Market Paints a Dual-Tone Picture Ahead of US Macro Data Update

Karthik Subramanian

Karthik Subramanian has been a professional trader and fund manager over the last 18 years. He is basically a software developer who made the transition to financial domain around 18 years back as the attractiveness of the financial markets proved too much for him. He lives in Chennai in India along with his wife and son. He began his career as a software developer in 1999 and then gradually moved into the financial industry as he began trading stocks in his pastime. He then moved into the financial markets full time and then shifted his focus to the FX markets due to the liquid nature of these markets. Since then, he has been trading FX diligently and his favourite pair are the EURUSD and EURJPY. Over the last couple of years, he has found blockchain to be of high interest and considering his background in software and finance, he has since assembled a team of highly talented developers who have since worked on a variety of projects like crypto exchanges and blockchain architecturing. Now, he balances his time between trading and commenting on both the FX and crypto markets. He has worked with many publications including FX Street and Finance Magnates, which has helped him gain experience and also recognition across the industry. He loves to write and this passion has helped him to reach out across the FX and crypto industry. Right now, he works on his pet projects in the FX and crypto industry and spends his time writing and managing his blockchain team and helping it to reach higher.

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Market Paints a Dual-Tone Picture Ahead of US Macro Data Update

February 21, 2019

Positive Cues from Wall Street inspired positive price action in the market, but mixed European macro data and caution ahead of US macro data updates result in mixed price action.

marketSummary: Global market today saw divided price action on data and headlines driven momentum. All major Asian indices and equities saw positive price action on positive cues from US Wall Street and increased risk appetite influenced by optimism surrounding Sino-U.S. trade talks. Meanwhile, the Forex market saw most major currency pairs trade range bound as Dollar which rebound from last night lacked the strength to create a breakout in its favour. During Pacific-Asian market hours last night, fed meeting minutes of January was released and it provided mixed signals that boosted the dollar, but Fed member Robert Kaplan’s reiterated Fed’s patient stance on rate hike plans for 2019 and this limited Dollar’s rebound action in the broad market. European market saw major indices and equities open positive on increased risk appetite and positive investor sentiment influenced by cues from international markets, however mixed macro data caused some of the major indices to decline in the mid-European trading session. Of the four most-watched European markets – Germany & Spain indices saw positive price action while France & Italian indices and equities saw downside price action.

Precious Metals: While price action of major precious metals is still above critical price levels, Dollar’s rebound last night signalled the end of the recent rally albeit bulls being supported from a fundamental perspective to remain above critical price levels. While price action of #1 asset gold’s spot market is well near 2019 highs, it has dropped from ten-month highs hit early last night. It still held well above $1330 handle during Asian and European market hours.

AUD/USD: The Australian dollar today saw a two-way move in Asian market hours as upbeat macro data gave the currency a fresh breath of positive influence. However, news that China’s Dalian port banned Australian coal import limited gains. Further, USD gained strength on the release of Fed meeting minutes update, while the rebound was limited following Fed member Kaplan’s speech, weak AUD resulted in USD managing to gain the upper hand.

USD/JPY: The US Dollar managed to find yet another trigger to aim for $111 handle as Dollar rebound in Pacific-Asian market hours following the release of Fed meeting minutes for the month of January. However, dovish comments from Fed member Kaplan capped Dollar’s rally in the broad market. Further, US President Donald Trump’s threat of tariff on European auto market underpinned demand for Japanese Yen owing to its safe-haven status resulting in range bound action. US macro data updates later in the day can help USD resume its upside move if data release today beats expectations.

On The Lookout: The main focus continues to remain on Sino-U.S. trade talks as recent headlines suggest an increased possibility for a trade deal between two nations. Given the fact that US President Trump has to deal with the fallout of his actions in declaring a national emergency and that he was responsible for the trade war between US & China, Trump administration is aiming at minimizing damage. This has led investors to believe that the trade deal would be signed by both nations in the near future and continues to inspire high-risk appetite in the broad market. Aside from Sino-U.S. trade talks, investors focus in on headlines relating to Trump’s threat of imposing a tariff on European auto market, and the Brexit progress. However, in the immediate future, investors would focus in on ECB meeting minutes for the month of January and Speech By ECB Peter Praet as he is expected to provide further details on ECB’s TLTRO plans. Post ECB updates, investors await the release of PMI’s, Philadelphia Fed manufacturing index data, Existing home sales data and Core durable goods order data from US market.

Trading Perspective: Market is expected to be highly volatile for the rest of the day’s trading session. Investors await US macro data update for directional cues on short term price action.

EUR/USD: EURUSD pair continues to trade range bound today but has expressed a bullish bias influenced by positive macro data updates despite overall EURO area macro data seeing a mixed outcome. Investors now await ECB Preat’s speech and US macro data updates for directional cues, and disappointing US macro data will lead to EURO bulls aiming for monthly highs.

GBP/USD: The GBPUSD pair continues to trade rangebound near monthly highs as Brexit uncertainty does little to influence downside price move. While Dollar’s rebound early in the day and headline which hints at a lack of favourable proceedings in Brexit front pressured the pair slightly, hopes for an extension of the Brexit deadline continues to keep British Pound well above the 1.3000 handle. Ahead of the US macro data updates, the pair is trading well above the mid-1.30 handle.

USD/CAD: The pair managed to breach the 1.3200 handle for a short while early in the day when dollar rebounded in the broad market, but CAD regained momentum once the rebound action lost strength in the market. While crude oil price declines in the broad market, it failed to affect CAD’s recovery erasing all gains made early in the day. Investors now await US macro data update and speech from BOC Governor Poloz for directional cues as trading session approaches the week’s close.

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