The week ahead offers a barrage of economic news for currency traders to digest, with the key highlights coming from the US. Markets will focus closely on the FOMC monetary policy decision on Wednesday afternoon. We expect the Fed to ease policy by 25-basis points to 2.0%, and maintain a downbeat outlook on the economy similar to its previous statement. Nonetheless, we anticipate the Fed to leave policy unchanged for the remainder of the year after this weekÂ¡Â¯s rate cut given the aggressive easing that has already materialized.
In addition to the highly anticipated US jobs report on Friday, the calendar also consists of April consumer confidence, US Q1 advanced GDP, PCE, Chicago PMI, March consumption, personal income, durable goods orders, and factory orders. The April unemployment rate is expected to hold steady at 5.2%, while non-farm payrolls are not expected to improve, posting another 80k loss of jobs. The Q1 advanced reading for GDP is seen slowing to 0.2% from 0.6% previously, the PCE index is expected to ease to 3.7% from 3.9% in the previous quarter.
The greenback rallied to its highest levels in two-weeks against the yen at 104.79 and euro at 1.5590. While it remains to be seen whether the recent dollar rebound will be sustainable, Eurozone officials have become more outspoken about their unease over the euroÂ¡Â¯s strength. ECB President Trichet said Â¡Â°there have been at times sharp fluctuations between major currenciesÂ¡Â± and expressed concern about the Â¡Â°possible implications on economic and financial stabilityÂ¡Â±.
Euro Mired near Two-Week Lows
The euro holds steady above the 1.56-level, having retreated sharply since breaching the psychologically key 1.60-mark last week. The Eurozone economic reports will include Germany and E-13 employment reports, manufacturing PMI, and Germany retail sales.
We look for the euro correction to stabilize near the 1.5350-region and make another run toward its all-time high at 1.6018. The pair finds interim support at 1.56, followed by 1.5550 and 1.5520. Subsequent floors are seen at 1.55, backed by 1.5460 and 1.5430. On the upside, ceilings will emerge at 1.5670, backed by 1.57 and 1.5740. Additional gains will target 1.5780, followed by 1.58 and 1.5865.