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Weekly Digest - The highlights that will impact USD rates.

Tuesday, October 29, 2019 11:41 AM GMT

The previous week was relatively quiet for major economic calendar events and political developments, but that didn’t prevent major currency pairs moving in wide ranges, offering up tremendous opportunities for the ZuluTrade community to profit. A quick look at the weekly movements reveals that the USD made significant, stealth-like gains, throughout the trading week. On a weekly basis, EUR/USD closed down -0.82%, GPB/USD down -1.12%, AUD/USD down -0.51% and USD/CHF up 1.04%. The dollar index, DXY, closed the week out up 0.66%. 

Many trading mentors will suggest that markets range far more than they trend, some studies suggest that markets range by approximately 70-80% of the time. Last week, trying to separate the noise from the signal required a lot of skill, as the USD made gains versus its peers from mid-week onwards. However, as always, there were plenty of skillful ZuluTrade Traders and Investors who banked significant gains during the week’s trading sessions. 

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Accessing the Rankings, the ZuluTrade TradeWall and our Social Charts sections can reveal which Traders are on their game. As an Investor, you should ensure you derive maximum benefit from all these features, which our technicians and engineers have developed for your benefit. You should also take time to consider using the algorithmically selected  ZuluTrade Combos feature if you want to spread your risk across various Traders.

The U.S. equity markets are flirting with the recent record highs 

The U.S. dollar rose in tandem with the main U.S. equity markets which are (once again) threatening to print record highs. On a year to date basis, the Dow Jones Industrial Average is up 15.56% and the NASDAQ 100 is up 24.32%. The December 2018 sell-off, as a consequence of China-USA tariffs and the trade war, combined with fears that the economy had peaked, currently feels like a distant memory. The NASDAQ 100 is up 3.822% monthly, the tech heavy index has been sensitive to the positive developments regarding news from the Trump office; that the China-USA tariff impasse, maybe approaching a resolution. 

As an indication regarding the thawing of China-USA relations, the massive surge in Tesla stock last week took many equity investors by surprise, particularly those who had been short the stock for some time. Price rose by over 19% after hours on Wednesday, after Tesla reported third-quarter earnings per share of $1.86, down from $2.90 in the prior year, but way above the 46 cent loss analysts anticipated. Tesla generated revenue of $6.3 billion for the quarter, versus the $6.4 billion estimate. Many publications quickly doubted the surge would set a new course for Tesla.

The risk on optimism could fade quickly if investors pay attention to fundamentals 

The massive surge in Tesla’s stock price is a reminder of the relative stability and ease of trading when ZuluTrade’s Traders and Investors trade forex, commodities and equity indices, in comparison to the risk taken when trading or investing in individual stocks. The latest risk-on mood and appetite, which gripped equity markets last week, is a curious phenomenon considering some of the alarming USA economic data recently published. 

The U.S. deficit for 2019 came in last week at just under $1trillion, but based on current projections 2020 will see this milestone figure breached. In precise terms, the United States federal budget deficit has jumped 26% in the 2019 fiscal year to $984 billion, reaching a seven-year high, as the government was forced to borrow more money to pay for President Trump’s tax cuts and spending policy, according to the official figures revealed on Friday.  

Trade Economic News at ZuluTrade

The U.S. deficit, when measured on an annual rolling basis, is up 50% since Trump took office. The national debt is $22.6 trillion, having breached £20 trillion in February 2018, it’s clearly evident that both the debt and the deficit are accelerating at an unsustainable rate. Government debt v GDP in the USA is currently over 105%, when an 85% figure is generally regarded as a level where Treasury officials and central bank Governors, become concerned and suggest the implementation of austerity measures, to rein back fiscal and monetary spending. 

The tipping point of government debt v GDP, when the debt is greater than the combined annual GDP/turnover for a country, leaves classic, orthodox economists gasping for air, as it signals an economy that is quite frankly broken, if you use textbook orthodoxy. But the USA government, investors in USA government debt and banks bringing money into existence as debt, appear unconcerned regarding the warning signals and the inevitable comparison and parallels with the Great Recession. It’ll be interesting to observe what comments the FOMC publish relating to their October 29th-30th committee meeting, at the end of which they’re predicted to announce a rate cut, which would represent their third cut in series. 

The FOMC meeting is the standout calendar event of the week likely to impact on the USD  

As previously mentioned, the widely held prediction, after both Reuters and Bloomberg have polled their panels of economists, is for the FOMC to reveal a cut in the upper bound interest rate by 0.25%, from 2.00% to 1.75%. The announcement will be broadcast at 18:00 pm U.K. time on October 30th. Shortly thereafter, Jerome Powell, the Fed chair, will hold a press conference explaining and justifying the decision.

 The decision of the FOMC could be influenced by the latest GDP figures for the U.S. economy, due for release on October 30th at 12:30pm. The forecast is for a fall to 1.6% from 2.00% quarter on quarter, annualised for Q3. Such a figure would represent a significant fall from the 3.1% figure printed for Q1. When considered with the aforementioned: deficit, national debt and debt v GDP, such a fall in GDP might result in the FOMC making a more dovish statement than many analysts are anticipating. The committee might signal that any cut they implement isn’t the last in this current cycle, or before the year ends. Therefore, Traders and Investors in the ZuluTrade community should diarise these high impact calendar events, to ensure they’re positioned to profit. 

Trade Economic News at ZuluTrade

Traditionally, the first Friday of the month is the day when the latest NFP jobs numbers are printed by the USA BLS at 12:30pm. The forecast is for the creation of only 88k jobs in October, down from 136k in September, significantly below the yearly average. The most recently published NFP numbers are not moving the markets relating to USA securities, to any large extent. However, if the unemployment count creeps up according to Friday’s data and wages fail to rise, then analysts and institutional traders might mark down the USD. 

The October 31st Brexit date will cease to be critical for GBP, as focus turns to a general election 

Over recent weeks GBP/USD has oscillated in unison with Brexit movements, over and above any high impact calendar events. The trading range has been close on 1,000 pips, from 1.200 to 1.300 during October. The Brexit events that should be closely monitored this week.

Naturally, as Brexit events unfold, sterling will rise and fall versus its peers and It’ll be fascinating to witness how FX markets react to the extension, if it’s granted. Will a relief rally in GPB/USD occur, or will the markets consider that the recent highs represent a ceiling for optimism? Other notable calendar events published for the U.K. economy this week includes various statistics on personal credit and mortgage approvals, published on October 29th at 9:30am. Friday’s IHS Markit PMI for U.K. manufacturing is predicted to illustrate a sector still in recession, with October’s reading forecast to match September’s metric of 48.3. Such a figure, when combined with the latest poor services and construction PMIs and GDP at 0.00% for the month of September, could indicate the U.K. is close to a recession, perhaps causing a sell-off in sterling. 

Calendar events likely to impact on the value of the euro this week 

It’s a significant week for the Eurozone, beginning on Monday with the President of the ECB, Mario Draghi, giving a speech at 15:00pm in Frankfurt. French GDP is expected to show a fall to 1.3% when the data is published on October 30th at 6:30am, German unemployment is predicted to remain at 5.0% when the data is published in the same trading session, while German CPI is predicted to show a fall to 1.1.% YoY up to October. On Thursday the latest E.Z. CPI inflation is forecast to come in at 1.0% YoY up to October. The euro might rise in the afternoon session if Italian GDP comes in at 0.2% YoY, back into positive territory and taking the country out of recession. 


Other notable calendar events and data releases this week 

Canada’s latest interest rate decision by the BOC central bank will be announced at 14:00pm on October 30th, the anticipation is for no change to the current rate of 1.75%. Analysts will quickly turn to any accompanying statement to determine the sentiment towards the value of CAD. Canada’s GDP is forecast to show a rise to 1.4% YoY up to August, when the data is released on October 31st at 12:30pm. 

Trade Economic News at ZuluTrade

On October 30th, during the Australian-Asian session, the latest Australian CPI figure is expected to show a rise to 1.7%, a result which could affect the value of the Aussie dollar versus its main peers. A series of eight calendar events involving the Japanese economy is published on October 31st and will contain the latest interest rate decision from the bank of Japan, the expectation is for no change from the current -0.1% main rate.


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 Social Trading Platform and do not constitute an offer or invitation to anyone to invest or trade.

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