The Weekly Forecast: Week of June 29-3, 2015

 

Focus

Forex Forecast

Equities Outlook

Commodities Outlook

Global Data

Forex Weekly Forecast

EUR/USD

EUR/USD (daily chart) remains within a bearish trend since May 2014. Even though the euro is trading in a place above its March 2015 low of 1.0461, resistance from the significant 200-day moving average is extraordinary strong. After the subsequent scramble of the Bull Central upper band 1.13605(June 14 week close price) last week, currency pair fallback near the lower band of the Bull Central 1.1147-30(week Low), the breakthrough of this level would likely to test the 1.10943 (61.8% retracement), then the 1.09616(50% retracement and 100-day SMA) and 1.08183(38.2% retracement and week low of May 25). For the upside, the 1.14 level would continually be the main resistance.

GBP/USD

GBP/USD (daily chart) lift up to a year-to-date high of 1.59286 the middle of this June. Generally, this high denoted a 50% retracement of the preceding downtrend from last year high 1.7190 to the year low 1.4565 last April. After the pair arrive to a multi-year low last April, GBP/USD considerably pick up a bullish path, with a sharp fall back to the 1.52(23.6% retracement, 100-day SMA). In early June, the currency pair rapidly lifted above 1.5900. Along the rise, two Bull Centrals are created above and below the 23.6% retracement, so the 23.6% retracement would be a significant level to the market trend. Although, the pair is moving on an uptrend, the sharp rise above 1.5900 in a very short period would indicate a pullback is inevitable. The currency pair breakthrough the key 1.59 level would reboot the bullish trend, despite the pullback below 1.5498 would testing another key support in 1.5250-00.  

Equity Outlook

Since 2010, Greece at least dominated 87 European financial ministers meeting. On Saturday, Eurozone have declined a Greek request to extend the bailout program beyond 30 June. The most imminent money owed by Greece to International creditors $1.6 billion has to be pay on Tuesday, it looks like a payment would be missed, since the Greek prime minister Alexis Tsipras made a surprise announcement of a referendum to be held next Sunday, July 5, to vote whether accept the reforms proposed to Greece by its creditors as part of a possible bailout extension. A deal would still possible to make before Tuesday, the question now, it appears, is what happens next and whether this missed payment open the gate for a “Grexit”. In this crucial moment, the Greek government is strived for there to be a last minute deal by Tuesday, because a significant decision would be made Sunday by European Central Bank on whether it will increase the emergency liquidity assistance Greek Banks could use upon. The decision maintains a significant financial life to Greece’s banks, as massive deposits withdraw. Given the negative outcome from a series event on this weekend, the bears are showing their presence. The European stock market most likely open low at the coming Monday and would remain bearish for the early next week. The situation is becoming much complicated, as the Greek government would recommend Greeks vote “no” in the referendum, this tend to negatively impact the Euro, which is correlate inversely with the European stock markets. In addition, a series of high impact data releases include Eurozone CPI on Tuesday and the US nonfarm payrolls data, would abnormally fluctuate the market.

Positive economic data contributed to the bullish sentiment of Dow 30. New home sales climbed to 546,000 in may, increasing 2.2%. It was the strongest growth recorded since Feb 2008. Durable goods declined 1.8% to $228.9 billion in May, a bit more

than the consensus estimate of a 0.9% drop. The optimism over Greece’s bailout deal was permeated earlier last week. In the meantime, U.S economy pullback in the first quarter at a slower rate than the previous estimated, which is decreased at annual rate of 0.2% instead of 0.7%. In addition, the real personal consumption expenditure was upwardly revised to 2.1% in the first quarter.

Technically, the Dow 30 would have downward pressure resulted on the outcome of the Greece referendum at the start of the week. The first support is lower band of the Bull Central 17617, a fall below this level would test the 50-week SMA 17501 and 50% retracement 17350. If investors see any dawn lights from the Greece crisis, the index would rise to the upper band of the Bull Central 18067, thereafter, the prior high 18331 would be the next significant resistance level.

 

Global Data

Eurozone:

June: 29th 0900 BST Confidence data of June:

This business climate indicator is expected to decline, however, a surprise increase in the index could lift up the EUR, even in the situation of highly uncertain development of Greek Crisis.

30th June 0900 GMT Unemployment rate of May:

Investor expect the unemployment rate to stay at 11.1%, unless unexpected rise in data, we won’t consider this data to be a main mover of the current trend.

30th June 0900 GMT CPI estimate of June:

The CPI would remain lower than ECB’s preferred target of 2%. The data reading is expected to be 0.2% increase after a 0.3% rise in May, core rate of inflation would be steady at 0.8% from 0.9%. If inflation is weaker than forecast, we would see a negative impact to the single currency.

2nd July 0900 GMT Retail sales of May 1130 GMT ECB minutes,

Any noises from Germany signified an unhappy feeling would rise the expectation to cut the current QE. Another significant subject would be about the emergency funding for Greek banks.

3rd July 0900 GMT Retail sales of May:

The market is expecting a moderate increase after April’s Easter-inspired jump in sales for the currency bloc. 0.1% is expected, anything larger could have a positive impact on the single currency.

 

US:

29th June 1400 GMT Pending home sales of May:

The market is expected to see another good-looking home sales data, the recent strong reading to actual homes sales data hint that we would see a strong reading to this data. A larger than forecast would fuel the dollar rally.

June 30th 1345 GMT Chicago PMI of June:

Investor expected a rise to 50.0 in the expansion region, after May’s surprise decrease to 46.2. The index is gradually picking up the pace after the sluggish winter month. Market expects a well bounce off to accelerate the reading for Q2 GDP growth. A unexpected low data reading would negatively impact the dollars.

1st July 1215 GMT ADP Employment change of June:

After a strong reading 201k in may, investor is expected to see another solid reading in the private sector employment of 210k. The ADP has steady above 150k since Jan 2013. Larger number reading would fuel the dollar rally against the EUR and GBP.

1st July 1400 GMT ISM manufacturing of June:

This index is looking for a slightly rise to 53.1 from 52.8 in May, a hidden potential risk would be the weaker reading from the US PMI for June. Prices paid index would require special consideration, which is forecasted to see a lift to 52.0 from 49.5, a strongest reading since October 2014. The rise in inflation could accelerate the dollar.

2nd July 1230 GMT Labour market data of June:

The unemployment data is expected to see a slightly decline to 5.4% from 5.5%, as the market is looking for a another above 200k figure- 230k for June against 280k for May. Hourly earnings are looking for a tick up at 0.2% on the month, in the meantime, the annual rate of wage growth would be maintain moderately at 2.3%. This is the most significant data release of the week. A larger than expected reading would raise the expectation of a Feb rate increase.