Daily Insights Report 17/04/17

• 17 Apr 2017

Data released showed that the US inflation rate was down to 2.4% in March. Consumer prices in the US increased 2.4% year-over-year in March, lower than the 2.7% seen in February. 2.4% also falls below the market’s prediction of 2.6%. This is the lowest inflation rate seen in 3 months due to the slowdown in energy and services cost. The monthly index went down 0.3%, which is the first drop in 13 months. The graph shows how the inflation rate has changed in recent months.

Last week, President Trump announced that the Dollar was too strong. Initially there was a small change in the value of the Dollar, but not something so significant. Following the comments, the Dollar fell about 0.4% against the Euro and suffered a similar fate against the Yen. If the economic fundamentals, including inflation are consistent with what the President has said, then it is likely that the USD will weaken against its peers. Any commentary from the president alone on the Dollar may only have a limited ability to disrupt the underlying trends, but the president’s actions can shape them significantly.
By delivering this statement about the Dollar, the president has essentially broken common practice of US presidents by speaking about what the US Treasury secretary is meant to talk about.

– The Yen climbed about 0.4% to 108.18 per Dollar this morning. The Yen jumped 2.3% last week and is trading at its highest level since mid-November.

– The Dollar index lost value last week, most likely due to the comments of the President discussed above. The NZD gained the most against the majors. Resulting in a 0.4% increase against the Dollar.

Commodities

– Gold rose 0.5% to $1,292.37 an ounce. It advanced 2.5% last week, and reached the highest trading level since November.

– West Texas Intermediate (WTI) crude fell 0.9% to $52.68 a barrel, after seeing a weekly gain of 1.8%. The price of oil has is expected to rise somewhat this week after the head of Saudi Arabia’s state energy giant warned of an oil shortage as there has been a drop of $1T USD in investments to the sector. He also stated that the oil market was getting closer to rebalancing supply and demand, though the short-term market still points to a surplus as US drilling levels rise and a growth in shale output returns.

Technical Analysis

GBPCAD

Looking at the daily chart of this currency pair we can see the currency pair is yet to pass above the 200 day SMA. Because of this, a long position may not be feasible. The stochastic indicator is showing that the currency is almost being oversold at present levels. If the pair remains to be seen as oversold, then it may be better to enter a long position of this pair.

A downside break may be seen as the more likely outcome, because of the long-term trend that can be seen from the chart. For this reason, as of now, it may be better to enter a short position on this currency pair. If the currency pair falls further, then it would provide a greater case for entering into a short position of this pair.