US HOUSING DATA IN FOCUS FOLLOWING VOLATILE WEEK

Fed week ends on a more subdued note on Friday, giving traders the opportunity to reflect on a series of high-profile events. However, active traders shouldn’t be complacent as Friday’s session still features several potentially market-moving events.

In terms of economic reports, Italy will release its latest global trade figures at 08:00 GMT. Italy is the Eurozone’s third-largest economy, behind only Germany and France.

One hour later, the European Commission’s statistical agency will report on first quarter labour cost across the 19-member euro area. The labour cost indicator is used to measure cost pressures arising from the productive component of labour. The index rose 1.6% in the fourth quarter.

At the same time, Eurostat will release final Eurozone inflation data for the month of May. The consumer price index (CPI) is forecast to decline 0.1% from April, which translates into a year-over-year gain of 1.4%. So-called core inflation, which strips away volatile food and energy prices, is expected to decline 0.1% on the month. In annualized terms, core CPI is expected to come in at 0.9%.

The US Commerce Department will report on housing starts and building permits at 12:30 GMT. The monthly data series is viewed as a barometer of housing market health. Both indicators are forecast to rebound sharply in May.

At the same time, Canada will report on foreign portfolio investment in Canadian securities. The report is not expected to be a major market mover but could shine the spotlight back on the loonie. The Canadian dollar rose to two-month highs this week before giving back gains on a volatile energy sector.

Oil prices plumbed eight-month lows this week, with US West Texas Intermediate (WTI) futures falling below $45.00 a barrel. Oil is in a pronounced downtrend that could intensify Friday should Baker Hughes Inc. report another surge in active US oil rigs.  

EUR/USD

The euro broke sharply to the downside this week after the bulls failed to extend the rally north of 1.13. After a prolonged consolidation near 1.12, the EUR/USD exchange rate has fallen back to the mid-1.1150 range. A negative RSI divergence suggests that the euro may be running out of steam.

USD/CAD

The Canadian dollar pulled back from two-month highs on Thursday, as its US counterpart staged a large relief rally against a basket of global peers. The outlook on the USD/CAD depends on numerous factors, including oil prices and the outlook on Canadian monetary policy.

WTI Oil

Crude oil is coming off its worst settlement of the year, as oversupply woes continue to ravage the market. Prices are now approaching the intraday swing low from early May. A breach below that level could expose deeper losses for a commodity with very little upside at the moment. The technical outlook remains extremely bearish.