Global financial markets are heading to the last stage of the year 2017 before long Christmas break. Three upcoming weeks are crucial for trends of next year. Economic calendar is full of important events to watch if you want to determine the structure of your investments and trading opportunities.
The markets are very sensitive to two headline topics in the leading worldwide economy: US tax reform and investigation against president. These topics are not listed in the economic calendar, so you should keep an eye on news. Any positive development of the tax bill vote story would support greenback bulls, while bears will be looking at any success in possible impeachment story.
Traders and investors will monitor closely the upcoming meetings, decisions and press-conferences of major central banks. Next week kicks-off with Reserve Bank of Australia and Bank of Canada interest rate decisions. Heavyweight players like ECB, FED and BOE are expected on the scene in December 13-14 period. Thus, FX speculators expect volatility to surge in two upcoming weeks, which might help to boost the Christmas holidays budget.
I will start the outlook with aussie. To be honest, I trade it rather rarely, but the next week calendar makes me feel some fresh profits. Retails Sales report, RBA meeting, GDP and Trade balance figures will determine the direction of AUDUSD and the rest of aussie cross-rates. Last comments from Australian officials tried to prepare the market participants for more hawkish tone in the nearest future. So, I would not be surprised if the RBA Statement will change the sentiment and allow the aussie to gain some strength.
Technically, AUDUSD daily chart has several signs of possible upside correction if not reversal. First one is potential double bottom formation with higher lows. Second sign comes from fast oscillator: RSI14 heads up to 50% level to cross and turn bullish. Bollinger Bands support worked well last week.
The price action has to complete some conditions to confirm bullish reversal pattern:
- Daily close prices have to cross middle BB line (0.7614) together with mid-term median line (red dotted), which used to be long-term support.
- Break through green resistance line of the downtrend started in September.
- Move above 200-day Simple moving average and upper BB line. Both resistances are at 0.7694 mark currently.
These factors could open the road to 0.7750 target. I will be looking for intraday whipsaws to go long on AUDUSD, AUDJPY and go short on GBPAUD. However, if the RBA statement continued the recent dovish rhetoric, these technical suggestions would not work and the aussie would continue the downtrend. The show is scheduled for Tuesday 03:30 AM GMT, so get your helmets ready.
The next huge trading day is Wednesday. US ADP Non-Farm Employment Change report is not so important as official NFP due to a different methodology of calculating statistics, but traders will monitor it to adjust expectations of unemployment figures. Two crucial events for loonie will continue the flow of data. BOC rate decision and statement and US Crude Oil Inventories are due to release at 03:00 and 03:30 PM respectively. My prediction of USDCAD slide was accurate on Friday, finishing the past trading week with lucrative shorts on profit of 200 pips. But will USDCAD continue moving southwards?
Let me turn your attention to the past. RBA hiked the interest rates two times in last 5 months and both decisions were unexpected for market participants. So I would not be surprised if the regulator will decide to hike one more time this year, despite the cautiousness about possible bubble in real estate sector. The odds are low of course, but potential profit could compensate the risk. One more supportive factor for the loonie is the price of Crude Oil heading to important resistance level of $60 per barrel.
Technical picture tells me about downside continuation. First of all, the Friday huge bearish daily candlestick has only 2 pips of difference between low and close prices, adding chances for a weekend gap. Secondly, RSI14 is clearly below 50% mark, indicating bearish sentiment. It’s far from oversold levels yet, leaving the room for further weakness. Next support levels to monitor: 1.2621 (close price AUG-30), 1.2433 (June and October lows) and the green dotted median magnetic line (1.2250/2300).
Let me get back to boring major currency pairs. All of the european reports scheduled for upcoming week do not have huge impact, except EU GDP on Thursday. So the trading direction will be determined by news flow from other side of the Atlantic, with the main event of US NFP on Friday. I do not expect EURUSD to get out of the recent range before Friday NY session, but who knows, how fast they will push it above 1.20 psychological level?..
Technical pattern of the H4 chart below is bullish. RSI14 is supported, posting higher lows with a lot of space to go up. The pair is buoyant on pullbacks to green support line. Simple moving average has the same trend angle.
I would recommend not to be greedy and take profits of potential EURUSD intraday longs around 1.1950 level. Long-term traders can hold long positions even through the NFP report in case if there would not be any huge unexpected figures like +300K jobs created in November. Trading NFP is always a separate story, which deserves special attention, so stay tuned for updates closer to the end of the week and feel free to give me a shout if you need any support.
Let the profit be with us!
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