Daily Fundamental Dose: 06 – July – 2017
Following last-week’s hawkish rhetoric by major central-bankers, global investors welcomed the first week of July in search of evidences that the US economy, which so far seems lagging behind rest of its counterparts, is capable enough to help Federal Reserve perform rate-hike and balance-sheet curtailing promises or not. However, greenback Bulls remained disappointed after Wednesday’s FOMC minutes revealed that most of the policymakers are divided about the timing of balance-sheet tapering and inflation outlook. Additionally, North Korea’s another missile-test, which US termed as capable of hitting them, harmed the USD and pushed global leaders to discuss the issue at this week’s G20. Hence, Friday’s NFP and a two-day long G-20 meeting now grab financial market players’ attention to foresee upcoming moves.
US Holiday, FOMC Minutes, PMIs & Geo-Politics Played Their Role
While Monday’s US ISM Manufacturing helped the US Dollar to remain strong, independence-day holiday on Tuesday, followed by the response to North Korea’s missile-test and downbeat FOMC minutes on Wednesday, dragged the greenback towards south. On the other hand, EUR remained sluggish but took the advantage of USD’s weakness as no major economics were scheduled for publish whereas GBP had to bear the burden of soft headline PMIs. Further, the Australian Dollar (AUD) couldn’t stretch its previous north-run after RBA refrained from being optimistic on rate-hike while NZD registered no major swings due to lack of data-points but the CAD rallied on another hawkish statement by BoC Governor. Additionally, Crude prices dropped on concern that Russia seems not ready for exceeding production-cut, if at all it is being agreed by OPEC, and dragged the commodity currencies downwards on Wednesday. Moreover, JPY managed to regain its safe-haven support due to latest North Korean action but the Gold failed to reflect the same as traders are yet to recover early-week losses by the yellow metal and wish to wait for upcoming data-points before taking any decision.
Eventful Days Lie Ahead
With the recent intercontinental ballistic missile test by the North Korea pushing global leaders to reveal their disappointments at this week’s G20, an otherwise medium-level event gains high importance. Furthermore, Friday’s NFP, an evergreen crucial data-point to gauge US economical strength, coupled with slew of second-tier details on Thursday, could keep entertaining market players for the days to come.
During early Thursday, investors ignored upbeat Trade surplus figures from Australia and overall commodity basket seems weak with recent plunge in Crude prices. However, rest of the day details, namely US ADP Non-Farm Employment Change, Trade Balance and ISM Non-Manufacturing PMI, together with Canadian Trade Balance details, are likely triggers that could generate intermediate trade moves.
While ADP is indicating soft number of 181K compared to 253K previous, Trade Balance might point shrinking deficit to -46.3B from -47.6B but ISM Non-Manufacturing PMI could add weakness into the greenback with 56.6 number against 56.9 earlier. In case of Canadian Trade Balance, deficit is likely to be widened to -0.50B from -0.37B, mainly due to latest strictness of US.
Moving towards Friday, the early-day releases of UK Manufacturing Production & Goods Trade Balance could help determine near-term GBP moves while the rest of the day moves are likely to be governed by employment details from US & Canada, together with news from G20. While expected increase in UK Manufacturing Production, to +0.4% from +0.2%, can counter widening Goods Trade Balance deficit of -10.9B versus -10.4B earlier, chances of an otherwise reading hurting the Pound are high.
If we analyze job statistics from US & Canada, figures from Canada aren’t likely to impress the Loonie traders while the same from US may help the US currency to recover its latest losses. The NFP, which softened a bit during previous release to 138K, could print 175K mark while Average Earnings that remained unchanged earlier at 0.2% bears forecast of 0.3% growth. Further, the Unemployment rate is expected to register 4.3% mark for second consecutive time. Additionally, the Canadian Employment Change is expected to soften by registering 15.0K addition from 54.5K prior while the Unemployment Rate might remain unchanged at 6.6%.
At the Geo-political front, US President, Donald Trump, is heading towards meeting his Russian counterpart, Vladimir Putin, for the first-time on G20 after being the global leader and the latest North Korean attempt to tease world’s largest economy is the talk of the town. Even if majority of the global leaders supported Mr. Trump when he demanded tough actions against North Korea in Wednesday’s emergency meeting, the Vladimir Putin refrained from being too harsh which in-turn may raise a negative impression of the leader in the eyes of US that is already famous for being loud. However, the bond between Trump and Putin gained fame when the Republican leader was campaigning for US presidential election and hence chances of positive outcome from G20 are high.
Given the US data-points manage to portray strong employment scenario at the world’s largest economy and the Russia joining hands with US to tame North Korea, chances of the USD’s rally to recover latest losses can’t be denied.
In case of GBP, slew of weaker data-points continue forcing Pound traders to ignore latest hawkish comments from BoE leaders and extended round of downbeat prints on Friday could hurt the UK currency more. Further, the EUR, left with no major details except ECB meeting minutes, might depend upon USD to portray its immediate moves while JPY and Gold are likely to benefit from present geo-political crisis concerning North Korea if the G20 fails to generate any fruitful outcome.
Additionally, commodity currencies and the Crude are also expected to stretch their latest downturn as scheduled details bear negative forecasts.
Hence, upcoming stats from US, Canada and UK, coupled with news from G20, become important for global investors to rely on while forecasting moves of financial markets.
At the technical side, EURUSD’s failure to surpass 1.1450 might fetch it to 1.1280 but an otherwise case can flash 1.1500 & 1.1530 on the chart while GBPUSD bounced-off from immediate ascending trend-line support of 1.2900 and may aim for 1.3050 again. Further, USDJPY needs to break near-term TL resistance, at 113.40 now, in order to aim for 114.40 with 112.50 acting as adjacent support. Moving on, USDCAD continues indicating 1.2900 unless it breaks 1.3050 on a daily closing basis while AUDUSD’s break of support-line favors 0.7550 re-test but a break of 0.7630 can help it target 0.7710. Additionally, NZDUSD struggles around 0.7250 support and 0.7310 resistance whereas Crude’s failure to surpass 50-day SMA level of 46.80 signals its 43.50 re-test.
Have a nice trading-day ……