USD: shut down or not, it’s a good trading week

US trading fun

Traders are excited about US currency and stock market trading opportunities this week including the WEF in Davos, Crude Oil Inventories and Advance GDP so it seems no political mishaps are going to put them off. With global growth surging ahead in the Euro zone and Asia, dollar traders don’t need to get caught up with domestic disputes, but it’s the bears who are feeling good. USD tends to fall when the world does well.

World Economic Forum

One global event you might want to trade this week is the World Economic Forum in Davos (Tuesday 23rd to Friday 26th). World business leaders get together in Switzerland this week to hammer out their shared vision for the future. There will be a stack of press releases for currency, commodity and stock traders to get excited over. This event is for everybody!

Trump’s attendance at Davos on Friday is now in question as the US government shut down started last week. But his speech is expected to contrast sharply with the outward-looking tone from other quarters and could create some shockwaves in the markets. Two key WEF dates: Tuesday 23rd (opening day) and Friday 26th (Trump’s speech).

Oil

Crude Oil Inventories has been in terminal decline since mid-November 2017 with a stonking -6.9M barrel reduction last week. Analysts were completely wrong with their restrained -1.4M forecast so don’t feel the need to listen on Wednesday 24th at 10.30am GMT either. If you’ve been playing oil for a while, you are sure to have your own ideas.

US Advance GDP

If all that isn’t enough, the big domestic US figure to watch this week is Advance GDP on Friday 26the at 8.30am GMT. Currently at 3.2% forecasts are for a drop to 3.0%. Federal Reserve targets are 2.0% but the fact is the US economy is booming. Stock markets are at all time highs and Trump’s America First policy is giving producers confidence.

 

 

4 key trade balances

Loving balance

Traders love to know a country’s trade balance because it is a key indicator of its economic health. China, Australia, Canada and the US reveal theirs this week and the markets are likely to react.

China’s Trade Balance is tentatively scheduled for Friday 8th. Currently at 321B the last couple of months have been good for the Chinese economy and another increase would be reassuring. However, events in North Korea are likely to spook traders so don’t expect a rush of investment in the Yuan even if the data is good.

Australia’s Trade Balance on Thursday 7th at 1.30am GMT is predicted to be positive, but their close links to Asian economies is also likely to subdue the markets.

Canada’s Trade Balance at 12.30pm GMT on Wednesday 6th is predicted to slide further into the red from its current -3.6B continuing a trend it started in April.

America’s Trade Balance is also out on Wednesday 6th at 12.30pm GMT but that is the least of its worries right now.

 

5 AUD events to watch this week

Sometimes things don’t go the way you think

The Australian dollar is an intriguing currency to trade as it’s closely linked to commodities, China and the US dollar. In the last year the Australian economy has flirted with recession but bounced back before it actually bit. This week there are 5 events that every AUD trader will be watching. Typically they’re not spread out evenly across the week though.

Tuesday 5th September
The Cash Rate and its accompanying all-important Rate Statement will be issued at 4.30am GMT. This follows the Current Account at 1.30am, which is predicted to slide a hefty 4.3B down to -7.4B. The Rate stands at 1.50% and most analysts predict that won’t change, but with the way things are, some believe there is a chance they’re wrong.

9.10am GMT the Aussie central bank’s governor Rob Lowe delivers a speech at the Reserve Board Dinner. Traders will want to know more about the future direction of the Cash Rate and any hints will be jumped on.

Wednesday 6th September
At 1.30am the quarterly GDP figures are released. Widely forecast to bump up to 0.8% from 0.3% this would suggest things are looking healthier.

Thursday 7th September
The last two big events of the week if you’re playing AUD are the monthly Retail Sales and Trade Balance at 1.30am GMT.  Sales figures are expected to drop slightly (0.3% to 0.2%) suggesting consumers are reining in their spending but the Trade Balance should remain positive and could even grow slightly, up from 0.86 to 0.95 if the experts are right.

It’s a mixed bag but with enormous geopolitical turmoil in the Korean peninsular and a close relationship with China to consider, there may be other factors affecting AUD this week.

It’s Kiwi time

But not just for some vitamin C, though that is important. No, this Kiwi time is all about the money. Currency traders will not be too alarmed by Monday 7th’s 2.1% Inflation Expectations report, down just 0.1% from last quarter. This is the current public expectation of how the price of goods and services will change over the next two years. So it looks fairly steady as she goes for the New Zealand dollar.

Wednesday’s Official Cash Rate at 10pm GMT is accompanied by the RBNZ Rate Statement and RBNZ Monetary Policy Statement. But more interesting for day traders will be the 11pm GMT RBNZ Press Conference. Then at 2.10am on Thursday 10th Governor Wheeler speaks at Finance and Expenditure Select Committee. These two events could lead some traders and market makers to change their stance depending on what is said making Wednesday and Thursday a good time to play.

 

3 Trade Balance events to move markets

Things aren’t always what they seem

Three markets that have seen some interesting movement recently will be impacted by Trade Balance news this week.

The Australian economy massively beat the forecasts last month to bring home a Trade Balance of 2.47B against a predicted 1.00B. This was a huge boost showing strength in the currency. It’s doubtful this month’s 1.77B prediction is any more accurate than June’s one but we’ll find out on Thursday 3rd at 2.30am. With the Aussie bank rates up for debate on 4th as well there’s a lot to play for.

The CAD markets will be looking to see if last month’s deficit stretch from -0.6B to -1.1B was a blip or a reversal. Things had been going well for the Canadian economy and the Trade Balance was hovering around 0.00 in May but predictions are for -1.4B on Friday 4th at 1.30pm GMT. Trudeau’s new found international popularity and dealings on the global scene may well improve the situation for exports.

On Friday 4th the USA releases its Trade Balance figures but these will be overshadowed by the Non-Farm Employment data. A shift of just under 1B (-46.5B to -45.6B) is on the cards, but there’s far more going on in the USD markets than this. Only a massive unexpected movement will cause this Trade Balance event to significantly impact the markets this week.

Non-Farm Friday is here

USD traders monthly highlight, the Non-Farm Employment Change, or Non-Farm Payroll as it’s also known, returns on Friday 7th at 1.30pm GMT. Predictions are for a significant increase from last month’s shock 138k up to 175k. Employment and job creation are integral to currency and stock market trading as they correlate to consumer spending. This feeds directly into the market’s perception of the economic health of the country. Job levels have fluctuated wildly for the last few months so not every pundit believes the positive predictions.

EURUSD demand supply lines EURUSD FX
Support and resistance lines for EURUSD going into NFP

The dollar index started the week at 95.64 trading fairly low against the 52 week range. It hasn’t been a good year for the dollar so far as it’s trading down 6.26% in the year to date and the past week is down 1.51%. Traders will be looking for signs of strength and reasons why that might change. The FOMC meeting minutes on Wednesday 5th and the G20 meetings on Friday could also affect market perceptions.

And don’t forget 4th July is a federal holiday. US markets close early today and won’t reopen until 5th.

GBP taking a battering

GBP is playing like this right now

When PM May called the election eight weeks ago she had an enormous majority in the polls and was trying to capitalise on it. It takes quite a feat of bad management to reduce that to a hung parliament. But that’s exactly what’s happened and the uncertainty has caused no end of problems for GBP.

The once great currency is looking decidedly rocky so there is little hope BoE governor Carney can fix it when he speaks at the Mansion House tomorrow. Slightly confusingly it has been rescheduled to a breakfast speech at 8.30am but is still being called a dinner speech. The recent murmurs caused by 3 votes for a rate rise after poor economic performance and rising inflation will lead to traders and analysts looking for any clue on timescale. Some pundits are suggesting it’s very much a case now of when, not if, the rate will change.

Is EUR easy money coming to an end?

This is how it’s done

There are murmurs and whispers in the ECB corridors of power that, while Thursday’s ECB Minimum Bid Rate is likely to stay low, there may be signs that the current bond-buying policy could start to slow down later in the year. With opposing pressures between weaker economies and Germany’s domestic market, nothing will happen quickly but any change in the official line will be pounced on as Draghi takes credit for the upswing in the Eurozone economy.

The ECB Press Conference at 1.30pm GMT will have traders ready to act as journalists press officials for more information. Whether or not they agree that cutting back bond-buying is the right strategy remains to be seen.

EURUSD FX pair
The EURUSD has an ABCD pattern completing into recent demand

EURUSD is at a significant resistance zone with previous chart structure and the 161 ABCD pattern completing into 1.1280. Drilling down into the lower time frames, there is possibly intermediate support at 1.1235 and a possible stronger case for support at 1.12 which has the half way back and the completion of an equidistant swing nearby.

EURUSD chart
1 hour chart on EURUSD

Casting its shadow over the EUR is the UK elections also on Thursday 8th. Results won’t be in until the early hours of Friday but with strikingly different attitudes towards Brexit negotiations between the two main parties, currency traders will be watching the exit polls all day.

AUD rollercoaster continues

AUD’s like this yoyo

AUD has been an interesting currency over the past six months. Edging close to recession, the figures are up and down like a yo-yo.

AUDUSD in a channel
AUDUSD has been making lower highs and lower lows and is at a key level.

The AUDUSD has been making lower highs and lower lows since the double top in March and is now at a level which has acted as support and resistance in the past. 0.7440 is the level to watch as we go into the trading week with the Aussie.

This week traders will be watching on Thursday 1st as the quarterly data for Private Capital Expenditure and monthly figures for Retail Sales are released. Pundits predict the first positive data for Private Capital Expenditure since February 2016 at 0.6% growth compared to last quarter’s -2.1% contraction. Retail Sales hasn’t seen growth since October 2016, but analysts are hopeful that this month will see a positive 0.3%. Traders will be thinking ahead to next week’s Trade Balance figures out on Thursday 8th for both Australia and its close trading partner, China.

Political events surrounding North Korea can cast a shadow across the Asian markets in general and their reach can affect AUD, so watch for any missive tests or other military action that may dampen enthusiasm for the currency.

Markets love non-farm and so do we

pay attention

USD market makers always pay close attention to the Non-Farm Employment Change. This month’s figures are due out on Friday 2nd June at 1.30pm GMT. Recent months have seen wild unpredictability with April’s rate plummeting from 235k to 98k against all expectations. May recovered to a better than expected 211k but it’s anybody’s guess what June will bring. As the job rate is so closely tied to the strength of the economy – people tend to spend less when they don’t have jobs – and the data is released very soon after the month ends, traders rely on it to plan their currency strategy.

Closely tied to job creation is the change in Average Hourly Earnings and this looks set to drop from 0.3% to 0.2% indicating a slowing economy but the Unemployment Rate seems to be staying the same at 4.4% if pundits predictions are correct.

Weirdly, just about the main pressure on the dollar is the POTUS twitter account so keep that feed running in the background. No matter what the facts on the ground are, his missives can change things ‘bigly.’