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WEEK AHEAD: JULY 12

Short Description

I’m looking at trading setups in NZD, CAD and JPY this week since there are three big central bank meetings as well as GDP data from China that might cause some volatility. Thanks! Rich

Video Script

Hi everyone, hope you are all well. It’s a busy week in forex markets coming up with three big central bank meetings and GDP data out of China. The dollar has been rising as of late over speculation about Fed tapering but this week, we get to hear what other central banks have planned. For me, I’ll be looking for opportunities in the Kiwi dollar, the Canadian loonie and Japanese yen ahead of the respective central bank decisions. Stay tuned for more.

 

Let’s make it easy and go in chronological order. First up we’ve got the Reserve Bank of New Zealand. NZD/USD looks like its topping out longer term. The kiwi dollar benefited from expectations of higher commodity prices and the relatively low number of covid-19 cases in the country. Now falling commodities and low vaccination rates have paused the rally.

 

But we’re not in a downtrend yet – and one reason to be more bullish on New Zealand is the RBNZ. For what its worth, Westpac Bank now see the first New Zealand rate hike coming this November with an official announcement on winding down asset purchases in August. If that’s the case, this month will be setting the scene for tighter policy to come.

 

And guys can I just ask that if you’re enjoying the video, please make sure you give a quick tap of that like button!

 

Next up we’ve got the Bank of Canada. USD/CAD hit a 2-month high last week- and it’s starting to look like the long downtrend is coming to an end. The 1.20 level has been major support for 6 years and is still working for now. The Bank of Canada were the first to turn hawkish because of inflation and remain so, its just that the Fed’s hawkish shift leaves the CAD looking vulnerable versus the USD.

China GDP will be a big one for the global ‘reflation’ trade. The pace of growth is expected to have picked up in Q2 with domestic strength now backed up by higher foreign demand for Chinese goods as Europe and US economies reopened. A good number should be good for risk-on assets like stocks and commodities, while a weak number would be good for the US dollar and bond markets.

 

We can also give a quick mention of the Bank of Japan. There big news is the moves to support bank lending toward climate change causes- but given the sky-high covid cases in Tokyo and the chance of an Olympic Games with no visitors - monetary policy should basically stay unchanged with little change in guidance.

 

Now let’s round off with the rest of the highlights in the economic calendar. We’ve covered the big ones but there is also US inflation and retail sales data to watch out for at the start and end of the week. If US inflation tails off, then the Fed will be vindicated in their view that inflation gains are transitory. After the surprise drop in May, US retail sales are expected to bounce back in June and help to counteract the idea that US economic growth is starting to fade. With the Fed tightening in focus, we’d expect strong US data to be positive for the US dollar.

 

Right thanks everyone, good luck trading this week and make sure to click on subscribe so you don’t miss the next episode of the week ahead.

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