Weekly Fundamental Dose: 16 – November – 2017
Hello Traders,
Be it Inflation figures from UK & US or the Australian & British Employment stats, needless to mention about political noises emanating from US tax-plan & UK PM’s future, the Forex market responded to everything with a great diligence during the week. As a result, the US Dollar is likely running towards another weekly loss and the GBP also seems not immune to the downside. However, the EUR, the JPY and the Gold managed to benefit out of it while commodity currencies are likely struggling. Though, there isn’t anything certain in regards to the weekly closing as US Senate is still left for voting on the tax-plan and some second-tier economics, including UK Retail Sales, Canadian CPI and US Philly Fed Manufacturing Index & housing market details, stand ready to entertain investors.
In order to understand fundamentals concerning rest of the week details/events, its better we start with what has happened till now and then progress towards the forecasts.
The First Weekly Loss Of The USD
Even if sluggish economic calendar limited the line of details in last-week, the US Dollar Index (I.USDX) registered its first weekly downside in previous four on uncertainty concerning the President’s tax-plan after the Senate proposed a slightly different measure with gradual tax-cuts. Alike USD, which suffered due to political concerns, the GBP also dropped on uncertainty over the future of UK PM & slower progress of Brexit talks even after British details were quite welcome. The EUR, however, managed to capitalize the fall of the USD & the GBP with an uptick while JPY and Gold also rose with Geo-political threats, including that from Saudi Arabia, US & UK, supported the safe-havens. Further, the commodity currencies, like AUD, NZD and CAD gained on softer greenback and strong Chinese data-points whereas the Crude rallied on growing support for an extension to global production-cut accord beyond March 2018.
Slew Of Economics Couldn’t Divert Market Sentiment In Favor Of The Greenback
While the present week has comparatively more and important data-points scheduled for publish, many of which posted upbeat outcomes, investors didn’t alter their forecasts for the US Dollar as tax-plan from the President continue facing hurdles and indicate another administrative failure by the Trump team after being defeated while repealing Obamacare.
The latest US consumer-centric numbers were supportive to the Fed’s already priced-in December rate-hike while the UK’s softer inflation and not so strong employment figures kept raising bars for the BoE’s another rate-change. The German and Italy’s GDP figures, coupled with ZEW figures, helped the EUR to maintain its strength but the commodity currencies had to shed some of their recent gains on China’s sluggish Industrial Production & Retail Sales. Moving on, JPY and Gold kept being strong but the Crude witnessed profit-booking after IEA predicted a fall in demand and US stockpiles grew.
At the political front, news that around 40 members of Theresa May’s party stand ready to draft a no confidence vote against the UK PM offered additional weakness to the GBP while two Republicans showed their anger against Mr. Trump’s tax-plan and spread worries for Thursday’s voting on the same critical issue on hand. Additionally, Saudi Arabian purge against corruption seems soothing off-late while Theresa May’s Brexit proposal to her party and subsequent debate on it didn’t quite gain market attention.
Whatever Is Left Is Important Too
Although majority of the economic details/events have already taken place, Retail Sales from UK, Canadian CPI and US Philly Fed Manufacturing Index & housing market details are still there on the economic calendar to be published. Additionally, voting in the US Senate on President Donald Trump’s tax-plan is also scheduled to take place on Thursday and the same could help propel enough liquidity to please traders.
In case of economics, US Philly Fed Manufacturing Index is likely to post 24.3 mark compared to 27.9 earlier on Thursday while the Building Permits & Housing Starts, on Friday, could again portray the strength of US reality sector with the former likely posting 1.25M against 1.23M prior and the later is expected to make 1.19M mark versus 1.13M earlier. Further, UK Retail Sales may help the Pound recover some of its latest losses with +0.1% mark against -0.8% prior contraction while the Canadian CPI could disappoint CAD Bulls by flashing 0.1% mark against 0.2% prior.
Hence, the Economic calendar is less likely to offer any strong support to the USD and may drag the CAD towards south but the GBP could witness a pullback depending upon the Retail Sales’ outcome.
Looking towards the burning political issues on hand, namely US tax-plan & UK PM’s future, some of the Republicans have already started showing their disagreement to the Trump’s tax-plan even before posting the formal vote to let the proposal go forward. Also, the President proposed to try getting support for the repeal/replace of Obamacare by including it in the present budget proposal, which in-turn raised another round of threats as Republicans have repeatedly failed to achieve that dream of them. As a result, it is most likely that they will become a barrier, like they did during Obamacare repeal, and may raise concern for a delayed tax-plan announcement. However, Mr. Trump has returned from his Asia trip, even with not so good news, and may try to regain fellow party-members’ support, which he is good at, and could help the tax-plan being considered for a law.
The UK politics look even pale with nothing good happening that can support Mrs. Theresa May to hold her seat as PM but the policymakers and the party aren’t ready for another election and that can let Mrs. May remain on power for a bit long.
While US politics is less likely to help the greenback recover its latest losses, the case is much brighter for the GBP with Tory’s resistance for another election. In all these, JPY and Gold should gain as such Geo-political moves affect market appetite for risk and favor the safe-havens.
Technical Analysis
Irrespective of the EURUSD’s latest rally, the pair couldn’t clear the 1.1830 on a daily closing basis which may drag the pair towards 1.1730 & 1.1660 re-test while 1.1910 could act as strong resistance on the 1.1830 break. The GBPUSD is struggling between the 1.3200 and the 1.3030 region with either side trigger indicating 1.3255 & 1.2980 whereas USDJPY recently bounced from 50-day SMA level of 112.55 and can challenge the 113.65 TL with 111.70 being strong downside support. Further, AUDUSD rests around 0.7575 TL support and may revisit the 0.7610 & 0.7650 resistance but a drop beneath the same can flash 0.7530 & 0.7500 on the chart. Additionally, NZDUSD aims for break the 0.6815 and mark 0.6770 with 0.6900 acting as nearby resistance while USDCAD took a U-turn from 1.2720 TL support and can again target 1.2855-60 region.
Have a nice trading-day ……