Introduction
The past week saw the U.S. dollar continue to make considerable gains versus the majority of its peers in the forex market. It’s become apparent that the recent FOMC cut in the key USA interest rate, hasn’t dampened the investment appetite for the globe’s reserve currency. Despite the main USA equity markets printing record highs during November, the appeal of the U.S. dollar hasn’t diminished, which could (in part) be due to its safe haven appeal. The other main safe haven currencies; the Swiss franc and Japanese yen, also registered gains last week, mostly at the expense of the euro and the U.K. pound.
The dominance of the U.S. dollar was illustrated by USD/CHF rising by 0.76% during the week, particularly during Friday’s trading sessions. The major pair is now trading close to flat on a yearly basis, retaking its position above the 200 DMA, last tested in early November. A brief introduction on safe haven currencies is provided here . In a near-perfect, negatively correlated move, EUR/USD fell sharply in Friday’s sessions when USD/CHF rose. Correlations in the forex market are a fascinating phenomenon, often overlooked by Traders and Investors, understanding these forces can prevent you being on the wrong side of the forex market unnecessarily. A simple introduction is provided here by the independent Mataf site, an additional resource for features not covered by ZuluTrade.
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The U.K. pound could experience increasing volatility as the general election date nears
ZuluTrade Traders and Investors who specialize in trading the major forex pairs were presented with excellent, trading opportunities, last week, as several major currency pairs responded to textbook, fundamental, economic calendar news, causing break outs from the previous trends. An example of fundamental analysis driving currency behaviour, was illustrated by GBP/USD ending the week down -0.62%, after crashing through the second level of support S2, as the IHS Markit services PMI metric came in at 48.6, below the critical 50 level separating growth from contraction. The U.K.’s manufacturing and construction PMIs also came in below 50.
With U.K. government borrowing rising sharply, helping to cause the deficit to double to £43b for 2019, and recent GDP figures revealing two consecutive months of -0.1% growth, analysts and investors have developed justifiable concerns that; whoever wins the U.K. election and forms a new government, will inherit an economy that is generating many recessionary signals. As the U.K. election campaigning enters its final three weeks, ZuluTrade Investors and Traders who swing or position trade, will need to monitor their GBP pair positions’ carefully, in order to manage any breaking news which could impact on price. It’s imperative that day traders also remain vigilant to any breaking news event, particularly during the final days before the December 12th vote and as the exit poll is announced on U.K. tv during the evening, at approximately 10:00pm.
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Key economic calendar events and data releases likely to impact the trading markets this week
Monday November 25th sees three IFO readings published for the German economy at 9:00am U.K. time. The metrics are forecast to reveal slight improvements in overall sentiment for the region’s economic powerhouse, which could prove to be bullish for the euro. Mid morning the U.K. business group the CBI will publish their latest figures, which could be bearish for GBP if the forecasts are met, revealing further deterioration in the U.K. retail and services sectors.
Tuesday November 26th begins with Jerome Powell, the USA Fed chair, delivering a speech at midnight, a time which could cause USD to react to the content of his speech, as the lower liquidity and less trading volume could cause increased volatility. At 9:05am the Australian central bank chief Lowe gives a speech in Sydney which, depending on the narrative, could impact on the value of the Aussie dollar. The afternoon New York session is dominated by USA economic news, starting with advanced trade orders balance, expected to show a deterioration to -$71b in October. House prices in the 20 main USA cities are predicted to show a 2% year on year rise up to September.
Focus turns to the kiwi dollar and the New Zealand economy in the late evening, from 8:00pm to 10:00pm. The RBNZ central bank will publish its latest economic stability report, and the trade balance for N.Z. is expected to show a modest improvement based on increased exports and lower imports in the month of October. Finally, the governor of the RBNZ delivers his translation of the stability report. Naturally, the kiwi dollar is expected to react to the news.
Wednesday November 26th mainly concerns USA economic data releases. The latest GDP figures will be published at 13:30pm, together with a raft of other metrics. GDP is expected to come in at 1.9% annually for Q3, durable goods orders are forecast to fall by -0.70% for October, and unemployment claims are predicted to remain relatively stable. From 15:00pm various income and expenditure figures for USA citizens will be revealed, little change is anticipated. Pending home sales should reveal a sharp fall, which will be accounted for and excused by analysts as seasonal factors.
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Various energy stockpile and reserves data for the USA will be published which could affect the price of WTI oil if any significant changes are recorded. At 19:00pm the Fed publishes its beige book. All the aforementioned data might have a muted impact on the value of USA equity market indices if the risk on appetite remains constant, however, the U.S. dollar may come under increased scrutiny.
Late evening the latest Japanese retail figures could impact on the value of yen, retail sales are forecast to reveal a sharp deterioration by -3.8% YoY and retailers sales by -7.1% in October.
Thursday November 27th at 6:45am U.K. time the latest Swiss GDP figures are predicted to show a modest improvement to 0.8% year on year, a result which could prove to be bullish for the Swiss franc. The euro will come under increased focus and speculation when the latest German CPI figures are published. CPI is forecast to come in at -0.6% for the month of November, with annual inflation due to come in at 1.2%.
In the evening the latest New Zealand building permits data is published, as is a 4 month government financial statement. Attention then turns to Japanese figures, as a slew of data which could impact on the value of JPY is published. The jobless rate is forecast to remain unchanged at 2.4%, CPI is anticipated to come in at 0.6% annually, whilst the latest industrial production figures are predicted to reveal a major slump; falling by -2.0% monthly in October, taking the yearly fall to -5.3.%
Friday November 29th will reveal the latest sovereign debt rating for the Swiss economy broadcast by Moody’s, at various times during the day. At 5:00am the latest Japanese construction orders and vehicle production figures will be delivered. Japanese housing starts are predicted to continue a slump, coming in at -7.4% year on year, up to October.
The London-European trading session begins with the latest French GDP figure, forecast to come in at 1.3%. German unemployment is predicted to remain unchanged at 5.00%. Various mortgage and consumer credit detail is published for the U.K. and at 10:00am a slew of CPI metrics for the Eurozone is revealed. For November the key CPI rate is forecast to have fallen to -0.4% which could affect the value of the euro, if the figure is judged to make an ECB interest rate more likely.
Canada’s latest GDP figures are the outstanding high impact event due to be published in the New York session. The forecast is for the annual rate to come in at 1.4% with Q3 coming in at 1.3% falling from 3.7% in the second quarter, on an annualized basis. Month on month, the GDP figure is predicted to reveal 0.1% growth. The Canadian dollar could react to the data, depending on the translation by analysts and traders.
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Disclaimer
The views expressed do not constitute investment or any other advice /recommendation /suggestion and are subject to change. Reliance upon information in this material is at the sole discretion of the reader. Opinions expressed in the report do not represent the opinion of ZuluTrade Copy Trading Platform and do not constitute an offer or invitation to anyone to invest or trade.