My short position on NZD/USD has been going slower than I expected with the weak economic numbers out of the US and the volatility was hurting my margin. Therefore with the short-term bearish sentiment in the USD after last week’s NFP data, I entered a short position in USD/CAD with smaller leverage, just to hedge the possible short-term losses in my Kiwi trade . Here is the review of the two open positions:
Kiwi is gradually sliding along the Triangle
My Kiwi trade is more of a longer term and therefore a bit of a volatility wouldn’t be as much of a concern, because we are looking at a big picture. As predicted, NZD/USD is trapped inside a triangle pattern and the pair is lining the upper band of the pattern while teasing the Ichimoku cloud. The Tenkan line is crossing below the upper band of the cloud which is an indicator more downward pressure coming up.
Our goal is to reach 0.73500, but of course if we see a solid reversal signal who its head, I’d definitely readjust the target and would try to get the hell out with profit! So far though, the pair is behaving and dancing within barriers.
Loonie: Slow and Steady
The USD/CAD pair continues its consolidation as it entered the Ichimoku cloud last Thursday, but the trading pressure remains on the downside. We expect more volatility today at 7 PM GMT when the FOMC meeting minutes are finally out and could give dollar bears to go crazy again.
US Dollar: Recent Dip a Short Term Outliner?
Employment
Yes, we got hit hard in this section in March when the net jobs added came in WAY below the market expectations at 126K vs. 245K forecast.
A couple of bright spots from the most recent NFP report include a tick higher in the average hourly wage number (0.3% vs. 0.1% previous) and the unemployment rate staying at 5.5% despite the drop, but we did see downward revisions to the previous month’s numbers and the labor participation rate declined once again to 62.7%, indicating more discouragement among able bodied workers.
Inflation
Global inflation continues to slow and to be a drag on everyone since the fall of energy prices over the last year. Although we have seen stabilization recently, the outlook for price inflation is to remain low; this could continue to put pressure on average wages, or for some companies, lead to lower employment. I’m sure we can all guess on what kind of effect that scenario has on consumer spending, right?
In the U.S., thanks to a stabilization and bounce energy prices, the consumer price index came back into positive territory to 0.2% m/m after three straight months of declines. On the other hand, producer prices continued to decrease faster than economists expect, with February declining by -0.5% in February over an expected rise of 0.3%.
Bottom line is that the U.S. still seems to be in an okay place (not heading into a deflation scenario), but U.S. businesses are likely to continue to feel the pain of falling prices, especially for the international companies if energy prices stay low and the U.S. dollar remains strong (a high currency valuation decreases international profits and demand).
GDP
The final fourth quarter 2014 U.S. GDP was revised lower to 2.2% versus the 2.4% growth expectations. Consumer spending was the bright spot thanks to falling energy prices, but the same falling prices and strong Greenback previously mentioned put pressure on corporate profits.
Overall, the data is looking a lot less strong this quarter than the last few quarters, which is likely why the FOMC included rhetoric in their last monetary policy statement that they can “be patient in beginning to normalize.”
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