Recap from last week of Feb 20th - Feb 26th
Lat week was relatively quiet for the economic calendar, there weren’t any major releases beside two monetary minutes from RBA and FOMC which both did not provide too much insight.
The market was largely sentimentally driven by politics and lots of uncertainty over French election and Donald Trump.
Both incidents had caused large inflow into safe heaven currencies, particularly Japanese Yen, which was also the winner for the week.
Fundamentally, the CPI datas from Canada on Friday had given CAD a nice push upward as now CAD has a good GDP, employment & CPI to complete the fundamental strength.
However, Crude inventories were another built, although lower than expected but still a 7th consecutive week of built.
Our current view are here:
For EUR
Fundamentally nothing has changed, the inflations, employments and GDP datas were all picking up well, but not good enough for ECB to change any policy. This has also been confirmed by ECB itself and ECB has not yet set to change anything about their QE. Because of this, EUR still remains as a fundamentally weak currency.
On top of the fundamental weakness, the French election has continued to feed uncertainty and panic into the Eurozone. The market has reacted to the polls with ups and downs, exactly like what had happened last year in Brexit. Over the weekend we had a much better polls for Macron which eased the nerves of the investors. We saw French 10 yrs bond yields fell to one month low.
However, because the political uncertainty is likely to remain and most importantly, it is not predictable nor within our control. We will only follow the fundamental facts and as for now, EUR remains a weak currency on our list to short.
For USD
Fundamentally USD is still looking strong with all the positive datas, and it is still the only currency that has any possibility for an interest rate hike in 2017. This alone has put USD in our buying list regardless of all other factors. Sentimentally, the back ups from FED members especially Chair Yellen have given USD another push upward. The negative sentiment from Donald Trump is still here and will always be here, and the market will always react excessively optimistic and pessimistic. The best way to trade is to really ignore those sentiments and focus on the facts, especially for a swing trader.
USD is still the most bullish currency to buy unless we have any fundamental changes.
For GBP
Fundamentally GBP is still holding well especially with a positive Second estimate of GDP last week, it really shows the resilient economy of UK. However, the higher inflation has slowly effected the consumptions and it has already reflected in those disappointed Retail Sales datas. But so far, everything else have been quiet positive fundamentally speaking.
Sentimentally, we still have equal amount of buyers and sellers with perhaps more sellers on the bearish side. As mentioned, GBP had already dropped significantly since Brexit, and many buyers are buying for the fact of its oversold. Buyers also think the high inflations will cause BOE to hike rate inevitably, which is very logic. Many large corporations are still investing in UK and took the advantage of GBP weakness to invest more. The facts that UK still remains the only English speaking country that is geographically advantageous for trades and business to European nations.
On the other hand, Sellers also want to sell because they think the retaliation of Eurozone to UK will be a fact, and UK will be isolated and eventually lose any voices globally as a geographically small country. They also think Scotland will seek another Referendum which is very possible and had already been the news for this weekend to cause another drop in GBP.
In our view, both buyers and sellers do make senses so we are still sentimentally neutral in GBP. Fundamentally the facts are still solid to support the UK economy and we do not want to predict the future, rather we want to trade what’s happening in front of us. Because of that, we sill remain a neutral stance in GBP and will short it against stronger currencies such as USD, AUD, NZD and CAD but buy it against weaker currencies such as EUR, JPY & CHF
For CAD
Fundamentally CAD is looking really nice with 3 major datas all being positive than expected; GDP, Employments & Inflations.
On top of that, BOC is most likely to remain their policy as last time the only concern was the NAFTA deal with U.S and ever since the meeting between Trump and Trudeau, the relationship seems to be working well.
Meanwhile, the fundamental strength from the oil market continues to help CAD. We don’t know how far the OPEC can cut and we also don’t know how strong the oil demands will be for this year, but as for now, the bullish strength is still strong and that will be the trend we follow. There are more and more investment fund are placing large bet in the futures market for oil surging.
For AUD
AUD is a more interesting case because fundamentally we haven’t seen anything that’s really positive, from GDP, Employments to Inflations. The only notable thing was the Trade Balance which was helped by the higher commodity price this year. As the demands from China plus speculations continue in Commodity markets, AUD will continue to be pushed higher.
This of course will eventually reflect in the GDP and is exactly what many people are hoping to see in this week’s GDP report.
Another strong fundamental reason to buy AUD was the confidence of the RBA. As one of the highest yield currencies, as long as the central bank is determined to keep their currency attractive, then there are always large buyers to park their money in.
Beside from that, Australia still enjoys the sentimental benefits as a country, with political stableness, attractive locations and housing markets, beautiful and peaceful natural sceneries etc.
For NZD
NZD is a much better currency in comparison to AUD fundamentally speaking, although this fact has not been shown in the price action yet, but we remain our positive outlook for NZD. The very big fact is that the economic recovery of NZD was based on real GDP, Employments and Inflations. Although it is a much smaller economy than AUD, but it also has less effect from the commodity speculation. We have seen last week when the commodity markets dropped, AUD also dropped significantly and that will always be the fact as AUD is a much speculative currency than NZD.
Sentimentally, NZD also enjoys the political stableness, attractive locations and housing markets. The only risk for NZD is ironically from their own central bank RBNZ which tried to jawboning the currency weeks ago. It is understandably that a low currency will help their trading, but fundamentally as the highest yield currency, buyers will always interested to put their money there. There aren’t any rate cut possibility for now, and therefore NZD is still on our buying list.
For JPY
JPY has been a strong currency this year due to all the political unstableness and safe heaven inflows. This effect will always be there but will always be hard to predict, therefore, we will still trade with the fundamental side of JPY but can always trade JPY for intraday risk event trade.
Fundamentally speaking, JPY still remains to be a very weak currency. The inflation is still way below the BOJ target, the consumption is also low and we just haven’t seen any signs of recovery for the economy of Japan. Japan is still struggling and will take years before we see any results. Meanwhile, the whole country still relies heavily on Exporting and therefore to have a low currency is vital for their economy.
For CHF
CHF is in the same spot as JPY but perhaps even worse, as a much smaller economy than Japan, with a much lower interest rate and much pessimistic central bank, on top of that, it is right within the Eurozone that is currently suffering from all the political unstableness. CHF still enjoys the safe heaven inflows just like Japan, but we think it is a more bearish currency than JPY especially for this year, unless all the elections in Europe have passed - and we sill have a Eurozone after that.
This week’s Tradable events for us are here:
Tuesday Feb 28th
USD Prelim GDP q/q
Max 2.3%
Min 1.7%
Wednesday March 1st
GBP Manufacturing PMI
Max 56.5
Min 54
CAD BOC Rate Statement & Overnight Rate
Max 0.5%
Min 0.5%
USD ISM Manufacturing PMI
Max 58
Min 55
Thursday March 2nd
CAD GDP m/m
Max 0.5%
Min 0.1%
Friday March 3rd
GBP Service PMI
Max 55.9
Min 53
USD ISM Non-Manufacturing PMI
Max 58
Min 55.5
USD Fed Chair Yellen Speaks
Recap from last week of Feb 20th - Feb 26th
Lat week was relatively quiet for the economic calendar, there weren’t any major releases beside two monetary minutes from RBA and FOMC which both did not provide too much insight.
The market was largely sentimentally driven by politics and lots of uncertainty over French election and Donald Trump.
Both incidents had caused large inflow into safe heaven currencies, particularly Japanese Yen, which was also the winner for the week.
Fundamentally, the CPI datas from Canada on Friday had given CAD a nice push upward as now CAD has a good GDP, employment & CPI to complete the fundamental strength.
However, Crude inventories were another built, although lower than expected but still a 7th consecutive week of built.
Our current view are here:
For EUR
Fundamentally nothing has changed, the inflations, employments and GDP datas were all picking up well, but not good enough for ECB to change any policy. This has also been confirmed by ECB itself and ECB has not yet set to change anything about their QE. Because of this, EUR still remains as a fundamentally weak currency.
On top of the fundamental weakness, the French election has continued to feed uncertainty and panic into the Eurozone. The market has reacted to the polls with ups and downs, exactly like what had happened last year in Brexit. Over the weekend we had a much better polls for Macron which eased the nerves of the investors. We saw French 10 yrs bond yields fell to one month low.
However, because the political uncertainty is likely to remain and most importantly, it is not predictable nor within our control. We will only follow the fundamental facts and as for now, EUR remains a weak currency on our list to short.
For USD
Fundamentally USD is still looking strong with all the positive datas, and it is still the only currency that has any possibility for an interest rate hike in 2017. This alone has put USD in our buying list regardless of all other factors. Sentimentally, the back ups from FED members especially Chair Yellen have given USD another push upward. The negative sentiment from Donald Trump is still here and will always be here, and the market will always react excessively optimistic and pessimistic. The best way to trade is to really ignore those sentiments and focus on the facts, especially for a swing trader.
USD is still the most bullish currency to buy unless we have any fundamental changes.
For GBP
Fundamentally GBP is still holding well especially with a positive Second estimate of GDP last week, it really shows the resilient economy of UK. However, the higher inflation has slowly effected the consumptions and it has already reflected in those disappointed Retail Sales datas. But so far, everything else have been quiet positive fundamentally speaking.
Sentimentally, we still have equal amount of buyers and sellers with perhaps more sellers on the bearish side. As mentioned, GBP had already dropped significantly since Brexit, and many buyers are buying for the fact of its oversold. Buyers also think the high inflations will cause BOE to hike rate inevitably, which is very logic. Many large corporations are still investing in UK and took the advantage of GBP weakness to invest more. The facts that UK still remains the only English speaking country that is geographically advantageous for trades and business to European nations.
On the other hand, Sellers also want to sell because they think the retaliation of Eurozone to UK will be a fact, and UK will be isolated and eventually lose any voices globally as a geographically small country. They also think Scotland will seek another Referendum which is very possible and had already been the news for this weekend to cause another drop in GBP.
In our view, both buyers and sellers do make senses so we are still sentimentally neutral in GBP. Fundamentally the facts are still solid to support the UK economy and we do not want to predict the future, rather we want to trade what’s happening in front of us. Because of that, we sill remain a neutral stance in GBP and will short it against stronger currencies such as USD, AUD, NZD and CAD but buy it against weaker currencies such as EUR, JPY & CHF
For CAD
Fundamentally CAD is looking really nice with 3 major datas all being positive than expected; GDP, Employments & Inflations.
On top of that, BOC is most likely to remain their policy as last time the only concern was the NAFTA deal with U.S and ever since the meeting between Trump and Trudeau, the relationship seems to be working well.
Meanwhile, the fundamental strength from the oil market continues to help CAD. We don’t know how far the OPEC can cut and we also don’t know how strong the oil demands will be for this year, but as for now, the bullish strength is still strong and that will be the trend we follow. There are more and more investment fund are placing large bet in the futures market for oil surging.
For AUD
AUD is a more interesting case because fundamentally we haven’t seen anything that’s really positive, from GDP, Employments to Inflations. The only notable thing was the Trade Balance which was helped by the higher commodity price this year. As the demands from China plus speculations continue in Commodity markets, AUD will continue to be pushed higher.
This of course will eventually reflect in the GDP and is exactly what many people are hoping to see in this week’s GDP report.
Another strong fundamental reason to buy AUD was the confidence of the RBA. As one of the highest yield currencies, as long as the central bank is determined to keep their currency attractive, then there are always large buyers to park their money in.
Beside from that, Australia still enjoys the sentimental benefits as a country, with political stableness, attractive locations and housing markets, beautiful and peaceful natural sceneries etc.
For NZD
NZD is a much better currency in comparison to AUD fundamentally speaking, although this fact has not been shown in the price action yet, but we remain our positive outlook for NZD. The very big fact is that the economic recovery of NZD was based on real GDP, Employments and Inflations. Although it is a much smaller economy than AUD, but it also has less effect from the commodity speculation. We have seen last week when the commodity markets dropped, AUD also dropped significantly and that will always be the fact as AUD is a much speculative currency than NZD.
Sentimentally, NZD also enjoys the political stableness, attractive locations and housing markets. The only risk for NZD is ironically from their own central bank RBNZ which tried to jawboning the currency weeks ago. It is understandably that a low currency will help their trading, but fundamentally as the highest yield currency, buyers will always interested to put their money there. There aren’t any rate cut possibility for now, and therefore NZD is still on our buying list.
For JPY
JPY has been a strong currency this year due to all the political unstableness and safe heaven inflows. This effect will always be there but will always be hard to predict, therefore, we will still trade with the fundamental side of JPY but can always trade JPY for intraday risk event trade.
Fundamentally speaking, JPY still remains to be a very weak currency. The inflation is still way below the BOJ target, the consumption is also low and we just haven’t seen any signs of recovery for the economy of Japan. Japan is still struggling and will take years before we see any results. Meanwhile, the whole country still relies heavily on Exporting and therefore to have a low currency is vital for their economy.
For CHF
CHF is in the same spot as JPY but perhaps even worse, as a much smaller economy than Japan, with a much lower interest rate and much pessimistic central bank, on top of that, it is right within the Eurozone that is currently suffering from all the political unstableness. CHF still enjoys the safe heaven inflows just like Japan, but we think it is a more bearish currency than JPY especially for this year, unless all the elections in Europe have passed - and we sill have a Eurozone after that.
This week’s Tradable events for us are here:
Tuesday Feb 28th
USD Prelim GDP q/q
Max 2.3%
Min 1.7%
Wednesday March 1st
GBP Manufacturing PMI
Max 56.5
Min 54
CAD BOC Rate Statement & Overnight Rate
Max 0.5%
Min 0.5%
USD ISM Manufacturing PMI
Max 58
Min 55
Thursday March 2nd
CAD GDP m/m
Max 0.5%
Min 0.1%
Friday March 3rd
GBP Service PMI
Max 55.9
Min 53
USD ISM Non-Manufacturing PMI
Max 58
Min 55.5
USD Fed Chair Yellen Speaks