Week Ahead: Christmas, GDP Report, Kuroda’s Speech, CPI Data, and a USDSGD Trade Idea
Next week is going to be a relatively quiet one as most financial institutions across the world close for Christmas. Among the major currencies, only the Japanese yen will have a full schedule of economic releases. The rest have little to no reports.
BOJ Governor Kuroda’s Speech and Third-Tier Data from Japan
The biggest event risk for the Japanese yen is going to be BOJ Governor Haruhiko Kuroda’s speech on Thursday. He is slated to speak in Tokyo at the Japan Business Federation meeting. In the Bank of Japan’s (BOJ) last meeting, the central bank kept rates steady at -0.10%. Kuroda also reflected some optimism on the Japanese economy. According to him, they expect growth to pick up next year given that risks to global growth have been subdued following the US-China phase one deal. He is also confident that the government’s fiscal stimulus program will contribute to growth.
Despite these remarks though, Kuroda still warned that the central bank still has room to drive rates lower, if needed.
We’ll get a deeper insight into the central bank’s commitment to negative rates when the minutes of their last meeting is released on Monday at 11:50 pm GMT.
Another key report that the BOJ keeps track of is the CPI report. The core reading for December is due on Tuesday at 5:00 am GMT. A reading higher than last November’s 0.3% uptick may have a bullish effect of the Japanese yen as it would take the BOJ closer to its 2% inflation target.
Meanwhile, the unemployment rate for November is scheduled to come out on Thursday at 11:30 pm GMT. Market participants are likely expecting it to match its October reading at 2.4%.
In terms of purely economic data, the biggest report we have next week is Canada’s GDP report for October. The country’s economic growth has been muted in the past few months with August and September readings both at 0.1%. Market participants eye the October report to also print at 0.1%. A better-than-expected figure will likely be bullish for the Canadian dollar as it would keep off pressure from the Bank of Canada (BOC) to ease rates soon.
Crude Oil Inventories
Crude oil inventories are also something that could continue to spark volatility in the markets next week on Thursday. Remember that crude oil prices are currently trading at their three-month highs above $61.00. A negative reading could spark another rally in the commodity and push prices to their four-month highs around $63.20.
Singapore CPI and Industrial Production
An interesting currency pair to look at next week would be USDSGD. Aside from its technical set up, there are a couple of reports due from Singapore that may move it. First, the CPI report for November is eyed to come in at 0.5% on Monday. Then on Thursday, the country’s industrial production is expected to have declined by 4.1% during the month.
On the daily time frame, we can see that USDSGD has just bounced off support at its June lows. Now, better-than-expected data from Singapore may inspire sellers to push prices lower. A close below support at 1.3510 could mean that USDSGD may soon drop to its year-to-date lows around 1.3450.
On the buy side of things, there is a confluence of resistance around 1.3590. For one, a broken rising trend line which previously offered the currency with support may now have turned into resistance. Secondly, there is another trend line (from connecting the highs of September 2, October 1, and December 2) that may also limit the pair’s gains. Lastly, the area around 1.3590 also coincides with the area between the 38.2% Fib and 50% Fib (when you draw from the high of December 2 to the low of December 13).
Reversal candles around this price could mean that USDSGD is priming for a move lower. On the other hand, a strong break above the 1.3600 handle may suggest that the currency pair may soon re-test its December highs at 1.3688.