Week ahead »Central Bank Monitoring and Earnings Season
Last week it was all about central bank monetary policy. This week is about following up on the decisions made in these meetings and their impact on forex.
The past week was all about central bank activity. The Reserve Bank of New Zealand (RBNZ) raised rates by 50 basis points, the Bank of Canada (BOC) by 50 basis points, and the European Central Bank (ECB) did nothing. However, due to central bank activity (or inactivity in the case of the ECB), the currency of each of its countries was on the move. This week, these 3 countries are releasing inflation data. Will their currencies continue to move in the same direction in forex this week or will they reverse?
In addition, the first quarter earnings season kicks off a boost as we see the releases of major titles FAANG, Netflix and Tesla. Also, China has a data dump on Monday. Will China continue to show a slowdown due to the “Zero-covid” policy?
The Reserve Bank of New Zealand met last week and surprised the markets with a 50bp hike to 1.5% OCR. It was the first 50 basis point increase in more than 20 years. They added that monetary conditions should continue to be tightened.
However, the central bank also added that the 50 basis point hike was intended to ensure that high inflation does not fit into longer-term inflation expectations.
In essence, the central bank has risen more now to keep inflation expectations low. Given the conservative sentiment in the statement, the New Zealand dollar was sold. This week, New Zealand releases CPI for the first quarter. Will the New Zealand dollar reverse in forex and rise?
The Bank of Canada also met last week and raised interest rates by 50 basis points to 1%. Additionally, the Bank of Canada said it will stop reinvesting the proceeds of its maturing bonds starting April 25, ending its quantitative easing program. Additionally, the Bank of Canada said it will have to raise interest rates to neutral (now 2.5% from 2.25% previously) or above neutral due to the expected rise in inflation. The central bank also raised its inflation forecast for 2022 to 5.3% from 4.2% in January.
The Canadian dollar made an offer soon after the release of the release and the press conference. Canada releases CPI data this week. Will the Canadian dollar reverse on forex and fall? Or will it continue to rise, especially if the price of oil continues its recent rise?
The European Central Bank met on Thursday and disappointed the markets. The ECB said it will continue to buy bonds at the predetermined rate of € 40 billion in April, € 30 billion in May and € 20 billion in June. In addition, the central bank said it will continue to reinvest the proceeds of maturing bonds for an extended period beyond the data when it begins to raise interest rates. Traders were hoping the ECB would announce the end of the QE program first, or at least announce a date when it would stop reinvesting the proceeds (letting bond holdings shrink). The euro was aggressively sold in forex following the statement and press conference. This week, the EU announces its final March CPI reading. The preliminary reading was 7.5% yoy. If this week’s reading is stronger, will the euro rate reverse in forex?
While the big news for stock last week may have been Elon Musk’s hostile Twitter takeover, this week’s story will be about corporate earnings. Among FAANG shares, Netflix will release its quarterly report this week.
We recall last quarter that Steam’s online service disappointed investors by adding just 2.5 million subscribers to Wall Street’s estimate of 8.3 million. In addition to Netflix, other big names have posted their earnings this week, including BK, TSLA, and SNAP. Other companies to watch out for this week are: BAC, BK, SCHW, SAVE, LMT, NAL, NFLX, JNJ, AA, UAL, PG, TSLA, AAL, T, BX, SNAP, AXP, VZ.
As previously mentioned, New Zealand, Canada and the European Union will all release inflation data this week. Additionally, China will release several economic data on Sunday, which should indicate to markets whether the slowdown has stopped. Keep in mind that this data comes from before the Shanghai blockade. Other key economic data this week includes RBA minutes, US real estate data, and global manufacturing and services PMI. Key economic data expected for release this week includes:
Sunday – April 17, 2022
China: GDP growth rate (Q1)
China: industrial production (MAR)
China: Retail Sales (MAR)
Monday – April 18, 2022
United States: NAHB Real Estate Market Index (AVR)
United States: speech by Bullard, FOMC member
New Zealand: NZ PSI Services (MAR)
Australia: RBA meeting minutes
Australia: HIA New Home Sales (MAR)
Tuesday – April 19, 2022
Japan: Final Industrial Production (FEV)
Canada: Housing begins (MAR)
United States: Housing begins (MAR)
United States: Building Permit (MAR)
Japan: Balance of trade (MAR)
Wednesday – April 20, 2022
Germany: PPI Producer Price (MAR)
EU: trade balance (FEB)
EU: industrial production (FEV)
Canada: IPC (MAR)
Canada: new house price index (MAR)
United States: Existing Home Sales (MAR)
United States: Fed Beige Book
Stocks of crude oil
New Zealand: CPI (Q1)
Australia: Prel Retail Sales (MAR)
Thursday – April 21, 2022
EU: IPC Final (MAR)
United States: Philadelphia Fed Production Index (APR)
United States: Weekly unemployment benefits claims
United States: speech by Powell, chairman of the Fed
EU: Speech by Lagarde, President of the ECB
Global manufacturing and flash services PMI (APR)
Japan: CPI (MAR)
Friday – April 22, 2022
United Kingdom: Retail Sales (MAR)
Mexico: Mid-month CPI (AVR)
Canada: Retail Sales (FEB)
Canada: IPP (MAR)
EU: Speech by Lagarde, President of the ECB
United Kingdom: BOE Governor Bailey speaks
See »Economic calendar
Forex Chart of the Week »Monthly USD / JPY
After breaking through a descending trend line dating back to January 2002 last month, the price of the pair USD / JPY it reached its highest level in forex since May 2002 this week, hitting a high near 126.50. Can the USD / JPY pair go up?
Current levels are traditionally where government officials start trying to lower the level of pairs, including the Japanese yen. Already last week, no fewer than 4 officials declared in various forms that “sudden movements in currency effects are undesirable” and that they are “closely watching the recent depreciation of the yen. “
This is done to try to “pull” the market or “push” the pairs, including the yen, down. The Bank of Japan also has the option to enter forex and directly buy yen to lower the level of yen pairs. The next resistance level for USD / JPY is the psychological resistance of the round number at 130.00.
Above it is a February 2002 horizontal resistance near 131.84. However, note that the RSI over the monthly time horizon is in the overbought territory, indicating the possibility of a short-term withdrawal. If the price is down, the first support is the March high at 125.10. Below, the price may return to the long-term trend line near 121.00.
Last week it was all about central bank monetary policy. This week it is a question of following up on the decisions made in these meetings. Additionally, its earnings season and markets will see results from companies like Netflix and Tesla. These companies may set the table of expectations for future earnings releases.
By Joe Perry, CMT, FOREX.com »Official site
Disclaimer: The information and opinions contained in this report are provided for general information purposes only and do not constitute an offer or solicitation to buy or sell any forex or CFD exchange contracts. Although the information contained herein has been obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness, and assumes no responsibility for any direct, indirect or consequential damages that may arise from the fact that someone relies on such information.