Having passed through many weeks of uncertainty concerning the US Federal Reserve’s another rate-hike, traders finally reached to the day when the central bank is all but certain to raise benchmark rates by 0.25% and Tuesday’s better than expected PPI figures added strength to the same speculations by helping the US Dollar Index (I.USDX) to carry on its north-run. The EUR and GBP, however, had to continue declining with political uncertainty whereas AUD, NZD and CAD also ignored upbeat Chinese data-points and weakened as rising USD hurt commodity basket. Moreover, Crude registered a volatile-day by first declining after Saudi Arabia said to reverse nearly third of its previous production-cut but later recovered losses on weaker than expected US API stockpile figure. Furthermore, Gold and JPY failed to please traders as Bulls are in favor of brighter USD and higher returns than these safe-havens. Additionally, UK PM won parliamentary support to trigger two-year long Article 50 discussions with EU.
Being the FOMC day, monetary policy decisions by Federal Reserve are undoubtedly in the lime-light; however, additional elements of news that Federal Judge summoned Trump administration to appear on Wednesday to justify its latest travel ban and election at Netherlands could inflate the importance of the day. During the start of the day, USD maintained its up-move but there was some increase in safe-havens, namely JPY and Gold, ahead of the crucial decision. Moreover, commodity currencies also recovered a bit after Chinese Premier said China is pushing hard to cut financial risk and there are bright prospects for cooperation with the U.S.
Moving forward, UK jobs report and US CPI, Retail Sales and Empire State Manufacturing Index might trigger intermediate market moves ahead of the FOMC wherein these data-points are bearing weaker forecasts and might pull the GBP and USD a bit back prior to fueling the greenback during Fed rate announcement.
As the case of Fed rate-hike is almost certain, traders are more likely to concentrate on FOMC economic projections and Fed Chair’s press conference in order to look for clues relating to whether the central bank inflates the number of expected rate-hike from previously discussed three. While rate-hike news can offer immediate strength to the US Dollar, its medium to longer-run up-move depends on whether US policymakers announce any hawkish statements or not.
Although GBPUSD recently bounce-off from 1.2100 round figure and is presently aiming the 1.2280, weaker UK jobs report may fetch the quote to 1.2030 on the break of 1.2100. Further, USDCAD is trading at short-term ascending trend-line support of 1.3440, breaking which 1.3370 can comeback while 1.3500 and the 1.3540 continue offering near-term important resistances to the pair. Moreover, NZDUSD traders should watch 0.6950 and 0.6890 levels before putting any trades as break of these levels can trigger the pair’s following move to either 0.7010 or to 0.6830.
“Expecting too much from a central bank always prove to be harmful!” The same seemed right yesterday when USD dropped even after the Federal Reserve announced a 0.25% rate-hike and maintained its forecast for additional two such lifts to be seen during the year. Traders were looking for a hawkish statement, shooting economic forecast and more rate increase signals than previously pointed two but nothing happened and the US Dollar Index (I.USDX) had to bear the burden of this disappointment. In addition to that, 2018 budget proposal by US President also hurt the greenback as Mr.Trump revealed his favour for huge increase in defence spending at the cost of many previous federal programs. On the other hand, EUR gained on Netherland election results as exit polls showed ruling party to again come in power and fade anti-EUR sentiments whereas GBP recovered with positive jobs report. Further, commodity currencies also celebrated the USD’s decline while Crude had additional support from first US stockpile depletion after nine straight increases. Moreover, JPY and Gold rallied after disappointed traders again bought safe-havens in search of risk-safety.
On Thursday, market maintained its anti-USD moves during early trading-hours but AUD and NZD couldn’t benefit as a surprise hike in Australian Unemployment rate to January 2016 high and depleting Employment Change, coupled with lowest New-Zealand GDP print since September 2015, dragged Aussie and Kiwi respectively. Moving forward, the Bank of Japan (BoJ) stood pat with its present monetary policy whereas Crude ignored the EIA’s monthly report which stated that global oil inventories rose for the first time in six months in January.
For the rest of the day, monetary policy meetings by the Swiss National Bank (SNB) and Bank of England (BoE), followed by US Housing and Philly Fed Manufacturing data, could keep entertaining short-term traders. Among them, SNB and BoE are both less likely to alter their present monetary policies but expected hawkish statement from SNB can help CHF while US figures may keep extending latest pullback of the greenback if matching weaker consensus.
On the technical side, USDJPY is again signalling 100-day SMA re-test, at 113.00 now, but a breakdown is less likely and the pair may keep targeting 114.40 and 115.10 during U-turn. The AUDJPY also reversed from its 87.50 range-resistance and can revisit 86.70 support while EURJPY seems failing to sustain its bounce from 50-day SMA, which in-turn points to 121.10 comeback on the chart with 122.20 being nearby resistance to watch.
Thursday proved to be another disappointing day for US optimists when Bulls curtailed their greenback longs and equities witnessed more sellers after Fed couldn’t offer additional rate-hike signals and Mr. President proposed a defense-savvy budget.
It was more like a “No rate-hike” session for global markets filled with disappointed traders, who expected more than two rate-lift signals from the Federal Reserve, and some of the Democrats opposing Trump’s heavy defense spending at the cost of diplomatic and foreign aid programs. Additionally, soft housing and manufacturing figures also dragged the US Dollar Index (I.USDX) down for the second consecutive day.
On the other hand, the EUR maintained its counter-strength with strong Final CPI and Dutch election outcome whereas GBP gained a bit as one of the outgoing BoE policymaker favored rate-hike. Further, AUD and NZD couldn’t manage to rise as early-day release of AU Jobs report and New-Zealand GDP kept dragging Aussie and Kiwi to south while CAD also dropped on Crude’s failure to sustain its previous-day’s strength. Moving forward, Gold and JPY regained their charm and registered another positive closing with investors support to safe-havens.
Looking at Friday’s economic-line, Canadian Manufacturing Sales, US Industrial Production and Prelim UoM Consumer Sentiment are the only data-points scheduled to be observed. Among them, US figures may help greenback traders recover some of their recent losses but overall disappointment from Fed and on-going criticism for Trump’s budget proposal can keep dragging the US Dollar.
As we’re on the edge of weekend, thin economic calendar might restrict traders from initiating any fresh trend-change signals unless there are drastic positive sentiments received. Hence, it is likely that the US Dollar could end-up registering second consecutive weekly loss, even with rate-hike, while JPY and Gold flaunt their positive closings.
Unlike weaker fundamental triggers for the USD, technicals are signaling different picture. The GBPUSD and EURUSD are near to their 1.2380 and 1.0830 resistances with overbought RSI on H4 indicating brighter chances of their pullbacks to 1.2300 and 1.0700 marks respectively. However, the USDCAD seems failing to surpass 1.3350 resistance and can revisit 1.3275 support, breaking which 1.3215 may become next level to watch.
With less accepted rate-guidance and absence of hawkish statement from US Federal Reserve, USD Bulls nursed losses and made greenback gauge post the longest losing streak since Donald Trump won Presidency. On the top of that, not so welcomed economics and Trump’s defense-oriented budget proposal provided additional weakness to the US Dollar Index (I.USDX) in flashing second consecutive weekly loss. However, investors haven’t yet lost their confidence in US economy and the Fed’s ability to provide two-more rate-hikes in 2017 which in-turn can keep nurturing upside momentum of the greenback. Meanwhile, let’s discuss this week’s economic calendar and probable impacts on Forex market.
Fed Disappointed Dollar Bulls
While raft of hakish statements from FOMC policymakers and upbeat data-points favored greenback optimists to look for signals relating to more than two rate-hikes by the US Federal Reserve, the central bank disappointed those bulls when it announced first 2017 rate-lift on Wednesday. The Fed, even after praising economic improvement in US, refrained from discussing any changes in their rate-guidance which still portray three rate increases projected for current year. Moreover, mixed economics and a defense-savvy budget proposal by Mr. President gave additional reason for USD buyers to cash-out their profits.
The EUR, on the contrary, gained on Netherland’s election results whereas GBP also registered noticeable up-move after one of the BoE’s MPC members favored a rate-hike. Further, the JPY and Gold recovered some of their previous losses while commodity currencies celebrated weaker USD-fueled buying sentiment. Additionally, Crude prices marked its first positive weekly closing after US stockpile figure dropped.
Hence, Fed’s disappointment and merits at rest of the world favored safe-havens and commodity currencies while cutting down USD longs.
A Bit Weaker Calendar To Be Observed This Week
As compared to last week’s heavily-filled economic plate, present week’s economic-line is a bit shorter with UK Retail Sales & CPI, EU PMIs, US Durable Goods Orders and RBNZ meeting being some of the major details to be observed.
Amongst the scheduled details, Tuesday’s UK CPI and Thursday’s Retail Sales are both likely to help GBP to extend its latest up-move towards challenging 1.2580 again while EU PMIs, up for Friday, aren’t expected to offer any noticeable EUR moves unless being drastically up or down.
For USD traders, Wednesday’s New Home Sales and Thursday’s Existing Home Sales might offer intermediate shifts in USD direction before Friday’s Durable Goods Orders provide any clear sign for short-term traders, which is likely to favor the greenback in recovering some of its latest losses. Further, Tuesday’s RBA minutes and Japanese Trade Balance, Wednesday’s RBNZ and Friday’s Canadian CPI are some other stats to be observed. Herein, RBA minutes may reveal praise for China’s economic improvement and could help AUD extend its upside whereas RBNZ seem to be on the sidelines by discussing weaker GDP print and can weaken the NZD. Also, Canadian CPI and present inability of Crude Bulls to propel energy prices are likely reasons for CAD to keep trading down.
Given the latest shock from Fed, coupled with fewer data-points to be observed, chances of witnessing a less volatile market are higher. However, any political news from UK, EU and/or US should be given proper attention as these can offer traders a reason to propel market moves.
Considering latest weakness of the USD, the EURUSD may challenge 1.0830-50 region before aiming the 200-day SMA level of 1.0900. Though, 100-day SMA figure of 1.0650 acts as short-term important support. GBPUSD also signal extended advances to 1.2580 if it breaks 1.2410 on a daily closing basis but 1.2220 shouldn’t be ignored if the pair reverses from present levels. Further, USDJPY traders should be on the lookout for 111.60-40 region with 113.50 being nearby resistance while 0.7780 & 0.7110 are likely upside levels that should be observed by AUDUSD and NZDUSD buyers respectively.
In an otherwise dull trading-day, with less economics to observe and Japanese holiday, policymakers from US, EU and UK helped global markets remain alive. At US, comments from Chicago Fed President Charles Evans and Minneapolis Fed representative Neel Kashkari increased uncertainty over the pace of future rate-hike by the Federal Reserve; though, both of them were optimistic about the strength of the economy and hence end-up providing positive daily closing to the US Dollar Index (I.USDX). The Euro region currency also witnessed some buying as Pro-EU candidate for French election, Emmanuel Macron, won televised debate on Monday, signaling brighter chances of his success going forward while UK PM’s announcement to start Brexit divorce proceedings with the EU on March 29 dragged GBP from its three-week high.
Further, Crude prices remained weak on third consecutive day on mixed clues from Russia and Saudi Arabia concerning whether global producers are in support to extend production-cut beyond June whereas AUD, and NZD remained strong on rest of the commodities’ gains. Additionally, JPY and Gold also maintained their strength as less clarity over the Fed rate-hike, together with political turmoil at EU & UK, favored safe-havens.
During early Tuesday, when Japanese markets reopened after extended weekend, the JPY witnessed some profit-booking moves whereas RBA minutes provided noticeable weakness to the AUD as the central bank seemed cautious of housing market boom. The NZD and CAD also weakened with fresh pullback in commodity basket whereas GBP and EUR flashed mixed signals ahead of a comparatively busy-day.
Moving forward, today’s UK Inflation numbers and Canadian Retail Sales are likely important figures that traders should be concerned wherein both the details likely flashing positive signs for their respective currencies, namely GBP and CAD. Moreover, some of USD traders aren’t happy to wait for Trump’s promised tax structure and might come ahead to convey the same, which in-turn can drag the greenback again towards south.
Although UK CPI is likely to please GBP, the GBPUSD again reversed from 100-day SMA, at 1.2415, and an unexpected weakness in headline inflation figure might drag the pair towards 1.2300 and the 1.2200 supports. Further, the NZDCAD also took at U-turn from 0.9425 of 200-day SMA and is also likely to revisit 0.9380 & 0.9350 supports whereas USDJPY’s bounce from 112.30-20 favors 113.00 come-back on the chart.
While growing doubts over Mr. Trump’s capacity to enact promised economic and tax policies dragged the US Dollar to four-month lows on Wednesday, the greenback refrained from favoring short-term Bears on the day when Republican health-care bill will be offered for a vote in Congress. Being considered as a litmus-test for the Trump administration’s pro-growth policies, traders are taking sidelines ahead of such an important event.
Before we start discussing some important details/events that are expected to propel Forex market moves during the upcoming days, it becomes wise to have a look at what happened till now.
Angst Against Trump’s Weakness & Run For Safe-Haven
Global markets stretched their last-weekly downside of the US Dollar Index (I.USDX) during early week-days after US President’s budget proposal for 2018, comprising repeal/replace of Obamacare scheme, gained high criticism and is fetched to House of Representatives for vote. This pushed Mr. Trump to act harshly by saying that “any failure to gain house acceptance might provide serious damages to his promised policies.”
With this, USD sellers got additional reason to sell the currency, which was already down due to Fed’s disappointment, and propelled safe-havens, like JPY and Gold prices. The EUR has its own reason to shine with anti-EU candidate gaining less acceptance ahead of French election whereas GBP rallied with UK CPI running beyond BoE’s target for the first time since 2013. However, news of terrorist attack close to Britain's Parliament, that left five people dead and nearly 40 injured, weakened the Pound initially before the attacker was shot and no additional causalities were registered. Moving on, AUD had a weaker signal from RBA minutes which spotted concerns over housing boom whereas NZD managed to sustain its bounce even if RBNZ held benchmark rates unchanged and favored no such change for "considerable" future-time due to global volatility and protectionist policies by US. Additionally, CAD neglected Crude downside, mainly due to higher inventory figure and concern over global supply-glut, as Canadian Retail Sales flashed upbeat number.
The House Vote, Yellen’s Speech, Durable Goods Orders And Many More…..
Although markets remained volatile for the days till now, absence of major economic details/events have been a reason for traders to wait for additional moves. Though, nothing will last for long as today’s house vote becomes crucial for traders and is near to Fed Chair, Janet Yellen’s, speech at Federal Reserve System Community Development Research Conference, in Washington DC. Moreover, US New Home Sales and Jobless Claims are additionally important stats for market players to observe during the day after which tomorrow’s Durable Goods Order will gain attention.
Other than US, today’s UK Retail Sales and New-Zealand Trade Balance might offer intermediate market swings before tomorrow’s EU & German PMI’s, followed by Canadian CPI, become important.
Considering broader criticism for Trump’s proposed replacement of Obamacare with almost same healthcare plan, chances are higher that house might not accept Trump’s plans, which in-turn would be too disappointing for the USD buyers and can flash sub-99.00 mark for the US Dollar Index. Alternatively, a win with major support could boost the greenback towards not only recovering latest losses but to flash weekly positive closing.
For GBP, Retail Sales might offer additional strength to the UK currency whereas EUR’s upcoming move depends upon today’s US outcome and tomorrow’s EU PMIs. Further, AUD, NZD and CAD are less likely to portray any major moves unless commodity basket responds to fiercely to the USD moves whereas JPY and Gold, being safe-havens, might maintain their weekly advances unless greenback rallies with optimism triggered through reflation trades after house approval.
EURUSD already cleared 1.0800 and is aiming 200-day SMA figure of 1.0890 with 1.0715 & 1.0670 being nearby supports. The GBPUSD did surpass 100-day SMA figure of 1.2420, which in-turn signal its rally to 1.2570 but a daily closing below the SMA figure may reignite possibilities to see 1.2220. Further, USDJPY broke 111.30 support and is presently running towards 110.20-10 region but a break above 112.30 may trigger its pullback towards 113.50. Moving on, AUDUSD reversed from 0.7730 important TL and signals 0.7600 re-test while NZDUSD may not surpass 0.7100 and could visit 0.6970 with USDCAD indicating bounce from 100-day SMA figure of 1.3290 towards challenging 1.3430.
Last week was a big blow to Mr. Donald Trump when his proposal to repeal/replace Obamacare was rejected by US House Of Representatives. With this, US Dollar traders remained afraid of Trump’s capacity to make his promises true and dragged greenback gageu (I.USDX) for third consecutive weekly decline. The EUR, however, got this as positive and managed to please buyers, together with support of higher PMIs, while GBP was equally strong enough on upbeat data-points favoring strong UK economy. However, commodity currencies, like AUD, NZD and CAD, couldn’t shine anymore as pessimism surrounding Trump’s optimistic policies pointed towards less of commodity demand in future. Further, the JPY and Gold remained benefited due to their safe-haven nature whereas Crude had to bear the burden of higher Crude output.
As we start the present week, which has fewer important data-points scheduled for release, traders would be more interested in looking towards final GDP figures from US & UK, together with EU Flash CPI. Though, higher the chances are for additional weakness of the US Dollar than the otherwise case unless Mr. Trump takes any such action to prove himself as a strong US politician.
On Monday, German Ifo Business Climate rallied to the highest levels since July 2011 and helped EUR to extend its up-move while latest news that global oil-producers might extend their output-cut into second half of 2017 favored Crude and CAD prices. As there seems nothing major scheduled for the rest of the day, markets are likely to extend their previous trading patterns, which have been against the USD; however, some of the FOMC members are scheduled to appear in public and might say something, like support for further rate-hikes, that favors greenback’s bounce.
Even if EURUSD cleared 1.0855-60, the 200-day SMA figure of 1.0890 becomes a crucial level for traders to watch, breaking which 1.0950 and the 1.1000 can come-back on the chart. USDJPY again tests the magical 110.00 support, breaking which 109.30 & 20-day SMA figure of 108.20 becomes crucial with 111.70 acting as strong resistance. Furthermore, NZDJPY seems had enough of downside and might reverse to 78.25 with 77.70 & 77.30 being nearby supports.
Even if failure to get the Obamacare repeal/replace hurt US Dollar badly in recently days, Tuesday proved to be a good-day for the greenback as highest Consumer Confidence reading since 2000, coupled with hawkish statements from some of the FOMC members and upbeat Goods Trade Balance, helped US Dollar Index (I.USDX) to post biggest positive daily closing in nearly a month. The EUR and GBP didn’t have anything but nearness to start of formal Brexit proceedings between EU-UK dragged both these currencies towards south. Further, JPY and Gold witnessed some profit-booking on rising USD whereas NZD and CAD dropped due to commodity basket weakness but AUD recovered some of its latest losses.
Today is comparatively active-day for the Forex market with US Pending Home Sales and weekly Crude Oil Inventories scheduled for publish. Moreover, Federal Reserve Bank of Chicago President Charles Evans is up for speaking at the International Capital Markets Conference, in Frankfurt. The market has been active since the start of the day and is extending latest support in favor of the US Dollar. However, the Crude prices stretched their latest up-move with geo-political tensions at Libya and concern over extended production-cut helped energy prices.
With the housing market figure likely to reverse its prior -2.8% mark with +2.3% and FOMC member is expected to sing songs of US economic strength and need for additional rate-hikes, chances of the US Dollar’s further upside can’t be denied. On the other hand, EUR and GBP might keep bearing burden of Brexit updates whereas Crude prices may find US stockpile data as another blow to weaker energy prices. Furthermore, JPY and Gold are also likely to witness additional weakness on stronger USD whereas AUD may have lesser room on the downside.
NZDUSD is presently trading at 0.7000 short-term support, breaking which 0.6970 & 0.6950 can come-back on the chart while 0.7020 & 0.7035 may offer immediate resistances to the pair. Moving on, GBPAUD signals 1.6140 re-test with 1.6300 acting as strong nearby resistance whereas EURGBP cleared short-term trend-channel resistance of 0.8685 and is aiming further upside towards 0.8750.
While last week’s Republican failure to get enough votes favoring repeal/replacement of Obamacare raised concerns over the capacity of Mr. Trump to announce any such drastic measures going forward, the present week triggered the greenback’s recovery on upbeat data-points and hawkish comments from some at FOMC. However, final reading of Q4 2016 GDP figures for US, Canada & UK economy, official Manufacturing PMI from China and US Chicago PMI are some front-line details which are yet to be observed.
House Failure Challenged Trump’s Authority
Even after commanding both the houses, Republican leader failed to secure majority support to make true one of his biggest election promises and that was like challenging his authority. The same turned out be a nightmare for reflation-expecting bulls as such a failure raises questions over whether Mr.Trump will be able to announce other such measures which he promised during election campaign or not. With this the US Dollar Index (I.USDX) had to register third consecutive weekly decline and ignored upbeat Durable Goods Orders’ print on Friday.
The EUR managed to enjoy upbeat PMI figures whereas GBP pleased to have CPI & Retail Sales as trigger for its fresh up-move. Further, commodity currencies also witnessed downside on concerns of weaker global demand if Trump fails to provide promised spending while JPY and Gold were biggest winners due to safe-haven buying.
Economics Again Helped Greenback
Until Tuesday, it seemed that the US Dollar has already lost what it gained ever since Donald Trump came into power and chances of further downside are higher now. However, Tuesday’s CB Consumer Confidence rallied to the highest since 2000 and some of the FOMC members, including Fed Chair, maintained their optimism for US economy, which in-turn triggered the greenback’s fresh upside.
The US currency managed to extend its recovery on Wednesday when Pending Home Sales flashed another good number and news came out that Mr. Trump will announce too big infrastructure spending soon.
The same resulted into EUR loosing its strength, which gained momentum after news broke that ECB is more likely to favor easy-money policy, while GBP also dropped as EU & UK started their two-year long Article 50 discussion. Further, the Crude prices rallied after US stockpile declined more than expected and geo-political tensions at Libya remained live. Moreover, AUD, NZD and CAD recovered some of their strengths as commodity basket recovered.
Forex Calendar Gains Importance
Although some of the second-tier data-points have helped US Dollar off-late, actual trading volatility is likely to be started from today itself with US GDP figure. Given the GDP number meet 2.0% forecast, versus 1.9% initial consensus & 3.5% prior, traders might aim for further upside of the greenback but the same couldn’t be considered as a strong signal unless the reading flash any figures near to 3.5%. Other than the GDP, Friday’s Income-Spending data and Chicago PMI number would also be important for traders. While Income and Spendings both are likely to maintain their 0.4% & 0.2% respective priors, Chicago PMI is also expected to soften a bit to 57.2 from 57.4.
Alike US, Flash reading of EU CPI and Final UK GDP are also scheduled to be released on Friday. EU CPI might add weakness into the regional currency with 1.8% mark against 2.0% prior but the GBP may struggle to find additional clues as the UK GDP is expected to remain unchanged at 0.7%. Further, Chinese Manufacturing PMI can please commodity traders with 51.7 figure against 51.6 prior but CAD might not enjoy such up-moves as Canadian GDP isn’t expected to change from 0.3%.
Hence, while optimistic data-points rejuvenated USD bulls, chances of further greenback upside depends upon scheduled figures which may not keep pleasing buyers. Further, EU, UK and Canadian details are less likely to support their respective currencies while Chinese figures may help AUD and NZD prices.
EURUSD recently broke short-term ascending trend-channel and is likely to extend its downside towards 1.0670 with 1.0830 & 1.0880 acting as nearby resistances. Further, GBPUSD re-tests 100-day SMA figure of 1.2415, breaking which 1.2300 and the 1.2220 can comeback while 1.2580 becomes adjacent resistance to watch. Moving on, USDJPY successfully recovered from 110.00 support and aims to surpass 111.60 whereas AUDUSD and NZDUSD may revisit 0.7600 and the 0.6950 rests with 0.7750 & 0.7100 being important resistances to watch.