Thanksgiving in the U.S marks the beginning of the Holiday Season. The day after Thanksgiving known as Black Friday marks the commencement of the Holiday shopping season. Many analysts view this particular season as one of the most important shopping seasons in recent history. The idea is simple. If the consumer stays home and sales are down significantly it may be the final nail in the coffin for many retailers who are still struggling from sluggish sales and hard to find credit.
The following are some important economic data releases to watch heading into the final month of 2009. Economic data releases related to the Consumer, Housing, and the Federal Reserve will capture forex trader’s attention the most. Let’s take a brief moment and highlight the key releases under those 3 sectors.
Consumer - “Retail Sales” will enable traders to gauge consumer spending and the impact on the retail market and its trickle-down effect. The “Unemployment Rate” will be a good indicator of whether the consumer will derail, assist, or possibly be neutral in a pending recovery.
Housing - “Home Sales” both new and existing will continue to be very important as this is the sector that nearly caused the financial collapse. As many as 1 in 4 home owners are underwater so it is vital that home sales and home prices stabilize.
Federal Reserve - comments, minutes, and meetings dictate financial policy. Any speculation of a possible rate increase will strengthen the Greenback. The reason behind why the FED may want or need to raise rates will be secondary to the actual intimation of a hike.
An additional variable to consider heading into year-end will be liquidity. There are many ingredients that feed into this equation. Many funds are up huge this year and want to lock in profits for their year-end closing of the books. This is very important given last year’s massive losses. Therefore you can expect typical end of year slack in volume. Another factor that affects liquidity will be the actual hoarding of cash by corporations and banks in order to shore up balances sheets before they report their financials. To this effect, we have already seen the 3 month T-Bill turn a negative yield as these institutions sock cash away.
Barring some catastrophic event most analysts believe that the Dollar will continue to depreciate. Here are some suggestions for trading the market. Firstly, let’s look at today (Nov. 25th) we had positive prints for Jobless Claims and New Home Sales. Positive means that things are less negative. The economy is losing fewer jobs but still not adding any new ones either. The Dollar tanked on the news (see chart below) as its G-10 rivals advanced smartly.
Until the news turns truly positive (and not just less negative) it allows traders to take risks. Traders view the economy as stabilizing but not to the extent that the FED can raise rates. When data releases are negative the impact is measured in “derailments”. Derailments are defined as the potential to slow or even reverse a global recovery. In summary, go short on the Dollar on news which is positive (meaning less negative than the prior month). Go long the Dollar against the currencies that appreciated the most against it when truly negative data prints.