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'S DATE
Stocks: Prior day: Asia, Europe down, US up. Today: Asia, Europe up. Stocks up on good US housing data and expectations for good jobs data Friday. But beware the 3 big signs of more downside ahead as detailed in our special report: Three Powerful Bearish Signs: S+P 500 Heading To Around 830, Short Risk Assets
- US Bonds: Treasuries slightly lower, yield up slightly from 3.30 to 3.3340 as rising demand for risk assets eases bond prices.
- Commodities: Oil futures up from $72 to nearly $74, and continuing higher to around $74 in early Thursday trade GMT, gold down slightly as fears about the EUR eased somewhat.
- FX: Overall bias against safety currencies [JPY, USD, CHF in order of
safety appeal] vs. risk currencies [AUD, NZD, CAD, EUR, GB in order of risk
appetite appeal], mostly according to a currency’s place on the risk spectrum, but with the EUR and CHF getting a technical reaction bounce higher
- Main events: MON: USD: Fed Chairman Bernanke speaks, bank holiday EUR: ECP Pres. Trichet speaks, NZD Business Confidence- CAD GDP m/m TUES: CNY Mfg PMI, AUD Building Approvals M/M, Retail Sales M/M, RBA Cash Rate, Rate St. GBP Halifax HPI m/m, Mfg. PMI EUR Unemployment rate CAD BoC Rate St., USD USM Mfg. PMI WED:JPY: PM resigns AUD GDP q/q, CHF retail sales y/y, USD Pending Home Sales THUR: AUD trade balance, GBP Nationwide HPI, Services PMI EUR Retail Sales, USD ADP Non-Farm Payrolls, Unemployment Claims, Revised Nonfarm Productivity q/q, ISM Non-Mfg PMI FRI: All: G20 Meetings CAD, Employment Change, Unemployment Rate, Building Permits m/m, Ivey PMI, USD Non-Farm Employment Change, Unemployment Rate, Average Hourly Earnings m/m, SAT: G20 Meetings
Big Theme: Risk Appetite ON again? At least thus far today Risk assets are in rallying on good US housing data and hopes for a good US jobs report. However we see the bounce of the past 24 hours as temporary, given the bearish forces aligned against risk asset rallies: SEE The Week Ahead: Stocks, Commodities, Forex – 3 Key Market Drivers May 31st – June 4th, and May 31st – June 4th Forex Quick Review/Preview: Stocks, Commodities, Forex for full weekly preview of this week’s likely market movers. See also our latest special report: Three Powerful Bearish Signs: S+P 500 Heading To Around 830, Short Risk Assets in which we discuss how key risk asset charts show 3 major signs of a more prolonged bear market ahead.
US: Up – Stocks made another reaction bounce higher, but on only average volume. No major news other than a solid beat by Pending Home Sales, which gained 6% vs. the expected 4.9%.
Pending Home Sales Gain: Likely Just A Temporary Gain As Housing Credit Runs Out – See full length version for details
Thursday Key Data For Forecasting Friday US Jobs Reports– See full length version for details
US Bonds: Up on Friday - Treasuries were predictably higher as the selloff in stocks sent investors fleeing into bonds in a flight to safety move, and they bid up bond prices to send yields down by 0.3700 to 3.3010%. Those who followed Charles Nenner’s recommendation, from our April interview with him, to buy it while yields were near 4% are up 20% already.
Asia Stock Outlook: Asian stocks jumped on Thursday, posting their biggest single-day gain in four weeks, as U.S. housing data fueled optimism and bargain hunting buying about the world's largest economy. The Nikkei rose over 3% for its biggest day in 6 months as its MACD (a technical indicator) flashed a bullish sign. The index closed above key resistance at 9920, its 38.2 % Fibonacci retracement level.
European Stock Outlook: Up – European shares opened higher Thursday to a fresh two week high as investors’ confidence in the global economy improved after strong U.S. pending home sales data, with banks and beaten-down energy stocks rallying. Expectations for a decent US jobs report also are fueling the move higher.
Commodities Outlook Tuesday and early Wednesday trade GMT: Mixed - At the close yesterday, oil and gas prices held steady in positive territory to settle the session with gains, but precious metals prices were unable to attract enough support to find higher ground.
Natural gas prices pushed 4.0% higher to close at $4.42 per MMBtu. That was just a couple of cents shy of its session high.
Silver prices sank 1.3% to close pit trade at $18.32 per ounce. They had been as low as $18.09 per ounce.
Though gold and silver were weak, strength in oil and gas helped give the CRB Commodity Index a 0.2% gain.
Crude Oil Daily Outlook: Up- Oil futures up from $72 to nearly $74, and continuing higher to around $74 in early Thursday trade GMT.
Gold Daily Outlook: Little Changed- Futures down modestly Wednesday to $1222, uptrend from May 20 remains intact. At the close Wednesday in New York gold prices settled pit trade with a 0.4% loss at $1222.60 per ounce. Prices were as low as $1213.20 per ounce and never made it into positive territory during the session.
FOREX Daily Outlook in Tuesday and early Wednesday trade GMT: Clear bias to risk currencies as bearish concerns of recent days get pushed aside by positive US housing data and hopes for good US jobs reports on Friday.
US Dollar Daily Outlook: Down vs. the EUR, AUD, CAD, CHF, NZD, GBP, up vs. the JPY, as a ‘risk on ‘ day sends the dollar down vs. all but the leading safe-haven JPY.
Euro Daily Outlook: Up vs. the USD, JPY, CHF, down vs. the AUD, CAD, NZD, GBP , following the bounce in risk higher, up vs. the safer fx, down vs. the higher risk ones, and for some reason, also the GBP. Currently around 1.2285 as the 1.2200 level continues to hold as support that may bend but doesn’t break to allow for end of day closes beneath it.
Yen Daily Outlook: Down vs. all as risk appetite makes the JPY the big loser over the past 24 hours. Political uncertainties don’t help now that PM Hatoyama has resigned, making him the 4th PM to resign in 4 years as the economy continues to stagnate.
British Pound Daily Outlook: Up vs. the USD, JPY, down vs. the AUD, EUR, CHF, NZD CAD. Generally moving with overall sentiment as the GBP sits right in the middle of risk sentiment, though it is falling vs. the lower yielding CHF as the rising EUR rises . A rising EUR means that the SNB will likely allow the CHF to rise too.
Australian Dollar Daily Outlook: Up vs. ALL -the JPY, USD, GBP, EUR, NZD, CAD, CHF as rising risk appetite gives the near term oversold AUD a bounce. The AUD may be done for now with rate increases but it still is the ideal buy for carry trade with its highest short term rate, and also posted its 5th straight quarterly year on year GDP increase.
New Zealand Dollar Daily Outlook: Up vs. all except for the AUD
Canadian Dollar Daily Outlook: Up vs. all but the AUD and NZD
Swiss Franc Daily Outlook: Up vs. the JPY, USD, GBP, down vs. all others as a risk appetite bounce sends the EUR and other risk fx higher.
CONCLUSIONS & Big Picture: The multi-week trends now firmly down for risk assets, though early Thursday GMT is showing a risk appetite bounce thus far, fed by good US pending home sales figures and expectations for good US jobs reports Friday that will show the US recovery is moving forward. Beware, however, as we note in our recent special report: Three Powerful Bearish Signs: S+P 500 Heading To Around 830, Short Risk Assets: stocks are the key barometer for risk assets, with the S&P 500 the most indicative of overall risk asset trends. These are showing 3 major bearish signs of more downside to come for the coming months( long term down trend, death cross, average percent drop below major moving averages still suggests more decline).
EURUSD Short: Currently around 1.2290, the1.2200 major support level continues to hold and the pair has been trading in a tight range over the past 10 sessions between 1.2330-1.2200. No real support before 1.1800. With the pair currently at 1.2237, try to enter a new short positions around the recent closing high of the past 10 days around 1.2330 that still leaves almost 330 pips to go before taking profits, which should be done just above this level at around 1.2218. If the pair is moving hard downwards, put in a trailing stop of 20 pips and look to take profits just before the next major support around 1.1812, stop loss no higher than 1.23360 or around 30 pips above your entry, or whatever allows you at least a 3:1 reward: risk ratio.
EURUSD DAILY CHART COURTESY AVAFX 18june03
CRUDE OIL Short: Currently just below $74 at strong resistance both from this price level and the 61.8% Fibonacci retracement level from the lows of July 2009. If it can sustain a drive above this level, there is little resistance until around $78. However, note how the red 50 day moving average is within days of crossing below the purple 200 day moving average, which would form a very bearish ‘death cross’ that would suggest a prolonged down trend ahead ( note what happened to the EUR/USD when this occurred in January 2010)
Entry point: around $74, first profit target exit just above $71, stop loss $75.86, risk : reward better than 2:1. Second profit target just above $70.
CRUDE OIL DAILY CHART COURTESY OF AVAFX 19JUNE03
DISCLOSURE AND DISCLAIMER: OPINIONS EXPRESSED ARE NOT NECESSARILY THOSE OF AVAFX, AUTHOR HAS NO POSITIONS IN ABOVE INSTRUMENTS.