Technical Outlook: US Trade Balance & China’s Inflation Data

Mar 08, 3:59 pm
China's inflation_0803

The US Dollar Index remains within a tight range since the beginning of the week, trading right below its key resistance area which stands at 102.0

This is despite the fact that the US data that were released yesterday came in with disturbing news for the Fed. Yet, there are many economic figures that investors are eyeing ahead, whether from the US or around the world which should give us more signs on when and how the Dollar is likely to react.

US Trade Balance Deficit Soared

                           US Trade Balance

Yesterday, a disturbing news came in from the US, which would be positive news for the US President Donald Trump, as it will be a good reason for him to criticize the previous administration.

The US Trade Balance deficit widened more than expected, rising to the highest level in 5 years, specifically since March of 2012 on soaring imports.

Imports increased for 4 months in a row, positive the highest reading in over two years, while exports posted the weakest increase in two months.

Inflation Is Rising Globally

                             Switzerland CPI YoY 

Despite the fact that it had no effect on the market or a media coverage earlier today, but Switzerland is finally out of deflation.

Today’s YoY CPI edged higher to the highest level since 2011, rising to 0.6% in February compared to 0.3% in January of this year. This is the first time Switzerland YoY posts two consecutive positive reading since 2013.

Such increase shows that even countries who suffered from deep deflation over the past few years are showing signs of inflation pressure.

Back to The US

Despite the tight range that the US Dollar has been trading in since the beginning of the week, this is something that should have been expected, as we wait for key events this week including today’s ADP Non-Farm Employment Change and the US Jobs Report on Friday.

Today’s ADP Non-Farm Employment change impact might be limited as the UK Budget Release might overshadow any upcoming data. But the key event remains on Friday.

                             USD Index

In the meantime, the US Dollar Index technical outlook remains bearish as long as it stays below that key resistance at 102.0.

China’s Inflation Data Ahead

During the upcoming Asian session, all eyes will turn toward China, as we will be waiting for the inflation data, including the YoY CPI and PPI.

                             China CPI YoY

Estimates are pointing to slower inflation in February; the YoY CPI may slow down to 1.9% down from 2.5%, which would be the first slowing down after more than three months of gradual increase.

China PPI YoY

However, the PPI is expected to post its longest rising stake since 2010, rising for the fifth consecutive months to 7.6% in February up from 6.9%.

These figures might come in with another surprise, meaning that inflation may continue to rise further, which would push the PBoC away from any new easing measures anytime soon.

Watch Gold

Gold

Despite the fact that Gold lost more than $40 since last week, declining all the way to 1211 earlier this morning, Yet, such move is considered as a short term retracement after the continuous gains since the beginning of the year.

With inflation perking up across the board, the Gold potential is here to stay. As long as it stays above this year’s high, I would be looking to build new long positions, looking for a break above the recent highs above $1260 in the coming weeks. This is even if the Federal Reserve manages to hike the rates this year.

Nour Eldeen Al-Hammoury

Nour Eldeen Al-Hammoury has more than ten years of experience in focusing on foreign exchange and global economic developments, as well as central bank policies and intermarket analysis (global markets relationships). Nour Eldeen is a regular on many major TV networks (several times each) such as: BBC Radio, BBC World News, Al-Jazeera, Al-Hurra TV CNBC Europe, CNBC Asia, CNBC Arabia, Al Arabiya, Bloomberg, Russia Today, Dubai TV, Sama Dubai, Skynews Arabia, Qatar TV and Future TV News.