Forex Weekly Outlook January 6-10

US ISM Non-Manufacturing PMI, The Fed  Chairman Nomination of Janet Yellen, Trade Balance, FOMC Meeting Minutes as well as important employment data culminating in the most important NFP event on Friday. These are the main market movers on our list for the second week of 2014. Here is our outlook for the major events to influence forex trading.

Last week US first weekly jobless claims report in 2014 posted a 339,000 increase in the number of new claims for unemployment benefits. The figure was broadly in line with market consensus and was down 2,000 claims from the prior week. Further good news arrived with US consumer confidence, rising to 78.1 in December after posting 72 points in the previous month. Sentiment regarding current conditions increased to a 5 year high due to improved economic and labor market conditions. Manufacturing growth was also satisfactory sustaining its growth trend reaching 57.0, following  56.4 in the previous month. All in all US economy continues to expand, a good omen for 2014.

Let’s start,

1. US ISM Non-Manufacturing PMI: Monday, 15:00. The U.S. services sector index fell to 53.9 in November from 55.4 in October indicating cautious spending by consumers. This lukewarm expansion rate was lower than the 55.4 reading forecasted by analysts. The employment gauge fell to 52.5 from October’s 56.2 to hit its lowest since May, while business activity growth slowed to 55.5 last month from 59.7 in October. Growth in the service sector was steady in 2013 with an average of 55 over the past 12 months. A rise to 54.6 is expected this time.
2. Fed Chairman Nomination Vote: Monday, 10:30., The US Senate will vote to approve the nomination of Janet Yellen as Federal Reserve Chairperson for a term, Feb 2014 – Jan 2018.
3. US Trade Balance: Tuesday, 13:30. The U.S. trade deficit narrowed to $40.6 billion in October from September’s gap of $43 billion due to an all-time high in energy products export. Exports rose 1.8% to a record $192.7 billion.  Imports climbed 0.4% to $233.3 billion, the highest since March 2012. Oil imports rose 1.5%. U.S. petroleum exports edged up 9.3% in the first 10 months of 2013 compared with the same period in 2012, while petroleum imports plunged 11.1%. Economists believe exports will keep growing, reflecting modest recoveries in Europe, Japan and China. Trade deficit is expected to contract further to 40.2 billion.
4. US ADP Non-Farm Employment Change: Wednesday, 13:15. U.S. private sector employment market added 215,000 jobs in November, exceeding forecasts of a 172,000 increase. Hiring picked up since October after a sharp upward revision reaching an 184,000 job-gain. This event is usually overshadowed by the major non-farm payrolls report from the U.S. Labor Department but the upward trend increases optimism among economists. A smaller gain of 199,000 is expected now.
5. US FOMC Meeting Minutes: Wednesday, 19:00. Minutes from the Fed’s October meeting reveal the members have struggled to find the right message for their taper intentions, announcing the central bank will cut back its $85 billion a month bond purchase in one of its next few meetings. The Fed stated the US economy is growing at a moderate pace but monetary policy will remain accommodative to support further growth.
6. UK rate decision: Thursday, 12:00. The Bank of England kept its main interest rate at 0.5% and monetary stimulus program unchanged on its December meeting, in line with market forecast. Analysts predict the BOE will not change rates until unemployment rate drops to 7.0%. No change in rates is forecasted.
7. Eurozone rate decision: Thursday, 12:45. The European Central Bank maintained its benchmark rate at a record low of 0.25% in December, after a rate cut of 0.25% in November amid continued fragile recovery and prolonged long inflation. The ECB reiterated its forecast of a 0.4% shrinkage in 2013 but projected a 1.1% growth in 2015. Economic recovery is expected to improve in light of a gradual strengthening of exports. No change in rates is expected this time.
8. US Unemployment Claims: Thursday, 13:30. US first weekly jobless claims report in 2014 posted a 339,000 increase in the number of new claims for unemployment benefits. The number of claims was 2,000 lower than the reading posted in the prior week. The data in recent weeks was highly turbulent due to the holiday season volatility. This week’s reading returns to a more stable state. Nevertheless, nearly 4.5 million people received some form of unemployment benefits in the week ending Dec. 14, the latest data available. That’s 180,000 more than the previous week. An addition of 334,000 jobs is expected now.
9. Canadian employment data: Friday, 13:30. Canadian job market created 21,600 jobs in November, posting the third consecutive rise. The rise topped predictions for a 12,300 rise.  Meanwhile, the unemployment rate remained at a nearly five-year low of 6.9%. The Bank of Canada is more concerned about low inflation than the situation in the job market. The positive job market figures are welcome news for them. Since November 2012, the economy added 179,100 jobs, an increase of 1.0 percent. The Canadian job market is expected to add 13,300 jobs and unemployment rate is expect5ed to remain unchanged at 6.9%.
10. US Non-Farm Employment Change and Unemployment rate: Friday, 13:30. Non-farm payrolls posted a 203,000 job gain in November, following a revised 200,000 increase in October. The increase was well above market prediction of a 180,000 job addition pushing jobless rate to a five-year low of 7.0% from 7.3% in October. Analysts believe further improvement in the labor market will occur in 2014 aided by stronger GDP growth. The pick-up in hiring suggests companies are more confident in future demand and labor conditions are improving amidst this upward trend. The US economy is expected to add 194,000 jobs with the same unemployment rate.

That’s it for the major events this week. Stay tuned for coverage on specific currencies

*All times are GMT.

Further reading:

• For EUR/USD, check out the Euro to Dollar forecast.
• For the Japanese yen, read the USD/JPY forecast.
• For GBP/USD  (cable), look into the British Pound forecast.
• For the Australian dollar (Aussie), check out the AUD to USD forecast.
• For USD/CAD (loonie), check out the Canadian dollar
• For the Swiss Franc, see the USD/CHF forecast.

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Forex - Euro near 2-week lows against broadly higher dollar

The euro remained near two-week lows against the U.S. dollar on Friday, as demand for the greenback remained supported after Thursday's upbeat U.S. jobless claims data, while markets eyed Federal Reserve Chairman Ben Bernanke's upcoming speech. 


EUR/USD hit 1.3629 during European afternoon trade, the pair's lowest since December 22; the pair subsequently consolidated at 1.3643, slipping 0.20%. 

The pair was likely to find support at 1.3544, the low of December 5 and resistance at 1.3702, the high of December 26. 

The dollar remained supported after the U.S. Department of Labor on Thursday said in a report earlier that the number of individuals filing for initial jobless benefits declined by 2,000 to a seasonally adjusted 339,000 last week. 

Analysts had expected U.S. jobless claims to fall by 7,000 to 334,000 from the previous week’s revised total of 341,000. 

In the euro zone, official data earlier showed that the number of unemployed people in Spain dropped by 107,600 in December, compared to expectations for a 20,000 rise, after 2,500 decline the previous month. 

The euro was little changed against the pound, with EUR/GBP easing 0.04% to 0.8307. 

Also Friday, Markit research group said the U.K. construction purchasing managers' index fell to 62.1 in December, from a reading of 62.6 the previous month. Analysts had expected the index to drop to 62.0 last month. 

The report came after industry data showed that U.K. house price inflation rose 1.4% in December, beating expectations for a 0.7% uptick, after an upwardly revised 0.7% increase in November
.

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EUR/USD Jan. 3 2014 – Euro Downward Spiral Continues

EUR/USD has started 2014 with a slide and has broken below long term downtrend support. The pair shed one cent on Thursday and the downward trend continues on Friday, with EUR/USD trading in the mid-1.36 range. Economic releases started the year on the right foot, as European Manufacturing PMIs pointed to expansion in Spain, Italy, and the Eurozone. In the US, Unemployment Claims and ISM Manufacturing PMI met market expectations. On Friday, Spanish Unemployment Claims sparkled, dropping by over 100 thousand. In the US, a host of FOMC members will be speaking, including outgoing Fed chairman Bernard Bernanke.

Here is a quick update on the technical situation, indicators, and market sentiment that moves euro/dollar.

EUR/USD Technical

• EUR/USD was steady in the Asian session and touched a high of 1.3674. The pair consolidated at 1.3651. EUR/USD has edged lower in the European session.

Current range: 1.3615 to 1.3675.

Further levels in both directions: 

• Below:  1.3615, 1.3525, 1.3440, 1.34, 1.3320, 1.3240, 1.3175 and 1.31.
• Above: 1.3675, 1.3710, 1.3800, 1.3832, 1.3940 and 1.4036.
• 1.3675 has reverted to a resistance role. 1.3710 follows.
• 1.3615 is providing weak support.

EUR/USD Fundamentals

• 8:00 Spanish Unemployment Change. Exp. 24.3K, actual -107.6K.
• 9:00 Eurozone M3 Money Supply. Exp. 1.5%, actual 1.5%.
• 9:00 Eurozone Private Loans. Exp. -1.9%, actual -2.3%.
• 10:00 Italian Preliminary CPI. Exp. 0.3%. Actual 0.2%.
• 15:30 US Natural Gas Storage. Exp. -125B.
• 16:00 US Crude Oil Inventories. Exp. -2.3M.
• All Day – US Total Vehicle Sales. Exp. 16.0M.
• 17:45 US FOMC Member Charles Plosser Speaks.
• 18:15 US FOMC Member Jeremy Stein Speaks.
• 19:30 US Fed Chairman Bernard Bernanke Speaks.

For more events and lines, see the Euro to dollar forecast.

EUR/USD Sentiment

• Spanish unemployment claims tumble: It’s been a great start to 2014 for Spanish releases. On Friday, Unemployment Change sparkled, dropping by 107.6 thousand, crushing the estimate of 24.3 thousand. This was the best reading ever in the month of December. Earlier in the week, Manufacturing PMI crossed above the 50-point level, indicating expansion. We’ll see if Spanish Services PMI keeps pace with some good news when it’s released early next week.
• Unemployment Claims Unchanged: Unemployment Claims were almost identical to the previous week, coming in at 339 thousand. This was slightly above the estimate of 334 thousand.  The markets will be keeping an eye on the year’s first Non-Farm Payrolls, which will be released next week. The NFP can impact the next Fed decision, after 2013 ended with QE tapering. While it was small, the Fed did indeed change policy, and this could have a significant positive impact on the US dollar.
• Flows now turning against the euro: The flows towards the end of 2013 went in favor of the euro and against the dollar. But as the excess liquidity needs to find a way, the flows are now changing direction and the euro has dropped sharply since January 1. We will probably see stability only next week, when the winter vacation is really over.
• Euro gets a new member: Latvia joined the Eurozone on January 1, becoming the 18th member of the bloc. With a population of just two million, Latvia will be one of the smallest economies in the Eurozone. Although many Latvians are not enthusiastic about adopting the continental currency, there were immediate benefits to the move, as the S&P and Fitch ratings agencies raised the country’s credit rating. There are now some 333 million people are now using the euro.
• Dollar bullishness in 2014?: Many analysts see the dollar strengthening in 2014, but the euro is certainly expected to give a fight. Here is one outlook: 2014 – Conditional Dollar Strength.

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