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After posting the biggest quarterly declines since 2010 many investors are questioning whether the dollar will finally attract some bulls.

Although last week was quite with regards to the economic data releases, central bankers rattled global financial markets. Governors of the European Central Bank, Bank of England and Bank of Canada all sent similar signals indicating that the era of cheap money is getting closer to an end. Investors took the opportunity to adjust their position in FX markets by dumping the USD and sending the single currency to a 14-month high, the cable above 1.3, and the Canadian Lonnie to a multi-month high despite the fall in oil.

What seemed to be a coordinated action by monetary policy makers, the speeches impacted fixed income and equity markets heavily sending bond yields higher and stocks lower. Going forward I expect to see volatility returning during the process of normalization as monetary policies converge.

Fed Minutes

The Fed will release the minutes from its June 13-14 meeting on Wednesday. Most Fed speakers remained confident despite recent economic data falling short of expectations, especially that inflation continued to undershoot the 2% target. This led to the divergence in interest rates expectations as most market participants believe that four rate hikes along with the reduction in the Fed’s balance sheet is far from reach. I believe that the Fed statement will sound more cautious than Chair Janet Yellen’s press conference on June 14 as some Fed members might show different opinions in the economy’s strength, leading to continued weakness in the USD.

NFP

Friday’s non-farm payrolls report is of more importance I believe and will be a critical test to the USD. The charts are already showing oversold signals on the USD but this requires a fundamental catalyst to convince the bulls to return. The 138,000 jobs added to the economy in May came sharply below the expected 185,000. Wage growth also disappointed with average earnings rising 2.5% annually. If the jobs report managed to surprise to the upside this time, the USD will likely find a near-term bottom. However, the headline figure won’t be enough even if it came above 180,000. Wage growth is what’s needed to narrow the disparities between the Fed’s dot plot and the markets own dot plot.

U.S. manufacturing and service reports

Manufacturing data from the U.S. and other major economies are also on the calendar the week ahead. U.S. durable goods dropped 1.1% in May as new orders fell unexpectedly. The report added to the growing concerns that manufacturing in the U.S. might not be moving in the right direction. Although Monday’s ISM Manufacturing report isn’t considered a tier one release, I think at this stage it’s important to monitor all data coming out from the U.S. ISM Non-Manufacturing PMI will follow on Thursday with an expectation to drop slightly from 56.9 to 56.6.

Currency pair EUR/USD

The EUR/USD break above resistance (dotted lines) is showing strong bullish momentum. Price is approaching Fibonacci targets of wave 5 (purple) which could complete wave 3 (green).

The EUR/USD is building a triangle correction (red/blue lines) within a wave 4 (brown). The Fibonacci levels of wave 4 vs 3 could act as potential support levels. A break above the resistance could start wave 5 (brown) whereas a break below the support (green) makes a wave 4 less likely.

Currency pair USD/JPY

The USD/JPY is in a bullish trend channel which is indicated by the support (blue) and resistance (red) trend lines. A break above the channel could see a wave 3 (purple) develop within a larger wave C (brown) zigzag.

The USD/JPY potential break above the resistance (red) and top could indicate a wave 3 (purple) continuation.

Currency pair GBP/USD

The GBP/USD is showing strong bullish momentum as price approaches the 1.30 round level resistance, which could be explained by a wave 3 (orange/blue) impulse.

The GBP/USD is building a correction within a potential wave 4 (purple). A bullish continuation could complete wave 4 and 5 (purple) within wave 3 (orange).

Key Points:

• Momentum is slowing but may not be exhausted yet.
• The GDT Price Index could keep the bulls in play.
• Technical readings remain bullish, albeit to a lesser degree than last week.

The NZDUSD has been making remarkable progress over the past few weeks and the pair is now seeking fresh highs. Indeed, it looks as though the Kiwi Dollar is well on the way to reaching the 0.7374 mark – potentially inside of a week. As a result, it may be worth taking a closer look at what has been fuelling the pair recently and what could help to keep it bullish moving forward. Additionally, we might need to look at the technical bias and what this suggests is next on the cards.

The Kiwi Dollar continued to build on recent gains last week, reaching the 0.7329 handle by the close of trading on Friday. Much of this momentum stemmed from the technical bias which was quite bullish overall. However, the bulls were helped out by the broader swing against the USD resulting from the continued political turmoil in the US. Additionally, numerous NZ economic data releases came in better than anticipated. In particular, the ANZ Business Confidence and Building Consents Figures shot up to 24.8 and 7.0% respectively which saw sentiment remain with the pair throughout the week – even if the two releases were downed out on Thursday by the US GDP numbers.

As for the days ahead, it is yet another light week on the NZ news front but the GDT Price Index could prove to be particularly impactful this time around. This is largely due to the fact that its posting happens to fall on July 4th– a US public holiday – which means there is no American data to offset the dairy numbers. As a result, a solid uptick in the GDT figure could prove to be the spark needed to get the Kiwi Dollar to hit a high for the year at around 0.7374. As for the rest of the week, the US NFP data and the FOMC meeting minutes are likely to be the key risk events to watch for.

Moving on to the technical bias, the Kiwi Dollar remains rather bullish but becoming overbought will certainly see headwinds increasing moving ahead. Specifically, the bullish EMA and Parabolic SAR readings may no longer be enough to fuel the uptrend as both the RSI and stochastics have now moved into overbought territory. Additionally, the NZD may struggle to gain traction in the coming days as it is fast approaching fresh highs for 2017 which may be causing some of the bulls to spook.

Overall, expect further gains but resistance will be in place at the 0.7345, 0.7374, and 0.7454 levels. Conversely, support will be seen at the 0.7298, 0.7243, and 0.7194 levels.

Market movers today

Today, the June manufacturing PMI figures for Norway, Sweden, the euro area (including Spain and Italy), the UK and the US are due out .

The unemployment rate for the euro area in May is also due out today and we estimate it stayed at 9.3%. It is st ill our view that the unemployment rate will continue to fall this year as the economic recovery continues.

In the US, we estimate ISM manufacturing fell to 54.0 in June but regional PMIs and Markit PMI have pointed in different direct ions (an increase and a fall, respectively).

Tomorrow in Sweden, we expect the Riksbank to stay on hold but remove its small cut probability in the updated rate path.

Selected market news

Caixin China manufacturing PMI rose to 50.4 in June from 49.6 in May. Hence, the index is now signalling a slight expansion rather than a slight contract ion in Chinese manufacturing. It was somewhat bet ter than expected by consensus. The copper price rose on the news.

In Japan, the quarterly manufacturing business confidence survey released this morning showed t hat Japan's manufacturers are t heir most positive since 2014. This improvement was in line with consensus. Consequent ly, the market react ion to the data release was muted.

The recent rally in EUR/USD found additional justification on Friday from stronger euro area core inflation and weaker US PCE core inflation. In the euro area, core inflation rose to 1.1% y/y, while in the US it dropped to 1.4% y/y. EUR/USD has stabilised above the 1.14 level.

Oil prices Friday found support in the news that the number of oil rigs in the US dropped by two. This is the first sign so far of US crude oil producers reacting negatively to the recent slide in oil prices.

Dry weather in the US and Europe has been a cause for concern recently in the world wheat market . On Friday, a report from USDA added to those concerns, providing additional fuel to the recent rally in world grain prices. Overall, world food prices are up about 10% since the beginning of May – something that could also potentially come to the attention of major global central banks if it starts to pass through to inflation.

For the 24 hours to 23:00 GMT, the AUD rose 0.07% against the USD and closed at 0.7687 on Friday.

LME Copper prices rose 0.03% or $2.0/MT to $5907.5/MT. Aluminium prices rose 0.6% or $11.0/MT to $1908.5/MT.

In the Asian session, at GMT0300, the pair is trading at 0.7675, with the AUD trading 0.16% lower against the USD from Friday's close, following downbeat Australian building approvals data.

Data showed that Australia's seasonally adjusted building approvals slid 5.6% on a monthly basis in May, more than market expectations for a drop of 1.3%. In the previous month, building approvals had recorded a revised rise of 4.8%. On the contrary, the nation's AIG performance of manufacturing index rose to a level of 55.0 in June, expanding for the ninth consecutive month and following a reading of 54.8 in the prior month.

Elsewhere in China, Australia's largest trading partner, Caixin/Markit manufacturing PMI rose more-than-expected to a level of 50.4 in June, crawling out of the contraction territory and marking a three-month high level. In the previous month, the PMI index had recorded a reading of 49.6, while markets expected for a rise to a level of 49.8.

The pair is expected to find support at 0.7660, and a fall through could take it to the next support level of 0.7644. The pair is expected to find its first resistance at 0.7698, and a rise through could take it to the next resistance level of 0.7720.

The currency pair is showing convergence with its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the EUR declined 0.17% against the USD and closed at 1.1423 on Friday, after the Euro-zone's flash consumer price index (CPI) advanced 1.3% on an annual basis in June, rising at its weakest pace since the start of this year, thus suggesting that inflation in the common currency region is not yet on a stable path despite a variety of stimulus measures used by the European Central Bank. In the preceding month, the CPI had climbed 1.4%, while markets had envisaged for a gain of 1.2%.

Separately, Germany's retail sales rebounded more-than-expected by 0.5% on a monthly basis in May, compared to market consensus for an advance of 0.3%. In the prior month, retail sales had recorded a drop of 0.2%. Moreover, the nation's seasonally adjusted unemployment rate remained steady at 5.7% in June, at par with market expectations. On the other hand, the number of people unemployed in Germany unexpectedly rose by 7.0K in June, advancing for the first time in more than a year and defying market expectations for a drop of 10.0K. In the prior month, the number of people unemployed had dropped by a revised 7.0K.

In the US, data showed that personal spending climbed 0.1% in May, meeting market expectations. Personal spending had advanced 0.4% in the previous month. Also, the nation's personal income rose 0.4% on a monthly basis in May, surpassing market expectations for a gain of 0.3%. In the prior month, personal income had risen by a revised 0.3%.

Other economic data revealed that the US final Michigan consumer sentiment index dropped to a level of 95.1 in June, hitting its lowest level since November 2016 and compared to a reading of 97.1 in the previous month. However, the index was revised higher from a level of 94.5 registered in the preliminary print. Further, the nation's Chicago Fed purchasing managers index unexpectedly advanced to a level of 65.7 in June, notching its highest in more than 3 years and following a level of 59.4 in the previous month.

In the Asian session, at GMT0300, the pair is trading at 1.1416, with the EUR trading 0.06% lower against the USD from Friday's close.

The pair is expected to find support at 1.1391, and a fall through could take it to the next support level of 1.1365. The pair is expected to find its first resistance at 1.1443, and a rise through could take it to the next resistance level of 1.1469.

Going ahead, investors will keep a close watch on the final Markit manufacturing PMI for June across the Euro-zone along with the region's unemployment rate data for May, slated to release in a few hours. Additionally, the US ISM manufacturing PMI and the final Markit manufacturing PMI, both for June as well as construction spending data for May, will garner significant amount of market attention.

The currency pair is showing convergence with its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the GBP rose 0.12% against the USD and closed at 1.3025 on Friday.

On the macro front, final estimate of gross domestic product (GDP) showed that the British economic growth sharply slowed to 0.2% on a quarterly basis in 1Q 2017, confirming the flash estimate and following an expansion of 0.7% in the prior quarter. In contrast, the nation's final total business investment rebounded 0.6% QoQ in 1Q 2017, in line with preliminary estimates and compared to a fall of 0.9% in the previous quarter.

In the Asian session, at GMT0300, the pair is trading at 1.3005, with the GBP trading 0.15% lower against the USD from Friday's close.

The pair is expected to find support at 1.2957, and a fall through could take it to the next support level of 1.2910. The pair is expected to find its first resistance at 1.3041, and a rise through could take it to the next resistance level of 1.3078.

Moving ahead, market participants will look forward to UK's Markit manufacturing PMI for June, slated to release in a few hours.

The currency pair is showing convergence with its 20 Hr moving average and trading above its 50 Hr moving average.

For the 24 hours to 23:00 GMT, the USD rose 0.45% against the JPY and closed at 112.50 on Friday.

In the Asian session, at GMT0300, the pair is trading at 112.41, with the USD trading 0.08% lower against the JPY from Friday's close.

Overnight data indicated that Japan's final Nikkei manufacturing PMI dropped to a level of 52.4 in June, while the preliminary figures had indicated a drop to a level of 52.0. The PMI had recorded a level of 53.1 in the prior month. On the contrary, the nation's Tankan large manufacturing index climbed more-than-anticipated to a level of 17.0 in 2Q 2017, after recording a level of 12.0 in the prior quarter. Further, the nation's Tankan non-manufacturing index advanced to a level of 23.0 in the second quarter of 2017, meeting market expectations.

The index had registered a level of 20.0 in the previous quarter. The pair is expected to find support at 111.89, and a fall through could take it to the next support level of 111.38.

The pair is expected to find its first resistance at 112.76, and a rise through could take it to the next resistance level of 113.12. The currency pair is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD rose 0.35% against the CHF and closed at 0.9588 on Friday.

Macroeconomic data showed that Switzerland's KOF leading indicator climbed more-than-anticipated to a level of 105.5 in June, compared to a revised level of 102.0 in the previous month, while market participants had envisaged for a rise to a level of 102.5.

In the Asian session, at GMT0300, the pair is trading at 0.9594, with the USD trading 0.06% higher against the CHF from Friday's close.

The pair is expected to find support at 0.9568, and a fall through could take it to the next support level of 0.9542. The pair is expected to find its first resistance at 0.9609, and a rise through could take it to the next resistance level of 0.9624.

Ahead in the day, traders would focus on Switzerland's real retail sales data for May and SVME–PMI for June.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD declined 0.23% against the CAD and closed at 1.2963 on Friday.

The Canadian Dollar gained ground, after Canada's gross domestic product (GDP) rose 0.2% on a monthly basis in April, at par with market expectations, increasing the likelihood of an interest rate hike later this month. In the prior month, the GDP had recorded a rise of 0.5%. Additionally, on an annual basis, the economy expanded 3.3% in April, advancing at its fastest pace in three years. Markets were anticipating the GDP to climb 3.4%, compared to an advance of 3.2% in the prior month.

In the Asian session, at GMT0300, the pair is trading at 1.2984, with the USD trading 0.16% higher against the CAD from Friday's close.

The pair is expected to find support at 1.2954, and a fall through could take it to the next support level of 1.2924. The pair is expected to find its first resistance at 1.3007, and a rise through could take it to the next resistance level of 1.3030.

The currency pair is showing convergence with its 20 Hr moving average and trading below its 50 Hr moving average.