The G-20 Summit meeting in Osaka, Japan on 28–29 June 2019, was bound to affect the Forex. The meeting between Chinese President Xi Jinping and the U.S. President Donald Trump was the most awaited by the financial markets particularly dealing in AUD/JPY, USD/CAD, and EUR/USD. It was due to the ongoing trade talks between America and China.
China’s Manufacturing PMI was expected to weigh heavily on the AUD/JPY. Reserve Bank of Australia’s (RBA) meeting with the Central Bank of Australia was also presumed to gyrate aud to yen value further. It was highly speculated that after the meeting the RBA would cut interest rates again.
The AUD/JPY was expected to linger between 74.362 and 76.630 with a 68% statistical probability for the next seven days post the Summit after judging by the AUD/JPY one week’s volatility reading of 10.58%. While the spot AUD/JPY appeared to breakout above bearish downward resistance, the pair looked like it would lose upward momentum after crossing 76.000.
The EUR/USD also looked ripe for volatility one week after the meeting and after Germany’s labor market. It was also affected by the Institute of Supply Management’s US Manufacturing PMI’s release. The implied volatility read 6.28% and spot EUR/USD was estimated to swing between 1.1280 and 1.1470 the next week post the Summit.
The EUR/USD price action was expected to shake later in the week after trader’s reaction to the US Nonfarm Payroll (NFP) data release. Last month’s NFP report’s further downside meant bullish conviction that appeared to have developed since the starting of the month. The US jobs report was likely to threaten and send EUR/USD downwards with an estimated 1.1300 price level.
The spot EUR/USD functioning over a short time period was likely to be driven majorly by the market’s anticipation for the FR (Federal Reserve) to change the rates. The overnight swaps suggested that the rate traders were pricing a 25-basis point reduction in interest rate policy by the central bank as a near-certainty with 24% additional probability of a 50-basis point decrease in Fed’s benchmark policy rate. Consequently, positive US economic data risks decreasing the market’s expectation regarding cutting down of rates by the Fed at its next FOMC meeting and supporting the greenback in turn.
The price action was expected to quickly accelerate with spot USD/CAD testing YTD (year-to-date) lows. As a result, it was anticipated by the forex traders that spot USD/CAD would stay between 1.2970-1.3206 the later week based on currency pair’s one week implied volatility of 6.53%. It was the highest reading since March 5th. The USD/CAD bulls were likely to stay near 1.3100 price level and 61.8% Fibonacci retracement before affirming fresh lows for 2019.
The Canadian dollar was expected to look into G-20 Summit impact, the abovementioned U.S. economic data, the Canadian Manufacturing PMI and Canadian labor market. The crude performance had potential to weigh on CAD although CAD shares a strong relationship with oil prices.
