Weekly Game Plan – 3.7.16

Themes for the Week and potential opportunities

Reminder: Wall Street closed Monday for Independence Day.
Global equities strong amongst “lower for longer” sentiment. Precious metals higher amongst risk aversion & central bank action. Crude helped by marginally weaker USD.

US: It’s NFP week, and the market is expecting a better print, in the 150K range. Average Earnings are also expected higher by 0.2% driving annual growth rate to 2,7% even though unemployment might rise a tad. Before NFP we have a speech by Fed’s Dudley (Tue), who’se comments will be important and should be representative of the top ranking members of the Fed. FOMC Minutes (Tue) will be less influential as they are pre-Brexit. Base case is that rate hikes are off the table for 2016. ISM Non-Manuf. (Wed) expected firm. Overall, the market is already discounting no hikes this year and until we start seeing data from the post-Brexit vote, not much should change.

EUR: More than the Services PMI (Wed) what might be interesting is the Sentix Confidence index (Mon) which will take into account post-Brexit vote sentiment. The market is expecting quite the deterioration (5 vs 9.9 previous). All other data this week (retail sales on Tue, Factory Orders Wed and Ind. Prod. on Thurs) are from before the vote so less influential.

GBP: Services PMI (Tue) would usually be influential but with the vast majority of the survey responses being pre-Brexit, it’s unlikely to provide much forward-looking insight. UK data on industrial production (Thu) and external trade (Fri) are even less timely.

Comm-Dolls: election should not influence Aud much but look to verify ruling coalition still in power after Sunday’s vote. RBA (Tue) expected to stand pat, acknowledging impressive Q1 GDP but incorporating Brexit risk. On the data front, building approvals (Mon) expected to fall, retail sales ( Tue) expected to rise as well as trade data. Finally, RBA’s Debelle on Wednesday will attend a Thomson Reuters event to examine the FX Code of Conduct.

NZD traders have a GDT dairy auction to watch on Tuesday.

Cad unemployment is out alongside NFP while the trade balance (Wed) is set to see the deficit widen sharply due to a hit on energy exports from the Alberta wildfires.

CNY: data over the past week has remained mixed. This week we have Caixin PMI (Tue) to skew risk appetite even thoguh the focus is likely to remain on trends in the Yuan.

Jpy: a speech from Kuroda (Thu) might surprize the markets if he (finally) brings fourth hints on stimulus, to weaken the Jpy.

So going into the week, I will be looking for more Gbp weakness vs. Aud and Nzd mainly; but also AudJpy or NzdJpy longs depending on any surprizes from Kuroda. And eyes on USD after Dudley. US equities still bullish, metals also strong.

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