Market Review: United States Core Consumer Price Index
Economic calendar (highest volatility): 9th April– 13th April 2018:
Timezone: (GMT -5:00) Eastern Time (U.S & Canada), Bogota, Lima
In the previous week, the United States (U.S) March 2018 Non-Farm Employment Change (NFP) was released and results fell below expectations at 103k (Forecast: 193k). This instantly led to further weakness for the U.S Dollar (USD) as reflected by the USD Index (DXY) which erased all gains made during the earlier half of the week, bringing the DXY back to the low 90 level. This adds consistency to our view that there is an apparent ‘buy on rumour sell on fact’ play for the USD, suggesting that ‘protectionist’ and 'geopolitical' issues are of a larger concern to the market compared to Interest Rate hike optimism. Formerly, U.S President Trump signed a memorandum imposing wide-ranging tariffs of up to U.S$60 billion on China; following previously imposed tariffs on steel and aluminium imports. China has since retaliated with the introduction of it's own tariffs on imports on 128 U.S products. Last week, U.S President Trump further rattled markets by announcing the possibility of an additional U.S$100 billion worth of tariffs to be imposed against China. The team here at FintechFX will continue to monitor these developments and further analyze the potential of a heavier 'trade war' taking place and the implications it would bring on currencies.
In regards to this week, there is a chance for another 'buy on rumour, sell on fact' move again for the USD approaching the mid-week's U.S March 2018 Consumer Price Index (CPI); - the economic release of the week which is anticipated to bring about the most trading volatility. In addition to this, the U.S Federal Open Market Committee (FOMC) Meeting Minutes will also be released during the same timeframe making the mid-week trading timezone a major volatility period. On a softer note, several speeches out of Central Bank Governors globally namely Lowe, Kuroda, & Carney also stand to bring about some strength for the currency they represent in our opinion given the current market sentiment on the USD.
The GBP/USD can easily be crowned as one of 2018's star performer; the pair is seen to have recouped much of it's post-Brexit losses as indicated in the strong uptrend visible in the chart below. The Bank of England (BoE) has cautioned that akin to the U.S, the BoE may also raise Interest Rates faster than expected. This statement sparked some optimism for GBP/USD prices as this message was reaffirmed during the BoE Interest Rate Decision meeting recently; the markets are now pricing in for a rate hike to take place sometime this May 2018. The team here at FintechFX views that at least the "buy on rumour" move seems to be holding strong for now as indicated by the well validated support line as shown in the chart below.
The USD/JPY which is regarded as a safe haven currency frequently correlates with the movements of Gold and the Swiss Franc (CHF). Gold is seen to have erased quite a bit of it's losses post the American NFP and with the CHF testing a crucial resistance level, the USD/JPY comes of interest to the team here at FintechFX. This week, price seems to loom steadily above the crucial 23.6% Fibonacci level. The team views that a potential break past this level could well bring the USD/JPY back to the 105 level once again following growing negative geopolitical sentiments and the potential for weaker American economic data moving forward amidst growing trade restrictions.
Source (Charts): https://www.investing.com
Source (Economic Calendar): https://www.forexfactory.com/calendar.php
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