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FOREX, COMMODITIES, STOCKS 2/3: The Two Minute Brief


Stocks: Prior Day: Asia, mixed, Europe up, USA up, Today: Asia up, Europe up

- FX: bias to risk currencies [JPY, USD, CHF in order of safety appeal] vs. risk currencies [AUD, NZD, CAD, EUR, GBP in order of risk appetite appeal], in early Tuesday trade, as risk assets appear to begin their oversold reaction bounce higher, as the S&P 500 has pulled away from its lower Bollinger Band

- Main event: WED: AUD- Trade Balance, GBP- Services PMI EUR- Retail Sales, USD-ADP Non-Farm Payrolls Change ISM Non-Mfg PMI, NZD- Unemployment Change q/q, Unemployment Rate

- Big Theme: Will leading indicators for NFP feed the oversold bounce or kill it? SEE SPECIAL REPORTS: Friday US Jobs Reports: Explanation, Impact, How To Profit, and Must Watch Market Movers For Wednesday–Friday: Oversold Bounce Vs. NFP AT FOR DETAILS


US: Tuesday: While news failed to move stocks, they continued their oversold bounce higher to close above 1100, S&P futures down slightly in early Wednesday trade to about 1097. Typically when the S&P 500 begins to rise above its lower Bollinger Band as it did Monday, it tends to rise to at least mid-way to its upper Bollinger Band or reach it, suggesting that the current move could go to 1114-1140. Implication: risk assets likely to move up in the coming days, as the S&P 500 remains our barometer for risk appetite – Barring bad NFP leading indicator data.

Asia: Asian shares up Wednesday with energy and resources stocks leading the way, as demand for riskier assets increased after Wall Street rallied as upbeat U.S. earnings and economic data provided the excuse for the oversold bounce we've been predicting.

European Stock Outlook: Futures point to higher opening following Asia and the US, But in early Wednesday trade European shares turned negative in early trade on Wednesday, as weaker than expected results from drugmaker Roche and home appliance producer Electrolux weighed on shares, offsetting gains in miners.

Commodities Outlook: Up as risk assets continue their long awaited oversold bounce, albeit on much lower than average volume, which casts doubt on the sustainability of the move, though we've seen a lot of low volume rallies lately. Whether the rally endures will depend greatly on Friday's US jobs reports and leading indicators leading up to it over the next 2 days.

Crude Oil Daily Outlook: Continuing higher following overall risk asset rally led by S&P 500 oversold bounce, futures up almost 4% Tuesday, following a 2% rise Monday, continuing to rise into early Wednesday trade, as oil often exaggerates moves in stocks.

Gold Daily Outlook: Continuing higher following overall risk asset rally led by S&P 500 oversold bounce, futures up 3.7 % since the week began, still rising in early Wednesday trade, aided by a weakening US Dollar, breaking through resistance of its 50 day SMA.

FOREX Daily Outlook: Risk appetite continues, sending risk currencies higher vs. safe-havens as they follow the oversold bounce in the S&P.

US Dollar Daily Outlook:Lower vs. all majors including the Japanese Yen despite positive US data and earnings as risk appetite overrides them and they are swept aside by the oversold bounce in risk assets.

Euro Daily Outlook: Mixed performance over yesterday and early today: Up vs. the US Dollar, Swiss Franc down vs. the British Pound, Japanese Yen, Australian Dollar, clearly not reacting solely relative to risk ranking. Nor were there major news items. See Timing the Reversal of the US Dollar Rally, Euro Decline for tips on playing the current EUR/USD rally. EZ PMI beats forecasts

Yen Daily Outlook: Up vs. the US Dollar, Euro, down vs. the Aussie, unchanged vs. the Brit Pound yesterday and into today.

British Pound Daily Outlook: Little changed vs. the Yen, down vs. the Australian Dollar, up vs. the US Dollar and Euro yesterday and into today as of this writing early Wednesday GMT. Manufacturing PMI was better than expected Monday, boosting the pound on expectations that there will be no further QE announced Thursday.

Australian Dollar Daily Outlook: Generally moving up vs. lower yielders with the risk appetite oversold bounce, but down vs. the British Pound and Euro as the oversold Euro especially benefits from the weakening US Dollar.

New Zealand Dollar Daily Outlook: Following the Aussie, generally up vs. lower yielders on the risk appetite rally. Poor labor cost data Monday was ignored in the risk appetite rally, the same fate is likely for Wednesday's employment data if risk appetite is still on by late Wednesday when these figures come out, as the Kiwi's relatively high yield, link to rising commodities, benefits it.

Canadian Dollar Daily Outlook: Continues to gain vs. the US dollar and other safe havens as its link to rising commodities helps.

Swiss Franc Daily Outlook: Vs. the Euro down Tuesday but more than regaining those losses in early Wednesday trade, continuing its gains since the beginning of the week vs. the US Dollar.

CONCLUSIONS & Big Picture: Watch the S&P 500 and EURUSD to gauge risk appetite and USD strength. As noted yesterday: Barring major surprises, risk sentiment likely to move with the interplay between the ongoing risk asset rally and the various reports that serve as leading indicators for the Friday US jobs report. We got some positive Manufacturing PMI and that was enough to get at least a reaction bounce on low volume on the S&P 500. We wait to see if data this week connected to Friday's US jobs reports confirms this optimism and fuels further rally in risk assets.

Daily Trade Recommendations: None- No new positions until interplay between risk asset bounce and US jobs leading indicators clarifies. The rally could sweep it all aside, but a nasty surprise could kill this largely technically driven bounce