With Fed Chair's upbeat Testimony favoring promised rate-hike irrespective of Trump policies, USD buyers were all happy since early last-week. Those Bulls gained additional strength after CPI, housing market figures and manufacturing indices managed to portray rosy picture of world's largest economy and helped US Dollar Index (I.USDX) to post consecutive second weekly gain. On the contrary, sluggish economics at EU & UK, coupled with lead of anti-Euro parties at Germany & France ahead of crucial elections, dragged EUR & GBP towards south. Further, AUD remained a bit weaker as Aussie traders chose to cash-out after long rally whereas NZD dropped on weaker than forecast reading of quarterly Retail Sales. Additionally, rise in US stockpiles and rig counts dragged Crude and CAD prices to south but optimism surrounding production-cut curbed extended downside whereas JPY and Gold remained buyers' favorite due to political uncertainty at EU & UK.
Moving forward, present week starts with Monday's US President's Day holiday and has fewer economics to observe. Though, minutes of latest RBA & FOMC meetings, UK GDP & EU Flash PMIs, coupled with US housing, Canadian CPI and Sales figure, become some important details/events to have a look at. Moreover, news from EU, UK and some Fed policymakers might also offer intermediate trading opportunities to grab.
FOMC Minutes Can Help Justify Recent USD Strength
While Fed Chair, together with some FOMC members, have already signaled their readiness to observe three rate-hike a year plan, traders would be more interested in Wednesday's FOMC minutes to get a clue of what the board thinks about how Trump policies can affect their planned rate-lifts. Additionally, Flash Manufacturing & Services PMI, followed by Existing & New Home Sales figures, are some data-points that could offer extra clarity to judge near-term USD moves.
Even if US Federal Reserve refrained from announcing any rate-hikes during early-February meeting, the policy statement was quite hawkish and kept favoring chances rate-lifts during 2017, as promised by 2016-end. However, investors would closely observe FOMC minutes to see how policymakers target the threat emanating from Trump's policy measures and whether latest economics were in-line with central bank's forecast. Additionally, around five FOMC members are scheduled to give public appearances at different places during the week and any strong comments from them would also be important for the USD.
On the data-front, Tuesday's Flash Manufacturing & Services PMI portray mixed picture as Manufacturing index might shrink to 54.7 from 55.00 but the Services PMI could extend its north-run towards 55.8 versus upwardly revised 55.6 prior. Further, Wednesday's Existing Home Sales & Friday's New Home Sales are some additional US details that can help predict near-term greenback trend. Forecasts suggest strong figures housing figures with Existing Home Sales likely flashing 5.55M mark versus 5.49M prior and the New Home Sales could please buyers with 575K against 536K previous.
Hence, while data-points keep portraying upbeat sentiment and additional USD advances, traders would be more interested in analyzing FOMC minutes. Given the minute statement reveal that most of the board members expect less harm from Trump policies and continue repeating their statements supporting planned rate change, chances of the US Dollar to extend its up-moves can't be denied.
EU PMIs & UK GDP Become Crucial For EUR & GBP Respectively
Amidst threat emanating from failure of pro-Euro candidate at German and French elections, the EUR traders would be interested in observing Flash reading of Manufacturing & Services PMIs during Tuesday, followed by Thursday's German Final GDP. On the other hand, Second Estimate of UK GDP, up for Wednesday, becomes the only reading from Britain to help predict GBP moves.
EU Flash PMIs have been strong since late-2016, which in-turn favored welcome figures of GDP & CPI. However, this time around the EU Manufacturing PMI is likely to remain a bit weak at 55.0 from upwardly revised 55.2 with Services PMI expected to flash no change from its 53.7 adjusted mark. Though, German Flash PMIs are showing mixed expectations with manufacturing gauge likely meeting 56.2 mark versus 56.4 and services index may print 53.6 from 53.4 prior number. Further, German Final GDP is also expected to remain unchanged at 0.4% mark and may keep inflating uncertainty for EUR traders. Moreover, Second estimate of Q4 2016 UK GDP is less likely to offer any strong clues to the GBP traders unless it differs from 0.6% growth mark.
As EU & UK data-points show less clarity, traders would keep observing political outcomes from both these nations to portray EUR & GBP moves. However, latest weakness in data-points might get extended and could affect both these currencies to maintain their downtrend against other counterparts.
Technically, EURUSD continue remaining weak unless providing a closing break of 1.0740, 100-day SMA, and can keep favoring chances of 1.0500 comeback whereas 1.2220 becomes strong support for GBPUSD traders with 1.2700 keep performing its task of crucial resistance.
Few But Meaningful Events/Details From Canada & Australia
Although AU economics have been quite strong off-late, RBA hasn't been so optimistic in discussing its monetary policy going forward. The Australian central bank, in its latest monetary policy meeting, left the monetary policy unchanged and could please Aussie buyers with few hawkish statements praising economics. However, Tuesday's RBA minutes would be important for AUD traders to see whether the threat of inflation and weaker economy has actually gone or not. If RBA minutes flash light on improvement in Australian data-points and reveal optimism amongst board members, chances of further AUD advances can't be denied. However, 0.7730 & 0.7780 continue being strong resistances for the AUDUSD with 0.7600 being noticeable support.
Last but not the least, monthly releases of Canadian Wholesale Sales, Retail Sales and CPI are likely providing meaningful signals to CAD traders on Monday, Wednesday and Friday respectively. While Wholesale Sales and CPI may please Loonie buyers with 0.4% and 0.3% figures compared to their respective priors of +0.2% & -0.2%, the Retail Sales may soften to 0.1% growth versus 0.2% previous. However, expected growth in Core Retail Sales, by +0.8% mark against +0.1% earlier, could inflate Canadian Dollar. While economic data-points are in favor of USDCAD's 1.2960-50 re-test, momentum of Crude prices also become crucial to watch with expected weakness in energy quote can again propel the pair towards 1.3200 if 200-day SMA figure of 1.3140 can be countered.
Cheers and Safe Trading,
Anil Panchal