Inflation of major economies in focus

After the robust payrolls number market participants will now be keeping an eye on the inflation number that will be released from the US. Expectation is that inflation in July would remained unchanged compared to growth of 0.2% in the previous month. In the past the Federal Reserve has hinted that they expect inflation to pick up in the coming months and better-than-expected number could support the dollar against its major crosses. Apart from US inflation, market participants will also be watching inflation number that will be released from the Euro zone and a pick up in the benchmark number would support ECB’s view on inflation. Inflation in July is expected to remain subdued from both the nation but could see a pick in August primarily on back of rise in global crude prices.

Inflation of major economies

EURUSD

In absence of major economic events from Europe and also from US, euro remained in the range of 1.1060-1.1220 band before closing the week at 1.1158 up by 0.65%.  In early last week, upbeat German Industrial production and weaker US dollar supported the Euro at lower levels. Throughout the week, euro remained stronger against US dollar on expectation of delay in the rate hike. Last week, speculators reduced favorable bets on the U.S. dollar for a second straight week, as investors remained skeptical about whether the Federal Reserve would raise rates this year despite a strong U.S. non-farm payrolls report last month. Yesterday, Euro zone government bond yields pulled away from record lows as rallying equities slashed the demand for fixed income markets, even as weak economic data kept the central banks cautious to provide stimulus to support global growth. Today, German ZEW Economic Sentiment numbers and CPI numbers from US will be important event to watch for. Further in this week, Final CPI and ECB Monetary Policy Meeting Accounts on Thursday will be important events to note down.

Technical view for EURUSD

After gaining almost 0.65% in the last week, Euro continued gaining higher above 1.12 in today’s session. In the near term, the pair is likely to face resistance near 1.1250 coincides with falling trendline and short term trendline. A break above this could extend its gains further upto 1.1300-1.1340 levels. However, failure to move and close above 1.1250 could drag the pair downside towards 1.11-1.1050 levels. Hence, it is advised to wait for daily closing above 1.1250 to gauge for short term view.

GBPUSD

Last week, pound remained under pressure after weaker than-expected data from UK docket. Last Tuesday, manufacturing production for UK came in at 0.3% (MOM) in June following a 0.6% contraction in May. June’s outcome was slightly worse than the 0.2% decline forecast by economists. In addition, The trade deficit in the UK widened sharply by £0.9 bn to £5.1 bn in June 2016 from an upwardly revised £4.2 bn in May. It was the biggest deficit since July last year, as exports increased by 2.4% while imports increased at a faster 4% to a record high of £48.9 bn. CFTC released last week suggests that sterling net short positions jumped to 90,082 contracts this week, a record high. Speculators have been short sterling since November last year. The pound has been pressure after Bank of England lowered rates by 25bps and increased its quantum of bond purchase program in a move to mitigate the impact of Britain's vote to exit the European Union. Today’s UK CPI number along with US CPI figure will surely be impacting the pound movement. Further, Average Earnings Index, Claimant Count Change and retail sales are due in mid of this week.

Technical view for GBPUSD

Throughout the last week, pound remained under pressure despite weaker US dollar. After a steadier opening in yesterday’s session, the pound sink more than half a percent to trade weaker than 87 pence per euro for the first time in three years. Technically, short term indicator suggests that the pair is trading in oversold territory and expected to turn on the upside. However, reversal is still not confirmed. Weak momentum in current bearish leg suggests double bottom is likely to take place and there are chances of reversal from 1.28-1.2850 band. Hence, it is advisable to go long for 1.30-1.3050 levels if pair holds 1.2800 on daily closing. On contrary to this, if it breaks then further downside can be seen till 1.2650 levels.

USDJPY

USD/JPY pair recovered in the early last week following strong NFP number from the US. The recovery was capped as resistance was seen at 102.46 in the early week, with a steady decline towards previous lows. On Friday, US retail sales data disappointed market participants and for the week the pair closed on a negative note. On Sunday, Japan has released the GDP data which has unexpectedly showed no growth in the June quarter of 2016, following a 0.5% expansion in the first quarter and market expectations of a 0.2% growth, preliminary estimates showed. Private consumption and government spending slowed sharply while capital expenditure and exports declined. In the coming week, there is no major data from Japan. Market Participant would keep an eye on US CPI data which is expected to edge down to 0.0% against a rise of 0.2% in the prior reading. And later there is US minutes meeting, market participants will keep an eye on guidance on the path of normalization, although the Fed may take a data-dependent approach.

Technical view for USDJPY

The pair failed to show any strength on upside and reversed from the resistance of 102.50 and closed on negative note consecutive for third week. On daily chart, the pair has breached the support of 100.50 and resumes the downtrend. In short, as long as the resistance would not breach on upside, bias is negative and it could move lower towards 98.00 levels.

AUDUSD

For the third successive week the Australian dollar gained against its US counterpart but witnessed selling pressure on higher levels at the end of the week. Gains eroded primarily on back of profit-booking and ahead of the important economic data that will be released this week. Gains in the Australian dollar were seen after data showed that private consumer sentiment figure rose in August compared to the previous month. The index grew 2% in August compared to contraction of 3% in the previous month. Importantly this week’s economic data from Australia will be keenly watched and will be important to gauge a view for the Australian dollar against the US dollar. Market participants will be most importantly watching the employment number that is expected to remain unchanged in July compared to the previous month.

Technical view for AUDUSD

AUDUSD made a low of 0.7495, thereafter it failed to sustain below the support of 0.7500, bounced back sharply and tested the resistance of 0.7670 for 3rd time.  The pair has breached the multimonths downward sloping trendline on upside, but failed to sustain above the trendline and pulled back. In near term, 0.7670 could act as a strong resistance; a move below 0.7500 could take the pair towards 0.7400 levels. Nonetheless, move above the resistance could resolve the uptrend and it could take the pair towards 0.7800 levels.

USDCAD

Early last week, the pair found support near 1.3050 levels, however, later it failed to hold this support and continued to move lower. The pair came under pressure as oil showed sharp recovery throughout the week and disappointing retail sales number that weighed on the dollar; this has extended the down move in USDCAD. USDCAD posted the largest weekly decline since late April in the past week. USD/CAD has now posted 5 consecutive daily declines, and gave up 227 points from its open last week. In the coming week market participation would take a cue from Canada monthly manufacturing sales number which is expected on Tuesday, manufacturing sales is expected to show growth of 0.8% against contraction of 1% in the previous month. Inflation data is expected on Friday, along with retail sales. In the past five readings, retail sales have been reported above expectations.

Technical view for USDCAD

The pair has breached the immediate support of 1.3050 on downside and closed on negative note. On weekly chart the pair has formed the bearish engulfing pattern. Also the pair has breached the upward sloping trendline on downside and closed below the trendline. This indicates the negativity note over short term. 1.3050 could act as a strong resistance which has been acting support earlier, as long as the pair sustain below the resistance level bias is negative and it could move lower towards 1.2800-1.2750 levels.