Today’s Key Market Drivers: 17th September 2018

“Bank of Japan reports on Wednesday.”

The US Dollar was the winner on Friday after better than expected US economic data. I am not convinced the rally on the US Dollar is going to last in the short to medium term as traders have priced in the interest rate increase at the Fed next week and there may be some things that conspire against the greenback in coming days and weeks. The US Fed will at some point need to advise the market it’s going to slow the rate at which its raising rates and if it decides to do this in September the likely outcome is a fall on the US Dollar. The fundamental reasons behind my short-term weaker US Dollar view are that recent inflation data was weaker, we have a strong stock market and this won’t support a rise in the US Dollar and China and US trade tensions appear to be subsiding. There is no reason at present for traders to continue to buy the safe-haven greenback.

This week sees only one major Central Bank reporting and that is the Bank of Japan on Wednesday and there is very little in the way of high impacting news until then. The market does not expect any significant change from the BOJ who currently has its interest rate at 0% and continues to print trillions of Yen in the quest to see inflation rise in the 3rd largest economy in the world. The Yen has recently been on the slide as traders see no reason to buy the safe-haven currency and as I explained in Sunday’s pre-market video, if the current fundamental trends continue to shift gears there are some major technical levels that could be broken that offer great risk to reward trading opportunities.

The RBA monthly minutes on Tuesday won’t likely move the AUD, however, Wednesday’s UK Inflation figures could give traders another reason to buy back into the Pound. I continue to hold the view a Brexit trade deal with the European Union will be done and when this is announced the likely outcome is a move higher on the Pound. If inflation data this week beats market estimates it is only going to give traders more reason to buy into the Bank of England’s interest rate tightening cycle which will continue steadily in 2019 and 2020. The Bank of Canada is another Central Bank that whilst not reporting this week will be eagerly watching what Canada’s official inflation gauge says on Friday. The Bank of Canada will also continue to tighten interest rates throughout 2019 and the Canadian Dollar will continue to rise against any country with rates on hold such as Australia and New Zealand. The RBNZ will not be adjusting the official cash rate until 2020 and this week sees the latest growth figures for New Zealand released. The NZD is recently off its lows but I still hold the view that over the long haul the NZD v USD is destined for lower levels.

I am patiently waiting to see if any of the multiple reversal signals want to play ball early this week and until they do I will sit on my hands. Please look after your risk management.

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About the Author: Andrew Barnett

Andrew is a professional trader and successful investor who has a strong focus on education. He is a regular Sky News Money Channel Guest and one of Australia’s most awarded and respected financial experts and is regularly contacted by the Australian Media for the latest on what is happening with the Australian Dollar. Director at LTG GoldRock, Andrew Barnett, guides thousands of traders around the world in the live market on a daily basis, advising them on buy and sell directions, as well as trading his own personal account. Andrew, a regular keynote speaker at trading and wealth-creation events throughout the Asia Pacific region, is an authorized representative registered with the Australian Securities and Investment Commission (ASIC).

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