Will the markets dodge the NFP release and settle for a low-volatility summer?
USD: Non-farm payrolls to drive direction
Spot
DXY91.56
Week ahead bias
Bearish
Weekly range
91.30 – 92.40
1 month target
92.00
Volatility levels in the FX markets have begun sinking once again following the FOMC meeting earlier this month. The greenback seems to be moving toward a rangebound trading pattern for the remainder of the summer. This week’s data calendar will be important for the trajectory of the greenback as it includes – consumer confidence, ADP, ISM and Friday’s all-important June’s NFP data.
The recent rhetoric from the Fed meeting suggests that the Fed may have a twitchier trigger finger when it comes to tapering than originally thought. That said, unless we have a blockbuster NFP figure (close to the one million mark) markets will be pricing in a low volatility and range bound market for the remainder of the summer.
CAD: Its all about oil this week
Spot
USD/CAD1.2284
Week ahead bias
Mildly Bearish
Weekly range
1.2160 – 1.2350
1 month target
1.2100
Any rebound in the loonie this week will likely be dependent on external factors rather than domestic ones. The data figures this week only include growth figures for April which are likely to have been impacted by the covid-19 lockdowns in most of Canada at the time. Markets are likely going to ignore the data as outdated considering the federal government is aiming for 75% of the population to be fully vaccinated by July.
This week’s OPEC meeting will be the most relevant for the CAD’s short-term direction. OPEC is expected to ease cuts with an expected increase of +500MM barrels per day. If oil survives the OPEC+ meeting without a price correction, most analysts don’t see any major impediments for USD/CAD to keep shedding post-FOMC gains.
EUR: ECB determined not to be dragged into premature tightening
Spot
EUR/USD19.70
Week ahead bias
Mildly Bearish
Weekly range
1.1880 – 1.2020
1 month target
1.2000
The EUR/USD is recovering and is beginning to gain back some of the losses incurred after the FOMC announcement. However, no one expects the EUR to lead the pack as the ECB has continued to reiterate that it does not what to be coerced into an early tightening cycle. This “lower for longer” rhetoric is likely to be reiterated this week from a host of ECB speakers including Lagarde.
This week’s data will focus around the June inflation data. Headline rates are expected to remain subdued around the 1.9% - hardly enough to have the ECB react to the reading. We also see June’s PMIs which will likely be ignored by the markets given the supply chain disruptions that continue to plague global commerce and the manufacturing sectors.
GBP: Nothing much happening in the UK this week
Spot
GBP/USD1.3919
Week ahead bias
Neutral
Weekly range
1.3780 – 1.4110
1 month target
1.4100
This coming week should be relatively calm for the GBP. The UK-EU dispute has calmed with grace periods extended and the BoE this past week didn’t bring too much in terms of surprises while also refraining from pointing to earlier rate hikes. The current environment should provide some stabilization for the currency forcing the GBP/USD to remain rangebound and rather subdued.
Data wise this week we see the final Q1 GDP reading (which should not bring any surprises) while June’s housing and mortgage data are unlikely to have any impact on the GBP. As long as the USD continues to reverse some of its gains, the GBP/USD should move slightly higher in the coming days.
Currency Chart
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