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 | S&P Futures Hover Around 1100Written by:Matthew Myers |
The S&P futures are hovering around their highly psychological 1100 as investors celebrate Labor Day following an impressive week in equity markets. A stronger than expected non-farm payrolls figure topped off an encouraging turnaround in sentiment with the S&P futures rallying solidly from our key long-term uptrend line. A pick-up in M&A activity along with signs of life in the employment market have rejuvenated bulls who were beaten down by a dreary month of economic data. That being said, considering headwinds do remain in the global economy it would be wise to exhibit a cautious optimism as we monitor whether August lows are a lasting bottom or just temporary relief. Interest rates in Greece are back at levels prior to the EU’s emergency rescue package and stress test results, meaning fiscal fears could once again creep back into the marketplace.... | |
 | AUD/USD Consolidates Below August HighsWritten by:Matthew Myers |
The Aussie is presently consolidating below August highs as investors take a breather ahead of tomorrow’s RBA monetary policy decision. Although analysts are expecting the RBA to keep its monetary policy unchanged from last month due to economic uncertainty in the U.S., it is likely the RBA’s policy statement will become more optimistic due to the latest round of data from Australia. In fact, we don’t think it’s outside the realm of possibilities that the RBA surprises by hiking its benchmark rate by another 25bp. Otherwise, the RBA could make it clear that another rate hike is coming next month baring a considerable fundamental slowdown in the West. Should the RBA all but guarantee tighter monetary policy in the near-future then investors could price in another rate hike and send the Aussie beyond August highs. Either way, it’s difficult to be negative on the Aussie considering the data sets we received last week.... | |
 | Gold Hangs Around $1250/ozWritten by:Matthew Myers |
Gold is hanging around its highly psychological $1250/oz level in a quiet trading session as Americans celebrate the Labor Day Holiday. However, markets should come alive tomorrow with monetary policy decisions from both the RBA and BOJ on deck. Although the BOJ is not expected to intervene in the currency markets at this point, should the central bank actually take action then this would likely benefit gold since looser liquidity normally leads investors towards gold as a hedge against inflation. Speaking of inflation, investors should keep an eye on activity in softs since markets have experienced huge rallies in agricultural commodities, particularly wheat. If the rally in ags spreads to oil inflation chatter could increase and boost gold in succession. Either way, gold’s long-term uptrend is clearly intact with a multitude of uptrend lines in play.... | |
 | USD/JPY Trends Lower as BOJ MeetsWritten by:Matthew Myers |
The USD/JPY is trending back towards August lows as the BOJ kicks off its monthly monetary policy meeting. The BOJ will announce its decision tomorrow and the USD/JPY is struggling since analysts aren’t expecting any new action from the central bank as far as currency intervention is concerned. Regardless, statements from the BOJ will carry more weight over the near-term since the USD/JPY is trading in dangerous waters. Meanwhile, the longer the USD/JPY can hold above August lows the better chance the currency pair has of establishing a more lasting bottom. Bulls will be looking for some help from global economic fundamentals since neither the BOJ nor the DPJ are getting the job done in regards to weakening the Yen in order to aid Japanese exports. If U.S. data can manage to improve from a dismal August then investors may regain confidence in the risk trade and encourage bears to divest from the Yen and head back towards risk.... | |
 | GBP/USD Struggles as Pound UnderperformsWritten by:Matthew Myers |
The Pound is underperforming again today as the EUR/GBP pops higher. Investor sentiment towards Sterling is still sour after last week’s round of PMI reports fell short of analyst expectations. The UK economy has clearly hit a bump in the road, yet it remains to be seen whether the present pullback is a sign of a more lasting downturn or merely a cool down in the midst of an upward trajectory. Considering the UK parliament is in the beginning stages of implementing aggressive austerity measures the pullbacks in PMI are disconcerting. The UK will be quiet on the data wire again tomorrow, meaning monetary policy decisions from both the BOJ and RBA should dominate the trading session. Since we’re expecting a positive tone from the RBA its likely positive sentiment from last week’s U.S. employment data will carry over into Tuesday’s trading session.... | |
 | EUR/USD Tests 8/18 HighsWritten by:Matthew Myers |
The EUR/USD is testing 8/18 highs while still eyeing 1.30 as the Forex markets experience a relatively quiet trading session due to the Labor Day holiday in the U.S. However, activity should pick up during tomorrow’s Asia trading session with BOJ and RBA monetary policy decisions on the docket. Should the RBA give a positive outlook as we suspect this could help extend the rally in the risk trade and allow the EUR/USD to test its highly psychological 1.30 level. The data wire will be pretty quiet elsewhere, meaning optimism from Friday’s non-farm payrolls figure could spill into Tuesday’s trading session. However, we do notice some discouraging signs in that the Cable is not participating fully with the risk rally and investors are buying up the Yen again today. Hence, a sense of risk-aversion still lingers in the air and we suggest investors tread forward with cautious optimism.... | |
| S&P Futures Hit 1100 in Confirmation RallyWritten by:Matthew Myers |
The S&P futures gave bulls the confirmation rally they were looking for on Friday as the futures reached their highly psychological 1100 level in reaction to stronger than expected employment data. Non-farm payrolls came in at -54k vs. -101k eyed amid a considerable improvement in private sector hiring. Abnormally high unemployment has been the sore thumb in America’s recovery from crisis lows and any signs of improvement bode well for U.S. equities. Meanwhile, Obama plans to announce a new round of measures aimed at boosting the economy ahead of November elections as we head into Labor Day weekend. That being said, equities could be heavily influenced by psychological forces after investors return for the 3-day weekend. Additionally, investors should take note of the new M&A activity taking place after Burger King announced it will be purchased by a private equity firm.... | |
| AUD/USD Challenges August HighsWritten by:Matthew Myers |
The Aussie outperformed again on Friday as the risk trade rallied across the board in reaction to stronger than expected U.S. employment data. The Aussie was already in a favorable position after Australia’s GDP data topped analyst forecasts. Should the U.S. employment market continue to improve then this would clearly give the RBA a green light to raise its benchmark rate again in order to contain inflation pressures. Speaking of inflation, soft commodities are soaring higher as global leaders clamor about the potential for food shortages. If agricultural commodities test 2008 highs then the RBA would be under more pressure to tighten liquidity, particularly since Australia’s economy should benefit from higher wheat prices. The RBA has often cited economic headwinds blowing from the West as reasoning behind hesitating to pull the trigger on another rate hike. Hence, if U.S.... | |
| Gold Battles $1250/ozWritten by:Matthew Myers |
Gold is continuing to battle its psychological $1250/oz level after the precious metal took a bit of a hit on Friday as the risk trade rallied across the board. Stronger than expected U.S. employment data sent investors back into risk, denting gold due to its status as a safe-haven asset. However, the precious metal held up relatively well despite risk flows due to inflationary signals in soft commodities. Wheat and corn barreled higher last week as talks of food shortages reemerged for the first time since the global financial crisis struck. Should agricultural commodities continue to climb toward uncomfortable levels this could benefit gold due to the precious metal’s use as a hedge against inflation. Meanwhile, despite last week’s positive turn in investors sentiment headwinds remain in the global economy and we’ll have to see whether the risk trade can make August lows a lasting bottom.... | |
| USD/JPY Looks to Defend August LowsWritten by:Matthew Myers |
The USD/JPY experienced another volatile trading session on Friday as investors reacted to better than expected U.S. non-farm payrolls data. While investors initially bought up the USD/JPY and sent the currency pair climbing above its psychological 85 level, bears countered and held the currency down around weekly lows. However, the USD/JPY has managed to avoid a retest of August lows, meaning the USD/JPY may be building a new, more sustainable bottom. The resilience of August lows will depend highly upon economic performance in the U.S. since the BOJ has thus far refused to give into those requested currency intervention. If U.S. fundamentals can manage to stabilize and improve then investors would have more incentive to buy the USD/JPY as the risk trade regains its luster. Looking ahead, Monday should be a relatively quiet trading session since American investors will be celebrating the Labor Day holiday.... | |
| GBP/USD Battles Back Towards 1.55Written by:Matthew Myers |
The Cable battled back towards its psychological 1.55 level despite a weaker than expected UK services PMI release. The negative services figure completes a disappointing cycle of PMI data as the UK underperforms. Relative weakness in the UK has held down the Cable despite last week’s impressive rally in the risk trade. However, positive developments in the risk trade allowed the Cable to stabilize and build off of August lows. That being said, if the risk trade can continue its ascent next week then it is likely August lows will hold for an extended period of time. Meanwhile, Monday will be a quiet trading session as Americans celebrate the Labor Day holiday. Hence, positive sentiment generated from Friday’s better than expected U.S. non-farm payrolls figure will probably carry over.... | |
| EUR/USD Eyes 1.30Written by:Matthew Myers |
The EUR/USD closed the trading week on a positive note and the currency pair is now eyeing its psychological 1.30 level as markets head into a relatively quiet week data-wise. The risk trade rallied across the board on Monday after U.S. headline employment data came in stronger than expected. Non-farm payrolls declined by -54k vs. -101k expected, fueling a continuation of the recent risk rally. Friday’s follow-through was encouraging and investors are suddenly becoming more comfortable with the risk trade. U.S. unemployment has been the main drag on bulls and signs of improvement were warmly received by investors. Meanwhile, the data wire will be relatively quiet around the globe on Monday, allowing investors to build on topside momentum originating from August lows. However, investors should still proceed with a slight air of caution since these markets are prone to sudden shifts in sentiment, as we’ve seen this last week.... | |
| S&P Futures Calm Following SurgeWritten by:Matthew Myers |
The S&P futures surged higher yesterday, posting a remarkable defense of our previously highlighted key long-term uptrend line and the psychological 1050 level. Buying in the4 S&P futures returned with a vengeance after U.S. manufacturing PMI data came in at 56.3, topping analyst expectations of 53.2. Considering investors have only been receiving negative U.S. data recently, the encouraging PMI reading gave bulls ammo to take advantage of oversold conditions. Wednesday’s impressive rally has saved the S&P’s long-term uptrend for the time being after flirting with the concept of entering a more lasting contraction. The most encouraging part of yesterday’s manufacturing PMI reading is that the reading had been on a steady downtrend. The reversal sets up the possibility of only a large step down in the U.S. economy and not a double dip. Analysts flooded the wires with estimates ranging from 25-33% chance of a double dip, meaning odds are the U.S.... | |
| AUD/USD Blows Past .90Written by:Matthew Myers |
The Aussie logged huge gains yesterday and blew right past its highly psychological .90 level after Australia’s GDP topped analyst forecasts by 3 basis points and the currency pair benefitted from a rally in the risk trade as a whole. Yesterday’s positive GDP release came after encouraging housing and consumption data, indicating Australia’s economy is on solid footing despite recent headwinds from the U.S. Additionally, China’s manufacturing PMI improved and it appears the slowdown in China may just be a step back and not a double dip. The tide of good fundamentals has reaffirmed confidence in the Aussie and is leading analysts to believe that the RBA will raise its benchmark rate once again before year’s end. Meanwhile, the Aussie is trading well above long-term uptrend lines while the currency pair eyes August highs. However, present strength in the Aussie could be capped by upcoming U.S. data. The U.S.... | |
| Gold Taps $1250/ozWritten by:Matthew Myers |
Gold is testing its highly psychological $1250/oz mark while staring down previous 2010 highs as the precious metal continues its ascent higher despite yesterday’s rally in the risk trade. Gold did take a small step back yesterday as U.S. equities soared and investors found more interest in risk. However, intraday losses were negligible and the precious metal’s long-term uptrend is clearly intact with investor uncertainty still at a heightened level. That being said, gold could have enough topside momentum to leave behind $1250/oz over the near-term with key news and data on the way. The ECB will make its monthly monetary policy decision shortly followed by U.S. pending home sales. The U.S. will highlight the trading week with its highly anticipated headline employment data. The ECB will likely stay loose and reiterate a dovish monetary policy for the foreseeable future as the central bank combats headwinds from the U.S.... | |
| USD/JPY Fluctuates Above August LowsWritten by:Matthew Myers |
The USD/JPY is fluctuating just above August lows as the currency pair flirts with the idea of taking yet another step lower. That being said, it will be very important for the USD/JPY to consolidate above August lows and establish a more lasting bottom. Otherwise, the currency pair may continue drifting into troubling historical level. The USD/JPY did receive some good news yesterday after America’s manufacturing PMI topped analyst estimates. The release resulted in a huge rally in U.S. equities and many risk assets participated. In fact, it is likely this encouraging PMI release which prevented the USD/JPY from deteriorating below August levels. However, the USD/JPY’s footing is still on weak ground, leaving potential stability up to news and data from the EU and U.S. Investors are presently awaiting the conclusion of the ECB’s monthly monetary policy meeting followed by U.S. pending home sales.... | |
| GBP/USD Underperforms in the Wake of Weak DataWritten by:Matthew Myers |
The Cable is underperforming in the midst of a rally in the rest of the risk trade. The Pound is being punished in reaction to comparatively weak UK fundamentals. Weaker than expected manufacturing and construction PMI’s along with a discouraging decline in home prices has wiped away the optimism generated from last week’s positive UK GDP data. However, despite the recent wave of negative UK data the Cable is still holding above August lows as investor uncertainty subsides in the wake of better than expected manufacturing PMI data from both the U.S. and UK. The U.S. economy was in dire need of some good economic news and bulls got what they were waiting for yesterday, driving the S&P futures higher by nearly 3% after manufacturing PMI printed at 56.3 vs. 53.2 expected. However, despite the positive turn substantial downward pressure remains as uncertainty increases regarding the sustainability of the global economic recovery.... | |
| EUR/USD Settles Ahead of ECB MeetingWritten by:Matthew Myers |
The EUR/USD is settling around 1.28 following yesterday’s encouraging rally in the risk trade as investors await the ECB’s monetary policy decision. Analysts are expecting the ECB to stay dovish considering the headwinds blowing back from the U.S. Additionally, the ECB will likely need to keep monetary policy loose for the foreseeable future in order to counter the contractionary impacts from austerity measures. While expectations of such a dovish stance would normally weigh on a currency, the Euro is outperforming as investor uncertainty cools. Solid manufacturing PMIs from both the U.S. and China along with a positive wave of data from Australia have allowed the risk trade to stabilize and rally across the board. Meanwhile, the EUR/USD’s August lows appear to be firming as the currency pair targets medium –term uptrend lines which are presently hanging around the highly psychological 1.30 level. That being said, 1.... | |
| S&P Futures Test Key Long-Term Uptrend LineWritten by:Matthew Myers |
The S&P futures were subject hefty selling pressure today and are still trending lower at the moment as investors sent the S&P back below its psychological 1050 level. The S&P’s negative performance on Monday came without noteworthy data and news, meaning investor sentiment has clearly soured. Monday’s losses negate Friday’s gains and are setting up equities for monthly losses as August comes to a close. This is clearly not the performance bulls were looking for as key economic releases approach, beginning with today’s CB consumer confidence figure. Investors are looking for a slight increase from 50.4 to 50.7. Should the CB hit 51 then the S&P futures may be able to pare losses and hold around 1050 ahead of Wednesday’s prelim non-farm payrolls release.... | |
| AUD/USD Buoyed By Positive DataWritten by:Matthew Myers |
The Aussie is trying to weather investor uncertainty and the currency pair received some fundamental support today as building approvals and retail sales topped analyst expectations. Additionally, the current account deficit came in lighter than anticipated, signaling a pickup in export demand. Hence, it seems the RBA has backing to stay neutral and even slightly cautious despite a slowdown in the U.S. That being said, the RBA will get a full picture tomorrow with Australia’s GDP on tap. Investors are expecting growth of 0.9%. Should GDP top 1% then the Aussie would receive additional support even if the risk trade buckles. In addition to Australia’s GDP investors will also be paying close attention to China’s manufacturing PMI figure. Since Australia’s economic performance is highly reliant on Chinese demand for natural resources, if the manufacturing PMI number contracts then the Aussie could be subject to selling pressure.... | |
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