TatFX Brief: May 2018

fx news may2018

[From this month, FX news commentaries will be monthly, owing to popular client requests.]

In the second half of April, we saw a rally of the US dollar against different currencies, with investors taking profit, while awaiting publication of the April US labor market report. In addition, the Federal Reserve left the rates firm, and confirmed that it will raise the cost of money very gradually. This may have disappointed those who expected an acceleration in the Fed’s tightening path.

Let’s now take a stock of where AUD stands:

  • AUD/USD

Since December 2017, we do not see the AUDUSD rate in 0.75. After reaching the highs above 0.81 area in the end of January, prices have quickly taken a single direction, leading to a strengthening of 8% in 3 months against the AUD.

We will see a pause, a possible re-tracement and then continuation of price evolution, or there will be a continuation of the AUD downtrend and I know Jerome Powel could help.

We await the first data on US inflation on Thursday and the Fed is currently signaling two more rate hikes this year, but the inflation figures – if strong enough – could just confirm growing expectations among market players that it will squeeze in a third.

  • AUD/EUR

In February 2017, the AUDEUR exchange rate saw prices go from 0.73 to 0.62, and in this second quarter, the EUR’s outperformance against AUD was slowed by a weak stable inflation around the 1% area.

US-led trade tensions remain a cause of concern for both Australia and the Eurozone, and AUD may suffer more if the US tariffs on China are confirmed and China retaliates in the weeks ahead. If commodity prices continue to stabilize, we could see a strengthening of AUD against the Euro after creating  support in the 0.62 area.

  • AUD/GBP

Any signs that the BoE is likely to maintain a policy tightening bias in the months ahead should offer support to the Pound.

It will be important to see the latest quarterly inflation report, which could lead to higher rates and further appreciation of the GBP.

  • AUD/CNY

CNY eyes on industrial production, and forecast are positive. However, a worse than expected figure could give more strength to AUD, especially, if we have positive data on retail sales and employment change.

Since the end of January 2018, AUD has lost about 8% against CNY.

  • AUD/INR

The strength of the USD led to a rapid price movement against INR of 65 to 67 and even AUD was affected by this intense movement. The bullish trend could bring prices AUD-INR back to area 51.

Major events/data this month:

Tuesday, May 8

11:30   AUD Retail Sales (MoM) (Mar)
17:15   USD Fed Chair Powell Speaks 

 

Wednesday, May 9

00:00   USD JOLTs Job Openings (Mar)
22:30   USD PPI (MoM) (Apr)

 

Thursday, May 10

00:30   USD Crude Oil Inventories  
07:00   NZD RBNZ Interest Rate Decision  
07:00   NZD RBNZ Rate Statement   
08:00   NZD RBNZ Press Conference   
11:10   NZD RBNZ Gov Orr Speaks   
18:30   GBP Manufacturing Production (MoM) (Mar)  
21:00   GBP BoE Inflation Report   
21:00   GBP BoE Interest Rate Decision (May)  
22:30   USD Core CPI (MoM) (Apr)  

 

Friday, May 11

22:30   CAD Employment Change (Apr)  
23:15   EUR ECB President Draghi Speaks 

 

Tuesday, May 15

12:00   CNY Industrial Production (YoY) (Apr)  
18:30   GBP Average Earnings Index +Bonus (Mar)  
18:30   GBP Claimant Count Change (Apr)  
22:30   USD Core Retail Sales (MoM) (Apr)  
22:30   USD Retail Sales (MoM) (Apr)  

 

Wednesday, May 16

09:50   JPY GDP (QoQ) (Q1)  
19:00   EUR CPI (YoY) (Apr)  
22:30   USD Building Permits (Apr)

 

Thursday, May 17

11:30   AUD Employment Change (Apr)  
22:30   USD Philadelphia Fed Manufacturing Index (May)

 

Friday, May 18

22:30   CAD Core CPI (MoM) (Apr)  
22:30   CAD Core Retail Sales (MoM) (Mar)

 

Wednesday, May 23

18:30   GBP CPI (YoY) (Apr)

 

Thursday, May 24

00:00   USD New Home Sales (Apr)  
18:30   GBP Retail Sales (MoM) (Apr)

 

Friday, May 25

00:00   USD Existing Home Sales (Apr)  
18:30   GBP GDP (QoQ) (Q1)  
18:30   GBP GDP (YoY) (Q1)  
22:30   USD Core Durable Goods Orders (MoM) (Apr)  


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TatFX Brief: 03 April 2018

rba-aus-dollar - source:propertyclub

RBA leaves rate unchanged!

  • AUD/USD

    No noticeable move in AUD post RBA. This was expected, as all forecasts pointed status-quo on rates.

We believe that there is a slim chance of RBA doing anything on rate which is at 1.5 percent.

AUD/USD is comfortably moving sideways. USD positioning is relatively neutral. This week, we can see AUD/USD to be range-bound.

  • AUD/EUR

    Eurozone manufacturing PMIs should be out shortly, which is key data!

Traders would be back after Easter break, hence expecting thin volumes, but the 1.23 level on EUR/USD is crucial.

Traders wait for opportunity to buy any dip in EUR. I am mildly bullish on EUR vs AUD this week.

  • AUD/GBP

    GBP/AUD peaked last week at 1.8508, successfully meeting our previous forecast target at 1.8500, but has since pulled back amidst strong quarter- and month-end selling interest.

AUD/GBP has reached a floor and more downside will be difficult from here on.

PMI business survey data can move the cable. BOE governor Mark Carney’s speech is significant, for it may hint whether the BOE still intends to raise interest rates in May as the market currently expects.

  • AUD/INR

    Downward pressure on AUD seems to be fading out against INR! INR might get some blow due to ongoing spat between US and China on trade.

Any depreciation in INR would attract exporters’ interest. We are slightly bullish on AUD vs INR this week.

  • AUD/CNY

    Last week, CNY hit a 2.5 year high against greenback. An important reason is China’s ‘petro-yuan’, which was launched as the first crude futures contracts priced in CNY, and may end the dollar dominance in oil industry!

China won’t sit idle on trade-war: it would retaliate, boiling down to USD vs CNY.

CNY has an edge over AUD at the moment.

Key data / events this week:

Tue Apr 3

  • 01:00am USD ISM Manufacturing PMI
  • 03:30pm AUD Cash Rate
    • AUD RBA Rate Statement
  • 07:30pm GBP Manufacturing PMI

Wed Apr 4

  • 12:30pm AUD Retail Sales m/m
  • 07:30pm  GBP Construction PMI
  • 11:15pm USD ADP Non-Farm Employment Change

Thu Apr 5

  • 01:00am USD ISM Non-Manufacturing PMI
  • 01:30am USD Crude Oil Inventories
  • 12:30pm AUD Trade Balance
  • 07:30pm GBP Services PMI
  • 11:30pm CAD Trade Balance

Fri Apr 6

  • 11:30pm CAD Employment Change
    • CAD Unemployment Rate
    • USD Average Hourly Earnings m/m
    • USD Non-Farm Employment Change
    • USD Unemployment Rate

Sat Apr 7

  • 02:15am GBP BOE Gov Carney Speaks
  • 04:30am USD Fed Chair Powell Speaks

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TatFX Brief: 26 March 2018

Turbulence [Picture Courtesy: Tat Capital's Aniket Deshkar]

Turbulence to continue this week!

AUD/USD

US was the center-stage of all the turmoil last week: right from staff reshuffle at the White House to trade war, and the tech industry facing the whip – thanks to Facebook’s data leaks!

The USD has been in two minds. Unlike GFC, USD doesn’t behave like a safe haven currency nowadays.

AUD, on the other hand, should be jittery due to trade wars. Although Trump finds Australia as an ally, he sees China otherwise.

US-China trade skirmish would impact Australia indirectly. Lack of economic data this week makes development on tariffs more important for AUD

AUD/GBP

Quiet week for both AUD and GBP in terms of important data and events.

The technical analysis shows GBP approaching a crucial level of 1.85 against AUD.

Might see some term sellers shorting GBP/AUD around that level, but the momentum backs GBP’s uptrend and AUD’s downtrend. So, if 1.85 is breached, GBP/AUD is bound to move higher.

AUD/EUR

EUR moved higher again last week, and is set to move higher.

Inflation data will be the next key release in the future. Like other G10s, there is no major data in this short week.

The broad view is EUR to inch higher against USD, AUD. We clearly see EUR having edge over AUD this week too.

AUD/INR

Continuing the theme from last week, we saw 50 level to be supported well. This week, might see AUD going below the psychological and important level as we are bearish. Still a good level to remit INR.

INR is expected to strengthen amid good inflows.

AUD/CNY

US-China trade war fears continue to rattle the markets globally. While Trump has been vociferous in his tariffs, expect China to retaliate.

The knee-jerk reaction: Yuan-denominated contract begins trading in Shanghai from today. Denominating oil contracts in yuan would promote the use of China’s currency in global trade.

More stringent actions might follow from world’s second largest economy. This implies that Yuan would get stronger in weeks to come.

Key data / events this week:

Wed Mar 28

  • 01:00am USD CB Consumer Confidence
  • 11:00am NZD ANZ Business Confidence
  • 11:30pm USD Final GDP q/q

Thu Mar 29

  • 01:30am USD Crude Oil Inventories
  • 07:30pm GBP Current Account
  • 11:30pm CAD GDP m/m

Upcoming holidays-

Fri Mar 30

  • All Day NZD Bank Holiday
  • All Day AUD Bank Holiday
  • All Day CHF Bank Holiday
  • All Day EUR German Bank Holiday
  • All Day GBP Bank Holiday
  • All Day CAD Bank Holiday

Sun Apr 1

  • 01:00am NZD Daylight Saving Time Shift
  • 03:00am AUD Daylight Saving Time Shift

Mon Apr 2

  • All Day NZD Bank Holiday
  • All Day AUD Bank Holiday
  • All Day CHF Bank Holiday
  • All Day EUR French Bank Holiday
  • All Day EUR German Bank Holiday
  • All Day EUR Italian Bank Holiday
  • All Day GBP Bank Holiday

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[*Picture Courtesy: Tat Capital’s Aniket Deshkar]

TatFX Brief: 19 March 2018

Lull before storm [Picture Courtesy: Tat Capital's Aniket Deshkar]
Lull before the storm: Finally time for Fed to hike rates!
  • AUD/USD

It seemed that AUD bearishness was scripted.

Last week we saw see-saw action in USD with Trump firing Rex Tillerson. The onus will shift to Jerome Powell, and market will closely watch Fed hike (which is factored in), along with the future guidance.

Whether there would be three hikes this year or more, would determine USD’s performance. AUD has been reeling under pressure, and momentum sees further downside. Employment data on Wednesday will be a key domestic data!

  • AUD/GBP

UK has a string of important data and events.

Highlight this week is EU summit on March 22-23, which will determine whether the EU and UK will enter a two-year ‘transition period’. Any positive development would boost GBP’s strength, which is already close to important level of 1.8000 against AUD.

Given that AUD has weakened across majors last week, this might see AUD to grind lower.

  • AUD/EUR

Last week, the final inflation report for EZ in February saw a downgrade from 1.2% to 1.1%. Whether Euro zone growth has peaked would be dependent on time.

USD would dominate till Fed delivers this Thursday. The AUD/EUR pair is expected to be range-bound with Fed hogging the limelight.

  • AUD/INR

AUD’s under-performance has helped INR slightly.

As I have mentioned in last week’s commentary, any level between 51.25 to 51.75 is good level to convert AUD to INR.

With AUD at a sniffing distance from 50, it it would be interesting if AUD breaches 50. Oil prices would be a crucial drive for INR.

  • AUD/CNY

US trade war with China might be running out of fizz now.

Market is expecting that the impact of tariffs might not be as severe as projected earlier. PBOC has change of guard and the new governor, Yi Gang, might have to continue opening financial markets, capital borders and reducing risk after years of soaring debt.

4.90 on AUD/CNY is broken now, and CNY would continue to appreciate this week!

Important data / events:

Tue Mar 20

  • 11:30am AUD Monetary Policy Meeting Minutes
  • 08:30pm GBP CPI y/y

Wed Mar 21

  • 08:30pm GBP Average Earnings Index 3m/y

Thu Mar 22

  • 01:30am USD Crude Oil Inventories
  • 05:00am USD FOMC Economic Projections
    • USD FOMC Statement
    • USD Federal Funds Rate
  • 05:30am USD FOMC Press Conference
  • 07:00am NZD RBNZ Rate Statement
  • 11:30am AUD Employment Change
    • AUD Unemployment Rate
  • 08:30pm GBP Retail Sales m/m
  • 11:00pm GBP MPC Official Bank Rate Votes
    • GBP Monetary Policy Summary
    • GBP Official Bank Rate

Fri Mar 23

  • 11:30pm CAD CPI m/m
    • CAD Core Retail Sales m/m
    • USD Core Durable Goods Orders m/m

Upcoming holidays –

Wed Mar 21

  • All Day JPY Bank Holiday

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[*Picture Courtesy: Tat Capital’s Aniket Deshkar]

TatFX Brief: 12 March 2018

Finally, Fed is ready to cross the bridge!

  • AUD/USDUS jobs surge gives green light to Fed rate rises.

Unlike the see-sawing USD over past weeks, this be the time that Dollar bulls finally get to run for more than a couple of weeks.

Locally, lack of big / domestic cues this week will leave AUD completely dependent on USD & Fed. Technically too, AUD is showing signs of weariness against USD, and we can witness the downtrend in AUD.

  • AUD/EUREuro adrift amid light calendar, at whims of USD.

ECB too confused the markets last week, ultimately dragging it lower. Our call on 1.23 against USD was well-honoured. Expecting a dull, range-bound trading in AUD/EUR this week.

  • AUD/GBPAnother currency pair with sideways movement since past weeks. The trend is expected to slowly move downward, unless Brexit talks spook the market. Both are high-beta currencies, and any surprise can easily disrupt the trend. Slightly bullish on GBP this week.
  • AUD/INRINR has moved to a new range 64.50 – 65.25 vs USD. With AUD holding well against USD last week, we have seen AUD/INR to rise above 51. However, 51.75 would be a stiff resistance and with AUD expected to depreciate, current level is good level to convert some AUD into INR.
  • AUD/CNYChina’s NPC will decide top policymakers for monetary and fiscal policies in the coming days. With US President going all in on trade war, China has to be wary of the repercussions.

The country continues to take efforts to avoid a trade war with the U.S. After hitting 2.5-year high level in early February, CNY has consolidated now. 5.05 on topside is a good resistance, and 4.90 is a solid support.

The pair will gravitate within this range.

Important data / events:

Tue Mar 13

  • 07:30am GBP Annual Budget Release
  • 08:30am USD CPI m/m
    • USD Core CPI m/m
  • 10:15am CAD BOC Gov Poloz Speaks
  • 10:00pm CNY Industrial Production y/y

Wed Mar 14

  • 04:00am EUR ECB President Draghi Speaks
  • 08:30am USD Core Retail Sales m/m
    • USD PPI m/m
    • USD Retail Sales m/m
  • 10:30am USD Crude Oil Inventories
  • 05:45pm NZD GDP q/q

Thu Mar 15

  • 04:30am CHF Libor Rate
    • CHF SNB Monetary Policy Assessment

Fri Mar 16

  • 08:30am USD Building Permits

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