• Forex Weekly Outlook March 13-17

If there is anything the US economic data confirmed last week, it was the Federal Reserve’s rate decision and the solid labour market. The economy added 235,000 jobs in February, following a 238,000 job in January. Making it the best back-to-back gain since July 2016.

The unemployment rate also improved to 4.7 percent from 4.8 percent recorded in January, indicating additional improvement in the participation rate which increased from 62.9 percent to 63 percent.

However, the wage growth was below the 0.3 percent projected by most economists, rising just 0.2 percent in February after January year-on-year wage growth was revised down from 2.9 percent to 2.8 percent. This further validated the Fed’s concerns regarding sustainability once the interest rate is increased. Therefore, clouding the potential of the U.S assets amid series of uncertainty emanating from the country.

Also, on a critical look into the report, about 26,000 jobs were lost in the retail sector of the economy in the same month. Meaning, the retail sector that formed the bulk of the services sector that constituted 70 percent of the entire American economy is not creating jobs, as retail owners are reportedly worried about the impact of the proposed border tax on their imports and subsequently profit margin. Therefore, if the Federal Reserve raise rate this week, the subsequent increase would depend on how well fiscal stimulus complement monetary adjustment in terms of job creation, wage growth and productivity. Putting the likelihood of the third rate hike this year in question.

In Euro-Area, the economy rose 0.4 percent in the final quarter of 2016. Boosting investors’ confidence to its highest level post-recession but with both household consumption and government spending surging 0.2 percent and 0.1 percent respectively, the ECB was forced to raise its growth forecast to 1.8 percent in 2017 and 1.7 percent in 2018.

Although, the European Central Bank president Mario Draghi has attributed the renewed confidence and growth in the region to surging commodity prices and argued that the underlying fundamentals remain weak. Economic experts believed the improvement in global economic outlook is aiding the region, but that the weak wages and rising inflation remain a concern.

In Canada, the economy added another 15,300 jobs in February, bringing the total jobs created in the past 12 months to 288,100 and unemployment rate to 6.6 percent from 6.8 percent.

Canadian strong job market has been supporting household spending, though there are worries around the quality of those jobs. The Bank of Canada has highlighted “subdued” wage growth and hours worked as evidence of continued lack in the country’s labor market, even with recent job gains.

Overall, the global economy is stronger in the first quarter of 2017 than what was obtained last year. But the uproar in the euro-area political sphere and uncertainty in the US continued to cast a shadow on both the financial markets and global economy.

This week NZDCAD, EURJPY, EURNZD and NZDJPY top my list.

NZDCAD

This pair has lost around 608 pips since peaking at 0.9923 price levels in November 2016. Confirming the renewed interest in the Canadian dollar after OPEC reached consensus and a more favourable bilateral trade deal with the US following a series of positive comments from Donald Trump since winning the US election.

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Also, the last 5-week candlesticks don’t just attests to downside pressure but correlate with the underlying fundamentals of the paired currencies and validated by the gravestone doji established two weeks ago. This week, I am bearish on this pair and will be looking to sell below 0.9298 for 0.9108 targets.

Last Week Cap

EURJPY

Since I mentioned this pair last week, it has gained 137 pips but still below our target of 124.18. Nevertheless, I expect the growing odds of the Fed raising rates and the eventual rates increase to impact the attractiveness of the Japanese yen and further aid this pair.

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Also, given continued growth and renewed confidence in the euro-area I remained bullish on this pair while monitoring both Netherland-Turkish and France political uprising.

EURNZD

This pair has gained about 322 pips since I mentioned it last week but was 63 pips short of our target (1.5469). While I remained bullish on this pair this week, it is advisable to adjust stop lost to lock-in part of the profit realized last week while leaving moderate room for price movement.

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NZDJPY

For the past three weeks, I have been mentioning this pair and its sell opportunities. Even though it was slower the other pairs but it was consistent and has given us 214 pips in total. However, last week it was 5 pips short of our first target at 78.83. This week, I remained bearish on this pair and will look to add to my position below 78.83 support levels.

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