Key Fundamental Factors this Week (1/5-1/9)

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Key Fundamental Factors this Week (1/5-1/9)

For the last 2 weeks, we have gotten very few key fundamental factors in terms of economic releases and events. As we begin the first full week of the new year, we will start seeing more important data points. Let’s see what’s in store for us.

Monday 1/5

German Prelim CPI m/m (December)
Forecast: 0.1%
Previous: 0.0%
Inflation data is expected to remain around 0.0%. The 0.1% forecast is essentially no change. The euro is already pressured so a negative reading might be needed to push it lower this week. The reaction will be tentative because there is another key inflation data to be released Wednesday.

UK Construction PMI (December)
Forecast: 59.2
Previous: 59.4

Australia Trade Balance (November)
Forecast: -1.59B AUD
Previous: -1.32B AUD

Tuesday (1/6)

UK Services PMI (December)
Forecast: 58.9
Previous: 58.6
uk services pmi
(click to enlarge; source: forexfactory.com)
Service growth flattened out earlier in 2014, and took another dip towards the year’s end. There is not much of a drop off, but a reading lower than 56 might be GBP-negative. A reading above 60 on the other hand should help support the pound if it is bearish, but not likely to give it any sustainable rally.

NZ GDT Price Index (last 2 weeks in Dec.)
Previous: 2.4% (first 2 weeks in Dec.)

US ISM Services PMI (December)
Forecast: 58.2
Previous: 59.3
us ism services pmi dec
(click to enlarge; source: forexfactory.com)
Services growth in the US has been on a climb in 2014 according to the ISM surveys. It has leveled off in the past few months. A reading above 60 might help push the USD further, but note that the USD is already strong, so it might only nudge it along its secular bull trend.

Wednesday (1/7)

EU CPI Flash Estimate y/y (December)
Forecast: 0.0%
Previous: 0.3%
eu cpi dec
(click to enlarge; source: forexfactory.com)
Core CPI Flash Estimate y/y (December)
Forecast: 0.6%
Previous: 0.7%
Inflation in the Eurozone has been declining and has become a concern for the ECB, which has its finger on the trigger for another shot of stimulus. This time around it might be full scale QE. If the annual CPI inflation indeed continues to fall to a flat reading or even negative, the euro should remain pressured. It will likely take a reading above 0.3% (the November print), to help the EUR stabilized at least in the short to medium-term.

EU Unemployment Rate (November)
Forecast: 11.5%
Previous: 11.5%
eu unemployment nov
Although unemployment has topped off in 2013, it has not receded by much in 2014. When it starts moving down again, the euro will likely stabilize as well.

ADP Non-Farm Employment Change (December)
Forecast: 227K
Previous: 208K

CAN Trade Balance (November)
Forecast: -0.2B CAD
Previous: 0.1B CAD

US Trade Balance (November)
Forecast: -42.3B USD
Previous: -43.4B USD

Can Ivey PMI (December)
Forecast: 52.3
Previous: 56.9

FOMC Meeting Minutes will likely reaffirm that the Fed has been seeing better economic data that has been inline with expectation or even better than it. This keeps the current projection window for a rate hike to be April to mid-2015. The USD has been pricing in this “earlier” rate hike possibility, so these minutes should not give it much more than a gentle nudge in its prevailing bullish direction.

Thursday (1/8)

AUS Building Approvals m/m (November)
Forecast: -2.7%
Previous: 11.4%

BoE Monetary Policy Statement, Asset Purchase Program, Press Conference
The Bank of England has been encountering deteriorating data and slower inflation. It is expected to delay its rate hike until the end of 2015 or early 2016. Let’s see where the market will place the projection window after this week’s meeting.

US Jobless Claims
Forecast: 291K
Previous Week: 298K

Friday (1/9)

AUS Retail Sales m/m (November)
Forecast: 1.5%
Previous: 1.4%

UK Manufacturing Production m/m (November)
Forecast: 0.4%
Previous: -0.7%

CAN Building Permits m/m (November)
Forecast: 0.8%
Previous: 0.7%
Employment  Change (December)
Forecast: 10.3K
Previous: -10.7K
CAN employment dec
(click to enlarge; source: forexfactory.com)
Unemployment Rate (December)
Forecast: 6.6%
Previous: 6.6%
Canadian jobs data has been volatile as we can see in the chart. Still you can extrapolate a positive trend throughout 2014. The employment change reading is expected to by positive in December. If it is NOT, then the CAD is likely to take a beating because it would be the first back-to-back job declines since late 2011. A reading above 20K on the other hand might give the CAD some short-term strength. However, CAD-strength will likely be temporary until oil prices can stabilize as well.

US Non-Farm Employment Change (December)
Forecast: 241K
Previous: 321K
nfp dec 2014
(click to enlarge; source: forexfactory.com)
Unemployment Rate (December)
Forecast: 5.7%
Previous: 5.8%
Average Hourly Earnings m/m (December)
Forecast: 0.2%
Previous: 0.4%
The job market in the US has been improving and NFP reports above 200K, has become the new normal in 2014. Readings above 300K will be needed to impress in 2015 in terms of giving the USD more juice during its current secular bull run that started mid 2011, languished from mid-2012 to mid-2014 before taking off like a rocket.

While jobs numbers will likely continue to serve as a foundation for USD strength, wage growth and inflation might be the data points needed to give the USD more fuel to rally, at least in the first half of the year, so the average hourly earnings reading should not be overlooked. A reading between 0.2% and 0.4% will be the “normal”, and a reading above 0.4%, or several months of 0.4% prints, could give the USD an extra bump.

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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.