Forex Weekly Outlook October 23-27

The US dollar rebounded last week after the senate adopted 2018 fiscal budget. However, the weaker than expected inflation rate, 0.5 percent, and retail sales, 1.6 percent, remain concerns as the Federal Reserve prepares to start unwinding its balance sheet in October. 

In Europe, the Brexit got a huge support from German Chancellor Angela Merkel in a move believed by most to have broken Brexit deadlock. Merkel refuted the general assertion that Brexit negotiation won’t succeed, she said “there is zero indication that Brexit talks won’t succeed and she “truly” wants an agreement rather than an “unpredictable resolution.”

This week, I will be reviewing our last week’s pick, AUD/JPY, NZD/USD, AUD/USD, NZD/JPY, and USD/JPY.

AUD/JPY

The Australian dollar gained against the Japanese Yen last week to close above the 88.17 price level.

This was because of the uncertainty surrounding the Japanese Yen prior to the October 22 election as explained in the weekly outlook. However, with Prime Minister Shinzo Abe winning the election and securing a two-thirds parliamentary majority. He now has the mandate to go ahead and revise Japan’s pacifist constitution and sustain his Abenomics.

Therefore, the strong Japanese economy and growing export amid likely surge in investment inflow this week should aid the attractiveness of the Japanese Yen against the overpriced Australian dollar. This week, I remain bearish on AUD/JPY pair and will look to sell below the 88.17 support level for 86.34 targets.

NZD/USD

As explained during the week, the uncertainty surrounding the New Zealand dollar and the success of the 2018 fiscal budget with the US senate boosted the NZD/USD selloff last week.

However, until the New Zealand First coalition announces its economic growth plan, investors will continue to pull out money from the market. So this week, I remain bearish on this pair with 0.6892 as the target.