The Latest Iteration of US Consumer Price Data Showed a Surprise Uptick Feeding Dollar Gains
The New Zealand dollar has experienced a dramatic rebound in the past few weeks, rising to a 15-week high amid the rebound in dairy prices and improved risk-sentiment amongst market participants. The move back into risk assets has boosted commodity currencies at large including the Kiwi dollar as lower inflation in China has raised the specter of increased stimulus measures to help the globes second largest economy improve growth metrics. The easing measures undertaken by the Reserve Bank of New Zealand have also improved the outlook with inflationary figures rising more than expected with quarterly inflation at 0.30% and annualized inflation printing at 0.40%. However, the recent rebound in the New Zealand dollar is likely to catalyze the next round of rate cuts from the RBNZ, a move that will see the NZDUSD pair sink over time as a factor of targeting a weaker exchange rate.
Today marks the release of the latest inflation figures from the Euro Area in what will likely be confirmation that the monetary region has slipped back into the throes of deflation. Inflation is currently printing well below the 2.00% target set by the European Central Bank with Governing Council members warning that the goals are unlikely to be met this year after expectations from earlier in the year expected a rebound and anchoring of inflation in the second half of 2015. Headline CPI is forecast to contract -0.10%, a figure that could fuel expectations of expanded stimulus measures from the ECB in the form of a duration extension for asset purchases or the addition of supplementary instruments aside from those already covered by the existing program. EURUSD closed the session weaker following the unexpected uptick in US consumer prices.
The Canadian dollar has seen recent improvements and appreciation in-line with conditions experienced by other commodity currencies and risk-assets. The gains in oil prices have seen the Canadian dollar increase versus peers, notably the dollar after the USDCAD pair fell through a major support level, marking the potential for a third-straight week of gains for the currency. Manufacturing data is due later in the session with the sales figure forecast to contract after strong expansion in the prior month. With the weakness anticipated in manufacturing sales combined with the most recent decline in crude oil prices off the back of stronger US inventory numbers, the USDCAD could be in the early stages of a rebound to the upside especially if energy prices continue falling. Crude oil prices managed to stage a modest rebound on the back of slowing production, but energy markets remain oversupplied.
Nasdaq Equidistant Channel Trading Opportunity
The improvement in risk assets come on the back of reduced liftoff expectations with the latest economic data pointing to a first or second quarter rate hike in the United States. The lengthier timeline for interest rate policy normalization has brought back the tendency for risk assets to trend positively on the announcement of negative data points, a sign that markets expect Central Banks to remain accommodative. The Nasdaq Composite futures continue to rise despite the recent weakness in corporate earnings and soft IPO market hurting the outlook for benchmark indices. The equidistant channel pattern has a strongly bullish bias with ideal long positions taken at the lower channel line targeting the upper channel line. A move below the lower channel line could signal a channel-based breakout to the downside to be accompanied by renewed momentum downward.