US President, Donald Trump, again surprised global financial markets with his promise to deliver “phenomenal” tax plan during last week. The same defied arguments favouring the death of reflation trades, that triggered greenback’s previous rally, and propelled the US Dollar Index (I.USDX) to post first weekly gain in last seven. Looking forward, we have crucial economics on card to observe which can help witness noticeable Forex moves. Let’s examine details of the past and upcoming week.
Trump Promised USD Strength
Although Mr. Trump refrained from showing his concern about recent pullback of the US Dollar, his promise to have a “phenomenal” tax plan favouring US businesses gave a hint that he would surely follow the path he pledged during campaigns and help the USD to strength. On the economic side, Jobless Claims again plunged to record low and the Michigan Confidence sentiment flashed weaker than expected signals while Trade deficit shrank.
On the other hand, the GBP managed to enjoy upbeat Manufacturing and Trade figures whereas EUR couldn’t sustain its previous advances on lack of economics. Further, JPY and Gold had to shed some of their latest gains due to optimism at US and AUD became the only commodity currency to rise as upbeat RBA statement and Chinese data-points pleased Aussie traders. Moreover, NZD had to register noticeable drop as RBNZ favoured prolonged low rates while the Crude managed to end on positive side with IEA report showing latest production-cut accord is performing well to help prices.
Consumer-Centric Details In Highlight
During the early week, JPY shed some of its gains on weaker than expected GDP figure but it was straight fourth quarter rise and Japanese PM’s visit to US also closed with a smile which in-turn restricted drastic downside of the currency.
For the week coming by, Inflation figures from US, China and UK, coupled Retail Sales numbers from US, UK & New-Zealand are likely to dominate market moves. Moreover, Fed Chair’s testimony during Tuesday and Wednesday and Jobs reports from UK & Australia will also be crucial to watch.
While Forecasts portray continued upside of the US Dollar, Tuesday’s Fed Chairs words and Consumer-centric figures of Wednesday will be important as this would be the first testimony by Janet Yellen after Trump became President. Should she choose remain firm on her strong economic predictions about the US and says that the central bank sees brighter chances of gradual rate-hikes, chances of the USD’s extended rally can’t be denied. Moreover, UK data-points are also indicating good scenario for GBP whereas JPY and Gold might continue liquidating their strengths on improved market sentiment.
With the EURUSD’s sustained observance to 100-day SMA, coupled with optimism at US, chances of the pair’s 1.0510-15 re-test with 1.0780 being nearby resistance to observe. For GBPUSD, 1.2430 become strong immediate support with 1.2550 serving as adjacent resistance whereas USDJPY managed to extend its TL break and signals 115.30 with 111.60 acting as crucial support. Furthermore, 0.7700 and 0.7240 become important resistances for AUDUSD and NZDUSD respectively with 0.7600 and 0.7130 gaining attention if pair’s decline.
Following its first week of gains, the US Dollar Index (I.USDX) managed to extend the upward trajectory on Monday, even without any major economics, as Trump’s promise to deliver “phenomenal” tax plan maintained its strength to please greenback traders. The USD Bulls were strong enough to avoid news of resignation by Donald Trump’s national security adviser over the allegations of his Russian contacts but remained cautious ahead of Fed Chair’s Testimony on later Tuesday. The Pound also observed its previous advances, mainly due to upbeat economics, but the EUR had to drop across the board on French political worries and Greek debt strains. Further, the AUD and NZD weakened as strong USD hurt commodity basket a bit whereas JPY & Gold had to stretch their prior weakness on renewed market optimism. Additionally, Crude prices advanced as OPEC revised up its forecast for 2017 worldwide oil demand in monthly report, which in-turn helped CAD prices.
As we come to the active Tuesday, Australian Business Confidence rallied to two-years high and the Chinese PPI grew the strongest since 2011 with CPI revisiting June 2014 high. With this, Commodities and commodity currencies, like AUD, NZD and CAD, got boost while US Dollar shed some of its latest gains. Further, the JPY and Gold also recovered from their latest lows as traders become cautious due to active economic calendar.
For the rest of the day, investors are likely to put more emphasis on UK CPI and Fed Chair’s testimony in order to determine GBP & USD’s move whereas EU & German GDP & ZEW Economic sentiment figures can serve as second-tier details to propel market liquidity. As today’s semi-annual testimony by the Fed Chair being the first under Trump administration and fresh head of Senate Banking Committee, chances of her trying to justify good works of US Federal Reserve are higher. In doing so, Janet Yellen might choose to provide loose links of upcoming rate-hike, though no strong ties are expected to be revealed, which in-turn can help greenback to regain its strength. However, any disappointment might have higher repercussions, as far as USD & GBP are concerned, and hence economics need to be traded with caution.
Being few hours away from important EU, US & UK details, EURGBP becomes an important pair to observe as its recent pullback dragged it to 200-day SMA, at 0.8445, which is likely to trigger the pair’s bounce to 0.8500. Further, 1.0590 & 1.0640 become crucial levels for EURUSD during the day whereas AUDUSD’s break of 0.7700, which gains less favor at the moment, could quick flash 0.7750-55 on the chart.
During her first testimony under Trump presidency, Federal Reserve Chair, Janet Yellen, remained strong enough to avoid any monetary policy difficulties from Mr. President’s fiscal & tax policies and said the central bank doesn’t need to wait for such triggers while deciding on its next rate-hike. Market players perceived this as a strong signal, and together with upbeat PPI figures, propelled US Dollar Index (I.USDX) to test more than three-week highs. The EUR, however, had to bear this burden when EU & German figures disappointed regional currency traders whereas GBP also dropped for the day as UK CPI remained lesser than forecast, but being at highest since mid-2014. Further, the AUD and CAD remained strong with early-day Chinese and AU details helping commodity basket whereas NZD couldn’t manage to counter stronger greenback. Additionally, JPY and Gold flashed mixed signals as Gold rose and JPY declined, mainly due to political risks at EU and upbeat sentiment at US.
As yesterday’s Testimony provided additional fuel to recently strengthened reflation trades, market players carried their upbeat sentiment for US Dollar during early-Wednesday. However, AUD and NZD still remain strong enough with commodities rising. Crude traders are waiting for US stockpile figures whereas second-round of Fed Chair’s testimony becomes important for investors. Additionally, UK jobs report, US CPI, Retail Sales and Empire State Manufacturing are some of the headline data-points that could provide noticeable market moves during the rest of the day.
Looking at forecasts, UK Jobs report might provide another reason for Pound traders to continue their latest profit-booking whereas US data-points keep indicating strong economy and further advances by the greenback. Moreover, Fed Chair’s testimony, if maintaining yesterday’s strength, could become a boost for greenback whereas US Crude stockpile might help energy prices to rally as the figure has already grown too much during previous release.
GBPNZD again reversed from 1.7460-70 area and is indicating brighter chances of flashing 1.7300 mark while break of 1.3100 can help USDCAD to meet 1.3140-45 resistance-zone. Also, USDJPY managed to surpass 114.10 and is heading towards 115.00 and 115.30 north-side numbers with 113.80 & 113.20 become immediate supports to watch.
On Thursday, upbeat US data-points, including Jobless Claims, Housing figures and Philly Fed Manufacturing, all failed to provide a positive daily closing to the US Dollar as an unscheduled press conference by US President, Donald Trump, weighed down global investor sentiment. Mr. President’s aggressive behavior against media over allegations of his campaign links with Russia threatened traders and pushed them to cash-out of latest USD up-move while no strong clues from US Fed, relating to next rate-hike during March meeting, also spread worries. The EUR and GBP benefited from the same whereas AUD rallied on strong employment details. Further, Crude prices also rose on expectations that OPEC will extend its latest production-cut agreement beyond H1 2017 and might include some more non-OPEC producers to follow the suit. Additionally, Gold and JPY gained on safe-haven demand whereas CAD enjoyed commodity advances and NZD had to weaken with lesser than expected quarterly Retail Sales growth.
During the early Friday, markets again started favoring US Dollar and refrained from taking any more longs on JPY and Gold. Moreover, Crude and some commodity currency prices also retraced with higher chances that weekend release of US rig count would again disappoint energy traders.
For the rest of the day, UK Retail Sales is the only economic releases scheduled for publish, which is likely to provide additional strength to the GBP. However, absence of any updates of Article 50 discussions between UK & EU might drag the Pound to south if Retail Sales fail to print 1.0% growth and flash another negative mark. Further, US Dollar might also extend its latest pullback as traders seem towards a run to complete second weekly gains of greenback with majority of economics portraying chances of a rate-hike to take place sooner.
While EURUSD already broke short-term descending trend-channel, it becomes likely to visit 1.0710-15 but failure to stretch its advances might drag the pair towards 1.0640 re-test. Further, short-term descending trend-line, at 1.6270, can keep limiting the GBPAUD’s upside whereas USDCAD seem heading to 1.3100 TL mark, breaking which can help it achieve 1.3150 status.
With slew of upbeat US data-points, coupled with hawkish comments from Fed policymakers, including Fed Chair, the US Dollar Index (I.USDX) managed to post second consecutive weekly positive closing. However, uncertainty at UK & EU kept favoring safe-havens whereas Chinese figures helped commodity basket to remain a bit strong. Present week starts with holidays at US on Monday due to President’s day and shifts market attention towards political threats at EU & UK. Let’s examine fundamentals.
US Optimism & The Rise Of USD
It all started with the early-week release of US PPI which rallied to more than two-years high and helped USD to extend its prior up-moves. The rise was then backed by Fed Chair’s testimony which stated brighter chances of rate-hike soon and even ignoring impacts of Trump policies. Bulls were also pleased by strong housing and Manufacturing figures and the headline CPI, which in-turn nurtured the greenback gauge during the week.
At EU, the political trauma, due to lead of anti-Euro parties’ chances of winning at Germany & France, continued dragging regional currency towards south while economics were also not good enough provide intermediate upside momentum. Further, UK Retail Sales, PPI & Job figures flashed mixed signals and kept hurting the GBP whereas JPY and Gold could manage to post weekly gains. Additionally, Crude prices had to bear the burden of higher US stockpile & rig counts, dragging the CAD to south, but optimism surrounding production-cut restricted larger losses. Moreover, AUD and NZD also dipped as New-Zealand Retail Sales remained weaker while AU employment figures failed to please Aussie traders who now expect mild pullback after sharp rise.
Few Details/Events This Week
Compared to last week, current week has lighter economic-calendar but minutes of FOMC & RBA meeting, UK GDP and EU PMI might offer noticeable market moves. Also, US Housing market numbers, Canadian CPI and Sales numbers could entertain traders with intermediate opportunities. Though, political uncertainty at EU & UK may continue maintaining their importance and can fetch respecting currencies further towards south.
While RBA minutes and EU PMIs are less likely to provide additional weakness to the AUD and EUR during their releases on Tuesday, Wednesday’s UK GDP & FOMC minutes may help GBP and USD to remain a stronger. Moving on, Canadian numbers are showing mixed forecasts for Friday’s CPI & Wednesday’s Retail Sales with Monday’s Wholesale Sales likely helping CAD to enjoy latest uptick in Crude prices. Furthermore, Japan’s higher than forecast trade deficit numbers provided noticeable weakness to the JPY and the less-risky currency may keep witnessing such drags going forwards unless EU & UK pessimisms help it.
While EURUSD continue indicating 1.0500 re-test, an uptick beyond 100-day SMA figure of 1.0735 can give rise to 1.0850 on the chart. GBPUSD and USDJPY are both showing intermediate downside towards 1.2280 & 111.50 support-levels with 1.2580 & 115.00 acting as nearby resistances to watch. Moving on, AUDUSD & NZDUSD can keep struggling between 0.7730 – 0.7600 & 0.7130 – 0.7250 levels whereas USDCAD can revisit 1.3200 mark on the break of 1.3140, 200-day SMA, with 1.2960 being important support.
During first trading day of the week, most global markets remained sluggish as US institutions had a President’s day holiday which in-turn provided negative daily closing to the US Dollar Index (I.USDX). However, that didn’t restricted the greenback from rising against JPY, CAD, NZD and CHF as traders weigh more chances of the soon-to-happen rate-hike by the Federal Reserve after some leading FOMC members maintained hawkish stance during their latest public appearances. The EUR witnessed pullbacks whereas GBP gained on two-year high order growth figure. Further, AUD managed to sustain its advances whereas Crude prices struggled between gains & losses with switching forecast on future demand-supply situations. Additionally, Gold prices gained on present uncertainty at EU & UK whereas commodity basket remained strong on upbeat sentiment at China.
At the start of Tuesday, release of latest RBA meeting’s minutes triggered AUD moves. The minute statement mentioned rising resource exports helping the economic growth but flashed caution against medium-term Chinese outlook. For the rest of the day, Flash PMIs for the EU and its two largest economies, namely Germany & France, followed by US Flash PMIs and some more speeches by FOMC members are likely to rule market sentiment.
Looking at the Forecast, EU PMIs show mixed results with Germany & France struggling to hold their recent strength whereas regional figures might please Euro-traders. On the other hand, US PMIs are indicating upbeat picture of world’s largest economy and might help greenback to extend its latest upside if policymakers repeat their strong words favoring March rate-hike.
EURUSD failed to clear 1.0630 and is indicating quick re-test to 1.0560 & 1.0520 supports whereas 0.7130 becomes strong near-term support for the NZDUSD, breaking which the pair could plunge to 0.7070. Moreover, GBPNZD might again rise to 1.7470-80 resistance-region but is less likely to break the same and can witness following pullbacks to 1.7300 & 1.7230 supports.
Following an extended weekend, US markets reopened on Tuesday with a strong buying in favor of the US Dollar and equities as optimism surrounding world’s largest economy, as expressed by some FOMC members recently, and political turbulence at EU, kept nurturing the greenback. The Euro, however, couldn’t manage to enjoy upbeat PMIs due to lead of anti-Euro leaders at France whereas GBP rallied across the board with progression in Brexit preparation by UK leaders, coupled with hawkish comments from BoE members. Further, AUD and NZD remained weak as stronger USD hurt commodity basket whereas CAD, even after weakening against its US counterpart, could strengthen on rising Crude prices backed by positive comments from the OPEC. Additionally, the JPY and Gold prices witnessed a bit of pullback but the CHF dropped even if Swiss Trade surplus rose to record highs.
Moving on, Wednesday started with a drag in USD as traders are now being cautious ahead of today’s FOMC minutes whereas EUR continue remaining weak on political woes. On the other hand, JPY gained support from hawkish comments of BoJ Governor that mentioned fewer chances of rate-cut soon while Gold still struggles to recover its latest losses. Moreover, AUD and NZD also portrayed pullbacks after AU Wage Prices and Construction Work figures flashed better than previous readings.
For the rest of the day, second estimate of UK GDP, Canadian Retail Sales and US FOMC Meeting minutes are likely to dominate market moves. Amongst them, UK growth figures can keep helping Pound to shine while Canadian numbers show mixed forecasts and can provide disappointment if Crude drops. The US FOMC minutes are likely to gain major attention to justify latest comments from policymakers and might disappoint greenback traders if statement remains neutral, which is less likely.
As GBPUSD again confront 1.2510-20 horizontal-resistance ahead of UK GDP, weaker figure might again drag the pair to 1.2400 & 1.2370 supports. For CHFJPY traders, 112.00 support again becomes crucial, breaking which 111.50 can comeback whereas GBPJPY trades around 142.10 TL and can witness pullback towards 141.00 if Pound misses on data-point.
Following last week’s upbeat testimony from the Fed Chair, market players were expecting a hawkish statement from FOMC minutes which can help the US Dollar to extend its latest advances. However, nothing has happened as minutes of latest FOMC meeting revealed that policymakers, even after preferring a soon rate-hike, still remain uncertain about the economic outlook and Trump policies’ impact on US economy. With this, the US Dollar Index (I.USDX) had to mark the negative daily closing while JPY and Gold prices took advantage of such uncertainty. The EUR witnessed a bit pullback after latest polls showed that lead of anti-Euro contestants is receding whereas GBP had to decline even after registering strongest GDP in a year as business investment fell. Further, AUD and NZD maintained their strength whereas CAD couldn’t rise as Crude prices dipped on comments from OPEC members mentioning less clarity on the future of production-cut accord.
During early Thursday, the US Dollar kept running down whereas Crude prices rallied after API showed an unexpected drop in stockpile details. Moving on, Australian Dollar (AUD) registered noticeable downside after capital spending dropped more than anticipated in the Q4 2016. Though, NZD and CAD carried their gains forward while JPY and Gold flashed mixed signals.
Having witnessed most of the important data-points scheduled during the week, investors will focus more on the political side of the US, EU & UK to determine near-term moves of their respective currencies but official reading of US Crude inventory will be important for energy traders. Given the EU continue facing political headwinds from France, chances of its further downside are much brighter whereas positive statements from Trump and/or May administrations could provide support to the USD and GBP respectively. Additionally, US Jobless Claims and comments from Federal Reserve Bank of Dallas President Robert Kaplan may offer intermediate moves to the greenback.
A month old descending trend-channel again restricted GBPCAD’s upside and presently indicates a pullback by the pair towards 1.6300 & 1.6270 supports whereas AUDNZD’s inability to surpass 1.0735-40 horizontal-line can again fetch it to 1.0600 support-mark. Also, EURNZD trades around 1.4640-35 support and a break of which can quickly drag it to 1.4600 and then to 1.4560.