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Next week Forex forecast

Sergiy Zlyvko
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The main event of the coming week for the currency market will be the publication results of a U.S. Federal Reserve meeting. As for American regulator, we expect that it will shorten the quantitative easing program by the next 10 billion. Weak labor market data for December charged to abnormal weather conditions and Fed officials, who spoke last week, made it clear that the decrease in purchases of securities will occur regularly and may be suspended only if macroeconomic statistics deteriorates significantly.

On this background, the U.S. dollar may feel more confident but the committee has not yet fall out of the schedule of purchases reduction, which it vaguely outlined in December. Accordingly, we do not expect large-scale movements.

The main event of the week for single European currency traders will be a report on the business climate index in Germany from the Center for Economic Studies Ifo (January 27, 09.00 GMT). After the publication of strong data on the PMI indices deviations from the median forecasts in the growth direction are possible. The EURUSD is poised to continue to grow, unless the Fed will not change the balance of power in the market against the dollar. In terms of technical analysis, 1.3820 determined as the highest point of possible movement. Overcoming this level, in our opinion, is not yet supported by fundamental data. Even in the case of rapid improvement in the economy of the Eurozone, the ECB is unlikely to move to tighten monetary policy in the foreseeable future, since there is no inflationary threat.

Mark Carney significantly weakened the British pound. Market participants have been stored for a rate increase as soon as possible, but the regulator has signaled that it is ready to abandon its targets for monetary policy and not ready to rush. We admit the possibility of impulse formation towards 1.6230 support, but to find sterling short positions it does not look very attractive. Its positions are supported by static quality macroeconomic and monetary policy in the UK, even if it will not change, remaining much stricter than in the U.S. The publication of GDP data for the fourth quarter (January 28, 09.30 GMT) and the performance of Mark Carney (29 January, 12.15 GMT) will be the main events of the week. The situation in the UK economy is good, but it is not a surprise. Even deviations from the median towards GDP growth under different orientations on monetary policy cannot move pound up strongly.

The Australian dollar is in free fall. PMI data in the industrial sector in China signaled that the second world economy continues to slow and the measures of state incentives do not give desired effect. In addition, Aussie is under pressure by the position of the Reserve Bank of Australia, which threatens intervention and believes the culprit weakness in the non-oil sectors of the economy a strong national currency. The goal of this move down is a mark 0.8550.

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