2017-AUG-13 FX general weekly outlook

Please note, that this article comes from my archive. Check the actual date in the header.

The ether of last week was full of loud words and speeches from politicians and officials. THey moved the markets, but not economical fundamentals. They create emotions instead of good sense. You know I hate politicians and I love them at the same time. I hate them because they always throw in something unexpected and we need to change the trading plan. Not because we really believe their words, but we believe the fact that the crowd believes. And I love politicians because they always give an opportunity to have a nice profit for us, speculators.

First good example is USDZAR early this week. They announced the secret ballot and the vote of confidence to South African President, mr Jacob Zuma. The pair had a deep run with the hopes that the parliament will remove corrupted president finally. His ratings are at all-time low and people really need deep changes. But I watched that vote on Tuesday with a smile on my face. It’s been prepared and planned. Mr. Zuma already survived 7 same votes. It seemed to be just next sale of the votes. I went long on USDZAR before the vote. Nothing to deal with my political views or corruption support. I have a habit to take what the market gives me. 400 pips of the profit is not something that usually lies on a surface.

Next gift from the market came in later same day. Reserve Bank of New Zealand left the interest rate unchanged, as expected. But look at the intraday price action of USDNZD or EURNZD. It also gave lows to go against the NZD right before the speech of Governor Wheeler. It’s not that hard to assume his benefits of lower currency exchange as official of an export oriented economy. He did not even hide his intentions, making a verbal intervention. Do you see the market reaction to his speech? I see it in my profits statement.

I bet you want to ask a question. Why don’t you talk about the main topic of the past week? North Korea nuclear war and it’s impact for the USD and worldwide economy. The answer is very simple. I’m tired of loud words without consequence to follow. Show me at least one single country really interested in that war! Zero. Now try to show my any single fact about mr. Trump’s actions, which come in line with his words! I can tell you about a bunch of opposite facts. Being a businessman, he had a lot of threats to go in court about journalist's slander. But the last time it happened 34 years ago! Where is “something interesting” in certificate of birth of Barack Obama, as he promised to show in 2011? How about investigation against Hillary Clinton as he promised? Maybe I missed the start of a great construction of the wall between USA and Mexico? Nothing. It’s just his style.

I wonder if mr.Tillerson has a second job to translate President’s words. That’s what he said on Wednesday: “Americans should sleep well at night. I do not believe there is any imminent threat in my own view.”

I think we observe an overreaction when it comes to the jump in safe heavens past week. I think emotions will calm down and the prices of precision metals, Japanese yen and Swiss franc will get back to normal fundamental levels. The only difference between third example and two previous is just in the scale of the movement and time for the rates to go back,

Let’s try to have an outlook of the markets in the scope of upcoming business activity season. Long-term traders, who can afford themselves to hold positions during several months should pay attention to attractive long-term support in USDJPY in the range of 108.00/109.00. There is no other direction for speculative cash flows rather than out of Japan. Where? To the regions that have biggest consumption of Japanese exported goods. Even if we talked about a risk aversion and shift to bonds and treasuries. Japanese and Swiss interest rates do not cover even lowest inflation, so European and US assets look much more attractive.

Same story with precision metals. I assume a further upside movement in GOLD prices. But I do not think it’s going to be sustainable above 1305.00/1317.00 dollars per ounce. We can see a huge range here about 1000 pips between 1200.00 and 1300.00. And I do not see any strong fundamental argument to get out of this range in both directions. So what do we do, when we see prices in a high part of the range? Yes, we sell. But remember about patience for these projections to occur.

Ohh, almost forgot about the US inflation. Do you see, how they grab our attention out of the important economic data? Both US PPI and CPI reports came out weaker-than-expected. I can imagine Fed officials scratching their foreheads. Full employment and low inflation? Or maybe employment is not that full? Lack of wage growth? What if they could hurt the economic recovery with their next rate hike? I use the word ‘recovery’ because we are far away from normal economic situation and usual levels of interest rates. The upcoming reports next week: US Retails Sales on Tuesday, FOMC meeting minutes on Wednesday and Philla Fed Mfg Index on Friday will try to unveil the shadow of thoughts inside Fed official’s minds.

Let the profit be with us!

Please note, that this article comes from my archive. Check the actual date in the header.
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