Forex Outlook: Feb 19–24th

Last week had the Janet Yellen speaking to congress. And the USD reacted oddly. This week should be simpler. God willing…


USD — Should be strong, yet the market hasn’t shown it. USD dropped for much of last week. It rose during Janet Yellen’s hawkish speech, but corrected immediately rather surprisingly. U.S. data was also strong pretty much across the board. Yet as soon as Yellen finished her testimony to the House the DXY fell. How long can the USD defy fundamental? I don’t know. It’s tempting to buy into the USD at this point. USD can’t defy its fundamentals forever, right?

GBP — Underlying weakness. Data for GBP has been mixed. With Brexit looming, it feels like GBP is fragilely higher than it should be. But with no major news scheduled, I don’t expect there to be any catalyst for the sell off, yet.

EUR — No EUR data this week. However, watch for stories about Le Pen and how the German economy benefits/hurts from the EUR strength/weakness. Trump spoke about how Germany has benefited from a weaker EUR. Merkel responded that there is no problem with the value of the EUR. It’s worth keeping an eye on.

JPY — Overall the Yen strengthened last week. The main reason being no one knows what the hell is going. If the dollar keeps defying fundamentals, I expect the JPY to continue to strengthen. The only thing keeping the JPY strong is all the uncertainty by the dollar. I’m cautious of the JPY this week. Fundamentally, it’s weak. And if the dollar gets its act together, it could go up to 114 or even 115.

Economic Events That Interest Me:

For the most part it’s going to be a quieter week than last week. No big speeches coming from the FED. The pieces of economic news that stick out to me are the ‘FOMC Meeting minutes’ on Wednesday and the ‘Unemployment Claims’ on Thursday.

Last week Janet Yellen and the other members of the FOMC were rather hawkish, I’m curious to see if the minutes reflect that. And if, this increases the likelihood of an interest rate change in March. If they come out hawkish I expect the dollar to gain strength.

The other piece of news I am curious about is the ‘Unemployment Claims’ on Thursday. U.S. data has been strong, but this hasn’t been showing in the market. It will be interesting to see if that trend continues.

Final Thoughts:

Overall, we’re living in odd times. Trump could tweet something at any moment that could cause a move, there is uncertainty in the EU, and no one knows exactly how Brexit will play out. Politics and Jawboning will be far more impactful for the forcible future than standard Forex Fundamental data.

Gif that describes the Markets: