Weekly Outlook - Economic data, US politics and RBI in focus

Weekly Outlook - Economic data, US politics and RBI in focus

21 Feb 2021 11:05 AM

Weekly Outlook 22nd February to 26th February 2021

USDINR: No material economic data releases are scheduled to be released for India in the upcoming week. For the US - In the 1st half of the week, consumer sentiment figures for February are in focus. Following some disappointing Michigan numbers, expect a slide in the CB Consumer Confidence Index to test support for riskier assets. After a quiet Wednesday, the focus then shifts to a busy end to the week. On Thursday, core durable goods, 2nd estimate GDP numbers, and the weekly jobless claims are in focus. Expect the numbers to draw plenty of attention ahead of inflation, trade, and personal spending figures on Friday.

Technical Analysis: Rupee gained against the dollar in the past week with sustained trading below the key support level of 72.75. The pair did end the week with an inverted hammer amidst a downtrend which might attract some buyers. The key support region underneath 72.50 comes around 72.00, while a break above the current week’s top of 72.91 might lead the pair above 73.00. Exporters can target 73.65 and above to hedge using forwards for long tenures and vanilla options for the near-term. Importers too should partially hedge their positions with a mix of forwards and vanilla options.

EURUSD - In the 1st half of the week, German business confidence figures for February are due out. Expect the headline IFO Business Climate Index to be the key driver. On Wednesday and Thursday, the German economy remains in focus. 2nd estimate GDP numbers for the 4th quarter and March consumer sentiment figures will draw attention. Barring revisions to GDP numbers, expect the consumer sentiment figures to have the greatest influence. At the end of the week, French consumer spending and 2nd estimate GDP numbers for the 4th quarter will wrap things up. Once more, barring a marked revision to 1st estimate numbers, expect the consumer spending figures to be the key driver.

Technical Analysis: The euro traded lower initially in the week but then found itself with upside momentum again. The well-supported market seems ready to make a move towards $1.23. The region extending from $1.23 till $1.25 offers massive resistance and breaking above it seems unlikely but it seems like the pair might reach this region. A 300-pip trading range is expected to continue from $1.20 to $1.23, while the pair continues to build its upside momentum. The pair has formed a hammer on the weekly chart and is likely to attract some buyers.

GBPUSD - It’s a relatively quiet week ahead on the economic calendar. December’s unemployment rate and January claimant count figures will be the key drivers. Wage growth and 3-month rolling employment change figures will likely have less impact on the Pound. Away from the stats, expect the UK government’s progress on vaccines and COVID-19 news to continue to influence.

Technical Analysis: The pound has rallied significantly in the past week finally breaking above the $1.40 level. The next major resistance on the weekly chart is at $1.42, however, the market is overstretched and is needed. $1.3750 is likely to offer a lot of support as it was a major resistance level, but currently, we’re halfway from major support and a major resistance level equating the short-term move to a gamble. A pullback at this point towards the support would not only be lucrative but also signify the continuation of the trend.

USDJPY - It is another busy week ahead. February inflation and January industrial production and retail sales figures are in focus on Friday. Expect the industrial production and retail sales figures to have the greatest impact on the markets. Ultimately, however, the numbers are unlikely to have too much impact on the Yen.

Technical Analysis: The dollar has rallied a lot against the Yen in the past week but ended up giving back most of these gains. This would typically be concerning but isn’t since we’re in the middle of a trend change. The pair broke through its 50-week EMA but then again pulled back towards a 200-day EMA. A look at the weekly chart clearly indicates how steep the downtrend line was and a breakout shouldn’t come as a surprise. Pullbacks seem like buying opportunities, a break above the top of last week’s candlestick might trigger a potential move towards ¥108. If the pair manages to break below ¥104 might indicate that a false breakout has happened.