Weekly Outlook: 2015, September 27 - October 04

EUR/USD: Here Are The Trades We Like - SocGen

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• "Market volatility has been elevated following the Chinese FX regime shift and has remained so despite the Fed delaying its rate lift-off. Pressure on risk assets have persisted, and the fragile market sentiment is restraining G3 bond yields, which are in turn constraining EUR/USD and USD/JPY in tight ranges"
• "We like shorts in CHF/SEK as the case for such negative rates in Sweden slowly fades."
• "We like long-term shorts in GBP/JPY as the UK growth rate crests and Brexit risk flares higher."
• "Being short the G10 economies with the biggest current account deficits appeals too. USD/CAD and EUR/NOK are too oil-sensitive to have conviction about here. For choice, we like to be short NOK and CAD in the very short-term."
• "As for EUR/USD, it’s barely worth trading. It fell this week with the VW share price, and having a view on where it goes next is way outside my skill set."

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the source

A turbulent week has seen the dollar dive but recover quite nicely. US Consumer Confidence, ADP jobs release, Canadian GDP, Janet Yellen’s speech, and a buildup to the highly important US monthly jobs report are the highlights of this week.

The dollar suffered for while, on unimpressive durable goods orders. The pain was especially strong against the euro, that received only normal dovish words from Draghi. Yet the fate changed as Yellen surprised with a hawkish tone, stressing that a 2015 hike is certainly on the cards. The final GDP estimate for the second quarter in the US beat forecasts with a better than expected reading of 3.9% annual growth. Elsewhere, the Aussie struggled with another weak Chinese figure and USD/CAD reached an 11 year high, yet these commodity currencies recovered.

• William Dudley speaks: Monday, 12:30. William Dudley, president of the New York Federal Reserve will give an interview for the Wall Street Journal and talk about the rate hike issue and about inflation expectations. In his former talks, Dudley spoke against a rate rise in September amid international and financial market developments, but noted he hopes the Fed will still raise rates this year. Market volatility is expected.
• US CB Consumer Confidence: Tuesday, 14:00. U.S. consumer confidence edged up in August, rebounding after a sharp fall in July. The Conference Board consumer confidence index increased to 101.5 from a revised 91.0 in the prior month mainly due to an improved view of the labor market. Current conditions were more favorable in terms of the job market viewing jobs as “plentiful” increased from 19.9% in July to 21.9% in August. Those who viewed jobs as “hard to get” decreased from 27.4% in July to 21.9% in August. Analysts believe the strong reading will support stronger consumer spending in the following months. US consumer confidence is expected to reach 96.2 this time.
• US ADP Non-Farm Payrolls: Wednesday, 12:15. The U.S. private sector continued to increase the pace of hiring in August, despite global financial market turmoil. The ADP Report showed private payrolls increased 190,000 from 177,000 in July. The reading was below economists’ expectations but was in line with the growth trend of the first seven months of this year. Furthermore, strong data from manufacturing and domestic activity show a pick-up in economic activity. Economists expect ADP release will show a 191,000 job gain.
• Canadian GDP: Wednesday, 12:30. Canada’s economy expanded 0.5% in June, after a 0.2% contraction in the previous month. However, this positive reading could not offset the negative growth in the second quarter as a whole. On an annualized basis, the economy shrank 0.5% in the April-to-June period, following 0.8% annual pace contraction in the first three months of 2015. Policymakers were concerned about the possibility of a recession, but recent data suggests a growth trend in the third quarter. Canadian GDP for July is expected to reach 0.2%.
• Janet Yellen speaks: Wednesday, 19:00. Federal Reserve Chair Janet Yellen is scheduled to speak in St. Louis. Following the important Fed meeting in September where the Federal Reserve postponed the rate hike move, Fed Chair Janet Yellen said the U.S. central bank is still prepared to raise interest rates this year for the first time in nearly a decade. Yellen said that recent inflationary weakness is temporary, caused by a strong dollar and low oil prices, which are likely to pass. She said U.S. economic prospects appear solid suggesting a rate hike is near. Market volatility is expected.
• US Unemployment Claims: Thursday, 12:30. The number of applications for unemployment benefits, filed last week, rose less than expected, reaching 267,000, indicating the growth trend in the US economy continues. Economists expected the number of claims to reach 268,000. The four-week moving average dropped by 750 to the lowest level in more than a month, reaching 271,750. The number of people continuing to receive jobless benefits was little changed at 2.24 million. The number of new claims is expected to rise to 273,000 this week.
• US ISM Manufacturing PMI: Thursday, 14:00. The U.S. manufacturing sector expanded at the slowest pace since May 2013, reaching 51.1 after posting 52.7 in July. New orders fell 4.8% to 51.7, also the lowest level since May 2013. The employment index declined to 51.2 from 52.7 in July. The weak employment reading indicates a mild slowdown in factory payroll gains in August. Economists expect manufacturing PMI to reach 51.3 in September.
• US Non-Farm Payrolls: Friday, 12:30. U.S. job growth moderated in August, but the unemployment rate declined to a near 7-1/2-year low while wages increased. Nonfarm payrolls increased 173,000 in August after an upwardly revised addition of 245,000 jobs in July. August’s increase was the smallest in five months amid job loss in the manufacturing sector. Despite the mixed report, the general trend remains positive indicating that the U.S. economy remains strong. Analysts expect a jobs gain of 202,000 in September with an unemployment rate of 5.1%. Monthly wages are expected to rise by 0.2%.

the source

US Dollar Forecast – US Dollar Nears 12 Year Highs But Does It Have Motivation to Break?
The US Dollar posted an impressive advance this past week, but it conspicuously fell short of breaking the 12-year high on the Index and clearing key range boundaries with major counterparts.

Japanese Yen Forecast – USD/JPY Vulnerable as Yen Leans on ‘Funding-Currency’ Status
The long-term outlook for USD/JPY remains bullish amid the deviating paths for monetary policy, but the range-bound price action in the exchange rate may unravel in the days ahead as market participants continue to treat the Japanese Yen as a ‘funding-currency.’

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Australian Dollar Forecast – Australian Dollar at the Mercy of US, China News Flow Once Again
The Australian Dollar continues to look to external developments for direction cues, with prices at the mercy of US and Chinese news-flow in the week ahead.

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Canadian Dollar Forecast – The Canadian Economy is Ensnared by the Impact of Falling Oil Prices
CAD finished the week higher against the USD by ~1% and benefited similar to other commodity currencies post-FOMC against the USD within the G10.

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New Zealand Dollar Forecast – NZD Ends Week on a Positive Note After Fonterra Upgrades Forecast
Fonterra raised their milk payout forecast on Thursday giving NZD an end-of-week boost.

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Gold Forecast – Gold Rallies Into Critical Resistance Ahead Fed, NFP
Gold prices are firmer for the second consecutive week with the precious metal up 0.57% to trade at 1145 ahead of the Ney York close on Friday.

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