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Overview: Modestly risk on day. Stocks higher in US, Asia, Europe, most commodities pushing higher, gold hitting new highs likely on currency fears, Yen recovering, suggesting the affects of the BoJ’s intervention may be brief unless followed up with more soon. Mildly risk-on day for forex. For full details on how we see the coming week: WEEKLY KEY MARKET DRIVERS AND IMPLICATIONS: STOCKS, COMMODITIES, FOREX
STOCKS: US: Up – The major indices recovered from 3 days of modest losses, finish week about 2% higher, The primary drivers Friday: better than expected German Ifo sentiment and US durable goods orders. Belief that the likely advent of a new round of stimulus improved the odds for further gains in stocks.
US Bonds: Down- Benchmark 10 Year Note down modestly with rising stocks. Yield closed Friday at 2.6120%, futures prices recovering as of midday GMT.
Asia Stock Outlook: Up - Virtually all major Asian indexes are higher, up around 1% or more on follow through from US markets’ gains Friday and the rapidly improving technical picture.
European Stock Outlook: Up– following Asia higher with all major indices opening and remaining modestly higher on light news, improved merger and acquisition activity in the food sector, and an improving technical picture that suggests the rally could have room to run further.
Commodities Outlook Friday-Midday Monday GMT: Oil, gold/silver all up, softs steady-to-higher
Crude Oil Daily Outlook: Up- Futures up strongly Friday from $75 to around $76.50, holding those gains thus far today despite abundant supply as risk appetite boosts speculative interest.
Gold Daily Outlook: Up: Futures currently hitting new all time highs around $1297, poised to test $1300 as momentum traders pile in, as expected new US stimulus and likely additional stimulus in Japan, EU, and UK favor gold’s long term picture.
Softs: Wheat up, soybeans up 4.89% since Friday, coffee sugar steady
FOREX Daily Outlook Friday-Midday Monday GMT: Mildly positive risk appetite background per stocks and commodities. USD, CHF, JPY weakest in that order, AUD, GBP strongest in that order.
US Dollar Daily Outlook: Down vs. all since Friday, steady thus far Monday, clearly continuing to feel the effects of expected new stimulus spending and the Fed’s lack of concern about inflation. Together these mean more potentially dollar-devaluing money supply AND no pressure on the Fed to raise rates on inflationary concerns.
Euro Daily Outlook: Up vs. all but the AUD, as USD weakness and successful PIIGS bond auctions ease concerns about the EU crisis for now, though we wonder how much ECB buying was in those auctions.
Yen Daily Outlook: Up vs. the USD, CHF, down vs. all others due mostly to the ‘risk on’ nature of trading since Friday into midday today.
British Pound Daily Outlook: Up vs. the USD, CHF, JPY (though losing some of those gains to the JPY thus far today), NZD, CAD, down vs. the AUD. No clear reason for its strength except that the lone BOE hawk is calling for rate increases, and inflation remains persistently above target. However we suspect that unless the UK economy improves BOE will risk inflation over risking additional burdens over those of the new austerity spending cuts.
Australian Dollar Daily Outlook: Up vs. all since Friday, benefitting from both last week’s hawkish RBA comments AND to the ‘risk on’ nature of trading since Friday into midday today.
New Zealand Dollar Daily Outlook: Up vs. USD, JPY, CHF down vs.all others except flat vs. the CAD.
Canadian Dollar Daily Outlook: Up vs. the USD, JPY, flat vs. the GBP, NZD, Down vs. all others despite rising oil prices and risk appetite.
Swiss Franc Daily Outlook: Up vs. the USD, down vs. the GBP, EUR, JPY, all commodity dollars
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