Start your trading week right by prepping for these top-tier catalysts and checking out my potential trade setup.
Don’t forget to review which factors drove forex market price action last week, too!
Major Economic Events:
U.S. CPI report (Mar. 10, 1:30 pm GMT) – Both headline and core inflation figures are slated to show a slight pickup in price pressures, with the former projected to come in at 0.4% and the latter to show a 0.2% uptick for February.
Given the increased market attention on surging bond yields recently and the prospect of Biden’s stimulus plan getting approved, the upcoming CPI release would likely impact Fed monetary policy expectations. Stronger than expected results might bring some rate hike buzz, which would be dollar bullish.
BOC rate statement (Mar. 10, 3:00 pm GMT) – No actual changes to their 0.25% interest rate are expected, but any shift in rhetoric among BOC policymakers could lead to sharp moves for CAD pairs.
The Canadian economy has been seeing some green shoots in the past months, particularly when it comes to GDP and leading indicators. However, the BOC previously stated that they’d hold off any tightening moves until their inflation target is achieved.
ECB monetary policy statement (Mar. 11, 12:45 pm GMT) – ECB head Lagarde and her fellow policymakers are expected to sit on their hands as well, making no changes to interest rates or bond purchases for the time being.
Lagarde and some senior ECB officials have been particularly vocal about rising bond yields these days, though, so it will be interesting to see how their concerns could play into policy expectations.
Hints that the central bank is ready to act might mean some downside for the shared currency, as this could involve additional QE. Assuring that no immediate action is needed for now, on the other hand, could boost European bond yields and the euro.
Forex Setup of the Week: EUR/NZD
With the ECB decision likely to be the biggest market catalyst for the week, I’m keeping close tabs on this long-term downtrend setup on EUR/NZD.
The pair is sitting right on the descending trend line on its 4-hour time frame while showing a bearish divergence to boot, so I’m inclined to think that the selloff could resume soon.
This might be the case ahead of the ECB announcement, as traders price in expectations of a dovish tone and hints that the central bank could step in if global bond yields continue to rise.
There are no major reports coming from New Zealand, which leaves the Kiwi as a good candidate for a counter currency against euro weakness. After all, this country is faring waaay better than its peers when it comes to weathering the pandemic.
Risk-taking might also favor the higher-yielding Kiwi, especially if market watchers stay optimistic about vaccination efforts and the prospect of more government stimulus.
