What if the VIX fails to move lower?

Divergence in the $VIX can mean ?

I usually don’t do much analysis in regard to the daily moves of the VIX (volatility index) when compared to the SP 500 ($SPX). Everyone seems to use it incorrectly so I stay away from the noise. But I do take notice at divergence and many of you know I love to trade counter tend for cash flow active trades or even longer swing trades off my model when I see blatant signals of a top or bottom based on diverging signals. In this case, the huge parabolic moves in the $SPX just might be walking on thin Ice up here near the 1690 levels IF the VIX does not show some sort of signs of moving towards all time lows based on the $SPX at all time highs. With all the hyped up “new market” environment and closing in on 1700 as every sell-side analyst lost in the shuffle calls for 1750 +, we just might see a total failure soon? Its almost too perfect of a scenario to go higher, exactly like AAPL at 700. Every sell-side  talking head called for 750 – 1000 in AAPL. It’s so sure to happen, it fails. This is what makes me nervous about the next leg up in the $SPX.  

So let’s examine what I’m referring to: The two charts below are the $SPX then the $VIX and notice that the $SPX is at all time highs and the relationship of the RSI to those previous highs. We can start to see the most current data is not quite confirming the move yet. but let me stress, YET. RSI can lag and give false reads in strong trends so we wont rely on this as our sole data point for comparison. And of course the potential projection to 1700 and beyond is what is being touted now.

SPX

 

Now the $VIX , in theory, should be making or near all time lows but we can see this is not happening by any stretch of the means. At least not yet. The lower  trends (blue arrows) are showing higher lows at key valleys since last March as the RSI sits at the bottom of the range and not really giving any clues to the next direction other than continued weakness in the VIX.

vix

 

So what should we do? I’m still long STT and HAL so far as this market defies logic and still not giving any real solid signs of selling off. I will look for more signs of a top or near top in the $SPX and $DJI the next few days to weeks and we will revisit the moves of the $VIX to see if this indicator can show us more signs of an impending top signal. But for now, honor all stops and its not time to roll into short aggressively . 

Nick Pirraglia

www.tradersthinktank.com

 

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TOP 10 FOREX EVENTS OUTLOOK: JUL. 15–19

Guest Post By: 
Published July 14, 2013, in Forex Outlook

Jul. 14, 2013 (Allthingsforex.com) – Two testimonies on Capitol Hill by the Fed Chairman Ben Bernanke will come to the forefront of the market’s attention in the week ahead as traders look for clarity on the future direction of the U.S. central bank’s monetary policy.

In preparation for the new trading week, here is the outlook for the Top 10 spotlight economic events that will move the markets around the globe.

1.    USD- U.S. Retail Sales, an important gauge of consumer spending measuring sales at retail establishments, Mon., Jul. 15, 8:30 am, ET.

Consumer spending in the U.S. is forecast to keep the momentum going with another month of increase by 0.7% m/m in June compared with 0.6% in the previous month.

2.    GBP- U.K. CPI- Consumer Price Index, the main measure of inflation preferred by the Bank of England, Tues., Jul. 16, 4:30 am, ET.

Inflationary pressures in the U.K. are expected to rise by 3.0% y/y in June, up from the 2.7% y/y reading in May. If economic conditions deteriorate, inflation will not be an obstacle for the Bank of England to ease monetary policy further in upcoming months, but for the time being a jump in inflation should reduce the odds of more easing and could lend some support to the GBP.

3.    EUR- Euro-zone ZEW Economic Sentiment Index, a leading indicator of economic conditions measuring the outlook of financial experts, Tues., Jul. 16, 5:00 am, ET.

The forward-looking indicator has registered a few months of improvement in economic outlook and this trend is expected to continue with the ZEW index forecast to show a reading of 40.0 in July compared with 38.5 in the previous month. A more optimistic outlook on economic conditions in the euro-area could become euro-supportive but not for too long as the market still sees the European Central Bank stuck firmly in an easing mode.

4.    USD- U.S. CPI- Consumer Price Index, the main measure of inflation in the world’s largest economy, Tues., Jul. 16, 8:30 am, ET.

The U.S. inflation gauge is forecast to inch higher to 1.6% y/y in June from 1.4% y/y in May. Although still far from the Fed’s 2.5% threshold, the USD could draw strength from rising inflationary pressures on expectations that the Fed could start to tighten monetary policy sooner rather than later.

5.    USD- U.S. Industrial Production, the main gauge of industrial activity measuring the output of factories, mines and utilities, Tues., Jul. 16, 9:15 am, ET.

Industrial production is forecast to pick up the pace with a 0.3% m/m increase in June, after staying flat in the previous month.

6.     GBP- Bank of England Meeting Minutes, a detailed report of the bank’s latest meeting containing an outlook on monetary policy and the economy, Wed., Jul. 17, 4:30 am, ET.

Bank of England sat on the sidelines at the first meeting with Mark Carney as the bank’s new Governor. The expected 7-2 majority vote against more QE will make it clear that policy makers are not in a hurry to do more easing at this point. On the other hand, the Bank of England’s leader also stated that there will be no tightening in the near future. The GBP could see pressures rising if the minutes reveal that more Monetary Policy Committee members, including the new Governor Carney, voted for an increase of the Asset Purchase Program from 375 billion to 400 billion pounds, and if the option of additional QE was once again placed on the table.

7.    USD- U.S. Housing Starts, an important gauge of housing market activity measuring new home construction, Wed., Jul. 17, 8:30 am, ET.

Housing starts for the month of June are expected to regain their upward momentum with an increase to 950K from 910K in May, while building permits reach the one million mark in June. The report could confirm that the housing market recovery is still intact, despite of the drop in mortgage applications because of higher rates.

8.    CAD- Bank of Canada Interest Rate Announcement, Wed., Jul. 17, 10:00 am, ET.

With all other major central banks not ready to call the end of the easy policy cycle, the Bank of Canada might not be too adventurous and will more than likely leave the benchmark rate at the current 1.0% level. Compared with the rest of the major central banks, the Bank of Canada still remains as the most likely candidate to tighten monetary policy. However, such decision would probably be pushed further into 2014/2015.

9.    USD- U.S. Federal Reserve Chairman Testimony, Wed. and Thurs., Jul. 17 and 18, 10:00 am, ET.

All eyes will focus on the Fed Chairman Ben Bernanke’s testimonies in front of the House Financial Services Committee and the Senate Banking Committee after last week he reassured the markets that the U.S. central bank’s policy will remain “highly accommodative for the foreseeable future”. As a result, the USD has come under pressure, but the greenback could see its positive trend continuing if the Fed Chairman signals that tapering of the monthly asset purchases is only a matter of time, despite of the Fed’s lack of urgency to end the QE program completely.

10.    GBP- U.K. Retail Sales, an important gauge of consumer spending measuring sales at retail establishments, Thurs., Jul. 18, 4:30 am, ET.

U.K. consumers may have spent less last month with retail sales forecast to register a smaller increase by 0.4% m/m in June compared with the 2.1% m/m jump in May. A weak retail sales report could increase the odds of more easing by the Bank of England and could weigh on the GBP.

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TOP 10 FOREX EVENTS OUTLOOK: JUL. 8-12

Guest Post By: 
Published July 7, 2013, in Forex Outlook

Jul. 7, 2013 (Allthingsforex.com) – Following a better than expected employment report from the world’s largest economy, in the week ahead traders will compare economic conditions on both sides of the Atlantic, as a sequence of notable economic data from the U.S., the U.K., and the euro-zone hits the newswires.

In preparation for the new trading week, here is the outlook for the Top 10 spotlight economic events that will move the markets around the globe.

1.    JPY- Japan Current Account, an important measure of foreign trade, Sun., Jul. 7, 7:50 pm, ET.

Compared with a year earlier, the current account surplus in Japan doubled in April to 750 billion yen and is expected to stay in range with 650 billion surplus in May. Further improvement in Japanese economic data could lend temporary support to the yen on reduced odds that the Bank of Japan will need to implement even more aggressive measures to weaken the currency and to stimulate the economy.

2.    EUR- Germany Industrial Production, the main gauge of industrial activity measuring the output of factories, mines and utilities, Mon., Jul. 8, 6:00 am, ET.

After rising by 1.8% m/m in May, industrial activity in the euro-zone’s largest economy is forecast to slow with a drop by 0.5% m/m in June. The report could deliver a warning sign that the industrial sector of the largest economy in the euro-zone may be losing momentum.

3.    GBP- U.K. Industrial Production, the main gauge of industrial activity measuring the output of factories, mines and utilities, Tues., Jul. 9, 4:30 am, ET.

Recent data from the U.K. has shown signs of improvement and this trend could continue with industrial activity picking up by 0.3% m/m in June, compared with 0.1% m/m in the previous month. The GBP could attract more bids if the U.K. economic data continues to boost optimism and reduces the odds of additional easing by the Bank of England.

4.    USD- U.S. FOMC Meeting Minutes, a detailed report of the Fed’s latest meeting containing an outlook on monetary policy and the economy, Wed., Jul. 10, 2:00 pm, ET.

This is the minutes of the Fed’s meeting that shook the markets as the U.S. central bank made it clear that it is considering taking the first step towards monetary policy tightening by reducing the size of its monthly asset purchases. Series of stronger than expected reports from the U.S., including last Friday’s non-farm payrolls, have raised the odds that the Fed might tighten even earlier and by a larger amount than initially estimated. The bullish USD trend could accelerate if the minutes confirm such expectations.

5.    AUD- Australia Employment and Unemployment Rate, the two main gauges of labor market conditions measuring job creation and unemployment, Wed., Jul. 10, 9:30 pm, ET.

Last month’s job report showed a smaller job creation of 1,100 new jobs in May and the Australian economy is expected to add only 300 jobs in June, while the unemployment rate inches higher to 5.6% from 5.5%. A weak employment report could raise the odds of another rate cut by the Reserve Bank of Australia and could weigh on the Australian dollar.

6.    JPY- Bank of Japan Interest Rate Announcement, Thurs., Jul. 11, around 12:00 am, ET.

With economic conditions beginning to improve, the Bank of Japan will not need to get more aggressive at this point but will be likely to reaffirm its commitment to open-ended QE until the 2% inflation target is in sight. As the monetary policies of the Fed and the Bank of Japan continue to diverge, the yen losses could extend further.

7.    EUR- Italy 10-year Bond Auction, Thurs., Jul. 11, around 2:00 am, ET.

The Italian Treasury will sell its benchmark 10-year government bonds and traders will watch the auction results closely in order to find out if investors will demand higher premiums to hold the debt of the third-largest economy in the euro area. Rising borrowing costs and weak demand could weigh on the euro.

8.    USD- U.S. Jobless Claims, an important gauge of labor market conditions measuring first-time claims for unemployment benefits, Thurs., Jul. 11, 8:30 am, ET.

The U.S. jobless claims are forecast to head even lower to 335K compared with last week’s decline to 343K. Another positive report from the U.S. labor market should keep the USD supported on expectations of a Fed tightening sooner rather than later.

9.     EUR- Euro-zone Industrial Production, the main gauge of industrial activity measuring the output of factories, mines and utilities, Fri., Jul. 12, 5:00 am, ET.

Identical to the German data, industrial activity in the Euro-zone is forecast to slow with a 0.2% m/m drop in June after rising by 0.4% m/m in the previous month. The EUR could stay under pressure if the report sparks concerns that the region’s economic recovery is fading.

10.    USD- U.S. Consumer Sentiment, the University of Michigan’s monthly survey of 500 households on their financial conditions and outlook of the economy, Fri., Jul. 12, 9:55 am, ET.

The preliminary estimate of the U.S. consumer sentiment index is forecast to show a more optimistic outlook with a reading of 85.3 in July from 84.1 in June. A weekly sequence of upbeat U.S. economic data should keep the bullish USD trend intact.

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When Cash Is a Position

The past few weeks I have had no entries on my system. This is all by design due to the trading ranges we have see the last few weeks which really began in early June.

See my post two weeks about about market ranges here. The choppy action is probably creating many stop loss triggers for traders on a daily basis. Not for me. You have to be smarter than the average trader and not get caught up in the hyped up news and commentary or events.

So cash is a position for me as the market move through the ranges during summer months. BUT that does not mean I do not trade at all. I shift to some cash flow active trades as often as I see the opportunity. Generally I’ll actively trade in an ETF which allows me to go where the money goes on a short term time frame. My day or active methods is not part of the TradersThinkTanks trading system but a totally separate criteria to stay involved in the action and make money to balance out the swing trades from the system. Short term cash flow works great when paired with a swing trading model.

Expect more f the same ranges to move around and now we may get a July rally into earnings season as the $SPX attempts to move up and over the 1637 mark which is the top resistance trend line slopping down from the may highs. We need some closing prices above this to verify the stage is set to continue higher.

Nick Pirraglia

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TOP 10 FOREX EVENTS OUTLOOK: JUL. 1-5

Guest Post By: 
Published July 1, 2013, in Forex Outlook

Jun. 30, 2013 (Allthingsforex.com) – In the holiday-shortened week ahead, traders will watch the next moves by the European Central Bank and the Bank of England, while gauging the odds of “tapering” of the Fed’s asset purchases based on the outcome of the U.S. Non-Farm Payrolls.

In preparation for the new trading week, here is the outlook for the Top 10 spotlight economic events that will move the markets around the globe.

1.    EUR- Euro-zone Manufacturing PMI, a leading indicator of economic conditions measuring activity in the manufacturing sector, Mon., Jul. 1, 4:00 am, ET.

Despite of the index rising in recent months, the chronic contraction in the euro-zone manufacturing sector is likely to continue. The final reading of the Manufacturing Purchasing Managers Index is forecast to be confirmed at 48.7 in June, still below the 50 boom/bust line.

2.    USD- U.S. ISM Manufacturing Index, a leading indicator of economic conditions measuring activity in the manufacturing sector, Mon., Jul. 1, 10:00 am, ET.

Manufacturing activity in the U.S. slowed down and the index unexpectedly dropped in contraction territory to 49.0 in May, but we could see the sector gaining traction in June with the index climbing back above 50 to 50.6 in June.

3.    AUD- Reserve Bank of Australia Interest Rate Announcement, Tues., Jul. 2, 12:30 am, ET.

There was a recent shift in leadership with the Australian Prime Minister replaced by the previous one. The data in the last few months has shown the country’s largest trading partner China slowing, liquidity concerns rising, the mining boom peaking and the “two-speed” Australian economy underperforming. All of this creates an environment in which the Reserve Bank of Australia could be forced to announce another 25 bps rate cut, maybe not at this meeting but sometime in the near future. The Aussie dollar has fallen significantly since the last meeting and could stay under pressure if the central bank makes it clear that policy makers are still willing to ease monetary policy further.

4.    EUR- Euro-zone Services PMI, a leading indicator of economic conditions measuring activity in the services sector, Wed., Jul. 3, 4:00 am, ET.

The final reading is expected to be in line with the preliminary estimate which showed activity in the euro-zone services sector inching higher to 48.6 in June from 47.2 in May. Despite of the anticipated increase, the index will be likely to remain below the 50 boom/bust line for yet another month of contraction.

5.    USD- U.S. ADP Employment Report, a measure of job creation in the private sector of the U.S. economy, Wed., Jul. 3, 8:15 am, ET.

Following the unexpected decline to 135K in May, the U.S. private sector is forecast to pick up the pace of job creation with up to 160K jobs added in June. The report could set the tone for an upbeat non-farm payrolls report on Friday.

6.    USD- U.S. ISM Non-Manufacturing Index, a leading indicator of economic conditions measuring activity in the services sector, Wed., Jul. 3, 10:00 am, ET.

Reaching its weakest level in nine months with a drop to 53.1 in April, activity in the U.S. services sector bounced higher to 53.7 in May and the index is forecast to continue to climb to 54.3 in June.

7.    EUR- Euro-zone GDP- Gross Domestic Product, the main measure of economic activity and growth, Thurs., Jul. 4, 5:00 am, ET.

In the first quarter of the year, the euro-zone economy was unable to return to growth and the final reading is forecast to confirm that the economy contracted by 0.2% q/q, prolonging the recession for a third consecutive quarter. With no end to its recessionary period and not much optimism that the economy might be turning a corner in the near future, the EUR could be pushed lower on expectations of additional easing by the European Central Bank.

8.    GBP- Bank of England Interest Rate Announcement, Thurs., Jul. 4, 7:00 am, ET.

The first meeting with the new Bank of England Governor Mark Carney in charge is not very likely to bring any sudden changes in the central bank’s monetary policy course. Recent data from the U.K. has shown signs of improvement and there is no need for policy makers to rush to increase the size of the Asset Purchase Program. With the bank expected to start offering forward guidance, future QE expansion will be dependent on the state of the U.K. economy. As long as the Bank of England remains on the QE sidelines, the pound should remain as a viable alternative to currencies whose central banks are committed to aggressive monetary policy easing.

9.    EUR- European Central Bank Interest Rate Announcement, Thurs., Jul. 4, 7:45 am, ET.

Conditions in Germany may be getting better in the last few months, but unfortunately, the 17-nation euro-zone is still struggling with record high unemployment and a prolonged recession. In this economic backdrop, the European Central Bank is not going to be willing to tighten monetary policy. Moreover, in an effort to spur economic growth, the ECB might need to consider additional unconventional monetary policy easing measures. The USD could find further strength against the EUR as the Fed gets ready to take the first step towards monetary policy tightening while the European Central Bank remains in an easing mode.

10.    USD- U.S. Non-Farm Payrolls and Employment Situation, the main indicator of U.S. economic health measuring job creation and unemployment, Fri., Jul. 5, 8:30 am, ET.

The U.S. labor market could continue its current trend with the economy adding up to 165K jobs in June compared with 175K in May, while the unemployment rate inches lower from 7.6% to 7.5%. A decent NFP report will raise the odds that the Fed could reduce the size of its monthly asset purchases sooner than expected and could give the USD a boost.

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Market Ranges: Adjust Your Trading Plan and Adapt

By Nick Pirraglia, http://www.TradersThinkTank.com

 I plotted some key points of interest on a daily chart of the SPY to show you how the markets can and will react to levels of support and resistance that forge a trading range over the next few weeks. It’s not predictable, but simply a guide to potential false breaks in both directions. Basically, I expect a lot of back filling , range trading and linear patterns to occur. A novice trader will get sucked into the daily moves on small time frames and expect breakouts to follow through as they have been in the past. But the past is over and the summer months will lead us into a range trading era up to and through earning season. I could plot many other charts in gold, silver, copper, currencies and show a ton of broken correlations or data that tries to prove a top or a trend shift but that will only get you into trouble. You need to focus on your plan and implement your plan according to the major market movers like the SP 500, $DJI and $NDX for the time being. Now is not the time for complicated trading methods. Keep it simple.

 Point being, don’t add risk to your trading these next several weeks because you are convinced the markets going to breakout and your going to catch that break or “anticipate” the break. Many very smart technicians and portfolio managers have wasted a ton of time, energy and money doing this at the wrong time.  Ignore the silly media pitches that are there to fill time slots. Use common sense and independent thinking in managing your trading techniques.

The SPY daily chart shows some potential ranges that can fill in the next few weeks. These levels can keep your trading in tune with the markets, your expectations and price moves. The key to trading ranges is to limit the risk if you are wrong. Also, to limit your expectations of a follow through and important high water mark levels in the stock or markets you’re trading. Set your targets to exact levels and adjust them according to the markets range contractions. Expect the oscillators studies that rely on momentum, volume and direction to give false reads most of the time.

SPY

Key points on the chart:

  • Parallel down trend in place with higher peaks and lower valleys. Projected by the green parallel trend lines towards SPY 155. 00.
  • Yellow circles show two very important markers. The long circle is the base and the small yellow circle shows the initial push – bar as price touched the 20 MA from the base up back in April. Note the next day the gap up that ignited a new up-trend.
  • The two parallel lateral blue lines show the price band between the two yellow circles as a potential large support zone if the markets continue to progress lower or a catalyst creates an expansion sell-off.
  • The trading “zone” is marketed by the tops and bottoms of the trends pointing down and the potential trading ranges within the trends.
  • The RSI and OBV circled in red is nothing we can really use, so expect more of the same.

Plotting ranges keeps us in check with expectations of gains and market directional moves. Trading the ranges successfully means you must know that your targets are within reach in your trading time frame and stick to those levels. Bad habits form when a trader is in the money and cancels the target limit because he/she “thinks” the markets will stay in their favor. A bad move in this type of market!

Trade to limit risk and take profits is the best method here. Even if it’s only a 1/3 of the position. I recommend at least ½ in ranges like these that I see developing.

Expect false breakouts on the first attempt in stocks and look for a clean pull-back with the intent to time entries with market stability within a range support zone.

 Nick Pirraglia

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TOP 10 FOREX EVENTS OUTLOOK: JUN. 17-21

Guest Post By: 
Published June 16, 2013, in Forex Outlook

Jun. 16, 2013 (Allthingsforex.com) – In the week ahead all eyes will focus on the Federal Open Markets Committee meeting in search for clues of the Fed’s willingness to take the first step toward monetary policy tightening.

In preparation for the new trading week, here is a list of the Top 10 spotlight economic events that will move the markets around the globe.

1.    GBP- U.K. CPI- Consumer Price Index, the main measure of inflation preferred by the Bank of England, Tues., Jun. 18, 4:30 am, ET.

Inflationary pressures in the U.K. are forecast to rise to 2.7% y/y in May from 2.4% y/y in April. A pickup in the level of inflation could make it more difficult for the Bank of England to ease monetary policy in upcoming months.

2.    EUR- Euro-zone ZEW Economic Sentiment Index, a leading indicator of economic conditions measuring the outlook of financial experts, Tues., Jun. 18, 5:00 am, ET.

The ZEW index is expected to show a month of improvement with a reading of 38.0 in June compared with 36.4 in the previous month. The euro could get a boost from a report that instills optimism that recovery is underway in the euro-area.

3.    USD- U.S. Housing Starts, a leading indicator of housing market activity measuring construction of new residential properties, Tues., Jun. 18, 8:30 am, ET.

The weekly sequence of U.S. housing market data could start on a high note with housing starts forecast to increase to 924K in May from 853K in April. Strong U.S. data should continue to raise the odds of the Fed tightening monetary policy sooner rather than later.

4.    JPY- Japan Trade Balance, an important gauge of economic activity measuring the difference between imports and exports, Tues., Jun. 18, 7:50 pm, ET.

Finally, after all these months of significant yen weakness, the trade balance data could begin to show better results with the Japanese economy forecast to register a trade surplus of 1.2 trillion yen in May compared with 362 billion yen trade deficit in April. Signs that the economy is improving could reduce expectations that the government and the Bank of Japan would step up their efforts to devalue the yen and to spur economic growth.

5.    GBP- Bank of England Meeting Minutes, a detailed report of the bank’s latest meeting containing an outlook on monetary policy and the economy, Wed., Jun. 19, 4:30 am, ET.

As expected, the Bank of England sat on the sidelines in June and the minutes will probably confirm that policy makers were not rushing to make any changes a month before the bank’s new Governor Mark Carney takes his seat. Although we could see once again that some members voted for an increase of the Asset Purchase Program from 375 billion to 400 billion pounds, the overall content of the minutes report is not likely to deliver any surprises. The GBP, which has managed to stage a nice rally in recent weeks, could remain supported if the minutes do not hint of any impending easing moves by the Bank of England.

6.    USD- U.S. FOMC Interest Rate Announcement, Wed., Jun. 19, 2:00 pm, ET.

With the recent jobs report showing the economy creating more jobs in May but revealing some weaknesses like the unemployment rate inching higher and the participation rate declining, the Fed will be in no hurry to reduce the size of its monthly asset purchases. There is no doubt that the US central bank is considering taking the first step towards monetary policy tightening, but getting the timing of the QE reduction right will be a difficult task and the current fragile economic environment may not be very supportive of such move. The FOMC will probably remind the markets that policy can be adjusted depending on economic conditions, but will be more likely to stay the course with open-ended QE until the unemployment rate falls below 6.5% or inflation exceeds 2.5%. The USD could come under pressure if the Fed does not signal “tapering” of QE.

7.    CHF- Swiss National Bank Interest Rate Announcement, Thurs., Jun. 20, 3:30 am, ET.

In recent weeks, Swiss National Bank officials have made it clear that maintaining the franc cap at 1.20 per euro is “the right policy for the foreseeable future”. The Swiss central bank will more than likely echo this statement following its meeting. We could see unwinding of CHF long positions if the Swiss National Bank hints that it may be willing to consider additional options to weaken its currency.

8.    EUR- Euro-zone Composite PMI- Purchasing Managers Index, a leading indicator of economic conditions measuring activity in the manufacturing and services sectors, Thurs., Jun. 20, 4:00 am, ET.

Although the index might inch a bit higher, no relief from the chronic contraction in the euro-zone manufacturing and services sectors is expected to be seen yet. The Composite PMI is forecast to remain below the 50 boom/bust line for another month with a reading of to 48.1 in June from 47.7 in May. The euro could stay under pressure if the report fails to instill optimism that conditions in the euro-area are improving.

9.    GBP- U.K. Retail Sales, an important gauge of consumer spending measuring sales at retail establishments, Thurs., Jun. 20, 4:30 am, ET.

The disappointing 1.3% m/m drop in April is expected to be followed by 0.8% m/m increase in retail sales in May. The GBP could stay well bid if the report does not deliver a negative surprise.

10.    USD- U.S. Existing Home Sales, the main gauge of the condition of the U.S. housing market measuring the number of closed sales of previously constructed homes, condominiums and co-ops, Thurs., Jun. 20, 10:00 am, ET.

Sales of existing homes in the U.S. are forecast to break slightly above the 5 million mark with a reading of 5.01 million in May from 4.97 million in April. Further improvement of the housing and labor markets should be U.S. dollar supportive on expectations that the Fed could start reducing the size of its monthly asset purchases earlier than expected.

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TOP 10 FOREX EVENTS OUTLOOK: JUN. 10-14

Guest Post By: 
Published June 9, 2013, in Forex Outlook

Jun. 9, 2013 (Allthingsforex.com) – The euro will be closely watched during the upcoming week which could mark a new phase in the euro-area’s debt crisis as the German Constitutional Court convenes to debate and make a decision on the legality of the country’s participation in bailout funds and sovereign debt purchases.

In preparation for the new trading week, here is the outlook for the Top 10 spotlight economic events that will move the markets around the globe.

1.    JPY- Japan GDP- Gross Domestic Product, the main measure of economic activity and growth, Sun., Jun. 9, 7:50 pm, ET.

The revised GDP estimate is expected to confirm that the world’s third-largest economy returned to growth by 0.9% q/q in the first quarter of 2013 after the flat 0% q/q reading in the final quarter of last year. The negative JPY trend is still intact, but a long overdue price correction has gotten underway in the last couple of weeks and the yen strength could continue if better-than-expected economic data from Japan reduces expectations of the need for additional easing measures by the Bank of Japan.

2.    JPY- Bank of Japan Interest Rate Announcement, Tues., Jun. 11, around 12:00 am, ET.

The Bank of Japan will be likely to reaffirm its commitment to open-ended QE until the 2% inflation target is in sight. Although the bank is not expected to step up its efforts at this point, it would be interesting to see if the central bank surprises the market with an announcement of even more aggressive easing due to the recent rapid rise of the yen. Should the Bank of Japan choose to sit on the sidelines, the yen rally could extend further.

3.    EUR- Germany Constitutional Court Ruling on Bailouts Participation, Tues., Jun. 11, and Wed., Jun. 12, all day events.

The German Constitutional Court will gather for two days of hearings on the legality of the country’s contribution to bailout funds like the European Stability Mechanism and the European Central Bank’s OMT bond-buying program. Some experts have already named it “the most important risk event” that could lead to a showdown between Germany and the ECB and could reignite the crisis in the euro-area. In recent years, the court ruled out an injunction intended to freeze the ESM, but at the same time tied politicians’ hands by capping Germany’s ESM contribution at 190 billion euro. Judges blocked the proposal of a bank license for the ESM, killed off hopes of eurobonds, debt-pooling, or fiscal union by prohibiting the Parliament from “accepting liability for decisions by other states”. Although the German high court may not announce its ruling for several weeks or may even pass the decision making to the European Court of Justice where an approval would be much more likely, uncertainty about the outcome of the event could elevate anxiety levels and could increase the pressure on the euro.

4.    GBP- U.K. Industrial Production, the main gauge of industrial activity measuring the output of factories, mines and utilities, Tues., Jun. 11, 4:30 am, ET.

Las week’s series of stronger Services, Construction and Manufacturing PMIs could be followed by a weaker overall industrial sector data with industrial production forecast to drop by 0.3% m/m in April after rising by 1.0% m/m in March.

5.    GBP- U.K. Jobless Claims and Unemployment Rate, the main gauges of labor market conditions measuring claims for unemployment benefits and rate of unemployment, Wed., Jun. 12, 4:30 am, ET.

Jobless claims in the U.K. dropped by 7,300 in March, but are forecast to register a smaller decline by about 6,800 in April, while the unemployment rate stays unchanged at 7.8%. A weaker-than-expected jobs report would increase the odds of more easing by the Bank of England when the new Governor Carney takes his seat in July and could trigger a correction of the pound’s recent gains.

6.    EUR- Euro-zone Industrial Production, the main gauge of industrial activity measuring the output of factories, mines and utilities, Wed., Jun. 12, 5:00 am, ET.

After rising by 1.0% m/m in March, industrial activity in the euro-zone is forecast to stumble with a 0.2% m/m drop in April. The EUR will not be likely to get a boost from data that fails to instill optimism that the region’s economy is on a path to recovery.

7.    NZD- Reserve Bank of New Zealand Interest Rate Announcement, Wed., Jun. 12, 5:00 pm, ET.

In a world where competitive currency devaluation has become the norm, the New Zealand central bank will not be in a hurry to start tightening monetary policy. The central bank joined “currency wars” in February with the Governor warning that intervention is being considered as an option to curb the persistent strength of the New Zealand dollar. The Kiwi has recently fallen and could weaken further if the Reserve Bank of New Zealand makes it clear that rates will not rise anytime soon.

8.    AUD- Australia Employment and Unemployment Rate, the two main gauges of labor market conditions measuring job creation and unemployment, Wed., Jun. 12, 9:30 pm, ET.

Following April’s strong jobs report which showed 50,100 new jobs created, the Australian economy is expected to lose 9,800 jobs in May, while the unemployment rate inches higher to 5.6% from 5.5%. A weak employment report could raise the odds of a rate cut by the Reserve Bank of Australia and could weigh on the Australian dollar.

9.    USD- U.S. Retail Sales, an important gauge of consumer spending measuring sales at retail establishments, Thurs., Jun. 13, 8:30 am, ET.
Consumer spending in the U.S. is expected to recover from the disappointing 0.2% m/m drop in April with an increase by 0.3% m/m in May.

10.    USD- U.S. Consumer Sentiment, the University of Michigan’s monthly survey of 500 households on their financial conditions and outlook of the economy, Fri., Jun. 14, 9:55 am, ET.

The preliminary estimate of the U.S. consumer sentiment index is forecast to show further improvement with a reading of 84.9 in June from the four-year high of 84.5 in the previous month.  Following the decent Non-Farm Payrolls report last Friday, stronger U.S. economic data in the week ahead could boost the US dollar on expectations that the Fed might begin the “tapering” of its asset purchases in upcoming months.

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TOP 10 FOREX EVENTS OUTLOOK: JUN. 3-7

Guest Post By: 
Published June 2, 2013, in Forex Outlook

Jun. 2, 2013 (Allthingsforex.com) – Three monetary policy announcements by major central banks and the U.S. Non-Farm Payrolls report will make for an intriguing week ahead as traders watch the next move by European Central Bank and gauge the odds of “tapering” of the Fed’s asset purchases based on the condition of the U.S. labor market.

In preparation for the new trading week, here is the outlook for the Top 10 spotlight economic events that will move the markets around the globe.

1.    EUR- Euro-zone Manufacturing PMI, a leading indicator of economic conditions measuring activity in the manufacturing sector, Mon., Jun. 3, 4:00 am, ET.

Although the index is expected to bounce a bit higher, the chronic contraction in the euro-zone manufacturing sector is likely to continue for another month. The revised estimate of the Manufacturing Purchasing Managers Index is forecast to show a reading of 47.8 in May, compared with 46.7 in April.

2.    USD- U.S. ISM Manufacturing Index, a leading indicator of economic conditions measuring activity in the manufacturing sector, Mon., Jun. 3, 10:00 am, ET.

Manufacturing slowed down to 50.7 in April and activity could remain subdued with an index reading of 50.5 in May.

3.    AUD- Reserve Bank of Australia Interest Rate Announcement, Tues., Jun. 4, 12:30 am, ET.

With its largest trading partner slowing, the mining boom peaking and the “two-speed” Australian economy underperforming, the Reserve Bank of Australia could be forced to announce another rate cut following the 25 bps reduction in May. The Aussie dollar has fallen significantly since the last meeting and could stay under the pressure if the central bank lowers the benchmark rate to 2.5% and warns about the negative effects of persistent currency strength.

4.    EUR- Euro-zone Services PMI, a leading indicator of economic conditions measuring activity in the services sector, Wed., Jun. 5, 4:00 am, ET.

The final reading is expected to be in line with the preliminary estimate which showed activity in the euro-zone services sector inching higher to 47.5 in May from 47.0 in April. Despite of the anticipated increase, the index will remain below the 50 boom/bust line for yet another month of contraction.

5.    EUR- Euro-zone GDP- Gross Domestic Product, the main measure of economic activity and growth, Wed., Jun. 5, 5:00 am, ET.

In the first quarter of the year, the euro-zone economy was unable to return to growth and the revised estimate is forecast to confirm that the economy contracted by 0.2% q/q, prolonging the recession for a third consecutive quarter. With no end to its recessionary period and not much optimism that the economy might be turning a corner in the near future, the EUR could be pushed lower on expectations of additional easing by the European Central Bank.

6.    USD- U.S. ADP Employment Report, a measure of job creation in the private sector of the U.S. economy, Wed., Jun. 5, 8:15 am, ET.

Following the unexpected decline to 119K in April, the U.S. private sector is forecast to pick up the pace of job creation with up to 170K jobs added in May.

7.    USD- U.S. ISM Non-Manufacturing Index, a leading indicator of economic conditions measuring activity in the services sector, Wed., Jun. 5, 10:00 am, ET.

Reaching its weakest level in nine months with a drop to 53.1 in April, activity in the U.S. services sector could bounce higher with a reading of 53.4 in May.

8.    GBP- Bank of England Interest Rate Announcement, Thurs., Jun. 6, 7:00 am, ET.

The hopes that the latest weak retail sales report automatically means more easing by the Bank of England may prove to be misguided, especially if the U.K. manufacturing and services PMI reports throughout the week signal that activity is picking up. Granted, the drop in consumer spending is not to be taken lightly, but it will take more bad data before the Monetary Policy Committee decides to increase the size of the Asset Purchase Program. For the time being, the U.K. economy has comfortably managed to avoid an unprecedented triple dip recession in Q1, the new Governor Mark Carney is to take his seat on July 1, and there is simply no urgency for the Bank of England policy makers to do anything in June, except to maintain the status quo. It will then be up to Mr. Carney to steer monetary policy depending on the state of the U.K. economy. Until the Bank of England rejoins the QE party, the pound should remain as a viable alternative to currencies whose central banks are committed to aggressive monetary policy easing.

9.    EUR- European Central Bank Interest Rate Announcement, Thurs., Jun. 6, 7:45 am, ET.

Despite of some recent signs that conditions in Germany may be improving, the 17-nation euro-zone is struggling with record high unemployment and economic growth is still nowhere to be seen. This is why it would not be a surprise to see the European Central Bank resorting to additional unconventional monetary policy easing measures that could be announced as early as the June meeting. Expectations that the ECB will continue to look for ways to spur economic growth with further easing could serve as a catalyst to push the euro further into the $1.20′s.

10.    USD- U.S. Non-Farm Payrolls and Employment Situation, the main indicator of U.S. economic health measuring job creation and unemployment, Fri., Jun. 7, 8:30 am, ET.

Job creation in the U.S. could keep the momentum going with the economy adding up to 180K jobs in May compared with 165K in April, while the unemployment rate stays unchanged at 7.5%. A strong NFP report could boost the USD on expectations that the Fed might be one step closer to reducing the size of its monthly asset purchases.

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TOP 10 FOREX EVENTS OUTLOOK: MAY 27-31

Guest Post By: 
Published May 26, 2013, in Forex Outlook

May 26, 2013 (Allthingsforex.com) – The Memorial Day holiday-shortened week ahead will keep the spotlight on the U.S. dollar and the Japanese yen as series of notable data from the United States and Japan will give traders an opportunity to assess the state of the world’s first and third-largest economies.

In preparation for the new trading week, here is a list of the Top 10 spotlight economic events that will move the markets around the globe.

1.    USD- U.S. Consumer Confidence, a measure of consumers’ outlook on the economy, Tues., May 28, 10:00 am, ET.

The outlook of U.S. consumers could continue to improve, lifting the consumer confidence index up to a reading of 69.5 in May from 68.1 in the previous month.

2.    JPY- Japan Retail Sales, an important gauge of consumer spending measuring sales at retail establishments, Tues., May 28, 7:50 pm, ET.

Consumer spending in Japan is not expected to gain traction with retail sales forecast to register an even bigger monthly drop by 0.4 m/m in April compared with the 0.3% m/m decline in March. A negative retail sales report should keep the yen under pressure on expectations of more aggressive easing by the Bank of Japan.

3.    CAD- Bank of Canada Interest Rate Announcement, Wed., May 29, 10:00 am, ET.

Of all major central banks, the Bank of Canada looks as the most likely candidate to start raising rates, but the current macro-economic backdrop is not yet supportive of such move. With the competitive currency devaluation race heating up, the decision to call the end of the accommodative monetary policy would probably be pushed further into 2014/2015. The Bank of Canada is not expected to make any changes to its existing monetary policy at the May meeting and will more than likely leave the benchmark rate at the current 1.0% level. The Canadian dollar could continue to feel the pressure if the central bank hints that it is not in a hurry to tighten policy anytime soon.

4.    CHF- Swiss GDP- Gross Domestic Product, the main measure of economic activity and growth, Thurs., May 30, 1:45 am, ET.

The Swiss economy could continue to weather the effects of the recession of its largest trading partner the euro-zone. First-quarter GDP is forecast to show the economy expanding by 0.2% q/q, same as the rate of growth in the previous quarter. If the report delivers a negative surprise similar to the unexpected drop in Q3 2012, the CHF could weaken as the market begins to price the probability of more action by the Swiss National Bank to weaken its currency.

5.    USD- U.S. GDP- Gross Domestic Product, the main measure of economic activity and growth, Thurs., May 30, 8:30 am, ET.

After avoiding contraction in the final quarter of last year, the final reading of the U.S. GDP for the first quarter of 2013 is expected to confirm that the economy gained momentum and expanded by 2.5% q/a. Provided that there is no downward revision, the USD should benefit from accelerating U.S. economic growth which would raise the odds that the Fed might take the first step toward monetary policy tightening sooner rather than later.

6.    USD- U.S. Pending Home Sales, a leading indicator of housing market activity measuring pending home sale contracts, Thurs., May 30, 10:00 am, ET.

Pending home sales in the United States are expected to increase for another month with the index forecast to rise by 1.6% m/m in April from 1.5% m/m in March.

7.     JPY- Japan CPI- Consumer Price Index, the main measure of inflation preferred by the Bank of Japan, Thurs., May 30, 7:30 pm, ET.

No light at the end of the deflation tunnel seems to be the likely outcome of this report, as the Japanese national core inflation gauge drops by -0.4% y/y in April from -0.5% y/y in March. With the index remaining into deflation territory and staying far away from the Bank of Japan’s 2% inflation target, the report could accelerate the trend of JPY weakness on expectations that the Bank of Japan might resort to even more aggressive measures to fight deflation and to spur economic growth by devaluing its currency.

8.    EUR- Euro-zone HICP- Harmonized Index of Consumer Prices, the main measure of inflation preferred by the European Central Bank, and Euro-zone Unemployment Rate, Fri., May 31, 5:00 am, ET.

Inflation in the euro-area is forecast to bounce to 1.4% y/y in May from the larger than expected drop 1.2% y/y in April. The unemployment rate in the 17-nation euro-area is forecast to increase for another month to 12.2% in April from 12.1%. With unemployment at record highs and the inflation gauge firmly below the European Central Bank’s 2% target, the EUR could be pushed lower as the odds of more easing by the European Central Bank increase.

9.    USD- U.S. Personal Income and Outlays, a measure of consumer income and spending, released along with the PCE Price Index- the Fed’s preferred gauge of inflation, Fri., May 31, 8:30 am, ET.

Consumer spending in the U.S. is forecast to rise by 0.2% m/m in April, same as the 0.2% m/m increase in March. The Fed’s preferred core PCE Index could show inflation inching slightly higher by 0.1% m/m after staying flat in the previous month, but not enough to prompt the Federal Open Markets Committee to make sudden changes to its current monetary policy.

10.     USD- U.S. Consumer Sentiment, the University of Michigan’s monthly survey of 500 households on their financial conditions and outlook of the economy, Fri., May 31, 9:55 am, ET.

The preliminary estimate showed the consumer confidence index at a four-year high in May and the final reading could lift the index even higher to 84.1 from 83.7. A weekly sequence of upbeat U.S. economic data could raise the odds of an early reduction in the size of the Fed’s asset purchases and could boost the greenback.

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