The London session opened today with consecutive Manufacturing PMI from European countries, although all came out mostly in line, we did see EUR lost strength versus GBP & USD.
The reason could be the recovery from yesterday’s volatilities, also the month end inflow for EUR has completed.
Then UK released Manufacturing PMI which was in line.
Finally in NY session we had ADP Non-Farm Employment Change which came out as a positive deviation.
This of course continued to support USD as the overall market had recovered from yesterday’s risk off sentiment.
Then ISM Manufacturing PMI came out as positive number once again.
Finally we had the Crude Oil inventories before the end of London session to give us a large built up. This of course was negative for oil market.
Then the long awaited FOMC statement came out in the afternoon with everything as expected, the rate was unchanged and the statement had very little change as well.
Then the Asian session we saw Building Approvals m/m from AUD which was still less than previous but positive than expected.
The Trade Balance from AUD was also a positive surprise.
The equity markets were all green today from Asian Europe to NY, and WTI also went up regardless of the negative Crude built up.
We had an obvious risk on sentiment day and as mentioned yesterday, it was very likely to have a risk sentiment shifts from negative to positive from day to day. It was simply a cycle of the market.
Sentimentally, Japan is trying hard to explain to Donald Trump of their currency strategy. Nevertheless, the most important thing for Japan is to continue keeping their currency low - and if the U.S president is not happy about it, we might very well have a currency war soon to cause further volatility.
The fundamental fact is that FED is looking to raise rate while BOJ has no agenda to stop easing. How is that going to help the Trade Balance of U.S?
Same story applies to China & Europe.
I think Donald Trump will try hard to talk down dollars, but at the end we’ll have to see whether FED can still remain as an independent entity and as long as it can, dollar should keep going up fundamentally speaking.
My view for the market is that we’re entering into an area of uncertainty again.
Many currency pairs travelled within the range these days, and were all very responsive to the sentimental news or technical levels.
The reason is that although there are fundamental strength in certain currencies, but the policy makers are all bounded together geopolitically, so one country’s policy will greatly effect the other countries, and the mood swings from high to low from day to day.
As mentioned, in this kind of environment, it’s best to trade with intraday movement less than Daily chart, or trade long-term in weekly chart and ignore the sentimental noises.
The choice is up to your lifestyle.
For EUR (fundamentally bearish & sentimentally neutral)
it still reacts to dollar as counter parts so Friday NFP will either boost it up or tank it down,, depends on what happens to the result and how traders react to dollar.
For USD (fundamentally bullish & sentimentally bearish)
the fundamental picture today was actually very strong, because of the large growth in ADP numbers, we know expect a great NFP this Friday.
However, Dollar did not act accordingly to its fundamental strength these few days and you could see how it swings up and down because no one has enough confident to hold USD for long-term now, providing Donald Trump might come out anytime to talk it down again.
For CAD (fundamentally bullish & sentimentally bullish)
the large built of Crude Oil did not hurt the oil market because as mentioned, we now have a divergence between OPEC members and Shale Producers.
Further, CAD has enjoyed a good ride on the weakness of USD and will continue to outperform if USD continues to be weak.
For GBP (fundamentally bullish & sentimentally neutral)
UK Parliament had voted for the first round of moving Article 50 to the next stage, this was not a surprise as Parliament had already announced their willingness to trigger the Article 50. However, because of the highly sensitive response of the market nowadays, this will be considered either a positive or negative sentiment. The truth is we don’t really know so it’s best to go with the flow technically. Look out for the trend and ride it up.
Today we will have Construction PMI from UK but the main driver for UK will be the BOE rate decision.
We will have the interest rate decision, minutes of policy meeting and quarterly inflation report all released at the time.
The expectation is for BOE to hold the rate, but there is always possibility for them to hike the rate.
The fact is that the fundamental datas of UK had been promising after the Brexit, not only the GDP remains strong, the unemployment rate remains low, the manufacturing PMI remains high, industrial production raised up last time, the service PMI also raised up last time, business confidence also jumped last quarter, consumer confident also increased, the only thing that went down is the Retail Sales m/m and the inflation also went up.
So it really puts a concurrent picture that the biggest risk for UK is the inflation from the weak currency.
So if BOE think the UK economy is strong enough to withstand the short-term volatility, especially now UK has more leverage for trade deals with the world thanks to the new president of Donald Trump, he might raises the interest rate to specifically target the currency issue and help to reduce the inflation.
We still think today’s rate decision should be on hold, but there is higher chance for BOE to hike. And if you remembered correctly, there is only another nation that has the possibility to hike which is U.S
So this fact has somehow put GBP as another attractive currency to buy, fundamentally.
Sentimentally, it does have the issue of Brexit, but now the uncertainty looks more and more trivia in comparison to U.S president and Euro elections.
For AUD & NZD (fundamentally neutral & sentimentally neutral)
they both benefited by today’s risk on sentiment with NZD lagged behind due to previous negative employment data.
The positive datas we had just now in Asian session will certainty boost AUD even further, and if USD continues to be weak, then AUD will take a good lead over others.
The large export increases in AUD was due to commodity price, although this might not be sustainable, but this can very well boost the next GDP result and as for now, it shows positive sentiment for AUD.
For JPY & CHF (fundamentally bearish & sentimentally neutral)
it had been pressured by today’s risk on sentiment but as the sentiment shifts very fast nowadays, they might be strong tomorrow and we never know.
They both don’t have any major catalyst on their own either.
The strong buy for now will be
AUD due to the positive datas we just had over the Asian session.
CAD due to the resilient oil market and positive GDP datas previously
GBP due to the possibility of rate hike, positive fundamental datas and less uncertainty over Brexit now
The rest are mixed with fundamental bearish/sentimental neutral
USD still has the fundamental bullish but the sentiment is largely negative, so really a bit risky to get into now.
JPY & CHF are still good to sell upon risk off sentiment day.
EUR & NZD are neutral and will react to the market.
The London session opened today with consecutive Manufacturing PMI from European countries, although all came out mostly in line, we did see EUR lost strength versus GBP & USD.
The reason could be the recovery from yesterday’s volatilities, also the month end inflow for EUR has completed.
Then UK released Manufacturing PMI which was in line.
Finally in NY session we had ADP Non-Farm Employment Change which came out as a positive deviation.
This of course continued to support USD as the overall market had recovered from yesterday’s risk off sentiment.
Then ISM Manufacturing PMI came out as positive number once again.
Finally we had the Crude Oil inventories before the end of London session to give us a large built up. This of course was negative for oil market.
Then the long awaited FOMC statement came out in the afternoon with everything as expected, the rate was unchanged and the statement had very little change as well.
Then the Asian session we saw Building Approvals m/m from AUD which was still less than previous but positive than expected.
The Trade Balance from AUD was also a positive surprise.
The equity markets were all green today from Asian Europe to NY, and WTI also went up regardless of the negative Crude built up.
We had an obvious risk on sentiment day and as mentioned yesterday, it was very likely to have a risk sentiment shifts from negative to positive from day to day. It was simply a cycle of the market.
Sentimentally, Japan is trying hard to explain to Donald Trump of their currency strategy. Nevertheless, the most important thing for Japan is to continue keeping their currency low - and if the U.S president is not happy about it, we might very well have a currency war soon to cause further volatility.
The fundamental fact is that FED is looking to raise rate while BOJ has no agenda to stop easing. How is that going to help the Trade Balance of U.S?
Same story applies to China & Europe.
I think Donald Trump will try hard to talk down dollars, but at the end we’ll have to see whether FED can still remain as an independent entity and as long as it can, dollar should keep going up fundamentally speaking.
My view for the market is that we’re entering into an area of uncertainty again.
Many currency pairs travelled within the range these days, and were all very responsive to the sentimental news or technical levels.
The reason is that although there are fundamental strength in certain currencies, but the policy makers are all bounded together geopolitically, so one country’s policy will greatly effect the other countries, and the mood swings from high to low from day to day.
As mentioned, in this kind of environment, it’s best to trade with intraday movement less than Daily chart, or trade long-term in weekly chart and ignore the sentimental noises.
The choice is up to your lifestyle.
For EUR (fundamentally bearish & sentimentally neutral)
it still reacts to dollar as counter parts so Friday NFP will either boost it up or tank it down,, depends on what happens to the result and how traders react to dollar.
For USD (fundamentally bullish & sentimentally bearish)
the fundamental picture today was actually very strong, because of the large growth in ADP numbers, we know expect a great NFP this Friday.
However, Dollar did not act accordingly to its fundamental strength these few days and you could see how it swings up and down because no one has enough confident to hold USD for long-term now, providing Donald Trump might come out anytime to talk it down again.
For CAD (fundamentally bullish & sentimentally bullish)
the large built of Crude Oil did not hurt the oil market because as mentioned, we now have a divergence between OPEC members and Shale Producers.
Further, CAD has enjoyed a good ride on the weakness of USD and will continue to outperform if USD continues to be weak.
For GBP (fundamentally bullish & sentimentally neutral)
UK Parliament had voted for the first round of moving Article 50 to the next stage, this was not a surprise as Parliament had already announced their willingness to trigger the Article 50. However, because of the highly sensitive response of the market nowadays, this will be considered either a positive or negative sentiment. The truth is we don’t really know so it’s best to go with the flow technically. Look out for the trend and ride it up.
Today we will have Construction PMI from UK but the main driver for UK will be the BOE rate decision.
We will have the interest rate decision, minutes of policy meeting and quarterly inflation report all released at the time.
The expectation is for BOE to hold the rate, but there is always possibility for them to hike the rate.
The fact is that the fundamental datas of UK had been promising after the Brexit, not only the GDP remains strong, the unemployment rate remains low, the manufacturing PMI remains high, industrial production raised up last time, the service PMI also raised up last time, business confidence also jumped last quarter, consumer confident also increased, the only thing that went down is the Retail Sales m/m and the inflation also went up.
So it really puts a concurrent picture that the biggest risk for UK is the inflation from the weak currency.
So if BOE think the UK economy is strong enough to withstand the short-term volatility, especially now UK has more leverage for trade deals with the world thanks to the new president of Donald Trump, he might raises the interest rate to specifically target the currency issue and help to reduce the inflation.
We still think today’s rate decision should be on hold, but there is higher chance for BOE to hike. And if you remembered correctly, there is only another nation that has the possibility to hike which is U.S
So this fact has somehow put GBP as another attractive currency to buy, fundamentally.
Sentimentally, it does have the issue of Brexit, but now the uncertainty looks more and more trivia in comparison to U.S president and Euro elections.
For AUD & NZD (fundamentally neutral & sentimentally neutral)
they both benefited by today’s risk on sentiment with NZD lagged behind due to previous negative employment data.
The positive datas we had just now in Asian session will certainty boost AUD even further, and if USD continues to be weak, then AUD will take a good lead over others.
The large export increases in AUD was due to commodity price, although this might not be sustainable, but this can very well boost the next GDP result and as for now, it shows positive sentiment for AUD.
For JPY & CHF (fundamentally bearish & sentimentally neutral)
it had been pressured by today’s risk on sentiment but as the sentiment shifts very fast nowadays, they might be strong tomorrow and we never know.
They both don’t have any major catalyst on their own either.
The strong buy for now will be
AUD due to the positive datas we just had over the Asian session.
CAD due to the resilient oil market and positive GDP datas previously
GBP due to the possibility of rate hike, positive fundamental datas and less uncertainty over Brexit now
The rest are mixed with fundamental bearish/sentimental neutral
USD still has the fundamental bullish but the sentiment is largely negative, so really a bit risky to get into now.
JPY & CHF are still good to sell upon risk off sentiment day.
EUR & NZD are neutral and will react to the market.