Audio - Weekend Edition with John O'Donnell
May ended on a sweet note with all 4 major market indexes finishing up for the month. Will that continue in June? John O’Donnell joins Merlin
for a big announcement about an upcoming event where Power Trading
Radio will be broadcasting live with a ton of great speakers! John and
Merlin also discuss the importance of metals and where the trading
opportunities may lie.
if actual > forecast = good for currency (for AUD in our case)
AUD - Retail Sales = Change in the total value of sales at the retail level. It's the primary gauge of consumer spending, which accounts for the majority of overall economic activity
Australia Retail Sales Gain 0.2% In April
Retail sales in Australia added a seasonally adjusted 0.2 percent on
month in April, the Australian Bureau of Statistics said on Tuesday -
coming in at A$23.168 billion.
That missed forecasts for an increase of 0.3 percent following the 0.1 percent gain in March.
the individual components of the survey, food retailing was up 0.3
percent, along with household goods retailing (0.6 percent), cafes,
restaurants and takeaway food services (0.7 percent) and other retailing
Department store retail was relatively unchanged
(0.0 percent), while clothing, footwear and personal accessory retailing
fell 0.1 percent.
By region, retail sales in New South Wales
added 0.7 percent, followed by Victoria (0.5 percent), Queensland (0.2
percent), Tasmania (0.3 percent) and the Northern Territory (0.4
Sales in Western Australia (-0.2 percent), the
Australian Capital Territory (-0.7 percent) and South Australia (-0.1
percent) were down.
Also on Tuesday, the ABS said that Australia
saw a current account deficit of A$5.67 billion in the first quarter of
2014 - up 52 percent on quarter.
beat forecasts for a shortfall of A$7.0 billion following the
downwardly revised deficit of A$11.7 billion in Q4 (originally a deficit
of A$10.1 billion).
Exports of goods and services gained A$4.959
billion (6 percent) and imports of goods and services added A$759
million (1 percent). The primary income deficit fell A$1.811 billion (17
In seasonally adjusted, the net goods and services surplus surged A$5.315 billion (54 percent) to A$15.118 billion in Q1.
Net exports of GDP climbed 1.4 percent - beating forecasts for 0.80 and up from 0.60 in the previous three months.
net international investment liability position was A$850.4 billion, an
increase of A$11.9 billion from Q4. Australia's net foreign debt
liability fell A$3.2 billion to a net liability position of A$855.6
billion. Australia's net foreign equity shed A$15.1 billion to a net
asset position of A$5.2 billion.
if actual < forecast = good for currency (for EUR in our case)
EUR - Spanish Unemployment Change = Change in the number of unemployed people during the previous month. Although it's generally viewed as a lagging indicator, the number of
unemployed people is an important signal of overall economic health
because consumer spending is highly correlated with labor-market
if actual > forecast = good for currency (for EUR in our case)
[EUR - CPI] = Change in the price of goods and services purchased by consumers. Consumer prices account for a majority of overall inflation. Inflation
is important to currency valuation because rising prices lead the
central bank to raise interest rates out of respect for their inflation
Eurozone Inflation Slows More Than Forecast
Eurozone inflation slowed more than expected in May, raising concerns about deflationary pressures.
fell to 0.5 percent in May from 0.7 percent in April, flash estimates
published by Eurostat showed Tuesday. The rate was forecast to ease
marginally to 0.6 percent.
Inflation held below the European Central Bank's target of 'below, but close to 2 percent' for the sixteenth consecutive month.
Excluding food, alcohol and tobacco, core inflation slowed to 0.7 percent from 1 percent a month ago.
prices remained flat after declining 1.2 percent in April. Cost of
services advanced 1.1 percent, slower than the 1.6 percent increase seen
in the previous month. Food, alcohol and tobacco prices gained only 0.1
if actual > forecast = good for currency (for USD in our case)
[USD - Factory Orders] = Change in the total value of new purchase orders placed with manufacturers. It's a leading indicator of production - rising purchase orders signal
that manufacturers will increase activity as they work to fill the
U.S. Factory Orders Rise 0.7% In April, More Than Expected
New orders for U.S. manufactured goods rose by more than expected in
the month of April, according to a report released by the Commerce
Department on Tuesday.
The report said factory orders increased by 0.7 percent in April after jumping by an upwardly revised 1.5 percent in March.
had expected orders to climb by about 0.5 percent compared to the 1.1
percent increase that had been reported for the previous month.
Commerce Department said factory orders increased for the third
consecutive month, rising to their highest level since the series was
first published on a NAICS basis in 1992.
The continued growth was
partly due to an increase in orders for transportation equipment, which
rose by 1.4 percent in April after surging up by 5.2 percent in March.
the increase in orders for transportation equipment, factory orders
still rose by 0.5 percent in April compared to a 0.8 percent increase in
the previous month.
Meanwhile, the report showed that factory orders edged down by 0.1 percent in April when excluding a jump in orders for defense.
Commerce Department said orders for durable goods increased by a
revised 0.6 percent in April compared to the 0.8 percent growth that was
reported last Tuesday. Orders for non-durable goods rose by 0.7
The report also showed that shipment of manufactured
goods edged up by 0.3 percent in April, while inventories of
manufactured goods rose by 0.4 percent.
With inventories and
shipments both rising, the inventories-to-shipments ratio was unchanged
compared to the previous month at 1.30.
EURUSD: "Sell the Rumor, Buy the News" Reaction to ECB? (adapted from fxstreet article)
It seems like the only topic on forex
traders’ minds this week is Thursday’s European Central Bank
announcement. Since last month’s hint of future action from ECB
President Mario Draghi, the market has grown more and more convinced
that the ECB will not only cut its main interest rate on Thursday, but
also take nonconventional actions to try to stave off deflation. We’ll
have a full ECB preview up tomorrow, but for now we’d like to set the
scene from a sentiment and positioning perspective.
traditional dichotomy between technical and fundamental analysis, one
oft-overlooked aspect of a currency’s value is traders’ sentiment and
positioning. When traders are overly optimistic on a certain currency
pair, it often falls despite typically bullish fundamental and technical
events. Likewise, when traders become excessively pessimistic on an
instrument, it may rally regardless of the fundamental or technical
developments because there’s “no one left to sell.” The most reliable
way to see how the market is positioned is through the CFTC’s Commitment
of Traders report, which shows whether various types of traders have
bought or sold different currency pairs. A chart of the most recent COT
data (from last Tuesday) is shown below:
“Commercial traders,” shown in red
below, are typically large companies trying to hedge their currency
risk, and as a result, they are not interested in making money trading.
For this reason, the large (green) and small (blue) speculators give the
most reliable indication of how active, profit-driven traders are
positioned. Looking at the current data shows that these traders are
nearing bearish extremes on the EUR/USD heading into Thursday’s ECB
meeting: large speculators are currently net short the EUR/USD to the
tune of 17,000 futures contracts, the most bearish reading since August
2013, while small speculators are net short almost 25,000 contracts,
also near 1-year lows.
This extreme bearish positioning suggests
that many traders have already sold the EUR/USD in anticipation of bold
action by the ECB on Thursday. Paradoxically, this suggests that even
if the ECB fulfills expectations by cutting its main interest rate by a
token amount and reducing its deposit rate to negative levels, the
EUR/USD could actually bounce in a classic “sell the rumor, buy the
news” dynamic. At this point, the ECB may have to reach for its “Big
Bazooka” – Quantitative Easing – to truly elicit more weakness in the
We saw an instructive example of this phenomenon earlier
today with the release of the eurozone CPI, which printed at just 0.5%
vs. expectations of a 0.7% rise. With the ECB’s laser-like focus on
inflation of late, this weak report increases the likelihood of bold
action by the central bank. However, the EUR/USD has actually spiked 50
pips higher since the report (see chart below), suggesting that euro
shorts may be simply overextended and exhausted.
In the short
term, the pair may remain trapped within its recent range between 78.6%
daily Fibonacci retracement support at 1.3587 and
previous-support-turned-resistance at 1.3650 ahead of the ECB’s
decision. However, the EUR/USD may be primed for a bounce later this
week unless the traditionally-conservative ECB can break its mold with
truly bold action on Thursday.
[AUD - GDP] = Change in the inflation-adjusted value of all goods and services produced by the economy. It's the broadest measure of economic activity and the primary gauge of the economy's health.
Australia Q1 GDP Climbs 1.1% On Quarter
Australia's gross domestic product expanded a seasonally adjusted
1.1 percent on quarter in the first three months of 2014, the Australian
Bureau of Statistics said on Wednesday.
That beat forecasts for an increase of 0.9 percent following the 0.8 percent gain in the fourth quarter of 2013.
a yearly basis, GDP climbed 3.5 percent - also topping expectations for
a rise of 3.2 percent and up from 2.8 percent in the three months
The terms of trade decreased 1.2 percent on quarter and 3.8 percent on year.
Real gross domestic income increased 0.8 percent, while disposable income added 1.3 percent on quarter and 2.2 percent on year.
contributors to the increase in expenditure on GDP were net exports
(1.4 percentage points), final consumption expenditure (0.3 percentage
points) and private gross fixed capital formation (0.2 percentage
points). The main detractor was changes in inventories (-0.6 percentage
The main contributors to GDP were mining (up 8.6
percent), financial and insurance services (up 2.8 percent) and
construction (up 3.0 percent).
Mining contributed 0.9 percentage
points to the increase in GDP while financial and insurance services and
construction each contributed 0.2 percentage points.
the release of the data, the Australian dollar strengthened against
major currencies, trading near 0.9296 against the U.S. dollar, 95.40
against the yen, 1.0155 against the Canadian dollar, 1.4637 against the
euro and 1.1023 against the kiwi.
Also on Wednesday, Australia's
service sectors improved in May to be just barely in contraction, the
latest survey from the Australian Industry Group revealed on Wednesday.
performance of service index came in with a score of 49.9 - up sharply
from 48.6 in April but still just barely below the reading of 50 that
separates expansion from contraction in a sector.
Among the individual components of the survey, growth in the sector was confined to health and community services, finance and insurance, and personal and recreational services during May.
But wholesale trade, employment and retail trade were lower.
[EUR - Spanish Services PMI] = Level of a diffusion index based on surveyed purchasing managers in the services industry. It's positively correlated with interest rates - early in the economic
cycle an increasing supply of money leads to additional spending and
investment, and later in the cycle expanding money supply leads to
Spanish Service Sector Activity Rises At A Slower Rate In May
Spanish service sector activity continued to rise in May, though at a
slower rate, the results of a survey by Markit Economics showed
The service sector business
activity index fell to 55.7 in May from 56.5 in April. The index was
also below the consensus estimate that called for a reading of 56.1.
Nevertheless, this marked the seventh consecutive month of expansion.
Among the sub-sectors, the biggest expansion was seen at post and telecommunications and financial intermediation companies
levels rose for the second consecutive month, marking the first
instance of back-to-back rises in employment since early 2008, though at
a moderate rate. Due to weak job creation and strong growth of new
orders, backlogs of work rose for the fourth consecutive month.
New orders rose sharply in May and a general improvement in market conditions was reported.
cost inflation remained weaker than the series average. However, among
the sub-sectors, input costs at hotels and restaurants rose sharply,
diverging from the general trend.
Output prices continued to
remain low owing to competitive pressures. However, the pace of decrease
slowed for the fifth straight month and was at its weakest since August
2008 when the current sequence of decline began.
sentiment remained positive in May, changing little from the previous
month. The optimism is attributed to predictions of an ongoing economic
recovery in Spain.
Forum on trading, automated trading systems and testing trading strategies
newdigital, 2014.06.04 12:44
Gold Presses Fibonacci Wave Relationship
Triangles are consolidation patterns that allow prices to trade sideways
in an effort to alleviate overbought and oversold pressures. In the
case of gold, it has been working its way lower for the past three years
and needs to consolidate those losses, which it has been doing in the
Elliott Wave triangles are made up of five waves inside the triangle
with each wave being contained inside the previous wave. In the
idealized example above, notice how wave ‘B’ ends BEFORE the beginning
of wave ‘A’. Notice how wave ‘C’ ends BEFORE the beginning of wave ‘B’.
This continues until prices squeeze together in five waves (A-B-C-D-E)
then they eventually explode.
In the same idealized example above, it appears gold is closing in on
the end of the ‘D’ wave which should yield a bounce higher in wave ‘E’.
wave ending near $1235 per ounce. Both wave relationships are expressed
through alternating waves having a fibonacci relationship in length.
First, inside the green ‘D’ wave, you’ll see we have a blue a-b-c
sequence. Many times, the length of wave ‘c’ will have an equality or
fibonacci relationship to the length of wave ‘a’. In the case for gold,
the length of blue wave ‘c’ equals blue wave ‘a’ times 61.8% at $1235
Secondly, green wave ‘B’ and green wave ‘D’ are alternating waves. If
you take the distance of green wave ‘B’ and multiply it by 61.8% and
project it for a distance on green wave ‘D’, it yields a price target of
$1235 per ounce.
So we have two different alternating waves pointing to the same price
target. This means there will likely be a reaction higher near $1235. If
$1235 does fail, look to $1190-$1200 providing significant support.
The price target to the upside in this scenario would be $1340-$1390. So
there is enough room to the upside to position towards the long side of
[EUR - GDP] = Change in the inflation-adjusted value of all goods and services produced by the economy. There are 3 versions of GDP released about 20 days apart - Flash,
Revised, and Final. The Flash release is the earliest and thus tends to
have the most impact
Eurozone Q1 GDP Growth Confirmed At 0.2%
The euro area economy grew as initially estimated in the first quarter, second estimate from Eurostat showed Wednesday.
domestic product in the 18-nation currency bloc grew 0.2 percent
sequentially, slower than the revised 0.3 percent expansion posted in
the fourth quarter of 2013.
On a yearly basis, growth accelerated
to 0.9 percent from 0.5 percent. Eurostat confirmed the preliminary
estimates for the first quarter released on May 15.
On the expenditure side, household spending gained only 0.1 percent, while government expenditure grew 0.3 percent.
advanced 0.3 percent versus a 0.9 percent rise in the previous quarter.
The increase in exports eased sharply to 0.3 percent from 1.4 percent.
On the other hand, imports growth rose marginally to 0.8 percent from