All other major peers are weaker against the USD in the range of 0.20-0.50% except from JPY which is 0.30% stronger as risk-off trade picks up.
Monday, January 16, 2017
Cable tumbles amid hard Brexit fears
The press coverage suggests that May's message on Tuesday will be very much hard Brexid biased. This sent the cable north opening with a 140 pips gap. The next resistance is the flash crash low around 1.1500.
Sunday, January 15, 2017
More facts on Brexit and many CPI data release next week
There were two events last week that had meaningful impact on markets:
- Trump news conference and
- US retail sales.
Nether of them offered some clear guidance, though both of them moved the USD. Trump speech resulted in USD weakening as market expected some more facts from president elect.
The key event next week will be May's Brexit speech in the Parliament. I suspect it would be rather on the hard side that could lift the USD as risk aversion could prevail, but should have the biggest impact on GBP and EUR. GDP, USD and CAD CPI data will be released. Market is very much focused on the CPI figures, so especially the USD data will be important. BOC and ECB meet next week. On Friday Chinese GDP data will be released.
Equities
Equities do not seem to care about anything as they march higher. Technically the picture is mixed. There is a massive MACD divergence everywhere as the Trump rally entered into a consolidation phase.
The Nasdaq and the DAX both made some kind of breakout both with a very week follow through. I would refrain from looking any short opportunities here. Technically Nasdaq looks the strongest so I will look for long opportunities there, but scalp rather swing my trades.
AUD/USD
Aussie is at a major resistance.
There are two forces (that are strongly interconnected) that move now the AUD:
- recovering commodity prices
- easing worries about Chinese hard lending.
Commodity prices are reflected in the strong Chinese PPI data released earlier.
USD/CAD
We are at the confluence of the long term trend line and the DEC low resistance that held so far.
Gold
The Gold is retesting the 1,200 area which is a major resistance.
- Trump news conference and
- US retail sales.
Nether of them offered some clear guidance, though both of them moved the USD. Trump speech resulted in USD weakening as market expected some more facts from president elect.
Retail sales was not so impressive, though it first helped the USD. Later on the USD gave back most of the gains.
The key event next week will be May's Brexit speech in the Parliament. I suspect it would be rather on the hard side that could lift the USD as risk aversion could prevail, but should have the biggest impact on GBP and EUR. GDP, USD and CAD CPI data will be released. Market is very much focused on the CPI figures, so especially the USD data will be important. BOC and ECB meet next week. On Friday Chinese GDP data will be released.
Equities
Equities do not seem to care about anything as they march higher. Technically the picture is mixed. There is a massive MACD divergence everywhere as the Trump rally entered into a consolidation phase.
The Nasdaq and the DAX both made some kind of breakout both with a very week follow through. I would refrain from looking any short opportunities here. Technically Nasdaq looks the strongest so I will look for long opportunities there, but scalp rather swing my trades.
AUD/USD
Aussie is at a major resistance.
- recovering commodity prices
- easing worries about Chinese hard lending.
Commodity prices are reflected in the strong Chinese PPI data released earlier.
The Chinese GDP is seemingly stabilizing at the 6.7% level.
USD/CAD
We are at the confluence of the long term trend line and the DEC low resistance that held so far.
The Gold is retesting the 1,200 area which is a major resistance.
Monday, January 9, 2017
USD correction is fading
The major economic headline of last week was the stronger than expected rise in hourly earnings (2.9% yoy). This triggered a rise in US yields and fade in the USD correction as rate differentials prevailed.
The main economic fundamentals:
- The US economy seems to be expanding fast enough to create some inflationary pressure.
- Trump Administration is expected to be pro-growth (fiscal spending, deregulation, tax changes, protective policies).
- In other developed countries the inflation appears to be bottomed as economic data are improving.
- In Europe the upcoming election in Austria, the Netherlands (both on 15th March), France (7th May) and Germany pose significant risk as the populist fores are gaining strength in some countries.
- Though the data from the UK suggest that the Brexit impact was fairly muted, but we are yet to see the the post Brexit business investment activity and its potential implications. People may be somewhat too optimistic in terms of the softness of Brexit.
These all suggest that USD appreciation should continue before long. Though, we have to bear in mind, that significant USD rally could fuel fears about EM USD debt sustainability that could force FED to be less hawkish as it happened in Q' 2016. It could be less likely this time as global economic data is improving.
On the other hand the long USD trade is very crowded so it is not unlikely that the correction would have another leg.
Equities:
SP500 and US piers fade all correction and made new highs. DOW is just a few ticks from the psychological 20,000 level. For SP500 the measured move target 2,300 is the next longer term resistance. We should watch as how it can break the Trump rally high of 2,477.
DAX is facing 11,800 (Jul 2015 high) and 12,000 (measured move) and 12,400 (April 2015 high) resistance.
The main economic fundamentals:
- The US economy seems to be expanding fast enough to create some inflationary pressure.
- Trump Administration is expected to be pro-growth (fiscal spending, deregulation, tax changes, protective policies).
- In other developed countries the inflation appears to be bottomed as economic data are improving.
- In Europe the upcoming election in Austria, the Netherlands (both on 15th March), France (7th May) and Germany pose significant risk as the populist fores are gaining strength in some countries.
- Though the data from the UK suggest that the Brexit impact was fairly muted, but we are yet to see the the post Brexit business investment activity and its potential implications. People may be somewhat too optimistic in terms of the softness of Brexit.
These all suggest that USD appreciation should continue before long. Though, we have to bear in mind, that significant USD rally could fuel fears about EM USD debt sustainability that could force FED to be less hawkish as it happened in Q' 2016. It could be less likely this time as global economic data is improving.
On the other hand the long USD trade is very crowded so it is not unlikely that the correction would have another leg.
Equities:
SP500 and US piers fade all correction and made new highs. DOW is just a few ticks from the psychological 20,000 level. For SP500 the measured move target 2,300 is the next longer term resistance. We should watch as how it can break the Trump rally high of 2,477.
DAX is facing 11,800 (Jul 2015 high) and 12,000 (measured move) and 12,400 (April 2015 high) resistance.
EUR/USD
The break of March 2016 low is yet to be proven to be false
GBP/USD
The 1.2200 level broke this morning. It is a good risk reward trade to bet on the break of the 1.2100 level as it would trigger stops.
AUD/USD
NZD/USD
USD/JPY
USD/CAD
GOLD
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