Daily Insights Report 05/04/17

• 5 Apr 2017

5 April 2017

The US Trade deficit came to be lower than expected. The goods and services deficit in the US narrowed to 43.6 B USD in February, lower than expectations of a 44.8 B USD shortfall. Exports increased 0.2% to a 2 year high. This boost is likely due to the increased shipments of cars and industrial supplies. At the same time, imports fell by 1.8%.

– The Japanese Yen was flat against the Dollar at 110.76 after it touched its highest point since mid-November yesterday. The currency strengthened during the previous three sessions.

– The Dollar index was slightly lower at 100.5.

Commodities

– Oil prices continued to go up as they enjoyed a 2% gain on Tuesday. This is because investors weighed up whether OPEC members might extend supply curbs beyond an initially agreed six-month period. Brent crude was up 0.2% at $54.28 a barrel in Asia while West Texas Intermediate (WTI) crude added 0.3% to reach $51.18 per barrel.

– Gold prices gained value over the past three days as global investors adopted a more cautious stance ahead of the French presidential debate, and the release later today from the Federal Reserve’s March meeting.

United States Dollar (USD)

ADP National Employment Report (March)

With a mild winter over, high consumer confidence, and generally strong economic data likely increased private payrolls by 298,000 in February. Services kept their steady climb, but it was the strong performance of goods-producing industries that led to February’s growth. Small business hiring, which has been booming recently, added 104,000 new jobs in February. The gains were distributed among the smallest companies with those companies with less than 20 people and those with 20-49 people. Midsize businesses (50 to 499 people) added 122,000 jobs and large businesses added 72,000, of which 43,000 new jobs were in companies with more than 1,000 people. March will be the sixth month using this new methodology. The ADP’s new methodology overestimated the Bureau of Labor Statistic’s estimate of private employment by 71,000 in February, compared with 9,000 in the two prior months.

ISM Nonmanufacturing Index (March)

The ISM nonmanufacturing survey’s composite index is likely to have remained solid in March, at 57.3, compared with February’s data of 57.6. Fundamentals show to be remaining positive for the nonmanufacturing segment of the economy, which currently accounts for 88% of GDP. Higher energy prices are helping the mining sector as active rig counts continues to increase. Household balance sheets are in good shape and consequently, consumers are expected to continue leading economic growth, a positive for nonmanufacturing. While housing is improving, supply constraints, including the labor supply issues and the lack of buildable lots, could keep downward pressure on single-family investment in real estate.

Japanese Yen (JPY)

Consumer Confidence (March)

A forecast of 43.4 might be expected from consumer confidence in Japan. Consumer confidence has been improving somewhat from the second half of 2016, although consumers still remain pessimistic. Employment conditions are close to the highest level seen in recent history, and this has led to reasonably strong wage growth. The higher stock market would have lifted household wealth. The Bank of Japan’s index of consumer confidence likely rose to 43.4 in March, which is up from 43.1 seen in February.

Technical Analysis

CADJPY

Looking at the hourly chart of this currency pair, we can see that the currency pair has bounced 82.00 which is at the bottom of the falling channel. Looking at the Fibonacci retracements, combined with the overbought signal coming from the stochastic indicator. Looking at both SMA’s, they are both currently above the current price of the currency pair. Graphically, this suggests that the currency pair will continue to decline. It may be feasible to enter a trading position in this currency pair if the price reaches the 50% retracement of 83.11.