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Next week’s Forex forecast

Sergiy Zlyvko
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The main conclusion that can be drawn from published data on Friday on the labor market – the U.S. economy continues to recover, but at a slower pace than expected. To some extent, this is good news, because it suggests that the Fed will not speed up the process of folding, but ahead the U.S. dollar may has difficult days since the proximity to the target level of unemployment on the background of unstable economic picture may force Fed representatives to reconsider its orientation from 6.5% to 6.0%, or completely abandon the policy of pegging to a particular indicator.

In the coming week the performance of the new Fed chief Janet Yellen before Congress is planned which will be under the focus of investors. Undoubtedly, it will be asked the questions about Fed’s plans in relation to the target levels of the labor market and, most likely, she will say that the revaluation will happen in March, but even talk of revaluation can put pressure on the U.S. dollar. In addition, another important event of the week will be the publication of the report on retail sales, which may eventually undermine USD. Figure is projected to grow by only 0.2%, while considering all the same slow pace of the jobs recovery in the last two months than can bring additional disappointment. Thus, USDJPY pair may incur losses during the trading week with the immediate goal at around 101.00.

The further fate of the euro this week will depend on developments in the U.S., since key reports from the Eurozone are not scheduled until Friday, when Eurozone GDP for the 4th quarter will be published. Last year was quite difficult for the E-17 and accelerated growth by the end of 2013 was not observed. Thus, it is unlikely that publication of indicators may be a sufficient catalyst for the further strengthening of EURUSD pair. If Janet Yellen will speak the U.S. economy is still too slowly recovering and in the current circumstances it is impossible to talk about speeding up the process of QE3 folding, it should support further strengthening of the pair to the area of 1.3720.

GBPUSD pair will has its own catalysts for growth in the coming week as the quarterly inflation report from the Bank of England, where we also learn a new look at the target mark on unemployment, as previously established 7.0% can be achieved in the coming months – current time indicator is at 7.1%. Unfortunately, the pace of economic recovery is not high enough to talk now about interest rates rising. Thus, we believe that the monetary authorities refuse to talk about specific economic benchmarks against which achievement we can wait for monetary policy tightening. Potentially, it can put pressure on the British currency with immediate goal to 1.6280 mark.

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