NB: THE FOLLOWING IS AN ABRIDGED VERSION FOR FULL ANALYSIS AND CHART ILLUSTRATIONS OF RECOMMENDED TRADES GO TO http://fxmarketanalysis.wordpress.com/ AND SELECT "DAILY OUTLOOK" FOR TODAY
Stocks: Prior Day: Asia mixed, Europe, USA up, Today: Asia mixed, Europe up
- FX: bias to safety currencies [JPY, USD, CHF in order of safety appeal] vs. risk currencies [AUD, NZD, CAD, EUR, GBP in order of risk appetite appeal], US Dollar up on TIC data, chance for reduced US health care spending, Euro weakness
- Main event: FRI: GBP: Retail Sales, AUD Import Prices EUR Industrial New Orders, CAD Core Retail Sales US Earnings:GE, MCD, MON: AMGN AAPL HAL, TXN
- Big Theme: US DOLLAR RALLY ON EURO WEAKNESS, POLITICS STRUGGLES– SEE RECOMMENDATIONS BELOW FOR THE COMING DAYS
STOCKS: Giving back gains on China, Europe Concerns Override Mixed Earnings Picture
US: Threats of tighter monetary policy in China and increased bank regulation combined with a sell-the-news mentality to drop the stock market for its worst single-session percentage loss in nearly 12 weeks. As noted earlier this week, we expected to see a pullback at least to the 50 day SMA. We got that yesterday. The question now is whether bargain hunters will have enough conviction to step in again, as they did Tuesday, to buy and hold over the weekend. Or will stocks test deeper support?
Asia: TOKYO, Jan 22 (Reuters) - Japan's Nikkei average slid 2.6 percent to a three-week closing low on Friday, as a bleak profit outlook from silicon wafer maker Shin-Etsu Chemical hit tech shares, while exporters slipped as the yen strengthened on plans for new restrictions on U.S. banks..
European Stock Outlook: LONDON, Jan 22 (Reuters) - European shares edged down in early trade on Friday, extending losses to a third straight session, with banks under pressure after U.S. President Barack Obama proposed tough new regulations on the sector
|ASIA- MIXED||N225I +1.22%||HS -1.99%||SSEC +0.22%||FTSTI -1.16%||AORD -0.94%|
|EUROPE UP||FTSE -0.98%||DAX -0.99%||CAC -1.44%|
|US- UP||S&P -1.89 %||DJIA -2.01 %||NASDAQ -1.12 %|
|THIS MORNING MIXED||N225I -2.56%||HS -0.65%||SSEC -0.96%||FTSTI -1.16%||AORD -1.60%|
|UP||FTSE -0.05%||DAX -0.30%||CAC -0.32%|
Commodities Outlook: Continuing weakness in early Friday trade as Obama banking regulation and China monetary tightening pressure risk assets like commodities.
Crude Oil Outlook: Fell 2.5% from $78-76 Thursday, stabilizing in early Friday trade as commodities pull back on the above concerns.
Gold Outlook: Fell 1.9% from $1116 to1095 on above
FOREX Daily Outlook: Short term Bias to risk currencies in early Friday trade as risk assets attempt a bounce. Multiday bias remains in favor of safe-havens as stocks in Asia and Europe retreat on concerns about reduced Chinese growth and demand, and ongoing Euro-zone sovereign credit worthiness concerns, and Obama banking regulations. Longer term bias to risk FX while stocks hold their uptrends.
US Dollar Daily Outlook:Thursday: US dollar down slightly vs. the oversold euro, (which is attempting a modest bounce against most majors Thursday into Friday), and Swissie, gained on the yen, all commodity dollars. Early Friday: Pulling back modestly against all majors as Asia closes and Europe opens. Obama bank regulations theoretically hurt both the USD and risk currencies
Euro Daily Outlook: Gaining modestly vs. the USD and most others (except the Swiss Franc) as selling appears exhausted for now. PMI data yesterday was mixed at best, with services generally missing expectations across the board, but at least all did show continued expansion. No major euro news today leaves the euro to move with overall risk sentiment, likely to be driven by US earnings.
Yen Daily Outlook: Thursday fell vs. the USD, gained on the euro and riskier FX, most of those gains reversing in early Friday trade as Asia closes and Europe opens.
British Pound Daily Outlook: Down yesterday, attempting a bounce today vs. the euro and US dollar. Has shown strength this week, dropping the least vs. the US dollar on stronger employment and inflation numbers, and a record deficit that was still lower than expected. Retail sales data out today could move the pound, and improving employment suggests spending should be better too.
Australian Dollar Daily Outlook: Like all the commodity dollars reacting to the abovementioned negative news for growth and thus commodities and higher yielding currencies, down vs. the USD and safer low yielders, attempting a bounce in early Friday trade.
New Zealand Dollar Daily Outlook: Like all the commodity dollars reacting to the abovementioned negative news for growth and thus commodities and higher yielding currencies, down vs. the USD and safer low yielders, despite stronger retail sales and PMI reports, attempting a bounce in early Friday trade.
Canadian Dollar Daily Outlook: Like all the commodity dollars reacting to the abovementioned negative news for growth and thus commodities and higher yielding currencies, down vs. the USD and safer low yielders, attempting a bounce in early Friday trade. Retail sales data could move the Canadian dollar, barring major news elsewhere or a move in oil, both of which could override local news.
Swiss Franc Daily Outlook: Thursday: up vs. the USD and EUR. Friday continuing to gain vs. the US dollar as the dollar experiences a market wide modest pullback. Losing ground to the euro as it experiences a modest dead cat bounce market wide on no real data to support the move other than its being oversold.
CONCLUSIONS & Big Picture: Short Term Bias Neutral. As noted above, we got our expected pullback to the 50 day SMA, and got in on 50% higher volume. Now we wait to see how Friday plays out. If bargain hunters step in, as they often have, we could see it stabilize, and willingness to hold with the weekend ahead would be a bullish sign. If not, 1110-1080 is the likely next support to be tested. See below for specifics on the S&P 500, CRUDE, GOLD, EURUSD, NZDUSD, USDCAD, USDCHF, and GBPUSD
Big name earnings reports are the likely key influence on sentiment. For any trades we try to select only those trades with resistance/ profit targets that are 2-3 times farther away from the entry point than the stop loss, for a 2:1 or 3:1 reward/risk ratio.
SPECIFIC TRADE RECOMMENDATIONS: SEE DAILY OUTLOOK