Less Economic Data May Allow Markets To Remain Calm

After all the glory of the US presidential election and a heavily packed economic calendar, the US dollar posted a noticeable upside during the last two weeks. However, this present week has comparatively fewer details to track and the Thanksgiving holidays may curb forex moves. Let’s discuss the details.

Another Strong Week Passes

With the aftershocks of the Trump victory continuing to fuel optimism about the world’s largest economy, the US dollar managed to test nearly 14 year highs as market players now expect that the new administration will ease Fed rate hikes.

Adding to this, upbeat tone of the US Fed chair in her testimony, coupled with positive Retail Sales and CPI details, confirmed greenback bulls’ strength. The EUR remained weaker against the majority of its counterparts after the ECB president indicated an economic threat, and the upcoming political challenges in Italy, France and Germany restricted traders from favoring the regional currency.

Further, the GBP also dipped with the BoE governor’s not-so-strong message and sluggish data-points while the JPY plunged because of a dearth of safe-haven demand.

Additionally, commodity currencies couldn’t refrain from declining following Trump’s threats to China but crude prices managed to post a rally for the first time in four weeks after OPEC and Russia during an informal meeting in Doha signalled the likelihood of a production-freeze accord taking place during the next formal meet.

What To Look For Going Forward

Having discussed what caused last week’s market moves, now is the time to discuss some important details/events to be observed this week.

Inside the economic list, minutes of latest FOMC meeting, US Durable Goods Orders and Second Estimate of UK GDP are likely headliners that shouldn’t be missed, while EU Flash PMIs and Japanese inflation figures may generate intermediate trading opportunities.

To look more closely, FOMC minutes, up for Wednesday, aren’t likely to deviate from the present hawkish market sentiment and can provide additional information relating to who all are favouring the immediate rate-hike; however, some bears amongst policymakers may curb the greenback bulls’ strength. Further, Durable Goods Orders, up for release on the same day, is also expected to continue bolstering the greenback’s rise.

Hence, the USD is more likely to gain during this week as well. However the pace of advance could be slow and weaker outcomes may have higher repercussions after such a strong rally.

At EU, Flash Manufacturing & Services PMIs and German Ifo Business Climate are the only details that may give rise to short-covering of the regional currency in case these figures manage to post another round of strong numbers, which is less likely.

Japanese inflation figures are key to JPY traders who have been losing for two weeks, and weaker prints of the same CPI measures could become a cause of worry for the BoJ, which has been favouring weaker a JPY but couldn’t dream of such a plunge.

To sum up, with less economic data scheduled ahead of the Thanksgiving holidays, chances are that the market will remain calm, excepting a few spikes near the aforementioned releases. Hence, it would be better for investors not to push for further USD longs unless receiving strong signals.

Technical Talk

EUR/USD failed to dip below 1.0600 and might reverse to 1.0800 area if scheduled data points disappoint traders while a dip below 1.0600 could give rise to 1.0480. For GBP/USD, the pair is trading around the 1.2330 horizontal support and with 1.2560 and 1.2080 being important levels while USD/JPY is aiming 112 with 109.20 flashing as crucial support-point. Additionally, AUD/USD and NZD/USD are also trading at 0.7300 and the 0.7000 support-levels respectively with a bounce expected to target 0.7510 and the 0.7230 resistances.


Cheers and safe trading.


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