How Will a Volatile Market React to the Fed Decision, US GDP?

Share This: DailyFX.com – While the markets may have recovered ground this past week, investors are far from optimistic. Anxiety pervades and a heavy round of key event risk ahead threatens to easily revive volatility – if not fear. US Dollar Forecast – US Dollar Traders on High Alert Amid GDP, FOMC, Market Volatility Technically, the Greenback (USDollar specifically) has advanced for fourth consecutive weeks through Friday’s close. Euro Forecast – Euro Burdened By Prospect of ECB Action in March – Is it a Real Threat? The ECB did as was widely expected and hinted at possible policy action in March. However, the Euro’s decline amid the prospect of fresh easing was rather mild compared to its broader reaction after the October 2015 meeting. Are markets taking the ECB’s threat of action seriously? British Pound Forecast – British Pound Shows Signs of Life – Can it Continue Higher? The British Pound finally showed signs of life as it recovered from multi-year lows to finish the week higher versus the Euro and the US Dollar. Japanese Yen Forecast –USD/JPY to Stage Larger Recovery on Hawkish Fed, Dovish BoJ The near-term breakout in USD/JPY may gather pace next week should the Federal Open Market Committee (FOMC) along with the Bank of Japan (BoJ) highlight the deviating paths for monetary policy. Australian Dollar Forecast – Australian Dollar Recovery at Risk on CPI Data, FOMC Meeting The Australian Dollar launched an aggressive recovery last week but a busy docket of high-profile event risk threatens spark volatility and cap upside momentum. New Zealand Dollar Forecast – New Zealand Needs a Relief Rally to Take Eyes Off RBNZ Rate Cut Bets Risk markets are no longer staring at the abyss as they were at the beginning of last week, which is benefitting markets like equities, Oil, & the New Zealand Dollar Canadian Dollar Forecast – BoC Takes a Step Back from QE to Put Focus on Fiscal Policy, Stimulus The more that a rubber band is pulled back, the harder the corresponding snap forward will be. Chinese Yuan Forecast – Yuan Volatility Eye On Equity Market Ahead of Holiday Season The yuan offshore rate (CNH) gained slightly against the dollar this week as the Chinese central bank continued to slow the pace on devaluation in the yuan. Sign up for a free trial of DailyFX-Plus to have access to Trading Q&A’s, educational webinars, updated speculative positioning measures, trading signals and much more! What are the Traits of Successful Traders? See what our studies have found to be the most common pitfalls of retail FX traders. original sourceDailyFX.com – While the markets may have recovered ground this past week, investors are far from optimistic. Anxiety pervades and a heavy round of key event risk ahead threatens to easily revive volatility – if not fear. US Dollar Forecast – US Dollar Traders on High Alert Amid GDP, FOMC, Market Volatility Technically, the Greenback (USDollar specifically) has advanced for fourth consecutive weeks through Friday’s close. Euro Forecast – Euro […]

Australian Dollar Recovery at Risk on CPI Data, FOMC Meeting

Share This: DailyFX.com – Fundamental Forecast for the Australian Dollar: Neutral Conflicting cues abound as markets eye CPI data to inform RBA views Hawkish FOMC statement may renew risk aversion, sink Aussie Dollar See how FXCM traders are positioned in AUD/USD with DailyFX SSI The Australian Dollar launched an aggressive recovery last week, posting the largest five-day advance in three months against a backdrop of firming risk appetite. Follow-through is far from assured however as a busy docket of high-profile event risk promises volatility and threatens to cap upside momentum. On the domestic front, the fourth-quarter CPI report is in the spotlight. Economists’ expectations point to an uptick, with the benchmark inflation rate rising to a one-year high of 1.6 percent. Australian economic news-flow has increasingly outperformed relative to consensus forecasts over recent months, suggesting analysts’ models may be underestimating the economy’s vigor and opening the door for an upside surprise. Leading survey data paints a worrisome picture however, suggesting price growth waned in late 2015. A soft CPI result is likely to bolster RBA interest rate cut expectations, pushing the Aussie Dollar broadly lower. Needless to say, a higher print stands to deliver to the opposite dynamic as traders scale back bets on near-term stimulus expansion. Turning to external catalysts, a monetary policy announcement from the US Federal Reserve takes top billing. Chair Janet Yellen and company are widely expected to maintain the status quo this time around, with Fed Funds futures assigning a mere 11.9 percent chance of another rate hike. Markets will pay very close attention to the tone of the statement accompanying the rate decision however as traders attempt to gauge the degree to which recent risk aversion has undermined officials’ appetite for tightening. The rout in risky assets has noticeably undermined investors’ views on the amount of stimulus withdrawal to be done in 2016. Indeed, a gauge of the priced-in year-end rate hike path derived from futures pricing has slumped alongside the S&P 500 since the beginning of the year. This suggests that investors expect the Fed to scale back rate hike intentions following recent turmoil. With that in mind, measures tracking progress on the Fed’s dual employment- and inflation-oriented mandate have largely improved. Core inflation and the pace of wage growth have firmed and payrolls growth has proven more robust than economists expected. For its part, the central bank has said that communicating its intentions to the markets remains a key challenge, hinting that it intends to stick with its December projection of four rate hikes in 2016 despite the dovish shift in investors’ outlook (which now calls for just one 25bps increase this year). January’s FOMC policy statement offers officials an opportunity to signal that financial market angst alone will not be enough to derail their game-plan as long as progress on the mandate continues to be made. Risk appetite is likely to sour if they choose to take it, sending the Aussie lower alongside stock prices. original sourceDailyFX.com – Fundamental Forecast for […]

Euro Burdened By Prospect of ECB Action in March – Is it a Real Threat?

Share This: DailyFX.com – Fundamental Forecast for EUR/USD: Neutral – The ECB did as was widely expected and hinted at possible policy action in March. – Retail traders flipped positioning in EUR/USDonly after the pair dropped following the ECB meeting. – Risk management is paramount to long-term profitability in trading – see what principles you should embody in the “Traits of Successful Traders” series. To receive reports from this analyst, sign up for Christopher’s distribution list. With equity markets turning around sharply by the end of the week – thereby removing a key source of strength for the Euro thus far in 2016 – the Euro fell broadly across the board. EUR/JPY’s performance was revealing in this regard, having gained +0.58%, only one of the two major EUR-crosses to post gains on the week (EUR/CHF was the other, up +0.34%). Indeed, with the European Central Bank’s policy meeting on Thursday being the source of optimism for markets globally, it’s not much of a surprise that the threat of policy action in March – particularly at a time when the news cycle is so negative and market participants are starved of monetary policy stimulus from central banks in advanced economies – sunk the Euro more broadly elsewhere. The Euro’s reaction across the board is telling: sentiment is extremely fragile and prone to exacerbate price swings across asset classes. However, it wasn’t nearly as significant in terms of the magnitude of the decline relative to what happened after the ECB’s meeting in October 2015. Thus, there is one question which we seek to answer: do markets take the ECB’s hint for more stimulus in March as a credible threat? At first blush, “yes” may seem like the logical answer. After all, the Euro posted its first losing week across the board for the first time all year, and global equity markets stabilized – if violently – after several days of tumultuous trading. Of course, then, with so much optimism having sprung henceforth, traders must feel that the ECB’s threat of upgrading its stimulus outlets is legitimate. Yet when we try to answer this question from the ECB’s perspective, the answer may in fact be “no.” As we’ve touched on in recent weeks, the ECB, like so many other central banks in advanced economies, has fallen into the predictable pattern of only altering policy when it has new economic forecasts in hand. This of course is a symptom of the global shift to more transparency in central banks’ activities, which in turn may be having a chilling effect on these institutions’ abilities to change policies quickly. By changing policy without a change in economic forecasts, central banks would otherwise expose markets to greater uncertainty as market participants inevitably ask themselves, ‘what do the central banks know that we don’t?’ If this is true, then the ECB had to keep policy action on the table for the March meeting, as without that option, markets would quickly embrace the view that the ECB wouldn’t be […]

GBP/USD to Rebound to Succumb to Dovish BoE, Upbeat NFP Report

Share This: DailyFX.com – Fundamental Forecast for British Pound: Neutral GBP/USD – All About 1.4400 GBP/USD Rebound Vulnerable to Lackluster 4Q U.K. GDP Print View our 2016 forecasts for the British Pound and other major currencies The Bank of England (BoE) interest rate decision is likely to heavily impact the British Pound next week with the central bank schedule to release its updated forecasts, and the near-term rebound in GBP/USD may continue to unravel should the Monetary Policy Committee (MPC) show a greater willingness to further delay the normalization cycle. The BoE meeting may reveal another 8 to 1 split within the committee as Ian McCafferty sees a risk of overshooting the 2% inflation target in the medium-term, but the majority may continue to endorse a wait-and-see approach as core rate of price growth ‘remains relatively subdued – a consequence of the past appreciation of sterling, weak global inflation and restrained domestic cost growth.’ With the 4Q U.K. Gross Domestic Product (GDP) print highlighting the slowest pace of growth since 2013, the BoE’s quarterly inflation report (QIR) may discourage bets for a rate-hike in 2016 should Governor Mark Carney and Co. curb their economic outlook for the U.K. In contrast, the Federal Open Market Committee (FOMC) may stay on course to implement higher borrowing-costs over the coming months as the U.S. Non-Farm Payrolls (NFP) report is anticipated to show another 190K expansion in January, and the 2016 voting-members may take a more proactive approaching in preparing households and businesses for higher borrowing-costs especially as the economy approaches ‘full-employment.’ However, a slowdown in Average Hourly Earnings may keep the Fed on the sidelines throughout the first-half of 2016 as it undermines the central bank’s pledge to achieve its price stability mandate, and the next interest rate decision on March 16 may undermine the bullish sentiment surrounding the dollar should the committee endorse a wait-and-see approach. Nevertheless, the longer-term outlook for GBP/USD remains tilted to the downside as the BoE continues to lag behind its U.S. counterpart, and the near-term rebound in the exchange rate may continue to unravel in the days ahead should we get more of the same from the MPC. At the same time, the Fed may have little choice but to stay committed to its normalization cycle amid the ongoing improvement in the labor market. original sourceDailyFX.com – Fundamental Forecast for British Pound: Neutral GBP/USD – All About 1.4400 GBP/USD Rebound Vulnerable to Lackluster 4Q U.K. GDP Print View our 2016 forecasts for the British Pound and other major currencies The Bank of England (BoE) interest rate decision is likely to heavily impact the British Pound next week with the central bank schedule to release its updated forecasts, and the near-term rebound in GBP/USD may continue to unravel should the Monetary Policy Committee (MPC) show a greater willingness to further delay the normalization cycle. The BoE meeting may reveal another 8 to 1 split within the committee as Ian McCafferty sees a risk of overshooting the 2% inflation […]

CAD Rally Stalls After Reversing Longest Losing Streak Since 1971

Share This: DailyFX.com – Fundamental Forecast for CAD: Bearish Canada’s Dollar Strengthen on Crude Oil’s Turnaround of 20%+ in 1-week, which shows few fundamental factors sustaining the rally. Canadian Dollar Likely to Gain further versus US Dollar per the Speculative Sentiment Index Canadian Dollar Strength Best Plaid through Bearish EUR/CAD As Markets Digest Draghi’s Comments & Crude’s Bounce Steven Poloz’s refrain of a Bank of Canada rate cut that had become the preferred bet as the Loonie dropped brought a magnificent reversal for the CAD. However, toward the end of the week, the CAD rally stalled and CAD-crosses looked to oil for direction. For a majority of the week, a ‘Dash for Trash’ in Oil assets seemed sustainable as news of a coordinated global oil production cut appeared in the making. However, on Thursday, the news became obvious that such a plan was unlikely to develop, and the elusiveness of such a plan made Oil and, therefore, CAD unable to hold gains. One oil trader, Gerrit Zambo of BayernLB stated, “Don’t think there are many experienced people that really think Russia or Saudi Arabia would considerably cut production as long as they have the possibility to sell into the market,” Suggested Reading: Oil Collapse Driven by Panic; Is CAD at a Policy Turning Point? The Canadian economy did show growth for the first time in three months when the government released GDP on Friday morning showing 0.3% MoM. This growth was a glimmer of good news because the global economy continues to show weak growth. A notable print last week was the pitiful durable good number in the United States that showed a 5.1% drop in orders for durable goods. This poor print affirmed the U.S. manufacturing sector susceptibility to global headwinds. Next week, we’ll have two key points to take the temperature of the Canadian economy in an environment where commodities remain at depressed prices. Canadian Manufacturing PMI & Unemployment will be looked at to see if there is a sense of positive momentum from the GDP print last Friday. From a sentiment perspective, we’ve seen traders through our speculative sentiment index or SSI fighting the latest move as USD/CAD has dropped. This move represents a substantial shift in retail forex trader positioning, which warns that the USD/CAD may have set an important top. Our data shows there are currently 1.3 open retail short positions in the USD/CAD for every one that is long; 43% of traders are long. As you can see on the # of bullish & bearish orders below, this represented a notable swing from three weeks ago when that ratio exceeded 4 to 1. original sourceDailyFX.com – Fundamental Forecast for CAD: Bearish Canada’s Dollar Strengthen on Crude Oil’s Turnaround of 20%+ in 1-week, which shows few fundamental factors sustaining the rally. Canadian Dollar Likely to Gain further versus US Dollar per the Speculative Sentiment Index Canadian Dollar Strength Best Plaid through Bearish EUR/CAD As Markets Digest Draghi’s Comments & Crude’s Bounce Steven Poloz’s refrain of […]

BoJ Makes Stealth Move to Negative Rates, Pressure on to China

Share This: DailyFX.com – Fundamental Forecast for Yen:Neutral The Yen put in its largest annual loss after the Bank of Japan made a surprise move to negative rates. USD/JPY: Shock and Some Awe (critical resistance zone in 121.50-122 area). USD/JPY – Don’t Forget About the 26-Year Trendline. Track changes in positioning and sentiment in real-time to filter trends and opportunistic trade ideas. Confidence is a pretty important thing in a financial system. After all, in a fiat-based monetary system, all that we really have is faith. There’s no gold or silver backing the currency, and while I’m not saying that’s a ‘good’ thing since pretty much all of those regimes have failed, faith is of utter importance because, should trust wane investors may just sell out of your currency at an uncontrollable pace. This could lead to significant currency weakness as investors flock to anywhere but your currency, and all of those goods that you have to import all of the sudden begin to get very, very expensive. This is one of the reasons that negative rate-regimes have been avoided for so long: It could be potentially playing with fire (the inflationary kind). And this inflation isn’t of the ‘healthy’ variety. Just ask Russia. This even began to show signs in Canada earlier this week with reports of the Great Cauliflower Crisis; where four simple heads of Cauliflower could buy a full barrel of Oil. But this isn’t about cauliflower; we’re talking about history here. The Bank of Japan shocked pretty much everybody watching last night by pulling rates into negative territory. I’m not aware of anyone that saw this coming or even thought of it as being a possibility. As a matter of fact, until a leak hit news wires in Japan just ahead of the announcement, the prospect of negative rates had been seemingly eliminated by the man at the top of the BoJ himself, Mr. Haruhiko Kuroda, just two weeks ago. Just before flying to the World Economic Forum in Davos, Mr. Kuroda told Japan’s parliament that he wasn’t even considering negative rates. And this made sense: Even at the lows of this thus far painful year, as panic was at an apex, the Yen was still 54% weaker against the US Dollar compared to the pre-Abe highs. And while Japan was still far from ‘turning the corner’ on the inflation front, the case could be made that they were in a significantly more handsome position than many other economies in the world. But Japan saw this as a big threat apparently. After ‘Abe-nomics’ really only provided relief in the form of exchange rates, growing risk aversion around the world exposed the Yen as a prime candidate for safe-haven flows. As investors ran out of riskier investments and riskier currencies, the seeming safety of a developed Japan could be a really attractive draw, even if rates were next to zero. In panics, the onus is on return OF capital, not return on capital. But that was effectively […]

Gold Boosted by Softer Fed Stance- Resistance at 1130

Share This: DailyFX.com – Fundamental Forecast for Gold:Neutral Gold Rejected on First 1130 Test Japan Negative Rate Spooks Gold, Rumored OPEC Cut Supports Oil Sign up for DailyFX on Demand For Real-Time Gold Updates/Analysis Throughout the Week Gold prices are higher this week with the precious metal rallying nearly 1.8% to trade at 1117 ahead of the New York close on Friday. The move comes amid continued volatility in broader risk markets with the FOMC rate decision fueling speculation that the central bank will likely have to delay subsequent rate hikes. Although the dollar was weaker for the majority of the session, a late-week rally took the Dow Jones FXCM U.S. Dollar Index (Ticker: USDOLLAR) to fresh highs. Ongoing technical divergence however continues to suggest the greenback remains vulnerable- with bullion standing to gain from dollar softness. The Federal Reserve held interest rates this week as expected with the accompanying commentary citing a slightly softer tone with regards to the assessment of the economy and the probable timing of future rate hikes. FOMC officials noted that they were, “closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation, and for the balance of risks to the outlook.” The commentary suggests that indeed the committee may have gotten a tad ahead of itself when they cited expectations for 4 rate hikes this year. Nevertheless, as the Fed attempts to buy more time gold may continue to regain some of its lost luster as traders look to the relative safety of the yellow metal amid the ongoing turmoil & volatility in broader equity markets. Looking ahead to next week, traders will be eyeing a loaded economic docket for US data with Personal Income/Spending, ISM Manufacturing, Factory Orders, Durable Goods Orders and the highly anticipated Non-Farm Payroll report on tap. On the back of last week’ FOMC rate decision, a weaker print on US data could kick-out interest rate expectations even further- a positive for gold prices. Gold price-action has remained constructive since the start of the year with the rally testing resistance at the upper median-line parallel extending off the October high this week before pulling back on Thursday. Heading into next week the immediate risk is for a move lower, before mounting the next offensive with confluence support seen lower at 1096/98 where the July low-week / low-day closes converge on slope support extending off the December lows. We’ll reserve this level as our bullish invalidation with a break below targeting 1088 & the 61.8% retracement of the advance at 1078. Bottom line: we’ll be looking for a pullback next week to offer favorable long entries with a breach higher targeting the 200-day moving average at 1131 & the 61.8% retracement of the decline off the October high at 1136. original sourceDailyFX.com – Fundamental Forecast for Gold:Neutral Gold Rejected on First 1130 Test Japan Negative Rate Spooks Gold, Rumored OPEC Cut Supports Oil Sign up for DailyFX on Demand For Real-Time Gold Updates/Analysis […]

Dollar Hits a 12-Year High, But Can NFPs and Sentiment Maintain Lift?

Share This: DailyFX.com – Fundamental Forecast for Dollar: Neutral The next FOMC decision is scheduled for March 16; and there is a wide gulf between the market’s and Fed’s outlook Top event risk on the US docket are the January labor statistics and the Fed’s preferred inflation reading for December See our 1Q 2016 forecast for the US Dollar in our Trading Guides page. The USDollar closed at a fresh 12-year high this past week. Yet, the occasion of breaching such exceptional heights has repeatedly disappointed over the past year. For the Greenback, ‘breakouts’ have chronically lacked follow through. This isn’t just a technical shortfall, rather it is a sign of the lackluster fundamental drive behind the market. Divergent rate expectations, rising market volatility and a shift to consumer economies have all benefit the benchmark currency. However, this is not an endless well of strength. To project the Dollar further on already extended moves like those seen with EURUSD, GBPUSD and AUDUSD; a tangible upgrade is needed. Will we find it on the coming week’s docket or headlines? There is little debating it: the Dollar is one of the FX market’s most robust players. Yet, that doesn’t mean it will simply keep climbing through the foreseeable future. This is a relative market and equilibrium is eventually found when a currency trades at the appropriate premium or discount to its counterparts. With a modest yield advantage and elevated resting rate of volatility in the FX market, the Dollar seems to have found its balance. To make its next move, the currency’s fundamentals need to shift…or its counterparts can provide indirect leverage. Weighing the fundamental themes that can effectively move the USD, the greatest potential still resides with general risk trends. The problem is that the currency isn’t finely tuned to small alterations in sentiment like Yen crosses or emerging market assets are. To tap the Greenback’s unusual risk standing, we either need to see robust speculative appetite that feeds rate expectations (its yield advantage) or steep enough risk aversion to divert capital to liquidity refuge. Reviving true investor optimism is unlikely given the premium many markets still trade at, the use of leverage, the dour outlook for global growth and discrete risks such as China’s stability. Sheer risk aversion on the other hand finds central banks waiting in the wings with liquidity lines and deeply engrained moral hazard. Neither side is unconquerable, but they are especially difficult to meet. Far more palpable a driver in the week ahead is the changing tides of monetary policy. This past week, the Fed decided to hold rates steady after the December hike. They made mention of global growth and financial concerns, but nothing in the statement would backtrack on the consensus forecast offered at the end of 2015 calling for 100bps (4 standard) worth of hikes this year. That is sharply contrasting the market’s own 25bps forecast for the coming 12 months via swaps. Shifting probability either towards the central bank or market’s view […]

Weekly Trading Forecast: Fresh Stimulus, Tentative Recoveries and Heavy FX Event Risk

Share This: DailyFX.com – The BoJ refreshed the global central bank discussion this past week after announcing negative rates. And, risk-oriented markets gained as they have in years past. Is this a return to familiar trends or a false dawn? US Dollar Forecast – Dollar Hits a 12-Year High, But Can NFPs and Sentiment Maintain Lift? The USDollar closed at a fresh 12-year high this past week. Yet, the occasion of breaching such exceptional heights has repeatedly disappointed over the past year. Euro Forecast – Euro Driven by Global Sentiment Trends as BOJ Tips the Scales January 2016 presented a number of surprises to market participants, including threats of looser monetary policy from the European Central Bank and the People’s Bank of China, while the Bank of Japan took the extraordinary step of introducing negative rates. Throw away all your preconceived notions going forward. British Pound Forecast – GBP/USD to Rebound to Succumb to Dovish BOE, Upbeat NFP Report The Bank of England (BoE) interest rate decision is likely to heavily impact the British Pound next week with the central bank schedule to release its updated forecasts, and the near-term rebound in GBP/USD may continue to unravel should the Monetary Policy Committee (MPC) show a greater willingness to further delay the normalization cycle. Japanese Yen Forecast – BoJ Makes Stealth Move to Negative Rates, Pressure on to China Confidence is a pretty important thing in a financial system. After all, in a fiat-based monetary system, all that we really have is faith. Australian Dollar Forecast – Australian Dollar May Move on US Data After Static RBA The Australian Dollar may find volatility in US new-flow’s impact on risk trends as the RBA maintains the status quo and Chinese economic data passes with little fanfare. Canadian Dollar Forecast – CAD Rally Stalls After Reversing Longest Losing Streak Since 1971 Steven Poloz’s refrain of a Bank of Canada rate cut that had become the preferred bet as the Loonie dropped brought a magnificent reversal for the CAD. Chinese Yuan Forecast – Chinese Yuan Remains Stable Despite of BOJ Decision Overall, the Chinese yuan in the next week should remain relatively stable. However, the hidden pressure from BOJ rate cuts may be released over a longer period of time. Gold Forecast – Gold Boosted by Softer Fed Stance – Resistance at 1130 Gold prices are higher this week with the precious metal rallying nearly 1.8% to trade at 1117 ahead of the New York close on Friday. Sign up for a free trial of DailyFX-Plus to have access to Trading Q&A’s, educational webinars, updated speculative positioning measures, trading signals and much more! What are the Traits of Successful Traders? See what our studies have found to be the most common pitfalls of retail FXtraders. original sourceDailyFX.com – The BoJ refreshed the global central bank discussion this past week after announcing negative rates. And, risk-oriented markets gained as they have in years past. Is this a return to familiar trends or a false dawn? […]

Australian Dollar May Move on US Data After Static RBA

Share This: DailyFX.com – Fundamental Forecast for the Australian Dollar: Neutral RBA likely to maintain status quo, Chinese PMI data may pass quietly Impact of US news on risk trends biggest Aussie Dollar volatility risk To see the 2016 outlook for AUD/USD, check out our Trading Guides The Australian Dollar continued to recover for second week, bolstered by better-than-expected inflation data and firming market-wide risk appetite. The former weighed against RBA interest rate cut expectations while the latter fueled demand for higher-yielding assets, offering support to the sentiment-linked currency. Looking ahead however, upside follow-through may be compromised as a relentless stream of high-profile event risk promises to unleash sharp volatility. On the domestic front, the RBA monetary policy announcement is in the spotlight. Policymakers are widely expected to keep things as-is for now, with the priced-in probability of a cut registering at a paltry 6 percent. This will put the onus on the statement released following the meeting and the forward guidance contained therein. Australian economic news-flow has markedly improved relative to consensus forecasts since early December but external threats – notably from instability in China – remain an important downside risk. With that in mind, Governor Glenn Stevens and company may opt for the status quo. This implies a neutral, data-dependent posture that offers little by way of near-term direction cues to the Aussie Dollar. Turning outward, Chinese PMI figures will inform investors on the health of Australia’s largest trading partner. While measures of manufacturing- and service-sector activity are expected to tick slightly lower, both outcomes are seen printing broadly in line with near-term trend averages. Absent a major disappointment, it seems unlikely that these outcomes are likely to meaningfully alter RBA policy bets, particularly with the central bank’s own policy update on the docket. That means a lasting response from the Aussie is probably unlikely. On balance, this paints US news-flow and its implications for broad-based sentiment trends as the most significant volatility risk. The PCE measure of inflation – the Fed’s preferred gauge – as well as January’s employment report will cross the wires. The FOMC attempted to strike a balance between acknowledging recent market volatility and a relatively steady outlook for mandate fundamentals in this year’s first policy statement. Traders interpreted the outcome as dovish however, as we suspected might be the case. The markets could become asymmetrically vulnerable to event risk that rekindles fears of a Fed rate hike in March in this environment. In practical terms, this means that even modestly upbeat results on the PCE and payrolls fronts could upend risk appetite. Needless to say, such a scenario would bode ill for the Australian unit, sending it downward alongside stock prices. original sourceDailyFX.com – Fundamental Forecast for the Australian Dollar: Neutral RBA likely to maintain status quo, Chinese PMI data may pass quietly Impact of US news on risk trends biggest Aussie Dollar volatility risk To see the 2016 outlook for AUD/USD, check out our Trading Guides The Australian Dollar continued to recover […]