Weekly Outlook - Economic Data, COVID-19, and Central Bank Commentary in Focus

Weekly Outlook - Economic Data, COVID-19, and Central Bank Commentary in Focus

21 Mar 2021 11:38 AM

Weekly Outlook 22nd March to 26th March 2021

USDINR: It is a relatively quiet week for Rupee on the economic calendar. At the end of the week, we have Bank Loan Growth, FX Reserves and Deposit Growth. A higher than expected numbers in all these can be positive for the Rupee. On the other hand, it is a busy week for the Dollar on the economic calendar. The week starts with Existing Home Sales followed by New Home Sales. A higher than expected reading should be positive for the USD as it shows the strength of the U.S. housing market. On Wednesday, Federal Reserve Chair Jerome Powell will testify on the economic outlook and the recent monetary policy actions in Washington DC. The crude oil inventories will be a key area of focus because a weaker than expected inventory might signal a greater demand for fuel, further increasing crude oil prices. In the latter half of the week, Initial Jobless Claim numbers and the GDP (QoQ) for the fourth quarter are due.

USDINR tech: The pair has been consolidating inside a triangle like formation in the past week. As the pair seems to linger around challenging long-term support, there does seem hope for an uptick. An MACD crossover might be around the corner alongside a breakout of this triangle like formation which might spurt a short rally towards 72.75. Key support regions come around 72.40 – 72.20, while significant resistance is from 72.80 – 73. Importers should continue to hedge for the near-term around the spot of 72.50, while exporters can target 72.70 and above to start selling dollars.

EURUSD - It’s a busier week ahead on the economic data front. After a quiet start, prelim private sector PMI figures for France, Germany, and the Eurozone will be in focus on Wednesday. While Germany’s manufacturing PMI will be the key driver, service sector PMIs will also influence. Late in the day on Wednesday, Eurozone consumer confidence figures for March will also draw attention. On Thursday and Friday, consumer confidence and business confidence figures from Germany are due out. From the ECB, the Economic Bulletin on Thursday will also draw plenty of attention. The markets will be looking for any shift in the ECB’s outlook on economic recovery.

EURUSD Tech: Euro consolidated in the 1.1880-1.1980 region last week. If the pair trades below 1.1860 a resistance turned support, in a sustained manner, we may see a down move towards its long-term average of 1.1730. The pair has been consistently forming lower highs suggesting that the bulls have lost their momentum. On the other hand, the MACD is pointing towards a slightly bullish Euro although, we have seen in the past week that the pair made multiple failed attempts towards 1.20.

GBPUSD - It’s a particularly busy week ahead on the economic calendar. In the first half of the week, employment, inflation, and prelim private sector PMIs will be in focus. Expect claimant counts, the service sector PMI, and inflation to draw plenty of interest. At the end of the week, February retail sales figures will wrap things up. Another dive in spending would pressure the Pound. On the monetary policy front, BoE Governor Bailey speaks in the week. Following last week’s unanimous vote to hold policy unchanged, any hawkish chatter should support the Pound.

GBPUSD Tech:  GBP has been consolidating in the 1.3795-1.40 region for the last two weeks. The momentum has shifted towards the negative territory signalling a bearish move in the pair. The MACD shows that the price line attempted to cut the signal line from below but, failed twice, supporting the bearish view.  If the pair breaks below 1.3830, the next support then lies at 1.3795 which also coincides with the 55-day SMA followed by 1.3530. The pair has made multiple attempts at the psychological barrier of 1.40 and failed to sustain, making it a strong resistance level.

USDJPY - Yen ended the week lower, pinned down by a policy announcement from the Bank of Japan. The BoJ made no changes to the benchmark policy rates of -0.10%. A pullback in 10-Year U.S. Treasury yields also pressurized Yen, so for the week ahead, the U.S. yields will give direction to the USD/JPY. On Wednesday there will be the Monetary Policy Meeting Minutes which is a thorough record of the BoJ’s policy-setting meeting, comprising insights into the economic conditions that influenced the decision on where to set interest rates.  On the economic calendar, Japan Services PMI data will release on Wednesday. Above 50.0 signals an increase, below 50.0 a decrease. Tokyo core CPI is expected to fall than the previous suggesting a fall in the currency.

USDJPY Tech: Yen traded in a fixed range last week between 108.50 and 109.35, pertaining to a lot of indecisiveness in the market. The MACD is pointing to a bearish move in the pair, with the signal line likely to intersect the price line from above. The currency formed lower lows in the last week, suggesting that we may see a down move in the pair towards 108.30, breaking out of the upward channel.