US Session Forex Brief, May 1 – Traders Cautious Ahead of the FED
Skerdian Meta • 4 min read
The US Dollar has been on a bullish trend last week, but this week it has reversed to bearish as traders wait for the FED meeting and the general consensus out there is that the FED will be bearish today. Yesterday we saw the US Chicago PMI dive to around 52 points from 59 points in the previous month, which gave the USD another kick down the road as it increases the odds of the FED being dovish today.
Although the consumer confidence jumped higher which is a positive thing, it remains to be seen whether the improved sentiment will translate into higher retail sales and higher demand in general. Although, the FED should give us some insight of the economic situation in the US, later today. In the last hour though, the USD has made some gains, so it seems like traders are just trying to get positioned ahead of the FOMC meeting. There are some decent data releases before that though. The ADP non-farm employment change posted some really good numbers earlier while a bit later we have the US manufacturing PMI report to be released.
- UK Manufacturing PMI – Manufacturing activity has been declining in the UK as in all of Europe with the PMI indicator bottoming at 52 points in February. But, we saw a jump to 55.1 points in March which was surprising, although that was due to stockpiling ahead of Brexit. Today, this indicator was expected to turn soft again and decline to 53.2 points and it came pretty close to that at 53.1 points.
- UK M4 Money Supply – The pace of growth in money supply has been slowing in the last several months, declining from 0.7% in November last year to 0.3% in February. Today’s report which is for March was expected to remain the same at 0.3%, but instead, money supply declined in March and today’s number came at -0.5%.
- UK Mortgage Approvals – Mortgage approvals have been on a declining trend in Britain since October last year, falling from 67k to 65k in February. Today’s report was for March and it was expected to decline again to 64k, but it missed expectations declining further to 62k.
- ECB’s De Guindos Speaking – The European Central Bank vice president, Luis de Guindos, was speaking in London this morning saying that low interest rate environment is with us for the foreseeable future. Low bank profitability remains a concern and Euro banking consolidation remains necessary, but the central bank doesn’t have a bank profitability mandate. The ECB is ‘open-minded’ about tweaks to inflation target but officials haven’t discussed changing their inflation target just yet.
- US ADP Non-Farm Employment Change – Non-farm employment change has been holding around the 200k range for some time but last month’s report showed a decline to 129k for March. Today’s report was expected to show a reversal and come at 185k, but it beat expectations, coming at 275k which is a pretty strong number.
- Canadian Manufacturing PMI – The manufacturing activity has been on a slowing trend in Canada as in the rest of the globe, declining from 55 points in December to 50.5 points in March, which is pretty close to contraction. Today there were no expectations for this indicator, but the actual number fell further to 49.5 points, which means that manufacturing is now officially in contraction.
- US Final Manufacturing PMI – In the US, manufacturing has also been slowing although not as much as in the rest of the world. The final manufacturing PMI report was released a while ago and it was expected to remain unchanged from the previous month at 52.4 points. But, it ticked higher to 52.6 points, which is an encouraging sign.
- US ISM Manufacturing PMI – US ISM manufacturing report is out and it is showing a big miss. ISM manufacturing indicator declined from 55.3 points in March to 52.8 points in February. ISM manufacturing prices also dropped from 54.2 points in March to 50.0 points, which means that prices remained flat last month. Employment also fell to 52.4 points against 57.5 points previously. Prices paid remained flat, coming at 50.0 points against 55.0 expected while new orders declined from 51.7 points from 57.4 points prior. A pretty negative report which should have some impact on the FED later today and the USD has turned bearish again.
- FOMC Meeting – The FED meeting is at 18:00 GMT today. Markets are anticipating a dovish FED but they don’t know to what extent. Forex traders have been unloading some of their long positions in the USD on these anticipations, although the main thing that traders will be focused on today is the future of interest rates.
- The main trend is bullish
- The pullback lower is almost complete
- Moving averages are providing support
Moving averages are again providing support for EUR/CHF
EUR/CHF turned bullish at the beginning of April after the Swiss National Bank chairman threatened with intervention if the CHF kept going higher, thus EUR/CHF sliding lower. The 20 SMA (grey) has been providing support for this pair during the uptrend but last week we saw a retrace take place. The 100 SMA (green) held the place and this week the price turned bullish again. Although today we are seeing another retrace lower. But again, the 20 SMA and the 50 SMA are providing support right now on the H4 chart while the pullback is nearly complete as stochastic shows.
The US ISM manufacturing report released just now showed a big dive which is hurting the USD. This looks strange because the final manufacturing PMI report released a while ago ticked higher from last month. But, the details don’t lie and they were pretty soft as well, so manufacturing heads down in the US as well as in the rest of the globe. Let’s see what the FED has to say about it.