Week Ahead in FX (Mar. 21 – 25): Get Ready for A PMI Parade!

It looks like Ukraine and COVID cases around the world will continue to influence risk-taking this week.

That doesn’t mean economic releases won’t impact your trades!

Here’s what you need to know about this week’s major data releases:

Major Economic Events:

U.K.’s inflation (Mar. 23, 7:00 am GMT) – Higher housing and utilities (read: gas and electricity) pushed annual inflation to from 5.4% to 5.5% in January. That’s the highest reading since March 1992! The release cemented March rate hike prospects and pushed GBP higher during the trading session.

Markets expect even higher oil prices to have pushed annual inflation to a whopping 6.6% in February with the monthly reading clocking in a 1.0% increase.

SNB monetary policy decision (Mar. 24, 8:30 am GMT) – Traders don’t expect the Swiss National Bank (SNB) to make policy changes this week but we could see more threats against a strengthening Swiss franc.

Keep your eyes peeled for comments about the economic risks of higher commodity prices, Russia’s invasion, and a strong domestic currency.

Manufacturing and services PMIs – This week traders will get a hint of the major economies’ growth trajectories amidst higher commodity prices and heavy sanctions imposed on Russia.

Eurozone’s PMIs (Mar. 24, 9:00 am GMT) might get some extra attention. Eurozone manufacturing is expected to have slowed down from 58.2 to 57.0 while services might have dropped from 55.5 to 54.6.

Germany’s PMIs (Mar. 8:30 am GMT) could see a similar story, with manufacturing edging down from 58.4 to 56.2 while services dipped from 55.8 to 54.4.

And then there’s France’s PMIs (Mar. 24, 8:15 am GMT), which may show manufacturing slowdown down from 57.2 to 55.8 and services dipping from 55.5 to 54.0.

U.S. manufacturing PMI (Mar. 24, 1:45 pm GMT) could have slid down from 57.3 to 56.8 while services dipped from 56.6 to 56.0.

Last but not the least, U.K. manufacturing PMI (Mar. 24, 9:30 am GMT) could weaken from 58.0 to 57.1 while services PMI is expected to drop from 60.5 to 58.8.

Forex Setup of the Week: EUR/JPY

March has been a good month for EUR, which has erased most of its losses against JPY. EUR/JPY found support at 124.50 before trading above the 130.00 mark.

Will the bulls run out of steam this week?

EUR/JPY is fast approaching the 133.00 mark, which has served as resistance at least thrice since mid-2021.

Stochastic is on the bears’ side with an overbought signal right now while the green candlesticks are getting shorter and the wicks getting longer on the daily time frame.

If this week’s PMI reports point to the growth of major economies slowing down, then we could see EUR/JPY pull back to the 130.00 levels.

If the risk-taking theme is extended in the next couple of days, however, then EUR/JPY could surpass its 2021 highs and head for areas of interest like 135.00 or 137.00.