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August 9th – 13th Quick Review/Preview: Stocks, Commodities, Forex





Likely Market Movers To Watch This WeekPrior Week

 

  • Poor US Jobs Report Hits USD But Late Rally Keeps Stock Gains For The Week

 

  • Stocks close higher for the week on combination of momentum from earnings, some positive PMI data

 

  • Wheat Continues To Spike On Russian Export Ban, Poor Harvests In Black Sea Region and Canada, Though Near Term Likely Overbought

 

  • Positive ECB Comments Contrast to Fed

 

Next Week

 

  • Key US Events: FOMC Policy Statement: FOMC Policy Statement, Retail Sales, a $74 billion refunding, auctioning three-, 10- and 30-year securities.

 

  • Key EU Events: Friday -  German Q2 preliminary GDP, French Q2 preliminary nonfarm payrolls, wages, GDP, July CPI, Euro-zone Q2 preliminary GDP, June trade balance

 

  • Bank Of England Quarterly Inflation Report Could Boost GDP

 

STOCKS

 

  • Show resilience and recover most of losses Friday despite bad US jobs report, S&P 500 closes above key resistance of 200 day SMA at 1115.
  • Next likely resistance at 100 day SMA around 1126
  • For the week, the Dow rose 1.8 percent, the S&P 500 gained 1.8 percent and the Nasdaq advanced 1.5 percent.

 

COMMODITIES

 

Commodities continued to be driven by macroeconomic events.

Oil

Like stocks, made most of its gain for the week on Monday, and managed to hold onto gains despite Friday’s US jobs reports, futures still close above key resistance of $80

Gold

Gold futures closed their 5th week of uptrend supported by weaker USD, fears of new US QE, easing Chinese gold trading regulations expected to fuel gold demand

A note on potential Chinese demand from oilngold.com: Currently the Chinese central bank is the 6th largest gold holders, with 1054.1 tons as of June 2010. However, the holdings only represent 1.6% the country's total reserve. If it's to increase its holdings comparable to other Asian counterparts, it will need to increase holdings by almost +50% (eg, Singapore has gold holdings 2.4% of total reserve).

Wheat

The biggest story in commodities this past week was Russia's ban on wheat exports. Fear on food shortage drove wheat price higher and spurred inflationary worries. On Friday, the benchmark CBOT wheat futures rallied to a 2-year high of 841 before declining to 725.75 at close.

Even after Friday's losses, the nearby contract remained on track for a weekly gain of nearly 10 percent.

Since prices bottomed on June 9 at $4.25-1/2 per bushel, wheat futures had gained 88% entering Friday's U.S. trading.

While most appear to believe prices have risen too fast in the near term, the longer term trend remains higher due to ongoing doubts about harvests in key export regions like the Black Sea region and Canada.

Oilngold.com   14aug07

CURRENCIES

 

US Dollar Weekly Outlook: Pressured By Odd Combination Of Poor US Fundamentals And Resilient Risk Appetite

 

US Dollar Bias: Neutral

  • Over the years, it’s unusual to see a sustained rise in asset markets alongside down trending US economic data, yet that’s what we’ve had over the past months.
  • USD drops on poor job reports, further weakening US economic fundamentals and rate increase prospects
  • USD safe-haven appeal is also weakened as stocks recover most of intraday losses after the jobs reports,  the bellwether S&P 500 still closes above its 200 day moving average and logs a gain for the week. Thus risk appetite survives, lessening USD safe-haven appeal.
  • FOMC and retail data are main US events this week
  • CPI data unlikely to be influential unless much lower than expected and feed deflation fears

 

While very strongly positive or negative US jobs figures’ affect on US economic fundamentals can move the USD in accordance with those fundamentals’ affect on rate increase prospects, the USD usually responds to the data in its role as #2 safe haven currency, rising on poor results, falling on good results. The likely reason this correlation failed to hold was that stocks and other risk assets recovered impressively in late Friday trade, signaling that while the US recovery is stalling, risk appetite remains resilient for now.

Euro Weekly Outlook: This Friday Brings The Next Test

 

Euro Bias: Neutral

  • EUR continues to rise mostly on USD weakness and receding awareness that the EU banking/sovereign debt crisis remains a crisis, the primary threat to the global economy. See What Will Reverse The USD Downtrend?
  • Upbeat ECB comments also help
  • Friday is the next key juncture for the Euro, with GDP data with EZ, German, French, Spanish and Portuguese results due, in addition to key US retail data. For a continued EUR rally there must be further improvement in the EUR’s fundamentals relative to those of the USD
  • 1.3500 area  next major resistance for EURUSD, both as price level and 200 day SMA, the pair already closes above its 200 day EMA

 

Japanese Yen Weekly Outlook: High Real Return on JGB Cause of JPY 15 Year High To USD

Japanese Yen Bias: Bullish

  • Peter Tasker via Mad Hedge Fund Trader notes source of JPY strength: 10 year JGB yields 1.1%, real deflation near 3%, gives it an over 4% nearly risk free return, and this, combined with lack of sellers allows minor rise in bond demand to send JPY higher
  • Despite high JPY’s damage to exports,  markets don’t anticipate BoJ intervention to lower the Yen

 for the rest see

August 9th – 13th Quick Review/Preview: Stocks, Commodities, Forex

Disclosure: No Positions