It should be a quiet start to the week, with no market moving events released over the weekend. Trump has averted the US government shutdown, without receiving any kind of compromise, and was ridiculed by both sides. Perhaps Trump will try to deal better with China this week.
Themes for the week ahead:
- US/China summit: the market will be watching the trade negotiations on Wednesday/Thursday for clues on whether China might slow down even more (no deal) or whether a deal is made (Expect a big rally in risk assets). Elsewhere, markets will focus on Chinese manufacturing data due on Thursday and Friday.
- FOMC: As we approach the first rates decision of 2019, a darkening global economic outlook and convulsing stock market are clouding the policy picture. Powell is preaching “patience” with regard to future rate increases. Forward guidance will be key.
- Brexit Plan B: On Jan 29, Britain’s parliament will debate PM May’s next Brexit steps as well as alternative plans. Reuters reports investors have taken off some option hedges they had put on to guard against sterling downside – as evidenced by the rise in GBP in the past week. If the possibility of no-deal raises its head again, those same investors will scurry back to safety en masse.
- Earnings Season: Apple (Tues) and Microsoft (Wed) will release earnings this week and represent a tell-tail as global tech struggles to recover from a tumultuous end of 2018.
Data in the week ahead:
- FOMC Decision
- Non-Farm Payrolls
- CAD Gdp
- AU CPI
On the Radar:
Last week the USD ended on a negative note and as such I like the odds of NZDUSD longs and USDCAD shorts this week since even the FOMC statement should be on the dovish side. GBP continues to be the leader but only because option hedges were removed, with participants speculating that a No Deal is being averted. As I have reminded subscribers, this is yet to be confirmed because effectively there has been no progress in Brexit talks and the EU is not likely to accept May’s Plan B. So basically, if you want to play GBP, please do so at 1/2 size or 1/4 size.
I also don’t mind EurNzd shorts, adn tentative longs in US equities.
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.