Archive March 2019

US Dollar May Rise as Data Casts Doubt on Dovish Fed Outlook


  • Yen down as Asia Pacific bourses rise following upbeat US GDP data
  • Eurozone PMI and CPI data may help revive global slowdown worries
  • US Dollar may rise as sentiment sours on firming Fed policy outlook

The anti-risk Japanese Yen broadly weakened in otherwise inconclusive Asia Pacific trade across the G10 FX spectrum. The move echoed gains across most regional bourses. The news wires attributed the move to optimism stoked by unexpectedly strong US GDP data and hopes for an imminent in US-China trade negotiations. Reports citing unnamed officials claim a deal may be signed in a matter of weeks.


A final look at February’s Eurozone manufacturing PMI figures is expected to confirm flash estimates showing the first contraction since June 2013. That may underscore worries about a broader slowdown in global growth. Against this backdrop, an expected uptick in regional CPI inflation might emerge as a further liability for sentiment, hinting the ECB might be slow to offer a counter-cyclical response.

This might cool the exuberance seen in APAC hours to some extent, but a committed push will probably depend on follow-on US economic releases. Indeed, evidence of sluggish performance in the single currency area would reconfirm something already known to investors rather than introduce a novel factor with scope for longer-lasting repositioning.


The US docket offers a diverse array of catalysts. The Fed’s favored PCE inflation gauge is expected to put price growth just shy of the policy target at 1.9 percent, the manufacturing ISM survey is due to show a slight slowdown in the pace of sector activity growth and the final reading for February’s University of Michigan consumer confidence is seen being revised higher.

Priced-in policy bets implied in Fed Funds futures suggest the markets are now operating on the premise that rates will almost certainly remain unchanged this year – forcing the Fed to backtrack on the 50 basis points in tightening still featured in official forecasts – and a cut will be issued in 2020. Data suggesting such a view may be too dovish is likely to be more market-moving than the alternative.

Such a scenario is likely to be supportive for the US Dollar. More broadly, anything that moves Fed policy bets away from the dovish side of the spectrum may rattle shell-shocked investors worried about any move to tighten credit conditions amid mounting signs of a downturn in the global business cycle. Firm results may thus turn out to sour sentiment, curbing Yen losses and weighing on pro-risk commodity currencies.

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Asia Pacific Trade Economic Calendar


Europe Trade Economic Calendar

** All times listed in GMT. See the full economic calendar here.


— Written by Ilya Spivak, Currency Strategist for

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter

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Data-Dependent Fed Has Gold Prices Eyeing US NFPs, ECB and BoC

Gold Price Fundamental Forecast: Neutral

  • Gold prices fell as US GDP data lifted the US Dollar and bond yields
  • Patient Fed places the focus for the commodity on US economic data
  • ECB, BoC rate decision may offer the most external volatility for gold

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Gold prices succumbed to selling pressure throughout most of last week, weakened as the US Dollar rose with local government bond yields. The commodity, which has no interest-bearing qualities, tends to underperform in this kind of trading environment. Stronger-than-expected US fourth quarter GDP contributed to this. Technically, XAU/USD broke a major rising trendline, increasing the risk of a bearish reversal.

The week ahead carries a plethora of price-moving events for gold, whose direction will likely be determined by the performance in the greenback. Last week, Fed Chair Jerome Powell made it clear of the central bank’s data-dependent and patient approach for interest rates. This places the focus on how economic conditions continue performing in the world’s largest economy.

Regarding this aspect, domestic data has been tending to underperform relative to economists’ expectations. This has somewhat slowed after last week’s GDP report. If it foreshadows a turnaround in results to come, gold could find itself accelerating its decline as hawkish Fed monetary policy bets increase. So, keep an eye on how ISM non-manufacturing and non-farm payrolls cross the wires ahead.

Outside of the US, watch out for the RBA, ECB and BoC rate decisions which could influence the US Dollar and thus gold prices. The Reserve Bank of Australia, after shifting its bias away from favoring a hike, seems to be in a neutral mode with no changes in rates expected in the near-term. With that in mind, of those three, the latter two will probably be the most interesting to watch.

The European Central Bank must contend with a slowing regional economy just as Italy has fallen into a technical recession and Germany is not far behind one. Gold prices could fall if the greenback finds a boost from Euro weakness on reduced ECB rate hike bets. Meanwhile, the Bank of Canada is in a similar data-dependent situation as the Fed. In fact, overnight index swaps are slightly more hawkish the BoC than its US counterpart. Given the numerous uncertainties, the gold fundamental forecast shall be neutral.

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— Written by Daniel Dubrovsky, Junior Currency Analyst for

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

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What Could be the Market Impact of Escalated India-Pakistan Tensions?


  • APAC equities hit after news breaks of India-Pakistan conflict
  • The political landscape suggests tensions could continue to rise
  • Escalation could dampen already-battered global risk appetite

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APAC equities and risk-on assets aimed lower in Wednesday’s Asia trading hours as news crossed the wires that India-Pakistan tensions dramatically escalated while risk-off assets such as the Japanese Yen and US Dollar gained. This preceded the news that denuclearization talks between Donald Trump and Kim Jong-Un ended earlier than expected, adding additional geopolitical risk to the docket.

Nikkei, S&P 500 Futures, AUD/USD – Daily Chart

Chart Shwoing S&P 500 Futures, Nikkei Futures, AUD/USD


Tensions between the two countries have always remained high since the 1947 Partition that resulted in decades of intermittent conflict and perpetual strain. On Wednesday, news broke that Pakistani jets had shot down two Indian air force planes and subsequently arrested one of the pilots after his crash-landing in Pakistani-held territory in Kashmir. Officials in Islamabad claim it hit targets on its side of the border.

This follows an airstrike New Delhi orchestrated against a terrorist network base in Pakistan which recently claimed responsibility for the killing of 40 Indian police officers in Pulwana on February 14. This frustrated Indian officials who for years have accused politicians in Islamabad of harboring terrorists. The bombing runs by Indian airplanes was the first time since 1971 that had India ventured into Pakistani airspace.

What adds to the international tension surrounding this affair is the fact that both countries possess nuclear capabilities. Fears of destabilization over the use of such a weapon have always remained a security concern for world leaders. Tensions escalated further when reports surfaced of Indian and Pakistani soldiers exchanging fire on at least three occasions at the border in Kashmir.

As a result of the conflict and fears over potential escalation, the government decided to close its airspace, which disrupted travel over the area and delayed thousands of passengers’ flights. There are potentially more ways in which this political dispute can end up disrupting economic activity in the region and internationally.

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Recently, news broke that Pakistan will return the captured pilot as a peace gesture to the Indian government. This will help defuse the immediate tensions, but this in no way suggests that the pressure will be completely dissolved and necessarily be reignited.

Indian Prime Minister Narendra Modi will be facing a general election in the Spring which may complicate de-escalation on both sides. As a member of the nationalist Bharatiya Janata Party, Modi will likely have to display strength and resolve against Pakistan’s actions, potentially leaving him less open to compromise. For Modi, the latter may be seen as weakness and could cost him political points and voters.

In 2016, 20 Indian solders were killed by Jaish-e-Mohammed, a terrorist organization residing in the disputed territory of Kashmir. As a response, Modi sent special forces into the area and implemented ‘surgical strikes’ against the network. While the incursion may not have yielded many military benefits, it did reward Modi’s political standing at home.

It is possible that he may use a similar tactic to secure a key vote that could lead to his reelection as Prime Minister. If he uses this kind of approach and takes a hard stance against Pakistan, relations between the two could deteriorate. Officials from both sides have expressed interest in the US helping to reduce tensions between them.

However, this might add to the problem because of President Donald Trump’s unorthodox approach to politics, which deviates from conventional diplomatic tactics. His style often relies on cultivating a nationalist sentiment in his voter base through relying on emotionally-charged rhetoric. He might relate to Modi in this regard, which could in turn alienate Pakistan and undercut the US’ ability to broker a peace deal.

Indeed, Trump has to be careful not to make Pakistani officials feel betrayed. The Economist writes that “Pakistan is playing a pivotal role in Afghan peace talks by calling for negotiations by the Taliban, which it has long supported”. If the talks are undermined, that could derail Trump’s plan to bring home 14,000 troops from the region, which might in turn hurt him politically in the 2020 election.

China may also have a dog in this fight and could be forced to weigh in on the issue. Islamabad and Beijing have grown closer in recent years, with the former’s total imports constituting 27% from the latter. China also has had border disputes with India and could be dragged a debacle at a time when it already has a lot on its plate e.g. trade wars and slower domestic growth.


The eruption of this conflict has also come during a time when global markets are beginning to yawn. Despite a breakthrough on the US-China trade war front, markets only shyly edged higher on a fundamental theme that has been dominating headlines for over a year. When an asset fails to rally on positive outcomes but disproportionately falls on negative ones, that speaks of underlying weakness.

If tensions between India and Pakistan continue to rise, sentiment-linked assets like the Australian and New Zealand Dollars along with equities may feel some pain. Conversely, the Japanese Yen, US Dollar and Treasuries might rise as haven demand increases. However, the Yen – when paired with the Swiss Franc – might fall because of the regional risk associated with the Japanese currency’s proximity to the conflict.


— Written by Dimitri Zabelin, Jr Currency Analyst for

To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter

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S&P 500 Still Not Committing to Reversal, Pound Run Slows and Dollar’s Questionable

Reversal Talking Points:

  • Technically, the S&P 500 and Dow have cued a technical break of support but there is zero follow through on the move
  • Another symbolic easing in the US-China trade war doesn’t seem to have inspired further recovery, just more focus on fading growth
  • US GDP proved a modest market-mover for the Dollar; ahead we have PCE for USD, GDP for the CAD and a few choice jolts of volatility

See how retail traders are positioning in the FX majors, indices, gold and oil intraday using the DailyFX speculative positioning data on the sentiment page.

A Technical Break, A Conflicted Fundamental Conviction and Deer in the Headlights

The S&P 500 and Dow – benchmarks for speculative appetite – produced an unmistakable technical break of their aggressive two-month rising wedge patterns. Yet, a break does not guarantee follow through; and the lack of any traction from these indices is great evidence to exactly that axiom. In fact, the day after the technical cross was made, the S&P 500 has put in for the smallest daily ranges since September 25th – before the market’s most recent bout of action. Some may say that systemic fundamental developments are beating back a more painful collapse in the capital markets, but I believe this inaction is an affliction to both bullish and bearish interests. The back down from the parties in the US-China trade war is a story that is not even a week old, and yet the market seems to have already adjusted for the very tepid enthusiasm it is able to muster.

This past session, the US Trade Representative’s office said it was dropping the threat to increase tariffs on those Chinese goods saddled with the tax from 10 percent to 25 percent “until further notice” at the direction of President Trump. That confirms earlier rumors but certainly raises the probability that a deal is soon at hand. What more could we expect from this node of fundamental interest to spur further gains? It isn’t even clear that an unmistakable end to the economic standoff could earn more optimism from the markets, and that is unlikely to happen. In the wake of disappointment for a market expecting more optimism – especially as it is the prevailing theme these past few months – skepticism starts to rise around other, unresolved fundamental issues.

Global growth is one such concern with the range of GDP updates this past session and a downgraded forecast for 2019 and 2020 from Moody’s. Monetary policy is another consideration for which doubt is gaining dangerous ground with so little capacity by the largest players to fight any future fires. In my book, the least appreciated extended leverage risk is that held by the governments. The US debt limit is technically met today, but there are means to cobble together financing to pay maturing debt. That, however, doesn’t earn much more confidence from a market questioning the long-term position of the USD against constant budget fights, regular trade conflicts and a general global interest to diversify risks.

Chart of S&P 500 and 1-Day Range (Daily)

S&P 500 and Daily Range Chart

How Long will Dollar Rise on GDP and Pound on Tempered No Deal Risk?

If systemic themes are unable to catch traction, at least there are sparks flying that are generating volatility. And, it should be noted that when a trend eventually does take, it will likely begin through a strong jolt in price action. For regional risk and FX response, the most prominent listing this past session was the US 4Q GDP release. This reading was delayed owing to the 35-day partial federal government shutdown, so the figure were presented with was a combination of both the ‘advanced’ and secondary readings. If we are setting the measure to the lowest possible boundary, the 2.6 percent pace beat the 2.2 percent forecast. Consumer spending offered slower growth than expected (2.8 percent), net trade was a draw owing to a faster increase in imports and residential investment dropped 3.5 percent. Ultimately, 2018 experienced a 2.9 percent run of growth – right in-line with Fed Chairman Powell’s expectations.

Where US equities didn’t respond to the move, we did see a Dollar. That is a reasonable response but expecting follow through from this otherwise modest and discounted update is expecting too much. Perhaps the update from the Fed’s favorite inflation figure – the PCE deflator – or the ISM manufacturing activity report Friday can generate more reliable motivation. Meanwhile, the Sterling’s Brexit climb seems to have reached a temporary saturation point. Whether the currency’s climb is only taking a breather or is preparing to turn remains to be seen, but we have already technically cleared some of the most important resistance across GBPUSD, EURGBP and GBPJPY this week.

The relief from a sense of imminent doom of a ‘no deal’ Brexit that the BOE, Government and IMF have warned against has already spread across the market. Yet, does that also mean its been fully discounted? There are good arguments to be made on both sides of the argument, but sheer speculative positioning via the CFTC’s COT futures report suggests there isn’t an overwhelming hedge that needs to be covered and thereby boost the GBP further. I have a bearish bias, but patience is the principal virtue.

Chart of GBPUSD and Net Speculative Futures Positioning in Pound from COT (Weekly)

Net Speculative Futures Positioning in Pound and GBPUSD

Will the Loonie, Franc, Kiwi or Commodities Make Anything Out of Their Volatility?

Where the big and anthemic currencies are struggling to give clear readings, there is at least some movement from some of the other top liquidity players. The Swiss franc was unexpectedly the biggest mover on the day. Some activity was not completely unexpected given the Swiss 4Q GDP release, but the disappointing 0.2 percent quarter and 1.4 percent pace fell short of expectations. What does that mean for tentative technical breaks like those from CADCHF and AUDCHF? Friday will be important to establish a true commitment or reversion to a familiar environment. There is little on the docket ahead upon which to anchor momentum.

The same lack of fundamental follow through will register with the New Zealand Dollar which was burdened by a deep dive in business confidence and 4Q terms of trade. For the likes of NZDUSD and NZDJPY, ranges may hold. In contrast, the Canadian Dollar advance was split by a 4Q current account deficit that swelled to C$15.5 billion and a jump in business sentiment. Ahead, the December GDP update will round out the fourth quarter and offer a singular focus for the Loonie to latch onto. Whether it is a significant enough reading to prompt a break from the likes of the USDCAD.

In commodities, headlines for crude oil that the US Department of Energy was willing to release 5 million barrels from the Strategic Petroleum Reserve was met with little more than a shrug – even more so than President Trump’s tweet or OPEC’s push back. Gold on the other hand is putting more substantial pressure on the its own aggressive trendline support as some of the more open-ended risks seem to recede. We discuss all of this and more in today’s Trading Video.

Chart of USDCAD (Daily)


If you want to download my Manic-Crisis calendar, you can find the updated file here.

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US Dollar Eyeing Breakout after Muted Action on Fed Chair Powell

US Dollar, Jerome Powell Talking Points

  • The US Dollar held onto gains after Fed Chair Jerome Powell spoke
  • He reiterated much of what was said from his testimony to Congress
  • DXY faces a breakout ahead to determine its next short-term path

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The US Dollar, having already exerted most of its energy on better-than-expected GDP data, held on to its gains following another round of commentary from Fed Chair Jerome Powell. He reiterated much of what was already said in his testimony before Congress, such as the central bank’s patient ‘wait-and-see’ approach for rates. Mr Powell said that the US economy is ‘in a good place’ with inflation running close to 2%.

Additional Commentary from Fed Chair Jerome Powell

  • US faces challenges including low productivity
  • Upward inflation pressure muted despite strong job market
  • Most incoming data solid, some sentiment surveys lower
  • Unexpectedly weak December retail sales reason for caution

What is becoming increasingly certain is that the central bank is on a path to halting the runoff in its balance sheet. We even saw equities rise on last week’s FOMC meeting minutes because this path is more clear than the natural uncertainty of interest rates. Keep in mind that the domestic economic outlook is overshadowed by some ‘cross-currents’ such as slowing global growth.

US Dollar Technical Analysis

The US Dollar, after clocking in its best daily performance in over two weeks, finds itself sitting right on the descending resistance line from the middle of February. Meanwhile near-term support, a range between 95.82 and 96.04, was bolstered. As such, we may see a breakout soon that could pave the way for what is to come in the short-term. You may follow me on Twitter for the latest updates on the Greenback here at @ddubrovskyFX.

DXY Daily Chart

DXY Daily Chart

Chart Created in TradingView

US Dollar Trading Resources

— Written by Daniel Dubrovsky, Junior Currency Analyst for

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

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AUD/USD Rate Outlook Mired by Risk of Bearish RSI Signal

Australian Dollar Talking Points

AUD/USD trades to fresh weekly lows as updates to the U.S. Gross Domestic Product (GDP) report undermine the recent shift in Fed rhetoric, and the exchange rate may face a more bearish fate over the coming days if the Relative Strength Index (RSI) fails to preserve the upward trend from earlier this year.

Image of daily change for major currencies

AUD/USD Rate Outlook Mired by Risk of Bearish RSI Signal

Image of daily change for audusd rate

AUD/USD gives back the advance from earlier this month even though President Donald Trump delays the fresh round of tariffs targeting China, Australia’s largest trading partner, and uncertainty surrounding the Asia/Pacific region may continue to drag on the aussie-dollar exchange rate as U.S. Trade Representative Robert Lighthizer warns that ‘much still needs to be done before an agreement can be reached.’

Image of rba official cash rate

In response, the Reserve Bank of Australia (RBA) is likely to keep the official cash rate (OCR) on hold at its next meeting on March 5 as Governor Philp Lowe informs Parliament that ‘the probability that the next move is up and the probability that it is down are more evenly balanced than they were six months ago,’ and the weakening outlook for global growth may encourage the central bank to endorse a wait-and-see approach throughout the first-half of the year as Chinaenduresthe effects of the tensions with the United States and the squeezing of finance to the private sector as the authorities seek to rein in non-bank financing.’

As a result, the RBA may show a greater willingness to further support the economy as Governor Lowe states that ‘available data suggest that the underlying trend in consumption is softer than it earlier looked to be,’ and the Australian dollar stands at risk of facing headwinds over the coming days if the central bank shows a greater willingness to revive its easing-cycle. Keep in mind, the AUD/USD remains tilted to the downside as the flash-crash rebound stalls at the 200-Day SMA (0.7252), with the Relative Strength Index (RSI) at risk of highlighting a bearish trigger if the oscillator snaps the upward trend from earlier this year. Sign up and join DailyFX Currency Analyst David Song LIVE for an opportunity to discuss potential trade setups.

AUD/USD Daily Chart

Image of audusd daily chart

  • Will keep a close eye on the RSI as it comes up against trendline support, with the near-term outlook for AUD/USD mired by the failed attempts to close above the 0.7170 (23.6% expansion) to 0.7180 (61.8% retracement) region.
  • In turn, a close below the 0.7090 (78.6% retracement) to 0.7110 (78.6% retracement) area raises the risk for a move towards the monthly-low (0.7054), with the next region of interest coming in around 0.7020 (50% expansion).

Additional Trading Resources

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— Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.

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Net-Short Traders Are 35.7% Higher from Last Week



GBPUSD: Retail trader data shows 45.3% of traders are net-long with the ratio of traders short to long at 1.21 to 1. The number of traders net-long is 1.9% higher than yesterday and 0.5% lower from last week, while the number of traders net-short is 1.7% lower than yesterday and 35.7% higher from last week.

For more in-depth analysis, check out the Q1 2019 Forecast for the GBP


We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBPUSD prices may continue to rise. Positioning is less net-short than yesterday but more net-short from last week. The combination of current sentiment and recent changes gives us a further mixed GBPUSD trading bias.

— Written by Nancy Pakbaz, CFA, DailyFX Research

Follow Nancy on Twitter @NancyPakbazFX

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US GDP Fueled Gold Price Reversal Risk, USD Awaits Jerome Powell

Asia Pacific Market Open Talking Points

  • The US Dollar soared on rosy GDP data as gold prices fell
  • JPY/CHF weakened as geopolitical risks increased in Asia
  • Asia stocks may pause declines, all eyes on Powell speech

See our study on the history of trade wars to learn how it might influence financial markets!

The US Dollar aimed higher against most of its major counterparts, boosted by a better-than-expected first estimate of fourth quarter GDP. Local front-end government bond yields rallied, singling increasingly hawkish Fed monetary policy expectations. This also boded ill for equities, which were already under pressure before the data release, as the S&P 500 closed lower for a third day.

Tensions between India and Pakistan as the Trump-Kim summit ended abruptly without an agreement were some of the causes of pessimism earlier in the day. These may have been why, unusually, we saw the anti-risk Japanese Yen weaken as its similarly-behaving cousin, the Swiss Franc, gain as a regional haven alternative. This is most clearly seen when looking at an intraday performance of JPY/CHF below.

JPY/CHF Fell as Asia Regional Risks Increased

US GDP Fueled Gold Price Reversal Risk, USD Awaits Jerome Powell

Chart Created in TradingView

Some of the worst performing major currencies were the pro-risk Australian and New Zealand Dollars. Not only did they contend with a deterioration in risk appetite, but poor economic data also weighed them down. NZD/USD fell with souring business confidence. Soft Chinese manufacturing PMI data pressured AUD/USD lower as it underpinned economic growth slowing in the world’s second-largest economy. Gains in the US Dollar also boded ill for gold prices which turned lower this week so far as expected.

Friday’s Asia Pacific Trading Session

Wall Street did trim some of its losses in the aftermath of commentary from US Trade Secretary Steven Mnuchin. He noted that there has been a lot of progress made in China trade talks. S&P 500 futures are pointing cautiously higher, perhaps leaving breathing space for Asia Pacific equities to pause some of their declines. Markets will be awaiting a speech from Fed Chair Jerome Powell.

US Trading Session Economic Events

US GDP Fueled Gold Price Reversal Risk, USD Awaits Jerome Powell

Asia Pacific Trading Session Economic Events

US GDP Fueled Gold Price Reversal Risk, USD Awaits Jerome Powell

** All times listed in GMT. See the full economic calendar here

FX Trading Resources

— Written by Daniel Dubrovsky, Junior Currency Analyst for

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

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