Forex market weekly analysis

 USD And Washington Politics: 

 this past week,many major currencies climbed to fresh multi-month and multi- year hights against the U.S. dollar. the Australian dollar and British pound were  the best performers, adding 1% to their gains. The euro,Canadian dollar and Japanese yen lagged behind but still managed to leek out small profit in what's much in the way of U.s. dollar looking ahead, we'll know risks in U.s. and Germany determining how currencies will trade in the front of these events directly affect it but there's also a European Central Bank monetary policy meeting on the calender. Commodity currencies are finally looking tired after a relentless uptrend this past month that saw very little corrections. we could easily see a cent pullback in the AUD/USD and NZD/USD on nothing more than profit taking 

 

by kathy lien 

the euro faces two major tests in the days ahead that will determine whether 1.23 is the top or the precursor to a stronger move to 1.25 on sunday,Germany's Social democrats will vote on forming a coalition with Angela Markel's government. if the vote fails, EUR/USD will crash and but the gains could be move below 1.20 if it succeeds 1..23 will be broken but the gains could be short-lived ahead of the European Central bank's monetary policy announcement. The first test for the euro is the spd vote, usd second  will be Mario draghi's press conference. the initial rally in EUR/USD this month was sparked by the accounts of the last ecb meeting, which revealed policymakers are open to tweaking their guidance in "early 2018" if reflation continues. but after a 4-cent rise since that report and a 5-cent move since the last meeting, European official are growing concerned about the rapid moves in the currency especially in light of the 25bp increased in 10-year German bund yields.  

the Australian, New zealand and canadian  dollars are also primed for a turn. We haven't seen a meanigful correction in the Australian and New Zealand dollar over the past month and this past week, both currencies hit fresh 3-month highs on the back of stronger data. For australia, job growth second auction in a row. chinese growth also beat expectations. However with manufacturing activity slowing in the fourth quarter, the New Zealand dollar is at greatest risk for a deep correction that could take NZD/USD down to 71 cents. there are no major Australian economic reports scheduled for release but.AUD/USD, which broke but and rejected 80 cents, could drop down to .7850 Much of that hinges on the market's appetite for U.S. dollar next week but the odds of a correction outweigh the chance of continuation.

 After seven stright days of gains, we've finally seen a pullback isn sterling.It took a softer retail sales report to turn the currency around as GBP/USD tried to make a run for 1.40 over the past month, we seen significant gains and while we believe there will be further gains in 2018, the currency pair is due for a correction.Prime Minister May received the votes she needed to approve the key european union bill and despite european commission president junckr's hope that brexit will be reversed, 2018 will be the year that a deal gets done. the spanish and dutch have already thrown their support behind a soft brexit and uk debates and negotiations continue, UK data has taken a turn for the worse with consumer price growth slowing year over year and retail sales experienced its largest decline in 7 month. this does not bode well for next week's fourth quater GDP report as spending slowed in the last 3 month of the year. uk labor market data is also due for release  and investors will be eager to see if wage growth also weakened. The prospect of softer wage data (after last month’s strong rise) leads us to believe that GBP/USD could slip down to 1.37.

in genral, economy data has been strong, with the EURO-Zone Citi

Economic Surprice index finished Friday at +54.6, stable relative to the past

+58.3 reading this week prior and +56.6 a month earlier. As noted in the past two weeks of this report, the calendar and a lack of new released at the end of December to replaced them; now that data are being released again, the gauge has firmed back up.

Likewise, recall that the final EURO-ZONE composite PMI reading for december showed that growth momentum in the Euro-area is at its strongest pace since finish 2017.while the EURO-Zone Manufacturing PMI hits its all time high to finish 2017  if Euro strenght is truly a problem, the preliminary january PMl reports due in the first week of February.