USD: Expect These Few Changes From The FOMC On Wed – Nomura

We expect the FOMC to keep the federal funds target unchanged at 0.50-0.75% at the conclusion of the 31 January –1 February meeting. The data on economic activity and inflation since the last meeting have been in line with expectations.

We anticipate few changes in the FOMC’s statement overall:

The paragraph on current economic conditions (the first paragraph) should be updated modestly to reflect recent developments. But we expect the general thrust of the paragraph to be unchanged. The labor market has continued to strengthen and economic activity expanded at a moderate pace.

For the economic outlook (the second paragraph), we also expect only minor changes. The most recent inflation data suggest that inflation continues to very gradually creep up towards the 2% target. We expect the risk statement from the December meeting, “Nearterm risks to the economic outlook appear roughly balanced,” to be repeated.

One area where there may be a change is the description of the labor market. During her speech on 19 January at Stanford University, Chair Yellen stated that the economy is close to full employment, or in her language, “I judge labor utilization to be reasonably close to its normal longer-run level.” Other members have expressed similar sentiments. Thus, the FOMC may change its language on the outlook for the labor market to reflect this view. However, we don’t think that this is likely. If the FOMC statement stresses that the employment has essentially reached its maximum “sustainable” level, market expectations for a hike in March would likely rise, but the uncertainty about the outlook for fiscal, and other, policies remains high.

Given false starts in the past – in the run ups to “tapering” in 2013 and to their rate hike in December 2015 – we do not think that the FOMC wants to send a strong signal about what they are likely to do at their meeting in March.

Copyright © 2017 Nomura, eFXnews™

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USD/CAD: Double Top: Awaiting Confirmation On A Weekly Close – Citi

USDCAD has failed twice just below 1.36 and has thus formed a double top.

We are currently back below the 55 week moving average and below the rising trendline.

If the pair stays below the double top neckline at 1.3082 on a weekly close basis, it will indicate a short term move down to 1.2575 

Beyond the near term we have a decent gap to the 200 week moving average where a longer term trendline also comes in around 1.20

The rise in the Oil price, which we expect will continue this year, will also play an important role…

x13.PNG

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USD: 2-Way Risks But Prefer Tactical Longs Into NFP – TD

Two-way risks for the greenback have intensified following the one-way surge after the election.

A mix of policy uncertainty and softer data (namely, GDP) are the main culprits, which is helping the major currencies consolidate against the USD. Trump’s executive order on immigration has captured most of the spotlight, owing to protests and outrage from other international leaders.

For the markets, this increased uncertainty about the transmission of campaign promises to policy is likely to inject more uncertainty into global markets, which continues to lag the rise in global political risk. Indeed, the first chart shows that vol markets remain in ’risk loving’ territory despite the spike in policy uncertainty.

X12.PNG

In this regard, we think the USD remains vulnerable to the continuation of negative policy surprises that focus on protectionism, immigration or trade rather than tax reform or other possible growthenhancing measures.

Moreover, some of the recent policy proposals could harm the supply-side of the economy, which is also bad for risk markets. Still, we suspect that month-end flows have helped to amplify move early in the week.

We believe that a solid NFP could help to soften the blow so like tactical long USD exposure into Friday’s release.

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How Far Can The Dollar Fall S/T? What Is The Trade? – SocGen

President Trump’s travel ban – and his associated decision to fire the acting Attorney General – dominates sentiment and remains good for Treasuries, the yen (and gold), but bad for bonds and the dollar. How long will market sentiment to be affected? How far can the dollar and yields fall on this?

I’m not sure serious analysis is possible, and I don’t trust my gut instincts on something as far from the usual state of affairs, but my bias is still that we’ll get back to the Trump economic program, and the implications for Fed policy, before too long. More prosaically, markets will focus on the US jobs data due Friday.

x11.PNG

So how to trade?

We still want to fade this bout of Yen weakness too, with the BoJ holding policy and still anchoring yields. This till leaves me looking fondly at long EUR/JPY as an idea, even if we still think it is 2 ½ months too early for that trade really.  

GBP looks rangebound, with mortgage approvals and the debate on the Brexit bill.

Visually, AUD looks as though it’s topping out but at the same time, Australia looks a haven of calm (or at least, Sydney seems an appealing destination as I sit in Heathrow this morning, on the way to Frankfurt instead!).

Copyright © 2017 Societe Generale, eFXnews™

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Tech Targets: EUR/USD, USD/JPY, AUD/USD, NZD/USD – UOB

EUR/USD: Neutral: In a 1.0600/1.0800 range.

EUR dipped briefly to a low of 1.0617 yesterday but rebounded quickly. Indicators are mostly neutral which suggest further broad sideway consolidation in the coming days, likely within a 1.0600/1.0800 range.

AUD/USD: Neutral: In a 0.7480/0.7630 range.

The current movement in AUD is deemed as a sideways consolidation range, likely between 0.7480 and 0.7630. Looking further ahead, the consolidation phase is expected to be resolved to the upside but only a clear break above the major 0.7630 resistance would indicate the start of a sustained up-move.

NZD/USD: Bullish: Diminished odds for further NZD strength.

While NZD edged above 0.7300 last week, it is struggling to maintain its momentum and the odds for further extension to 0.7350 are not high. However, only a move below 0.7220 would indicate that the current bullish phase has ended.

USD/JPY: Neutral: Immediate downward bias towards 112.50.

The current sharp decline from last Friday’s 115.37 high does not bode well for USD. While it is too early to expect a sustained down-move, the immediate pressure is on the downside and further weakness towards the major support at 112.50 would not be surprising. Overall, this pair is expected to stay under pressure in the coming unless it can reclaim 114.90.

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Preview: EMU: Unemployment, GDP, Flash HICP – Barclays, SEB

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Preview: EMU: Unemployment, GDP, Flash HICP – Barclays, SEB

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Preview: EMU: Unemployment, GDP, Flash HICP – Barclays, SEB

[unable to retrieve full-text content]

Preview: EMU: Unemployment, GDP, Flash HICP – Barclays, SEB

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How Far Can The Dollar Fall S/T? What Is The Trade? – SocGen

The US dollar is on the back foot, with EUR/USD touching 108[1] and USD/JPY breaking support.

Here is their view, courtesy of eFXnews:

President Trump’s travel ban – and his associated decision to fire the acting Attorney General – dominates sentiment and remains good for Treasuries, the yen (and gold), but bad for bonds and the dollar. How long will market sentiment to be affected? How far can the dollar and yields fall on this?

I’m not sure serious analysis is possible, and I don’t trust my gut instincts on something as far from the usual state of affairs, but my bias is still that we’ll get back to the Trump economic program, and the implications for Fed policy, before too long. More prosaically, markets will focus on the US jobs data due Friday.

For lots more FX trades from major banks, sign up to eFXplus[2]

By signing up to eFXplus via the link above, you are directly supporting Forex Crunch.

So how to trade?

We still want to fade this bout of Yen weakness too, with the BoJ holding policy and still anchoring yields. This till leaves me looking fondly at long EUR/JPY as an idea, even if we still think it is 2 ½ months too early for that trade really.

GBP looks rangebound, with mortgage approvals and the debate on the Brexit bill.

Visually, AUD looks as though it’s topping out but at the same time, Australia looks a haven of calm (or at least, Sydney seems an appealing destination as I sit in Heathrow this morning, on the way to Frankfurt instead!).

For lots more FX trades from major banks, sign up to eFXplus[3]

By signing up to eFXplus via the link above, you are directly supporting Forex Crunch.

Get the 5 most predictable currency pairs[4]

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US Consumer Confidence misses expectations – EUR/USD touches 1.08

The CB Consumer Confidence misses expectations with a score of 11.8, less than 113 forecast. In addition, the previous number was downgraded from 113.7 to 113.3 points.

The US dollar was already sliding ahead of the publication, and this release sends EUR/UDS to 1.08 and beyond.

The Conference Board’s consumer confidence measure for January was expected to tick down from 113.7 to 112.6 points. After the release in December, Trump took credit for the higher values.

The US dollar has been on the back foot on the ongoing crisis from Trump’s Muslim Ban[1] and the general disillusionment from his actions.

Trump’s most recent headlines were related to the pharma industry. He promised to cut regulations and also took advantage of the opportunity to blame other countries for devaluing their currencies. Earlier, his adviser David Navarro said Germany is manipulating the euro.

Earlier, the Chicago PMI disappointed with a drop from 54.6 to 50.3 points, lower than 55.1 points predicted. The S&P Case-Shiller House Price Index showed an annual rise of 5.3% instead of 5% expected.

EUR/USD has specifically enjoyed strong data from the euro-zone[2]. Inflation jumped to 1.8% y/y, growth beat with 0.5% q/q and the unemployment rate fell to 9.6%, an ongoing improvement, albeit from a higher level.

EUR/USD was flirting with resistance at 1.0780. This was a recent peak. The next line of resistance is at 1.0870.

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Canadian GDP beats with 0.4% m/m – USD/CAD falls

The Canadian economy grew by 0.4%, better than 0.3% expected and top of an upwards revision for October.

USD/CAD fell to a new low of 1.3049. Can it make a move on the round 1.30 level? This is the next line.

Canada was expected to report a monthly growth rate of 0.3% in November 2016 after a slide of 0.3% in October. See the preview: trading Canada’s GDP with USD/CAD[1]. Canada is unique in publishing growth figures on a monthly basis.

USD/CAD traded around 1.3080 ahead of the publication. The US dollar has been on the back foot as Trump Muslim Ban continues reverberating. The new administration is busy in trying to implement campaign promises, but markets want to see less trade wars and more fiscal stimulus, and is getting the opposite so far.

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