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Weekly Digest - Will the U.S. dollar continue its bullish momentum, and will the RBNZ lower rates?

Monday, November 11, 2019 12:56 PM GMT

Introduction

The past FX trading week provided welcome relief from some of the all-consuming, fundamental, economic issues and political narrative, which have dominated our forex markets over recent weeks and months. Brexit debate in the U.K. has been replaced by general election fever, the Trump impeachment proceedings have been replaced by healthy debate, surrounding a possible breakthrough in the China-USA tariff issue. In her first address as the President of the ECB, Christine Lagarde caused the euro to slip significantly versus its main peers, after she delivered a dovish, monetary policy, statement. 

A dominant week for the U.S. dollar 

The ZuluTrade Traders who remained long USD during the week, helped our Investors bank significant profits. You can drill down to find out which Forex Traders favor trading USD currency pairs and their historical success. In this listing and rating system, Investors can also evaluate which Traders match your ambitions and preferred the trading style and CopyTrade theirsstrategies. It’s imperative Investors experiment with and then put to use, many of the proprietary features and tools we’ve created. Our technical engineers have put in considerable effort to create features such as ZuluGuard which can have considerable benefits, if used correctly as a money-management tool, in conjunction with a comprehensive trading-plan, when you’re deciding on which Traders to follow. 

Trade Economic News at ZuluTrade

USD rises in correlation with several U.S. equity indices reaching record highs 

FX traders witnessed wide trading ranges in many pairs last week, particularly the major currency pairs, as the dollar reversed the losses incurred during the final week of October, after the FOMC cut the key interest rate in the USA by -0.25%. On a weekly basis EUR/USD fell by -1.33%, GBP/USD by -1.27% and AUD/USD by -0.78%. USD/CHF rose by 1.20% and USD/JPY by 1.02%. The rise in the U.S. dollar was in some ways counter-intuitive, as USA equity indices printed or approached record highs. It would appear that faith in the USA economy and dollar hegemony is gaining traction, the risk on sentiment has returned and is once again the dominant force.

The four hour time-frame, an excellent reference for swing-traders 

The four hour time-frame is a popular technical-analysis reference for many swing and position Traders. A reason for its popularity relates to it (approximately) chiming with the opening and closing of many trading-sessions. The bearish trend which EUR/USD has traded in over the past week, is clearly illustrated. The MACD is bearish and observations using the Heikin Ashi bars, reveals that sentiment during the week was consistently negative. However, the stochastics and the RSI are possibly indicative of a security that is now approaching oversold status. Therefore, Investors and Traders would be advised to consider the technical analysis on both lower and higher time-frames, in order to make their trading decisions. This website provides an excellent introduction for retail FX Traders, to the basics of technical analysis for FX markets 

Combining the ZuluTrade economic calendar with websites built for providing unbiased factual information 

For our ZuluTrade Traders and Investors who want to access an independent site, which has a library of facts on: forex, equity indices and commodities movements, this economics site provides an excellent resource and is worth keeping open in a tab on your p.c. or tablet when you’re trading.  You can cross-reference the economic calendar features and results with the impact on currency pair movements. The ZuluTrade economic calendar should also be referenced continually, as it allows you to fully customize the economic calendar events and data, to deliver information relevant to your Investor preferences. 

Trade Economic News at ZuluTrade

The high impact calendar events and data releases most likely to move the FX markets this week 

Monday November 11th begins with a series of data events that could impact the value of the U.K. pound. The latest GDP data series for the U.K. is published at 9:30am U.K. time, which Reuters forecast will reveal annual growth of 1.1%, falling from 1.3%. Monthly GDP is forecast to come in at -0.1% for September, which would represent a second, negative, monthly reading in series. Industrial production, manufacturing production and construction figures for the U.K., are all forecast to remain deeply mired in negative territory. 

The U.K. trade balance for September is also forecast to show a month on month deterioration. Overall, these combined figures, if all the predictions are met, won’t generate confidence in the U.K. economy, particularly if a Tory government wins a majority in the December 12th election and they rush through a no deal Brexit. 

Tuesday November 12th continues with high impact calendar data, relevant to the U.K. economy. The latest employment and unemployment data is published at 9:30am U.K. time. Reuters anticipate that a marked fall in employment will be revealed, down -102k on a rolling three month basis. Added to the previous reading of -56k analysts could extrapolate the data to predict that the U.K. employment numbers have peaked and employment is showing signs of structural weakness. Growth in U.K. earnings is forecast to remain unchanged at 3.8%. 

At 10:00am attention shifts to a series of ZEW economic sentiment readings, for Germany and the wider Eurozone. The German expectation survey is forecast to improve to -13 for November, from -22.8 in October. A reading which could impact on the value of EUR, if analysts and Traders determine the metric is bullish for the single currency trading bloc. 

Trade Economic News at ZuluTrade

Wednesday November 13th, during the Sydney-Asian trading sessions, New Zealand’s central bank the RBNZ will announce its latest decision on the key interest rate at 1:00am U.K. time. The widely held consensus, coming from Bloomberg and Reuters after they’ve polled their panels of economists, is for a cut in the rate to a record low of 0.75%. 

Attention will then quickly turn to the statement in the press conference from the central bank Governor at 2:00am. If the rate is cut then it’s a reasonable prediction that the kiwi dollar, NZD, will fall in value versus many of its main peers, if the rate cut hasn’t already been anticipated and priced in. NZD/USD fell by -1.53% weekly and is down -5.66% yearly, as a consequence of the RBNZ and FOMC monetary policy committees adopting opposing policies over the past year. 

Any Traders who specialize in trading the Antipodean currencies; AUD and NZD, would be advised to diarise this RBNZ event and take note that during times of low liquidity combined with increased volatility, whilst spreads widen, difficult trading conditions can be generated. 

Other notable calendar events on Wednesday morning include the latest CPI (inflation) figures for the U.K. and Germany. Germany’s CPI is expected to remain unchanged at 1.1%, with the U.K. falling to 1.6%. The theme of inflation data continues through to the New York trading session, at 13:30pm the CPI figure released for the USA is predicted to remain unchanged at 1.7%. Earnings are forecast to come in at 0.9% weekly on an annual basis up to October. A figure that should be concerning for analysts and institutional FX traders, because earnings would not be keeping up with inflation. However, in the current, bullish, risk-on environment for USA equities and USD, such fundamentals are likely to be ignored. 

At 16:00pm the Fed Chair Jerome Powell will deliver evidence in front of a joint committee at the congress, analysts will listen intently for any evidence of forwarding guidance. In late evening a series of eleven calendar events concerning the Japanese economy’s GDP will be published. Reuters predicts annual GDP to come in at 0.9% falling from 1.3%. A result that could affect the value of yen versus its main peer currencies. 

Thursday November 14th continues with the subject of GDP results, as the latest German GDP figures are published at 7:00am. The anticipation is for a figure of 0.8% annual growth to be delivered, rising from 0.00% annually in the previous quarter. Q3 is forecast to come in at 0.4%. These figures, if realized, could prove to be bullish for the euro, as any thoughts of an impending recession for the German economy will recede. At 10:00am the latest E.Z. GDP figure will be broadcast, forecast to come in unchanged at 1.1% year on year. 

Trade Economic News at ZuluTrade

Friday November 15th’s high impact events begin with Canada’s central bank Governor delivering two speeches in San Francisco, one at 2:15am and one at 2:45am. The timing of these speeches could prove critical in relation to the value of Canada’s dollar versus its peers. Depending on Governor Poloz’s narrative, CAD could rise or fall sharply, particularly during a time of low liquidity and increasing volatility. 

At 10:00am a series of Eurozone inflation figures will be released, currently, at 0.7% annually, there is little expectation from Reuters for any change. The E.Z. trade balance surplus for September, is forecast to fall marginally, to $18.7b from €20.3b. 

The afternoon session is dominated by both Canadian and U.S. economic data. The latest USA advanced retail sales data for October is revealed at 13:30pm, forecast to come in at at 0.2%, rising from -0.3%. Export prices fell by -1.6% in September, it’ll be interesting to note what impact the recent rate cuts have had on exports, presumably they’ll have fallen due to USD weakening marginally during previous months. However, as a consequence of a falling dollar imports will have become more expensive. 

Industrial and manufacturing production in the USA, is forecast to remain in negative territory at -0.4% for October, when the data is published at 2:00pm U.K. time, representing two successive months of contraction, which could suggest recessionary pressure is building in the globe’s largest economy. Evidence which could move the value of USD versus its main currency peers. Canada’s housing sector comes under scrutiny in the afternoon session; existing home sales are forecast to show a significant increase to 2.0% in October, from the previous month’s 0.6% reading.

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

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