Nervous trading results have hurt many day traders and likely financial institutions too, as behavioral sentiment in Forex gets blindsided by rather mixed U.S data and the Federal Reserve not giving a definitive answer regarding monetary policy. The violent trading in the USD last week was expected, but the turbulence that many Forex pairs experienced on Thursday and Friday of last week was rather vicious. For all the perceived sophistication of Forex markets via financial institutions, the trading results last week point to a definite fear of the unknown.
While the Bank of Japan finally changed its interest rate policy and moved to a Policy Rate of 0.10% early last week, this did not create selling momentum in the USD/JPY. The Federal Reserve's dangling of potential interest rates to come this year caused temporary weakness in the USD, but as financial institutions and their clients looked at the prospects for a more dovish Fed they apparently became unimpressed as the days passed.
The Fed seems to be betting on weaker jobs numbers developing, and there has been data which points to part-time jobs increasing, and full-time jobs becoming harder to find in the States. Jerome Powell said last week that if jobs numbers start to show weakness that the Fed would be willing to begin cutting interest rates even if inflation remains sticky. Lagging economic data correlations have not eased the Fed's problems.
The Fed has also admitted inflation in housing, transportation and food remains problematic. WTI Crude Oil spent much of last week above 80.00 USD per barrel as its price has begun to show signs of rising incrementally again; and there is little the Fed can do about more expensive energy costs should they be seen. Higher costs for logistics will not make anything cheaper. Pricier mortgages, more expensive rent and insurance rates for cars and gasoline is creating serious knock on effects.
And for the sake of acknowledging the screaming prices in Cocoa, please have a look at the chart below which should explain why your chocolate products are going to be more expensive in the coming months. The price of the most delicious commodity in the world has tripled in less than a year's time and is around 8931.0 USD per metric ton as of this writing.
Gold turned in a violent week of trading too as it reached 2224.00 last Wednesday, only to fall back to a known value around 2165.00. Day traders are dealing with violent cycles in Forex because sustained trends have been nearly impossible to find. While U.S equity indices are fighting upwards, speculators who are afraid of heights are likely being cautious if they are betting merely on the daily results from the S&P 500, Nasdaq 100 and Dow Jones 30 instead of investing for the long-term.
This week's coming data from the U.S is important, financial institutions are already dealing with plenty of noise, and they will have to be careful regarding their interpretations regarding the coming economic statistics. Meaning day traders who are speculating in all financial assets should use risk taking tactics that are planned significantly in advance.
Monday, 25th of March, U.S New Home Sales - a slight gain is expected, but mortgage rates continue to shadow the housing sector and cause concerns.
Tuesday, 26th of March, U.S Consumer Confidence via the Conference Board - the reading is anticipating a slight increase. Consumer numbers from the U.S have come in mixed recently. A stronger result than estimated might not be welcomed by traders with bearish sentiment regarding the USD. The Fed wants its cake and to eat it too, they would like to see weaker consumer numbers and a soft economic downturn. If U.S shoppers remain confident this could help sustain inflation. It should be noted too, that Core Durable Goods Orders data will be released one and a half hours before the Consumer Confidence numbers.
Wednesday, 27th of March, Australia Consumer Price Index - inflation numbers are expected to come in slightly higher than the previous results. Like most other central banks, except for the BoJ, the Reserve Bank of Australia would enjoy seeing inflation erode. The AUD/USD will react to the results certainly, but the price action might prove complicated because of USD centric notions.
Thursday, 28th of March, U.S GDP, Weekly Unemployment Claims, Pending Home Sales, and Revised Consumer Sentiment from the University of Michigan - put bluntly day traders will have to be well prepared for the combination of data from the States. Spectators who do not have large trading accounts and cannot take on a great amount of risk, should seriously consider sitting on the sidelines until most of the data is published. The GDP numbers will be watched carefully, while they are expected to match last month's total, any surprises will affect the USD immediately in Forex. Weaker growth numbers might cause USD sellers to ignite positions.
However, before traders react too much to the Gross Domestic Product numbers, the Weekly Unemployment data will also impact the financial market. Financial institutions are anticipating a higher amount of unemployment claims this week. Also, at the same time as the growth and jobs numbers, the Final GDP Price Index numbers will be brought forth. The mixture from these reports could cause speculative whiplash.
The housing sector numbers and consumer numbers which come one and a half hours later will finish off a very big day for traders and institutional investors. The wide array of data could make this coming Thursday rather loud, and again rather dangerous for retail traders to participate.
Friday, 29th of March, Japan's Tokyo Core Consumer Price Index - the inflation numbers are expecting to show a slight decrease to 2.4%. The result should certainly be watched by USD/JPY and GBP/JPY traders. If the number were to come in higher than expected, this could cause additional volatility for the Japanese Yen. Financial institutions seemed to indicate last week they would like to see the BoJ become more aggressive with their Policy Rate.
Friday, 29th of March, U.S Core Personal Consumption Expenditures Price Index - the reading is expected to be below the previous month's total. Traders should be on the lookout for revisions to past results. Financial institutions know this inflation number is important for the Federal Reserve, but they are concerned the U.S central bank doesn't have the ability to combat inflation which is not part of the Core number. Energy and food costs which are hurting U.S consumers are not part of this report and likely making the Federal Reserve gun shy regarding monetary policy - which has caused a large part of the USD whipsaw trading results that Forex has experienced.