Awaiting US Data – Forex Trading Tips

We currently do not have any pending trade call. However, we are awaiting US data. Please watch my weekly Forex news events overview here in order to learn how to interpret it.

Current Sentiment:

Yesterday’s US session saw the dollar regain about half of the losses that were made earlier in the day. The dollar index is at 95.60 after making a low yesterday at 94.65. Most participants will await NFP before entering dollar positions.

There has been no data from the Asia-Pac session with AUD, NZD and JPY all remaining subdued. Aussie and Kiwi are up about 30 pips after making fresh lows late yesterday.

The London session is also expected to be light given there is little scheduled news. The Greek situation is ongoing and any authoritative comments could cause a move in euro.

Any news from the OPEC meeting may affect oil and in turn CAD.

Fundamentals:

The USD remains the strongest currency in the longer term. The recent CPI reading has reaffirmed USD strength amid speculation of a rate hike by September. This week’s NFP will be vitally important. Long positioning in the dollar over the past 18 months has been significant. This can cause aggressive downward moves in the USD, occasionally on the back of little fundamental data, as stop-losses are triggered.

The EUR remains fundamentally weak due to QE and the ongoing Greek debt issue. However recent inflation and unemployment numbers have signalled that a recovery is on track, which has given the currency positive sentiment. If Greece fails to make any of their imminent repayments, the euro will be pressured. Conversely, a deal with a solid resolution will precipitate a relief rally. Sentiment on EURUSD is bullish as positions that were entered into ahead of QE are unwound.

GBP is looking at a rate hike in the next 12 months. This week’s Services PMI was negative for the pound. However Cable regained its losses yesterday due to dollar weakness, only to fall again late in the session. Awaiting data.

AUD: Low commodity prices and a slowdown in China has put bearish pressure on the AUD, however the recent RBA statement did not include any specific mention of further cuts and stated that inflation is expected to remain within target. This, along with better than expected GDP, has provided bullish sentiment for the AUD and has shifted the currency to a more neutral stance fundamentally. The positive data from the first half of the week has been somewhat discounted by yesterday’s trade deficit and poor retail sales number.

NZD has a chance of decreasing interest rates next week. The Overnight Index Swap market is pricing a 51% chance of a June 11 cut. Several major banks predict a cut in both June and July, while NZIER expects the RBNZ to remain on hold for at least the rest of the year, as they believe the central bank cannot afford to boost the overheating housing market.

CAD remains on the weaker side of neutral. GDP last Friday was weak, prior to that CPI and Retail Sales were also weak. CAD will take most of its direction from any significant changes in the price of West Texas Intermediate crude oil. When there is no oil-related news, the oil price will generally move with negative correlation to the USD.

JPY remains bearish due to QQE. Yen weakness has accelerated recently on the back of USD strength. Yen is at a 12-year low against the dollar. Sentiment on the JPY can turn bullish quickly if there is major uncertainty in the markets. Language from the BOJ shows they believe a recovery is beginning and QQE is having its intended effect.

CHF is fundamentally a weaker currency given the SNB’s negative interest rates, however it is highly susceptible to volatility due to SNB potentially intervening to weaken the currency as it tends to strengthen on safe-haven demand. CHF often will take direction from the EUR with which its correlation over the last 50 trading days is 74%.

Technicals:

We will be monitoring levels of support and resistance in unison with any impactful news and the underlying fundamentals in order to find a high probability trade. Support and resistance includes previous highs and lows (horizontal s/r), trendlines, moving averages, Fibonacci retracements, daily pivot levels and round numbers. These levels of support and resistance are most effective when there are several of them converging at the same area (confluence).

The post Awaiting US Data – Forex Trading Tips appeared first on Jarratt Davis.

Source:: Awaiting US Data – Forex Trading Tips