Weekly Outlook: 2014, May 18 - 25

US Dollar Index forecast for the week of May 19, 2014, Technical Analysis

The US Dollar Index rallied during the course of the week, but as you can see only kept about half of the gains. With that, it appears that the market settling above the 80 handle of course is a good sign, but it will more than likely continue to be a choppy market going higher. We believe that the 79 level is in fact a major “bottom” in this market, and if we get below there, things get ugly for the US Dollar. Ultimately though, we are bullish and we believe that ultimately this market will head back towards the 81.25 level at the very least, if not heading as high as the 83 or even the 85 level.

Silver forecast for the week of May 19, 2014, Technical Analysis

Silver markets tried to rally during the course of the week, but gave up most of the gains by the time we closed on Friday. We see the $20.00 level as massively resistive now, as the market has formed a shooting star. However, we have also formed a couple of hammers in this general vicinity, so the end of the day it’s probably going to be consolidation going forward. If we make a fresh, new low, then at that point time we would be willing to sell, but at this point in time would be very hesitant to do so. As far as buying is concerned, we needed at least a daily close above the $20.00 handle.

Gold forecast for the week of May 19, 2014, Technical Analysis

Gold markets went back and forth during the week, but essentially ended up relatively flat. We sit just below the $1300 level, which is a significant barrier, but it seems to also be the so-called “fair value” of the yellow metal at the moment. With that, we don’t really see much in the way of a trade until we get an impulsive candle, something that we are not seeing at the moment. Because of this, we feel that this is probably going to be more of a short-term traders market at this point.

USD/JPY forecast for the week of May 19, 2014, Technical Analysis

USD/JPY pair went back and forth during the course of the week, but found the 101.25 level to be supportive yet again. In fact, that area is being protected by an uptrend line as well, so as a result we feel that this market will more than likely go higher from here, but could very well be contained within the consolidation area that we’ve been stuck in that has an upside limit of 103. Ultimately, we do believe that this market goes higher, but might take a little bit more time to breakout to the 105 level.

USD/CAD forecast for the week of May 19, 2014, Technical Analysis

The USD/CAD pair initially tried to rally during the week, but as you can see we ended up falling. We rest right on the 1.0850 handle, an area of significant support. That being the case, we feel that a break down below here will more than likely send this market looking for the 1.07 level first, and then the 1.06 level where we would expect a significant amount of support. Any supportive candle down there, we would be more than willing to start buying. In the meantime though, it does look like this pair is probably going to see more weakness.

NZD/USD forecast for the week of May 19, 2014, Technical Analysis

The NZD/USD pair tried to rally during the course of the week, but as you can see pulled back to form a shooting star for the second week in a row. It appears that we are in the middle of consolidation, so it’s difficult to imagine that were going to break down significantly from here, but the fact is that we will more than likely test the 0.85 level in the short term. We believe that a supportive candle in that area is a nice longer-term buying opportunity as the market should head to the 0.90 and oh.

GBP/USD forecast for the week of May 19, 2014, Technical Analysis

The GBP/USD pair fell during the bulk of the week, but found enough support below to form a hammer. This hammer should send prices back to the upside, but we had a shooting star from the previous week right at the 1.70 level, an obvious resistance area on the longer-term charts. Because of this, we feel that this market will probably go higher, but it may be a bit of a grind from here as the resistance will have to be overcome. However, we get above the 1.70 level, we feel that this market will in fact go much higher, probably to the 1.75 level, if not higher than that. Obviously, that’s a longer-term Outlook, but ultimately we do see that this market has been very well supported and has had a nice uptrend for some time. In fact, the bottom of the hammer from the week touched that uptrend line that we just mentioned.

There should be a bit of a “floor” at the 1.65 handle, which has been massively supportive as well as resistive in the past. In fact, that’s a very thick support zone down to the 1.64 handle at the very least, so the on-demand unit broken to the downside are very slim at this point in time. With that, we think that buying on the dips will be done by short-term traders, and probably will remain so until we get to the 1.75 handle, whenever that ends up being.

If we did manage to break down below the 1.64 handle, we think at that point time the market would be somewhat broken, and would almost have to go down to the 1.60 handle if not lower than that given enough time. However, the interest rate differential continues to favor the British pound, and we see absolutely no reason to think why that’s going to change anytime soon, so ultimately we feel that we are in an uptrend going forward, thereby giving us much more confident on the long side of the equation in this pair.

EUR/USD forecast for the week of May 19, 2014, Technical Analysis

The EUR/USD pair fell during most of the week, but did manage to close right at the 1.37 handle, which is significant as it would has been both supportive and resistive recently. On top of that, there is an uptrend of sorts still being held by a line there, and as a result we feel that this market could continue to go higher. We may have just found the summer range – the area between the 1.37 level on the bottom, and the 1.40 level on the top.

Forex - Weekly outlook: May 19 - 23

The dollar ended Friday’s session slightly lower against the yen as a weaker-than-expected reading on U.S. consumer sentiment offset a report showing that U.S. home construction rose strongly in April.

USD/JPY settled at 101.52, down 0.05% for the day, not far from the two-month trough of 101.30 reached in the previous session. For the week, the pair was down 0.66%.

The Commerce Department reported Friday that U.S. housing starts rose 13.2% last month, after a 2.0% increase in March. It was the largest increase in five months, indicating that the economy is shaking off the effect of a weather related slowdown over the winter.

The upbeat housing data was overshadowed by a report showing that consumer confidence in the U.S. deteriorated this month. The University of Michigan's consumer sentiment index dropped to 81.8, from 84.1 the month before. Analysts had expected a slight uptick to 84.5.

The euro was lower against the dollar, with EUR/USD settling at 1.3693, holding just above the two-and-a-half month low of 1.3647 reached on Thursday. For the week, the pair was down 0.45%.

The single currency remained under pressure after weaker-than-expected data on euro zone first quarter growth on Thursday added to pressure on the European Central Bank to ease monetary policy at its next meeting in June, in order to safeguard the recovery in the region.

The euro zone’s gross domestic product grew just 0.2% in the first quarter, compared to expectations for growth of 0.4% and expanded by a smaller than expected 0.9% from a year earlier.

EUR/JPY ended Friday’s session at 139.03, down 0.17% for the day, after falling to lows of 138.78 earlier in the session, the weakest since February 12.

Elsewhere, sterling pushed higher against the dollar on Friday, with GBP/USD up 0.14% to 1.6812 at the close. For the week, the pair lost 0.35%.

Sterling weakened across the board on Wednesday after the Bank of England indicated that it is in no rush to hike interest rates, saying the economic recovery was still at an early stage.

In the week ahead, investors will be looking to the minutes from the Federal Reserve's latest monetary policy meeting, due for release on Wednesday, for insight on the central bank's view of the economy.

The euro zone is to publish what will be closely watched data on private sector activity, while the U.K. is to release data on consumer prices.

Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.

Monday, May 19

• New Zealand is to publish data on producer price inflation. Japan is to release a report on core machinery orders.
• Germany’s Bundesbank President Jens Weidmann is to speak at an event in Frankfurt; his comment will be closely watched. Later in the day the German central bank is to publish its monthly report.
• Markets in Canada are to remain closed for a national holiday.

Tuesday 20

• The Reserve Bank of Australia is to publish the minutes of its latest policy meeting, which contain valuable insights into economic conditions from the bank’s perspective.
• In the euro zone, Germany is to release data on producer price inflation.
• The U.K. is to release data on consumer price inflation, which accounts for the majority of overall inflation.
• Canada is to publish data on wholesale sales.
• In the U.S., Federal Reserve Bank of Philadelphia Charles Plosser and Federal Reserve Bank of New York President William Dudley are to speak.

Wednesday, May 21

• The Bank of Japan is to announce its benchmark interest rate and publish its monetary policy statement, which outlines economic conditions and the factors affecting the bank’s decision. The announcement is to be followed by a press conference.
• Japan is also to publish data on the trade balance, the difference in value between imports and exports.
• Australia is to publish data on the wage price index and a private sector report on consumer sentiment.
• The euro zone is to release data on the current account.
• The U.K. is to release data on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity. Meanwhile, the Bank of England is to publish the minutes of its May meeting.
• Fed Chair Janet Yellen is to speak at an event in New York.
• Later Wednesday, the Fed is to publish the minutes of its May meeting.

Thursday, May 22

• China is to publish the preliminary reading of the HSCB manufacturing index.
• New Zealand and Australia are to produce data on inflation expectations.
• The euro zone is to release data on manufacturing and service sector activity, while Germany and France are to release individual reports.
• The U.K. is to publish revised data on first quarter economic growth, as well as reports on business investment and public sector borrowing. The U.K. is also to produce private sector data on industrial order expectations.
• Canada is to release data on retail sales.
• The U.S. is to release its weekly report on initial jobless claims and private sector data on existing home sales.

Friday, May 23

• In the euro zone, the Ifo Institute is to publish data on German business climate.
• Canada is to publish data on consumer price inflation.
• The U.S. is to round up the week with data on new homes sales.

Forex - USD/JPY weekly outlook: May 19 - 23

The dollar edged lower against the yen late Friday after U.S. data on housing starts and consumer sentiment painted an uneven picture of the economic recovery.

USD/JPY settled at 101.52, down 0.05% for the day, not far from the two-month trough of 101.30 reached in the previous session. For the week, the pair was down 0.66%.

The dollar briefly edged up to session highs against the yen after the Commerce Department reported that U.S. housing starts rose 13.2% last month, after a 2.0% increase in March.

It was the largest increase in five months, indicating that the economy is shaking off the effect of a weather related slowdown over the winter.

The upbeat housing data was offset by a report showing that U.S. consumer confidence deteriorated this month. The University of Michigan's consumer sentiment index dropped to 81.8, from 84.1 the month before. Analysts had expected a slight uptick to 84.5.

Elsewhere Friday, EUR/JPY settled at 139.03, down 0.17% for the day, after falling to lows of 138.78 earlier in the session, the weakest since February 12.

The single currency remained under pressure after weaker-than-expected data on euro zone first quarter growth on Thursday added to pressure on the European Central Bank to ease monetary policy at its next meeting in June, in order to safeguard the recovery in the region.

The euro zone’s gross domestic product grew just 0.2% in the first quarter, compared to expectations for growth of 0.4% and expanded by a smaller than expected 0.9% from a year earlier.

In the week ahead, investors will be looking to the minutes from the Federal Reserve's latest monetary policy meeting, due for release on Wednesday, for insight on the central bank's view of the economy.

The Bank of Japan’s monetary policy decision on Wednesday will also be in focus.

Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.

Monday, May 19

• Japan is to release a report on core machinery orders.

Tuesday 20

• In the U.S., Federal Reserve Bank of Philadelphia Charles Plosser and Federal Reserve Bank of New York President William Dudley are to speak.

Wednesday, May 21

• The BoJ is to announce its benchmark interest rate and publish its monetary policy statement, which outlines economic conditions and the factors affecting the bank’s decision. The announcement is to be followed by a press conference.
• Japan is also to publish data on the trade balance, the difference in value between imports and exports.
• Fed Chair Janet Yellen is to speak at an event in New York.
• Later Wednesday, the Fed is to publish the minutes of its May meeting.

Thursday, May 22

• The U.S. is to release its weekly report on initial jobless claims and private sector data on existing home sales.

Friday, May 23

• The U.S. is to round up the week with data on new homes sales.