Trading activity will be minimal during the Christmas break.
The next activity is the ADP Non Farm Payrolls at on Jan 3 2019. This is an LLA so will be overshadowed by the HLA, Unemployment Rate the day after, on Jan 4.
Trading plans going into these events will made a day or two before.
Jeepson Trading have a unique method to determine the performance of an economy. This method is two form, firstly high level analysis which looks at the key indicators. And then, low level analysis which is an analysis of the indicators of the central bank’s focus area.
High Level Analysis
High Level Analysis (HLA) is the process of analysing the key indicators of an economy and determining the subsequent performance. The key indicators are as follows;
GDP Growth Rate
Unemployment Rate
Inflation Rate
Interest Rate
Balance of Trade
Government Debt to GDP
The individual performance of each indicator is analysed over a twelve month period to determine the the high level economic performance.
Central Bank
The Federal Reserve is the central bank of the united states who has a dual mandate to maintain price stability and achieve maximum sustainable employment.
At their previous meeting on November 8 they stated that the focus areas are the labour market and inflation. These can be monitored by reviewing the performance of the Significant Indicators (SIND).
Low Level Analysis
Jeepson Trading have identified the following SIND that are to be monitored for the low level analysis.
Labour
Non Farm Payrolls
ADP Non Farm Payrolls
Average Hourly Earnings
Inflation
Producer Prices Change
Core Inflation Rate
Inflation Rate Month on Month
High Level Analysis
Low Level Analysis
Conclusion
High Level Analysis: strong economy with an improving outlook
Low Level Analysis: strong indicators with an improving outlook
Even though there has been a mix of data, the trend has been improving over the previous twelve months.
The release due on November 28th is expected at 3.50 percent which will maintain the uptrend.
US GDP Growth Rate courtesy tradingeconomics.com
Fundamental and Geopolitical Analysis
measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments
Central Bank focus points
No other significant news events at this time
Sentiment Analysis
Dollar is in a bullish period over the previous week
Order
Orders to buy are good at appropriate levels determined by Technical Analysis here
The Federal Reserve are planning to raise interest rates again and a decision to do so is based on the performance of Labour and Inflation.
On review, the SUIN are in great shape and support buying the US Dollar.
Low Level Economic Analysis
Significant Indicators (SIND)
The SIND have been identified based on the focus of the Federal Reserve.
All indicators are performaing well and I expect the Inflation Rate Month on Month is being closely monitored. Should this show a strong result then a December hike is highly likely.
On review, the SUIN are in great shape and support buying the US Dollar.
There are six indicators that are used to judge the performance of an economy:
GDP Growth Rate
Unemployment Rate
Inflation Rate
Interest Rate
Balance of Trade
Government Debt to GDP
Balance of Trade and Government Debt to GDP are the only two that have worsened over the previous twelve months.
The Federal Reserve are monitoring the labour market and inflation to decide on further rate hikes. Fed fund futures have over 70 percent probability that a hike is happening, however this has dipped from over 75 percent.
The trend has been improving over the course of twelve months although more recently has been falling from the high’s of June and July of almost three percent.
The consensus forecasts the inflation to rise again following on from five releases of month on month stagnation.
US Annual Inflation
Fundamental and Geopolitical Analysis
Recent comments from the central bank…
…supporting strong labor market conditions and a sustained return to 2 percent inflation.
Other than the mid term elections last week there are no geopolitical events of concern.
Interest rates remained on hold at last weeks FOMC meeting.
Sentiment Analysis
Dollar has gained strength following the interest rate decision and coming out of a lull in the run up to mid term elections.
The trend is rising over a twelve month period, held steady for a six month period and could be considered to have declined over a three month period.
With a consensus of 180 thousand, nothing changes too much from a trend view.
Technical Analysis
Chart
Trend Direction
Trend Break Zone
Day
Up
111.40
Four Hour
Down
112.70
Thirty Minutes
Up
111.70
Low risk entry at 111.85
High risk entry at N/A
Fundamental and Geopolitical Analysis
“The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation.”
Stock market sustained losses in previous week but set to recover
Sentiment Analysis
Traders direction mixed but it appears more are opn the sidelines than invested so a rally could be expected.
Order
Buying up the dollar from low risk entry makes sense fundamentally in the run up to Non Farm Payroll release.