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Range or Breakouts for S&P 500, USD/JPY, GBP/USD Next Week?

Range or Breakouts for S&P 500, USD/JPY, GBP/USD Next Week?

John Kicklighter,

Talking Points:

  • The Fed held rates last week, but that does little to quiet the influence of speculation over the eventual move
  • A policy twist from the BoJ will keep the focus on Yen crosses as the Japanese efforts leads flagging credibility
  • Oil will face an event that can collapse the build up in pure speculation: a key OPEC meeting

See what live coverage is scheduled to cover key event risk for the FX and capital markets on the DailyFX Webinar Calendar.

Market conditions determine what fundamental themes can generate in price action and whether technicals can spark significant changes in market positioning. While some of the swell in volatility and volume from earlier this month is still bubbling in the market, its momentum has certainly receded. What's more, following the high profile event risk of the past week (Fed and BoJ rate decisions); we were left without the clear course setting hoped for and there are no events of that heft due for release ahead. In this vacuum, it is still possible to generate significant breakouts or event trends - but it is highly unlikely. More probable is consolidation. Patterns and fundamental oases that can take advantage of those circumstances will be preferable.

Among the majors, both the Dollar and Japanese Yen will carry forward some of the fundamental action from this past week. There are two notable indicators (PCE deflator and the consumer confidence survey) and 14 scheduled Fed decisions on tap for the week ahead. That will certainly generate friction for rate expectations and rouse the Greenback. Pairs like AUD/USD and EUR/USD will be well served by volatility that holds to range. Meanwhile, the BoJ altered course on monetary policy - again - and the market's skepticism doesn't seem to be extinguished. With a round of Kuroda speeches, BoJ fund of flows and summary of opinions updates, as well as key economic data; volatility may show up on these crosses as well. That is tricky for USD/JPY which finds itself running short on room in a large and blatant technical pattern.

Aside from those two most liquid currencies, traders would do well to keep tabs on risk, Brexit and oil speculation trends. The ebb and flow of sentiment is always important - even when anchored. The rebound from the S&P 500 and retreat from VIX will be put to the test as the market made an effort to transition from the July/August activity blackhole. For Brexit trends, it is the lack of event risk and fundamental grounds for fear that may present opportunity for pairs like GBP/USD, EUR/GBP and GBP/NZD. For oil, weeks of movement found on inventory draws and pure supply speculation will be resolved with an OPEC meeting. We discuss all of this and its trade potential in this weekend Trade Video.

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.