After a nice three day weekend, it’s time to get back to the markets! Yesterday’s trading was booorrrringgg since it was a US holiday but it’s obvious that the volume has picked back up today….which means it’s time to start looking for trades!
On Friday, retail sales came in with a 1% increase compared to the 0.6% forecast. However, you have to remember that this report was for December’s retail sales which means that this increase is due to the holiday shopping. And when I say holiday shopping, I’m really saying increasing consumer debt. And when I’m saying increasing consumer debt, I’m saying that this won’t be able to continue on for too much longer. I’m expecting to see some drops in consumer spending throughout the next few months now that the holidays are over.
Today the German and Eurozone ZEW economic index came in higher than expected which is Euro positive. Even so, the Euro failed to make any signifcant gains against the Greenback. The dollar is holding its ground pretty well right now.
US Producer Price Index (Overall & Core)
8:30 am ET; 13:30 GMT
(Overall) Previous= 2.0%; Consensus= 0.5%; Forecast Range= 0.2% to 0.9%
(Core) Previous= 1.3%; Consensus= 0.1%; Forecast Range= -0.1% to 0.3%
US Treasury International Capital
9:00 am ET; 14:00 GMT
Previous= $82.3B; Consensus= $82.5B
US Industrial Production and Utilization Rate
9:15 am ET; 14:15 GMT
(Industrial Production) Previous= 0.2%; Consensus= 0.1%; Forecast Range= -0.2% to 0.3%
(Utilization Rate) Previous= 81.8%; Consensus= 81.7%; Forecast Range= 81.5% to 81.9%
The Euro is hovering right above 2900 which is also right around its 50% Fib line on the daily chart. 4 hr stochastics is trending down and is nearing oversold territory while the daily stochastics is already in oversold territory and looks to be starting a reversal. I think the pair will fall to either 2900 or its 50 SMA on the daily chart (2870) before bouncing back up. It will most likely bounce up to 2950 or more if the US reports are surprisingly negative.
The Cable is hanging right around 9600 at the moment. 4 hr stochastics is trending down and is almost in oversold territory while the daily stochastics is doing the exact opposite by trending up and nearing the overbought territory. I think we’ll see a little more downward movement in the Cable before we see another move up. I’d like to make a play on this by shorting the pair if it can break its 200 SMA on the 4hr chart and targeting the 50 & 100 SMA, which happen to be lined up together.
Short at 9570; Stop Loss= 9610; Target= 9530; Target 2= 9500
The Swissy has been trying to break 2500 but hasn’t succeeded yet. We saw a spike to 2526 on January 11 but the price hasn’t been able to close above the 2500 level. The daily stochastics is showing overbought and 4hr stochastics is almost in the overbought territory. I don’t see this pair breaking 2500 unless we see very good US reports in the near future.
The Yen is moving more on fundamentals then on technicals lately since there is more and more evidence that the BOJ will hold rates steady at their next meeting. Technically speaking, the charts are screaming for this pair to fall down but like I said, the fundamentals are driving in the drivers seat. It goes against the charts, but I wouldn’t be surprised if the Yen hits 121.00 before falling back down. We’re going to have to seem some weak US reports to give the Yen some ammunition to make a move against the Dollar.
Quite a few reports tomorrow for the US so expect some decent movement. The biggest report for tomorrow will be the PPI report although any big surprises in any report will cause the markets to react.