Daily Market Outlook by Kate Curtis from Trader's Way

Commercial Content Analysts
222

USD

Volatility is expected to pick up in today’s trading sessions, after the snoozer on Monday’s trading. Financial markets are reopening today and traders will return to their desks, leading to some movement among major pairs. US existing home sales and Richmond manufacturing index are on the docket today, with home sales expected to be lower and the manufacturing index likely to show an improvement.

EUR

The euro was ahead of the pack in terms of establishing direction for the week, as EUR/USD started breaking lower in yesterday’s New York trading session. Perhaps traders are starting to price in the prospect of additional easing from the ECB or expectations of bleak PMI data today. Germany and France are set to release their manufacturing and services PMI figures and possibly show small upticks, but weaker than expected figures could push the euro lower.

GBP

The pound continued to consolidate around the 1.6800 area to the dollar, waiting for a convincing market catalyst for a break higher or lower. There are no major reports due from the UK today so pound pairs might keep consolidating until the BOE meeting minutes are released later on this week.

CHF

The franc resumed its selloff to the dollar yesterday but managed to score gains against the euro. There have been no reports released from Switzerland recently and none are due today, which suggests further consolidation or currency-specific reactions from franc pairs.

JPY

Yen pairs saw a bit of action in recent trading as a news report indicated that the Japanese government is considering loosening lending restrictions in the country. The government is mulling about lowering the rate ceiling on loans in order to give small businesses better access to funding, possibly as an effort to compensate for the drag caused by the sales tax hike this month. Trade balance came in weaker than expected over the weekend, lending to yen weakness.

Commodity Currencies (AUD, NZD, CAD)

The comdolls regained ground in recent trading, particularly the Aussie which drew support from a 0.3% uptick in its February leading index. Canadian wholesale sales are due in today’s New York trading session and a 0.7% increase is eyed. Later on, New Zealand will release data on visitor arrivals and probably show another strong increase.

By Kate Curtis from Trader’s Way

223

USD

The US dollar lost a bit of ground to some of its major counterparts in recent trading as risk sentiment improved in the markets. However, liquidity was still low and there were barely any big moves among dollar pairs. Data from the US was stronger than expected, as the existing home sales report showed a 4.59M reading, higher than the estimated 4.57M figure. The Richmond manufacturing index was also better than expected, as it jumped from -7 to 7 instead of landing at 0. For today, US new home sales and flash manufacturing PMI are up for release but the reaction may be overshadowed by other major economic events lined up.

EUR

The euro managed to edge slightly higher in recent trading despite the lack of major data from the euro zone. Consumer confidence in the region held steady at -9, reflecting pessimism. For today, German and French manufacturing and services PMIs are up for release. Small improvements are expected but if the actual figures disappoint, the euro might wind up returning most of its recent gains.

GBP

The pound continued to test its recent highs around the 1.6800 levels, as traders await the release of the BOE meeting minutes. Many are hopeful that the UK central bank policymakers will be more hawkish with their economic assessment and outlook, supporting Carney’s claim that the BOE could hike rates before the general elections next year. On the other hand, dovish comments might undermine pound strength.

CHF

The franc lost further ground to the dollar yesterday, with USD/CHF forming a reversal pattern on its long-term time frames. There have been no reports released from Switzerland lately and none are due today, which suggests that the franc could simply act as a counter currency to currency-specific events.

JPY

There was barely any action among the yen pairs in recent trading since there were no reports released from Japan. There are still no major reports lined up from the Asian economy today so yen pairs might be extra sensitive to risk sentiment.

Commodity Currencies (AUD, NZD, CAD)

The Australian dollar was sold off early in today’s Asian trading session since the quarterly CPI figure came in weaker than expected at 0.6% versus the estimated 0.8%. This goes to show that the rising value of the Aussie could be hampering inflation. Canada is set to print its retail sales data in today’s New York session and possibly show a 0.5% increase in headline sales and a 0.6% rise in core retail sales. Afterwards, the RBNZ is set to announce its monetary policy decision and possibly keep rates unchanged in the meantime.

By Kate Curtis from Trader’s Way

224

USD

Despite weaker than expected US economic data, the US dollar managed to score gains against most of its major currency counterparts. The flash manufacturing PMI for April fell from 55.5 to 55.4 while new home sales printed a bleak 387K figure instead of the projected 455K. US durable goods and unemployment claims data are up for release today and this might not have such a huge impact on dollar movement, as risk sentiment is the key driver of price action so far.

EUR

The euro sold off sharply when euro zone PMI data came in mixed. France reported lower than expected manufacturing and services PMI readings while Germany’s manufacturing PMI came in line with consensus. Its services PMI was stronger than expected, allowing the euro region’s services PMI to also beat the forecast. German Ifo business climate data is up for release and downtick from 110.7 to 110.5 is expected. Also due today is ECB President Draghi’s speech, which usually causes a lot of movement among euro pairs.

GBP

The pound gave up some of its recent gains when the BOE meeting minutes were not as hawkish as many expected. The minutes showed a unanimous vote when it comes to keeping monetary policy unchanged, with some policymakers highlighting the economic slack in the UK. Public sector borrowing data came in stronger than expected with a positive revision in the previous month’s figure. CBI realized sales is due today but this doesn’t usually have a large effect on pound movement.

CHF

The franc caved to dollar strength, as there were no reports from Switzerland to give it a boost. Swiss trade balance is up for release today and it might show a smaller trade surplus of 2.31B CHF from 2.62B CHF. Weaker than expected data could keep the franc in selloff mode to the dollar while strong figures could pave the way for a bounce.

JPY

The yen had a pretty volatile trading day as it started off strong but ended on a weak note, particularly to the US dollar. There were no major reports released from Japan then as risk sentiment changes were responsible for most of the yen’s changing direction. There are no major reports lined up for today so more risk trading might be seen.

Commodity Currencies (AUD, NZD, CAD)

The Aussie lost a lot of ground in recent trading because of the bleak Australian CPI while the Loonie was unable to take advantage of the improvement in consumer spending, as retail sales figures simply came in line with expectations. Meanwhile, the Kiwi got a strong boost in today’s Asian trading session when the RBNZ decided to hike rates and express a hawkish bias. The central bank said that inflationary pressures could remain strong in the next couple of years, which led many to believe that another rate hike could be possible. Australian and New Zealand banks are on holiday today in observance of Anzac Day.

By Kate Curtis from Trader’s Way

225

USD

The US economy released mixed economic reports in yesterday’s New York trading session, printing stronger than expected durable goods orders figures while showing a weak initial jobless claims reading. Headline durable goods orders increased by 2.6% versus the estimated 2.1% growth and core durable goods orders chalked up a 2.0% gain versus the projected 0.6% uptick. Meanwhile initial jobless claims came in at 329K, higher than the consensus at 309K. Revised UoM consumer sentiment data is lined up for today and an upward revision from 82.6 to 83.2 is eyed.

EUR

The euro consolidated to the dollar in recent trading although it did see some rallies during the release of strong German data. The Ifo business climate reading rose from 110.7 to 111.2, outpacing the consensus at 110.5. Volatility picked up when Draghi took center stage and pointed out that monetary policy might be influenced by the euro’s exchange rate movement, which led some to believe that the ECB is more inclined to ease if the euro keeps climbing. No major reports lined up for today from the euro zone.

GBP

Data from the UK came in stronger than expected as the CBI realized sales index jumped from 13 to 30, higher than the forecast at 18. However, this wasn’t enough to push the pound in a clear direction since traders were still digesting the outcome of the BOE monetary policy meeting. The minutes revealed mixed views on economic performance and showed that many were concerned about weak inflation. UK retail sales are due today and a 0.4% decline is projected to follow the previous 1.7% increase.

CHF

Data from Switzerland was much weaker than expected yesterday, as the trade balance fell short of the expected 2.31 billion CHF surplus at 2.05 billion CHF. The previous month’s figure was also revised lower, indicating weaker export performance for the country. There are no reports due from Switzerland today but SNB head Thomas Jordan will make a testimony that might rock the franc’s movement before the end of the trading week.

JPY

Japan printed weaker than expected inflation reports in today’s Asian trading session but this still marks increased price pressures, which was taken positively by the yen. All industries activity data is up for release today and a 0.5% decline is expected. No other reports are lined up from Japan for the rest of the day.

Commodity Currencies (AUD, NZD, CAD)

The comdolls retreated from their recent climb as risk aversion took hold of the markets yesterday. The Kiwi was unable to sustain its rallies despite the RBNZ rate hike while the Aussie retreated as Australian traders were off on a holiday. There were no reports from Canada then and none are due today.

By Kate Curtis from Trader’s Way

226

USD

Dollar pairs were mostly in consolidation last Friday, as data from the US economy came in mixed. The UoM consumer sentiment figure for April was revised higher to reflect more optimism in the economy while the flash services PMI for the same month fell short of expectations and showed a slower expansion in the sector. Only the pending home sales report is due today and a 1.0% rebound is eyed to follow the previous 0.8% decline.

EUR

The euro edged slightly higher to the dollar on Friday but opened weaker this week. There were no reports released from the euro zone then but the risk-off environment spurred the worsening tension in Russia and Ukraine led to a poor showing for the higher-yielders. German import prices data is due today but this might not have such a huge impact on euro movement.

GBP

The pound was unable to sustain its rallies past the 1.6800 major psychological level as traders booked profits off the key resistance area. UK retail sales were stronger than expected at 0.1% versus the estimated 0.4% decline but the previous month’s reading was revised lower to 1.3%. Mortgage approvals were also lower than expected, according to the BBA. No reports are due from the UK today.

CHF

The franc gave in to dollar strength last Friday as risk aversion took hold of the markets ahead of the weekend. SNB Thomas Jordan also reiterated their pledge to maintain the franc peg in his speech last week, lending more weakness to the currency. There are no reports lined up from Switzerland today.

JPY

The yen got a bit of a boost from the stronger than expected rise in retail sales. The figure showed a 11.0% annualized increase, stronger than the estimated 10.9% growth and the previous 3.6% rise. This eased fears of further easing from the BOJ this week, as many thought that the recently implemented sales tax hike could hurt spending.

Commodity Currencies (AUD, NZD, CAD)

The comdolls were unable to extend their gains in Friday’s trading as traders eased off their riskier holdings. There were no reports released from Australia, New Zealand and Canada then. Only the New Zealand trade balance report is lined up for today and it might print a higher surplus of 919 million NZD versus the previous 818 million NZD.

By Kate Curtis from Trader’s Way

227

USD

The US dollar was still stuck in consolidation to most of its major forex counterparts, as traders are awaiting the release of the top-tier data later on this week. US pending home sales were stronger than expected as it showed a 3.4% increase versus the estimated 1.0% growth. US CB consumer confidence data is up for release today and it might show an improvement from 82.3 to 82.9, enough to keep the dollar supported throughout the trading day.

EUR

The euro moved sideways against the dollar in yesterday’s trading but encountered a bit of weakness when German import prices came in weaker than expected and showed a 0.6% decline, worse than the estimated 0.1% dip. German preliminary CPI is up for release today and another weaker than expected result might increase fears of deflation in the euro region and trigger euro weakness.

GBP

The pound edged slightly higher in recent trading despite the lack of major data from the UK economy. UK preliminary GDP data is up for release today and a 0.9% growth figure is eyed, stronger than the previous 0.7% rise. A higher than expected GDP reading might be enough to push GBP/USD past the previous highs around 1.6825.

CHF

The franc failed to establish a clear direction at the start of the week since there were no major reports lined up from Switzerland. Their schedule is still empty for today, which suggests that USD/CHF movement could hinge on dollar demand and that EUR/CHF action could be dependent on German data.

JPY

Japanese banks are on holiday today, which suggests that the yen might see the same amount of weakness from yesterday. Retail sales posted stronger than expected data over the weekend but the Nikkei ended lower for the day as risk aversion weighed on yen pairs.

Commodity Currencies (AUD, NZD, CAD)

The comdolls sank in recent trading, thanks to the run in risk aversion due to the conflict in Ukraine and Russia. New Zealand trade balance came in line with expectations at 920 million NZD but the previous month’s figure was revised lower, pushing NZD/USD down. There are no reports lined up from the comdoll economies today, except perhaps the speech by BOC Governor Poloz in the US session.

By Kate Curtis from Trader’s Way

228

USD

The US dollar saw a bit more volatility in recent trading as it edged lower to the Canadian dollar but rebounded to the Japanese yen. Data from the US was weaker than expected, as the CB consumer confidence figure failed to meet expectations and landed at 82.3. This could all change today though with the preliminary GDP, ADP non-farm employment change figure, and FOMC monetary policy statement all on the docket. The GDP figure could show 1.2% growth for the first quarter of the year, much weaker compared to the downgraded 2.6% reading for the previous quarter. Meanwhile, the FOMC statement is likely to be a little more cautious compared to the previous one, with no rate hike forecasts likely to be announced.

EUR

The euro showed signs of weakness to its major counterparts as the euro zone printed a set of bleak figures. German preliminary CPI showed a 0.2% decline instead of the estimated 0.1% dip while Spanish joblessness surged to 25.9%. Private loans, M3 money supply, and Italian retail sales also disappointed. German and French retail sales data are due today, along with the euro zone’s preliminary CPI estimate. Spanish flash GDP and German unemployment change are also on tap. Weak figures could push the euro much lower to its forex counterparts.

GBP

The pound also bowed down in recent trading when the preliminary GDP reading fell short of expectations. The figure showed 0.8% growth instead of the estimated 0.9% reading. GfK consumer confidence did show an improvement from -5 to -3, but it still reflects pessimism. There are no major reports lined up from the UK economy today.

CHF

The franc fell to the dollar but gained against the euro in recent trading, as the lack of Swiss data kept the currency virtually directionless. Swiss UBS consumption indicator and KOF economic barometer are both on tap today, with both reports likely to show some form of improvement. In this case, the franc might be able to erase some of its recent losses to the dollar and possibly advance further against the euro.

JPY

The yen lost ground to most of its major counterparts as traders started pricing in dovish remarks from today’s BOJ rate statement. Data from Japan was mostly weak, as the official manufacturing PMI showed contractionary conditions while the preliminary industrial production reading fell short of expectations. The BOJ is not likely to change monetary policy this month but they could insist that they are open to easing if needed. GDP and inflation forecasts are also due today and downgrades could lead to yen weakness.

Commodity Currencies (AUD, NZD, CAD)

The Aussie and Kiwi showed weakness in recent trading but the Canadian dollar got a boost from a rise in oil prices. Meanwhile, ANZ business confidence in New Zealand slipped from 67.3 to 64.8, reflecting lower optimism. Canadian monthly GDP is due later today, along with a speech by BOC Governor Poloz. A 0.2% growth figure is eyed, weaker compared to the previous 0.5% GDP increase.

By Kate Curtis from Trader’s Way

229

USD

The US dollar had a topsy turvy trading day as data and events showed mixed results. The advanced GDP reading for the first quarter of 2014 turned out to be a disappointment as the economy clocked in a mere 0.1% growth figure, down from the previous 2.6% GDP reading. However, the FOMC statement turned things around as the committee voted unanimously to taper asset purchases. Their economic assessment and outlook was relatively upbeat this time, leading many to believe that easing could end in December this year. Initial jobless claims and ISM manufacturing PMI are up for release today but the bigger mover could be Yellen’s speech during the US session.

EUR

The euro managed to survive against the dollar in recent trading as CPI data wasn’t as bad as expected. Aside from that, German jobs data showed strong results as hiring increased by 25K versus the 10K estimate. Spain logged in a 0.4% GDP figure, just in line with market expectations. There are no reports due from the euro zone today as banks are closed on Labor Day.

GBP

The pound extended its rallies to its major counterparts in recent trading, as GBP/USD climbed to the 1.6900 mark. There were no reports released from the UK then and only the Nationwide HPI and manufacturing PMI data are the reports to watch out for today. Manufacturing PMI is expected to dip from 55.4 to 55.3, but a stronger than expected reading could push GBP/USD much higher.

CHF

The franc made a bit of recovery to the dollar in yesterday’s trading as the UBS consumption indicator climbed from 1.52 to 1.84, indicating a pick up in spending. There are no reports due from Switzerland today as banks are also closed on a Labor Day holiday.

JPY

The yen advanced against the dollar but stayed stuck in consolidation to most of its major counterparts, as risk sentiment remained stable in recent trading and the BOJ refrained from making any changes in monetary policy. There are no reports lined up from Japan in today’s Asian session but do watch out for the release of the jobless rate and household spending data in the next Asian session.

Commodity Currencies (AUD, NZD, CAD)

The Aussie and Kiwi recovered in recent trading while the Loonie was stuck in consolidation to the dollar. There were no major reports released from these economies recently, although Canada reported a 0.2% monthly GDP growth in line with expectations. Underlying inflation reports from Canada were weaker than expected, preventing the Loonie from taking part in the risk rallies. There are no major reports lined up from Australia, New Zealand, or Canada today.

By Kate Curtis from Trader’s Way

230

USD

The US dollar failed to draw support from upbeat data in recent trading. US ISM manufacturing PMI posted a stronger than expected expansion in the industry, as the index surged from 53.7 to 54.9, outpacing the consensus at 54.3. Personal spending and income also showed stronger than expected results, while the core CPI price index showed a 0.2% uptick. Initial jobless claims, on the other hand, came up short of expectations. For today, the non-farm payrolls release might be the biggest mover in dollar price action and the economy is expected to show a 216K gain in employment.

EUR

The euro remained steady to the dollar in recent trading, unable to sustain its rally past the 1.3875 mark. Euro zone banks were on a Labor Day holiday, which explains why the shared currency was unable to draw additional support. Spanish and Italian manufacturing PMI are due today, along with the euro zone jobless rate. Stronger figures could keep the currency supported throughout the day but EUR/USD’s longer-term direction could depend on the NFP result.

GBP

The pound continued to edge higher against most of its counterparts, reaching a new 4.5-year high to the dollar. UK manufacturing PMI was much stronger than expected at 57.3, up from an upwardly revised 55.4. This indicates a rebound in the industry, which could be enough to result to a higher than expected Q2 2014 GDP reading later on and push the BOE to tighten. UK construction PMI is up for release today and another strong result could lead to more pound gains.

CHF

The franc consolidated for the most part of yesterday’s trading since Swiss banks were on a Labor Day holiday. There were no reports released from Switzerland then as USD/CHF movement hinged on US data. Swiss SVME PMI is due today and a rebound to 55.1 from 54.4 is expected, which might provide support for the franc.

JPY

The yen lost ground to major counterparts in recent trading as risk appetite picked up. The Nikkei logged in a 1.27% gain for the day as a news report revealed that the government is coming up with a timeframe for corporate tax cuts. This could compensate for the potential slack that could be caused by the sales tax hike. Data from Japan was stronger than expected, with household spending rising by 7.2% and unemployment holding steady at 3.6%.

Commodity Currencies (AUD, NZD, CAD)

The comdolls showed signs of weakness in recent trading as gains in commodity price levels appeared to be subdued. Earlier today, Australia printed a stronger than expected PPI increase for the quarter while New Zealand showed a 4.0% decline in ANZ commodity prices. No other reports are due from the comdoll economies today.

By Kate Curtis from Trader’s Way

231

USD

The US dollar had a volatile day on Friday when the non-farm payrolls report came in stronger than expected. The economy added 288K jobs in April, higher than the estimated 216K gain. The previous month’s figure was also revised to show a stronger pace of hiring for March, enough to bring the jobless rate down to 6.3%. However, components of the report revealed that the decline was mostly spurred by a dropping participation rate, suggesting that there’s still significant slack in the jobs market. Wage growth stagnated for the month of April as well. US ISM non-manufacturing PMI is due today and the index could hold steady at 54.2.

EUR

The euro moved back and forth to the dollar on Friday but failed to make significant headway in either direction. Data from the euro zone was mixed, with the jobless rate and Italian manufacturing PMI beating expectations while the Spanish manufacturing PMI fell short. Euro zone Sentix investor confidence data and EU economic forecasts are on the docket today.

GBP

The pound suffered a quick selloff to the dollar but staged a strong rebound in an instant, after the NFP results were published. UK construction PMI was weaker than expected at 60.8 versus the estimated 62.2 reading. For today, UK banks are on holiday in observance of May Day so pound pairs might be in for a bit of consolidation with no data points up for release as well.

CHF

The franc regained ground on Friday as Swiss SVME PMI printed stronger than expected results. The index jumped from 54.4 to 55.8, outpacing the consensus at 55.1. This reflects a stronger expansion in the manufacturing industry, which could lead to better growth prospects. There are no reports due from Switzerland today.

JPY

The yen tossed and turned to the dollar on Friday but started this week on a strong note, despite Japanese traders being off on a holiday. There are no reports due from Japan today and tomorrow, but it appears that positioning from institutional traders is affecting yen movement in the meantime.

Commodity Currencies (AUD, NZD, CAD)

The comdolls lost a bit of ground to the dollar on Friday but capped off the week with a decent recovery. NZD/USD is moving closer to the .8700 major psychological resistance while AUD/USD found support around .9200. USD/CAD, on the other hand, remains stuck in consolidation. Earlier today, Australia reported a 3.5% decline in building approvals, along with a downward revision in the previous month’s figure. China’s HSBC final manufacturing PMI was revised lower to 48.1 from 48.3, leading to more selling pressure for the Aussie. No other reports are due from the comdoll economies for the rest of the day.

By Kate Curtis from Trader’s Way

232

USD

The US dollar barely reacted to stronger than expected ISM non-manufacturing PMI yesterday. The index jumped from 53.1 to 55.2, surpassing the consensus at 54.3 and indicating a much stronger expansion in the services industry. US trade balance is up for release today and might show a smaller trade deficit, which could provide support for the Greenback. Other than that, risk sentiment is expected to be the main driver of forex price movement in the next few hours.

EUR

The euro is still stuck in consolidation to most of its major counterparts, as traders sit on the edge of their seats ahead of the ECB interest rate decision later on this week. Euro zone Sentix investor confidence was weaker than expected, as the reading slipped from 14.1 to 12.8 instead of improving to 14.2. EU officials lowered their euro zone growth and inflation forecasts as expected, lending more support to potential easing from the ECB. Spanish and Italian services PMI are due today, along with Spain’s employment change report.

GBP

The pound struggled to edge higher in recent trading as the lack of liquidity kept the currency in consolidation for the most part. UK traders return to their desks today from yesterday’s holiday and this might spark more action for pound pairs. UK services PMI is also due today and might show a rise from 57.6 to 57.9, indicating a stronger expansion in the industry which comprises a huge chunk of the country’s overall economic growth.

CHF

The franc was stuck in consolidation to the dollar during the recent trading sessions, thanks to the lack of catalysts from Switzerland. There are still no reports lined up for today, which suggests that more sideways movement might be seen. Traders could wait for Yellen’s speech in Congress tomorrow before deciding on the longer-term direction for USD/CHF.

JPY

The yen erased most of its recent gains in yesterday’s trading sessions as risk appetite picked up in the markets. Japanese traders were on holiday then and are still on holiday today, which suggests that overall market sentiment could be responsible for the yen’s price movement again.

Commodity Currencies (AUD, NZD, CAD)

The comdolls made small rebounds in recent trading, as NZD/USD edged closer to the .8700 handle while USD/CAD tested 1.0950. Data from Australia and China have been weaker than expected and there were no reports released from Canada or New Zealand. Today, the RBA will make its rate decision and probably announce no monetary policy changes. However, downbeat remarks on the economy could lead to losses for the Aussie. Canadian trade balance and Ivey PMI are up for release in today’s US trading session, with a larger trade surplus and a lower manufacturing PMI expected. New Zealand quarterly employment data is also coming up and weaker hiring figures are expected.

By Kate Curtis from Trader’s Way

233

USD

The US dollar gave up ground to most of its major counterparts right when the London session opened yesterday and risk appetite picked up. US data came in line with expectations as the trade balance showed a 40.4 billion USD deficit, smaller than the previous 41.9 billion USD shortfall. US preliminary non-farm productivity and labor costs data are up for release today but the bigger mover could be Fed Chairperson Yellen’s speech in Congress. Bear in mind that there was no press conference following the relatively hawkish FOMC statement last week and that this could be the chance to hear more remarks from the Fed head.

EUR

The euro continued to climb to the dollar and the yen in recent trading sessions, as data from the euro zone reflected a bit of stability. Spanish unemployment change and services PMI showed strong results, along with a better than expected euro zone retail sales reading. Italian services PMI merely came in line with expectations. German factory orders and French industrial production data are due today but this might not have such an impact on euro movement, as traders try to position ahead of tomorrow’s ECB rate statement.

GBP

The pound jumped to new highs against the dollar when the UK services PMI printed stronger than expected results. The index jumped from 57.6 to 58.7, outpacing the consensus at 57.9. There are no major reports lined up from the UK today but the positive sentiment could keep the pound supported ahead of the BOE rate statement tomorrow.

CHF

The franc advanced to the dollar after a brief period of USD/CHF consolidation, as market sentiment improved in recent trading. Swiss employment level data and foreign currency reserves are up for release today, which might spark a bit of franc weakness if the data comes up short of expectations.

JPY

The Japanese yen fell victim to risk appetite in recent trading but managed to advance against the US dollar. There were no reports released from Japan yesterday since it was still a banking holiday in the country but traders are ready to return to their trading desks today. The BOJ monetary policy meeting minutes were released and revealed a relatively optimistic outlook for the Japanese economy, despite the sales tax hike.

Commodity Currencies (AUD, NZD, CAD)

The comdolls raked in the gains when risk appetite improved in recent trading sessions, pushing NZD/USD past the .8700 mark and USD/CAD to test its previous lows. Data from Canada was actually weaker than expected, as the Ivey PMI and trade balance both missed expectations. New Zealand’s quarterly jobs report was mixed, as the employment change reading ticked up by a stronger than expected 0.6% but the jobless rate held steady at 6.0%. Australia’s retail sales was weaker than expected with a mere 0.1% uptick. Canadian building permits are up for release later on.

By Kate Curtis from Trader’s Way

234

USD

The US dollar regained ground to most of its major counterparts in recent forex trading, as risk appetite waned. Not even Yellen’s relatively cautious speech was enough to force the dollar to retreat. The Fed head retracted her six-month rate hike forecast after asset purchases end, as she noted that there are still plenty of challenges facing the US economy. Preliminary non-farm productivity and unit labor costs both came in stronger than expected though. Initial jobless claims are up for release today, along with another testimony by Yellen.

EUR

The euro edged slightly lower to the US dollar and Japanese yen in the latest trading sessions when data from the euro zone came in below expectations. German factory orders slipped by 2.8% while French industrial production made a 0.7% decline. The main event for today is the ECB interest rate decision, with the central bank expected to announce easing measures or give dovish remarks on economic activity.

GBP

The pound retreated upon hitting the minor psychological resistance of 1.6950 to the US dollar, as the lack of data from the UK kept the bulls at bay. For today, the BOE interest rate decision is scheduled and this might push the pound back in rally mode if the remarks are dovish. Take note though that traders might opt to wait for the minutes of the monetary policy meeting to get more clues on future BOE moves.

CHF

The franc gave up most of its recent gains to the euro and the dollar as foreign currency reserves data showed that the central bank can still afford to defend its currency peg. The SNB has recently indicated that it will not hesitate to intervene if necessary, which convinced franc bulls to be a little more cautious. Swiss SECO consumer climate and CPI are up for release today and strong data could provide support for the Swissy.

JPY

The yen paused from its rally in yesterday’s trading sessions and lost ground to the Aussie and US dollar. It continued to consolidate to the pound and euro, as these currencies are awaiting central bank decisions. There have been no major reports released from Japan recently and none are due today, as the currency is being driven mostly by risk sentiment.

Commodity Currencies (AUD, NZD, CAD)

The New Zealand dollar posted massive losses yesterday when RBNZ Governor Wheeler warned that the central bank is ready to intervene if the Kiwi keeps rallying and winds up hurting inflation and exports. Recall that the latest dairy auction showed a decline in prices, which means that the Kiwi might be partly to blame for industry weakness. In Australia, the jobs report came in much better than expected with a 14.2K increase in hiring that allowed the jobless rate to hold steady at 5.8%. Canadian housing starts data is up for release later today.

By Kate Curtis from Trader’s Way

235

USD

The US dollar made a pretty strong recovery in recent trading as risk aversion returned to the markets. Initial jobless claims came in stronger than expected at 319K versus the estimated 328K increase in claimants, adding another boost to the dollar. For today, only the JOLTS job openings data is up for release and this might not move the dollar as much.

EUR

The euro had a volatile time during the ECB interest rate decision and press conference but eventually settled lower to most of its major counterparts. The ECB refrained from making an actual monetary policy adjustment but Draghi hinted that they could make a move in June if the CPI forecasts to be released earlier that month come in weak. Only medium-tier data are up for release from the euro zone today and this might not be enough to stop the shared currency’s selloff.

GBP

The pound retreated to most of its counterparts in the latest trading sessions when the BOE didn’t turn out to be as hawkish as some expected. Traders might need to wait for the minutes of the meeting to be released before understanding the monetary policy bias of the UK central bank and whether they’re ready to hike before the UK general elections, as Carney hinted. UK manufacturing production numbers are up for release today and a 0.3% uptick is eyed to follow the previous 1.0% increase.

CHF

The franc gave up its recent gains to the dollar when volatility picked up in the US trading session. Swiss CPI came in line with expectations of a 0.1% uptick but the SECO consumer climate fell from 2 to 1 instead of improving to 3 as expected. No reports are lined up from Switzerland today so it could be range-bound behavior for most Swissy pairs.

JPY

The yen had a mixed performance in recent trading sessions, as the lack of data from Japan left the currency reactive mostly to risk sentiment. The currency lost ground to the comdolls but gained against the euro, pound, and the US dollar. There are still no reports lined up from Japan today so more risk moves could be seen among yen pairs.

Commodity Currencies (AUD, NZD, CAD)

The comdolls had a bit of a rebound in recent trading, as the Kiwi and Aussie staged recoveries from their recent losses. The Australian dollar got a stronger boost from upbeat jobs figures, as the economy added 14.2K jobs and kept the unemployment rate steady at 5.8%. Chinese trade balance also gave the Aussie support throughout most of the trading day. However, Chinese CPI came in slightly weaker today yet the Aussie remained steady. Canadian jobs data are due in today’s US trading session and an employment change figure of 12.8K is expected.

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USD

The US dollar had a mixed trading day before the week came to a close, as most traders booked profits off their dollar longs ahead of the key events this week. JOLTS job openings data was weaker than expected at 4.01M versus the estimated 4.21M reading and the previous 4.13M reading. Wholesale inventories was also worse than expected with a 1.1% increase versus the projected 0.5% uptick, indicating that stockpiles are higher and that there is a slack in purchases. Only a speech by Fed member Plosser is lined up for today, along with the release of the Federal budget balance.

EUR

The euro continued its descent to its major counterparts towards the end of the week, as traders positioned ahead of an ECB rate cut in June. Data from the euro zone was also weaker than expected since Germany reported a smaller than expected trade surplus. There are no reports due from the euro zone today but it’s likely that the selloff for the shared currency could continue.

GBP

The pound erased most of its recent gains despite stronger than expected manufacturing production and trade balance data. UK manufacturing production saw a 0.5% uptick, stronger than the estimated 0.3% gain but weaker compared to the previous 1.0% increase. The trade deficit shrank from 8.7 billion GBP to 8.5 billion GBP, reflecting an improvement in exports. Only the BRC retail sales monitor is due today and it might not have such a huge impact on pound direction.

CHF

The franc gave up most of its recent winnings as the US dollar took the limelight last Friday. There were no reports released from Switzerland then, leaving the franc at the mercy of risk sentiment. Swiss retail sales is due today and a 1.9% increase is expected, stronger compared to the previous 1.0% gain.

JPY

The yen managed to score wins to the euro and pound last week, despite the lack of top-tier data from Japan. Over the weekend, the current account balance release had a weaker than expected result. Economy Watchers sentiment data is due today and so is the M2 money stock, but yen pairs are more inclined to react to risk sentiment and country-specific data.

Commodity Currencies (AUD, NZD, CAD)

The comdolls edged slightly lower on Friday, as risk aversion took over the markets. In particular, the Loonie was the biggest loser among the three since Canada printed weak jobs data. Employment change slipped by 28.9K instead of increasing by the estimated 12.8K figure, keeping the jobless rate unchanged at 6.9%. Earlier today, Australia’s NAB business confidence index showed an improvement from 4 to 6, helping keep the Australian dollar afloat.

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USD

The US dollar had a mixed performance in recent trading, as it consolidated to the euro and Canadian dollar but managed to extend its wins to the yen and the franc. There were no major reports released from the US economy, although the Federal budget balance showed a weaker than expected result. US headline and core retail sales data are up for release today and a weaker increase compared to the previous month’s data are expected. Headline retail sales might tick up by 0.5% while core retail sales could show a 0.6% gain.

EUR

The euro consolidated to the dollar and pulled up a bit to the Japanese yen as traders tried to evaluate their bias for the euro prior to the top-tier data this week. There were no reports released from the region yesterday and only the German ZEW economic sentiment figure is due today. The index could dip from 43.2 to 41.3, reflecting more pessimism in the country.

GBP

The pound edged lower to the dollar in recent trading but recovered to the Japanese yen. The BRC retail sales monitor showed a 4.2% rebound from the previous 1.7% decline, just enough to support the pound against most of its other forex counterparts. There are no major reports lined up from the UK today so it should be all about positioning ahead of tomorrow’s UK claimant count change release and BOE inflation report.

CHF

The franc continued to lose ground in recent trading despite the 3.0% jump in retail sales. The previous month’s figure was also revised to show a 1.2% annual gain, up from the initially reported 1.0% increase. There are no reports due from the Swiss economy today so franc pairs might be in for a bit of consolidation or more weakness if risk sentiment picks up.

JPY

The yen bowed down to most of its major counterparts when risk appetite improved in the Asian trading session. The Economy Watchers sentiment in Japan, however, showed a shift from optimism to pessimism for the economy. There are no reports due from Japan today so make sure you watch how the Nikkei closes to see how risk sentiment could impact yen pairs in the next trading sessions.

Commodity Currencies (AUD, NZD, CAD)

The comdolls managed to hold steady in recent trading, thanks to the lack of market updates. NAB business confidence in Australia had a small improvement from 4 to 6 but the Aussie’s gains were erased today when both HPI and home loans data showed weaker than expected results. Coming up is New Zealand’s quarterly retail sales data, which might show a 0.9% uptick for both the headline and core figures. Chinese industrial production, fixed asset investment, and retail sales are also lined up for today. Another round of weak data could trigger risk aversion and be negative for higher-yielding commodity currencies.

By Kate Curtis from Trader’s Way

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Forex Major Currencies Outlook (May 14, 2014)

EUR

The euro underwent another selling wave in recent trading when the Bundesbank expressed its support for further ECB easing. In an interview with the Wall Street Journal, an insider shared that the German central bank is willing to back negative deposit rates or further LTRO as the euro zone struggles to combat low inflation. German ZEW was much weaker than expected, as the index slipped from 43.2 to 33.1. Only medium-tier euro zone reports such as industrial production are due today and more signs of weakness could lead to more euro losses.

GBP

The pound was put on a weak spot in recent trading despite the lack of top-tier data from the UK. Perhaps traders are bracing for disappointment in today’s set of data, with the jobs report and the BOE inflation report lined up. Claimant count could drop by roughly 30K again in April, which should bring the jobless rate down to 6.8%. However, the bigger mover for the pound might be the inflation report, which should provide better clues on whether the central bank could be ready to tighten by the end of the year or early next year.

CHF

The franc was stuck in consolidation in recent trading, although with a few signs of weakness. There were no reports released from Switzerland yesterday and there are none due today, opening up the possibility of further consolidation for USD/CHF and EUR/CHF.

JPY

The yen took advantage of dollar weakness after the bleak US retail sales release in recent trading. It also advanced further to the euro and pound as risk appetite waned in the forex market. There were no reports released from Japan then and none are due today, which suggests that sentiment could continue to push yen pairs around.

Commodity Currencies (AUD, NZD, CAD)

Comdolls were in for mostly sideways movement thanks to the lack of major economic catalysts. Data from China and Australia were mostly weaker than expected, weighing on demand for the Australian dollar. New Zealand retail sales simply came in line with expectations, barely triggering any impact on the Kiwi. There are no reports due from these comdoll economies for the rest of the trading day.

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239

USD

The lack of major catalysts from the US economy led the dollar to give a mixed performance in recent trading. It was able to pack gains against the pound but consolidated to the euro. US PPI data came in stronger than expected, with the headline figure printing a 0.6% increase and the core figure showing a 0.5% gain. For today, US CPI figures are due along with the initial jobless claims release. Core CPI could pick up by 0.1% while headline CPI could show a 0.3% uptick. US Empire State manufacturing index and Philly Fed index are also due today.

EUR

The euro struggled to hold on to its recent levels to the dollar but continued to lose ground to the Japanese yen. Euro zone industrial production came in line with expectations and showed a 0.3% decline in activity. There are plenty of major events in the euro zone today, with French and German preliminary GDP figures due. Euro zone flash GDP is expected to come in at 0.4%, higher than the previous 0.2% growth figure.

GBP

The pound gave up a lot of its recent gains when the BOE Inflation Report revealed that the central bank was no longer as hawkish as it used to be. BOE Governor Carney acknowledged the recent improvements in the economy but stopped short of increasing growth and inflation forecasts. He also said that a rate hike isn’t necessary to tame housing inflation, as there other fiscal measures that can be used. UK claimant count change also turned out to be a disappointment but the jobless rate still managed to improve to 6.8%.

CHF

The franc rebounded in the latest trading sessions, as the Swiss ZEW economic expectations index climbed from 7.0 to 7.4. Swiss PPI is due today and a 0.3% uptick is eyed to follow the previous flat reading. Stronger than expected results could reinforce the franc’s strength as it would ease fears of deflation in Switzerland.

JPY

The yen continued to gain ground in yesterday’s trading sessions as risk appetite waned. Data from Japan was stronger than expected, as the preliminary GDP reading came in at 1.5% instead of the estimated 1.0% growth figure. Tertiary industry activity showed a 2.4% gain in line with estimates. However, it remains to be seen how these figures could be affected by the latest sales tax hike.

Commodity Currencies (AUD, NZD, CAD)

Comdolls retreated in the previous trading sessions when risk appetite weakened. There were also no major reports from the comdoll economies to give these currencies support. In New Zealand, the Business NZ manufacturing index slipped from 58.0 to 55.2. Australia’s new motor vehicle sales stayed flat after declining by 0.3% in the previous month. Canadian manufacturing sales is due later on and a 0.2% uptick is expected.

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240

USD

Data from the US economy came in mixed yesterday, with manufacturing indices printing stronger than expected results and industrial production data coming in short. The Empire State manufacturing index showed a large improvement from 1.3 to 19.0, outpacing the consensus at 5.5, while the Philly Fed index dipped from 16.6 to 15.4 instead of falling to 13.9. Industrial production slipped by 0.6% even as analysts predicted a 0.4% uptick while TIC long-term purchases and capacity utilization data printed weaker than expected results. Building permits, housing starts, and preliminary UoM consumer sentiment data are due today.

EUR

The euro dealt with mostly weaker than expected GDP figures but gained a bit of ground when CPI data came in line with expectations. The core figure printed a 1.0% increase while the headline figure showed a 0.7% rise in price levels. Euro zone flash GDP was weaker than expected at 0.2% versus the estimated 0.4% growth figure while the previous quarter’s reading was revised lower. France reported a flat growth figure while Italy noted a 0.1% decline in GDP. Germany’s GDP was the only stronger than expected reading at 0.8%. French non-farm payrolls and euro zone trade balance are due today.

GBP

Data from the UK was light yesterday, as the CB leading index was the only report released. It showed a 0.3% increase, slower compared to the previous 0.4% rise. There are no reports due from the UK today, as the pound could continue to weaken on the change in BOE rhetoric recently.

CHF

The franc managed to hold steady to the dollar despite weaker than expected Swiss PPI. After staying flat in the previous month, producer prices declined in April instead of printing the estimated 0.3% uptick, reviving deflation concerns in the country. There are no reports due from Switzerland today.

JPY

The yen took advantage of the downturn in risk appetite recently, although consumer confidence in Japan weakened. The report showed that the figure dipped from 37.5 to 37.0 as expected. Japanese revised industrial production data is the only report on tap for today and this might not have such a huge impact on yen movement.

Commodity Currencies (AUD, NZD, CAD)

The comdolls showed signs of weakness in recent trading as risk sentiment took a turn for the worse. Canadian manufacturing sales was better than expected at 0.4% though and foreign securities purchases are up for release today. There are no other reports due from the comdoll economies so it might be all about risk sentiment and yields for the comdoll pairs.

By Kate Curtis from Trader’s Way

241

USD

The US dollar had a mixed performance on Friday, as the lower-yielding currency simply reacted to currency-specific events. Data from the US economy was mixed, as the UoM consumer sentiment figure fell short of expectations while the housing data turned out strong. Building permits climbed from 1.00 million to 1.08 million while housing starts rose from 0.97 million to 1.07 million in April. There are no major reports due from the US economy so it might be all about risk sentiment driving dollar pairs.

EUR

The euro made a small recovery on Friday as traders booked some of their profits before the end of the trading week. Euro zone data was mostly weaker than expected, with France reporting a 0.1% decline in quarterly non-farm payrolls and euro zone showing a smaller than expected trade balance. There are no major reports lined up from the euro zone today, except perhaps for a few speeches by key officials.

GBP

The pound continued to show signs of weakness last week as the change in BOE rhetoric weighed on the currency’s strength. There were no economic reports released from the UK then, leaving the currency with nothing to draw support from. There are still no reports due from the UK today so it might mean more weakness or consolidation among pound pairs.

CHF

The franc struggled to hold on to its current levels to the dollar in recent trading but it gave up a lot of ground to the Japanese yen. There were no major reports released from Switzerland then but the break of a major support area let the sellers in. There are no reports lined up from the country today.

JPY

The yen was generally stronger on Friday when risk aversion extended its stay in the currency market. Japan’s industrial production was revised higher and added to support for the currency. There are no reports due from Japan today so risk sentiment might be the driver of yen pairs for the next trading sessions.

Commodity Currencies (AUD, NZD, CAD)

The Aussie and Kiwi ended the week on a bleak note but these currencies managed to hold stead on Friday. The Loonie extended its wins to the dollar despite the weaker than expected foreign securities purchases data. For today, the comdoll schedule is empty so these currencies might be sensitive to market sentiment or might just stay in consolidation.

By Kate Curtis from Trader’s Way