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Cliff Wachtel
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Cliff Wachtel, CPA, is currently the Chief Analyst of anyoption.com, a leading binary options broker, and Director of Market Research, New Media and Training for Caesartrade.com, a fast growing forex and CFD broker. He is also the author of The Sensible Guide To Forex, and publisher of... More
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  • August 2nd – 6th Quick Review/Preview: Stocks, Commodities, Forex 2 comments
    Jul 31, 2010 10:43 PM


     

    Likely Market Movers To Watch This Week

    For details on these see: The Coming Week: Stocks, Commodities, Forex - 3 Key Market Drivers August 2nd – 6th  

     

    1. Friday’s monthly US jobs reports and preceding events that provide clues on their results
    2. Euro-zone, UK, and China PMI reports
    3. Central bank rate statements and commentary from the Euro-zone and Australia
    4. Weak technical picture for the bellwether S&P 500 combined with more lackluster US data suggests a higher chance of downside moves this week, though within ranges of the prior 2 months
    STOCKS

     

     

    S&P 500 DAILY CHART COURTESY OF AVAFX    04JUL30

    Key technical points:

    • S&P 500 failed to sustain a drive above its 200 day SMA (purple line)
    • It recorded another major “lower-high” following the prior one of June 22nd

     

    Both points reinforce our expectation of a 3% - 5% drop to test lows of the prior months

    Weekly summary per Briefing.com

    Index Started Week Ended Week Change % Change YTD %
    DJIA 10424.62 10471.85 47.23 0.5 0.4
    Nasdaq 2269.47 2259.70 -9.77 -0.4 -0.4
    S&P 500 1102.66 1103.34 0.68 0.1 -1.1

     

    COMMODITIES

     

    Gold

    • Lower on further easing of concerns about the Euro, at least relative to the USD.  
    • Over the past years gold has tended to rise on fears about the EUR or USD losing value either from inflation (due to growth or excessive money)supply or from a breakup of the Euro-zone.
    • Neither of these are near term concerns, though both will likely recur over the coming years.
    • Break of long term uptrend line suggests more downside in coming months, $1100 zone likely strong support

     

    Energy

    • Little changed, though oil was up for July 4%, along with stocks
    • A third ‘lower high’ reinforces downtrend, another test around $70 looking likely in coming months

     

    Price Summaries – Courtesy of oilngold.com

     

    12aug01

    CURRENCIES

     

    US Dollar Weekly Outlook: Lower on earnings, data, Euro-zone stabilization, monthly jobs reports threaten more downside

     

    US Dollar Bias: Neutral-Bearish

    1. US data weak compared to EU, GDP miss plus downward revisions for 2007-09 confirm the stagnation story
    2. Fed considers more QE on worsening fundamentals, looking more dovish compared to ECB
    3. EU worry eases as PIIGS hold successful bond sales, rates stabilize, markets shrug off EU banking weakness implied by stress tests
    4. USD bias flat to slightly lower near term barring fundamental or technical breakdown
    5. For the coming months, USD’s fate depends on how US economic fundamentals compare relative to those of the Euro-zone, and risk aversion – spikes in either should send USD rallying vs. the EUR
    6. Key events:
    • Monday: July ISM manufacturing index and prices paid, June construction spending, and remarks on the economy by Fed Chairman Bernanke
    • Tuesday: June personal income and spending, personal consumption expenditure (PCE) numbers, pending home sales, and July vehicle sales. Also, 2 Dow Components, Procter & Gamble (NYSE:PG) and Pfizer (NYSE:PFE) report earnings.
    • Wednesday: weekly MBA mortgage applications, July challenger job cuts, ADP employment change, and ISM non-manufacturing
    • Thursday: Dow component Kraft (KFT) reports earnings
    • Friday: the change in non-farm payrolls (NYSE:NFP), unemployment rate, and average hourly earnings

     

    Euro Weekly Outlook: EU Bank Stress Tests, Risk Appetite Likely To Set EUR Direction

     

    Euro Bias: Neutral-Bullish

    1. Up on relatively good data vs. the USD
    2. Absence of further sovereign debt worries for now due to successful PIIGS bond sales, in some cases even at lower rates
    3. Low expectations on EU bank stress tests also help prevent EUR drop despite the weakness in EU banks implied by the low standards and lack of transparency
    4. Little chance of the ECB hiking interest rates before mid – 2011, but even that compares favorably to the  Fed’s considering further easing
    5. EUR will drop if Greece restructures its debt in the coming months
    6. A break above 1.3125 opens chance for a push to the 1.3350 - 3400 zone
    7. Unemployment rate in the 16 member euro area remained unchanged at a 12 year high
    8. Euribor rate continues advance, posting yearly highs, suggesting markets remain nervous about the EU

     

    Key events

    • Monday: final July manufacturing PMI numbers out of France, Germany, and the Euro zone
    • Tuesday: Jean-Claude Juncker is set to speak and June EZ PPI
    • Wednesday: French, German, and EZ final July Services, EZ retail sales for June
    • Thursday: German June factory orders , the ECB interest rate announcement, followed up by commentary from Jean-Claude Trichet
    • Friday: France’s June trade balance and German industrial production

     

    Japanese Yen Weekly Outlook: Rising Risk Aversion Favors Further Yen Gains

    Japanese Yen Bias: Bullish

    • Yen crosses trending lower
    • Extreme JPY longs leave it vulnerable to even minor risk rallies
    • Light event calendar leaves Yen moving with events elsewhere, especially US jobs reports and related data earlier in the week
    • BoJ intervention possible but unlikely

     

    British Pound Weekly Outlook: BoE Rate Statement Likely To Be A Non-Event

     

    British Pound Bias: Neutral-Bearish near term vs. USD after gains

    • Higher inflation threat balanced by tentative recovery means no rate change likely
    • Calendar events to provide further clarity on UK recovery

     

    Key events

    • Monday: July manufacturing PMI
    • Tuesday: July construction PMI
    • Wednesday: July services PMI
    • Thursday: BoE interest rate and asset purchase facility
    • Friday: July PPI along with June industrial and manufacturing production

     

    Swiss Franc Weekly Outlook: Benefitting from EZ stabilization, USD weakness

     

    CHF Bias: Bullish

    • Calming in EZ suggests better export prospects
    • Weakening USD with rising risk aversion also feeds CHF demand

     

    Key events:

    Monday: Retail sales

    Canadian Dollar Weekly Outlook: Rate increase prospects and fundamentals boost long term prospects

     

    Canadian Dollar Bias: Neutral-bullish

    • Markets price in another 75 bps rate increase in the coming year
    • Ties to stocks, oil could hinder CAD advance

     

    Key events

    • Thursday: building permits for June
    • Friday: July employment data, Ivey PMI

     

     Australian Dollar Weekly Outlook: Pressured by likely risk aversion, continued pause on rate increase

     

    Australian Dollar Bias: Bearish

    • Most expect RBA to hold rates steady, though hawkish comments could bolster AUD, as could continued improvement in Aussie economy
    • Much depends on China growth
    • Progress depends how whether USD moves more on its own fundamentals or risk aversion

     

    Key events

    • Monday: June retail sales and building approvals
    • Tuesday: RBA’s interest rate decision, July AiG performance of services index, June trade balance, Q2 house price index
    New Zealand Dollar Weekly Outlook: Likely lower on risk aversion, fading rate hike prospects

     

    NZD Bias: Neutral

    Lower as RBNZ lowers rate boost expectations

    Events

    Monday: July ANZ commodity price, 2Q private wages and average hourly earnings

    Wednesday:  Q2 unemployment rate and employment change

    Other Events- China

    • Sunday: unemployment rate and employment change
    • Monday: unemployment rate and employment change
    • Tuesday: July non-manufacturing PMI
    • Wednesday: July HSBC services PMI

     

    Disclosure: No Positions


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Comments (2)
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  • WiZlon
    , contributor
    Comments (16) | Send Message
     
    Hey Cliff:

     

    Great post, as ever. Your articles and posts are on my "must-read" list every day. Thanks for helping us to figure out the information.

     

    Andrew
    1 Aug 2010, 12:34 PM Reply Like
  • Cliff Wachtel
    , contributor
    Comments (1766) | Send Message
     
    Author’s reply » Much thanks for kind remarks, glad to help
    10 Aug 2010, 06:15 AM Reply Like
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