Market Review: Reserve Bank of Australia Cash Rate Decision
Economic calendar (highest volatility): 4th May – 8th June 2018:
Timezone: (GMT -5:00) Eastern Time (U.S & Canada), Bogota, Lima
In the previous week, the United States (U.S) Dollar (USD) managed to retain its strength as indicated by the U.S Dollar Index (DAX). The DAX hovered around the 94 level and drew support mainly from the May 2018 U.S Non-Farm Employment Change (NFP) numbers. The May 2018 U.S NFP came out well ahead of expectations at 223k while the unemployment rate fell further to just 3.9%. The risk-on trade which triggered a sharp rally in the USD/JPY might bring about some correctional opportunities this week as other pairs did not move in a similar manner against the USD.
This week in lack of market moving U.S data, the prime volatility drivers in view by the team here at FintechFX would be the Reserve Bank of Australia’s (RBA) Cash Rate Decision. Regardless whether they will be a hawkish or Dovish statement made, or whether there will be an actual Interest Rate hike or not, markets generally tend to move during such decisions. Therefore, the team here at FintechFX urges our readers to be early in picking up these trading cues in order to be able to catch a formation of any particular fresh trend. In addition to this, there will be two Gross Domestic Product (GDP) releases namely the First Quarter (Q1) of 2018 Australian and European GDP which might ignite some trading volatility in these respective currency pairs.
In addition for this week, the team here at FintechFX opines that European Central Bank (ECB) Mario Draghi speech in Frankfurt could bring about an unanticipated spike in trading volatility. Markets are concerned on the wellbeing of the European Union (EU) as Italian banks face some stress due to the rising Italian debt yields. There are whispers of a possible relection to take place and such an indication if made this week, could be a dark horse in triggering primary volatility especially for the case of the Euro, which can most definitely trade further downwards.
Other economic data release this week includes a slew of PMI data for Eurozone, France and Germany. Chinese trade data will also be released which is set to loom large with U.S. negotiators in Beijing. In Japan, the focus is on whether a revision to first-quarter GDP would show that the economy extended on a growth streak or stumbled, as preliminary data indicated.
The team here at FintechFX note that U.S President Trump's ‘protectionist’ stance and hovering 'geopolitical' issues stand to deter our views. The Trump administration showed no sign of backing down from restrictive tariffs in the face of pushback from allies and China over the weekend, isolating the U.S. and complicating the president’s meeting later this week with leaders of Washington’s staunchest partners.
This week, the AUD/USD presents traders with some trading volatility as there stands to be two crucial AUD related data scheduled for release namely the RBA Interest Rate Decision and the Australian Q1 2018 GDP. The Australian Dollar (AUD) in our opinion, is still highly undervalued and shows some signs of rising this 2018. In the light of a potentially more hawkish statement moving forward, the market is looking at the AUD/USD to regain some of it's strength which has been lost throughout the years. Therefore for this week, the team here at FintechFX view some opportunity to buy the AUD/USD on some USD correction.
This week, the EUR/USD will certainly be subjected to some degree of volatility given the upcoming speech by European Central Bank (ECB) President, Mario Draghi where he is expected to address several concerns in regards to Italy. Formerly, the market focus for ECB's President Draghi's speeches were focused on the timing of when ECB's asset purchasing programme would be scheduled to come to an end as well as to pick up a clearer timeline for an Interest Rate hike. At present due to the situation in Italy, President Draghi's speech is expected to spur some confidence in regards to the bloc of countries once again. The team at FintechFX view that this could lead to a brief correction for the EUR/USD given that it was largely oversold last week as indicated in the chart below.
Source (Charts): https://www.investing.com
Source (Economic calendar): https://www.forexfactory.com/calendar.php
Source (Charts): https://www.investing.com
Source (Economic Calendar): https://www.forexfactory.com/calendar.php
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