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Weekly Game Plan 4 Mar 19

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Last week closed with optimism on some sort of US/China agreement, disappointing US data taking the edge off some of the risk assets and an acceleration of the move higher in US yields. This week might start off with a bang if the market gives any weight to Trump’s complaints (saturday) over the strong US dollar and some further criticism of the Fed’s balance sheet reduction. Beyond Trump, it will be a busy week.

Themes for the Week:

Brexit: UK PM May is now attempting to delay Brexit by a few months and the week of March 11 sees a few meaningful votes in that sense. At the same time, Corbyn is now in favour of another referendum. The irony of all this: the EU is simply not participating or negotiating. GBP has been rising on speculation that “no-deal” is definitely ruled out. For now, trade the rumour but beware that it’s not over yet. CBI’s chief economist stated recently “More and more companies are hitting the brakes on investment and day-to-day business decisions are becoming increasingly problematic”.

China: China’s parliament kicks off its annual meeting on March 5 and the market is looking forward to tax cuts alongside laws banning forced technology transfer and government “interference” in foreign business practices. China is becoming an influential global player so we will need to track their data and developments more and more going forward.

ECB: the market is expecting the ECB to unravel some kind of stimulus at this meeting (mar 7) in the form of fresh Targeted Long-Term Refinancing Operation (TLTRO) that provides loans to banks for a fixed period at low cost in order to stimulate lending within the Eurozone.  A second consideration will be whether the ECB signals a delayed hike. However, the ECB could well do any combination of delaying hike guidance, announcing intention to introduce a TLTRO III, or announcing details of a TLTRO III. It could also do none of these steps versus simply jawboning markets that it is prepared to do so.

NFP: the market will look carefully at this report. Headline jobs’ numbers have been good recently, but the FED seems more interested in the Average Hourly Earnings and recently spoke about “muted” inflation pressures. Rising pay shows no sign of translating into price increases.

Data in the week ahead:

  • RBA Decision & Lowe speech
  • AU GDP
  • BOC Rates Decision
  • AU Retail Sales
  • ECB Rates Decision
  • CAD Employment Data
  • US NFP

On the Radar:

USD strength into last week’s close has impacted all asset classes. I like Silver shorts this week, and there may be a place for Crude Oil shorts if the negative momentum continues. In terms of risk appetite, the Dow closed out neutral last week, with a tight range. I will be looking to play breaks either way. In FX, GBP closed out the week rather strong, so GBPAUD and GBPCAD look interesting. But also AudUsd (short) and UsdCad (long). Nzd is also showing weakness but Aud seems weaker ahead of the RBA.

About the Author

Justin is a Forex trader and Coach. He is co-owner of www.fxrenew.com, a provider of Forex signals from ex-bank and hedge fund traders (get a free trial), or get FREE access to the Advanced Forex Course for Smart Traders. If you like his writing you can subscribe to the newsletter for free.

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