Today’s focus turns to AUD, NZD & EUR

US data

Trading on Friday was a little tricky especially after the US GDP data was released. The initial reaction to the GDP Advanced data result. +2.3% actual versus the forecast of +2.0% was spot on with the USD spiking as you’d expect.

But the big surprise packet and this is why we should always consider all components of the data. Was “GDP Consumer Spending Advance” which came in at four-year lows at +1.1% versus forecasts of +4.0%. US 10YT dropped back down to 2.9587 and that too led to USD selling or profit taking.

The GDP consumer spending data is low tier data by any measure. But it goes to show if you get significant variance in the low tier data it too can have a big impact.

If anything it gave traders an excuse to take profits on the recent USD rally especially with the FOMC meeting on Wednesday.

Sterling

Sterling hardly budged after weak UK GDP data +0.1% (its slowest pace since the fourth quarter of 2012) put a kibosh on a potential May rate hike by the BOE. GBPUSD was belted down from 1.3890 to a final low of 1.3745 and proved to be the trade of the day.

So to start the week a few of the majors are retracing back towards good trendlines. My initial thought it to get long USD but the big question the market is deciding is whether this run-up to 3% in the US 10YT and the oil prices and inflation expectations that were driving it – is sustainable. I really think the market will wait for more data before the USD charges higher again.

We’ve got a load of US data this week but the major focus will, of course, be on Wednesday’s Federal Reserve interest rate decision & Statement + US Non-Farm payrolls on Friday.

So we’ll have our answer shortly. In the meantime, I see no reason why we shouldn’t be reloading on USD longs & playing the recent ranges ahead of the FOMC Wednesday.

It’s a big week so there’s no real need to rush in today!

Check our Next Best Trades Watchlist for full details as to which specific pairs we are focusing on.

Asian Session

It’s good to see no gaps in the majors on the Monday open. That generally means we haven’t had any major geopolitical issues over the weekend.

The Chinese Manufacturing data will have the AUD & NZD on high alert today. We also have the NBNZ Business outlook data at the same time so it’s a ‘double whammy’ for the NZD.

Any significant variance in the Chinese data should impact the AUD & NZD.

European Session

We have a few key German numbers being released which may give traders an early directional lead for EURUSD.

Retail sales are scheduled first and they’re followed up by Prelim CPI data some 6 hours later.

The CPI is always a big release but the German numbers are a little different. Because the ‘Actual’ is comprised of data from 6 German states which report their CPI throughout the day. So it can get a little diluted as the various results come through.

Still, it’s worth keeping an eye on if you have Euro positions.

North American Session

We get an early lead into USD direction. With the first round of Personal Consumption Expenditure data due for release and this is followed up with Pending Home Sales.

The PCE data is an extra inflation number that the Fed watches very closely, so that will be the major focus for traders.

The US 10YT will also be well worth watching after it’s major influence on the direction of the USD last week.

Technical Set Up – What’s Happening with the Majors

The USD is taking a breather but to me, it still looks like a good buy on dips.

Today’s Fundamental Drivers

Plan the Trade, Trade the Plan!

The idea of our “Market Insight” is to give you some guidance with your daily preparation.

Your Daily Analysis needs to become habitual – For full guidance on our daily routine click here.

Make sure you don’t waste unnecessary time in front of the screens.

Remember you need to be fresh, confident and ready to trade and by sitting aimlessly in front of your screens you will become stale and uncertain.

The key to your success: Isolate the opportunities that work for you and focus on them.

Don’t worry about things that you can’t make…..chasing them will only cause problems (tiredness & irrational behavior will take over).

Tune up your charts & get ready to trade…..see you in the 247 Trade Zone!

Brad