Even with not too many economic data-points, last week proved to be a good one for USD traders after US President, Donald Trump, finally broke his silence for Tax and spending plan by promising a "Phenomenal" tax structure to come soon. With this, traders who gave up on chances of reflation opportunities tightened their belts again in favor of the greenback and provided first positive weekly closing to the US Dollar Index (I.USDX) in nearly six weeks. At the data-front, Jobless Claims and Trade Balances signaled US optimism whereas Consumer Sentiment remained weak but were overlooked by Bulls. Alike US currency, its British counterpart, namely GBP, also witnessed a good week after Manufacturing and Trade details flash upbeat signals but the EUR, left with no major figures to publish, had to decline against both these majors. Further, the NZD also weakened across the board after RBNZ said to have no plans for the rate-hike until next two-years whereas AUD enjoyed upbeat RBA statement and positive Chinese figures. Moreover, JPY and Gold witnessed profit-booking on stronger USD whereas Crude remained sluggish with only minor gains on mixed market clues about demand-supply impacts of production-cut agreement.
Unlike last week, when the economic platter was half-filled, slew of headline data-points, namely Retail Sales, CPI and Jobs Report, are scheduled for publish during the week from developed economies. Additionally, Fed Chair's Semi-Annual Testimony is an event that can help trigger noticeable market moves together with details. Hence, it would be better to understand fundamentals behind these events/details to take advantage of upcoming volatility.
Fed Chair's Testimony & US CPI Would Be Market Favorite
Following last-weeks' hawkish promise from US President, Federal Reserve Chair, Janet Yellen, is scheduled to provide a semi-annual testimonies in front of US lawmakers during Tuesday and Wednesday. Being the first testimony under Trump presidency, coupled with improvement in data-points, traders would analyze how Yellen confronts questions from policymakers and help greenback. Further, monthly releases of CPI & Retail Sales would also gain attention as the same could help predict whether the US central-bank can actually follow three rate-hike plan orchestrated in December or not.
While aforementioned chart from the US Bureau of Labor Statistics portray that US inflation is well in direction to the Fed's favorable three rate-hike plan, actual releases on Wednesday would be crucial to watch. The YoY figure rallied to 2.1% last time and is expected to carry on the same strength with 2.4% mark whereas the MoM CPI might remain unchanged at 0.3%. Further, Core CPI is likely to scale a bit back from 2.2% to 2.1% on a yearly basis but monthly releases aren't expected to change from 0.2%. Another consumer-centric figure, namely Retail Sales, can disappoint greenback traders with 0.2% mark versus 0.6% prior but Core Retail Sales may recover the losses with 0.4% figure against 0.2% earlier print.
Fed Chair's semi-annual Testimony before the Senate Banking Committee, on Tuesday, seems an important event as traders would observe how Yellen sees economy during Trump Presidency and whether her gradual rate-hike plan is acceptable to Senate Banking Committee's new chair. It would also be interesting to see whether the Fed Chair actually uses the appearance to signal a rate-hike in near-term or not.
Additionally, Tuesday's PPI, Wednesday's Empire Manufacturing and Industrial Production, followed by Building Permits, Housing Starts & Philly Fed Manufacturing Index, up for Thursday, are some second-tier details that can offer intermediate trade opportunities.
Even if US PPI isn't bearing forecast of any change from 0.3% previous-mark, Empire State and Philly Fed Manufacturing indices are flashing different signals with Empire index likely growing to 7.2% from 6.5 and the Philly gauge expected to dip from 23.6 to 18.00. Moving on, Industrial Production might also threaten greenback traders with 0.1% mark from its 0.8% prior but Building Permits and Housing Starts can soothe the pain with 1230K & 1227K from their respective priors of 1228K & 1226K.
Hence, while economics are still struggling to provide clear direction to the US Dollar, Fed Chair's testimony will be a crucial one to observe. Should she speaks in favor of her rate-hike plan, present optimism surrounding the USD could get a boost.
Pound Traders Shouldn't Miss Jobs, Retail Sales & CPI Figures
After last-week's production & trade balance figures helped GBP, this week's CPI, employment report and Retail Sales can provide additional details on whether the British economy is strong enough to negotiate its entry-gate status with EU during March or not.
Tuesday's UK CPI could be the first from Britain to please Pound traders with +1.9% mark versus +1.6% prior but the addition in Claimant Count Change, up for Wednesday, to 1.1K from -10.1K, might challenge recent strength of the GBP. However, Friday's Retail Sales are expected to flash +1.0% gain as compared to prior -1.9% contraction and can help Cable to extend its north-run. It should also be noted that Unemployment rate and Average Earnings Index, on Wednesday, aren't likely to change from their 4.8% & 2.8% respective previous marks.
As Retail Sales being the driver of UK GDP, a strong print, coupled with chances of upbeat CPI, could help GBPUSD to revisit 1.2700 mark but disappointment would have higher repercussions as a break of 100-day SMA, at 1.2440, can fetch the pair to 1.2300 & 1.2220.
Chinese Inflation & AU Jobs Report Are Crucial For AUD
Although last week's RBA statement was quite hawkish and helped AUD to extend its northward trajectory, Tuesday's Chinese Inflation and Thursday's AU employment details could portray the strength of AU economy and its largest trading partner, China.
Chinese CPI is likely to flash another good-news for commodity traders with 2.4% mark versus 2.1% prior and the PPI is also expected to accelerate towards 6.6% figure compared to its 5.5% earlier. Further, AU Employment Change might soften a bit from 13.5K prior to 10.0K whereas Unemployment rate isn't like to alter from its 5.8% previous-mark.
With Chinese inflation figures keep portraying strong picture of dragon-economy, commodity basket might extend its up-move but rising USD and an expected drag in AU employment figures could curb the advances, which in-turn may fetch AUDUSD towards 0.7500 re-test with 0.7700 being immediate important resistance.
New-Zealand Retail Sales, German GDP & Some Other Stats
Other than aforementioned data-points, Tuesday's Preliminary German GDP & ZEW Economic Sentiment figures, followed by Thursday's quarterly New-Zealand Retail Sales, are some additional stats that traders would be interested in watching.
Forecasts suggest an upbeat German GDP figure of 0.5% from 0.2% prior with a bit weaker ZEW Economic Sentiment reading of 15.1 from 16.6 earlier. Additionally, EU Flash GDP is likely to remain unchanged at 0.5% growth-mark with 22.3 ZEW number against 23.2 prior. Furthermore, Quarterly reading of New-Zealand Retail Sales offers a ray of hope for NZD traders after previous number disappointed Kiwi traders with 0.9% growth.
So, weaker stats from EU & New-Zealand might extend latest pullback of EURUSD & NZDUSD towards 1.0500 and 0.7120 respectively, surprises can rejuvenate both these pairs towards targeting 1.0760, comprising 100-day SMA, & 0.7300 resistances.
Cheers and Safe Trading,
Anil Panchal