Traders who have not been comfortable in Forex since the beginning of the year should acknowledge the coming days could offer more unpleasant impetus which is certain to affect financial institutions' behavioral sentiment and speculative wagers. There will be plenty of U.S data including inflation numbers and consumer outlooks in the coming days.
A look at the USD Index above shows how the USD has moved on a correlated track with interpretation of U.S Federal Reserve sentiment via their monetary policy over the long-term. Day traders hoping to find a sudden magical wand which will lead them in the right direction should understand the USD is likely to remain choppy until a clear outlook is delivered.
The USD has climbed back to important mid-term values against many major currencies, but intriguingly after hitting important prices last week against the EUR, GBP and JPY, the USD did start to lose value again. However, short-term speculation is going to remain difficult and risk taking tactics need to be precise. This week's U.S data may give a clearer window into the thinking of the Fed, but it also might create additional whirlwinds if the economic numbers are mixed.
Barometers regarding risk appetite remain fascinating as the S&P 500 continues to fight upwards. As the major U.S indices begin opening today, they will start the day still seemingly with strong winds behind their backs as they fight for new highs.
And the higher values on the S&P, Dow Jones and Nasdaq were accomplished as U.S Treasury yields turned higher slightly last week, but then bond yields like the USD saw slight reversals lower as the weekend approached. Investors who believe it is inevitable yields will come down as the Federal Reserve turns more dovish regarding interest rates in the late spring will likely continue to lean heavily towards stock market infusions while seeking better returns compared to U.S Treasuries.
Perhaps the most solid barometer for the USD remains Gold for short-term traders. The price of the precious metal is near important mid-term support levels as speculators seemingly wait for further insights. The 2020.00 USD per ounce level appears to be an important psychological juncture. Obviously, the 2000.00 USD mark is an important inflection point for perspective.
The better Gold has done, the weaker the USD has been over the mid-term. Forex day traders should keep their eyes on the value of Gold this week. Yes, speculative forces can cause sudden surges in Gold in various directions which cannot be calibrated to USD trading, but from a behavioral sentiment perspective it will be worthwhile to see where Gold is trading at the end of this week when all the U.S data on the menu has been digested.
Monday, 12th of February, China Lunar New Year - a week long banking holiday has begun in China. Data from the Asian giant has continued to be rather grim. Upon the return of China to the financial markets next week, investors will continue to ask difficult questions about Chinese government policy which is not particularly transparent.
Tuesday, 13th of February, U.S Consumer Price Index - a slew of CPI readings will be published. The monthly Core and broad reports are expected to meet last month's results, but the year long Consumer Price Index comparison is expected to come in with a 2.9% reading, below the 3.4% gain from the previous result. Financial institutions who are geared towards a more 'dovish' Federal Reserve are probably hoping for inflation numbers that meet expectations or come in lower. However, if the CPI figures come in 'hotter' than forecast with higher outcomes, this could ignite more strength in the USD across the Forex markets.
Wednesday, 14th of February, U.K Consumer Price Index - an expected gain of 4.1% is anticipated from the broad year on year comparison. If the CPI number comes in higher, it would put the Bank of England in a more difficult spot. U.K economic data has been lackluster, but stubborn inflation remains a hurdle which seems to be keeping the BoE from becoming more proactive regarding a more dovish approach to interest rate cuts, which is needed in the eyes of many analysts. The GBP/USD will respond to this number and day traders should anticipate the price range of the currency pair to widen before and in the aftermath of this CPI release.
Thursday, 15th of February, U.K Gross Domestic Product - an outcome of minus -0.2% is expected. If the 'growth' number comes in with this negative estimate, it will spur on noise about recession in the United Kingdom (but this is largely known already). However, if the GDP result is weaker than the already lackluster forecast, the GBP/USD would react with volatility. The potential combination of daunting inflation and recession pressures at the same time is not a happy place. The Bank of England will have a 'minefield' they have to navigate ahead if stagflation continues to ebb forth. GBP/USD traders should be ready for choppy results and then brace for additional fireworks because of coming U.S data on the schedule.
Thursday, 15th of February, U.S Core Retail Sales - a negative estimate of minus -0.2% is the expectation from the broad figure, while the Core result is anticipated to show a slight gain of 0.1%. U.S consumers have proven to be a durable crowd the past handful of months, but a lot of the spending has been aided apparently by the use of credit cards. The Federal Reserve will not say so, but they would actually be content to see Retail Sales numbers come in weaker than expected. A stronger outcome would cause additional USD anxiety and perhaps another crawl upwards for the greenback. Consumer Sentiment numbers will come from the University of Michigan on Friday which will add to the analysis of U.S consumers.
Friday, 16th of February, U.S Producer Price Index - Manufacturing Index reports from the Empire State and Philly Fed readings will have been seen on Thursday and are expecting negative results. However, these PPI inflation numbers could prove to have more impact on financial markets. Expected gains of 0.1% are anticipated from the Core and broad reports. Slightly negative results would be welcomed by the Fed and financial institutions, and perhaps propel a weaker USD. Stronger than anticipated inflation data from the PPI could create more USD choppiness.
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