Week Ahead: Rate Decisions from the BOJ, ECB, BOC, and 5 Long-Term Trade Setups
The Bank of Japan(BOJ) is scheduled to take center stage on Tuesday. In its monetary policy meeting, there are no changes expected to its current interest rate level at -0.10%. There is some sense of optimism that BOJ Governor Haruhiko Kuroda will announce an upgrade on growth forecasts. Easing tensions in the Middle East as well as the US-China Phase One deal is expected to be credited for a positive growth outlook.
On the weekly time frame, we can see that USDJPY is trading beyond resistance at the falling trend line. If there are enough buyers in the next few weeks of trading, we could see the currency pair soon rally to its March 2019 highs at the 112.00 handle. On the other hand, If sellers dominate in the next few weeks, USDJPY could fall to the confluence of support at 109.50. This price coincides with the previous trend line, 100 SMA and 200 SMA, and 38.2% Fib level.
Market participants will be closely watching the economic reports from the UK next week following dovish remarks from BOE officials and last week’s disappointing CPI. The Claimant Count Change report for December will be released on Tuesday. It is estimated to print at 33,400. Meanwhile, the unemployment rate is seen at 3.8%. Then on Friday, the manufacturing PMI and services PMI reports for December are eyed at 48.8 and 51.1, respectively. Worse-than-expected data could be bearish for the pound because they could give the BOE more reason to ease. On the other hand, positive readings could be bullish for the currency as they calm fears of a rate cut.
On the weekly time frame, we can see that GBPUSD has pulled back some of its gains to the 38.2% Fib level. This price, around 1.3040, also coincides with the 100 SMA and 200 SMA. A strong bullish candle closing above last week’s high at 1.3203 could mean that GBPUSD is on its way to its December highs above 1.3500. On the other hand, a close below December 22 at 1.2896 could mean that could be headed to support at 1.2575.
The ECB is scheduled to announce its monetary policy decision on Thursday. In the minutes of their last meeting, policymakers expressed their view that inflationary pressures remain resilient. Market participants will be keeping an ear out for ECB President’s Lagarde’s view on inflation and if she echoes the not-so-dovish tone of the minutes, the euro could rally. There are no changes expected to the central bank’s current interest rate level at 0.00%.
Then on Friday, a roster of PMI reports from two of the largest countries in the euro zone are due: Germany and France. Stay tuned to our website next week as we provide updates on these data.
On the daily time frame, we can see that the currency pair has formed higher highs which were succeeded by a lower high. In turn, a head and shoulders chart pattern has materialized. A bearish close below the neckline support at 1.1080 could mean that EURUSD may soon fall to its November 2019 lows at 1.1000. On the other hand, reversal candles at the neckline could signify that there are still buyers in the market who could push price back up to 1.1170.
BOC rate statement, Canadian CPI and Retail sales
On Wednesday, the BOC will announce its rate statement. Based on market expectations, no changes will be made to the bank’s current interest rates at 1.75%. It could, however, change if the CPI report significantly veers away from forecasts. The headline reading is eyed at 0.2% while the core CPI is estimated at -0.2%. Worse-than-expected figures could be enough to make the BOC sound more dovish, so watch out!
Then on Friday, Canada will release its retail sales report for December. The headline reading is seen at 0.1% while the core reading is anticipated at -0.1%.
On the daily timeframe, USDCAD is seen to have recouped some of its losses back to the 38.2% Fib level. This price, around 1.3050, also coincides with a previous low. A bearish close below the January 10 low at 1.3020 could mean that USDCAD may soon fall to its December lows at 1.2950. Conversely, a bullish close above January 10 highs 1.3102 could hint at an impending rally up to the 100 SMA at 1.3180.
AU employment and NZ CPI
Australia will be releasing its employment data on Thursday. It has been forecasted that 11,200 jobs were added in December and that unemployment will be at 5.2%. On the same day, New Zealand’s quarterly CPI is estimated at 0.4%.
AUDNZD has been trading below trend line support, however, the currency pair seems to be testing it now for resistance. Near-term support is at 1.0320 where AUDNZD bottomed last week. However, be wary of a strong bullish close above this week’s highs at 1.0455 as it could mean that buyers could still push price to resistance at 1.0540.More content