Daily Fundamental Dose: 06 – April – 2017
Ever since the news of two-day meeting between Donald Trump and his Chinese counterpart broke, financial markets seem nervous over the summit and traders favored safe-havens mainly due to Mr. Trump’s dislike for China. However, early-week releases, like UK PMIs and US ADP, Factory Orders and FOMC minutes, offered intermediate liquidity to traders before they prepare for Xi-Trump meet and Friday’s NFP. Let’s understand fundamentals to ascertain upcoming moves.
Fewer Data-Points Turn Market Catalysts Till Now
While last-week’s upbeat consumer sentiment and hawkish comments from some of the FOMC members helped US Dollar Index (I.USDX) to post first positive weekly closing in four, the greenback gauge remained less active since the start of current week. However, some of the data-points, like Manufacturing PMIs, Trade Balance and ADP figures, coupled with hawkish FOMC minutes, turn market catalyst in offering trade opportunities to short-term players. FOMC minutes revealed that most of the MPC members suggest trimming $4.5 trillion US balance sheet debt while ADP, an early signal for NFP, unexpectedly rallied and helped greenback on Wednesday.
Elsewhere, UK Services PMI recovered majority of the early-week losses of the GBP while EUR remained less acceptable to market players as on-going EU-UK divorce proceedings signal stronger Britain. Further, AUD had to bear the burden of RBA’s worry over booming house market whereas NZD and CAD became victim of commodity basket weakness. Additionally, JPY and Gold continued being buyers’ favorite ahead of the important event but Crude dropped as US stockpile again smashed optimism concerning production-cut agreement.
Everybody Stares At US
Following the scheduled release of second-tier data-points/events, the present week comes to two important days, namely Thursday and Friday, when political leaders of US and China are locked to hold two-day meet and the US Bureau of Labor Statistics up for flashing monthly employment report. Hence, nothing seems more important for traders than the news from US, be it from political front or economic desk.
As such there isn’t any clear-cut agenda for the first meeting between the US President Donald Trump and his Chinese counterpart, Mr. Xi Jinping; however, both the global leaders are inclined to have strong trade-ties with mutual relationships established to tame North Korea from its weapon building.
US President, Mr.Trump, has been loud mouthed about China ever since he started election campaign and termed it a “currency manipulator”. Trump also promised to announce few policies which could hurt Chinese import into the nation and restrict them from building huge currency reserves. Though, he has been accepting a soft stance since last few days, even after terming his meeting with Xi to be “tough”. On the other hand, China hasn’t been aggressively opposing the US behavior and seems ready to co-operate with global leader in establishing strong ties which can help both the economies in restricting North Korean threat.
At the data front, Friday’s US jobs report might provide disappointment to USD bulls as the Non-Farm Payrolls (NFP) is likely to flash 174K mark against 235K prior while Unemployment Rate and Average Hourly Earnings are expected to remain unchanged at 4.7% and 0.2% respectively.
Hence, while economics are less likely to boost the US Dollar, positive developments between the US-China meet, which become more expected, might favor the greenback to extend it latest recovery towards posting another positive weekly closing.
In addition to US front, Friday’s UK Goods Trade Balance, Manufacturing Production & Industrial Production, followed by Canadian Job details, are some other data-points that traders should observe. On that side, soft trade deficit may fail to hurt GBP much as Production figures are expected to reverse their previous contraction while increase in Canadian Unemployment Rate and a soft employment change mark could further drag the CAD towards south.
With the EURUSD resting around 100-day SMA figure of 1.0625, chances of its bounce to 1.0700 are much higher; however, a dip with a good-news for US may fetch the pair to 1.0590 TL and then to 1.0525 supports. Further, GBPUSD struggles between short-term symmetrical triangle range of 1.2515 and the 1.2420 whereas USDJPY again aims for 110.00 break which can fetch it to 109.30 with 111.60 being strong resistance. Additionally, AUDUSD and NZDUSD have less downside with 0.7510 and the 0.6950 be adjacent while 0.7610 and the 0.7020 acting as immediate resistances.
Have a nice trading-day ……