Weekly market Analysis

Commitments of Traders

EURUSD: Speculators added 4K fresh long positions and covered 7.6K shorts. The same theme prevailed over the last three weeks, where speculators are selling off their shorts and acquire new longs.
GBPUSD: Speculators, after taking profit last week, added 2.5K new longs and covered 1.3K shorts. They were slightly bullish but remained 104K net short – all time high.
USDJPY: This week speculators opened new 8K longs and closed 6K shorts. Bullish JPY sentiment is clearly in play. They were 53K new short, down from 66K last week and 71K two weeks ago
AUDUSD: Speculators kept adding new longs. This week they opened another 5.4K longs and closed 2.7K shorts. They are being bullish again but their long positions are now at 90K, which is an extreme.  AUD tends to decline once these levels are reached. I suspect this could be the same case once again.
USDCAD:  Speculators, after closing over 60% of their longs last week, kept them unchanged this time.They also added 4K new shorts.They were 28K net short, largest level since February 2016

Fed Watch

Probability of more hikes from FED were higher across the board. May remains out of the picture but June and July gained most confidence and spiked from 49 % to 63% and from 56% top 70% respectively. September was up by 10% and it is now reading 80%. November and December were slightly up too. Investors will be looking for a little bit more hawkish tone from FED this week to confirm rate hike expectations for 2017 and 2018. Given strong US data, FED might be looking into adding additional hike for 2017.

This Week's Risk Events

Tuesday 4 April

5:30am AUD Cash Rate, RBA Rate Statement
Today Australian the Retail Sales missed expectations and came out at -0.1% versus 0.3% eyed as weak wage growth and higher debts weighed on consumer demand raising fears that the RBA may turn more dovish at its meeting tomorrow.
This was the second negative reading in three months and only the second negative reading in more than a year and a half suggesting that consumer demand in Australia is clearly slowing down. RBA statement might confirm if the central bank is concern about recent bad numbers and if it is prepared to act upon it. If the RBA chooses to address that fact the Aussie could see further weakness.

9:30am GBP Construction PMI
Not a market mover. Market expects this report to come out unchanged from the previous 52.5. Lower than expected might have an impact on the price of GBP, given that construction PMI printed 54.2 vs 55.1 earlier today ( Monday ) Bad Construction figure could spark worry and Pound might sell off.
3:30pm EUR ECB President Draghi Speaks
Important one to see if Drahi corrects ECB intentions after the recent comments when European Central Bank presented more dovish tone that the market interpreted. Given poor inflation numbers, I expect bearish outlook and extension of easing policies in europe for now.
Tentative NZD GDT Price Index
Dairy prices have been poor recently. The index printed 1.7% in March 21st. Two previous figures were negative. Consensus points to more weakness in GDT, which should weigh negatively on NZD.

Wednesday 5 April

9:30am GBP Services PMI
The most important PMI for UK economy. This time market is expecting 53.5 vs 53.3 previously. This figure must be looked at with two other PMIs already released this week. If the construction is lower and this prints lower too, GBP will be heavily sold off.
1:15pm USD ADP Non-Farm Employment Change
Normally not a market mover and it proved to be not really an accurate tool to predict NFP figures.
3:00pm USD ISM Non-Manufacturing PMI
Market is expecting ISM to come out at 57.1 vs 57.6 pior. Expectations are a little bit softer but the number is solid and there is no reason to believe that the number will disappoint.

7:00pm USD FOMC Meeting Minutes
Investors will be looking for a little bit more hawkish tone from FED this week to confirm rate hike expectations for 2017 and 2018. Given strong US data, FED might be looking into adding additional hike for 2017. Dovish tone will be Dollar bearish in this scenario.

Thursday 6 April

No significant reports

Friday 7 April

9:30am GBP Manufacturing Production m/m
Market expects a significant rebound from -0.9% to 0.3%. Again, this report must be looked at in the conjuction with the earlier PMI reports. At this stage, the market already priced in the news and I don’t expect this figure to change anything here.
1:30pm USD Average Hourly Earnings m/m, Non-Farm Employment Change
Average earnings are likely to weigh more on the USD than NFP in this case. Wage inflation has been weak suggesting slow growth, which will affect consumer spending and confidence. The two previous reports missed expectation. This time market expects earnings to come out unchanged at 0.2%
NFP is expected at 176K vs 235K.