In this clip from our Thursday Market Intelligence Briefing, we cover the key releases coming up in the Friday session including CPI data from China (as well as industrial production), an important jobs report from Canada that can help set the tone for the Canadian Dollar (CAD), and producer inflation and the UMich consumer sentiment data from the US.
In this clip from the FXTimes Market Intelligence Briefing we review key overnight developments including Chinese trade data (weaker imports and exports, Australia’s employment change (a monthly gain and drop in unemployment rate), and the Bank of England interest rate decision (decided to pause QE program).
By Joel Kruger, Technical Strategist for DailyFX.com China March PMIs come in very solid but data to be taken with a grain of salt China HSBC Markit PMIs less encouraging and mitigate favorable reaction Aussie building approvals come in much weaker than expected Bank of Japan Tankan results show an ongoing concern over the outlook…
We have been monitoring Chinese equities for clues as to where investor sentiment lies, as China provides much of the spare capacity for commodities demand. If China’s economy slows more strongly than expected, then commodities will feel the brunt of that and that has a big impact on commodity linked currencies like the Australian Dollar. We saw this play out overnight as a key support level in Chinese equities gave way pressuring AUD crosses.
With the fundamental docket quite this week, the HSBC manufacturing PMI data takes on considerable more significance, and can create the catalyst for a move one way or the other. A weaker reading could create the conditions for USD and JPY strength to reemerge, especially against commodity currencies. A reading showing expansion can calm fears and stabilize sentiment if not bring a rebound in the AUD and NZD crosses to end the week.
Tuesday’s trading session has been dominated by risk aversion with commodity currencies weaker against their major counterparts. What has caused this shift in risk sentiment over the previous few sessions? It’s been a combination of Bernanke squashign near-term prospects for QE, the prospect of weaker growth in China and Europe as well as concerns about the unraveling of the Greek PSI deal.
By cutting the reserve ration requirement (RRR) by 50 basis points it should inject around 400 billion yuan ($63 billion) of fresh lending into the economy. Bank lending was very weak in January. The move should be interpreted as a “risk positive” event and can help boost the Asia-Pacific higher yielding commodity and growth linked currencies – the AUD and NZD – to start Sunday’s trading.
China’s trade balance beat expectations posting a very strong $27.3 billion surplus for January. That thoroughly beat expectations of a $10.8 billion figure. The decline in exports was not as bad as forecast, but the retrenchment by Chinese imports means that households and businesses are cutting back on their spending which may imply weaker growth for China in the 1Q.
Can the recent month-long risk rally extend? The upcoming China trade balance report can help shed some light on the health of the global economy, and therefore will be an important gauge for risk sentiment. A poor report can hurt growth expectations, but in a twist that makes this report tricky, it could also increase speculation around an imminent cut to the central bank’s reserve ratio requirement – a loosening of monetary policy. We preview the report inside.
In Thursday’s Asia session China releases its latest reading on inflation. Headline annual inflation is expected cool a bit further in January to a 4.0% pace from 4.1% in December, which would further confirm that inflation peaked in mid-2011. The news can help to give Chinese authorities some extra scope to loosen monetary policy considering there are growing concerns about China’s growth, with the main move expected being a drop in China’s reserve ratio requirement.
This! RT @CVecchioFX Mind boggling and absolutely backwards that market rallies on poor growth data...$FED (cont) http://t.co/hMrJxJW6 **BOE Fisher: Would Be "Uncomfortable" With Continued GBP Appreciation (via DJ)
Good bye Awfully disappoining Philly Fed at -5.8 vs exp 10. LEI -0.1 #forex
$GBPUSD Shed more weight after PM Cameron's remarks that Euro Zone must “make-up or break-up” and that a collapse would hurt the UK economy
USD/MXN stalling at resistance now - another chart coming in 7 minutes http://t.co/1JMTooeo RT @alaidi: starting to think $EURGBP can do mid 60s =||= Interesting - maybe a touch of resistance first? http://t.co/T66MKfMF Keep your eye on these levels - they're really all that have mattered lately (USD/CAD at resistance) http://t.co/qwMiwacS Thinking about selling some USD/CAD? Here's a chart for you: http://t.co/8rDw3OSv Buy-Time for NZD/JPY? It's showing some Arizona Rules counter-trend divergence on 5M: http://t.co/DW9STU47 #Bankia has called on depositors to remain calm, responding to today's reports that over €1bn had flowed out in recent days #forex AUD/USD banging on .9900 support - here are some levels http://t.co/tlPFiB3C €€€ leaking of Spain too. #Bankia, just nationalised last week, said to hemorage € 1bn in withdrawals #forex What @vicky_malhotra Which pair in particular? It does look OB across the board Fed ahead of the artificial growth, FX devaluation curve RT @conorsen Really enjoying the divergence of views (cont) http://t.co/KlJqONB7
$USDJPY is the only pair in which traders are not short the USD. Ratio at 4.3 longs per short. I'm not bearish, however, as pair range-bound
Although U.S. jobless claim figures missed market expectations, they're still holding at the lowest rate since 2008. Extreme RSI and Rate of Change measures on $USDOLLAR emphasize that the risk of short-term pullback is high, but I'm looking to buy dips. $USDOLLAR http://t.co/6UHs6oqT SSI Snapshot: crowds still heavily short USD, uptrend remains very much intact. $USDOLLAR http://t.co/f7Wmp0Ng Daily RSI at most extreme in its 2yr history, 14-day ROC most extreme since 11/2011 top. Stole away from the expo to get down to markets. (Not like I'm useful to FXCM Italy at the booth since I don't speak Italian..) bottom feeders helping to keep bearish momo intact MT @ZipperTheory markets cant hold gains for anymore than 20 mins..certainly not bullish Bigest weekly run-up in $EURUSD option volatility since September. Premium subscribers see Tuesday chart for reference #forex Moody's Eyes Spanish Banks, Stocks Reach 7% Territory http://t.co/2w6M7lw7 #forex $SPX While rate differentials aren't conducive to a weaker $EURAUD, commodity currencies still viewed as a safer alternative to debt-plagued euro
REPORT: Check out our "Morning Slices" report at http://t.co/CA4ZFwMi for an overview of the latest developments. lol *DJ Spain Deputy Finance Minister: Bankia Has Strong Future -not to worry, stock only down 25% 1320 marks that 7% peak-to-trough move in $SPX. Now we're talking #forex #stocks US crude ($CL_M) again slowest to react to overall selloff in risk assets, eyeing 89.90s from here. Our Premium targets 60 pts from 93.90 Repeating the same $AUDUSD idea from Tuesday's Premium shorts/parameters #forex $EURUSD: Clears stops below 1.2680 and would now expect to see a test of the 1.2625 yearly lows from January into North American trade. A weaker $EURUSD =stronger $USDCHF (base currency driver) =stronger $AUDCHF ..led by a capital flight out of euro denominated assets #FX
The blog owner requires users to be logged in to be able to vote for this post.
Alternatively, if you do not have an account yet you can create one here.
Powered by Vote It Up
Information and opinions contained on this page are for educational purposes only and do not constitute trading recommendations.
Trading OTC Forex on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange or futures you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange and futures trading, and seek advice from an independent financial advisor if you have any doubts.
