after a crash in January and February on the background of the difficult weather conditions. In particular, the weekly report on initial jobless claims showed unemployment falling to the lowest level since May 2007 (300 thousand from 332 thousand). Data on consumer confidence from the University of Michigan reflected improvement in sentiment among the population (82.6 in April from 80.0). Thus, there is reason to believe that the demand for the dollar will soon be back yet.

Japan next week will not publish its own meaningful statistics. A scheduled performance of the Bank of Japan will not make much of an impression in the market. The exception will be in the case if Mr. Kuroda says something different from what he had been previously announced. Thus, a pair traditionally will largely be influenced by the U.S. statistics. Retail sales, consumer price index, the number of building permits issued, the number of housing starts, industrial production. In light of recent Fed comments that when deciding on monetary policy, they will take into account a wide range of indicators, each of these reports is becoming quite significant. In this case, if the data continue to indicate a recovery of the U.S. economy, the dollar may strengthen, aiming first at the district level of the rise from 101.80 to the next goal at 102.30.

A large number of reports in the Eurozone economy are not planned for publication. Therefore largely the dynamics of the pair can be caused by external factors. Although, on Saturday, April 12, ECB President Mario Draghi’s speech is scheduled. Therefore, it is possible that the beginning of the week will be under the influence of his comments. And it is possible that he will speak again in the way that the current euro exchange rate is too high. However, such statements are unlikely to lead to sharp fluctuations in currency, since it responds to verbal factors which are not too active. In addition, the publication of sentiment index in the business environment from Germany ZEW will be a key event this week. The decline may be an indication that the business community is not optimistic about the economy of the country, fearing of strong European currency negative impact. Consequently, the euro could come under pressure with the primary goal at 1.3800 mark and further 1.3720. Also the data on the trade balance of the Eurozone is noteworthy, which will assess how the existing euro rate effects the state of foreign trade. Given the previously published report on the trade balance of Germany, most likely it will not bring optimistic information.

Next week some interesting reports are scheduled for the publication in the United Kingdom. Firstly, it this consumer price index data. Provided that the price pressure will continue to decline, the pound may come under pressure as the low rate of inflation will not allow the Bank of England to a more rapid tightening of monetary policy. Secondly, this is the data about the UK labor market. On the background of the individual signs of economic recovery slowing pace, positive data (namely, the reduction of applications number for unemployment benefits) may provide some support for the pound.

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