Weekly Fundamental Dose: 07 – December – 2017
With the front-line economics from UK & Australia have already disappointed respective currencies’ traders, together with Theresa May’s failed attempt to please EU policymakers over Brexit deal, global investors are more likely to concentrate on the Friday’s US Jobs report and how proceedings of the Trump’s optimistic tax-plan take place. Additionally, fears emanating from US Government shutdown, China’s Inflation figures and British Manufacturing Production could offer intermediate trade opportunities to watch.
Let’s quickly determine fundamentals relating to each of the details/events.
It Was Finally A Good Week For The US Dollar
Having witnessed consecutive three negative weekly closing, the US Dollar Index (I.USDX) finally managed to please buyers with a positive close during last week as welcome data-points, including Consumer Confidence, GDP & housing market stats, gathered additional support from Senate Republicans’ ability to push Mr. President’s hawkish tax-plan a step-closer to becoming a law. Due to this, optimistic traders didn’t pay much attention to the news threatening Trump administration over its alleged role in Russian meddling during 2016 Presidential election.
On the other hand, EUR remained sluggish even with better than previous Flash CPI while JPY and AUD had to bear the burden of stronger greenback. Further, GBP maintained its upside with investors believing that UK PM will be able to deliver optimistic Brexit deal during her lunch-meet with EU policymakers whereas CAD rallied due to upbeat GDP & employment details. Moving on, NZD could enjoy China’s better than forecast Caixin Manufacturing PMI but the Crude failed to praise global producers’ accord to extend output cut deal till 2018 with the intermediate meeting in June 2018.
Greenback Sustained Its Strength But Not The GBP
If we take a look at the present week’s Forex moves, the US Dollar didn’t refrain to extend its up-moves even though early-week data-points, including trade balance, ISM Non-Manufacturing PMI & Factory Orders, flashed soft numbers as global market players remain positive for the Republican’s ability to get the tax-plan rolled before year-end. However, worries relating to the government shutdown, if congress fails to deliver spending plan before December 08, capped the US currency’s rally.
In case of the GBP, the Pound has to liquidate some of its latest gains after Theresa May failed to please European policymakers over her lunch-meet on Monday due to Irish border issue and the frontline PMIs also flashed downbeat figures. Further, the EUR remained weak due to not so positive prints of second-tier data-points whereas Gold was badly affected by the USD’s up-moves but the JPY could recover some of its losses on increased consumer confidence. Moreover, AUD became the victim of disappointing GDP & trade balance figures while the CAD had to decline on BoC’s cautious tone over future policy moves but welcome GDT Price Index & RBNZ Governor’s speech favored the NZD. At the end, Crude prices kept running down after witnessing heavy increase of Gasoline & Distillate inventories.
What’s In For The Rest Of The Week
While majority of the scheduled data-points and events have already rolled out, investors would now concentrate on the monthly release of US Employment report & how Republicans manage to prepare a formal tax-plan combining House & Senate views which will go to the President for being a law. Also, developments concerning Congress’ ability to approve spending plan, in order to avoid government shutdown, and stats from China and UK may entertain short-term traders.
Starting with the Friday’s US Jobs report, the numbers are likely to keep registering mixed signals with NFP bearing a soft consensus & the Earnings indicating an increase while Unemployment being less expected to change. Details suggest Non-farm Payrolls (NFP) might retrace a bit to 200K from its previous surge of 265K while the Average Earnings could rise from 0.0% prior towards marking 0.3% gain. However, no change in expected in the 4.1% Unemployment Rate. It should also be noted the US Prelim UoM Consumer Sentiment is also up for release on Friday and is likely to register 99.2 figure compared to 98.5 earlier-stat.
Moving on to the political front, the process of getting Mr.Trump’s Tax-Proposal towards being a law is running fast with both the Republicans & Democrats have already formed their respective committees to discuss which amendments to take from House & Senate. However, the actual work is still left, where in representatives with bargain over why & how any proposal should or shouldn’t be taken for granted. At the end of it, a final paper will roll out to get the President’s sign and then become a law. Other than tax-plan, the North Korean issues and fears relating to government shutdown are still on the card and may anytime propel the market moves in case of adverse outcome.
Hence, while US Job’s report is less likely to offer any disappointment and the tax-plan proceedings are also going well, a stumbling block from Congress’ spending plan & bargain hunting of the Democrats could lead to the greenback’s downside.
In addition to the details/events concerning US, Final version of Japan’s Q3 2017 GDP, UK Manufacturing Production & Goods Trade Balance, China’s Trade Balance and Inflation readings are some other data-points that shouldn’t be missed.
Forecasts suggest a contraction of -0.1% in the UK Manufacturing Production against +0.7% earlier and the higher deficit figure of -11.5B in the Good Trade Balance statement versus -11.3B prior. Further, Japanese GDP is likely to have grown by 0.4% compared to 0.3% earlier estimate while China’s CPI and the PPI could flash worrisome signs of 1.8% & 5.8% respectively compared to their 1.9% & 6.9% priors. Additionally, China’s Trade Balance might also book declining surplus and can threaten commodity traders.
Considering continuation of dovish details from UK & China, coupled with Brexit woes, the GBP & Commodity currencies, including AUD, NZD and CAD, might not gain Bulls’ attention but Japanese GDP & safe-haven flows could help the JPY to remain strong.
On the technical front, EURUSD is declining towards 1.1700 TL support with the 50-day SMA level of 1.1755 offering intermediate halt but an upside break of 1.1950 could propel it to 1.2100. Concerning the GBPUSD, the pair might revisit the 1.3330-40 support-zone, breaking which it can drop to 1.3280 with 1.3450 being nearby important resistance. Further, 50-day SMA level of 112.80 and the confluence of 100-day & 200-day SMAs around 111.60-70 could limit the USDJPY moves while may keep maintaining its 1.2660 & 1.2920 range. At the end, the 0.7475 & 0.7430 can restrict the AUDUSD’s south-run and may propel it to test 0.7630 again whereas NZDUSD is less likely to depict any major moves unless breaking 0.6780 & 0.6930 levels.
Have a nice trading-day ……