Weekly Outlook-Economic Data & Corona Virus In Focus

Weekly Outlook-Economic Data & Corona Virus In Focus

25 Apr 2021 10:58 AM

Weekly Outlook 26th April to 30th April 2021

USDINR: USD/INR closed above 75 for the first time in 2 week as continuously rising coronavirus cases and lockdowns across states continue to weigh on the risk sentiment and prompt fears of foreign fund outflows from Indian equities. On the other hand, a falling Dollar index and likely RBI intervention is expected to support the pair. It is a relatively uneventful week for Rupee on the economic calendar with only weekly FX reserves data, Fiscal deficit and Infrastructure Output figures (Mar) due out. With no material stats due out of India to influence the pair, it will be left in the hands of coronavirus and lockdown updates. However, it is a busy week for Dollar on the economic front. Durable goods orders are due out on Monday followed by the consumer confidence index on Tuesday. In the second half of the week, advance GDP, pending home sales, personal income and outlays report will be in focus. The preliminary GDP for Q1 is expected to grow at 6.5% compared to 4.3% previously, boosted by the new fiscal stimulus. PCE deflator which is the Fed’s preferred inflation indicator is expected to rise above the 2% target. Remarkably robust stats could reignite worries of rising inflation. The key event for the week will be FOMC’s meeting scheduled for Tuesday and Wednesday where the Fed is expected to keep its monetary policy unchanged. However, a glimpse of optimistic economic outlook during Powell’s speech after the meeting might give rise to a risk-on mood and put pressure on the US Treasury yields.

USDINR Tech: There have been two attempts at 75.31-32: first on 15 April and the next one on 22 April. A quick glance at the 2 hourly chart shows the double top formation (highlighted in yellow). The neckline (USDINR low between the two highs of 75.31-32) is at 74.26 (highlighted by the green horizontal line). As long as the top of 75.31-32 is not broken, the double top formation will tend to indicate a trend reversal. If it is indeed a reversal, the price target of the double top will be = NECKLINE – (TOP – NECKLINE) or 74.26 – (75.32 – 74.26) = 73.20. How such tops and bottoms work can be emphasized using a recent occurrence. USDINR formed a double bottom (reverse of double top) in Feb/Mar by forming two lows at 72.25-26 – highlighted by blue dotted lines. Neckline of the double bottom was formed at 73.77 (red dotted line). The double bottom’s price target (using the same formula outlined above) is 73.77 + (73.77 – 72.25) = 75.29. This target is already met.  

EURUSD: The EUR/USD pair rallied again this week. The European Central Bank maintained the rates unchanged. The pair climbed on improved risk-appetite globally, due to upbeat US data released. EUR/USD may further gain this week as the U.S. President Joe Biden is set to raise taxes on capital gains. On the economic calendar, the week starts with German Ifo business climate index for the month of April. A number better than forecasted may support the currency. On Thursday, German Unemployment Change for April is due out. A number better than expected may reinforce the view that the economy is still struggling to recover and should be taken bearish for the currency. Moving ahead, German GDP (QoQ) for Q1 is due out, which is expected to be -1.5%. Later in the day, CPI (YoY) for the month of April is due out. A higher than expected reading should be taken bullish for the Euro.

EURUSD Tech: The EURUSD pair has rallied again  and traded near 1.21 level this week. The last 3 candle sticks were bullish suggesting an uptrend in the pair. The MACD analysis is also indicating a bullish crossover in the pair. The pair may see some resistance near 1.2180 levels and after that 1.2244 which was the February’s high. To the downside, we may see a massive support barrier at 1.16.

GBPUSD: It is a relatively silent week for the economic calendar. It has a few lightweight releases which shouldn’t affect the pair much.  Data released earlier in the week has been positive for the GBP with the retail sales figures for march beating expectations. The latest PMI numbers have also been positive suggesting an increase in demand for goods and services in the economy as the economy opens up from lockdowns. The increasing corona virus cases in India has also become a problem as UK's travel ban on flights from India has come into effect and worries about global growth are weighing on sentiment. Prime Minister Boris Johnson also warned of a potential new corona-virus wave in the winter. However, his concerns have come amid a successful local vaccination campaign and a drop in infections, hospitalizations and deaths.

GBPUSD Tech: The pair rallied in the first half of the previous week, however it hit resistance of 1.4010 and started falling from there. There is a strong resistance at 1.4010 and a support at 1.367.We can see that the pair has traded in-between 1.4010 and 1.367 for the past two months. If we see the MACD, we can see that the price line might have a bullish crossover with the signal line suggesting a bearish trend in the pair.

USDJPY: USDJPY  fell by by 0.79% in the previous week with a low of 107.46. Easing U.S. bond yields has helped strengthen yen. Yen is the best performing currency among the G-10 countries on a 5-day view as Covid related news in the Asian region has destabilized the risk appetite. It is a relatively busy week for USD/JPY. The week starts with BoJ interest rate decision, monetary policy statement and the outlook report for the economy. The monetary policy statement and outlook report would be the key area of focus and will be driving the currency pair.  Later in the week, retail sales numbers for march are due out. The week ends with industrial production numbers for march. A higher than expected reading would be positive for JPY.

USDJPY Tech: USDJPY formed lower lows throughout the week indicating a down trend however, it formed a dragonfly doji candle on the last trading day. The presence of a dragonfly doji candle means that we may see a trend reversal in the coming week. A possible bullish crossover can be seen in the MACD, further suggesting a trend reversal in the pair. Immediate resistance lies at 108.30 followed by 108.40 which also coincides with its 9-day SMA and 108.80, its 14-day SMA. The pair was trading near the 110 level just a few weeks back although, regaining those levels again would require a strong catalyst. If the pair manages to break below 107.45, we can expect a drop till 106.65 levels and 106.40, its 89-day SMA.