Weekly Outlook 29th June to 3rd July 2020

Weekly Outlook 29th June to 3rd July 2020

28 Jun 2020 12:22 PM

USD/INR – It’s a quiet week ahead for the Indian rupee. Infrastructure output, fiscal deficit, bank loan growth and FX reserves are all expected to have a muted impact on the currency. Any further corporate dollar inflows might cause rupee to strength in the short term. Daily reported new COVID-19 cases are on the uptrend inching closer towards the 20,000 mark. Chatter indicating lockdown extension in the containment zones is a real possibility. Another lockdown would adversely affect the currency. In the US, FOMC meeting minutes on Wednesday will garner plenty of attention. The U.S markets are closed on Friday in recognition of American Independence.

Technicals - Rupee ended the week at 75.645. The interim support is near 75.45 while the medium-term support is at 75.00-75.20. Currently there are two open downward gaps at 75.97 – 75.88 and another one at 76.62 – 76.46 which will ultimately fill. RSI (14) stands neutral currently at 46.

EUR/USD – It’s a busy week ahead on the economic data front for the Eurozone. Preliminary estimates of June inflation would be released, while Germany will also unveil May’s Retail Sales. June’s private sector PMIs for Italy and Spain are due out on Wednesday and Friday. Finalized PMIs from France, Germany, and the Eurozone are also due out. The US is expected to have recovered 3 million jobs in June, while the unemployment rate is seen retreating from 13.3% to 12.2%. Yet positive numbers could be overshadowed by the resurgent number of coronavirus cases.

Technicals - The sellers are giving up easily and it suggests that we could perhaps be looking at a lot of energy being wasted trying to break to the upside. I think if we were to break above the 1.15 handle, then it becomes a major trend change. 144, 89 and 55-day SMA lie at 1.10 levels indicating that could be the next downside target, perhaps even the 1.07 level on a longer-term basis.

GBP/USD – Brexit negotiations resume on Monday. Whiff of a disagreement from either end, could make the Pound suffer, while silence could provide some solace. The highlight of the UK economic calendar awaits traders on Tuesday, for Q1 GDP growth. Britain will likely confirm the 2% contraction, which will worsen in Q2. Final PMIs and a couple of speeches from Bank of England officials are also of interest, yet UK coronavirus stats are of higher importance. The government's next easing of the lockdown depends on improvement on that front.

Technicals – The widened Bollinger bands reflect increased volatility, as the price action lies closer to the lower band. If we break the bottom of the last candlestick at 1.23, a further weakening towards 1.20 levels could be seen. The slow stochastics are on a downtrend and could be headed for undersold levels.

USD/JPY - It’s a quiet week ahead on the Japanese economic calendar. The unemployment and Industrial production figures are due on Monday. Industrial production is expected to have improved from -15% to -11%, while unemployment is expected to have marginally increased. Rest figures to be released throughout the week are expected to have a muted impact. Risk parameters are still dominant on the currency markets as COVID-19 cases continue to increase in the US and other countries.  The consumer driven US economy appears able to recover faster than the export led Japanese model, and that will eventually lend support to the USD/JPY.

Technicals – Ichimoku cloud suggests that consolidation could be coming to an end and a downtrend could be seen implying stronger Yen. RSI is predominantly neutral at 47. ¥106 level will continue to be a long-term support, if we break down below the ¥105 level, that could be a major move just waiting to happen.