Huge Economic Calendar Awaits

Includes: FXE, FXY, IEV
by: The LFB

The European session may not have the initial buzz to it as things get going from around 02:00 EDT, due to the fact that the economic calendar is loaded with releases that will move fair value on the dollar and that will very likely impact equity and commodity prices to some degree, via Usd values moving.

The U.K. gets things started with a look at the consumer price index read that is expected in at 1.5%, under the Bank of England 2% target rate, and down from the previous 1.8% read. Anything above or below 1.5% is very likely to send the pound higher, or lower in direct response.

The most respected of Euro-zone releases, the ZEW Economic Sentiment report, comes out of Germany at 05:00 EDT, and is looking to increase from 39.5 to 45.2. At the same time, the Euro region report is looking to print at 44.6, up from the same 39.5 previous read. Not only are markets very reactive to these releases, the analyst rarely get this expected number wrong, and as such it will be very unlikely not to see appreciation in Eur valuations at that time.

The impact of both of these releases may be muted by the fact that global equity trade is in the red, and looking to hold that way in early trade, something that by default empowers the Usd. As such we are looking for a session that maybe starts in benign form, but soon then goes on to create energy and build expectation in price movement as 04:30 EDT nears.

The global equity markets dropping in value can be hedged with a short Eur/Usd play that fills if 1.3990 is taken out going short, which is something that takes advantage of the 90% correlation between Eur and S&P Futures at this time.

A portfolio exposed to oil market movement may also need some short-sided insurance, and as such a long Usd/Cad play from 1.1150 will hedge a drop in the price of crude. Any depreciation in gold holdings are covered in a short Aud/Usd play that takes a trade if 0.8150 gets taken out as support, and finally, those portfolios exposed to interest rate differentials, or Treasury note movement can look to hedge with Usd/Chf breaking either side of 1.0800 or 1.0700.

The moves will last all week off these economic reads coming in the next few sessions, and when added to the Canadian Foreign Purchase numbers, and the U.S. PPI, Building Permits, and Housing Starts, we have a powerful argument for setting trades either side of the Usd and Jpy. The signal page will reveal that information, and we will straddle both sides of the economic calendar.

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