FXR Team

Remember that the US and Canada have shifted to DST already.

There wasn’t any market moving news on the weekend so it should be a quiet start to the trading week and we should pick up where we left off on Friday with rising fears over the state of global growth following very weak China trade data and a huge miss in the headline US jobs number. Adding to investor angst were reports indicating the US and China were not yet close enough to agreeing on a trade deal to schedule a meeting between US President Trump and China President Xi.  However, the move on NFP may be overdone since AHE were better than expected and the unemployment rate also improved.

Themes for the Week:

  • Global growth concerns have crowded out central bank expectations as the main factor impacting markets. ECB, Bank of Canada and RBA have shifted the trends in their currencies and selling rallies should be the way to go for now.
  • Brexit: Barnier’s latest attempt to “offer concessions” is old wine in a new bottle and as such will be refused.  The UK Parliament will vote Tuesday on UK PM May’s latest draft deal with the EU. If the deal is rejected again there will be another vote on Wednesday for a ‘no deal’. If the no deal proposal is rejected as expected, there will likely be yet another vote the next day (Thursday) on delaying the March 29 deadline. If nothing comes of the votes, there will be a deadlock. I still think that either the Malthouse deal OR a no-deal Brexit are the only real contenders.
  • Risk appetite turned sour into the close as various reports suggested that a meeting between Trump and Xi wasn’t set in stone and there were still gaps to be filled before a meeting can take place. The trade war sentiment will still drive markets in the week ahead.
  • The Bank of Japan meets this week and they aren’t expected to change policy. Of interest will be the statement and whether Kuroda follows the dovish tilt that other central banks have shown recently.
  • Emerging Market stress: with the rally in the USD, emerging market fx like ARS, TRY AND ZAR have taken a beating. This may also weigh on risk sentiment in the coming week as funds that face further losses in EM space will be forced to liquidate profitable holdings elsewhere.

Data in the Week ahead:

  • US Retail Sales
  • Powell Speeches
  • UK GDP
  • US CPI
  • BOJ Decision
  • China Industrial Production

On the Radar:

The USD remains the leader in FX space and as such I like the odds of EurUsd, GbpUsd shorts and UsdCad longs. The caveat is that the Brexit votes will impact GBP and my stance could change depending on the outcome. EurJpy shorts may be considered also, if risk sentiment continues to deteriorate. Technically speaking, the Dow hasn’t done anything particularily bearish just yet, so it will take more negative news to keep the pressure on.

About the Author

Justin is a Forex trader and Coach. He is co-owner of www.fxrenew.com, a provider of Forex signals from ex-bank and hedge fund traders (get a free trial), or get FREE access to the Advanced Forex Course for Smart Traders. If you like his writing you can subscribe to the newsletter for free.