Introduction
Last week was a challenge for the ZuluTrade Traders and Investors who remained bullish the U.S. dollar, as the globe’s reserve currency gave back some of the significant gains recorded during previous weeks. The dollar index, the DXY, closed out the week down -0.36%, EUR/USD up 0.34%, GBP/USD up 1.03% and USD/CHF down -0.77%. In a standard, correlated, move, the main USA equity indices soared to record highs, despite the trading volatility being relatively low. The VIX index, often referred to as the “fear index”, remained subdued and trading close to two year lows at 12, meanwhile, overall trading volumes for November are close to multi-decade lows.
The SPX index recorded its 29th session gain on Friday November 15th, the longest winning streak since 2005. The pattern which has developed since 2008-2009; a low VIX negatively correlating with rising markets, with investors having the confidence to buy every short-lived dip, appears to be underpinning the overall risk-on sentiment. The SPX is up 24.48% and the NASDAQ up 28.71% year to date in 2019, representing a significant turnaround from the November-December 2018 sell-off, caused by the China-USA trade war and tit for tat tariff reprisals.
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An interesting observation has developed in analyst circles, as references are being made to the Hindenburg Omen. The Hindenburg Omen is a technical indicator designed to predict the increased probability of a stock market crash. It compares the percentage of new 52-week highs versus new 52-week lows, to a predetermined reference percentage to predict the increasing likelihood of a market crash.
RBNZ takes forex markets by surprise as they keep the interest rate at 1.00%
Our ZuluTrade Copytrading community of Investors had many opportunities to profit from our Traders’ signals last week, as significant forex market movements were witnessed, which corresponded in text-book fashion with the high impact calendar news releases. In last week’s weekly digest we highlighted the RBNZ interest rate decision on November 13th as a potential opportunity to bank profits. The New Zealand central bank took forex Traders and Investors by surprise, when they kept the interest rate at 1.00%.
As stressed during our previous weekly digest; when high impact decisions are broadcast during times of low liquidity and relatively low forex trading volume, the market reaction can be extreme.
That phenomenon and movement is clearly illustrated on the following chart for NZD/USD.
Australian employment, unemployment and inflation figures spooked forex markets
The kiwi dollar wasn’t the only antipodean dollar to experience a significant change in direction during last week’s forex trading, as a consequence of the publication of high impact data, which missed analysts’ forecasts. On November 14th, the latest Australian employment and unemployment figures, combined with rising inflation, spooked investors, causing a significant sell-off in AUD/USD, as price slumped through the third level of support, S3.
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There were 19k jobs lost in October versus the expectation of 15k created and 10.3k full-time jobs lost, as a consequence, the unemployment rate rose to 5.3%. Inflation expectations came in at 4% for November, versus 3.6% previously. Similar to the reaction experienced by NZD/USD as the high impact data was revealed, the fall in the value of AUD versus all its main peers, highlighted why Traders and Investors need to develop both fundamental and technical analysis skills in order to bank profits.
It’s also imperative that the ZuluTrade community put our unique, proprietary, tools to use. These features can have considerable benefits on your bottom line profitably, if applied to your trading-plan effectively and efficiently. For example, the Traders’ Combos features allow Investors to spread their risk and trades amongst several profitable Traders, selected by our algorithm.
If you prefer a more hands-on investment approach into the forex market through copy-trading, then it’s essential that you develop your own method to decide which Traders you’d prefer to follow. The day to day rankings are listed here, however, there’s a wealth of detail and criteria by which you can judge ZuluTrade Traders’ performance.
Economic calendar events and data releases for the coming week likely to impact on markets
From time to time there are outlier political events that can dramatically affect the value of a currency. On Tuesday evening at 8:00pm the first of several head to head general election discussions will take place on one of the main U.K. television channels. Hosted by ITV, this discussion could cause the value of sterling to oscillate, if the mainstream media develops an opinion that one or other, of Jeremy Corbyn or Boris Johnson, has dominated the proceedings.
Monday November 18th witnesses the German Bundesbank publish its latest economic report at 11:00am U.K. time, a report which could impact on the value of the euro, dependent on how bullish, or bearish the report is. Other than bond sales the most prominent data release concerning the USA economy is the latest NAHB housing index, forecast to remain unchanged at 71 for November, when the result is published at 15:00pm.
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Tuesday November 19th at 12:30am sees the Australian central bank the RBA publish its minutes from the November rate setting meeting, a publication that could affect the value of AUD. Naturally, analysts and Traders will examine the report to ascertain the overall dovish and hawkish nature of the report and how united the central bank’s decision making is. At 13:30pm Canada’s latest manufacturing sales statistic is predicted to reveal a fall to -0.5% for September.
From the USA the latest available housing permits and starts statistics are forecast by Reuters to reveal a marked improvement; starts to rise by 4.9% in October from a fall of -9.3% in September, with permits rising to -0.8% from -2.7%. Such figures could provide a further boost to equity markets and U.S. dollar values, if the consensus reached is that the USA economy’s growth isn’t necessarily limited to the financial sector.
In late evening the Aussie dollar could experience increased trading volume as the latest Westpac bank, leading index reading, for the Australian economy covering October is revealed. Later in the Sydney-Asian session the latest Japanese trade balance data is forecast to show a dramatic improvement; from -¥123b to ¥301b in October. However, any bullish appetite for yen could be tempered if exports come in as forecast at -7.5% and imports at -15.4% year on year up to October. Such dismal figures (if met) could indicate that Japanese manufacturing is set for a significant contraction and readjustment.
Wednesday November 20th begins with the ECB publishing its financial stability report at 9:00am U.K. time. This report can impact on the value of the euro, depending on the narrative contained therein. Canada’s latest inflation data (CPI) is delivered at 13:30pm, Reuters forecast the annual inflation rise will come in at 1.9%, with the monthly figure coming in at 0.3% for October, rising from -0.4% in September. This inflation data could cause the value of CAD to alter, depending on the figure and its immediate translation by analysts.
During the later stage of the New York session the minutes from the last FOMC rate setting and policy meeting are published at 7:00pm U.K. time. The Fed/FOMC cut the interest rates by 0.25% at the recent meeting, analysts and traders will quickly scour the report for any forward guidance clues in relation to monetary policy, over the short to medium term.
Thursday November 21st in the Asian trading session, the latest credit card spending metrics for New Zealand are published at 2:00am, which could reveal levels of consumer optimism. Japan’s all industry activity reading for September is revealed at 4:30am, forecast to show a marked improvement to 1.5% from 0.00%, the reading could alter the value of JPY versus many of its peers.
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During the early stages of the London trading session, at 9:30am, a series of metrics concerning U.K. government, public-sector borrowing is delivered by the U.K. ONS. There is no significant change anticipated by the news agencies Reuters or Bloomberg. However, due to the fluidity of breaking general-election news, any changes could have a disproportionate impact on the value of sterling.
The euro will come under close scrutiny during the London-European session, when at 10:00am the latest OECD report on the Eurozone economic outlook will be published. The German central-bank the Bundesbank will also publish its stability report and at 12:30pm the minutes from the last ECB monetary policy meeting will be released.
In the afternoon session the Governor of the bank of Canada Steven Poloz will have a live interview in Toronto at 13:40pm, which could alter the value of CAD versus its main peers. At 15:00pm euro consumer confidence readings are revealed, as are the latest home sales data in the USA for October. At 22:00pm a series of PMI results for the Australian economy is published and shortly after Japan’s latest CPI figure is predicted to show a rise to 0.3% from 0.2%, a result which could impact on the value of JPY.
Friday November 22nd is a day dominated by mainly euro related news. Germany’s GDP growth is predicted to remain unchanged at 1.0% YoY, with Q3 coming in at 0.1%. At 8:00am the newly appointed president of the ECB, Christine Lagarde, delivers her second major speech in Frankfurt. Her maiden speech delivered a fortnight back, caused a sharp sell-off in the euro, therefore, Traders and Analysts should carefully monitor their positions during her speech.
During the London-European session a slew of IHS Markit PMIs are published for the Eurozone, (specifically Germany) and the U.K. economy. The various E.Z. metrics are not expected to alter by any significant degree. Focus may be more intense on the U.K. PMIs, based on the fact that the U.K. manufacturing and construction sectors are currently in recession. Services is the leading economic sector for U.K. and the PMI is predicted to come in right on the 50 level for the second month is series, which separates contraction from expansion.
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In the afternoon New York trading session the latest monthly Canadian retail sales are forecast to come in unchanged month on month, at 0.1% growth for September. Thereafter, from 14:45pm PMIs for the USA are published; services, manufacturing and the composite reading, are forecast to demonstrate improvements.
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.