Weekly Outlook: 2015, August 16 - August 23

"With the PBOC fixing CNY effectively unchanged from yesterday, there’ll be plenty of people downplaying the significance of this week’s moved...But while headlines like ‘China joins the currency wars’ are a wide off the mark, the symbolism of this week’s move is important and it sends two messages. Firstly, that the continued weakening trend of the Chinese economy requires a further policy response, and secondly that the PBOC is willing to use all available policy tools to react."

"And since I expect the Chinese economy to go on slowing, I’d conclude that, albeit at a more measured pace and with less fanfare than this week, we’ll see more CNY weakness in the weeks and months ahead, which in turn will feed through to more weakness overall for Asian currencies against the dollar, and also, as has happened this week, more weakness for commodity prices overall. More downward pressure on commodity exporters, more downward pressure on US and European import prices."

the source

Japan GDP data, Inflation in the UK, the US and Canada, FOMC Meeting Minutes, US Unemployment Claims and Philly Fed Manufacturing Index. These are our market movers for this week. Join us as we explore the highlights on Forex calendar.

U.S. data released last week raises hopes for a Fed rate hike by the end of the third quarter. Retail sales rebounded in July amid a rise in purchases of automobiles and other goods, suggesting growth rate is positive in the second and third quarters. Retail sales edged up 0.6%, in line with market forecast, while core sales, excluding automobiles gained 0.4%. The robust release added to a strong employment data, suggesting the US economy is on solid footing. Will this trend continue?

1. Japan GDP data: Sunday, 23:50. Japan’s economy recovered from the brief tax-induced recession in 2014, with GDP growth of 0.6% in the first quarter, exceeding market forecasts of 0.4% expansion rate. On a yearly base, GDP grew 2.4%, way above the 1.6% rise expected by analysts. Domestic consumption edged up 4.3% and wage growth increased, indicating a positive momentum. Exports increased 10% due to the weaker yen, but inflation continues to fail, despite the massive money-printing program aimed to lift inflation. Economists estimate a 0.5% contraction in the second quarter.
2. UK Inflation data: Tuesday, 8:30. UK Inflation index inflation fell to 0% in June, from 0.1% in the prior month due to a decline in clothing and food prices as well as air fares. Bank of England governor Mark Carney expects inflation to remain low in the coming months, but anticipates a pick-up by the end of this year. However, rising wages expected to increase consumption, leading to stronger inflation pressure. UK CPI is expected to remain flat this time.
3. US Building Permits: Tuesday, 12:30. The number of building permits issued in June edged up 7.4% to a 1.34 million-unit rate, the highest level since July 2007. Builders’ confidence also reached a 9-1/2-year high in July, indicating the housing market is expected to expand further in the coming months. Economists forecast that the housing market will compensate for the struggling manufacturing sector. The number of permits is expected to reach 1.21million in July.
4. US Inflation data: Wednesday, 12:30. U.S. consumer prices increased 0.3% in June, rising for the fifth consecutive time after a rebound in gasoline prices as well as a range of other goods indicating inflation is back in track. The recent positive economic data such as the growth trend in the housing market raises the odds for a rate hike in the near future. June’s gain was preceded by a 0.4% in May. Both CPI and Core CPI are expected to gain 0.2% this time.
5. US FOMC Meeting Minutes: Wednesday, 18:00. In their previous meeting, Federal Reserve officials started preparing for a rate raise later this year, amid promising economic data. John C. Williams, president of the Federal Reserve Bank of San Francisco said he wants to make sure the economy progresses in line with the Fed’s expectations before voting to raise rates. Even those supporting the tightening measures, preferred to delay the rate hike until September.
6. Japan rate decision: Thursday. Aug 7 The Bank of Japan kept its accommodative monetary policy, aiming toward 2% inflation without additional monetary easing. However, economists believe the 2% deadline may be changed, depending on future oil price moves. The weak yen is positive for exports and companies but is bad for households and small firms via rising import costs. Household sentiment picked up and Consumer spending remained string after emerging from a temporary hit from bad weather.
7. US Unemployment Claims: Thursday, 12:30. The number of Americans filing initial claims for unemployment benefits increased unexpectedly by 5,000 last week, reaching 274,000. However, the general trend remains positive, indicating the US labor market continues to strengthen. Analysts expected claims to reach 272,000, but the number of new claims continue to stay below the 300,000 threshold and the four-week moving average of claims fell 1,750 to 266,250, the lowest since April 2000. The number if new claims are expected to reach 272,000 this week.
8. US Philly Fed Manufacturing Index: Thursday, 14:00. Philadelphia’s manufacturing gauge for the region plunged in June to 5.7 from 15.2 in June. The reading was worse than the 12.5 points estimated earlier but still indication expansion. The strong dollar and softer global demand lowered the number of orders for manufactured goods. Economists expect a meaningful rebound in the next few months. New orders reached 7.1, from 15.2 and employment remained flat. Philadelphia’s manufacturing index is expected to reach 7.2 in July.

the source

US Dollar - "Aside from data and the long weight for a return to active sentiment fluctuations, there is another motivator that Dollar traders should keep tabs on as it is unusual active: reserve interest. The US currency accounts for 64 percent of total world reserves, and that appeal produces a passive bid. Yet, that position is not rigid and nor is the USD. This past week we have seen the PBoC move to further open its exchange rate mechanism and Greece receive its bailout program. That will reinforce the Yuan and Euro – key Dollar counterparts."

GBPUSD - "It would likely take a substantial surprise out of the Consumer Price Index inflation report to force a meaningful shift in expectations and the GBP itself. And indeed, forex volatility prices remain low for the British Pound, the US Dollar, and major FX counterparts. There’s an outside chance that the upcoming release of US Federal Reserve meeting minutes will force meaningful reactions out of the US currency. Traders currently price in a roughly 50 percent chance the Fed will hike in September, and surprises in official rhetoric could nudge the odds in one direction or the other."

AUDUSD - "Clues to that effect may help cement September as the consensus time frame and force investors to re-price expectations baked into asset prices. That stands to weigh on risk appetite as traders consider the pivotal role of expansionary monetary policy in fueling the post-crisis recovery in financial markets, sending the Aussie lower alongside other sentiment-linked instruments. Needless to say, a stronger CPI print would only encourage this process."

USDJPY - "With only so much time remaining ahead of the Fed’s September 17 interest rate decision, the CPI report may boosts U.S. interest rate expectations as the headline reading is projected to increase an annualized 0.2% in July following the 0.1% expansion the month prior, while the core rate of inflation is expected to hold steady at 1.8% for the second-consecutive month. However, like the BoJ, weak oil prices may also become a growing concern for the Fed as it drags on the inflation outlook, and the committee may continue to endorse a wait-and-see approach as Chair Janet Yellen remains in no rush to remove the zero-interest rate policy."

GOLD - "The U.S. July Consumer Price Index (CPI) will be central focus next week with consensus estimates calling for an uptick in core price growth to 0.2% m/m. With the recent moves from the PBOC likely to weigh on expectations for higher rates from the Fed in the near-term, a weaker than expected gauge on inflation could further hit the greenback. In turn gold may yet have more upside before broader downtrend resumption."

the source

Dollar Looks for Fed Move as Major Counterparts Gain Ground
The ‘Summer Lull’ doesn’t do the US Dollar any favors. As a favored haven currency, the reduced volatility - and thereby risk - curbs its innate demand.

USDJPY to Take Cues From Japan 2Q GDP, U.S. CPI Report
The fundamental developments due out next week may spur a near-term advance in USD/JPY as Japan’s 2Q Gross Domestic Product (GDP) report is anticipated.

British Pound Likely to Stick to Tight Range but Watch Key Data
A substantial breakout seems unlikely as traders tread softly in the month of August but watch significant UK CPI and Retail Sales for surprises.

Australian Dollar Bounce May Be Stymied by Outside Forces Yet Again
The Australian Dollar may be stymied in its ability to capitalize on an improving monetary policy outlook by external forces yet again.

Gold Relief Rally at Risk on Sticky US Inflation – 1145 Key Resistance
Gold prices are markedly higher after a seven week losing streak with the precious metal up 1.8% to trade at 1114 ahead of the New York close on Friday

more...

• "While our economist Michelle Girard thinks the Fed may disappoint on giving a “firm” signal, which would fit with their data dependent outlook, she sees a risk that the FOMC minutes begin to put a greater emphasis on the pace of hikes being gradual. A clear discussion along those lines may be a “soft signal” that an earlier start to rate hikes, giving more assurance that a gradual pace can be taken, is the preferred path of the FOMC’s majority."
• "Because the meeting took place before China’s devaluation, that discussion should not come up in the FOMC July minutes."
• "It’s also too early for that impact to be seen in the July CPI, which is the key data release tomorrow in the US ahead of the FOMC minutes. Our economists see the risks to the y/y rate as slightly on the upside – a “high” 0.2% m/m edge up in the core CPI index could push the y/y rate up from 1.8% to 1.9% y/y."

the source

Just a situation with EURUSD 10 minutes before USD - CPI news event.
Red dotted line is for sell stop order, blue dotted line is for buy stop order to be placed:

Originally Posted by newdigital

Just a situation with EURUSD 10 minutes before USD - CPI news event.
Red dotted line is for sell stop order, blue dotted line is for buy stop order to be placed:

Same for Gold (XAU/USD) - 6 minutes before USD CPI news event:

This is half an hour after USD CPI news event: