Friday Report – May 12, 2017


Tons of economic development took place today, but as a Forex trader, here’s what you should know:

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  • Peru Central Bank (BRCP) cut rate from 4.25% to 4.00%.  Market was widely expecting a hold.  This is not a major impact event for the general market but a telling tale of situation in Peru and South America.  The last time BRCP changed rate was back in February of 2016 and it was last of 4 rate hikes that started in September of 2015.  It does seem economy is slowing down and inflation is not exerting the kind of pressure predicted previously.
  • Moody’s on Australia: In reference to Australia Treasurer Morrison updates of Federal Budget forecasts (below) Moody’s expect to see wider deficit than the government expects:
    • Australia Government Expected Deficit: 
      • Raises FY17/18 budget deficit from -A$28.7B to -A$29.4B
      • Raises FY18/19 budget deficit from -A$19.7B to -A$21.4B
      • Lowers FY1920 budget deficit from -A$10.0B to -A$2.5B
      • Raises FY20/21 budget surplus from A$0.4B to A$7.4B
    • Australia Government Expected Real GDP growth forecast:
      • Maintains FY17/18 GDP growth forecast at 2.75%
      • Maintains FY18/19 GDP growth forecast at 3.00%
      • Maintains FY19/20 GDP growth forecast at 3.00%
      • Sets FY20/21 GDP growth at 5.25%
  • (CN) China Vice Commerce Min Yu Jianhua: To discuss a 1-year economic cooperation plan with US; Looking to strengthen bilateral economic cooperation and hold further talks this summer.
    • US-China talks seen stabilizing global concerns about potential trade war.
    • Initial results of ongoing trade talks include increased access for US financial firms into China
    • China/US trade imbalance exists but is overestimated; not deliberately pursuing a trade surplus with US
  • (US) APR ADVANCE RETAIL SALES M/M: 0.4% V 0.6%E; RETAIL SALES EX AUTO M/M: 0.3% V 0.5%E
  • (US) APR CPI M/M: 0.2% V 0.2%E; CPI EX FOOD AND ENERGY M/M: 0.1% V 0.2%E; CPI INDEX NSA: 244.524 V 244.610E
    • CPI Y/Y: 2.2% v 2.3%e
    • CPI Ex Food and Energy Y/Y: 1.9% v 2.0%e 
  • (US) Fed’s Evans (dove, voter): US unemployment rate at 4.4% is really very good; real economy is doing well but inflation still running under 2% target is a difficulty
    • We should maintain accommodation to reach the inflation target
    • The Fed never seriously contemplated using negative rates
    • It’s time to start the normalization process.
    • The Fed is still discussing balance sheet exit strategy; normal size of the balance sheet will be substantially more than $800B (the pre-crisis level)

PUTTING IT ALL TOGETHER

USD is remaining strong and as we know USD is the counter currency of 85% of all Forex trades, therefore a stronger USD means weaker all other currencies, and this is abundantly clear versus Peruvian Sol.  A positive confirmation that the support on greenback is likely to continue and bias remains long for the USD.

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AUD remains soft with potential of further dips as news out of Australia is not very supportive of its currency.  Furthermore, with China taking it easy and as the largest trade partner with Australia, I do not expect to see a “pop” in AUD for the short-term.  Again, with USD remaining strong and AUD as a commodity currency based on metals (Gold, Silver), I would not hold LONG trades on the AUD for an extended period of time.

Moreover on the US front, with both CPI and Retail Sales figures missing estimates by just a bit, and the fact Fed Evans calling for maintaining policy accommodation, we could see a tiny window of opportunity to go LONG on USD if we see a drop.  BUY USDJPY would be a good choice as recent range of 114 is likely to be tested on any positive data out of US.

 

Thanks,

 

About Henry Liu

My name is Henry Liu and I am a Forex Trader and Mentor. I help traders achieve consistent income trading Forex while spending less time trading. My focus in trading is a combination of Fundamental Analysis, Technical Analysis, and Market Sentiment. Far too many retail Forex traders concentrate on just one aspect of trading, technical analysis, and ignore everything else; it is my goal (and vision) to educate every trader on how to take advantage of news trading and become more balanced traders.

You can find more information about me on my Google Profile.

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