Market Analysis: 12 September, 2016
by Christala Parmaxi
US Dollar traders caught by surprise on Friday since the greenback gained ground upon FOMC members Hawkish words. Specifically, Eric S. Rosengren made a speech on Friday warning of the rise of low interest rates and the likelihood of US economy overheating. Rosengren is deemed to be one of the doves members of the FOMC, however his speech was quite hawkish and thus greenback traders had a good reason to buy the Dollar on Friday and boost it close the day higher. He also highlighted that the tightening of the policy is likely to be appropriate and he expects US growth to reach 2% and full employment in 2017.
Moreover, Former Minneapolis Fed President Gary Stern had an interview on Bloomberg on Friday where he mentioned that he would support a rate hike in September. On the other hand, Federal Reserve Governor Daniel Tarullo said on Friday that he wants to see more evidence of sustained inflation before he considers a rate hike but he does not rule out a hike in 2016.
Minneapolis Federal Reserve Bank President Neel Kashkari supported today that a Fiscal Policy approach would help US economy to grow faster, such as immigration or tax reform. Kashkari reported that he is skeptical if a large-scale expansion of government spending by itself would be the best way to boost the economy.
There is a busy week ahead with significant economic releases and the Bank of England policy meeting in the spotlight. On Tuesday during the Asian morning we are looking for Chinese YoY Industrial Production which is expected 10 points higher than the 6% rate of the last month. Then, during the European morning UK’s Consumer Price Index is expected 0.7% against the 0.6% figure of the last month. However, Tuesday’s highlight is ECB President Mario Draghi speech in Italy at 12:00 server time. There are more UK data releases on Wednesday since July’s Average Earnings Index and Claimant count change will be announced.
The busiest day of the week for investors is definitely Thursday. New Zealand’s GDP is scheduled to be announced at 01:45 server time while Australian August employment rate is going to be released at 04:30. During the European morning at 10:30 we are looking forward for the interest rate decision of the Swiss National Bank that is expected to remain steady at -0.75%. One hour later UK’s August Retail Sales will be released and they are expected -0.4% against the 1.4% of the last month. The policy meeting of the Bank of England is scheduled at 14:00 server time and we would expect the interest rate to remain steady at 0.25%. All those are part of the Asian and European session; there are more announcements on Thursday during the US session! At 15:30 server time we expect US Philadelphia Fed Manufacturing Index, Producers Price Index and August’s Retail Sales.
Last but not least, Friday. We are looking for the interest rate decision from Russia that is expected to be decreased by 50 points at 10% while later at 15:30 server time we are looking for US Core CPI.
There’s an interesting attempt by Aussie to break the daily uptrend line to the downside. Firstly we noticed the lower high of the pair on September 8th and now the pair is forming a failure swing pattern. If the day closes below the trendline and most significantly below the previous low at the psychological level of 0.75, then we would expect a further move down to the support level of 0.745 and upon penetration of it we are looking for 0.74. On the flip side, the risks are near the resistance levels of 0.759 and 0.765.
The Loonie is running an aggressive upside move since Thursday. The next target to the upside is 1.3145 but maybe we see a consolidation before moving further upside. All of the indicators are on bullish territories indicating bullish signals; MACD crossed its trigger line above the equilibrium level and both Stochastic and RSI crossed their overbought levels to the upside.
US Dollar is moving higher against all of its majors, however the stimulus of some majors is still stronger than USD. One of them is Japanese Yen; USDJPY is moving to the downside since Friday US Session and the next target to be reached is 101.5. MACD just had a bearish signal while RSI is slopping downwards. However, Average Directional Index is on Overextended bearish territories.
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