Note: I'm filling in temporarily for Mr. Robert Balan, who will return to this space on Monday, July 5. I will publish this column once daily in early European hours.
Market Commentary, June 30
My stab yesterday at predicting a weak Consumer Confidence number based on recent Bush approval ratings was a misstep indeed, as the confidence reading surged to the highest level in 2 years. Apparently the falling of prices at the gas pump and perception and headlines about job growth are having a bigger impact than I would have expected...
The pivot point today is, of course, the FOMC meeting, with the rate announcement (we STRONGLY believe in a 0.25% hike, which is also the market expectation - a 0.50% hike is a true longshot) coming at 18:15 GMT. The accompanying statement will be one of the most closely scrutinized ever, with signs of more hawkishness than expected the feared scenario - making a dovish tone (for example, a simple repeat of the existing statement) the surprise - and USD negative - scenario. I suspect the Fed will adjust it to a slightly more hawkish tone with an adjustment of a word here and there, but will not come out with guns blazing.
The closely watched Tankan survey of large manufacturers in Japan is out tonight. Some say that the recent weak retail and other data was due to the timing of the Golden Week holiday - which leaves JPY strength as a possibly scenario as the next big move post FOMC (assuming the Tankan is strong and the Fed's wording doesn't cause a route in the bond market - this would mean a EUR/JPY of 1.2900 or lower and GBP/JPY would fare even worse.)
Technically, the USD looks very strong, and could strengthen even more. But the sluggish price action and back and forth movements on the charts can provide for a treacherous trading environment, as every strong move in one direction seems to be immediately reversed. The general outlook is this: while the USD looks to strengthen, it may not last long even if we see a lot of movement. Don't forget that, while Consumer Confidence is very high, we saw a hugely disappointing Retail Sales number, and WalMart - by far the largest retailer in the US with $300+ billion in annual sales - has lowered its same store sales growth expectations. The US is a consumer economy. A perception that the consumer economy is slowing could eventually send the USD tumbling once again.
CAD traders - watch out for today's GDP announcement. The last few inflation numbers from Canada have been strong - leaving the door open for the BOC matching the Fed's moves in the future. A strong growth number today could have CAD strengthening even while the USD is doing the same.
Possible targets areas if USD strengthens:
GBP/USD: 1.7850 USD/CHF - 1.2800 EUR/USD - 1.2000 AUD/USD - 0.6680
New Trades
None - I prefer to sit today out and have a look at the aftermath tomorrow. There seems to be a real struggle going on between the large and determined opposing forces in the currency markets - the technicals don't suggest that this churning will necessarily end right away.
OR - Buy USDCHF for a try at 1.2800 and a stop somewhere below 1.2600. Looking at the charts, I suspect there are oodles of stops just above the 1.2700 level that will blast this one higher before the FOMC meeting if we see the USD strenghthening throughout the day.
Maintenance of Trading Strategies from :
Long EUR/GBP - pull stop up to 0.6625
Long EUR/USD - maintain buy stop order at 1.2225 (this looks like a longshot now!) and stop of 1.2140 and target of 1.2330. If market drops below 1.2000, cancel this order.
Economic Data Today:
Consumer Confidence Indiciator for June (France) at 06:40 GMT
Unemployment Rate/Change for May (France) at 06:45 GMT
Consumer Confidence for June (Sweden) at 07:30 GMT
Industrial/Consumer Confidence for June (Euro-Zone) at 09:00 GMT
KOF Swiss Leading Indicator for June (Switzerland) at 09:30 GMT
GDP for April (Canada) at 12:30 GMT
Chicago PMI for June (US) at 14:00 GMT
Weekly Crude Inventories (US) at 14:30 GMT
FOMC Rate Decision (US) at 18:15 GMT
Tankan Survey for June (Japan) tonight at 23:50 GMT
Important Data this week:
Thursday: Retail Sales (Australia), CPI (Switzerland), Deposit Rates (Norway), Manufacturing PMI (Europe), ECB Announces Rates (EU), PMI (Swizerland), ISM Manufacturing (US)
Friday: Unemployment Rate and Nonfarm Payrolls (US)
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