US Dollar Guide to PMI & NFP Event This Week | USDCAD & EURUSD
I continue to maintain a weak bearish bias on the USD given the risk to both the economy and monetory policy remain titled to the downside.
In term of monetary policy, the market still expects the FED to ease further within the next 12-months, even though the FOMC's recent dot plot showed that no board members expect any changes to rates in the year.
In terms of economic data, I have seen a string of negative data points out of the US over the past couple of months. The most recent one was last week's ISM Manufacturing PMI that had yet another negative surprise to the downside coming at 47.2, it was the lowest reading since 2009.
It's also important to note that the sub-components like ISM Manufacturing New Order and the ISM Manufacturing Employment Index also fell further. Apart from that, the balance of recent US economic data has surprised to the downside and is probably one of the reasons why the markets still expect more easing from the FED in 2020.
Sell USDCAD in case of a dovish sentiment shift
In the the case of a dovish sentiment shift from big surprise negative deviations in the data, sell USD against the CAD which has remained well supported against the Dollar due to a more upbeat BoC. The big rise in Oil prices over the past 2 months has been another tailwind for the CAD, given the geopolitical tension between the US and Iran.
Sell EURUSD in case of a hawkish sentiment shift
If we do see a tradable hawkish sentiment shift, we could pair the USD against the EUR which remains a fundamentally bearish currency due to the state of the EU economy as well as the easy policy stance from the ECB. I would advise to be careful not to get sucked into any short-term bullish price action in the USD from this event unless it is due to tradable and sustainable hawkish sentiment shift.
Please let me know your view on this at the comment.
In term of monetary policy, the market still expects the FED to ease further within the next 12-months, even though the FOMC's recent dot plot showed that no board members expect any changes to rates in the year.
In terms of economic data, I have seen a string of negative data points out of the US over the past couple of months. The most recent one was last week's ISM Manufacturing PMI that had yet another negative surprise to the downside coming at 47.2, it was the lowest reading since 2009.
It's also important to note that the sub-components like ISM Manufacturing New Order and the ISM Manufacturing Employment Index also fell further. Apart from that, the balance of recent US economic data has surprised to the downside and is probably one of the reasons why the markets still expect more easing from the FED in 2020.
Sell USDCAD in case of a dovish sentiment shift
In the the case of a dovish sentiment shift from big surprise negative deviations in the data, sell USD against the CAD which has remained well supported against the Dollar due to a more upbeat BoC. The big rise in Oil prices over the past 2 months has been another tailwind for the CAD, given the geopolitical tension between the US and Iran.
Sell EURUSD in case of a hawkish sentiment shift
If we do see a tradable hawkish sentiment shift, we could pair the USD against the EUR which remains a fundamentally bearish currency due to the state of the EU economy as well as the easy policy stance from the ECB. I would advise to be careful not to get sucked into any short-term bullish price action in the USD from this event unless it is due to tradable and sustainable hawkish sentiment shift.
Please let me know your view on this at the comment.