Let’s start with a look at the economic calendar for the upcoming days.
Weekly Forex Outlook: May 14-18
The US dollar reached new highs since the end of 2017 last week but failed to stay there. On the weekly chart of the US dollar index, we can see a “shooting star” candle. It’s a sign that the USD will be under pressure and will likely go down in the coming days.
There was some negative news for the USD. Donald Trump decided to pull out of the nuclear deal with Iran. In addition, both American producer and consumer price indexes disappointed.
EUR/USD came close to the psychological level of 1.20. Europe didn’t bring much news in recent trading days, but the situation is going to change. We’ll find out the region’s GDP for the first quarter on Tuesday. This will be a release of great importance: traders will see whether they want to return to this year’s uptrend in the euro or continue with its reversal down.
In addition, pay attention to the developments in Italy. This country is about to form a government. If a member of an anti-establishment party is in charge, the euro may suffer. However, if Italy’s next prime minister is an independent figure, the euro will strengthen. Above 1.20, the next resistance is at 1.2017 and 1.2067 with the final obstacle at 1.2325. Support is at 1.1911 and 1.1850.
GBP/USD had a very uncertain week and traded around the 200-day MA at 1.3545. The Bank of England cut its economic forecasts but tried to assure the markets that the current economic problems are temporary. A close above 1.36 will give the pound some confidence, although there are further resistance levels at 1.3650 and 1.3700. Below 1.3550, support is at 1.3460 and 1.3380.
Elsewhere, the news that the US President will meet North Korean leader Kim Jong Un on June 12 improved the market’s risk sentiment. AUD/USD returned above 0.7500 and may continue to 0.76 and 0.7650. The Canadian dollar was supported by higher oil prices, and USD/CAD needs to fall below 1.2760 to slide to 1.2680.
The main releases of the week are the euro area’s GDP and US retail sales on Tuesday, Australian employment on Thursday and Canadian CPI and Retail sales on Friday. The UK Prime Minister Theresa May meets with her Brexit cabinet Tuesday to discuss plans for a post-withdrawal customs union.