EUR - How Much will EZ Industrial Production Hurt? | DZHI - DZH International 
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EUR - How Much will EZ Industrial Production Hurt?

  • Kathy Lien
  • 13 June 2019

Daily FX Market Roundup June 12, 2019

 

The Eurozone's industrial production report is typically not a big market mover for the euro but the currency has been trading in a tight range for the past 3 days and its inability to extend higher could make Thursday's report more market moving than usual. Given the sharp drop in German industrial production, Eurozone industrial production will not only fall for the third month in a row but the decline could be larger than anticipated. The global economy is slowing and it is no secret that the European Central Bank is worried. Industrial production may be a minor report but it is the most significant piece of EZ data this week and it's a leading indicator for next week's PMIs. If industrial production weakens more than expected, we could see EUR/USD slip below 1.13 towards 1.1250. Technically, the pair's gains have been capped by the 200-day simple moving average and the decline today paves the way for a further correction. However don't expect a major sell-off in EUR/USD prior to Friday's US retail sales report.

 

The US labor market is weakening and everyone is eager to see whether slower job growth affected spending. Investors shrugged off muted inflation numbers because the decline was widely anticipated - year over year growth slowed to 1.8% from 2%, which was in line with the consensus forecast. However a disappointing retail sales report cannot be ignored. If consumer spending rises by 0.5% or less, we will see a renewed decline in the dollar that could take USD/JPY to 108 and EUR/USD above 1.1350. With oil prices falling, wage and job growth slowing, there's a much greater chance of a negative than a positive surprise for the dollar. The resilience of USD/JPY has been remarkable following last week economic reports and it is clear that retail sales will tip the balance for the pair.

 

Keep an eye on the Swiss Franc tomorrow because the Swiss National Bank has a monetary policy announcement. There's been very little change in the SNB's outlook over the past year - they believe that accommodative monetary policy is needed for foreseeable future. They will keep interest rates unchanged at -0.75% and suggest that further easing could be possible if the Franc resumed its rise. Earlier this month CHF hit a 2-year high versus the EUR.

 

Meanwhile all 3 commodity currencies traded sharply lower today and the weakest was the Australian dollar. Investors are worried that tonight's employment report will fall short of expectations, triggering further liquidation of the currency. While the labor market has been one of the few areas of strength, the Reserve Bank made it clear that without material improvements, the RBA will need to ease again. However according to the PMIs, the pace of hiring increased last month in the manufacturing, services and construction sectors. So there's a good chance that the labor market numbers could surprise to the upside. Even if the net change in employment is less than the previous month, an increase in full time jobs would be enough to stem the slide in A$. But if the PMIs are wrong and the jobs report falls short of expectations, even by a small amount, it could be just the excuse that AUD/USD traders need to take the currency back to 69 cents. The New Zealand dollar also declined but the sell-off was modest compared to AUD and CAD. Oil prices fell 4%, driving USD/CAD sharply higher. Stockpiles continued to rise adding to concerns that slower global growth could ease demand.

 

 

 
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About the Author
Kathy Lien
Kathy Lien is Managing Director and Founding Partner of BKForex. Having graduated New York University’s Stern School of Business at the age of 18, Ms. Kathy Lien has more than 13 years of experience in the financial markets with a specific focus on currencies

Ms. Kathy Lien is Managing Director of FX Strategy for BK Asset Management and Co-Founder of BKForex.com. Her career started at JPMorgan Chase where she worked on the interbank FX trading desk making markets in foreign exchange and later in the cross markets proprietary trading group where she traded FX spot, options, interest rate derivatives, bonds, equities, and futures.

In 2003, Kathy joined FXCM and started DailyFX.com, a leading online foreign exchange research portal. As Chief Strategist, she managed a team of analysts dedicated to providing research and commentary on the foreign exchange market.

In 2008, Kathy joined Global Futures & Forex Ltd as Director of Currency Research where she provided research and analysis to clients and managed a global foreign exchange analysis team. As an expert on G20 currencies, Kathy is often quoted in the Wall Street Journal, Reuters, Bloomberg, Marketwatch, Associated Press, AAP, UK Telegraph, Sydney Morning Herald and other leading news publications.

She also appears regularly on CNBC’s US, Asia and Europe and on Sky Business. Kathy is an internationally published author of the bestselling book Day Trading and Swing Trading the Currency Market as well as The Little Book of Currency Trading and Millionaire Traders: How Everyday People Beat Wall Street at its Own Game all published through Wiley. Kathy’s extensive experience in developing trading strategies using cross markets analysis and her edge in predicting economic surprises serve key components of BK’s analytic techniques.