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Ilian Yotov is a longtime FX Strategist, known among industry peers as the creator of The Quarters Theory, a revolutionary methodology applied to the price behavior of currency exchange rates. His FX market analysis, outlook and forecasts are sought by popular financial publications worldwide... More
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  • Top 10 Forex Events Outlook: Sept. 30 - Oct. 4

    Sept. 29, 2013 (Allthingsforex.com) - The direction of the European Central Bank's monetary policy and the state of the U.S. labor market will be the main themes of the week ahead as traders determine the odds of a taper announcement at the Fed's October 29-30 meeting.

    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 Tankan Index, a Bank of Japan quarterly survey of large and small businesses considered as the main indicator of economic conditions in Japan, Mon., Sept. 30, 7:50 pm, ET.

    Since last December, the Tankan survey has been one of the reports representing gradual improvement in economic conditions by moving from negative into positive territory. The index is forecast to continue this trend with a larger expansion and a reading of 7 in Q2 2013 compared with 4 in the previous quarter. The report could keep the JPY well bid on reduced chances for additional easing by the Bank of Japan.

    2. AUD- Reserve Bank of Australia Interest Rate Announcement, Tues., Oct. 1, 12:30 am, ET.

    Even though there is still room for rate cuts, if needed in the future, the Reserve Bank of Australia already reduced the benchmark rate by 25 bps in August and will not be in a rush to cut rates again in October and possibly for the rest of the year. The Aussie dollar has fallen significantly in recent months and could stay under pressure on risk aversion or if the central bank decides to keep the door open to further monetary policy easing.

    3. EUR- Euro-zone Unemployment Rate, the main measure of labor market conditions, Tues., Oct. 1, 5:00 am, ET.

    No end in sight is expected for the euro-zone economy's record-high unemployment with forecasts pointing to a reading of 12.1% in September, same as the previous month. The report could serve as a reminder that although the recessionary period has come to an end, unemployment is still a big hurdle for the 17-nation economy.

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

    Manufacturing activity in the U.S. has regained traction after the index unexpectedly dropped in contraction territory with a reading of 49.0 in May, but we could see a small monthly pullback to 55.3 in September from 55.7 in August.

    5. EUR- European Central Bank Interest Rate Announcement, Wed., Oct. 2, 7:45 am, ET.

    Although activity in the euro-area has been picking up, ending the prolonged recession and the chronic contraction in euro-zone's manufacturing and services sectors, the 17-nation economy is still struggling with record high unemployment. The European Central Bank will not tighten monetary policy anytime soon in this environment and will probably echo the message that policy will remain accommodative "for the foreseeable future". The USD should be able to regain its strength against the EUR if the labor market data improves and the Fed gets ready to take the first step towards monetary policy tightening while the European Central Bank remains stuck in an easing mode.

    6. USD- U.S. ADP Employment Report, a measure of job creation in the private sector of the U.S. economy, Wed., Oct. 2, 8:15 am, ET.

    The anticipated small increase to 177K in September from 176K in August might fall short of instilling confidence in the ability of the private sector to create enough jobs to persuade the Fed that it's time to start tapering of monthly asset purchases in October.

    7. USD- U.S. Jobless Claims, an important gauge of labor market conditions measuring first-time claims for unemployment benefits, Thurs., Oct. 3, 8:30 am, ET.

    Jobless claims are forecast to stay close to their four-year lows with a reading of 315K from 305K in the week before. The trend of declining claims for unemployment benefits is a good leading indicator of future improvement in the U.S. labor market and if this is coupled with stronger jobs creation in the months ahead, the USD should benefit.

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

    The ISM services index is forecast to retreat from the August high of 58.6 with a reading of 57.2 in September.

    9. JPY- Bank of Japan Interest Rate Announcement, Fri., Oct. 4, around 12:00 am, ET.

    With the prospect of a corporate tax cut to offset the hike in the consumption tax currently off the table, come April 2014, the Bank of Japan might be asked to pick up the slack with additional easing. But for the time being, economic conditions have improved and inflationary pressures have risen, creating an environment in which the Bank of Japan wouldn't need to get more aggressive. The central bank 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 diverge in the months ahead, the U.S. dollar should be able to resume its bullish trend against the yen.

    10. USD- U.S. Non-Farm Payrolls and Employment Situation, the main indicator of U.S. economic health measuring job creation and unemployment, Fri., Oct. 4, 8:30 am, ET.

    Another disappointing nonfarm payrolls report will pretty much eliminate the odds of a Fed taper in 2013 and would contribute to what could become a miserable for the USD month of October. Weaker-than-expected readings and downward revisions for previous months have become a trend in the jobs data throughout the summer. Although we wouldn't "bet the farm on it", we could see a bit stronger job creation in September with the economy forecast to add up to 180K jobs compared with 169K in the previous month, while the unemployment rate stays at 7.3%. Should the NFP report surprise to the upside, the USD will regain its footing on expectations that there is still a chance that tapering of monthly asset purchases may be announced by the Fed at the October 29-30 meeting.

    Tags: DIA, SPY, QQQ, USD, forex, fx, fomc, fed, ecb
    Sep 30 8:35 AM | Link | Comment!
  • Top 10 Forex Events Outlook: Sept. 23-27

    Sept. 22, 2013 (Allthingsforex.com) - Following the Fed's decision to abstain from reducing the size of monthly asset purchases, in the week ahead traders will shift their focus from the U.S. dollar to the euro as the outcome of the German elections and economic data from the euro-zone offer more insights on the future policies of the leader of the union and the state of the 17-nation economy.

    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- Germany Federal Elections, Sun., Sept. 22, all day event.

    At the time of writing of this article, the latest polls pointed to a clear win for Chancellor Angela Merkel- the country's first female chancellor and only the fourth chancellor since World War II to win a third term. Ms. Merkel's Christian Democratic bloc is set to take about 42.5% of the vote and that would give her a one-seat majority in the lower house of the Bundestag, just enough to govern without trying to find a coalition partner (although a coalition to assure more significant majority would likely be formed in upcoming weeks). A third term for Chancellor Merkel should be euro-positive as German policies remain unchanged. Germany is the biggest contributor in the 496 billion euro bailout fund and the current programs of austerity in exchange for financial aid will probably continue to be the blueprint of choice for German participation in future bailouts. The euro could extend its recent rally towards the 2013 high around $1.37.

    2. EUR- Euro-zone Manufacturing and Services PMI- Purchasing Managers Index, a leading indicator of economic conditions measuring activity in the manufacturing and services sectors, Mon., Sept. 23, 4:00 am, ET.

    The chronic contraction in the euro-zone's manufacturing and services sectors finally ended a couple of months ago and both indexes are expected to continue to improve. The Manufacturing PMI is forecast to register another positive month with a reading of 51.8 in September from 51.4 in August, while the Services PMI also heads higher with a preliminary estimate of 51.1 in September from 50.7 in the previous month. Solid PMI reports should keep the EUR supported.

    3. EUR- Germany IFO Business Climate Index, a leading indicator of economic conditions measuring the outlook of businesses, Tues., Sept. 24, 4:00 am, ET.

    This could be yet another report that might give the euro a boost next week. The business outlook in the euro-zone's largest economy is forecast to be more optimistic with the Ifo index forecast to rise to 108.4 in September from 107.5 in August.

    4. USD- U.S. Consumer Confidence, a measure of consumers' outlook on the economy, Tues., Sept. 24, 10:00 am, ET.

    In contrast to the euro-zone data, the outlook of U.S. consumers is expected to deteriorate with the consumer confidence index forecast to decline to 79.9 in August from 81.5 in the previous month.

    5. USD- U.S. New Home Sales, an important gauge of housing market conditions measuring sales of newly-constructed homes, Wed., Sept. 25, 10:00 am, ET.

    Mimicking the jump in existing home sales, new home purchases in the U.S. are also forecast to increase to 422K in August from 394K in July.

    6. GBP- U.K. GDP- Gross Domestic Product, the main measure of economic activity and growth, Thurs., Sept. 26, 4:30 am, ET.

    In the first quarter of the year, the U.K. economy managed to avoid an unprecedented triple-dip recession and expanded by 0.3% q/q. The economy grew at an even faster pace by 0.7% q/q in the second quarter and this number is expected to be confirmed as the final Q2 2013 reading. The report could serve as a reminder that the U.K. recovery is on the right track and could keep the GBP rally intact.

    7. USD- U.S. GDP- Gross Domestic Product, the main measure of economic activity and growth in the world's largest economy, Thurs., Sept. 26, 8:30 am, ET.

    There might be another upward revision on the horizon with the final Q2 GDP reading forecast to show the economy growing faster by 2.7% q/a in the second quarter, compared with the previous estimate of 2.5% q/a. The USD could benefit from accelerating U.S. economic growth which could raise the odds that, despite of the decision to sit on the sidelines in September, the Fed might announce the tapering of asset purchases before the end of the year.

    8. USD- U.S. Pending Home Sales, a leading indicator of housing market activity measuring pending home sale contracts, Thurs., Sept. 26, 10:00 am, ET.

    Pending home sales in the United States are expected to register a smaller decline of 0.9% m/m in August, compared with the unexpected 1.3% m/m drop in July as a result of higher mortgage rates.

    9. JPY- Japan CPI- Consumer Price Index, the main measure of inflation preferred by the Bank of Japan, Thurs., Sept. 26, 7:30 pm, ET.

    Inflationary pressures in Japan have been on the rise in recent months and could stay that way with the National core inflation gauge forecast to remain at 0.7% y/y in August, same as the reading in July. With the index exiting deflation territory and heading towards the Bank of Japan's 2% inflation target, the report could reduce expectations that the Japanese central bank will need to step up its QE campaign, which could mean less pressure on the yen.

    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., Sept. 27, 9:55 am, ET.

    After the disappointing drop in the preliminary estimate, the U.S. consumer sentiment index is forecast to be revised slightly higher to 78.2 in September, but still down from 82.1 in the previous month. The USD will continue to feel the pressure if the U.S. economic data weakens and eliminates the chance of a Fed taper in 2013.

    Tags: DIA, SPY, QQQ, USD, forex, fx, ecb, fed, fomc
    Sep 22 5:11 PM | Link | Comment!
  • Top 10 Forex Events Outlook: Sept. 2-6

    Sept. 1, 2013 (Allthingsforex.com) - Although shortened by the Labor Day holiday, the week ahead promises to deliver a busy start to the month of September as traders watch the monetary policy decisions by five major central banks and dissect the results of the U.S. Non-Farm Payrolls report to gauge the odds of a taper announcement at the Fed's upcoming September 17-18 meeting.

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

    After reducing the benchmark rate by 25 bps last month, the Reserve Bank of Australia will not be in a hurry to cut rates again in September. But this doesn't mean that the central bank is completely done with the rate cuts going forward, especially if the "two-speed" Australian economy continues to underperform because of slowing demand from China and other big trading partners. If this is the case in the months ahead, the Reserve Bank of Australia could be forced to announce another 25 bps rate cut by the end of the year. The Aussie dollar has fallen significantly in recent months and could stay under pressure if the central bank makes it clear that policy makers are keeping the door open to further monetary policy easing.

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

    Manufacturing activity in the U.S. has regained traction after the index unexpectedly dropped in contraction territory with a reading of 49.0 in May, but we could see a small pullback to 54.2 in August from 55.4 in July.

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

    In the second quarter of the year, the euro-zone economy finally ended the six quarters long recession. The revised estimate is expected to confirm that the economy returned to growth and expanded by 0.3% q/q in Q2 after contracting by 0.2% q/q in the first quarter. The end of the recessionary period and the expansion of the manufacturing and services sectors have managed to instill optimism that the economy might be turning a corner. The EUR could continue to benefit from such expectations until the Fed begins to reduce the size of its monthly asset purchases.

    4. CAD- Bank of Canada Interest Rate Announcement, Wed., Sept. 4, 10:00 am, ET.

    The Bank of Canada will not be an exception from all other major central banks that are not in a rush to call the end of the easy monetary policy cycle. Policy makers will be likely to leave the benchmark rate at the current 1.0% level. Compared with the rest of the major central banks, the Bank of Canada and the Reserve Bank of New Zealand still remain as the most likely candidates to hike rates. However, such decisions would probably be pushed further into 2014, maybe even 2015.

    5. JPY- Bank of Japan Interest Rate Announcement, Thurs., Sept. 5, around 12:00 am, ET.

    Economic conditions have improved and inflationary pressures have risen in the last couple of months, creating an environment in which the Bank of Japan wouldn't need to get more aggressive for the time being. However, the central bank 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 diverge in the months ahead, the U.S. dollar should be able to resume its bullish trend against the yen.

    6. GBP- Bank of England Interest Rate Announcement, Thurs., Sept. 5, 7:00 am, ET.

    With the U.K. economy and its largest trading partner the euro-zone improving, the Bank of England has no urgency to ease monetary policy further and will maintain the benchmark rate and the size of the Asset Purchase Program unchanged in September and maybe into the final quarter of the year. The bank's forward guidance will keep the pound's future direction closely linked to the results of upcoming economic data, with the GBP strengthening on good reports and facing weakness if the data disappoints.

    7. EUR- European Central Bank Interest Rate Announcement, Thurs., Sept. 5, 7:45 am, ET.

    Activity in the euro-area has been picking up, ending the chronic contraction in euro-zone's manufacturing and services sectors. But the 17-nation economy is still struggling with record high unemployment and such economic backdrop will not be supportive of the European Central Bank tightening monetary policy anytime soon. The USD should be able to regain its strength against the EUR as the Fed gets ready to take the first step towards monetary policy tightening while the European Central Bank remains stuck in an easing mode.

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

    Following the increase to 200K in July, job creation in the U.S. private sector is forecast to slow to 180K in August. A better than expected data should set an optimistic mood going into the non-farm payrolls report on Friday and could give the USD a boost.

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

    A sequence of softer ISM reports throughout the week could continue with a retreat in the Non-Manufacturing Index to 55.2 in August compared with a reading of 56.0 in July.

    10. USD- U.S. Non-Farm Payrolls and Employment Situation, the main indicator of U.S. economic health measuring job creation and unemployment, Fri., Sept. 6, 8:30 am, ET.

    After a weaker than expected reading for July and the downward revisions for May and June, we could see stronger job creation in August with the economy forecast to add up to 180K jobs compared with 162K in the previous month, while the unemployment rate stays at 7.4%. An upbeat NFP report could trigger a U.S. dollar rally on expectations that tapering of monthly asset purchases may be announced right after the Fed's two-day meeting on September 17-18.

    Tags: USD, DIA, SPY, QQQ, forex, fx, ecb
    Sep 01 4:57 PM | Link | Comment!
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