Your weekly fundamental view 2016.04.25

Aprīlis 25, 2016 10:29

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Need to know

This week is all about central bank interest rate decisions. The US Federal Reserve meets on Wednesday and the Bank of Japan on Thursday.

Coming up

On Tuesday 26 April we have US durable goods orders for March. Durable goods orders are seen as a leading indicator, because they track how busy factories are likely to be in the coming months. The data since December has been inconclusive. February's reading was -2.8% versus January's +4.9%. Why should traders care? This metric can tell investors what to expect from the manufacturing sector - a major part of the US economy. The performance of this sector helps to determine interest rate policy. Watch Dollar index (USDX) support 93.79 : resistance 95.14

On Wednesday 26 April the Federal Reserve meets to decide on interest rates. The US central bank appeared to make a u-turn on rates at its March meeting. The markets do not expect a change in rates today but they will analyse any comments that accompany the decision very closely indeed. Why should traders care? The world's most powerful central bank is at crossroads. The choices it makes now could determine the trends in the markets for the balance of 2016. Watch US Tnotes support 129.25 : resistance 130.07

The Bank of Japan convenes to decide whether to lower interest rates further. The BOJ is in uncharted territory as it battles to revive Japan's fading economy. Lowering interest rates further into negative territory may encourage spending and stoke up inflation. But it could also strengthen the Yen and harm exporters, who are so important to that economic revival. Why should traders care? The world's 4th largest economy remains on life support yet money has continuesd to flow into the Yen. Can the BOJ say or do anything to turn this tide? Watch USD/JPY support 109.85 : resistance 111.50


Chart to watch: Brent Crude daily

Crude oil has rallied in the last week, despite the lack of agreement on a production freeze at OPEC's recent meeting in Doha. The international Energy Agency (IEA) has predicted that supply and demand for Oil will come into balance in 2017 - assuming there is no major economic downturn. The IEA believes that the lower oil price and falling investment will see non OPEC supply contract by as much as 700k barrels per day, which is the largest drop in 25 years. With demand for oil likely to be driven by emerging markets' growth - led by India and China - the question is can cash strapped OPEC producers resist the temptation to make up the projected supply shortfall.