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January 28, 2017

US Data Digest Before the FED. Does Dollar Prepare For a Jump?

US Data Digest Before the FED. Does Dollar Prepare For a Jump?

Hi traders,

We got a nice piece of data on US economy so lets discuss it.

At first, Q4 GDP and Confidence data topped estimates.That’s a great news because America should meet Trump strong to let undergo his adventures 🙂 Breaking down GDP by the components, exports fell 4.3 percent which I attribute to the sharp post-election rally of US Dollar while imports surged 8.3 percent. I doubt the upsurge in imports can be referred to pickup in consumption rather reflection of fears of local businesses on potential trade wars which pile up their inventories ;).

CFTC data draws bullish outlook for the greenback as net position doubled to 72.9K in the last week comparing to the week before (35.3K).

Monthly trend also points to some interesting thoughts:

bulls
 

FED decision is on cards next week where Yellen is likely to dodge from dropping clear hints on the timeframe of rate hikes, but I’m pretty sure Fed will need to take action due to two reasons:

1. Unemployment and inflation are very close to targets. (unemployment at 4.9%, Personal Consumption Expenditures, primary FED gauge has been floating at 1.6% in average in 2016)

2.Big fiscal spending ahead during Trump administration.

On the flip side there is unpredictable Trump politics in foreign trade matters which might throw the FED into confusion. The idea of trading wars is a direct blow to US economic growth heavily dependent to consumption of imported goods. 70% of GDP accounts for consumption and in case there are some import taxes levied, end consumers and retail business will suffer. With such approach unemployment targets may be shifted from current targets to lower bound (maybe 4% or even less)

Anyway markets hope for hawkish FED next week and its reasonable expectation in my view. I see US Dollar rising in the run up to Yellen conference and here is my targets on majors:

 

EURUSD – down 1.0450, SL – 1.0660
USDJPY – 116.50, SL – 1.1420

 
I trade according to my analytics on this live so feel free to check it out

Looking forward to you feedback or suggestions!

Anthony

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