Weekly Forex Technical Analysis

Central Bankers and Economic Data to Drive the Majors

Earlier in the Day:

The Kiwi Dollar was the victim of the Asian session this morning, tumbling to sub-$0.69 levels at the start of the day. Risk sentiment was on the softer side and a fall in commodity and dairy prices added to the woes of the already sensitive Kiwi Dollar. At the time of writing, the Kiwi was down 0.61% at $0.6861. A shift in the political landscape continues to be an added negative, while the markets are also less convinced of the RBNZ’s optimism over the economy and monetary policy.

Macroeconomic data through the Asian session didn’t help the Kiwi Dollar or the Aussie Dollar’s cause. Key stats included China’s industrial production, fixed asset investment and retail sales figures for October. The numbers were disappointing and softer from September numbers, weighing on market risk appetite. Concerns over how China’s economy is likely to perform in the final quarter have been brewing. Last week’s release of China’s October fiscal spending was also a negative for the 4th quarter.

While retail sales numbers were softer, sales were still up 10% year-on-year, with industrial production rising by 6.2%, down from September’s 6.6%.

The Aussie Dollar slipped from $0.76353 to $0.7652 upon release of the figures, giving up gains from earlier in the session off the release of October’s National Bank of Australia Business Confidence Index figures. Business confidence picked up in October, the numbers being aligned with the RBA’s positive sentiment towards non-mining investment.

The Aussie Dollar was up 0.14% at $0.7634 at the time of writing, with the Aussie managing to brush off the softer numbers out of China ahead of today’s busy European and U.S session.

For the major indexes, the Hang Seng managed to shake off the softer numbers out of China to join the Nikkei in positive territory. In contrast, the ASX200 saw a steep decline to end the day down 0.88%, joined by the CSI300 that was down 0.23% at the time of writing.

In spite of the mixed session, the Dollar managed to hold off the Yen at the time of writing, with the Yen down 0.01% at ¥113.63, though we don’t expect the pair to be range bound through the day.

The Day Ahead:

Following yesterday’s quiet start to the week, it’s certainly a busier day on the economic calendar through the European and U.S sessions.

Out of the Eurozone, key stats include finalized inflation figures for October out of Germany, Spain and Italy, 3rd quarter GDP numbers out of Germany and the Eurozone, German and the Eurozone’s ZEW economic sentiment figures together with the Eurozone’s September industrial production figures.

While Germany’s prelim GDP numbers are forecasted to be EUR positive and likely to be the key driver, ECB President Draghi is also scheduled to speak this morning. Any upside in the EUR off the stats could be reversed should Draghi take a dovish stance on policy this morning, the ECB eager to avoid a EUR rally anytime soon.

At the time of writing, the EUR was up 0.07% at $1.1675 ahead of the European open with Draghi likely to have the final say on how the EUR ends the day.

From the UK, October inflation figures are scheduled for release. The annual rate of inflation is forecasted to pick up to 3.1%, which would be a positive for the Pound, though the markets will be wary ahead of BoE Governor Carney’s speech later in the morning.

Following last week’s rate hike that was considered dovish for the Pound. Carney may look to take a more hawkish stance on monetary policy in the interest of support for the Pound, which has continued to be under pressure from noise over Brexit and Theresa May’s woes in parliament.

The Pound was up 0.01% at $1.3117 at the time of writing, with direction through the day hinged on the inflation figures and Carney’s comments. BoE Monetary Policy Committee member Cunliffe is also scheduled to speak late in the day, which could provide further support for the Pound should the two take a hawkish stance on policy. News from Parliament and concerns over the vote of no confidence letter will also be a factor to consider.

Across the Pond, economic data out of the U.S is limited to October’s producer price index figures that are forecasted to soften. We would expect the stats to play a minor role in the direction of the Dollar through the day. Focus will remain on tax reforms and whether the House of Representatives and the Senate can come to a compromise that satisfies the markets. FED Chair Yellen is also scheduled to speak this morning. Philly FED President Harker had provided some support for the Dollar on Monday, though how much upside for the Dollar there would be from any hawkish commentary remains to be seen, as tax reforms continue to hold court.

The Dollar Spot Index was down just 0.03% at 94.473 at the time of writing, with direction through the day hinged on noise from Capitol Hill and any comments from the FED Chair on monetary policy.