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Cliff Wachtel
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Cliff Wachtel, CPA, is currently the Director of Market Research, New Media and Training for Caesartrade.com, a fast growing forex and CFD broker. He covers a variety of topics including global market drivers, forex, currency hedged and diversified income investing, and is currently working on a... More
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  • Coming Week February 7-11: Market Movers & Conclusions, Calendar Themes, Highlights 0 comments
    Feb 6, 2011 12:46 AM
     MARKET MOVERS

     

    For full details see: KEY MARKET DRIVERS FEB 7-11: Continued Stimulus Hopes Keeping Markets Aloft

     

     

    PRIOR WEEK

     

    The Big One: Stimulus –Fueled Upward Momentum Continues To Dominate Markets: There was plenty of bad news last week, but this overrode it and kept markets from taking profits after the prior Friday’s steep selloff.

     

    Secondary Market Drivers: Good earnings, not-so-bad monthly US jobs report, encouraging news from Germany and Australia, and a relatively successful Portuguese bond sale

     

     

    COMING WEEK

     

     

    For full details see: KEY MARKET DRIVERS FEB 7-11: Continued Stimulus Hopes Keeping Markets Aloft

     

    FOR ALL MARKETS

     

    The Big One Again: Stimulus –Fueled Upward Momentum Likely To Dominating Markets: A lighter economic calendar suggests less potential for bad news, meaning an easier time for upward momentum to keep on rolling.

     

    For Forex

    • Continued risk appetite favors the EUR and other currencies that rise with stocks and other risk assets. However the EUR has some special headwinds.
    • Last week, Trichet’s dovish (though correct)dovish remarks reduced expectations for interest rate hikes
    • The EURUSD is still overbought in the short term and vulnerable to a correction to around the 1.3300 zone from its prior week close around 1.3580. Rising US bond yields are making the USD more attractive relative to the EUR

     

     

     

    Big Themes By Region/Country: US, UK Central Bank, Advanced GDP Key

     

     

     

    Asia: Watch for additional signs of China tightening & trade balance data Aussie jobs, retail sales data,

     

    US: None

     

    Europe: Lots of German data, which alone can carry the rest of Europe no matter how dire the overall picture as Germany is expected to fund or guarantee much of the future bailouts either to states or banks holding restructured or completely repudiated sovereign debt.

     

    UK: BoE rate decision to be watched for hints on how it will balance between the need to fight inflation via raising interest rates and the need to keep rates low in order to avoid crippling the UK’s slow recovery that is already burdened with public austerity spending cuts.

     

     

     

     

    Highlights By Region In Chronological Order

     

     

    United States: No really first tier events, leaving the USD to flow with non US events as earnings season loses influence

    Monday – Dec. Consumer Credit

    Tuesday – Jan. NFIB Small Business Consumer Confidence, Feb. IBD/TIPP Economic Optimism

    Wednesday – weekly ABC Consumer Confidence – Feb 4 MBA Mortgage Applications, Bernanke testifies at House Budget Committee

    Thursday – Weekly Jobless Claims, Dec. Wholesale Inventories, Jan. Monthly Budget Statement

    Friday – Jan. Monthly Budget Statement, Dec. Trade Balance, Feb Prelim. U. of Michigan Confidence

     

    Euro-zone: Lots of important German Data, and German data carries extra weight and can turn markets optimistic about the EU even if most members are struggling

    Monday – Sentix Investor Confidence, ECB’s Weber speaks in Tallinn, ECB’s Mersch speaks at Luxembourg Event, German Dec. Factory Order

    Tuesday – German Dec. Industrial Production

    Wednesday – German Dec. Current Account, German Dec. Trade Balance

    Thursday– ECB Feb. Monthly Report, European Financial Services Conference in Brussels

    Friday – German Jan. Final CPI

     

    United Kingdom: BOE rate decision is the main event because it might yield hints about how the UK plans to balance inflation fighting vs. the needs of a struggling economy for continued low rates. Friday’s inflation data also may affect how likely rate hikes appear to be. Our take, no rate hikes coming any time soon for the same reason the Fed and ECB won’t do them – they risk hurting fragile recoveries.

    Monday – Jan. RICS House Price Balance

    Wednesday – Dec. Total Trade Balance

    Thursday – BOE Rate Decision, Dec. Industrial Production, Dec. Manufacturing Production, Jan NIESR GDP Estimate

    Friday – Jan. PPI Input & Output

     

    Japan

    Monday – Dec. preliminary coincident and leading index CI

    Tuesday – Dec. current account total, Dec. trade balance

    Wednesday – Jan. consumer confidence, Jan preliminary machine tool orders

    Thursday – Dec. machine orders, Jan. domestic CGPI

     

    Canada

    Monday – Dec. building permits

    Tuesday – Jan. housing starts

    Thursday – Dec. new housing price index

    Friday – Dec. international merchandise trade

     

    Australia & New Zealand: Aussie jobs data the next big domestic data to confirm RBA optimism and hawkishness

    Tuesday – Australia AiG performance of construction index for Jan., Jan. ANZ job advertisements, Dec. and 4Q retail sales

    Wednesday – Jan NZ card spending, Australia’s Westpac Consumer Confidence index

    Thursday – Jan employment change, unemployment rate

    Friday – NZ Jan food prices, RBA’s Stevens speaks before Parliament

    China: Tuesday – Jan. HSBC Services PMI Wednesday – Jan. Trade Balance

     

     

    Conclusions & Ramifications

     

     

    The Key Lesson From The Past Week

     

    Either stick with the uptrend or stand aside. Bears should not attempt shorting risk assets until we have both:

    • Further signs of technical weakening
    • New fundamentals to drive a sustained move lower
    Key Risk Sentiment Gauges To Monitor

     

    • The daily charts of the S&P 500, EURUSD, EURJPY
    • Key commodities: any sustained pullbacks or sudden sharp drops are a major warning
    • PIIGS bond yields: the EU crisis is likely to stay quiet as long as these are stable or falling.  Any sudden spike in yields or CDS prices is a huge red flag
    Ramifications Of the Teflon Stimulus-Driven Risk Asset Rally That Ignores Bad News & Technical Corrections

     

    The ongoing bias to risk assets and against safety assets ( like the JPY, USD, CHF and their  related AAA sovereign or corporate bonds) means:

    • Avoid short positions until there is new evidence of a sustained move down in your preferred trading time frame.
    • Anyone planning on holding a position longer than a few days should avoid shorting until we see bearish fundamentals driving markets lower and confirmation of said reversal by bearish technical indicators.
    • In particular, for my binary option traders with time horizons of longer than a given day, the higher probability trade is to stick with the upward trend in risk assets.
    • If you want to attempt to play the downside, do so with low or no leverage instruments like ETFs and careful use risk management tools like small, incremental positions, and stop losses.

     

     

     

    For a full listing of calendar events, their relative importance, previous and forecasted results, see www.forexfactory.com >> calendar tab.

     

    DISCLOSURE & DISCLAIMER: AUTHOR SHORT THE EUR FOR PERSONAL PORTFOLIO. THE ABOVE IS FOR INFORMATIONAL PURPOSES ONLY AND NOT TO BE CONSTRUED AS SPECIFIC TRADING ADVICE. RESPONSIBILITY FOR TRADE DECISIONS IS SOLELY WITH THE READER

     

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