Weekly Analysis (Dec 16 – 22)

Interest rate decisions headline the economic calendar

BOE Headlines

During the upcoming trading week interest rate decisions from the Bank of England, Bank of Japan, and the People’s Bank of China headline the economic calendar. All central banks are expected to keep interest rates on hold, although the Bank of England may signal a move dovish stance after increasingly disappointing economic data. The Bank of Japan rate decision is set to be a non-event for financial market participants, with the central bank maintaining its ultra-loose monetary stance, while the PBOC may is not expected to cut rates.

The United States economy is also in focus this week with a raft of high-impacting economic releases including Growth, Inflation, Manufacturing, and Housing. The Australian economy also releases the Reserve Bank of Australia Meeting Minutes and its monthly Job report.

Monday 16th December, EU Manufacturing PMI

The EU Manufacturing Purchasing Managers Index is released by Markit Economics and measures the activity level of purchasing managers in the manufacturing sector. The manufacturing PMI is an important indicator of business conditions and the overall economic condition in the eurozone because the manufacturing sector represents nearly a quarter of total GDP. A reading above 50 indicates expansion in the sector and below 50 indicates contraction.

  • The EURUSD pair is only bearish while trading below the 1.115 level, key support is found at the 1.1090 and 1.1060 levels.
  • If the EURUSD pair trades above the 1.1115 level, buyers will likely test towards the 1.1170 and 1.1210 resistance levels.

Tuesday 17th December, RBA Meeting Minutes

The Reserve Bank of Australia Monetary Policy Meeting Minutes are published two weeks after the Reserve Bank of Australia interest rate decision. The RBA Meeting Minutes give a full account of the policy discussion, including factors that influenced recent monetary policy decisions and differences of view amongst RBA members.

  • The AUDUSD pair is only bearish while trading below the 0.6840 level, key technical support is found at the 0.6800 and 0.6780 levels.
  • If the AUDUSD pair trades above the 0.6840 level, buyers will likely test towards the 0.6960 and 0.7020 levels.

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Wednesday 18th December, UK Consumer Price Index

The United Kingdom Consumer Price Index is released by the National Statistics and measures the change in the price of goods and services from the perspective of the consumer. CPI is a key indicator that measures inflation and changes in purchasing trends, therefore CPI figures are closely watched by the Bank of England. A rise in the Consumer Prices Index may determine whether the Bank of England increases interest rates in order to manage inflation and slow economic growth.

  • The GBPUSD pair is only bearish while trading above the 1.3180 level, further losses towards the 1.3100 and 1.3040 levels remain likely.
  • If the GBPUSD pair trades above the 1.3180 level, buyers may test towards the 1.3470 and 1.3510 resistance levels.

Thursday 19th December, Bank of England Rate Decision

The Bank of England interest rate decision is announced by the Bank of England after close deliberation from the central bank’s monetary policy committee. If the Bank of England is hawkish about the inflationary outlook of the economy and raises the interest rates it is positive for the British pound. If the central bank has a dovish view on the UK economy and keeps the ongoing interest rate, or cuts the interest rate it is seen as negative for the British pound.

  • The EURGBP pair is only bearish while trading below the 0.8450 level, key support is found at the 0.8400 and 0.8350 levels.
  • If the EURGBP pair holds above the 0.8450 level, buyers may test the 0.8540 and 0.8600 resistance levels.

Friday 20th December, US Core PCE

The US Core PCE Index report is greatly valued mainly due to its capability of forecasting inflationary pressures inside the American economy. The Federal Reserve utilizes a measure of inflation resulting from the PCE as their primary gauge of inflation. An overall increase in prices may be derived from an excess take in of these high levels of production and consumption.

  • The USDJPY pair is only bullish while trading above the 109.00 level, further upside towards the 110.00 and 110.50 resistance levels seems possible.
  • If the USDJPY pair trades below the 109.00 level, sellers are likely to test towards the 108.60 and 108.20 support levels.

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