Weekly Fundamental Dose: 04 – January – 2018
While Wednesday’s FOMC minutes and solid second-tier economics from US helped the greenback broke its recent losing streak, investors now await Friday’s headline employment details in order to determine near-term market moves. Additionally, UK Services PMI, EU Flash CPI & Canadian job numbers are also on the card and become important to analyze.
Let’s start discussing the tales of recent past prior to analyzing fundamental aspects concerning each of the upcoming crucial details/events.
A Second Negative Weekly Closing of The USD
Even with least updates on the U.S. economic calendar, the US Dollar Index (I.USDX) couldn’t reverse its previous weekly losses as some of the scheduled details flashed softer outcomes and investors remained afraid of Trump’s tax-plan effect on the economy. As a result, the greenback marked its worst year in nearly a decade while the EUR benefited from the same and flashed heavy gains. Moving on, the GBP also stretched its up-moves due to positive developments on Brexit front by the UK policymakers while commodity-linked currencies, namely AUD, NZD and CAD, rallied as upbeat global economic outlook and weaker US Dollar fueled commodity demand. Further, JPY and Gold also advantage of the USD’s decline whereas Crude prices surged as depleting inventories and supply crunch at major pipelines pleased energy traders.
It Wasn’t A Good Start For The Greenback Until Wednesday
With the early-week trading sessions witnessing dearth of investors’ interest due to New-Year holiday mood, the US Dollar continued facing downside pressure as market sentiment remained strongly tilted towards commodity basket. Moreover, US President’s threats to Iran and North Korea provided additional reason to the greenback sellers. Though, everything reversed on Wednesday when ISM Manufacturing posted three-month high and FOMC minutes reassured investors of gradual interest rate-hikes from the Federal Reserve.
On the other hand, the EUR managed to entertain buyers with positive data-points but the GBP couldn’t sustain its latest up-moves due to weaker prints of Manufacturing & Construction PMIs. However, AUD, NZD and CAD didn’t lose their charm while Crude prices also extended north-run on the news of political unrest at Iran. Furthermore, JPY and Gold remained not too active as Japanese markets were close till Thursday and USD’s decline offered intermediate strength to both these safe-havens.
During early Thursday, market sentiment remained quite in favor of the US Dollar after FOMC minutes reignited buying interest, which in-turn negatively affected rest of the major currencies, including EUR, JPY and commodity-linked currencies. With this, the JPY traders couldn’t welcome the Japanese PM’s upbeat comments when their started after a long year-end break while GBP traders remained worried for the dip in UK Services PMI.
Having gone through FOMC minutes, global data highlight set on the Friday’s EU Flash CPI, US & Canadian Jobs report and US factory Orders while Thursday’s UK Services PMI may become of immediate importance.
Starting with the UK Services PMI, core to the British GDP, the headline gauge might reverse the GBP’s recent losses by flashing 54.1 mark against 53.8; however, latest updates on the Brexit hasn’t been good and may cap the Pound’s advances. Other than the UK stat, the U.S. ADP Non-Farm Employment Change, early signal for Friday’s NFP, could please greenback buyers with 192K compared to 190K previous reading.
Moving on to Friday, the early-day moves might be directed by the Australian Trade Balance and EU Flash CPI. While AU Trade Balance can further propel the AUD’s rally by registering 0.55B surplus against 0.11B prior, the EU Flash CPI can disappoint the regional currency traders with 1.4% mark versus 1.5% earlier.
Following the intermediate moves triggered by AU & EU details, market players will then jump on to the crucial US jobs report which encompasses, Non-farm Payrolls (NFP), Average Earnings and Unemployment Rate. Looking at the consensus, the Non-farm Payrolls (NFP) might become a disappointment for USD buyers if it matches the 189K prediction against 228K prior; however, expected increase in Average Earnings, to 0.3% from 0.2%, coupled with no change in Unemployment Rate from its 4.1% status, could please the optimists.
It’s time to shift to the rest of Friday’s economic calendar, namely US & Canadian Trade Balance, Canada’s employment stats and US Factory Orders. The U.S. Trade Balance might register lesser deficit figure of -48.1B against -48.7 earlier but the same from Canada, with its -1.3B deficit against -1.5B earlier, can please the CAD. Further, expected dip in Canadian Employment Change, by -2.5K against +79.5K prior, together with increase in Unemployment Rate to 6.0% from 5.9%, might hurt the CAD. At the end, US Factory Orders growth is expected to mark 1.5% figure against -0.1% earlier contraction.
Considering the upbeat expectations from US data-calendar, chances of the USD’s further advances are much brighter but Geo-political worries emanating from North Korea and Iran might confine the greenback’s up-moves.
In case of the EUR, softer inflation can trigger pullback of the regional currency while any more disappointments from UK stats would increase the strength of Brexit pessimism and drag the GBP towards south. Moreover, CAD has already rallied much and downbeat numbers might activate the much required pullback of the Loonie.
Furthermore, JPY and Gold can benefit from present worries at Iran but USD’s strength can limit their advances whereas Crude could witness profit-booking as pipe-line stops have faded and Iran is eager to take control of public unrest.
EURUSD has to clear the 1.2090 – 1.2100 region in order to claim the 1.2250 mark else it can revisit the 1.1960 & 1.1900 rest-points. For the GBPUSD traders, the 1.3620-25 and the 1.3450 become important to watch while USDJPY has to clear 113.20 should it wish to meet 114.00 otherwise chances of its drop back to 112.00 – 111.95 can’t be denied. Further, AUDUSD has 0.7890 – 0.7900 strong resistance with 0.7780 acting as crucial support while USDCAD may find it hard to break the 1.2410-15 and may bounce-back to 1.2760 if it breaks the 1.2600 mark. At the end, NZDUSD must surpass 0.7130 to target 0.7200 but a downside close below 0.7060 can reprint 0.7000 on the chart.
Have a nice trading-day ……