MARKET REVIEW: US Quarter Final Gross Domestic Product
Economic calendar (highest volatility): 25th June – 29th June 2018:
Timezone: (GMT -5:00) Eastern Time (U.S & Canada), Bogota, Lima
This month, the United States (U.S) Federal Open Market Committee (FOMC) raised Interest Rates as largely anticipated, bringing up the benchmark rate to 2% from the former 1.75% level. Interestingly while this decision largely met forecast, the tone of the regulators suggest that two more U.S Interest Rate hikes are likely to take place this year. This brought about sustenance in the U.S Dollar's (USD) value and avoidance of a 'sell on fact' currency play, as the formerly vague expectations for four Interest Rate hikes to take place this year has now been largely reaffirmed. The U.S Dollar Index (DXY) currently hovers at the 94 level, up from the 93 level before the FOMC Interest Rate hike decision and now looks highly likely to resume its uptrend.
Nonetheless to keep risk factors well in check, the team here at FintechFX view that political risk related issues might still stand to deter the rise of the USD. While the Trump and Kim meeting which took place in Singapore recently seemed to have went well, the U.S seems to be transiting towards forming a pretty frothy relationship with China and Canada and as of late, even the European Union. Last week, President Trump tweeted: "if [EU trade tariffs] are not soon broken down and removed, we will be placing a 20% Tariff on all of their cars coming into the U.S. Build them here!”. This tweet was said to be in response to the EU's decision to slap tariffs on U.S$3 billion worth of U.S goods, some specifically targeted at industries associated with the U.S president.
In reflection of President Trump's exchange with Canada and China, the U.S president formerly quoted that Canadian Prime Minister Justin Trudeau is a "very dishonest and weak" individual. In regards to China, the American President 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. Last week, a 25% tariff on 818 Chinese goods totalling up to US$50 billion was officially released.
In regards to this week, the team here at FintechFX views the Final U.S First Quarter (Q1) Gross Domestic Product (GDP) to be the prime volatility driver. In addition to this, the team views for some added volatility to affect the United Kingdom (U.K) and Canada as these countries GDP numbers are scheduled for release as well. This week, the Great Britain Pound (GBP) continues to be our currency pick as well following our now validated view on where we witnessed several Bank of England (BoE) committee members shift their stance towards an Interest Rate hike; following a more hawkish tone out of the U.S and as the U.K country inflation levels approach the 2% target level. Nonetheless in regards to our currency trading picks, the Reserve Bank of New Zealand (RBNZ) which will be releasing their Interest Rate Decision as well as the Canadian Dollar (CAD) which now trades close to a key resistance level are our two favourites for the week as explained further below.
This week, the NZD/USD presents traders with some trading opportunity as an Interest Rate Decision out of the Reserve Bank of New Zealand's (RBNZ) is scheduled for announcement. Technically, the NZD/USD is sitting on a strong yearly support line which squeezes between the Fibonacci / Dow level of 50.0% as shown in the chart below. The team here at FintechFX opine that given the recent tone of other central bankers whom country's interest rates still largely fall behind the pace of increase indicated by their American counterparts, the team here at FintechFX opine that the RBNZ is also expected to deliver their upcoming policy statements on a more hawkish note.
This week for the USD/CAD, the team here at FintechFX views that if well supported by positive Canadian GDP numbers, there is a strong chance for a sell-down to take place for the USD/CAD following the move of USD/CAD towards a key Fibonacci resistance level, specifically around 1.3370. There is also another key long-term resistance level around the high 1.34 zone, further supporting our view for a higher chance of depreciation rather than appreciation for the USD/CAD. As of late, the Canadian Dollar (CAD) has largely been affected by two catalyst, notably the political statements made out of the U.S and the fall in global oil prices; both factors which are viewed to achieve some stability soon.
Source (Charts): https://www.investing.com
Source (Economic Calendar): https://www.forexfactory.com/calendar.php
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