Trading in the first half of this week has been extremely difficult with a dearth of fundamental news on the economic calendar leading to all markets trading in very narrow ranges. This price action has also been seen across all the major forex pairs with only one or two offering any degree of volatility and opportunities. The market mood at present is reflective as we now await for the second half of the week to unfold and with an increase in both the number of news items and their relevance we should see some trading opportunities unfold both on Thursday and Friday.
The underlying theme across global markets is the ongoing issue of government money which continues to be thrown into the various economies and which may well lead to sustained inflation in due course. Thus far the poor benighted tax payer has seen little return on his/her money. In other markets yields on index linked Treasuries at an all time low largely as a result of the QE programmes but in addition a further cause is the absolute yield on conventional Treasury paper which is also at rock bottom at present. The forex market is looking for direction at present and commodity currencies such as the Aussie and Canadian Dollar are likely to lead with UK Sterling and the Euro dragging behind. As always the dollar yen pair is unpredictable and liable to swing in a random fashion around the 90 level, largely as a result of Japan’s fiscal year end when institutions look to repatriate their funds. The precious metals sector looks positive with a further modest rally forecast and we may see gold push on towards new highs in the next quarter. The indices continue to defy some market analysts with both the FTSE and Dow recovering from their recent short term reversals and showing positive momentum as we move towards the end of Q1.
Europe
European ministers are now increasingly blaming the speculators once again for the continuing problems with the Greek sovereign debt, in particular the number of short positions taken in credit default swaps. It was particularly interesting to see Rasmusson lambasting one of the UK hedge fund managers last night on tv by suggesting that the they were directly responsible for exacerbating the current situation. This is a lazy intellectual argument and much the same as the one put forward when oil rocketed to $147 a barrel. As is usual in these circumstances there is much debate and discussion about the practice of short selling with threats to control or even ban it outright – all laughable of course and impossible to police given the number of instruments now widely available. At the moment we have only seen minor skirmishes and no doubt ministers and their advisors will be returning to this battlefield before long.
With no tier one economic releases in Europe this week we can expect the eurodollar to trade sideways with only the possibility of a short squeeze. With this lack of hard data watch out for the ECB monthly bulletin on Thursday which is an analysis of the recent rate decision coupled with a forecast for the Eurozone economy moving forward. It is unlikely to contain any surprises but the markets may seize on this in the absence of anything else.
Friday closes again with limited news and the only item to note is industrial production forecast at 0.8%, an improvement of last month’s dismal -1.6% – this could provide a small lift for euro bulls.
Japan
With Japan focusing on its year end there is little news all week and the only items of note being final GDP due out later tonight and forecast at 1% against a previous of 1.1% and revised industrial production due out early Friday morning. This is forecast to be come in flat at 2.5%.
Switzerland
The key number in Switzerland on Monday was retail sales which showed a healthy growth up from 2.4% last time to 4.4% this time while tomorrow sees the announcement of the latest libor rate which is currently 0.25% which is expected to remain unchanged. The decision will be followed by a statement from the SNB (Swiss National Bank) where they communicate future monetary policy and their economic outlook which may provide clues for future rate decisions. Watch out for any reaction in the EURCHF which for the past few weeks has been trading in a most bizarre fashion.
UK
Sterling was helped lower earlier in the week by poor housing data and given a further shove lower this morning by the manufacturing production figures which came in well below forecast and negative at -0.9% against a previous of 0.3%. For those of you who follow the UK the housing market is one of the most important barometers of economic health and it has been calculated that a 1% drop in house prices leads to a 0.7% fall in consumer spending s0 an important market sector to watch.
Very little news for the rest of the week.
Canada
The Canadian dollar was one of the few currencies to have some significant news earlier in the week with housing starts on Monday which came in better than expected at 197k, exceeding the forecast of 188k. The big number tomorrow is the trade balance which is forecast to be positive at 0.3bn, reversing last month’s negative output of -0.2bn. This figure represents the difference in value between imports and exports with a positive number indicating that more goods were exported than imported. This is always a significant release for the Canadian currency as around 65% of Canadian exports are purchased by the US and therefore could be considered a leading indicator for both economies.
Friday sees another important set of numbers for Canada with the employment data which is forecast to see the unemployment hold steady at 8.3% whilst the employment change is positive at 17.5k – not quite so good as last time at 43k but nevertheless trending in the right direction.
Australia
The major release for Australia and the Aussie came this morning with home loans coming out dramatically lower and indeed negative at -7.9%, in stark contrast to the forecast of 2.1%. The forex market largely ignored this release as the Aussie rallied against both the US dollar and the Japanese Yen confirming our currency forecast of an interim target of 0.92 against the US dollar.
Tomorrow we have the unemployment numbers with the rate forecast to remain steady at 5.3% and the change in job creation to show a positive growth of 15k – not so dramatic as last month’s 52k, but nevertheless again showing a positive sign of recovery.
China
China’s trade balance shrank to its lowest level for a year last month as a surge in imports signalled to the markets that China may overtake the US as the number one economy in the world sooner rather than later, with imports rising a staggering 45% from this time last year. However, against this it must be remembered exports gained almost 46%. In other news tomorrow sees the release of industrial production which is forecast to increase to 19.5% from last month’s 18.5%.
USA
We have to wait until Thursday for two major releases in the US which are the trade balance data and unemployment claims. The first of these is forecast at -40.9bn against a forecast of -40.2bn with unemployment forecast at 456k against a previous of 469k so a small fall here. The week ends for the dollar with retail sales figures which are expected to be negative at -0.1% reversing last month’s positive 0.5%, but with core retail sales just holding firm in positive territory at 0.1% against a previous of 0.6%. Finally the week rounds off with the UoM (University of Michigan) sentiment index, a leading indicator which shows a mildly bullish outlook at 74, marginally higher than last month’s 73.6. Watch out for Treasury Secretary Geithner who is due to speak at the Annual Conference of Export/Import Bank in Washington later in the day on Friday.
What is one of the best retail forex trading platforms? In my view it is Metatrader 4. Advanced, powerful & intuitive it now comes with ECN execution, so you can happily scalp away without broker or dealer intervention. Just download your free demo copy of MT4 by following this link – download metatrader free – and get started today. Don’t forget to follow my daily posts for updates and analysis of the forex markets to help you with your forex trading – so good luck and good trading.
