The US Dollar is struggling against other currencies due to inflation fear. Therefore, the financial market may get a benefit from the Dollar weakness where the key event is German PMI. Get more insights for the new trading week with AtoZ Markets' Forex Weekly Fundamental Forecast.
May 18, 2021, | AtoZ Markets– The US Dollar became weaker against major currencies as soon as the Non-Farm Payroll missed the expectation. Moreover, unemployment came at 6.1% from 6.0% indicating an increase in unemployment. Therefore, the German PMI and AUD employment change may provide a stable outlook for the US Dollar for the coming days.
Forex Weekly Fundamental Outlook- German PMI
Due to the weaker NFP, we may see some decent movement in most of the major currency pairs. Let's have a look at the forex Weekly Fundamental Outlook with the GBPUSD:
The US dollar sentiment ran by the bond market all year. However, the treasury interest rate on Wednesday made a decent move in the USDJPY pair since early last November.
The US Consumer inflation has tripled in the last 4 months from 1.4% in January. Moreover, wages are rising and employees are coming back to works. The market had anticipated a massive increase in annual inflation due to lockdown. However, investors are expecting a statistical variation in data due to the upgrade in annual inflation. Besides treasury rate moved higher after the CPI release from 1.625% to 1.695%.
On the other hand, Japanese data had little effect on the market where April’s Eco weather remained weaker, demoting the prospects for a domestic recovery.
Bank of Japan Governor did not favor the yen during the pandemic but warned about the effect on the economy. Overall, the Japanese economy contracted in the first quarter with a rebound in Q2 that may lead the USDJPY Down.
- USD/JPY trend Expectation: Bearish
- Possible target level: 107.70
- Possible Invalidation level: 109.30
The US inflation has become a matter of tension where investors have seen a surge in CPI to 4.2% year-over-year and Core CPI to 3% YoY. On the other hand, Fed President Robert Kaplan said that the increase in inflation may help the US Dollar to cool down its gain.
There is a rapid drop in COVID-19 cases in the USA. The positive impact came from vaccination and the implementation of social distances and face masks.
On the other hand, in the UK, prime minister Boris Johnson declared a new phase regarding the economic reopening and new Indian strain of Virus. The government is accelerating campaigns where the variant remains prevalent.
Sterling received a boost from the GDP figure of Q1 where teh UK economy squeezed by only 1.5%. Moreover, Scotland’s election showed a positive impact on the UK economy with an outcome that could partially defuse political tensions.
In that case, the Pound has reasons to show strength against the US Dollar this week where investors should keep a close eye on German PMI this Week.
- GBP/USD trend Expectation: Bullish
- Possible target level: 1.4300
- Possible Invalidation level: 1.4120
The key investors’ requirement is that whether Fed will taper or not. The last week’s weaker NFP report convinced investors to believe that Fed will keep printing money of $120 billion per month.
Besides, the headline inflation surged to 4.2% while the core CPI moved 3% higher YoY, above expectations. However, the US Dollar is struggling to capitalize on the news as inflation is keeping policymakers thinking before taking any decision.
The US retail sales missed the expectation and remained flat in April while The University of Michigan's Consumer Sentiment Index unexpectedly dropped.
On the other hand, the European Central Bank’s next step is moving well. Some members are positive about printing Euros and complete the Pandemic Emergency Purchase Program (PEPP).
The current infection rate of COVID-19 is decreasing after a long week of frustration. It seems like the vaccination has a positive effect on consumers that are bringing down cases.
- EUR/USD trend Expectation: Bullish
- Possible target level: 1.2314
- Possible Invalidation level: 1.2120
Bitcoin moved down with the dovish tone from Tesla Inc. CEO, Elon Musk who said that Tesla would not accept Bitcoin as a payment method. Moreover, he included that the increase in Bitcoin mining and translation may affect fossil fuels.
Due to the concern of Elon Musk, Bitcoin moved down with a daily close below the $47,000 level followed by a potential Head and Shoulder pattern in the daily chart.
However, Elong Musk is still optimistic about the Digital currency and noted that he had no plan to sell Bitcoin held by Tesla.
Besides, bitcoin is keeping institutional interest among investors and more investment is coming to the crypto market that may rebound the current price structure at any time.
- Bitcoin trend Expectation: Bullish
- Possible target level: $58,000.00
- Possible Invalidation level: $40,000.00
Litecoin is a peer-to-peer cryptocurrency made by Charlie Lee, as a low-cost and efficient crypto coin that BTC. Therefore, Litecoin got a massive retail acceptance that to the top 10 cryptocurrencies in the world.
Following the Bitcoin, Litecoin moved lower as soon as Elon Musk’s statement regarding fossil fuel came. On the other hand, one of the prominent Betting companies ran a consumer voting program regarding crypto acceptance. Based on that vote with 10,000 users Litecoin and Dogecoin got nominated as a payment currency for the company.
Moreover, investors have an interest in Litecoin, which is helping the price to get stable above the $280.00 level.
- Litecoin trend Expectation: Bullish
- Possible target level: $370.00
- Possible Invalidation level: $257.00
Ethereum is still optimistic about its strong demand in Defi and other altcoins. However, with a dovish tone from Elon Musk, Etherum joined the bearish rally with Bitcoin and other cryptocurrencies.
As per the current market context, ETH is holding by many investors and users that may push the price higher. The primary target of ETH is $5,000 as per many analysts.
- Ethereum trend Expectation: Bullish
- Possible target level: $4400.00
- Possible Invalidation level: $3033.00
Coca Cola [KO]
As per the Q1 earnings release, Coca Colar stock is facing a revenue growth of $9 billion, 5% above the previous result. However, the EPD was down by 19% to 0.52. The revenue missed the analysts’ expectation but did not come much lower.
On the other hand, the operating margin of Coca-Cola is up by 30.2% against 27.7% a year ago. Analysts; changed the projection from Coca-cola stock higher than the expectation, which is a positive sign for investors.
- Coca Cola trend Expectation: Bearish
- Possible target level: $50.00
- Possible Invalidation level: $55.68
Amazon started this year with multiple growth possibilities, including its virtual health program expansion across the US with its drug business expansion.
According to the Amazon Q1 earnings report, the earnings came at $15.79 per share against the expectation of $9.54 per share. Moreover, the revenue was up by 44% to $108.5 billion, exceeding analysts’ expectations.
Among other developments, Amazon announced a pilot program that will connect medical professionals through video chat, and it will save time and effort for both.
- Amazon trend Expectation: Bullish
- Possible target level: $3500.00
- Possible Invalidation level: $3100.00
Overall, investors may see some decent movement this week with the weaker US Dollar. On the other hand, the global market is still facing some pressure from the 3rd wave of COVID-19, especially in the Asian continent.
Can GBP move higher with a positive German PMI? Let us know in the comments section below!