AUDUSD Fundamentals (based on dailyfx article)
The Australian Dollar consolidated against most of its major
counterparts for the week with plenty of intraday swings against its US
namesake. A status-quo RBA rate decision and dubious set of local
employment figures offered the currency few fresh cues. Additionally,
elevated volatility levels kept the bulls at bay and hindered a
recovery for the high-yielding currency.
Next week brings domestic Consumer and Business confidence data as
well as Chinese Trade Balance figures. However, the regional economic
releases may do little to shift well-anchored RBA policy bets. This in
turn may generate another lackluster response from the AUD to the
Local economic prints continue to play second fiddle to other guiding
factors including the ‘risk-off’ theme that has gained traction in
recent weeks. Investor nervousness and heightened volatility may
continue to detract from what has actually been a relatively stable
yield advantage for the Aussie. This could limit the scope for a
recovery and keep AUD/USD capped below the 90 US cent handle over the
Further, positioning amongst speculative futures traders remains
well-above last year’s extremes despite recently flipping to net short.
This suggests there is plenty of room in the AUD short trade before it
begins to look crowded.
Downside risks remain centered on the 0.8660 floor, which if broken on
a ‘daily close’ basis could open the next leg lower to the July ‘10
low at 0.8320.
NZDUSD Fundamentals (based on dailyfx article)
A quiet economic calendar on the domestic front is likely to see the New
Zealand Dollar price action fall in with broad-based risk appetite
trends in the week ahead. That probably spells volatility for the
sentiment-geared currency as heretofore complacent investors begin to
see a perfect storm of risk aversion gathering on the horizon.
The markets appeared to be taking the approaching end of the Federal
Reserve’s QE3 asset purchase program in stride until relatively
recently. While the swell in risk-geared assets has been closely linked
with the US central bank’s generous stimulus efforts, traders seemed
content enough with the post-Q1 recovery in US economic news-flow to
believe that asset prices need not necessarily unravel after liquidity
injections are wound down.
This relative calm appears to be giving way as policymakers from
seemingly all directions sound the alarm about “frothy” valuations
while global growth bets fizzle. Fears of another recession in Europe
coupled with a deep slowdown in China had been somewhat muted amid
hopes that a robust US would amount to a strong-enough countervailing
force. Such rosy notions were notably upset last week as minutes from
September’s FOMC meeting revealed concerns about contagion.
The churn continues in the week ahead. In the US, speculation about
the length of the time gap between the end of QE3 and the first
subsequent rate hike will be informed by September’s PPI data. On the
growth front, Retail Sales and Industrial Production figures as well as
the Fed’s Beige Book survey of regional economic conditions will help
inform bets on whether the US is strong enough to hold up global demand
as output elsewhere falters.
Meanwhile, a Chinese Trade Balance and CPI readings will help to gauge
just how deep of a slump is developing in the East Asian giant and
what might be done about it. The inflation gauge seems like it might
draw particular attention, with a softer print likely to be seen as
opening the door for Beijing to expand policy support, and vice versa.
On balance, the path of least resistance seems to favor risk aversion.
It seems altogether naïve to think that risky assets will happily
resume a steady advance even as the Fed withdraws its helping hand and
growth forecasts are roundly slashed. Timing such reversals is
notoriously difficult however, and it remains unclear if the week ahead
will ultimately deliver the seemingly inevitable breakdown. A bout of
volatility is almost surely in the cards however, with swings risk
appetite set to be mirrored in Kiwi performance.
GOLD (XAUUSD) Fundamentals (based on dailyfx article)
Gold prices are markedly higher this week with the precious metal
rallying more than 2.5% to trade at $1221 ahead of the New York close
on Friday. The advance marks the largest weekly rally since mid-June
and comes amid a surge in volatility with back to back triple-digit
swings in the Dow and steep losses in European equities. As fears of a
global slowdown begin to take root, recent comments from the Fed have
started to push out interest rate expectations with gold likely a
beneficiary in the near-term.
The release of the minutes from the latest FOMC policy decision on
Wednesday cited concerns among Fed officials with regards to the global
slowdown while noting that the stronger dollar may dampen inflation
and hamper exports. The dovish tone fueled demand for gold as markets
rallied on expectations that the central bank may need to delay the
normalization process. Equity gains were pared the following day
however with the SP 500 posting a 2% decline as gold stretched into
fresh monthly highs.
Looking ahead to next week, the attention shifts back to the US data
stream with retail sales, industrial production, the University of
Michigan surveys, housing numbers and the release of the Fed’s Beige
Book on tap. With the recent downturn in equities and continued
concerns regarding the recent USD rally, weaker data could further fuel
strength in gold in the near-term. With that said, we would need to
see a strong batch to cap this recent advance with the longer-term
outlook remaining weighted to the downside. Look for possible strength
in the coming weeks to likely offer more favorable short entries.
From a technical standpoint, gold continues to trade within the
confines of a descending Andrew’s pitchfork formation with the monthly
low coming in right at the rebound off pitchfork support. Prices are
now nearly 4.5% off the lows and we’ll look for a breach above $1222/24
(on a close basis) to validate a break of the monthly opening range.
Such a scenario targets resistance objectives at the June close at
$1243- this level happens to coincide with the pitchfork bisector line
late next week and may be relevant as the economic calendar picks back
up. Interim support stands rests at $1206 with a move below this
threshold shifting our focus back to the short side of the trade
targeting pitchfork support and the 2013 lows at $1178/80.
AUDIO - Weekend Edition with John O'Donnell
John O’Donnell calls in from Vancouver where he is teaching a free class on market timing. Merlin
and John talk about some of the market evolution that has happened in
Canada. Other topic include oil, precious metals, global currencies and
if actual > forecast (or actual data) = good for currency (for EUR in our case)
[EUR - German ZEW Economic Sentiment] = Level of a diffusion index based on surveyed German institutional investors and analysts. It's a leading indicator of economic health - investors and analysts are
highly informed by virtue of their job, and changes in their sentiment
can be an early signal of future economic activity.
German Oct ZEW Economic Sentiment Worse Than Forecast; Lowest Since 2012
Germany's investor confidence deteriorated for the tenth successive
month in October, turning negative for the first time since late 2012,
as the economic situation is expected to worsen further.
Indicator of Economic Sentiment dropped to -3.6 from 6.9 in September,
the Mannheim-based Centre for European Economic Research/ZEW said. It
was far worse than the zero reading forecast by economists.
The latest score was the first negative since November 2012, when the print was -15.7.
current conditions index of the survey plunged to 3.2 from 25.4 in the
previous month. Economists had forecast a reading of 15 for the month.
tensions and the weak economic development in some parts of the
Eurozone, which is falling short of previous expectations, are a source
of persistent uncertainty. These factors are tarnishing growth
expectations in Germany," ZEW President Clemens Fuest said.
figures concerning incoming orders, industrial production, and foreign
trade have likely contributed to the growing pessimism among financial
if actual > forecast (or actual data) = good for currency (for GBP in our case)
[GBP - 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
U.K. Sep Inflation Falls To 5-Year Low
U.K. inflation slowed to a five-year low in September, the Office for National Statistics showed Tuesday.
price inflation eased more-than-expected to 1.2 percent in September
from 1.5 percent in August. Economists had forecast the rate to slow
marginally to 1.4 percent.
Month-on-month, consumer prices
remained flat in September versus 0.4 percent rise in August. Prices
were expected to grow 0.2 percent.
Consumer prices excluding
energy, food, alcoholic beverages and tobacco, rose 1.5 percent from
last year, slower than the 1.9 percent increase seen in August.
report from the ONS showed that output prices declined for the third
consecutive month in September. Output prices declined 0.4 percent
year-on-year after falling 0.3 percent in August. Economists had
forecast a 0.3 percent drop.
On a monthly basis, output prices were down 0.1 percent, the same rate of fall as seen in August.
AUDIO - Monday Meltdown with Roger Best
Markets continued their downside momentum Monday, even in lieu of
positive comments that the fed will not raise rates for longer than
expected. Part of the selloff was due to fear in the market place, and
focus on Ebola. Master Instructor, Roger Best, joins Merlin
for a look at how these major news headlines spread fear and create
market moves as well as trading opportunities. Roger also shares his
thoughts on market levels and where he sees things headed.
EUR/USD Bear Flag in Focus Amid Growing Risk for Euro-Zone Recession (based on dailyfx article)