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FX Fundamental Breakdown - 16 Feb 2021

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Intro

We've covered what's happening for the major currencies in the coming weeks. Read on to see what we are looking for.

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Our Outlook

USA
Following last week's negative NFP reading from the US, there was some downside for the USD, although this did phase out as the week ended. While the US continued to produce negative economic data throughout the week, the Biden Administration hopes to reduce lockdown restrictions to a state level once again, which in turn is positive for the USD. As the $1.9 trillion stimulus package will likely boost the US economy, traders are looking to price the proposed package since it could depreciate the USD as concerns rise to the rate of cash being printed.

Major economic events to watch out for next week include the Retail Sales Data on Wednesday (17/02) and the USD FOMC Statement on Thursday (18/02) to create intraday volatility. This week’s forecast for the US is unreliable, as the USD is caught between short term positives and long term negative impacts of fundamental factors.

One week forecast for the USD is bullish.

EUR
With no high impact economic events in the last week, the EUR still managed to have some upside. A major amount of the EU has had some sort of Covid restrictions, which may likely negatively impact the economic data. However, there are some major events happening this week that are likely to give traders an updated bias for the EUR.

Major events to watch out for next week are the GDP Data on Tuesday (16/02), the ECB Monetary Policy Meeting Minutes on Thursday (18/02) and The Markit PMI Composite on Friday (19/02).

One week forecast for the EUR is bearish.

AUD
As the AUD managed to get back on the front foot, last week saw the AUD make significant gains across the board. Gold continues to support the AUD as well as the country’s current strong economy. Over the weekend, Melbourne had to re-initiate lockdown for the state, which can be viewed as a negative factor for the AUD. However, Australian health authorities have proved that they are highly efficient at keeping Covid outbreaks managed. Therefore, it will be good to see if traders will price this negatively or remain calm about it.

Major economic events to watch for in the next week include the RBA Meeting Minutes on Tuesday (16/02), the Employment Data on Thursday (18/02) and the Retail Sales Data on Friday (19/02).

One week forecast for the AUD is bullish.

GBP
The GBP finished off the week exceptionally well, as 1 in 5 Brits have already had at least one dose of the Covid-19 vaccine. This ratio meant that the pound continued to appreciate, as economic recovery seems to be near with the growth of vaccination rate. In addition to the vaccination, the lockdown has also ensured that Covid case rates have dropped dramatically in the UK. While the last month was pretty quiet for the GBP, there was still some positive data as the GDP came in much higher than forecasted, with 1% growth vs 0.5% consensus.

Major events to watch for next week include the CPI Data on Wednesday (17/02) and the Markit Services PMI Data on Friday (19/02).

The one week forecast for the GBP is bullish.

JPY
As risk on flows continued last week, the JPY also depreciated slightly. While there were no major economic events last week, the JPY still had negative (low impact) Monetary Base & Leading economic index readings.

An economic event to watch out for next week is the GDP Data on Monday (15/02).

One week forecast for the JPY is bearish.

CAD
Surging oil prices continued to support the CAD as it appreciated in the last week. There were no major economic events in the last week for the CAD, therefore, traders continue to value the currency in correlation with oil prices.

A few events to watch for in the next week is the CPI Core Data on Wednesday (17/02) and the Retail Sales Data on Friday (19/02).

One week forecast for the CAD is bullish.

CHF
There were no high impact events that triggered the CHF as it continued to move sideways in the last week. As mentioned in previous reports, Switzerland has been having positive economic data reported for the past few months, so it'll be interesting to see if the data remains unchanged.

There are no major economic events in place for the CHF in the coming week.

One week forecast for the CHF is bearish.

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