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Next week’s Forex forecast

Sergiy Zlyvko
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The coming week will be the first week of the month, and so it will be full of important macroeconomic releases and can significantly affect the prospects of the dollar in February. On Monday, February 3 at 15.00 GMT U.S. Institute for Supply Management will publish PMI index in the industry. On Wednesday (February 5, 15.00 GMT), the same organization will provide the data on the same index in the services sector and ADP Inc. announces the figures on the number of new jobs in January (13.15 GMT) in its version. A report on the labor market from the Bureau of Labor Statistics (February 7, 13.30 GMT) will end the week.

Macroeconomic data from the world’s largest economy has recently received positive. January weak report on the number of new jobs in December was attributed to the abnormal frosts and, accordingly, the median forecasts stands at 185,000. However, any significant deviation from it to the downside may already zoomed to the weakness in the economy and then hit the dollar, as the Fed will get an excuse to slow down the process of quantitative easing program reducing.

Single European currency will expect the outcome of the Governing Council of the ECB next meeting. European regulator is in a difficult position. On the one hand the major economies of the region are in the need of some tightening of monetary policy, and on the other side – its peripherals require mitigation. This time the region is facing the threat of deflation, which has not yet evaluated as significant, but prices’ growth rate continues to fall steadily. We believe that the ECB has some chances to surprise the market by additional money policy mitigation measures. Against dollar’s strengthening, the euro will remain under pressure unless Mario Draghi will not present more surprise during a press conference.

From technical point of view, it may be noted that EURUSD pair found resistance at 50-day moving average and moved down. Such behavior often signals about the presence of potential to reduce. There are virtually no reasons for the strong euro, but the dollar may strengthen in the event of positive macroeconomic data from the U.S. In this case it is possible to test the support area at 1.3360.

British pound is expected to report on the PMI indices in industry, construction and services, which will be published traditionally in the first three working days at 09.30 GMT. The results of the next meeting of the Monetary Policy Committee will also get the spotlight. However, nobody expects any surprises from British regulator. All changes in monetary policy that may occur, Mark Carney outlined in Davos. We believe that GBPUSD pair can touch the support at 1.6330, but only if the dollar strengthened along the entire market.

Reserve Bank of Australia will also hold a regular meeting and announce its results on Tuesday at 03.30 GMT. It is expected to leave interest rates unchanged, but will retain its rhetoric aimed on Aussie’s weakening. On Thursday at 06.30 GMT the data on retail sales and trade balance will be published and on Friday – official release of the Monetary Policy. If macroeconomic statistics will present no surprises to the upside, AUDUSD pair will continue to decline in the area of 0.85.

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