Sunday, October 11, 2015

Euro-dollar technicals contradict fundamentals | Forex market events this week

An interesting situation has developed in regard to the EURUSD pair on the weekly chart. It appears that since early this year the exchange rate has been carving out what is known as an ascending triangle, as can be seen on the chart above. This pattern is normally held to signal a breakout to the upside. However, the accepted wisdom in the Forex marketplace has been that the trajectory for this pair is down. This is because monetary policy in the US and the Eurozone is on a diverging path – US Quantitative Easing is a thing of the past, and the next move there is start raising interest rates, even if the Fed seems to be having some difficulty in biting the bullet here. In the case of the ECB, exactly the opposite is the case – QE is only getting into its stride, and the idea of Frankfurt raising interest rates any time soon is regarded by most as a remote prospect.

So we would seem to have a contradiction between the technical and the fundamental. It will be interesting to see how this plays out.

Economic events this week

There are no major events, in the way of monetary policy decisions, in the countries of the currencies that we watch this week. In Japan, there will be the release of BoJ Monetary Policy Meeting Minutes, but these are not expected to have a big impact.

Tomorrow, Tuesday, will see inflation figures in Germany and the UK, and retail sales in the UK, while on Wednesday the retail sales figures for the US will be released. These are always closely watched by the market and can cause a reaction. Then, on Thursday, employment figures in Australia come out, as well as inflation expectations. The same day sees inflation numbers from the US, and speeches from a number of Federal Reserve members. Inflation for the Eurozone as a whole will be out on Friday, as will the Reuters / University of Michigan Consumer Sentiment Index.

While all those things are important, they cannot ever take into account the surprises that can drop, from time to time, from a clear blue sky.

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