Fundamental Analysis by Admiral Markets

[Admiral Markets]

US Jobs Report Holds Key For Further US Dollar Up-Move

Last week's diverging central banks action, with the Federal Reserve announcing the end of its quantitative easing (QE) program and Bank of Japan's surprise announcement to expand its annual asset purchases, triggered sharp volatility in the Forex market and lifted the overall US Dollar index (I.USDX) to its highest level in over four years. Adding to the Dollar strength was slightly better-than-expected third-quarter GDP data that showed US economy growing by 3.5%, supporting the optimistic view about the fundamental strength of the US economic recovery.

Last week's US Dollar strength against most of its leading counterparts helped the index to register fourth consecutive month of advances. With the beginning of a new month, top-tier economic releases, which includes central bank monetary policy decisions and important PMI figure, will be in focus this week, which ends with the closely watched US employment reports for the month of October. The slew of economic releases this week have the potential to continue fueling volatility in the Forex market. Here is a brief outlook on some of the important market-moving events scheduled for the upcoming week.

US Economic Releases

The US labor market reports have always been one of the most important economic data watched by various market participants and has also been known for generating substantial volatility in the financial markets. This week's NFP data on Friday would be no exception. With the Fed already ended its bond-purchase program, stronger labor market reports would now play a major role in fueling speculations of an earlier-than-expected rate hike by the US central bank. Following an addition of over 200,000 jobs in last five months out of six, economists are expecting the momentum to continue with the consensus estimating the economy to have created 229,000 jobs while the unemployment rate to hold steady below the 6.0% mark at 5.9%.

In the run-up to the NFP data, ADP report, which shows the number of private-sector jobs addition and provides an early estimate for the government's report, is scheduled for release on Wednesday. The ADP report is expected to show an addition of 214,000 new private-sector jobs in October.

Other important economic data scheduled for release this week includes the ISM manufacturing and non-manufacturing PMI figures for October along-with the trade balance data for the month of September. The ISM manufacturing PMI is scheduled for release on Monday and the non-manufacturing PMI is scheduled for release on Wednesday. Both the manufacturing and services PMI numbers are expected to show continuing expansion, but at a slightly slower pace. The manufacturing index is expected to come-in at 56.5, marginally down from 56.6 recorded in September and non-manufacturing index is expected to reach 58.2, again down from September's reading of 58.6. Investors will also have a look at the trade balance for the month of September, which is scheduled for release on Tuesday.

Central Bank Monetary Policy Decisions

Major central banks namely, RBA, BoE and ECB are scheduled to announce their monetary policy decisions this week. RBA is scheduled to announce its monetary policy decision on Tuesday while both BoE and ECB are line-up to announce their respective monetary policy decisions on Thursday. Compared to last week's BoJ's surprise stimulus announcement and the Federal Reserve's decision to end bond purchase program, this week's major central bank decision announcements are unlikely to have a significant impact on the Forex market. However, the ECB press conference, which will be followed by the monetary policy decision announcement, could possibly infuse some volatile moves for the Euro-zone common currency, Euro.

Other Important Economic Releases

Meanwhile, this week's important economic indicators from other economies could also lead to some volatility in the Forex market. Key economic releases to watch from this week's UK economic calendar includes PMI readings (construction and services PMI) for the month of October and manufacturing production data for the month of September. The construction PMI data is scheduled for release on Tuesday and release of services PMI is scheduled on Wednesday. Thursday's key event include manufacturing production data for the month of September.

This week's dominant Australian data, that could materially impact the currency market include Australian employment report, scheduled for release on Thursday. Following September's dismal reading, market participants are expecting the reports to show a strong rebound in October. Consensus estimate the number of new people employed during the month of October to have increased by 10.3 K, while unemployment rate is expected to hold steady at 6.1%.

Other economic indicators that could lead to an eventful week for AUD are Australian trade balance and retail sales data, scheduled for release on Tuesday. Also watch out for trade balance data from Australia's largest trading partner, China, which is scheduled for release on Saturday.

The US Dollar seems to have established a strong up-trend and only a highly disappointing NFP reading, say below 200,000 or a substantial rise in unemployment rate, might disturb the ongoing trend. Even if the jobs number are in-line with consensus estimates, it is unlikely to pose any risk for the US Dollar strength.




“Original analysis is provided by Admiral Markets”

 

[Admiral Markets]

Upcoming Week's Major Market Movers

After reaching multi-year highs, the US Dollar Index (I.USDX) reversed its gains against most major currencies led by last week's US jobs data, which fell short of expectations. Friday's NFP data showed US economy adding 214,000 jobs in October as compared to the consensus estimates of 229,000 jobs. Although the NFP data fell short of expectations, the unemployment rate for October dropped further to 5.8%, and hence last week's slightly weaker US employment data doesn't seems to pose any serious risk for the ongoing strong up-trend for the US Dollar.

In other economic developments in the week gone-by, ECB made no changes to its policy stance, but ECB President Mario Draghi's comments indicated central bank's commitment to further expand its balance sheet. This coupled with ECB's dovish outlook capped any major pull-back for EURUSD, which earlier during the week fell to its lowest level since August 2012.

Moving forward, this week's Euro-zone preliminary GDP data, BoE's quarterly inflation report along with UK employment data and monthly retail sales data from the US will set the tone for the upcoming week's movement in the Forex market. Let's have a brief outlook for this week's important market moving events and how could the market react to these events.

Notable economic releases from this week's economic calendar that could materially impact the movement of GBP pairs include UK employment reports for the month of October and Bank of England's (BoE's) quarterly inflation report, both scheduled for release on Wednesday. Following a lower-than-expected drop in the number of people claiming for unemployment related benefits, this week's report is expected to show the number to decline by 24,900 and the unemployment rate is also seen dropping to 5.9% from 6.0% recorded in the previous month. However, stronger employment data is unlikely to change BoE's cautious economic outlook, which could be seen in the central bank's quarterly inflation report, that reveals central bank's inflation projection and economic growth over the next 2 years. Market participants will closely scrutinize the report in order to evaluate the possibilities of any further delay in rate-hike by BoE, which eventually would add to expectations of continuing near-term bearish movement for the British Pound (GBP).

The upcoming week's Euro-zone economic calendar features the preliminary release of the composite Euro-zone GDP data along-with GDP print of region's three largest economies, Germany, France and Italy for the third-quarter of 2014. The flash version of the 17-nation composite GDP, scheduled for release on Friday, is expected to show a nominal growth of 0.1%, while Euro-zone's two largest economies, Germany and France are expected to have expanded by 0.1% and the third largest economy, Italy, is expected to have contracted by 0.1%. Moreover, since the ECB has been targeting to defend region's economy against the risk of deflation, the importance of Euro-zone inflation data has risen. Hence, this week's Euro-zone final inflation data for October, also scheduled for release on Friday, would be closely watched. Although the CPI data is expected to remain subdued at 0.4%, it might still mark a halt in its decline. Rising expectations that ECB might announce additional stimulus measure to support the fragile Euro-zone economy, already seems to have capped any major upside for Euro. Further, a disappointing GDP reading would add to the possibilities of further near-term weakness for EUR pairs.

From the US, the monthly retail sales report for October is scheduled for release on Friday and will provide clues of consumers confidence in the overall economic recovery. Following a decline of 0.3% in September versus expected decline of 0.1%, Economists expect October retail sales to register a growth of 0.2% in October. Meanwhile, core retail sales, which excludes automobile sales, is also expected to register a growth of 0.2%, after recording a decline of 0.2% in the previous month. Only a large deviation from the expected retail sales number, the only important feature from this week's lighter US economic calendar, could possibly generate some momentum in the market. Also watch out for the University of Michigan's preliminary consumer sentiment index for November, scheduled for release on Friday.

“Original analysis is provided by Admiral Markets”

 

[Admiral Markets]

Gold Prices Extended Its Downturn

Gold prices, the tested a four-year low during last week and reversed a bit during the weekend, due to the offbeat US labor market numbers, are again trading down during the current week. The precious metal prices, trading near $1160 at present, have liquidated nearly 1% since the start of the month and are under the impression of registering consecutive annual decline.

Gold which is generally considered as a safe haven asset continued its decline since September as the improvement in US economic numbers strengthened the US Dollar, which generally provides a negative move to the yellow metal. Moreover, surge in global equity markets also provided a reason for the investors to shift their funds out of such metal and extend the decline in gold prices.

US, the world’s largest economy, have started gaining improvements in its labor market numbers off-late and the same caused the FOMC, in its recent monetary policy meeting to shun its monthly asset purchase program by final tapering of $15 billion, which in-turn fuelled speculations that the Federal Reserve can adopt an interest rate hike sooner. However, some of the FOMC members, including the Fed Chair, are also of the view that they still look for sustained improvement in job numbers and the inflation scenario before hiking the bench-mark interest rate. Recently, the plunge in the US NFP below its yearly average of 226K triggered a pullback into the gold prices towards a weekly high and an intraday gain of nearly 3.0%. However, broader optimism for the US Dollar remained intact as the FOMC member, Charles Plosser, signaled an urgency to hike the benchmark interest rate by the Federal Reserve. Hence, current speculations concerning the interest rate hike, backed by improvement in US economics, continues to support an extended downtrend of the yellow metal prices.

Geo-political crisis, that have once supported the up-move of gold prices seems not making their mark to the gold as the crisis at Israel seems already settled down while the Ukraine is still to get the peace moments as reports continue supporting presence of Russian soldiers into the rebel acquired regions.

Looking at the demand side, the recently released Q3 2014 demand trends report by World Gold Council signaled the plunge in overall demand to the lowest level in five years by trimming 2.0% to 929 tons. The details signaled a drop in jewelry demand by 4.0% mainly due to the 60% year-on-year drop in Chinese demand to 183 tons while the India snatched the crown of world’s largest bullion consumer from China with the 225 tons of gold buying. Moreover, the investment demand increased by 6.0% to 204 tons and central banks bought 93 tons of gold during Q3 by registering fifteenth consecutive quarter of net purchases. The ETF outflows continued to prevail for the seventh consecutive quarter by dropping the 41 tons of gold holdings. Gold holdings by SPDR Gold Trust, world’s largest gold-backed exchange-traded fund, declined by 0.25% to 722.67 tons on Wednesday by registering seventh consecutive daily decline and testing the lowest level in six years.

Even though, the US Dollar witnessed a bit of correction into its strong rally on Friday, due to the labor market numbers, it is early to say that the greenback is weaker as the labor market numbers remained well in the line of earlier releases and weren’t disclosing anything negative. Further, the discussions at the Federal Reserve continue supporting near-term rate hike and should the Fed adhere to such activity, during early next year, the US Dollar can rally considerably which in-turn can provide strong negative for the gold prices. Moreover, deflationary pressure continues to hurt rest of the global economies and hence becomes supportive to the US Dollar strength which seems stronger compared to the rest of the global currencies.

However, it should also be considered that the recent economic improvement in India, the world’s largest consumer, can become supportive to the gold prices together with the higher interest of central bankers, more like Russia, to acquire yellow metal. Also, should the Prelim GDP number of the US, scheduled for the later this month, drags below its previous release of 3.5%, speculations concerning near-term rate hike can be put on hold and the gold can again witness an uptick.

From the technical perspective, even though the gold prices have plunged too much, it has still to break the psychological magnet of $1000 before testing $800; however, a pullback above $1200 in yellow metal prices can cause the jump to near $1280 levels.

To sum up, improvements in US economics, coupled with speculations of near-term rate hike by the Federal Reserve, can continue hurting the gold prices; however, comments from the central banks representatives together with the rout of economic data can continue determining near-term moves of the yellow metal prices. Should the major figures, namely the GDP number, CPI and job market numbers, register pessimistic readings, chances of a considerable up-move by the gold prices can’t be denied.

Moreover, the prevalent phase of global pessimism together with the economic improvement at the world’s largest bullion consumer, India, mainly pushed by the recent government, can continue stopping the metal from declining heavily.




“Original analysis is provided by Admiral Markets”

 

[Admiral Markets]

US Dollar Bullish Trend Remains Intact

Last week's lighter economic calendar restricted any big moves in the Forex market. Last week, US monthly retail sales surprised on the upside, reversing previous month's declines, while Euro-zone GDP expanded at a sluggish pace, registering a modest growth of 0.2% in the third-quarter. Meanwhile, slightly weaker-than-expected UK employment data coupled with dovish BOE's quarterly inflation report triggered bearish move for the British Pound. Last week's mixed performance against other major currencies led to a range-bound move for the overall US Dollar Index (I.USDX), that measures US Dollar's performance against its major counterparts.

After last week's lull movement, will the minutes of the Fed's last policy meeting help US Dollar continue with its strong up-trend? Minutes of the Fed's October policy meeting is scheduled for release on Wednesday and would now be looked for some hints of considering an earlier-than-expected interest rate hike by the central bank. Apart from the Fed minutes, investors will also have a look at the latest reading on US headline inflation, consumer price inflation (CPI), for October, which is scheduled for release on Thursday. Following a modest rise 0.1% in September versus the expectation of CPI to remain unchanged, economists are expecting October reading to drop by 0.1% on a month-on-month basis. The Core CPI figure, which excludes the volatile food and energy prices, is expected to register an increase of 0.2%.

Source: US Bureau of Labor Statistics​

Investors will also watch two regional manufacturing indices along with the housing data from this week's US economic calendar for fresh signs of strength in the ongoing US economic recovery, which could be helpful in determining further strength for the US Dollar.

The release of government's report on building permits and housing starts for the month of September are scheduled for release on Friday. Economists expect the number of building permits to hold steady above the 1 million mark, at 1.04 million units annualized rate and housing starts are also expected to reclaim the annual pace of 1 million units in the month of September. Meanwhile, existing home sale are also expected to continue reflecting positive momentum in the US housing market and expected to come-in at an annualized rate of 5.16 million units.

Manufacturing data for the month of November includes the release of Empire State Manufacturing Index and Philly Fed Manufacturing Index, scheduled for release on Monday and Thursday respectively. Following an unexpected sharp drop to 6.2 in October from 27.5 in September, the Empire State Manufacturing Index is expected to climb and print 12.1 for November. Meanwhile, the Philly Fed Manufacturing Index is expected to register a decline and reach 18.9 from 20.7 recorded in October.

This week's inflation data and FOMC meeting minutes could possibly hint towards sufficient head-room for the central bank to keep lower interest rates. This in the short-run could extend last week's corrective move for the US Dollar, but the same is unlikely to distort the well-established medium-term bullish trend for the US Dollar.

From the UK, inflation data, minutes from Bank of England's latest monetary policy meeting and retail sales data are likely to continue probing some volatile moves for GBP pairs in the week ahead. This week's inflation report, expected to remain at 1.2%, the lowest level since Sept. 2009, already seems to be priced in by the market. However, subdued inflation seems to further push the expectations of a interest rate hike by BoE, which would eventually result into continuing weakness for GBP in the near-term. The same is likely to be reflected in this week's minutes from BoE's latest policy meeting, which is scheduled for release on Wednesday and is not expected to show any change in the number of MPC members showing willingness to raise benchmark interest rates. Meanwhile, consumer spending, which remains supportive pillar of UK's economic recovery, is expected to have bounced back in October with consensus forecasting retail sales, scheduled on Thursday, to register a 0.4% growth following a decline of 0.3% in the previous month.

Elsewhere, investors will be particularly focusing on the release of PMI data, a leading indicator of economic health, for both manufacturing and services sector from the Euro-zone. The flash reading of the PMI numbers from Euro-zone's two largest economies, France and Germany, along with the broader Euro-zone PMI for the month of November are scheduled for release on Thursday. The German manufacturing and services PMI are expected to show continuous expansion while the French PMI figures are expected to reflect contraction in manufacturing and services sector. The overall Euro-zone PMI figures, however, are expected to show activity in manufacturing and services sectors expanding at a similar pace witnessed in the previous month. Other key economic release featuring this week's Euro-zone economic calendar include German ZEW Economic Sentiment for November, scheduled for release on Tuesday. Even if the PMI figures print better-than-expected results, looming risk of deflation in the Euro-zone is likely to limit any major upside for the common currency, Euro.

Following the Bank of Japan's surprise announcement on Oct. 31 to expand its annual asset purchases, this week's BoJ's monetary policy decision, scheduled to be announced on Wednesday is likely to prove a non-event for the Forex market. However, market player would be keen to see BoJ's evaluation of the latest economic conditions after the release of GDP data on Monday, that showed Japanese economy shrank by 0.4% in the July-September period. The surprise Q3 contraction is a clear reflection of the economy struggling to overcome the effects of a sales tax hike introduced in April.

Also watch-out for HSBC's flash Chinese manufacturing PMI data for the month of November, which is scheduled for release on Thursday. Being the largest consumer of commodities, Chinese economic data always bears a material impact on commodity currencies and being Australia largest trading partner, this week's PMI data is likely to spark some meaningful move for AUD pairs.




“Original analysis is provided by Admiral Markets”

 

[Admiral Markets]

Important Economic Releases To Drive The Market In The Week Ahead

Last week what looked like a lackluster, range-bound market ended with yet another week of strong performance for the overall US Dollar Index (I.USDX). The US Dollar strength was primarily trigger by ECB President Mario Draghi's comments that took the Euro-zone common currency sharply lower and helped I.USDX rise to the highest weekly close in over 4 years, since June 2010. Also on Friday, Chinese central bank, the People's Bank of China (PBOC), surprisingly lowered its benchmark interest rates. PBOC slashed its one-year deposit rate by 25 basis-points to 2.75% while one-year lending rate was lowered by 40 basis-points to 5.6%.

Meanwhile, the FOMC meeting minutes released last week revealed that although the central bank remains on track to raise interest-rates in 2015, the committee is still worried about low inflation for a prolong period, which according to the data released last week, remained flat on a month-on-month basis. From the UK the inflation print came-in higher-than-expected while monthly retail sales data remained upbeat, beating consensus forecast. Also minutes from BoE's November policy meeting, released last week, continued showing two members of the Monetary Policy Committee voting for rise in the BOE's benchmark rate from its 0.5% low on the back of continuing economic growth.

Going Forward

Moving to the last week of the month, US, UK and Canadian GDP data, along with Euro-zone inflation data will drive the Forex market. Other prominent economic releases from this week's US economic calendar includes durable goods, new and pending home sales data for the month of October and the Conference Board's Consumer Confidence index for the month of November. Let's have a brief outlook of some important market moving events and how these events could impact the Forex market.

This week's US economic calendar begins with the release of the preliminary release (second estimate) of US GDP for the third-quarter of 2014. According to the Commerce Department's initial estimates, the US economy grew by 3.5% annualized pace in the third-quarter of 2014 but economists this time are expecting a minor tick-down, with the consensus estimating the data to show an annualized growth of 3.3%. However, weaker-than-initially reported growth is unlikely to disturb the steady growth trajectory, which seems more likely to be carried forward in the last quarter of 2014.

From the US housing sector, the release of new home sales and a forward-looking indicator, pending home sales, for the month of October are scheduled for release on Wednesday. This week's housing data will provide further cues over the health of US housing sector. Economists anticipate recovery momentum to continue with new home sales expected to reach seasonally adjusted annual pace of 471,000 units and pending home sales expected to show a rise of 0.9% in October.

Investors will also have a look at the US manufacturing sector from Durable Goods orders data for October and Chicago manufacturing PMI for November. Data pertaining to durable goods orders will be keenly watched to further support the optimistic views of the economic growth-trend to continue for the rest of 2014. Durable and core durable goods (excluding transportation items) orders data are scheduled for release on Wednesday. Orders for durable goods, which also includes transportation items, is expected to decline by 0.4% while core durable goods are predicted to gain 0.5%. Chicago PMI data is scheduled for release on Wednesday. Also watch out for Conference Board's Consumer Confidence index for the month of November, scheduled for release on Tuesday.

This week's US economic releases, especially the economic growth rate, would portray strength of the US economic recovery, which would continue supporting the prospects of a stronger US Dollar in medium to long-term.

For a complete list of major economic releases, refer to Forex Calendar

From the Euro-zone investors will closely scrutinize the Euro-zone inflation and employment data, both scheduled for release on Friday. The flash version of Euro-zone CPI for the month of November is expected to remain subdued at 0.3% and the unemployment rate for the month of October is expected to remain stable at 11.5%. Following ECB's decision to begin the purchase of asset-backed securities has already shattered investor's confidence in the common currency. Further, given ECB's readiness to provide additional stimulus, weaker inflation number is more likely to force the Euro-zone common currency, Euro, to continue sliding in the near-term.

Euro area annual

Source: Eurostat

This week's highlights from the UK economic calendar includes BOE Governor Mark Carney and MPC members' testimony before Parliament's Treasury Committee and second estimate of GDP for the third-quarter of 2014. The UK third-quarter GDP print is scheduled for release on Wednesday and is expected to indicate continuation of UK economic recovery. The second estimate of growth for Q3 2014 is expected to remain at 0.7%. With the minutes of BoE's latest policy meeting in November already hinting towards stronger economic recovery, any further hawkish signals accompanied with stronger GDP figure is likely to boost near to medium-term appeal for GBP.

ALSO WATCH: The most important factors in Fundamental analysis

Meanwhile, the Canadian GDP growth for the month of August surprised on the downside, shrinking for the first time in 2014. However, this week's GDP print, scheduled for release on Friday, is forecast to register a gain of 0.4% in September. Should the Canadian economy surprise again, this time on the upside, it might provide some relief for the Canadian Dollar (CAD), which recently has dropped significantly against the US Dollar.



Haresh Menghani
Senior Market Analyst
Admiral Markets

At any use of the analytical material taken from the site of company Admiral Markets, and the secondary publication on any other resources, the rights to intellectual property for a dealing center «Admiral Markets», reference to the company site is obligatory.

Follow me on twitter @Fx_Haresh for latest market updates

 

[Admiral Markets]

Possibly a Volatile Week Ahead in The Forex Market

Last week's mixed US economic data, including the better-than-expected preliminary release of US GDP for the third-quarter of 2014, failed to provide the required support for the US Dollar to extend its recent up-move. The US Dollar, however, got a boost as the Organization of the Petroleum Exporting Countries (OPEC) announced to maintain the existing daily crude production target. The late move helped US Dollar recover all of its losses registered earlier during the week, lifting the overall US Dollar index (I.USDX) for fifth consecutive month to its highest monthly close since February 2009.

Looking ahead to the first week of last month in 2014, investors will remain engaged with a series of top-tier economic events, which could potentially trigger some meaningful volatility in the Forex market. This week key highlights include monetary policy decisions from various central bank decisions ahead of the most keenly watched economic indicator, the US non-farm payrolls data (NFP).

Let's have a brief outlook on the most important market moving events lined-up for the upcoming week and how these events could possibly determine the near-term direction for various currencies in the Forex market.

In the run-up to the NFP data, this week's busy US economic calendar begin with the release of ISM manufacturing PMI data for the month of November, which is scheduled for release on Monday. After posting a better-than-expected reading in the previous month, the ISM manufacturing index is expected to come-in at 57.9, down from 59.0 recorded in October.

Ahead of the official employment report, ADP report, which shows the number of private-sector jobs addition and also provides an early estimate for the government's report, is scheduled for release on Wednesday. The ADP report is expected to show steady US labor market with an addition of 223,000 new private-sector jobs in November.

Also on Wednesday, the ISM non-manufacturing PMI data is scheduled for release and is expected to continue showing expansion for the month of November. Following a disappointment in the month of October, the index this time is expected to reach 57.5, slightly higher from 57.1 in October.

Moving on to the centre of attraction from this week's US economic calendar, the US labor market reports is scheduled for release on Friday. The US labor market reports has always been known for generating substantial volatility in the financial markets and this week's data on would be no exception. Last month, despite the US economy added fewer-than-expected new jobs in October, an addition of over 200,000 accompanied with a drop in unemployment rate was seen as positive signs of the US labor market recovery. The momentum is expected to continue in November with the consensus estimating yet another month of over 200,000 new jobs created in the economy and the unemployment rate holding steady at 5.8%.

The US central bank has already ended its quantitative easing program and this week's stronger-than-expected labor market reports along with other economic releases might undo any uncertainty over the strength of broader US economic recovery. This would eventually fuel speculations of an earlier-than-expected rate-hike by the central bank, paving way for continuation of the ongoing strong bullish trend for the US Dollar.

Central Bank Monetary Policy Decisions and Other Economic Releases

Monetary policy decisions from various major central banks namely the Reserve Bank of Australia (RBA), European Central Bank (ECB), Bank of England (BoE) and Bank of Canada (BoC) will also be on investors watch list for the upcoming week.

RBA kick-starts the series of central bank rate decisions on Tuesday. Although RBA is not expected to make a move on interest rates, but dovish growth outlook would open room for a future rate cut in order to stimulate economic growth. Moreover, this week's Australian GDP data for the third-quarter of 2014, scheduled for release on Wednesday, would also have a lasting effect on the Australian Dollar (AUD). Market participants forecast the data to show economy registering a growth of 0.7%, up from 0.5% growth rate recorded in the second-quarter. Other economic data that could significantly impact AUD include the monthly retail sales and trade balance data for the month of October and are scheduled for release on Thursday. Also watch out for manufacturing and services PMI data from Australia's largest trading partner, China, scheduled for release on Wednesday.

Market player will look upon BoE monetary policy decision on Thursday, which is likely to prove as non-event. However, key UK PMI figures for the month of November, which includes Construction PMI and Services PMI, scheduled for release on Tuesday and Wednesday respectively, will be scrutinized and could trigger some volatile moves for GBP pairs.

Also preceding the NFP data release, ECB is scheduled to announce its monetary policy decision on Thursday. After last week's comments from ECB President, Mario Draghi, market continue expecting ECB to maintain loose monetary policy stance. However, taking into consideration ECB's recent policy action, the central bank is now likely to wait before announcing any fresh stimulus measures. Hence, ECB press conference, which is followed by the decision announcement, will be closely scrutinized and a dovish tone accompanied with falling inflation expectations would continue to pose the risk of deflation. This could further open room for near-term depreciating move for the common currency, Euro.

Being the first week of the month, slew of important economic releases promises to trigger a meaningful volatility in the Forex market.



“Original analysis is provided by Admiral Markets”

 

[Admiral Markets]

Gold Market Update

Having registered third straight month of decline, the Gold prices rallied heavily on the start of the December mainly because of the profit booking that reimbursed the decline after Swiss referendum got rejection. Moreover, the news of Japan’s credit rating being downgraded by Moody’s and a rebound in overall commodity basket supported the northward move of the yellow metal prices. However, the gold prices, even after rallying nearly 3.5% since the start of the month, are trading near $1200 since last couple of days as strength in the US Dollar, together with the inability on the part of the metal to break $1215 technical resistance, curbed the upward movement of the gold prices.

The US Dollar, which is generally considered as an opposite of Gold prices, has been gaining momentum off-late. The US Dollar Index (I.USDX), that tracks the strength of the greenback against the basket of six currencies, secured consecutive fifth monthly gain during November as the Federal Reserve shun its monthly asset purchase program on the back of improved labor market statistics. Market focus is now towards the timings as to when would the central bank of the world’s largest economy will announce the interest rate hike. The FOMC members continue spreading the words that the interest rate hike is totally dependent upon the incoming economic signals and they are unsure about the timings. However, recent data points have become somewhat weaker than their previous releases and are currently creating uncertainty into the market relating to the Fed Rate hike. On Wednesday, the ADP Non-farm Payroll change lagged behind its consensus and prior releases and spurred speculations that the Friday’s release of monthly NFP number, which is a key labor market detail, will be lower than it is forecasted to be.

On the Geo-political front, the Ukrainian crisis is still continuing as the authorities kept mentioning the presence of pro-Russian troops in rebel areas. However, this hasn’t much of the market attention and isn’t likely to affect the Gold prices any time soon unless there are harsh measures from the international leaders.

Recently, India, world’s now largest consumer of Gold, abolished the rule that required importers to sell 20% of their gold to jewelers for re-export which is known as a good sign for the gold prices as the upcoming wedding season can fuel the yellow metal demand from the nation. However, speculation concerning the cut in the excise duty, which is at 10%, aren’t being supported by the government authorities and is likely to continue pressurizing the cost of gold for Indian consumers. On the other hand, China, the second largest consumer, recently introduced additional monetary easing measures that are likely to support the yellow metal demand from the dragon nation. However, the economics from China are also losing their strength and is likely to become a deterrent factor for Chinese gold buying. On the ETF front, the recent rally in gold prices supported the demand after continued witnessing weaker numbers in November. The Gold holdings by SPDR, world’s largest bullion backed ETF, rose 2.4 tons on Tuesday.

To sum up, the recent upsurge into the yellow metal prices isn’t more likely to change the bearish outlook for the yellow metal. However, should the Indian government announce additional measures to promote gold imports and the china supports more of the gold buying by adding more stimulus, the yellow metal prices can rally.

Moreover, the US labor market numbers, on Friday are also likely to be catalyst for the FOMC meeting on December 17. Should the NFP and the Unemployment Rate reveal weakness in US labor market, the speculations relating to rate hike is likely to be wiped out in the meeting. Alternatively, an optimistic number can give support the expectations of rate hike in early 2015 and can boost the US Dollar demand which in turn will be negative for the gold prices.

On the technical side, the yellow metal, even after reversing from near $1143, hasn’t been able to break the $1215 level, encompassing descending trend-line resistance, stretched from August. On the close above $1215, the 100-day EMA and the 38.2% Fibonacci Retracement of its March – November decline, near $1230, can cap the near-term up-move of the gold prices before its tests another descending trend-line resistance, also encompassing 50% Fibo. near $1260. On the sustained break of $1260, the yellow metal becomes likely to rally towards $1300 level by negating chances of near-term decline. However, a reversal from the current level seems supported by the $1192 support, including 23.6% Fibo. level, breaking which $1175 and $1148 are consecutive supports for gold prices. On the break of $1148, gold prices can become vulnerable to extend its decline towards the yearly low of $1130 and the $1080 support levels.

“Original analysis is provided by Admiral Markets”

 

[Admiral Markets]

Fewer Economic Releases Might Trigger US Dollar Pull-Back

Friday's blockbuster Non-farm payrolls (NFP) data and upward revision of September and October readings helped the US Dollar to register yet another week of strong gains, lifting the overall US Dollar Index (I.USDX) to its highest level since April 2006. Before the release of strong jobs report, encouraging US ISM manufacturing and non-manufacturing PMI figures also supported the US Dollar during the early part of the week.

Adding to the overall US Dollar strength was ECB and RBA's dovish tone, and disappointing Australian GDP print. ECB's dovish outlook fueled expectations of additional stimulus measures by the central bank, thus dragging the Euro-zone common currency to a fresh 2-year low against USD. Moreover, RBA statement also hinted towards interest-rate cuts in the near-future, pushing the Australian Dollar (AUD) lower against USD, to its lowest level since June 2010.

Going forward this week's lighter economic calendar seems to do little to help USD extend its recent up-surge. US monthly retail sales, manufacturing data from UK and China, Australian employment report and ECB's targeted Long Term Refinancing Option (LTRO) are among some major economic releases line-up for this week. Let's have a brief overview on the economic highlights scheduled during the course of the up-coming week.

Tepid US Economic Calendar

From the US, market participants will particularly focusing on retail sales data, which is scheduled for release on Thursday. October retail sales data showed better-than-expected reading. For the month of November, economists are expecting the retail sales to match October reading by registering a growth of 0.3%. However, core retail sales, which excludes automobile sales, is expected to remain muted and register a nominal growth of 0.1%. Along with the US retail sales data, preliminary University of Michigan's consumer sentiment index is scheduled for release on Friday. The Preliminary University of Michigan's Consumer Sentiment Index reading is expected to improve from 88.8 (revised lower) in November to 89.6 in December.

Global Releases

Moving on to the global manufacturing activity, the latest reading for UK manufacturing production data, which makes up for 80% of total industrial production from UK, is scheduled for release on Tuesday. The manufacturing production and industrial production for the month of October are estimated to show 0.2% and 0.3% growth respectively, down from 0.4% and 0.6% recorded in September. Meanwhile, Chinese industrial production data for the month of November, scheduled for release on Friday, is anticipated to show little change with consensus estimating a reading of 7.6% as against the previous lower-than-expected reading of 7.7%.

Ahead of Friday's Chinese industrial production data, Australian employment report for the month of November, scheduled for release on Thursday, is likely determine whether the Australian Dollar would continue with its weakening trend, led by last week's disappointing GDP data, or might witness some relief rally from over four-and-half year lows. Following a strong gains in October, markets this time are expecting smaller gains. Consensus estimate the number of new people employed during the month of November to have increased by 15.2 K and unemployment rate to rise to 6.3% from 6.2% recorded in October.

Other important data to watch-out from UK include trade balance data, scheduled for release on Wednesday and is expected to slightly better the previous month's reading, but still remain elevated, to show a trade deficit of 9.5 billion Pounds for the month of October. Also watch-out for Chinese inflation data, scheduled for release on Wednesday.

On Thursday, ECB is scheduled to report the results of the second tranche of TLTRO. After last week's dovish comments, market participants will examine the TLTRO release to examine whether the economy is using the funds directed or the central bank needs to go for full-fledged QE in order to revive region’s falling inflation expectations and stimulate economic growth.

With the US Dollar Index already in short-term overbought territory, this week's lighter economic calendar might compel investors to table some profits, thus posing some risk for the US Dollar strength, at-least in the week ahead.



“Original analysis is provided by Admiral Markets”

 

[Admiral Markets]

FOMC To Determine Near-Term US Dollar Direction

Last week, with lesser releases scheduled for publication, the US Dollar registered heavy losses against majority of its counterparts as market players remained cautious about the FOMC outcome, scheduled during the current week. However, the consumer centric details, Retail Sales and the Preliminary reading of UoM Consumer Sentiment, remained upbeat and minimized some of the losses piled during the early week days.

Concerns over the re-election in Greece again fuelled speculations relating to the economic health of the troubled region and continued hurting the regional currency, Euro, while snap elections in Japan, that matched forecast of current PM’s victory with great majority, provided some strength to the Japanese currency ahead of the snap elections during last weekend. Moreover, weaker Chinese numbers and the plunge in oil prices continued hurting commodity currencies, like AUD, NZD and CAD.

Looking forward, forex market is set to witness magnified volatility fueled by the active economic calendar where in almost every part of the globe is expected to see something that is really important to determine near-term market movement. However, the FOMC meeting, scheduled for Wednesday, is likely to take the center stage wherein everybody is looking for the indication as to when the central bank of US can alter the current interest rate to the upwards. Moreover, PMI releases from the Europe and the China coupled with the BoJ meeting, UK Retail Sales and the labor market numbers are some other details that are likely to be observed carefully.

The US and the FOMC

Even if the greenback started liquidating some of its gains off-late, FOMC meeting, scheduled for Wednesday, becomes crucial to determine near-term USD moves as recently released labor market numbers fuelled speculations that the Fed can remove the word “considerable time” while discussing the when they would hike the benchmark interest rate. Further, the press conference by the Fed Chair, Janet Yellen, after the meeting, can provide some of the links as to where the US economy is heading towards and what would be the role of Fed in near future. Moreover, the quarterly release of Economic projection by the FOMC also become an important point of information as it conveys the FOMC members’ view of the economy and when they see a change into current monetary policy.

Although, consensus support no change into the current monetary policy of the Federal Reserve, recent labor market numbers, that signaled overall improvement with payrolls, average earnings and hours worked all improving, continue pressing the central bank to stop being too dovish. However, deflationary pressure in global economy may help the Fed Chair to avoid being too optimist while addressing the media after the meeting.

The economic projection by the FOMC members can provide meaning information of the future moves of the Fed as higher the number of members supporting the earlier rate hike, more will be chances of it. Moreover, the GDP, Unemployment rate and the inflation forecast also signals the FOMC view of the future economic scenario of US. Should the changes into the GDP and the Inflation forecasts signal more of the optimism for the US economy, it can become safe to say that the Federal Reserve is going for the interest rate hike during early 2015.

Economic Projection details published in September 2014

Source: Board of Governors of the Federal Reserve System


Should the Fed Chair starts being optimist and discusses the timing of the interest rate hike, the US Dollar can witness considerable strength. Moreover, should the FOMC economic projection favor the strength of the US economy, the greenback can have a reason to reimburse some of its losses and continue its rally.

Alternatively, continued dovish tone of the Fed Chair, concerning the global deflationary pressure, can become strong negative for the US Dollar. Also, pessimistic forecast of the FOMC members into the economic projection report can become additional drag for the greenback.

In addition to the FOMC, the Empire State Manufacturing and the Industrial Production, scheduled for Monday, housing Market numbers, on Tuesday, the CPI, scheduled for Wednesday and the Philly Fed Manufacturing Index, scheduled for Thursday release are also expected to provide considerable movement into the forex market.

While Empire State Manufacturing and Industrial Production support an increase into the industrial activity, forecast concerning Philly index shows slightly weaker manufacturing during last month. Should these numbers remain well ahead of their consensus, the US Dollar can have a reason to celebrate. The Housing Market numbers, Building Permits & Housing Starts, are likely to continue remain mixed with no major changes as compared to their previous releases; however, the overall housing market sentiment remains positive and only a drastic decline into the actual numbers can only pose US Dollar for negative sessions. The CPI, is expected to plunge into negative territory to -0.1% against 0.0% registered in its previous release and can become a drag for the US Dollar ahead of the FOMC as well as provide support to the Fed Chair in being dovish.

Rest Of The Globe Releases

Alike US, rest of the global economy is also scheduled for publishing important economic numbers during the current week. Let’s discuss each of them in detail.

Manufacturing PMIs for France, Germany and the Euro-zone as a whole, scheduled for Tuesday, and the Final version of CPI, scheduled for Wednesday release, becomes the corner stone of the European economic calendar during the current week. Also, the German ZEW Economic Sentiment, German Ifo Business Climate and the GfK German Consumer Climate, scheduled for Tuesday, Thursday and Friday, are important for determining the strength of the European growth engine which is currently going through tough time.

Even if the French PMI is expected to continue its plunge below 50 level, the German PMI is expected to reverse its early decline and return to above 50 by testing 50.4 level while the EU PMI is also expected to rise from its previous release of 50.1 to 50.5. Further, the Final version of CPI isn’t expected to change from its Flash reading of 0.3%. Moreover, German indices signaling the expectations of the Economy, Consumer and Business Climate are all expected to surpass their previous readings.

With the Euro-zone Manufacturing PMI near to the contraction phase and the German PMI already into the below 50 level, additional decline into the manufacturing PMIs coupled with weaker German numbers and softer inflation reading can provide strong negatives to the regional currency by forcing the ECB President for additional QE who recently asked for some time to analyze the economy.

The UK CPI, BOE Financial Stability Report and Speech by the BoE Governor, scheduled for Tuesday, labor market details and the BoE meeting minutes, scheduled for Wednesday release, and the UK Retail Sales, scheduled for release on Thursday become important point of information for determining the near-term GBP moves.

Considering the current deflationary pressure, UK CPI can become important in signaling whether the UK is going to continue the downward trajectory in Inflation numbers seen since the 3.7% peak in 2011. The number is expected to decline to 1.2% from the previous release of 1.3%. The labor market numbers, namely Claimant Count Change and Average Earnings Index, are expected to show mixed readings as the Claimant count is likely to increase to -19.8K against the previous release of -20.4K while the Average Earning’s Index is expected to rise by 1.3% against the previous hike of 1.0%. Moreover, the voting numbers by the MPC members are likely to maintain their current state where 2 of the 9 members support bank rate change while none of them is in favor of change in asset purchase facility. The Retail Sales number, which become important for determining the UK GDP as it contributes heavily to the national product, is also expected to register a decline to 0.3% increase after rising 0.8% in its previous reading.

Weaker labor market numbers and lower than the previous reading of Retail Sales could become a drag for the UK currency. Moreover, should the Financial Stability report conveys the threat from global markets and the inflation number declines further, the GBP can become vulnerable to witness additional downside.

From the rest of the globe, the Chinese HSBC PMI, scheduled during early Tuesday and the Bank of Japan monetary policy meeting, scheduled for Friday release, are some of the important details to take care of. Should the Chinese number plunge below 50 level, as it is expected to test 49.8 level, after maintaining nearly five readings of expansion state, the commodity currencies, like AUD and the NZD, can become vulnerable to witness additional downside. Moreover, monetary policy decision by the Bank of Japan is important for the JPY even if the forecasts aren’t favoring a change into current BoJ monetary policy as the BoJ Governor, in a speech after the meeting, can convey future actions of the BoJ after the recent victory of PM who supports lose monetary policy. Should the tone of the BoJ Governor continue to be dovish, the JPY can lose its recent gain and is likely to plunge again.



“Original analysis is provided by Admiral Markets”

 

[Admiral Markets]

Holiday Season To Restrict Big-Moves In The Forex Market

In the week gone-by, when the Federal Reserve fuelled expectations of a possible rate-hike in the middle of 2015, the overall US Dollar Index (I.USDX) climbed to a fresh multi-year high. The central bank twisted its language by dropping the promise to keep interest rates lower for a "considerable time" and adding that it can be "patient" before raising rates. The changed language indicated central bank's readiness to raise interest rates by the middle or 2015 or possibly even earlier.

Going forward in a Christmas-shortened trading week, there are few catalysts, in term of major economic releases, that could possibly move the marked significantly before the end of the year. Third-quarter Final GDP print from the US and UK along with durable goods orders and new home sales data from the US and UK third-quarter current account balance are the key highlights from this week's Forex calendar. Let's have a brief overview on major market moving releases scheduled during the course of the up-coming week.

From the US housing sector, fresh readings on existing and new home sales for the month of November are scheduled for release on Monday and Tuesday respectively and would assist investors to gauge the strength of the sector. Existing home sales are expected to continue the positive momentum and print above 5.00 million annualized rate for sixth consecutive month. New home sales has been quite erratic this year, but is anticipate to slightly better 458,000 units recorded in October and reach seasonally adjusted annual pace of 461,000 units in November.

Investors will also have a look at the performance of US manufacturing sector with the release of durable goods orders, scheduled for release on Tuesday. Following an unexpected drop in October for core durable goods orders, which excludes transportation items, analyst expect an up-tick of 1.1%, while orders including transportation items is expected to surge by 3%.

The key highlight from this week's US economic calendar is the final version of the third quarter US GDP growth rate. According to the Commerce Department's Preliminary estimates (second estimate), the US economy grew by 3.9% annualized pace in the third-quarter of 2014 but economists this time are expecting the figure to be revised higher, with the consensus estimating the data to show an annualized growth of 4.3%. However, a minor blip from the initially reported growth is unlikely to disturb the steady growth trajectory, which seems more likely to continue in the last quarter of 2014.

Strong third-quarter growth, followed by robust second-quarter, would re-affirm that the US economic recovery remains on strong footing, which eventually would boost prospects of the Fed raising interest rates in mid-2015. This might lead to a broad based rally for the US Dollar in medium to long-term.

From the UK, third-quarter current account deficit and final GDP print are the key releases to watch for. After ballooning to -23.1 Billion Pounds in the second-quarter, current account deficit, scheduled for release on Tuesday, is estimated to come-in at -21.1 Billion Pounds for the third-quarter of 2014. An unexpected reading, especially higher-than-expected deficit, would seriously deteriorate demand from GBP and have a significant impact on GBP pairs. The final UK GDP print for the third-quarter of 2014, also scheduled for release on Tuesday, is expected to remain stable at 0.7%.

Traditionally volumes, during the year-end holiday season, drop significantly and with very little in terms of fresh economic triggers, the Forex market could possibly witness some lacklustre movement in the upcoming week.



“Original analysis is provided by Admiral Markets”