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RISK EVENT FOR THIS WEEK SEPTEMBER 5-9 2016

The following table shows that it was a mixed week for the U.S. dollar but aside from the
losses in the Japanese yen (and strength for USD/JPY), the greenback ended the week
unchanged to lower against most of the major currencies.

US DOLLAR - Data Review


 Personal Income 0.4% vs. 0.4% Expected
 Personal Spending 0.3% vs. 0.3% Expected
 PCE Deflator (MoM) 0.0% vs. 0.0% Expected
 Consumer Confidence Index 101.1 vs. 97 Expected
 ADP Employment Change 177k vs. 175k Expected
 Chicago PMI 51.5 vs. 54.5 Expected
 Pending Home Sales (MoM) 1.3% vs. 0.7% Expected
 ISM Manufacturing 49.4 vs. 52.0 Expected
 NFP Change 151k vs. 180k Expected
 Unemployment Rate 4.9% vs. 4.8%
 Avg. Hourly Earnings (MoM) 0.1% vs. 0.2% Expected
 Trade Balance $-39.5b vs. $-43.5b Expected
 Factory Orders 1.9% vs. 2.0% Expected
 Durable goods Orders 4.4% vs. 4.4% Expected
Data Preview
 ISM Non-Manufacturing Composite- Potential for downside surprise given sharp
drop in ISM manufacturing
 Fed Beige Book Release- Likely to maintain a positive tone
Key Levels - USD/JPY
 Support 103.00
 Resistance 105.00

Meanwhile investors were left scratching their heads after the U.S. dollar rose to a fresh
one-month high against the Japanese yen on the back of non-farm payrolls. The jobs report
missed expectations with payrolls rising only 151K, wage growth slowing to 0.1% and the
unemployment rate holding steady at 4.9% in the month of August. From all angles this
report should have taken the dollar lower but instead it ended Friday with broad based
gains. Looking at these numbers the Federal Reserve has a flimsy case for tightening in
September and a hike in December remains in doubt but the rise in the dollar reflects more
complex thinking.
Taking a look at the Fed Fund futures contracts, the market is now pricing in a marginally
lower chance of a rate hike in September (32% vs. 34% from Thursday) and December (59%
vs. 59.8), showing that expectations for a rate hike this year did not change much after the
payrolls report. U.S. stocks moved higher, which is consistent with no immediate tightening
but Treasury yields rose, which is the primary explanation for the dollar’s reversal. Even
though USD/JPY rose from 102 to 104 over the past week, most investors never believed

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that the Fed would raise rates in September and today’s jobs number doesn’t alter their
views. When Janet Yellen speaks later this month she will say that December is still on the
table because there are 3 jobs reports before that meeting so it's too early to draw any
conclusions and close out their options. Investors could be thinking that by taking away the
immediate pressure to raise rates in September, today’s jobs number gives the Fed the
leeway to maintain a hawkish bias and maybe even harden the case as 3 more months of
low rates gives the economy additional time improve. In the coming week, the Federal
Reserve’s Beige Book report is scheduled for release along with non-manufacturing ISM.
While the dollar should lose upside momentum, the abundance of key events elsewhere in
the world means that it won’t be just about the dollar next week. If the European Central
Bank, Reserve Bank of Australia and Bank of Canada are dovish, those currencies could fall,
driving the dollar higher.

BRITISH POUND
Data Review
 Manufacturing PMI 53.3 vs. 49 Expected
Data Preview
 PMI Services - Potential for upside surprise given sharp rise in PMI manufacturing
and higher GfK
 Industrial and Manufacturing Production- Potential for upside surprise given sharp
rise in PMI manufacturing
 Trade Balance - Likely to be Weaker Give sharp drop in PMI manufacturing
Key Levels - GBP/USD
 Support 1.3000
 Resistance 1.3300

The U.K. economy and the U.K. currency proved to be extremely resilient this past week.
The biggest surprise was the manufacturing PMI report which rose to its strongest level
since October 2015. The decline of the currency post Brexit played an important role in
supporting export activity and helping the economy weather post Brexit uncertainty. In
addition to new orders, consumer goods also saw healthy demand with consumption
improving since Britons decided to leave the European Union in June. Cable shorts have
been squeezed mercilessly as a result because most investors were positioned for economic
Armageddon. While Prime Minister May said they don’t see a need to consult Parliament on
Article 50, her opposition to “Leave” suggests that they will opt for the mildest form of
Brexit possible, satisfying only the minimum of requests made by voters. The U.K. won’t
remain in this state of “uncertain bliss” forever but there will be a period of calm before
Article 50 is invoked. Looking ahead, the U.K. PMI Services, industrial production and trade
balance reports are scheduled for release. We are optimistic especially after last week’s
healthy PMI manufacturing report and rise in the GfK consumer confidence index.

Note: This report is made exclusive to IB members of MagForex! Only.


EURO
Data Review
 EZ Economic Confidence 103.5 vs. 104.1 Expected
 GE CPI (MoM) 0.0% vs. 0.1% Expected
 GE Unemployment Change -7k vs. -4k Expected
 GE Retail Sales (MoM) 1.7% vs. 0.5% Expected
 EZ Unemployment Rate 10.1% vs. 10.0% Expected
 CPI Estimate (YoY) 0.2% vs. 0.3% Expected
 CPI Core (YoY) 0.8% vs. 0.9% Expected
 GE Markit Manufacturing PMI 53.6 vs. 53.6 Expected
 EZ Markit Manufacturing PMI 51.7 vs. 51.8 Expected

Data Preview
 Markit German and EZ PMI services and composite- Revisions are difficult to predict
but can be market moving
 Eurozone Retail sales- Potential for upside surprise given strong rise in German
spending, better French numbers
 EZ GDP- Potential for downside surprise given weaker German GDP and unchanged
growth in France
 ECB Rate Decisions – Draghi Could be Dovish, Economic Projections will be Released
 GER Trade and Current Account Balance- Potential for Weakness Given Lower PMI

Key Levels - EUR/USD


 Support 1.1100
 Resistance 1.1250

Speaking of rate decisions, the European Central Bank’s monetary policy announcement is
the most important event risk on the calendar next week. While no immediate changes in
monetary policy is expected, ECB President Draghi is expected to remind investors that
inflation is low, the economy is weak and easier monetary policy may be needed. Consumer
spending has been particularly soft, manufacturing and trade activity took a hit after Brexit
and most importantly, inflation remains well below target with year over year core CPI
growth slipping to 0.8% from 0.9% in August. Aside from the decision on rates and Draghi’s
press conference, the central bank will also release its economic projections and if changes
are made, they will likely be euro negative given the deterioration in manufacturing and
inflation data over the past week. Like many of the major currency pairs, EUR/USD went on
a rollercoaster ride post NFPs but the currency pair ended the week below the 100 and 20-
day moving averages which puts it on track for a move down to 1.1125, where we have the
50 and 200-day SMAs. If this support is broken and EUR/USD also breaches 1.11, 1.1050 will
be next. If 1.1125 holds, EUR/USD could drift up to 1.1215 with the “breakout” of these
moving averages determined the level of ECB dovishness. On a fundamental and technical
basis, the euro should trade lower but the crosses could experience greater losses on a
percentage basis than EUR/USD.

Note: This report is made exclusive to IB members of MagForex! Only.


AUD, NZD, CAD
Data Review
Australia
 AiG Manufacturing PMI 46.9 vs. 56.4 Prior
 AU Retail Sales 0.0% vs. 0.3% Expected
 CH Manufacturing PMI 50.4 vs. 49.9 Expected
 CH Non-Manufacturing PMI 53.5 vs. 53.9 Prior
 Caixin China PMI Manufacturing 50.0 vs. 50.1 Expected
New Zealand
 Building Permits -10.5% vs. 21.9% Previous
Canada
 Current Account Balance -$19.86b vs. -$20.20b Expected
 GDP 0.6% vs. 0.4% Expected
 International Merchandise Trade $-2.49b vs. $-3.20b Expected
Data Preview
Australia
AiG PMI Services- Potential for downside surprise given sharp fall in PMI manufacturing and
weaker wages
RBA Cash Rate Report- Very market moving but hard to call given mixed data (see below)
GDP Report- Potential for downside surprise given weaker trade balance and retail sales
Trade Balance- Potential for downside surprise given sharp drop in PMI Manufacturing
CH Trade Balance- Chinese data is very market moving but hard to predict
New Zealand
 No Data
Canada
Bank of Canada Rate Decision – Likely to be dovish given recent data (see below)
IVEY PMI Index – Manufacturing activity could slow after big jump in July
Employment report – Rebound in job growth expected after big drop in July
Key Levels
Support AUD .7500 NZD .7100 CAD 1.2800
Resistance AUD .7650 NZD .7350 CAD 1.3000
Neither the Reserve Bank of Australia nor the Bank of Canada expected to change monetary
policy next week, which means the focus will be on guidance. The latest economic reports
from Australia were terrible with manufacturing activity contracting and retail sales
stagnating. However since the RBA met in August, we’ve actually seen just as much
improvement as deterioration in Australia’s economy. Manufacturing and trade activity
improved and most importantly iron ore prices have found a bottom. So a signal to ease is
not a done deal. AUD/USD ended the week pretty much where it started and for the time
being we’re are slightly more bearish than bullish and expect another test of 75 cents in the
coming week. Aside from the RBA, Chinese trade numbers will also have a big impact on
AUD. With no major New Zealand economic reports on the calendar outside of the Global

Note: This report is made exclusive to IB members of MagForex! Only.


Dairy Trade auction, NZD will most likely take its cue from AUD. New Zealand data was
mostly softer with building permits plunging in the month of July and business confidence
falling. However the RBNZ is in no rush to ease again and for that reason NZD outperformed
most major currencies – a trend that could continue in the coming week.

Good luck to all.

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Note: This report is made exclusive to IB members of MagForex! Only.

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