Weekly Outlook: US Politics, Vaccine And RBI In Focus

Weekly Outlook: US Politics, Vaccine And RBI In Focus

17 Jan 2021 12:36 PM
 

Weekly Outlook 18th January to 22nd January, 2021

USDINR: It is a quiet week ahead on India’s economic calendar. No material stats are set to be released this week. Focus will remain on US politics, COVID-19 vaccine distribution, foreign inflows/outflows and RBI. President-elect Biden’s Inauguration Day and Trump’s impeachment will draw interest. For the US in the 1st half of the week, there are no material stats to consider. In the 2nd half of the week, it gets a little busier. Philly FED Manufacturing PMI and weekly jobless claims figures will be released. The jobless claims are expected to have the biggest impact. Another rise in jobless claims may weigh on riskier assets. Towards the end of the week prelim private sector PMI figures for January may provide direction to the pair.

USDINR tech: In past week we’ve seen the pair weaken a bit to touch a low of 73.51 but, it recovered to close the week at 73.08. The critical support region of 72.75 – 73.00 still holds. It should also be noted that the price gap of 73.67 – 73.72 has not filled yet. All dollar importers are advised to hedge their short-term liabilities using forwards as well as vanilla options as options volatility is at multi-month lows. Exporters can wait to target 73.70 – 73.90 (price gap filling) to start forward dollar selling, if mandated to sell, choose vanillas over forwards.

 

EURUSD – It is an eventful week ahead on the economic calendar. First half of the week will be driven by January ZEW Economic Sentiment figures for Germany and the Eurozone. In the second half of the week, the key drivers will be January prelim private sector PMI numbers with the Germany’s manufacturing and the Eurozone’s composite expected to have the greatest influence. On the monetary policy front, the ECB press conference will be eyed by the market participants as questions on the economic outlook are likely as EU member states extend lockdown periods.  

EURUSD Tech: The $1.20 level should offer a strong support to the pair, with this pullback being exactly what the market participants need. Crucial resistance levels start from $1.23 all the way to $1.25. To break out above that level, the pair would need a significant amount of momentum. On the other hand, a break down below the $1.19 level could be rather ugly for the Euro going forward.

 

GBPUSD – It’s a relatively busy week ahead on the economic calendar. Key stats include December inflation and retail sales figures, CBI industrial trend orders, and prelim January private sector PMIs with the retail sales figures and services PMI expected to have the greatest influence. COVID-19 news and vaccine updates will continue to also influence. On the monetary policy front, BoE Governor is scheduled to speak on Wednesday.

GBPUSD Tech: Pound has gone back and forth during the week which makes quite a bit of sense after the massive move higher. Key resistance is the $1.36 level and the $1.35 level underneath acts as a support. Ultimately, we may go higher but with a little bit of work to do in the short term.

 

USDJPY - It is a busy week ahead for Yen on the economic calendar. Finalized November industrial production figures will drive the 1st half of the week. Later in the week, December trade figures will draw plenty of attention as weak numbers could test market risk appetite. December inflation figures and prelim private sector PMIs for January conclude the week, with the PMI numbers expected to have greater influence. On the monetary policy front, the BoJ is in action on Thursday.

USDJPY Tech: USD/JPY initially rallied during the week to break above the ¥104 level, to form doji candle. A doji candle could mean a reversal in the trend. There is a significant resistance level all the way to the ¥105 level. If the pair was to break above there, then things could change quite drastically. Support region lies around ¥101 level.