[B]Daily Fundamental Dose: 20 – April – 2017[/B]
Hello Traders,
Although smaller economic-line and a holiday-shortened week pointed towards dormant trading-desks, global financial markets witnessed wild moves on Tuesday when all of the major bourses re-opened after four-day long break. The reason was a surprise general-election announcement on June 08 by the British PM in order to facilitate Brexit negotiation. With this, traders’ attention was aptly diverted from US-North Korea to political scenarios in UK and EU, where first round of French Presidential election would take place this weekend.
On the economic side, Thursday’s US Philly Fed Manufacturing Index, Friday’s Flash PMIs from EU & UK Retail Sales, coupled with Canadian CPI, are some of the data-points that might offer intermediate trade opportunities and are important too. Let’s quickly summarize all these fundamentals.
[B]What & Why Of Majors Off-Late[/B]
While US-Syria scene and US-North Korea tensions was already restricting USD up-move, even if data-points remained positive, Friday’s disappointing US CPI and Retail Sales became a reason for greenback Bears to enter the market and flash first negative weekly closing by the US Dollar Index (I.USDX) in previous three.
The greenback stretched looses to the present week with not so good details and weekend instance from North Korea wherein the nation’s missile-test failed. However, Wednesday helped the currency to witness a pullback after Fed Beige Book reignited chances of successive Fed-rate hike and a draft plan to abandon the Dodd-Frank financial-reform law signaled Trump’s readiness to prove his campaign promises right.
On the other hand, EUR kept struggling with political uncertainty ahead of French election whereas GBP maintained its previous week strength, driven by upbeat data-points, and added noticeable strength after snap-election announcement. Further, AUD seems reversing its last week gains with dovish RBA minutes whereas NZD remained strong as quarterly CPI approached central bank’s target for the first-time in more than five-years. Additionally, JPY and Gold couldn’t add more gains whereas first in two-month hike in US gasoline inventory and higher than forecast Crude stockpile dragged energy prices to reverse all of previous week profits and dip further towards south, which in-turn hurt CAD as well.
[B]Hence, while USD, AUD and EUR were witnessing no clear direction, the GBP and NZD gained high priority on traders’ list. However, halt in safe-havens’ rally, coupled with a plunge in Crud prices, increased troubles for Forex traders ahead of crucial release/events from EU and UK.
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[B]The Tale Of EU & UK Catalysts[/B]
Finally, the economic calendar has something important, namely Friday’s EU Flash Manufacturing & Services PMIs and UK Retail Sales, in addition to the political woes hovering on both the economies, which could offer important details to predict near-term moves of the EUR and GBP respectively.
At EU, a soft inflation number and uncertainty over French election has been disturbing the regional currency off-late and tomorrow’s PMIs are also expected to post not-so-good data-points with Manufacturing PMI likely being 56.1 from 56.2 but Services PMI may remain unchanged at 56.0. Hence, EUR traders could continue to facing difficulties ahead of Sunday’s French election wherein polls show a close-call for all the four candidates appearing to be amongst two choices for the French President.
Given the far-right candidate Marine Le Pen wins ticket, the EUR could drop heavily as she has promised to drag France out of EU if she becomes President; though, the situation would become interesting if Emmanuel Macron also joins her as a prospective candidate. It’s mainly because both of them are likely bearing greater chances to gain the post and are sharing contrasting views with each other.
In case of a surprise victory by the rest of two leaders, namely François Fillon and Jean-Luc Mélenchon, situations are likely to remain dull as both of them are EU loving politicians and may favor the EUR.
[B]To make it straight, it can be said that economics are showing mixed results and can restrict EUR moves ahead of Sunday after then a victory by Marine Le Pen and other than Emmanuel Macron could hurt the regional currency.
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On the other hand, UK has already announced its intention to hold general election to overcome difficulties raised by opposition in discussing Article 50 with EU and the Theresa May government now gains brighter chances to become winner and can help GBP to regain its pre-Brexit strength. Meanwhile, Retail Sales may disappoint Pound traders with -0.3% mark versus +1.4% prior. [B]So, uncertainty at UK politics and expectedly weaker Retail Sales are expected causes of concern for Pound traders and may limit its further advances unless any clear signals, either from economy or from polity.[/B]
Rest of the data-points, namely US Philly Fed and Canadian CPI shows chances of USD further trimming its gains on weaker Manufacturing gauge of 25.6 from 32.8 whereas CAD adding some weight on 0.4% inflation-mark compared to 0.2% earlier.
[B]Technical Talks[/B]
On the technical front, EURUSD is heading to 1.0775-80 region whereas a dip below 1.0680 can make it re-test 100-day SMA level of 1.0630 and then the 1.0615 TL. The GBPUSD has 1.2860-75 region to surpass in order to show its strength with 1.2670 acting as immediate support while USDJPY can keep struggling between 109.80 and 108.00. Further, AUDUSD may take a U-turn from 0.7470 towards again surpassing 200-day SMA figure of 0.7555 but the NZDUSD could find its hard to clear 0.7080 and can revisit 0.6970 support. Additionally, USDCAD cleared short-term descending trend-line, which points to its further up-move towards 1.3530, but a drop below 1.3400 can negate recent breakout.
Have a nice trading-day ……