The Week Ahead in FX (Sept. 13-17): Watch Out for Inflation Data & NZ Q2 GDP

 There’s no shortage of top-tier reports to trade throughout this week!

Among these, the inflation releases and New Zealand’s quarterly GDP might be the biggest movers.

Don’t forget to review which factors drove forex market price action last week, too.

Major Economic Events:

U.S. CPI (Sept. 14, 12:30 pm GMT) – With more Fed officials buzzing about tapering soon, dollar traders would likely be on the lookout for more clues from inflation reports.

The headline CPI is expected to have dropped from 0.5% to 0.4% in August and the core CPI is projected to have held steady at 0.3%.

Stronger than expected price pressures could confirm that the U.S. central bank is bound to reduce asset purchases sooner rather than later. On the other hand, a downside surprise could lead to a delay and a dollar selloff.

New Zealand GDP (Sept. 15, 10:45 pm GMT) – For the second quarter of the year, New Zealand’s economy is estimated to have grown by 1.2%.

This would be slightly weaker than the earlier 1.6% GDP reading, but it’s still an expansion nonetheless. An upbeat read could remind Kiwi traders that the RBNZ is still looking to hike interest rates pretty soon.

Note, however, that Q2 does not cover the latest round of lockdowns in New Zealand so traders might take any positive surprises with a grain of salt.

U.K. inflation figures (Sept. 15, 6:00 am GMT) – Another central bank that’s been talking about tightening lately is the BOE, so CPI data would likely play into those expectations.

Headline CPI is slated to have jumped from 2.0% to 2.9% in August, keeping it waaay above the central bank’s target and enough to warrant rate hike calls.

The core version of the report likely climbed from 1.8% to 2.8%, which might be enough to convince majority of BOE policymakers that the pickup in price pressures is no longer transitory.

Australia’s jobs report (Sept. 16, 1:30 am GMT) – A sharp 80K decline in hiring is eyed for August, after the Land Down Under posted a meager 2.2K increase in the previous month.

This should be enough to bring the jobless rate up from 4.6% back up to 4.9%, as lockdowns probably erased majority of the jobs gains over the past months.

U.S. retail sales (Sept. 17, 12:30 pm GMT) – Another monthly drop in retail sales is eyed for Uncle Sam, as stronger inflation and weaker jobs growth likely weighed on spending.

For August, headline retail sales likely fell 0.8% while core retail sales probably dipped by 0.2%. This would be a slower pace of decline compared to what was reported in July.

Forex Setup of the Week: NZD/USD

Don’t look now, but this pair is hanging out right at the top of its descending channel on the daily chart!

NZD/USD might be ready to resume its long-term slide, and technical indicators are confirming that resistance is likely to hold.

The 100 SMA recently crossed below the 200 SMA to signal that bearish pressure is picking up while Stochastic is starting to turn lower from the overbought zone.

This means that sellers are bound to regain the upper hand, as exhausted buyers take a break.

If the top of the channel keeps gains in check, NZD/USD could slump back to the bottom at .6750 or at least until the mid-channel area of interest around .6950.

Keep in mind that dollar bulls are waiting to see stronger price pressures that might seal the deal for October or November Fed tapering.

A weaker than expected Q2 GDP reading for New Zealand might also be enough to push this pair back on its downtrend.

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