The US ISM manufacturing report last Monday increased fears of a deeper economic slowdown for the US economy, as this sector fell deeper in contraction. That turned the USD bearish and the sentiment negative, but on Friday we saw an impressive employment report. New jobs jumped higher, while the unemployment rate ticked lower to 3.5%. Earnings were satisfying as well, while the consumer sentiment improved as well, more than expected. That turned the USD bullish, since it has been one of the few rounds of data from the US, or anywhere else for that matter, that has been impressive. Donald Trump rushed to highlight the better employment report that day.

Although, we are not seeing a follow-through of that price action today. The economic calendar has been very light, with only the Eurozone Sentix Investor Confidence report being the only decent data. The sentiment turned positive today after being in negative territory since December last year. The Euro has turned slightly bullish on that data, but it’s not really going to go anywhere, as are the rest of major currencies. traders are waiting for a number of important events in forex, such as the UK GDP tomorrow, US inflation report on Wednesday, the meetings from the FED, the SNB and the ECB later in the week and so on. Almost forgot, the general elections in the UK are scheduled for Thursday by thee way. So, I expect markets to remain quiet until tomorrow at least.

The European Session

• Eurozone Sentix Investor Confidence – The Sentix investor confidence weakened last year in the Eurozone and in December it fell in negative territory. This indicator resurfaced briefly in May, only to turn negative again in the following month and deepen further. It was expected to deteriorate a little today to -5.4 points, but it beat expectations, increasing instead to 0.7% and turning positive again, which is a small ray of hope.
• Positive Comments from China on Trade – The assistant commerce minister of China commented early this morning, saying that China hopes to reach trade agreement with US that satisfies both sides as soon as possible. China is to also actively boost imports.
• Threats from North Korea? – In case you missed the news from earlier today, North Korea has set a deadline the end of the year for the US to change its policies or Kim Jong Un may “embark on a new path” as de-nuclearisation talks between the two countries appear to have broken down. Later this morning, North Korea warns that Kim’s thoughts on Trump can change.

The US Session

• Canadian Housing Starts – The starts of building new homes used to be around 220k a month for several months and sometimes higher in the previous months. But, last month’s report showed a decline to just 202k, which was revised lower to 201k today for October. Today’s report remained unchanged at 201k as well, with expectations slightly lower to 200k.
  
• Canadian Building Permits – Building permits turned pretty negative in May and June, posting some major declines back then, but they turned positive in July and August. Although, the report released last month, showed another big decline of 6.5% for September. October was expected to be positive, with permits increasing by 3.5%, but it missed expectations, falling again, this time by 1.5%.
• US UoM Consumer Sentiment – US Prelim UoM Consumer Sentiment report was released just a while ago. It was expected to improve slightly to 97.0 points, from 96.8 in November, which was revised higher int he second revision, from 95.7 points. But, it came in much better, jumping to 99.2 points. Wholesale inventories came at +0.1% versus 0.2% estimates. Wholesale sales posted a 0.7% decline versus -0.1% last month, which was was revised down from 0.0%. Current conditions increased to 115.2 points versus 112.8 estimated. Up from 111.6 last month. Expectations also increased to 88.9 points against 87.5 estimated, up from 87.3 last month. One year inflation expectations falls to 2.4% from 2.5%, 5 – 10 year inflation expectations falls to 2.3% from 2.5%.

Trades in Sight

Bullish NZD/USD Again

• The trend has ben bullish for more than 2 months
• The pullback lower is complete
• The 50 SMA is providing support again

The 50 SMA is scaring sellers again today

NZD/USD made a bullish reversal at the beginning of October, which looked just like another retrace higher before sellers pushed further below. But, sellers didn’t come back and we haven’t seen them since then. We have seen several pullbacks lower, but buyers have come back and have kept things in control. The sentiment has improved for risk assets, as we approach the final stage of the Phase One deal between US and China. There have been events and comments which have taken this deal back and forth, such as Donald trump’s comments last Thrusday that he might postpone the deal until Chinese elections are over, responding to China targeting Trump’s electorate with retaliatory targets.

But, on Friday we heard form Bloomberg that the deal might be signed off on December 15, despite the heated rhetoric, which calmed the nerves. Donald Trump also helped the sentiment when he said a while ago that talks with China are going very well. NZD/USD had retraced lower during the Asian session, but  the 50 SMA (yellow) provided solid support on the H1 chart. The price bounced off that moving average as the sentiment improved after Trump’s comments at the NATO summit. So, this pair is pretty bullish now and we will look to open a buy signal on another pullback lower, to the 50 SMA.

In Conclusion

The sentiment has improved in the last two trading days, with Gold turning bearish, while risk currencies stretch the upside further, hence the buy signal in NZD/USD. We also had a long signal on WTI crude Oil and a sell one in Gold, both of which closed a while ago. I closed the Gold signal manually actually, since I don’t expect much action in the remaining US session, so I’m calling it a day regarding trades in forex.