Forex Major Currencies Outlook (August 21, 2013)

Traders are expecting to see clearer clues on whether the Fed is likely to push through with its Septaper plan or not. On one hand, the U.S. has shown respectable improvements in economic data, which could convince the Fed that a recovery is underway. On the other hand, some Fed officials are wary of using estimates as basis for monetary policy decisions instead of looking at actual reports. However, the rise in bond yields could be another factor to convince the Fed to reduce bond purchases next month, although this component might not be included in the recent minutes just yet. Just the same, brace for additional volatility when trading dollar pairs during today’s US session.

EUR

There are no reports due today, which suggests that traders could start pricing in their expectations for the upcoming top-tier reports. The euro could be in for some strong action in tomorrow’s London session with the euro zone PMI figures up for release. Last month, these PMI readings all came in stronger than expected and hinted that the euro zone could be recovering. This time around, further improvements are expected, with some figures slated to show expansions in manufacturing and services for August. If that’s the case, the euro might be able to make significant headway past the nearby resistance levels.

GBP 

Public sector borrowing and CBI industrial orders expectations are up for release from the UK today and strong figures could push pound pairs above the nearby inflection points. The public deficit of 10.2 billion GBP in the past month is slated to turn into a surplus of 3.7 billion GBP, which would be a good sign for the UK’s finances. Remember that one of the complications in the UK economy is its swelling government debt, but an improvement in this area could solidify the rally for the pound. CBI industrial orders are also expected to improve, with the reading projected to climb from -12 to -8.

CHF

As usual, there are no major reports scheduled from Switzerland in today’s trading, which could mean another round of quiet trading for the franc. Take note though that USD/CHF could be very sensitive to US events, namely the FOMC minutes release in today’s US session.

JPY

There are no reports on deck from Japan today, which means that the yen could be vulnerable to risk sentiment. In particular, USD/JPY’s moves, which could result from the FOMC meeting minutes release, could carry a huge impact on the behavior of dollar pairs for today.

Commodity Currencies (AUD, NZD, CAD)

A couple of medium-tier Chinese data could dictate the movement of the comdolls today since there are no other reports due from Australia, Canada, or New Zealand. In addition, keep close tabs on the release of the FOMC meeting minutes when trading AUD/USD, USD/CAD, or NZD/USD. Crude oil inventories, which have been affected by the ongoing conflict in Egypt, could also have an impact on Loonie trading as lower supply could push oil prices and the Canadian dollar up.

By Kate Curtis from Trader's Way