Daily Market Outlook by Kate Curtis from Trader's Way

Commercial Content Analysts
162

USD

The US dollar pocketed decent gains against most of its counterparts in yesterday’s trading, as data came in mostly better than expected. The ADP report showed a 215K rise in private payrolls, spelling good prospects for Friday’s NFP release and possibly the Fed’s decision to taper. Trade balance came in somewhat in line with consensus at a deficit of 40.6 billion USD. However, the ISM non-manufacturing PMI was weaker than expected at 53.9 versus the estimate at 55.4. For today, US preliminary GDP and initial jobless claims data are due and another round of strong data might lift the Greenback.

EUR

The euro bounced back and forth against the dollar yesterday. It was first weighed down by weak data from the euro zone, as Italian services PMI showed a contraction while region-wide retail sales chalked up a 0.2% decline. The ECB is set to make its interest rate decision today and traders are interested to find out whether negative deposit rates were discussed or not. Downbeat remarks from Draghi might push EUR/USD below 1.3400 while reassuring comments could trigger another test of 1.3600.

GBP

The pound retreated to the dollar in yesterday’s trading when the UK services PMI turned out to be a disappointment. The figure fell to 60.0 when analysts were expecting to see a small decline from 62.5 to 62.1. However, the losses were limited as traders hesitated to take any huge positions ahead of today’s BOE interest rate decision. No monetary policy changes are expected but we might hear of Carney’s assessment and outlook for the economy, which might be the major driving factor for pound pairs today.

CHF

The franc was able to regain ground against the dollar yesterday and extend its rally against the Australian dollar. There were no major reports released from Switzerland then and there is no report due today, which means that the franc might benefit from risk-off trades.

JPY

The yen was still in recovery mode yesterday when the Nikkei stock index posted another day in declines. The selloff in the yen pairs could also be attributed to profit-taking at significant levels and reducing exposure ahead of this week’s NFP release. There were no reports released from Japan yesterday and there are none due today so the yen’s movement might depend on risk sentiment again.

Commodity Currencies (AUD, NZD, CAD)

The Aussie and Kiwi were heavily beaten up yesterday, as Australia printed a weaker than expected GDP reading of 0.6% versus the 0.7% estimate. Meanwhile, the Loonie also lost ground because of the BOC’s hints that they’re considering further stimulus. For today, only the Canadian building permits is due from the comdoll economies and this isn’t likely to spark huge extended moves.

By Kate Curtis from Trader’s Way

163

USD

The dollar got a boost from a stronger than expected GDP reading for Q3 2013, as it was revised up from an initial estimate of 2.8% to 3.6%, higher than the projected 3.0% growth figure. Aside from that, the initial jobless claims report printed better than expected results, setting the state for a potential upside surprise in today’s NFP release. The jobs report could show an additional 180K in hiring for November, weaker than the previous month’s 204K increase, but it should be enough to bring the jobless rate down from 7.3% to 7.2%. However, if this improvement is simply chalked up to a weaker participation rate, the US dollar’s gains might be limited. In any case, make sure you account for additional volatility when trading the NFP.

EUR

The euro had another round of gains in yesterday’s trading when the ECB decided to keep interest rates unchanged at 0.25% and give no mention of further easing. In fact, in his speech a few hours later, ECB Governor Draghi reiterated that additional LTRO is not necessary for now. Traders weren’t expecting to see a less-dovish Draghi in yesterday’s press conference, leading many to believe that the economic situation in the euro zone might not be so bad after all. Only medium-tier reports are due from the euro zone today, as Germany factory orders data is up for release.

GBP

The pound was unable to sustain its rallies in yesterday’s trading even though the BOE decided to keep interest rates unchanged and make no changes to its bond purchases. Perhaps traders are still waiting for the actual minutes of the meeting to be released before taking on any large pound positions. Only the UK consumer inflation expectations report is up for release today and it isn’t expected to spark huge moves among pound pairs.

CHF

The franc was a big winner yesterday when it pushed USD/CHF below the .9000 major psychological level and AUD/CHF lower down the charts. There were actually no reports released from the Swiss economy yesterday so the move may have been inspired by risk aversion, which typically benefits the lower-yielding currencies like the Swiss franc. The CPI report is due today and a 0.2% drop in price levels is eyed.

JPY

The yen continued to rally against its counterparts in yesterday’s trading as risk appetite remained subdued. There were no reports released from Japan yesterday and the only report due today is the leading indicators release, which could show a small improvement from 109.2% to 109.9%, which might be positive for the Nikkei and USD/JPY.

Commodity Currencies (AUD, NZD, CAD)

The comdolls had another weak trading day, as AUD lost further ground to the dollar and the yen. Australia printed a weaker than expected trade balance, which might be blamed again on their strong currency, while Canada printed a massive disappointment with its Ivey PMI report. The figure dipped from 62.8 to 53.7 in November, lower than the estimated drop to 50.9. Canadian jobs data is up for release today and a 12.3K increase in hiring is expected, which could keep their unemployment rate steady at 6.9%.

Kate Curtis from Trader’s Way

164

Forex Major Currencies Outlook (December 11, 2013)

USD

The US dollar was a big loser in yesterday’s trading, as risk appetite seemed to benefit most other major currencies. There were no major reports released from the US economy then, as traders took the opportunity to book profits at key support and resistance levels. For today, only medium-tier events are scheduled, which suggests that the dollar might have trouble regaining ground.

EUR

The euro kept edging higher against its major counterparts, despite the mixed data seen from the region. French industrial production came in weaker than expected at -0.3% while Italian industrial production beat expectations with a 0.5% uptick. Another round of medium-tier reports are lined up for the euro zone today and, unless we see a set of bleak figures, the euro might still have a chance at pushing higher.

GBP

The pound rebounded in yesterday’s trading, even as U.K. economic data disappointed. The manufacturing production report printed the expected 0.4% uptick while the trade balance fell short of expectations and showed a wider deficit. There are no economic events lined up for the UK today, except perhaps for BOE member Weale’s speech, so pound pairs might be in for a bit of consolidation.

CHF

The franc continued to pummel its way against the other major currencies, as the SNB showed no discomfort with their currency’s current levels. USD/CHF sank below the .8900 major psychological mark while AUD/CHF is attempting to break .8100. There were no economic reports released from Switzerland yesterday and there are none due today.

JPY

The yen lost ground to its major counterparts in today’s Asian trading session as the Nikkei showed signs of rebounding. As for economic data, Japan’s figures have been coming up short recently, which is leading traders to speculate about an increase in stimulus from the BOJ. Earlier today, Japan’s machinery orders came up short of consensus and showed a mere 0.6% uptick. No other reports are due from Japan for the rest of the day.

Commodity Currencies (AUD, NZD, CAD)

The comdolls showed a bit of strength and took advantage of dollar and yen weakness in yesterday’s trading when data from China came in mostly in line with expectations. For today, Australia’s Westpac consumer sentiment showed a decline of 4.8% which isn’t good for the Australian dollar. A bigger mover could be the RBNZ statement in the next Asian trading session, as traders are expecting the central bank to jawbone the Kiwi. Canada has no economic data lined up.

By Kate Curtis from Trader’s Way

165

USD

The US dollar had a mixed performance against its major currency rivals in yesterday’s trading, as it rallied against the Australian dollar and pound but weakened against the yen, franc, and euro. There were no major economic reports released from the US in the latest New York session. Fed official Fisher was touted as the next Fed Deputy Chair, and traders tried to weigh in on his differing opinions compared to Janet Yellen. Fisher has been a known critic of the quantitative easing program and the Fed’s forward guidance, so he might be able to provide balance to the institution during his term. US retail sales reports are up for release today and given the continuous improvements in hiring, we might see strong figures. Headline retail sales could show a 0.6% increase while core retail sales might post a 0.2% rise.

EUR

The euro continued its ascent against its counterparts, despite the lack of top-tier data from the euro zone. French non-farm payrolls and German CPI came in line with expectations. Euro zone industrial production data is up for release today, along with the ECB monthly bulletin. Unless we see huge disappointments, the euro might still be in for more gains.

GBP

The pound continued to retreat against its counterparts even though the UK didn’t release any data yesterday. According to MPC member Weale, the forward guidance of the central bank has a strong impact at the very start but its effects could wane later on. There are no major reports due from the UK today, as the only release lined up is the CB leading index, which might show another increase following the previous 1.5% reading.

CHF

The franc continued to gain ground against its counterparts, as the SNB still didn’t make any comments regarding the currency’s strength. Today might be a different story though, as the central bank is set to make its interest rate decision. Indications that the policymakers are ready to defend the franc peg might trigger a strong bounce among franc pairs that have been treading lower.

JPY

The yen gained ground against most of its major counterparts on the heels of risk aversion in the currency market. There have been many criticisms of Abenomics popping up, mostly because of the recent weakness in Japanese data. However, selloffs among yen pairs might provide opportunities to buy at better levels, especially if the BOJ decides to reiterate its readiness to pump up stimulus if needed.

Commodity Currencies (AUD, NZD, CAD)

The comdolls also had a mixed performance, as the Loonie and Kiwi strengthened while the Aussie sold off sharply. The RBNZ decided to keep interest rates unchanged at 2.50% for the meantime but hinted of potential hikes if inflationary pressures remain strong. As for Australia, jobs data came in stronger than expected at 21.0K versus the previous 0.7K decline and the estimated 10.1K increase, but the jobless rate still ticked higher from 5.7% to 5.8%. No other major reports are due from the comdolls today.

By Kate Curtis from Trader’s Way

166

USD

It seems that nothing could stop the U.S. dollar from rallying yesterday when the US economy printed a better than expected retail sales report. Headline consumer spending increased by 0.7% while core retail sales showed a 0.4% increase. Not even the worse than expected initial jobless claims figure of 368K was enough to derail the dollar’s climb. For today, only the PPI reports are due and these don’t usually have a huge impact on dollar movement. Nonetheless, headline producer prices could stay flat while core PPI could print a 0.1% uptick.

EUR

The euro was unable to sustain its climb against the dollar when the 1.3800 handle held as strong resistance. There were no major reports released from the euro zone and the medium-tier data that was released came in weaker than expected. The region’s industrial production sank by 1.1%, worse than the estimated 0.4% uptick. No major reports are due from the euro zone today, which suggests that it could move sideways for the rest of the day.

GBP

The pound sank deeper against the dollar in yesterday’s trading since there were no top-tier reports to keep the currency afloat. The CB leading index printed a 0.4% improvement but was not enough to boost the pound higher. There are no reports due from the UK today except for MPC member Dale’s speech but this might simply spark small moves.

CHF

The franc suffered a bit of a selloff yesterday when the SNB reiterated its pledge to defend the franc peg. However, the currency’s rallies resumed towards the latter trading session. Against the dollar though, the franc had a larger retreat since the US printed strong data. Only the PPI is due from Switzerland today and a 0.3% rebound is eyed, which might help ease deflation concerns.

JPY

The yen had a mixed trading day as the Nikkei posted minor gains and the Japanese currency simply reacted to other currency-specific events. There were no reports released from Japan then and only the revised industrial production figure is due today. No changes are expected from the previous 0.5% estimate.

Commodity Currencies (AUD, NZD, CAD)

The comdolls were unable to hold on to their recent gains as dollar strength came back into play yesterday. AUD/USD retreated below the .9000 major psychological level while NZD/USD failed to make a sustained break above .8300. Only the Australian jobs report was released from the comdoll economies yesterday and this came in better than expected.

By Kate Curtis from Trader’s Way

167

USD

The Greenback barely reacted to weaker than expected PPI data on Friday, as it managed to hold on to its latest gains to the euro and the pound. Headline PPI showed a 0.1% decline while core PPI came in line with the consensus of a 0.1% increase. US Empire State manufacturing index and flash manufacturing PMI could be the movers for the dollar today, as both indices are expected to show improvements. Also due today are the revised non-farm productivity and labor costs data. Later on, we’ll see industrial production and capacity utilization figures as well. Overall, strong figures could allow the dollar to extend its rallies.

EUR

The euro was in a weak spot last Friday but it managed to start this week on a good note. However, this depends on the outcome of the upcoming PMI releases from France and Germany. Both manufacturing and services sectors of these economies are likely to show improvements, which could be very positive for the euro and allow EUR/USD to break past its previous highs. ECB President Draghi is set to give a speech later today and possibly add to the volatility among euro pairs.

GBP

The pound wasn’t on solid footing last Friday, as GBP/USD slid to the 1.6300 area and formed a reversal chart pattern. There are no reports lined up from the UK today, which suggests that the pound could trade sideways or continue to tread lower. Watch out for any changes in market sentiment that might also have an impact on pound pairs.

CHF

The franc held on to its gains against its counterparts, despite the SNB’s pledge to defend the peg. There were no major reports released from Switzerland last Friday and none are due today, which suggests that the Swiss currency could consolidate or keep rallying on risk aversion.

JPY

The yen got a dose of good news in today’s Asian trading session, as Japan’s Tankan figures printed stronger than expected results. The manufacturing component climbed from 12 to 16 while the non-manufacturing index improved from 14 to 20, reflecting strong prospects for the Japanese economy. This led some traders to believe that the strength in the economy means that there’s a lower likelihood of additional BOJ stimulus.

Commodity Currencies (AUD, NZD, CAD)

The comdolls were off to a shaky start, although the Kiwi was able to enjoy a bit of support from better than expected Westpac consumer sentiment data. Over the weekend, New Zealand reported a climb from 115.4 to 120.1. However, the comdolls weren’t able to sustain their gains when China’s HSBC flash manufacturing PMI printed weaker than expected results. The figure was projected to improve from 50.5 to 51.0 but the actual figure came in at 50.5 and the previous month’s reading was revised from 50.5 to 50.8. No other reports are due from these economies for the rest of the day.

By Kate Curtis from Trader’s Way

168

USD

The US dollar had one of its better days against the pound and the euro, as the low-yielding currency managed to put a lid on its recent losses. Data from the US, however, came in weaker than expected. The Empire State manufacturing index did post an improvement from its previous negative reading but the actual figure of 1.0 was short of the consensus at 4.9. The flash manufacturing PMI also fell short of expectations as it dipped from 54.7 to 54.4 instead of improving to 54.9. US inflation reports are up for release today and these aren’t likely to cause huge waves in price action as traders could be positioning ahead of tomorrow’s FOMC statement.

EUR

The euro was unable to make new highs in yesterday’s trading, as data from the euro zone was mostly weaker than expected. French manufacturing and services PMIs both disappointed while Germany printed a weak services PMI. The manufacturing PMI of Germany improved from 52.7 to 54.2, lifting the region’s manufacturing PMI from 51.6 to 52.7. German ZEW economic sentiment data is up for release today and the index is slated to rise from 54.6 to 55.3, which might allow the euro to extend its gains.

GBP

The pound suffered a deeper selloff in yesterday’s trading as there were no major reports to give it support. Today might be a different story as UK CPI figures are up for release. Stronger than expected figures might force the BOE to tighten earlier than initially estimated in order to keep inflationary pressures at bay. However, the annual CPI reading is projected to hold steady at 2.2%.

CHF
The franc resumed its winning ways in yesterday’s trading, as the risk off environment favored the lower-yielding franc. There were no reports released from Switzerland on Monday and there are none due today, which suggests that we’ll see a continuation of the recent price action if there are no changes in risk sentiment.

JPY

The yen had a mixed performance as it lost further ground to the euro but managed to hold steady against the Aussie. Data from Japan was actually stronger than expected, as the Tankan indices posted significant improvements, yet the Nikkei posted a 1.62% loss for the day. There are no reports due from Japan today, which suggests that yen pairs might be sensitive to risk sentiment.

Commodity Currencies (AUD, NZD, CAD)

The comdolls saw further weakness in yesterday’s trading, as AUD/USD edged to test its yearly lows while NZD/USD showed hesitation in rallying higher. Data from China was weaker than expected, with the HSBC flash manufacturing PMI falling short of the consensus at 51.0 and chalking up a 50.5 reading. RBA monetary policy minutes showed that policymakers thought that the AUD was too high while the government’s mid-year report showed larger than expected deficit estimates.

By Kate Curtis from Trader’s Way

169

USD

The US dollar was able to end the day strong even though data from the U.S. economy was mixed. The headline CPI fell short of the expected 0.1% uptick and printed a flat reading but the core CPI printed a better than expected 0.2% increase instead of the projected 0.1% rise. The current account was also better than expected at -95 billion USD instead of the estimated -101 billion USD and the previous -97 billion USD. For today, the U.S. dollar could be in for a lot of consolidation prior to the FOMC statement. A decision to taper could be very positive for the U.S. dollar while an announcement postponing the taper could lead to a strong dollar selloff.

EUR

The euro continued to stall around its current levels to the dollar, thanks to the lack of major reports from the euro zone. German ZEW economic sentiment came in better than expected at 62.0 instead of the 55.3 reading, but was not enough to propel the euro to new highs. Euro zone CPI readings came in at 0.9%, slightly in line with expectations. German Ifo business climate data is up for release today and another strong figure could be seen.

GBP

The pound was unable to draw enough support from BOE Governor Carney’s comments saying that QE has reached its end, assuming there are no further shocks. Perhaps what traders are eager to hear are remarks that QE will be reduced sooner or later, but this wasn’t the case. For today, UK claimant count change and BOE meeting minutes are up for release. The jobs data could show a 35.2K drop in claimants, which should keep the jobless rate steady at 7.6%. A larger than expected decline, coupled with less dovish BOE minutes, could be positive for the pound.

CHF

The franc rebounded against its counterparts in yesterday’s trading, even though there were no major reports from Switzerland. Today has the Swiss ZEW economic expectations report on tap and the index is expected to show an improvement from the previous 31.6 reading, which could allow the franc to extend its gains.

JPY

The yen was able to score gains against most of its major counterparts, despite the lack of top-tier data from Japan. Today’s trade balance release fell short of expectations though, triggering a quick bounce among yen pairs. No other reports are due from Japan for the rest of the day, but all eyes are on USD/JPY particularly for the FOMC statement.

Commodity Currencies (AUD, NZD, CAD)

The Australian dollar chalked up another round of losses when RBA Governor Stevens began jawboning again, saying that intervention can be useful and that the Australian central bank actually considered doing so recently. New Zealand reported a weaker than expected current account balance but made up for it with a strong improvement in its ANZ business confidence figure. As for Canada, stronger than expected manufacturing sales data was not enough to give it a strong boost and today’s wholesale sales might have a minimal effect as well.

By Kate Curtis from Trader’s Way

170

USD

The US dollar got a strong boost from the FOMC’s decision to taper bond purchases by $10 billion starting January next year. The Fed cited strong improvements in the labor market as their main reason for reducing stimulus, but pointed out that interest rates will still remain low until the jobless rate reaches 6.5%. Bernanke also cautioned about the potential impact of tapering on inflation, which has been stuck way below the Fed’s 2% target for quite some time already. With that, the US dollar might be in for a good run in the last few trading days of the year, unless incoming Fed head Yellen says that it will take a long time before the central bank tapers again.

EUR

The euro finally gave way to dollar strength in yesterday’s trading, as the FOMC decision to taper boosted the US dollar against its counterparts. Data from the euro zone was in line with expectations, as the German Ifo business climate came in at 109.5, up from the previous 109.3 reading. Euro zone current account and Spanish bond auction are lined up for today, both events of which are not expected to have a huge impact on euro movement.

GBP

The pound gave up a bit of gains to the dollar yesterday but GBP/USD still managed to stay afloat, as the UK had its share of positive data. Claimant count change was better than expected, with a larger decline in unemployment. This was enough to push the UK jobless rate down from 7.6% to 7.4%. For today, UK retail sales are up for release and stronger than expected data might be seen, given the recent rise in hiring. After dropping by 0.7% in the previous month, a 0.3% rebound is expected for November.

CHF

The franc gave up a lot of its recent wins to the dollar when the FOMC announced its decision to reduce bond purchases. Nonetheless, the USD/CHF downtrend is still very intact for now. Swiss SECO economic forecasts and trade balance are up for release today and these reports might spur franc strength if they come in stronger than expected.

JPY

The yen was no match to the dollar in yesterday’s trading, although other yen pairs didn’t move so much. There were no reports released from Japan, as USD/JPY’s movement was mostly spurred by dollar strength following the FOMC statement. There are no reports lined up from Japan today so the yen might continue to cave to dollar strength.

Commodity Currencies (AUD, NZD, CAD)

The comdolls were badly hurt in yesterday’s trading, both by the dollar’s rallies and the decline in gold and oil prices. AUD/USD sank deeper below the .8900 handle while NZD/USD was rejected at .8300 again. There are no major reports due from the comdoll economies today so these currencies might keep losing ground on risk aversion and dollar strength.

By Kate Curtis from Trader’s Way

171

USD

The US dollar tried to extend its rallies against its major currency rivals but had trouble doing so because of weaker than expected US economic data. The existing home sales report showed a 4.90M reading instead of the estimated 5.04M figure and lower compared to the previous 5.12M. Meanwhile, the Philly Fed index improved from 6.5 to 7.0 but fell short of the estimated 10.3 reading. There are no major reports due from the US today as the only event lined up is Yellen’s confirmation vote.

EUR

The euro kept losing to the dollar in yesterday’s trading, despite better than expected data from the euro zone. The current account balance grew from a surplus of 14.9 billion EUR to 21.8 billion EUR, higher than the estimated 14.2 billion EUR surplus. For today, German PPI and German GfK consumer climate data are up for release. Producer prices are expected to stay flat while the consumer climate figure could hold steady at 7.4.

GBP

The pound was no match to dollar strength yesterday and it seems to have no firepower today, as the UK GfK consumer climate figure dipped from -12 to -13 instead of improving to the estimate -11 figure. UK retail sales came in line with the consensus of a 0.3% uptick but the previous month’s figure was revised down from -0.7% to -0.9%. UK current account, final GDP, and public sector net borrowing data are due today.

CHF

The franc was still in loser territory yesterday, as the recent FOMC decision to taper boosted USD/CHF up from the .8900 area. Swiss trade balance was also weaker than expected at 2.11 billion CHF versus the estimated 2.57 billion CHF surplus while the previous month’s figure was revised lower. There are no major reports due from Switzerland today.

JPY

The yen was stuck in consolidation against most of its counterparts in yesterday’s trading, as there were no reports released from the Japanese economy. Traders are also probably bracing themselves for today’s BOJ interest rate decision, although the central bank isn’t likely to make any monetary policy changes just yet. Still, be mindful of potential volatility during the event and during BOJ Governor Kuroda’s press conference.

Commodity Currencies (AUD, NZD, CAD)

The comdolls still caved to dollar strength in yesterday’s trading, even though there were no figures released from Australia, New Zealand, and Canada. For today, Canada is set to print its CPI and retail sales figures, which might mean volatility for USD/CAD. Core CPI is projected to post a 0.1% uptick while core retail sales could stay flat. Headline CPI could see a 0.2% increase while headline retail sales are expected to rise by 0.3%.

By Kate Curtis from Trader’s Way

172

USD

Liquidity is expected to pick up today as more traders return to their trading desks. Over the weekend, Harvard economist Larry Summers spoke of the need to have fiscal stimulus for the US economy. He pointed out that this could spur full employment through higher investments instead of implementing more monetary stimulus, which might end up with asset price bubbles. Data from the US today is the ISM manufacturing PMI, which is expected to climb from 53.9 to 54.6.

EUR

Talks of deflation in the euro zone are starting to weigh on the euro for now, although there are no major reports due from the region in the next few hours. Most economies in the region are still on holiday after all. German preliminary CPI was actually better than expected at 0.4% versus the estimate of a 0.2% increase. Later on, Spanish and Italian services PMI are up for release and small improvements are expected.

GBP

The pound was unable to sustain its rallies past the 1.6500 handle as it eventually retreated below 1.6400 to the dollar. UK services PMI is up for release today and an increase from 60.0 to 60.4 is expected, which might allow the selloff to take a pause. Bear in mind that services accounts for a huge component of overall economic growth in the UK economy so this report could trigger a strong reaction.

JPY

Over the weekend, a Nikkei survey showed that 70% of Japanese major retailers expected sales to drop once the sales tax increase is implemented. Recall that the government approved a sales tax hike from 5% to 8% in April, which could dampen overall demand. However, companies also expect sales to pick up in the months leading up to the tax increase and for the drag on demand to taper in September this year.

CHF

There have been no reports released from Switzerland lately as Swiss banks are on holiday. This has led to a franc selloff, particularly against the US dollar lately. There are still no major reports due from Switzerland today, which suggests further franc weakness, especially if US data comes in strong.

Commodity Currencies (AUD, NZD, CAD)

Australia’s AIG services index posted a decline in activity over the weekend, reflecting a deeper contraction in the industry. This might weigh on the Australian dollar for the rest of the trading day, as there are no other major reports due from the country for the next few hours. Meanwhile, Canada is set to print a couple of inflation indicators, both of which are not expected to have a major impact on Loonie movement.

By Kate Curtis from Trader’s Way

173

USD

The US dollar enjoyed a bit of support, thanks to stronger than expected trade balance figures. The deficit shrank from a positively revised 39.3 billion USD to 34.3 billion USD instead of widening to 40.2 billion USD. This reflects stronger trade activity in the country. Up ahead we have the release of the ADP non-farm employment change data and the FOMC meeting minutes, both of which have a huge potential to rock dollar pairs in today’s US trading session. The jobs report could show a 199K rise in payrolls, lower than the previous 215K figure. Meanwhile, the FOMC minutes could reveal how many policymakers supported the December taper decision and whether another taper is likely or not.

EUR

The euro edged lower to the dollar in yesterday’s trading sessions, despite better than expected data from Germany. German retail sales rose by 1.5%, stronger than the estimated 0.5% uptick and better than the previous 0.8% decline. Unemployment fell by 15K, better than the estimated 1K decline and a considerable improvement from the previous 9K increase in joblessness. For today, German trade balance, Italian unemployment rate, German factory orders, euro zone retail sales and jobs data are up for release. Stronger than expected figures might trigger a bounce for euro pairs while weak data could push it lower.

GBP

The pound was stuck in consolidation for the past few trading hours since there were no major reports released from the UK economy. Today might be more of the same story, as only medium-tier reports are on tap. These are the BRC shop price index and the BOE credit conditions survey.

CHF

The franc continued to lose ground to the dollar since there were no reports from Switzerland to give it support. It could be in for another round of losses today since the calendar is still empty and the US might be able to churn out strong reports.

JPY

USD/JPY struggled to hold its ground in yesterday’s trading as it managed to bounce off the 104.00 major psychological level and rising trend line. There were no reports released from Japan then and none are due today, which suggests that US data and market sentiment might dictate movement for this pair.

Commodity Currencies (AUD, NZD, CAD)

There wasn’t much movement from the Aussie and Kiwi yesterday, but the Loonie suffered a sharp selloff because of a combination of weak data and downbeat remarks from BOC Governor Poloz. The central bank head spoke of disinflation concerns while the Ivey PMI and trade balance both fell short of expectations. There are no reports due from New Zealand, Australia, and Canada in the next few hours, which suggests that market sentiment and US reports could drive price action.

By Kate Curtis from Trader’s Way

174

USD

The US dollar gained ground against its major counterparts as the ADP employment report printed stronger than expected gains of 238K versus the estimate at 199K. In addition, the FOMC minutes showed that the Fed will proceed with a cautious taper as most policymakers acknowledged the latest improvements in hiring. However, some debated about lowering the unemployment target but others argued that this would simply confuse the markets. Only the initial jobless claims report is up for release today as the dollar might be in for quiet trading ahead of the NFP release.

EUR

The euro lost further ground to the dollar in yesterday’s trading, as the euro zone printed mixed economic reports. German trade balance was weaker than expected at a surplus of 17.8 billion EUR instead of the estimated 18.9 billion EUR. Italy’s monthly unemployment rate climbed from 12.5% to 12.7%, worse than the consensus at 12.6%. Meanwhile, euro zone retail sales jumped by 1.4% instead of the estimated 0.2% uptick while the jobless rate held steady at 12.1%.

GBP

The pound was the only currency that held strong against the dollar rally, despite the weaker than expected report released from the UK. The Halifax HPI came in at -0.6% versus the estimate at +0.6% while the previous figure was revised down to 0.9%. Up ahead we have the BOE interest rate decision and although no actual monetary policy changes are expected, market watchers are waiting to see if the UK central bank will have any change in rhetoric.

CHF

The franc lost further ground to the dollar, as USD/CHF solidified its break above the falling trend line on the daily time frame. More rallies could be in the cards for this pair, as there are no major reports lined up from Switzerland today.

JPY

The yen lost ground to its counterparts yesterday as risk appetite improved and the Nikkei posted a positive close for the day. There are no reports due from Japan today so watch out for market sentiment to drive yen pairs.

Commodity Currencies (AUD, NZD, CAD)

The Canadian dollar continued its losing streak in yesterday’s trading, followed soon after by the Australian dollar. Inflation reports from China turned out weaker than expected with the CPI falling from 3.0% to 2.5% instead of the estimate at 2.7%. Building approvals in Australia was also weaker than expected but retail sales was slightly stronger. Canadian building permits is up for release later on and there are no reports due from New Zealand.

By Kate Curtis from Trader’s Way

175

USD

The US dollar was sold off sharply on Friday when the NFP report printed weaker than expected results. The actual figure showed a 74K rise in hiring when analysts were expecting to see roughly 200K in jobs gains. However, the jobless rate fell from 7.2% to 6.7% as the participation rate fell. With that, FOMC officials might continue to debate on whether or not to adjust the jobless rate target of 6.5% lower or not. Up ahead, there are no major reports due from the US economy so traders might keep pricing in their expectations for Fed policy changes depending on the latest jobs release.

EUR

The euro rebounded to the dollar last Friday, as the shared currency took advantage of weak US data. French industrial production data came in better than expected and showed a 1.3% increase versus the estimated 0.6% uptick. Italian industrial production is up for release today and a 0.6% increase is expected.

GBP

The pound recovered to the 1.6500 area against the dollar on Friday, thanks to weaker than expected NFP data. UK manufacturing production was weaker than expected as the report showed a flat reading instead of the estimated 0.4% uptick while the previous month’s report was revised lower. There are no reports due from the UK today.

CHF

The franc gave up some gains to the dollar when the Swiss CPI report came in below consensus and showed a 0.2% decline in price levels but USD/CHF soon retreated when the US had its share of bleak data. There are no reports lined up from Switzerland today so USD/CHF might be vulnerable to market sentiment.

JPY

Japanese banks are on holiday today yet yen pairs saw a bit of movement. USD/JPY slipped below the 104.00 mark on the heels of weak US data and risk aversion. Japan’s leading indicators came in line with consensus and allowed the Nikkei to gain a bit of ground. Yen pairs’ behavior might be in line with Asian equities performance for the day.

Commodity Currencies (AUD, NZD, CAD)

The comdolls took advantage of dollar weakness on Friday, except for the Canadian dollar which was weighed down by weak data. The Canadian jobs report showed a decline in hiring of close to 50K, enough to bring their jobless rate up from 6.9% to 7.2%. The BOC business outlook survey is up for release today, along with the NZIER business confidence. Earlier today, Australia reported a 0.7% decline in ANZ job advertisements, spelling weak prospects for the labor report due this week.

By Kate Curtis from Trader’s Way

176

Very nice thread I must say. I find it very interesting,
I was also looking at the Euro, and think the pair has some more room to the upside left.
There is a bullish flag forming on the hourly chart as well.
Do you think the pair can reach the 1.3700 level in the short term?
Thanks for sharing the analysis BTW :slight_smile:

177

USD

The US dollar gave up a lot of ground to its major counterparts as there were no reports to support the US currency yesterday. The Federal budget balance came in better than expected and printed a larger surplus but was not enough to keep the dollar afloat. Today could be a different story as the US retail sales reports are due. Headline retail sales could see a 0.2% uptick while core retail sales might post another 0.4% increase. Bear in mind though that weaknesses in the labor market could result in poor consumer spending data but holiday spending could make up for that.

EUR

The euro rebounded against the dollar but caved to yen strength in yesterday’s trading as risk aversion took over the markets. There were no major reports released from the euro zone as the medium-tier Italian industrial production report printed weaker than expected results. For today, another set of low-impact reports are due from the euro zone so euro pairs might be more sensitive to risk flows.

GBP

The pound was unable to take advantage of dollar weakness yesterday, as the UK currency slipped against the yen as well. There have been no reports released from the UK then but traders are starting to worry that the UK is pulling back from its recovery. UK CPI is up for release today and the headline figure might show a 2.1% increase.

CHF

The franc found its legs in yesterday’s trading as it pushed USD/CHF back below the .9000 major psychological level. There were no reports released from Switzerland, as dollar weakness was the main driver of price action for the pair. There are still no reports due from the country today so risk sentiment might continue to push USD/CHF around.

JPY

The yen was in for a treat yesterday, as the low-yielding currency took advantage of risk aversion. USD/JPY made a strong break below its rising trend line while reversal chart patterns on other yen pairs were confirmed. Japanese traders are back from their holiday and we are seeing a set of Japanese data come in line with expectations. Bank lending showed a 2.3% uptick while the current account deficit landed at 0.05 trillion JPY.

Commodity Currencies (AUD, NZD, CAD)

Comdolls breathed a sigh of relief yesterday, as commodities posted rebounds in prices. However, the Loonie is still being weighed down by weak fundamental data and the Kiwi could get dragged lower by the recent Fonterra recall. A few Chinese medium-tier reports such as new loans and money supply are up for release and these might move the Australian dollar.

By Kate Curtis from Trader’s Way

178

USD

The US dollar saw a share of mixed data in the latest US session, as the core PPI and Empire State index both beat expectations but the headline PPI came up short. Core producer prices rose by 0.3% instead of the estimated 0.1% uptick while headline producer prices saw a 0.4% increase instead of the projected 0.5% rise. Meanwhile, the manufacturing index jumped from 1.0 to 12.5, outpacing the estimate at 3.2. Up ahead, CPI and jobless claims data are up for release. The headline CPI could show a 0.3% uptick while the core could print a 0.1% increase. Initial jobless claims are expected to be at 327K, lower than the 330K figure seen last week.

EUR

The euro continued to slide lower to the dollar, as it slipped below the 1.3600 major psychological level. There have been no major reports released from the euro zone recently and only the CPI figures are up for release today. Bear in mind though that talks of deflation have been running recently, and weaker than expected inflation reports might renew speculations of further LTRO or negative deposit rates, which would be negative for the euro.

GBP

The pound gave up more ground to the dollar in yesterday’s trading, despite the lack of top-tier data from the UK. BOE Governor Carney’s speech did not contain any surprises but it was enough to spark a little more volatility for the pound pairs. Earlier today, the RICS house price balance came in short of consensus at 56% instead of the estimated 59%. No other reports are due from the UK today.

CHF

The franc lost more gains to the dollar, as USD/CHF edged up to the .9100 major psychological level. Data from Switzerland was actually stronger than expected, with retail sales growing by 4.2% instead of the estimated 2.3% rise. There are no reports due from Switzerland today so risk aversion might keep driving this pair higher.

JPY

The Japanese economy printed mixed data earlier, with core machinery orders surpassing expectations and the tertiary industry activity index falling short of consensus. This might lead to declines in the Nikkei overall and possibly weigh on the yen pairs if risk aversion stays in the market.

Commodity Currencies (AUD, NZD, CAD)

The Australian dollar got another blow in today’s Asian trading session, as the jobs data showed a 22.6K drop in hiring instead of the estimated 10.3K increase. Although the jobless rate held steady at 5.8% and there were no revisions to the previous figure, the dismal report could keep dragging the Aussie lower for the rest of the week. As for Canada and New Zealand, there have been no major reports recently and none are due today.

By Kate Curtis from Trader’s Way

179

Well, the Euro is struggling to gain any upside momentum.
The 1.3580 support looks good for now.
I think the pair can now test the 1.3550 support level or may be a bit lower from here.
If the pair struggles further, then a test of 1.3500 handle cannot be denied.
I may be wrong.
Thanks for sharing your analysis mate.
I come to read this page on regular basis.

Cheers!

180

USD

The US dollar lost a bit of ground on Friday, thanks to weaker than expected consumer sentiment data. The preliminary figure reported by University of Michigan came in at 80.4 instead of the estimate at 83.4. Building permits and housing starts came in line with expectations around 0.99M. Up ahead, there are no major reports due from the US since traders are on holiday. Bear in mind though that the lower liquidity could result to higher volatility.

EUR

The euro slid lower to the dollar and yen at the start of the week, as fundamentals in the euro zone appeared weaker. German PPI and German Buba monthly report are up for release today but these aren’t expected to have a huge impact on euro price action. Keep watch for any changes in market sentiment and a potential surge in volatility during the US session though.

GBP

The pound was unable to recover on Friday but got a quick boost early this week, as the Rightmove HPI showed a 1.0% increase. This was enough to erase half of the 1.9% decline seen in the previous month. There are no other major reports due from the UK today, leaving pound pairs sensitive to risk sentiment.

CHF

The franc lost further ground to the dollar last week and seems poised to keep losing this Monday, after SNB head Jordan reiterated that there’s no need to remove the EUR/CHF peg. There are no reports lined up from Switzerland today.

JPY

The yen continued to move to the tune of risk sentiment last week, gaining ground against the Australian dollar and other weak majors. Japan’s revised industrial production report is due today but no changes are expected from the initially reported 0.1% uptick. Keep tabs on the behavior of the Nikkei if you’re trading yen pairs.

Commodity Currencies (AUD, NZD, CAD)

The comdolls showed signs of weakness towards the end of the week, as traders started pricing in bleak expectations for China’s GDP release. However, the Asian giant reported growth in line with consensus at 7.7%. This is slightly weaker than the 7.8% GDP figure in the previous quarter. No other reports are due from the comdoll economies today, as China’s GDP release could weigh on overall risk sentiment.

By Kate Curtis from Trader’s Way

181

USD

The US dollar lost ground to its major counterparts when prices retraced and risk sentiment improved. There have been no reports released from the US yesterday since traders were on holiday and there are no reports due today. This suggests that market sentiment might be the major driving force of price action in the meantime.

EUR

The euro edged lower than its counterparts in yesterday’s trading, as German PPI came in weaker than expected. The report showed a 0.1% uptick instead of the estimated 0.2% increase in price levels. Talk of deflation has been rampant, particularly in periphery countries, so traders were surprised to find out that the region’s largest economy might also be in for weaker inflationary pressures in the near term. For today, German ZEW economic sentiment is up for release and it could show an improvement from 62.0 to 63.4. Meanwhile, the euro zone ZEW is expected to rise from 68.3 to 70.2.

GBP

The pound was stuck in consolidation to the dollar yesterday, as GBP/USD moved sideways around the 1.6450 minor psychological level. There have been no major reports released from the UK then and only the medium-tier CBI industrial order expectations data is due today. The report could show a dip from 12 to 10, which might lead to a quick pound selloff.

CHF

The franc gave back some of its recent gains to the dollar, as there were no reports released from Switzerland yesterday. There are still no reports due today so it could be all about risk sentiment driving franc price action.

JPY

The Japanese yen packed in significant gains but returned some of these in today’s Asian trading session. Data from Japan has been weaker than expected yesterday, reporting a 0.1% decline in the revised industrial production report instead of the initially printed 0.1% uptick. There are no reports due from Japan so the yen pairs’ movement might be dictated by market sentiment.

Commodity Currencies (AUD, NZD, CAD)

The comdolls regained a bit of ground against the dollar in recent trading, with USD/CAD holding on to the 1.0950 handle and NZD/USD bouncing up to the .8300 area. New Zealand’s quarterly CPI report was better than expected at 0.1% for Q4 2013 instead of the estimated flat reading. This was enough to spark rate hike speculations in the RBNZ’s upcoming monetary policy statement. Later on, Canada will release its wholesale sales report and manufacturing sales. Both reports could show a 0.3% uptick but the odds of a downside surprise are high and might trigger further losses for the Loonie.

By Kate Curtis from Trader’s Way