'Keep an eye on NFP, any signs of weakness could mean a protracted rate hike' - Nenad Kerkez, Admiral Markets

NENAD KERKEZ
PROFILE
• Current Job: Analyst and Full Time Trader at Admiral Markets
• Career: Holds a MSc Degree in Economics at the John Naisbitt University (formerly known as Megatrend). Works as Senior lecturer and market analyst for Admiral Markets

View profile at FXStreet

Nenad Kerkez is an analyst and trader who has been in the market since 2008 and works closely with Admiral Markets as their Head Lecturer and Market Analyst. He is well known in the FX Community, ranking in the top 10 traders and analysts in the Forex Factory High Impact Members Ranking.

Nenad covers over 25 currencies on an intraday basis and has a Masters in economics. He also developed CAMMACD TM, a proprietary trading and analysis strategy. Further, he is the co-founder and head of Elite Currensea Trading, an educational website for currency traders.

Can the Trump rally in the USD keep going for a while or has it finally stalled?

I believe the USD rally has stalled for the time being, and my initial views are that the Fed will not hike until Trump is inaugurated as President in late January, so perhaps a February 2017 hike if the data permits it.  Until then, we may get a sideways movement on USD crosses.

What about the next Fed policy meeting? What kind of message do you expect from Janet Yellen?

I think we will see the same old messages re-emerging from the Fed, we’d like to see more inflation as the main argument not to hike.  Keep an eye on NFP later this week along with the unemployment data, any signs of weakness in the data and we may have a protracted hike.

The JPY crosses have experienced a big surge lately, with the yen weakening across the board. Is it all thanks to risk appetite sentiment in the markets?

Yes, the latest move on JPY crosses is purely due to the risk-on environment in risky assets following Trump’s historic win.  The Italian referendum this Sunday could pose a large risk to the political stability of Italy, and more so, the Italian Banks, which are technically insolvent given their large non-performing loan book, may struggle to raise capital, posing a greater risk to the EU banking system.  More so, the risks associated with an Italian exit from the EU will be greater, so this may cause a flurry to the JPY safe-haven currency if the No Vote prevails this Sunday.

What is your outlook for the oil prices?

This is largely contingent on OPEC’s ability to cut production in their meeting today (30 Nov 16) in Vienna.  Any agreed cuts to production should reduce the current over-supply in the market, and technically I could see WTI Crude closing above USD50/bbl.  Any failure to reduce the supply is likely to cause a downward price move closer to USD40/bbl.  Note, these temporary oil cutbacks are likely to be offset by rising Shale production in the USA, which Trump plans to restore production there, and hence the medium term outlook is pretty flat around the USD50/bbl.

And what do you think about the long-term bullish trend in the USDCNY? How will Trump protectionism agenda impact the Yuan?

Trump’s protectionism agenda is likely to weaken US demand for imports made from China should he impose a tariff. Back in 2015, US imports from China stood at USD497.8Bn, so any big dent to such demand and we could see a drop in CNY demand.  The foreign exchange reserves of the People’s Bank of China has been dropping in recent years as it tries to support the CNY from devaluing, so it’s a good chance that the CNY will continue to devalue.