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Asian FX Outlook: USD fails to capitalize on PPI, US retail sales/CPI up next

Written Ivan Delgado | 2017-11-14 18:19:08 GMT
  • The US Dollar back-pedals early strength post an upbeat US PPI to end NY fragile as the market has second thoughts, mainly due to rising EUR.
  • EUR main story of the day, rising towards 1.18 USD, boosted by EZ data, including a rise in German and Italian GDP readings. 
  • US Congress continues to examine the proposed tax reform bill, although US CPI and retail sales to garner all the attention on Wed.
  • UK employment data will gather plenty of headlines on Wed too, following a slight miss in British inflation figures on Tues, which adds to the conundrum faced by the BoE. 


Upcoming events

  • Japan's Q3 GDP QoQ is coming up next, with the data expected to come at 0.3% vs 0.6% prev; Q3 GDP capital expenditure is also seen softer at 0.3% vs 0.5% prev.
  • In Australia, Nov Consumer sentiment is due, but main focus on wage price index QoQ, expected to come at 0.7% vs 0.5% prev 
  • RBA Assist Governor Ellis speaks about the future of economic growth in Melbourne, with Q&A expected. 
  • UK employment figures due, with average earning as the critical numbers to dive into
  • In European hours, Chicago Fed President Charles Evans speaks in London.
  • ECB's Praet gives a speech in Frankfurt.
  • BoE Chief Economist Haldane speaks in Frankfurt.
  • In early US hours, US CPI and retail sales will be the main events for Wed. 
  • BoE Deputy Gov Ben Broadbent speaks in London.
  • Late in the US session, Boston Fed President Eric Rosengren speaks in Boston.
  • The Russian Oil Minister is set to meet Oil companies' CEOs to discuss OPEC + deal extension


A look at FX majors

  • EUR/USD: Unquestionable that buyers remain in control for the time being, which doesn't mean the direction will continue up in the near term as oversold conditions warrant caution. On top of that, the over-extended rise in the Euro fails to be backed up by a widening of the German vs US 10y yields spread, which is concerning, although, for the bulls' comfort, the rise simply catches up with multi-year highs in the German vs US yield curve.
  • GBP/USD: The stubbornness of the Sterling to lower levels despite the political turmoil in Britain and lower-than-expected UK inflation figures, is an alarming sign that risk is now skewed towards higher levels. As in the case of German vs US, the UK vs US yield curve also trades at multi-year highs, which underpins the downside, while the UK vs US 10y yield spread has been choppy without a particular direction for the last 3 weeks. 
  • USD/JPY: A setback for the bulls, which failed to close above 113.50, after having an early glimpse at the 114.00 door. The bearish price action formation on the daily shifts the risk towards 113.00 on Wed, with a move lower in both JP vs US 10y yield spread and yield curve aiding the potential down-cycle ahead of the US retail sales/inflation data, key data points to determine the next direction near term. 
  • AUD/USD: The path of least resistance for the Aussie continues to be lower, with Tuesday's broad-based USD strength not enough for the former to capitalize on, which should raise a 'red flag', as neither technicals nor fundamentals, with a decade-long depressed global yields era set to add further pressure into beta currencies such as the Aussie. On the bright side for short-term traders, the AU vs US 10y yield has corrected higher on Tues, which should slow down the bleeding. 


What happened?

  • Fed's Bostic said that gradual rate rises are needed to balance growth, inflation.
  • Fed's Bullard said interest rates should stay unchanged for the time being.
  • ECB's Coeure said repo market is undergoing 'significant change'.
  • US headline and core PPI rose by 0.4% in Oct vs 0.4 prev. 
  • U.S. Redbook MoM came at -1.2% vs -1.0% prev. 
  • Reuters reported that the US Senate plans to end Obamacare mandate in revised tax proposal.
  • A temporary bill to fund the US government after Dec 8 might be needed, US speaker Ryan said. 
  • Fed's Yellen said policy guidance on track but subject to economic prospects.
  • Speeches by top central bankers in Europe, Britain, Japan, US reinforce idea on right time to end ultra-loose monetary policy era. 

 

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Economic calendar

GMT
Event
Vol.
Actual
Consensus
Previous
Tuesday, Nov 14
10:00
 
 
10:00
 
 
10:00
2.5%
2.5%
2.5%
10:00
0.6%
0.6%
0.6%
n/a
0%
0%
0%
n/a
1%
1%
1%
n/a
1.1%
1.1%
1.1%
n/a
-0.2%
-0.2%
-0.2%
11:00
103.8
104.2
103.0
11:00
0.5%
0.4%
-0.4% Revised from -0.5%
n/a
0.5%
 
0.3%
n/a
2.5%
 
2.9%
n/a
-0.390%
 
-0.319%
n/a
-0.415%
 
-0.378%
13:00
0.8%
0.9%
1.0%
13:15
 
 
13:30
0.4%
0.1%
0.4%
13:30
2.8%
2.4%
2.6%
13:30
0.4%
0.2%
0.4%
13:30
2.4%
2.3%
2.2%
13:30
 
 
13:55
2.3%
 
2.6%
13:55
-1.2%
 
-1.0%
16:30
1.045%
 
1.035%
17:30
 
 
n/a
1.3%
1.5%
2.0%
21:00
2.5%
 
2.5%
21:30
6.513M
 
-1.562M
21:45
 
 
13.6%
23:00
3.6%
 
3.7%
23:30
 
 
3.6%
23:50
 
0.1%
-0.4%
23:50
 
1.3%
2.5%
23:50
 
0.3%
0.6%
Wednesday, Nov 15
24h
 
 
00:30
 
2.2%
1.9%
00:30
 
0.7%
0.5%
02:00
 
 
1.6%
02:00
 
 
$7.3B
02:30
 
 
2.1%
n/a
 
 
$1.76B
04:00
 
 
13.13%
04:00
 
 
15.6%
04:30
 
 
2.5%
04:30
 
-1.1%
-1.1%
04:30
 
 
3.3%
06:00
 
 
€0.2B
06:00
 
 
9.2B
07:45
 
-0.2%
-0.2%
07:45
 
0.1%
-0.2%
07:45
 
1.2%
1.2%
08:00
 
 
n/a
 
 
-6.4B
08:30
 
 
0.5%
08:55
 
 
4.25%
n/a
 
 
0.48%
09:30
 
2.2%
2.1%
09:30
 
4.3%
4.3%
09:30
 
2.1%
2.2%
09:30
 
 
2.3%

 

Author

Ivan Delgado
XM

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