This week’s economic calendar promises to keep investors active. The United States, Canada and the eurozone are all set to release key data that will give investors a better sense of where these economies are headed. The US dollar has been highly bullish against commodity currencies, and prior to the last two weeks, had made strong inroads against the yen. However, last week witnessed large corrections for the USD/JPY pair, paving the way for key reserve currency battles over the next five days.
Below we size up the economic calendar for the week ahead and breakdown what this could mean for 4 key pairs.
The Economic Calendar
- June 4: US, Canadian trade balance data. Strong export growth from both markets could significantly improve market sentiment for US and CAD pairs.
- June 5: Euro Q1 GDP, Retail Sales, German PMI. Euro Q1 GDP and retail sales are expected to decline year-over-year and quarter-over-quarter. German PMI is also expected to fall slightly for May. More of the same is expected out of the eurozone.
- June 6: US initial jobless claims, Canadian building permit data, ECB Interest Rate/Monetary Policy Statement. US jobless data will likely determine how key US pairs close off the week. Canadian permit data is an excellent indicator of future activity, and strong growth in this area can support the loonie’s correction against rival currencies. The ECB interest rate is expected to hold steady, but investors will be more interested in what the ECB has to say about the future of its stimulus plan.
- June 7: US Nonfarm payrolls, US unemployment rate, Canadian unemployment rate. US and Canadian trade pairs are heavily influenced by job data. Declining US/Canadian unemployment rates are a strong indicator of market performance for both countries, which will likely stimulate both currencies against major rivals.
Breakdown of Key Pairs
- USD/CAD: The outlook on this pair remains bullish. Both currencies expect heavy action this week. Strong Canadian figures could potentially curb the greenback’s month-long bullish ride. This pair advanced more than 2.3% in May.
- EUR/USD. The euro is facing correction in early-week trade, suggesting an initial target of Friday’s minimum likely, followed by consolidation and further decline. The markets predict a fall to 1.29 by end of week. The pair currently sits at 1.3033 (a gain of 0.34%).
- EUR/JPY: This pair remains in range of market expectations, hovering around 130. How the Japanese economy responds to BoJ stimulus will be of prime importance for this pair. The 130 level continues to find strong support.
USD/JPY: This pair has faced heavy losses over the past two weeks. Ahead of key US economic data, the pair has dipped below the psychological 100 level. A recent IMF report said that the yen has fallen too much, signalling further declines for this pair imminent over the short-run. We expect further declines to the 99.70 level, with ascending correction to reach 101.55.
Don’t forget to share your predictions over in the comments section, or on my wall @hmunawer1!