Fundamental analysis for a week of 14th – 18th December

forex fundamental analysis

The market is going through the last moments of uncertainty. The most important economic event of the year is near; it is the US Federal Reserve meeting. While US economic indicators improving Janet Yellen’s saying that the Fed’s decision on the basic interest rate will be based on economic indicators data haunts market participants.

Fundamental analysis

The probability that the Fed will start raising interest rates this year is very high, and this is reflected in the markets. Last week, the world markets were not reacting to economic news, market participants do not want to take any serious decisions without knowing the US Federal Reserve Bank’s decision. Even after reducing New Zealand’s key interest rates NZD continued to rally, fundamentals had no impact on market participants. Anxiety is felt, and stock markets on both sides of the Atlantic are affected. Main stock indices finished the week with a steady decrease in prices, the energy and financial sectors fell the strongest, declining oil prices have a negative impact on the world’s largest energy companies. In this anxious environment, precious metals recovered a little, but this week will be very volatile so we will not open any long-term positions. In emerging markets, most of my attention are focused on Turkey, as more and more serious Russian-Turkish conflict may continue to offer opportunities to open TRY “short” positions.

USD. The dollar index fell last week; market participants did not like the US retail sales figures, and we can feel a preparation for the forthcoming Fed conference. USD rally of recent months and the following week pause suggest that an increase of 0.25% base points to the rate are already included in the price by market participants. If interest rates remain unchanged, we believe USD may weaken against the other currencies because it would mean that the US economy is still not in good shape. In both cases the market will be very volatile, be careful.

GBP. Since the Fed’s decision will affect all currencies I will avoid redundancy 🙂 This week we are waiting for the CPI indicators from the UK, these indicators can help to understand further GBP movements during the week.

NZD. Milk, milk, milk. Price auction Global Dairy Trade has the largest influence on New Zealand economy, even higher than the base rate. So I will be happy to watch NZD charts after the announcement of the results looking for opportunities to enter the position.

AUD. This week we will read the last RBA meeting minutes, and we will look for clues on the further course of the economy.

Gold. One of the most speculative financial instruments this week will certainly not be calm. Since gold is strongly correlated with the USD, we will be very careful. Driving up the US base rate may be the reason for further depreciation of the precious metals.

European and US stock indices. Due to the complicated geopolitical situation in Europe, the appreciating euro and the uncertainty regarding the Fed’s decision this week we will refrain from any transactions with the European indices. Following the Fed decision in this, high-risk markets we expect huge volatility. In such situations, it is easy to lose money. In the long term our sentiment remains positive, but let’s leave the decisions for 2016.