Forex Weekly Analyses

Weekly EURUSD, GBPUSD, USDJPY Forex Analysis February 06 – February 13, 2023
The NFP printed a giant 517K jobs figure vs forecasts of only 193K. The unemployment rate fell to the lowest in 54 years at 3.4%, while wage growth also surprised higher. The ISM Services PMI also delivered a massive surprise late on Friday, coming in at 55.2 compared to forecasts of 50.5. Obviously, the US economy is still far from encountering any big setbacks or slowdown in activity. All of this was a massive surprise for the Fx market, which has been lately positioning for a weakening dollar. It looks like a squeeze on those short USD positions has now been triggered, which means the dollar can rebound further in the near term.
Weekly EURUSD, GBPUSD, USDJPY Forex Analysis January 30 – February 06, 2023
The Fed meets on Wednesday and is expected to deliver a 25bp rate hike and signal another 25bp hike in March. Market expectations (pricing) are less hawkish than this, so there is some scope for the Fed to deliver a hawkish message. However, the now rapidly falling inflation has weakened the Fed’s case for hawkish policy, which is why the dollar is in a steep downtrend. Thus, it may be hard for the Fed to deliver a big boost to the greenback at this meeting. But, equally, further losses don’t seem likely from current levels. Given that the Fed has communicated their planned actions well in advance, the Nonfarm payrolls and other economic data this week may have a bigger impact on the USD. The NFP and other job reports should show the US labor market is still strong. The forecasts are 190K for NFP and 3.6% for the unemployment rate. These are numbers that are consistent with a strong economy.
Weekly EURUSD, GBPUSD, USDJPY Forex Analysis January 23 – January 30, 2023
The dollar is stabilizing this week near the lows, a week ahead of the next Fed meeting on February 1 and the Nonfarm payrolls release two days after (Feb 3). In addition, several other central banks meet next week (including the ECB and BOE), which could add to the overall mood of sideways action as traders cut back positions ahead of a volatile trading week.
Weekly EURUSD, GBPUSD, USDJPY Forex Analysis January 16 – January 23, 2022
The US dollar is weaker again in what now seems like a strongly determined market to short the dollar no matter the specifics of day-to-day news. For instance, last week’s CPI report was close to the forecasts, and the market reaction was still bearish USD. The driver was a further reduction of Fed rate hike expectations, with the market now expecting only a 25bp rate hike at the next meeting, down from a 50bp hike two weeks ago. In effect, this additional pricing out of Fed rate hikes is the reason for the further USD decline last week. This week’s calendar is much lighter, which could help stabilize the Fx market a little, particularly now as traders will begin focusing on the Fed meeting in two weeks. The fact that the Fed is still “priced in” to deliver two more 25bp rate hikes is a reminder that the “hawkish mode” may be toning down but is still on. This could help to provide some much-needed stabilization to the embattled USD now.
Weekly EURUSD, GBPUSD, USDJPY Forex Analysis January 09 – January 16, 2023
The Friday Fx market action has confused many traders. The US dollar finally had a good week, having risen versus most currency peers well into late Friday trading. Then (at 4 pm CET, 10 am ET), the ISM services PMI index was released, printing a massive negative surprise of 49.6 against consensus expectations of 55.00. This mattered hugely for the Fx market because the ISM PMI reports are the leading indicators for US GDP and growth. Readings below 50.00 indicate economic contraction (recession). In addition to the massive 5.4 points miss of expectations, this was the first ISM services print below 50 since the Covid crisis in 2020.
Weekly EURUSD, GBPUSD, USDJPY Forex Analysis December 19 – December 26, 2022
These are interesting times in the Fx market. Last week we saw a fascinating theme, where we could say markets simply have stopped believing central banks. For instance, both the Fed and the ECB were hawkish, yet neither resulted in a stronger domestic currency. The reason for the tepid USD reaction to the Fed was the CPI inflation report the day before. Inflation in the US again surprised lower, and the markets took this to mean that the battle against high inflation is already being won. Hence, risky assets (stocks) rallied, and the dollar was sold. Essentially, the market here is saying the Fed won’t deliver on their own forecasts for rate hikes because inflation will fall faster than the Fed is expecting. So, who is right? The market or the Fed? This will be the key question that traders will be looking to answer over the following weeks and months, and that will also impact the Fx market to a great extent. For the dollar, in the near term, the latest developments could mean more range trading. The USD has already corrected down a lot (to the point that markets are priced for no more Fed rate hikes), which means there is scope for some correction in the other direction (USD higher). Still, a resumption of the USD bull trend from earlier this year now seems less likely in the near future.
Weekly EURUSD, GBPUSD, USDJPY Forex Analysis December 12 – December 19, 2022
The attention now turns to this week’s critical events: the CPI inflation tomorrow (Tue) and the Fed meeting the day after (Wed). Both will be equally significant events, likely causing a big spike in Fx volatility this week. Dollar bears are hoping for another miss in the CPI report, while dollar bulls hope for an upside surprise or at least a match of consensus expectations, which are standing at 7.7% y/y for the headline CPI and 6.1% y/y for the core CPI. The release of the CPI report on November 10 caused a 200 pips volatile spike in EURUSD. It could be the same tomorrow. The only question is the direction (whether USD higher or lower). The Fed meeting on Wednesday may only come as an extension of the volatility. How much volatility the FOMC causes will depend on the decisions they make and communication from Chair Powell in the press conference. The Fed also releases the closely watched economic projections at this meeting (so-called “dot plots”), which pretty much guarantees volatile trading around the event.
Weekly EURUSD, GBPUSD, USDJPY Forex Analysis December 05 – December 12, 2022
The USD correction is now becoming a little too deep, too soon. It doesn’t seem justified by the fundamentals, especially as the US economy is still running in much better shape than Europe and the rest (as last week’s NFP and jobs reports showed). Thus, it will come as no surprise if this USD move down is soon stopped in its tracks and reversed, particularly considering that the dollar has already fallen a lot and the DXY index is getting oversold.
Weekly EURUSD, GBPUSD, USDJPY Forex Analysis November 28 – December 05, 2022
The week ahead could potentially prove decisive for the dollar trend, depending on the outcomes of the scheduled high-impact events. The key focus will be on Fed Chair Powell’s speech (Wed), the PCE inflation report (Thur), and the Nonfarm Payrolls and other jobs reports (Fri). Each of these events - if there are some large surprises from expectations - could induce a new surge in volatility. Overall, given how much the dollar has already corrected since November 10, the space for a further USD decline seems to be shrinking. Instead, it now looks there is greater potential for a USD rebound, should e.g., Powell is hawkish or the NFP prints another robust number.