Key Fundamental Factors this Week (5/4 – 5/8)

0
39
Key Fundamental Factors this Week (5/4 - 5/8)

Last week, the USD got a boost after the FOMC brushed off the Q1 and winter-month slowdown as due to transitory factors. The market still has hopes that it will raise rates in September if not in June, so the greenback got back a vote of confidence from traders. Strong jobless claims data helped the case as well, because the FOMC said it still wants to see further labor market growth. In this upcoming week, we will have one of the most important jobs indicator in the Non-Farm Payroll on Friday. Let’s see what else is in store for us in terms of fundamental risk.

Monday (5/1)

AUS Building Approvals m/m (Mar)
Forecast: -1.7%
Previous: -3.2%

Tuesday (5/2)

Trade Balance (Mar)
Forecast: -0.98B
Previous: -1.26B

RBA Monetary Policy Statement:
Forecast 2.00%
Previous: 2.25%
rbamay2015
(click to enlarge; source: forexfactory.com)
The first key fundamental factor this week that is expected to have impact will be the RBA’s interest rate decision. Forecasts call for a rate cut. The RBA surprised the market a bit in February when it cut the official cash rate from 2.50% to 2.25%. This time around the market is ready. However, if it does not cut rates, the AUD should get some relief, although if the RBA leaves a rate cut on the table, any rebound in AUD should be limited.

US Trade Balance (Mar)
Forecast: -39.2B
Previous: -35.4B

US ISM Services PMI (Apr)
Forecast: 56.2
Previous: 56.5
USServicesPMIMay2015
(click to enlarge; source: forexfactory.com)

CAN Trade Balance (Mar)
Forecast: -0.6B
Previous: -1.0B

NZ GDP Price Index
Previous: (-3.6%)
NZGDTMay5
(click to enlarge; source: forexfactory.com)
There was a few weeks in February and March when dairy prices were rising. The NZD has correlations with dairy prices because it is a major exporter of dairy and dairy-related products. However, we saw that prices were declining in part of March throughout April and thus took away some support for the Kiwi. Perhaps an even more significant economic factor will be the upcoming labor market data.

NZ Employment Change q/q
Forecast: 0.8%
Previous: 1.2%
nzemploymentchangemay2015
(click to enlarge; source: forexfactory.com)

NZ Unemployment Rate (Q1)
Forecast: 5.5%
Previous: 5.7%
unemployment rate
(click to enlarge; source: forexfactory.com)

One of the reasons the RBNZ has not cut rates is that the labor market data is actually decent. Even if the employment change rate in Q1 slides slightly to 0.8%, the trend is intact. The unemployment rate has been sliding and if it does not rise above 5.7%, the Q4 jump will be forgiven. The NZD should might not be strong against the USD, but should be strong against the JPY and AUD.

Wednesday 5/6

AUS Retail Sales m/m (Apr)
Forecast: 0.4%
Previous: 0.7%
The march print was a surprising 0.7%, but economists expect the reading to come back to Earth in April for 0.4%. Shouldn’t be much of an impact unless the reading is above 0.7%, or below 0.1%.

UK Services PMI
Forecast: 58.6
Previous: 58.9
UK’s service sector is doing well according to the PMI data staying around 57 or better in 2015. However, this might not be enough to give the pound a boost outside of the intra-session reaction. A reading above 60 might have more psychological impact for traders.

US ADP Non-Farm Employment Change
Forecast: 192K
Previous: 189K
The ADP jobs report is usually seen as a predictor for Friday’s NFP. Last month, when the reading of 189K missed the forecast of 227K, the NFP also missed, and the USD got hit afterwards. Forecasts for April are still optimistic. A reading close to or above 200K should give the USD another boost, but the market is likely going to be tentative ahead of Friday.

CAN Ivey PMI (Apr)
Forecast: 50.1
Previous: 47.9

Thursday (5/7)

AUS Employment Change m/m (Apr)
Forecast: 4.0K
Previous: 37.7K
ausempchangeApr
(click to enlarge; source: forexfactory.com)

AUS Unemployment Rate (Apr)
Forecast: 6.2%
Previous: 6.1%
ausunempapr
(click to enlarge; source: forexfactory.com)

Forecasts see continuing deterioration in Australia’s labor market. With NZ jobs data looking to improve while AUS jobs data continuing to decline, we should watch for further pressure in AUD/NZD.

Friday 5/8

US NFP Employment Change (Apr)
Forecast: 231K
Previous: 126K
usnfpapr
(click to enlarge; source: forexfactory.com)
US Unemployment Rate (Apr)
Forecast: 5.4%
Previous: 5.5%
The USD might get another boost if the NFP is indeed going to be 231K or better. A reading below 200K would be disappointing and the USD might give back its gains from the previous week. Now, don’t be too bullish with strong jobs data. The participation rate will be a key caveat because it is still near historic lows. Furthermore, we have not seen evidence of wage growth, so let’s be cautious to any strong USD reaction to a good NFP release.

CAN Employment Change (Apr)
Previous: 28.7K
Unemployment Rate (Apr)
Previous: 6.8%

Previous Post by Author: GBP/USD Retreats from 1.55 and Breaks Rising Trendline

SHARE
Previous articleCrude Prices Jump on Inventory Data
Next articleTransferB Wins the 2015 Deloitte Top Technology Talent Competition
Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.