Trading fx fundamentals

Today's trading opportunity.

Beat on retail sales + upward revisions which is likely going to push up Q2 GDP and shows consumers are out spending in a healthy economy with low unemployment. Risk off in the AM was running out of steam and that is typically a sign to stay out. This news was a catalyst for sentiment landing 2 nice trades, the initial spike, then a technical pullback to test the top again. The first trade you could have pulled 15-20 pips and the second 10

This week we have the Fed, Boe, and Boj central banks communicating policy. Here are some comments from the Fed members to consider

 

1. Tariffs would have to stay 6 months to impact Fed policy
2. Fed may have overdone it with the December hike
3. Fed is not currently a point where they need to respond to low-inflation by changing policy, does not expect that to be the case in the near-term
4. Downside risk could call for more accommodative policy
5. No sustained deep inversion in the yield curve (Note it is still inverted)
6. A rate cut may help to maintain inflation goal credibility
7. A rate cut may become 'a more attractive option' if inflation keeps disappointing
8. Trade uncertainty seems to be weighing on business investment
9. Fed will 'act as appropriate' to sustain the expansion
10. Much higher likelihood rates will fall to effective lower bound in a downturn

This week's central bank policy meetings will all be about the communication, not the rates (not unless they are changed of course). The US economy is more of a mixed picture and given that things have deteriorated since the last hike, and Fed members have been communicating rate cuts, it could be a major event if the communicate easing. Keep in mind that last week we have beats with upward revisions on retail sales that will push up GDP for Q2 and could be enough to make them sit on their hands for some more (a muted policy communication).

Here is the Feds last press conference notes:

 

1. Incoming data broadly inline
2. Economic growth and job data has been stronger than expected
3. Inflation has been weaker than expected - believed to be transitory
4. Economy is healthy (accommodating financial conditions, high employment with job growth and wage growth, and strong business and consumer confidence)
5. Growth in private investment and fixed investment slowed - expected to bounce back
6. Inflation shifts due to moves in energy prices
7. Risks at the beginning of the year (trade tensions, Brexit, China & Europe slowdown) have moderated
8. Balance sheet runoff ends in September - changes to maturity structure coming later in the year
9. Don't see a strong case to move policy in either direction

Note the Boe and Boj which are both expected to stay put yet the Boj might add communication for further easing as their economy has slowed.

jpy not weaker today can you expain me

It's not so much of a case of the yen being strong but rather other currencies traded against it being weaker. What pair are you looking at?

Draghi @ ECB forum speech

He hasn't said anything we don't already know. His comments on the ECB having room for ease further has sent the euro crashing. A similar message was shared by Guindos on June 15th and Coeure yesterday. The significance of this statement now, however, is that it comes from the head of the ECB. If you had caught this then it was a brilliant trade.

ECB Persident Draghi speaks...

"Looking forward, the risk outlook remains tilted to the downside, and indicators for the coming quarters point to lingering softness. The risks that have been prominent throughout the past year, in particular geopolitical factors, the rising threat of protectionism and vulnerabilities in emerging markets have not dissipated. The prolongation of risks has weighed on exports and in particular on manufacturing".

Great

jpy fuck

BOE Gov Carney Speaks

i am not see information can show me?

His words did not bring any sensible volatility though

thank you Techanalyst

Not much said about the status quo but sure is an interesting listen, would have been great to have been there yesterday and today to take up all the discussions.

Draghi's inflation remarks have reignited the EUR selling from this morning

Core inflation remains muted. Our inflation path is converging more slowly

Closed my GBPUSD sell position $300 loss, not a big deal.

June 19

Today we get CPI data for the UK and Canada. For the UK, if CPI is > 2.1% it will be £ positive news and under 2% will add fuel to the weakness that's been ongoing. Later we get Canadian CPI which is expected to come in weaker than last month so any upward surprises of > than 0.3% will boost the currency and below 0.1% will weaken it.

The main event for the day is the FOMC. The market has been pricing in a language change for a rate cut in the near future. Globally we have seen RBA, RBNZ both cut rates, China adding stimulus, ECB downgrading growth with communication yesterday from Draghi of a move lower, and don't forget the ongoing trade war and its effects. The US data has been somewhat mixed with beats and misses across a range of indicators. Trying to front run this trade is not recommended because it could go either way. In reality, if the Fed is more dovish and in fact hint at easing then gold will be boosted and the $ will be weak. If they are not as dovish as expected then we will see $ strength. So the thing to watch out for is changes in the language. Take some time to review their last statement as well as the press conference in addition to their communication on the portal. You need to have this information fresh in your mind so you can pick up on language changes and trade accordingly.

As for pairing, you could look at USDJPY if they are dovish and if not then EURUSD is a good pairing as we had a dovish Draghi yesterday that will persist for some time. Other pairings might materialize today as news flow alters sentiment.

long cadchf looking to CPI m/m data

Eco which Fed member is most closely aligned with Powells views in your opinion. And how do they stand now

EcoTrader big thank share your experience