Weekly Review and Outlook 26th September 2016

Mark NugentSept 2016, Trading Plan


Weekly Forex Review – Week Commencing 19th September 2016

Economic Calendar

Early in the week saw the Reserve Bank of Australia minutes from September 6th policy meeting stated that the data shows growth is close to potential and the low AUD continues to support trade. It also stated that policy the stance is consistent with meeting the CPI target over time but demand uncertainty is still weighing on non-mining investment. This meeting was Governor Glenn Stevens last.

The Algerian oil minister said that oil producers will discuss the possibility of an output freeze at the Algiers gathering and commented that any extraordinary OPEC meeting which is agreed upon in Algiers could take place before November.

Bloomberg reported speculation that German Chancellor Merkel will not stand for a fourth term after 11 years in office. The backdrop is waning popularity on her no-barriers immigration policy.

On Tuesday New Zealand Global Dairy Price Index came in at a modest 1.7%.

Wednesday saw the Bank of Japan opts for a policy overhaul, abandoning its specific monetary base target (but will continue to be around JPY80T per year), launching yield curve control (which Kuroda described as a “new central pillar of easing”) and scrapping its bond buying range but leaves rates unchanged. The Bloomberg “explainer” article is HERE. Japanese government bond yield turned positive for the first time in many months. Equities rose and the Yen fell.

Later we had the Fed meeting where the rate was unchanged at 25 to 50 basis points.

• There were three dissenters: George, Mester and Rosengren.
• The statement said that the case for a hike has strengthened but they will continue to look at the data.
• The decision to remain on hold was due to the slack that remains in the labour market and with inflation remaining below target.
• The dot plot shows a slower pace of easing compared to the June plot. 14/17 members see a single hike this year.
• As expected, the USD weakened, US equities rose and Treasury yields declined.

RBNZ Official Cash Rate was unchanged at 2.00%.

The statement said that current projections and assumptions indicate further policy easing will be required but then highlighted that excessive house price inflation poses a major concern to financial stability.

RBA (new) Governor Lowe stated that additional rate cuts are possible dependent on a variety of factors and added that it is not likely the RBA will run out of policy space. Furthermore, he commented that a lower AUD would be helpful and mentioned that inflation is to stay low for some time.

Thursday: BoE Governor Carney calls for governments to play role in recovery: “long-run prosperity was never in the gift of monetary policy makers.” Similar message from UBS Chairman Axel Weber on CNBC.

On Friday oil fell over 3% after comments from Saudi and Iran increased doubts regarding an output freeze deal. The Algerian oil minister said that there is still a possibility for an output freeze deal, but added that the meeting this week could only result in elements of a deal. The energy minister also stated that Saudi Arabia is ready to freeze output at January levels. (Newswires/WSJ) However, Saudi Arabia themselves see the upcoming meeting in Algiers as a consultation and does not expect any decisions to be made, according to sources citing a delegate on Friday. (Newswires). Furthermore, Iran is unlikely to agree to a deal to freeze its crude production at current levels, according to an Iranian official on Friday. (Platts)

Headling and Core CPI and Headline and Core Retail Sales all miss in Canada.

Market Reaction

It was a solid risk-on week but with some nervousness around the BoJ and Fed announcements. Despite recent moves into positive yield territory, the German 10 year bond moved down last week and is essentially following a channel the midpoint of which is still negative. Oil rose during the week but lost almost all of the gain on Friday. UK and US 10 year bonds also moved down through the week.The USD index moved down on Fed news and down on the week. The GBP continued to weaken and the JPY strengthened over the week a little. CAD was down on the week due to Friday’s big move down in line with the oil price and poor Retail Sales and CPI numbers. AUD and NZD are range-bound, moving up and down respectively.

Trading Plan

Trade 63, GBPNZD short closed at breakeven. Trades 64 (USDJPY long) and 65 (Euro50 short) are still active and both in a small profit.

Weekly Forex Outlook – Week Commencing 26th September 2016

Economic Calendar

Mon – BoJ’s Kuroda states the main tool for further easing will be further reductions to interest rates. ECB President Draghi in front of the European Parliament in Brussels.
Tues – Oil producing nations meet in Algiers.
Wed – ECB President Draghi in front of the German Bundestag in Berlin. FOMC’s Bullard and George speak.
Thurs – US Final GDP
Fri – Tokyo Core CPI, UK Current Account, Canadian GDP.

Financial News

The news flow is heavily dominated by the oil producing nations’ Algiers meeting. There is a piece about Draghi visiting the Bundestag and German Finance Minister Schaeuble suggesting the Germans be hard with Draghi because of his low interest rate policy.

[mepr-hide if=”loggedin”]

VIP Club members please [mepr-login-link] to access your Weekly Review and Outlook video.

For VIP Club members, this commentary is augmented with a video where I discuss the Trading Plan for the forthcoming week. If you would like a free one month trial to the VIP Club you can find out more HERE.


[mepr-show if=”loggedin”]

Here is your Weekly Review and Outlook video. I start to discuss last week’s trades at 6:40 and this week’s Trading Plan at 12:55.

The Bloomberg “explainer” article on last week’s BoJ decision is HERE.

The profiles I use for this week’s trading opportunities are HERE. You will have to use them on MT4 provided by FxPro which is HERE. The instructions for use are at 19:20 in last week’s Weekly Review and Outlook video which is HERE.

If you want your own copy of the currency indices, you will need MT4 as provided by the broker LiteForex which is HERE and the profile I use for the currency indices for you to insert into the MT4 platform is HERE.

There is an archive of all VIP Club member’s content on the VIP Club page.