Comdoll Trading Kit (April 9-13, 2012): Midweek Market Analysis

Huddle up, traders! It’s time for a midweek analysis! Here are the economic themes that have been dominating the markets so far this week.

Market Themes

Better than expected Chinese data
Earlier this week, China printed a 3.6% increase in annual inflation, which outpaced expectations of a 3.2% increase. Later on, the Asian giant released a surprise trade surplus of $5.4 billion instead of showing a $2.2 billion deficit. Some say that this could lessen the likelihood of another PBoC rate cut but some analysts were quick to point out that the underlying figures still reflect a slowdown in the Chinese economy.

QE 3 from the Fed?
Thanks to the weak NFP figures and Bernanke’s recent speech about the U.S. economy still “far from having fully recovered,” investors are back to speculating another round of quantitative easing from the Fed. This is probably another reason why it was easy for high-yielding currencies to crush the Greenback early in the week.

Contagion concerns are back in vogue
The spotlight was on Spain and Italy yesterday as their bond yields rose to levels high enough to suggest that debt contagion in the euro zone is not out of the question. For example, the gap between Spain and Germany’s 10-year bond yields rose to its highest level since November after Spain’s Mariano Rajoy surprisingly cut another 10 billion EUR from education and health spending in the country. Will contagion fears continue to dominate trading this week?

Comdoll Review

It’s time to zoom in on the comdolls!

Australia, Canada, and New Zealand barely had any major data released since Monday, so commodity-related currencies have been trading on risk sentiment. Fortunately, China’s better-than-expected CPI and trade balance data, QE3 speculations, and start-of-week buying kept comdolls well-supported early in the week.

Too bad that the good vibes didn’t last long! Contagion concerns in the euro zone and growth worries in the U.S. hit markets hard yesterday, enough for the comdoll bears to push USD/CAD above parity and drag AUD/USD safely below 1.0300. Of course, it didn’t help oil-related Loonie that crude oil also dipped below $102 per barrel yesterday!

Do you think that we’ll continue to see risk aversion for the rest of the week, or will we see a catalyst that will inspire a midweek reversal for high-yielding currencies? As always, don’t hesitate to hit me up with any questions or concerns!

Comdoll Event Highlights for April 9-13, 2012

Calendar

This week starts off with a couple of inflation reports from China, Australia’s number one trading buddy. Their annual CPI showed a higher than expected 3.6% increase while producer prices posted a 0.3% decline for March. By tomorrow, China has its trade balance due.

New Zealand has only a couple of reports on this week’s schedule, and these are its NZIER business confidence figure and its Business NZ manufacturing index. Meanwhile, Australia is set to print its NAB business confidence report tomorrow and its Westpac consumer sentiment figure on Wednesday.

The action heats up during the second half of the week as Australia is set to release its jobs data while Canada has its trade balance on tap. The U.S. is also set to print its trade balance then, along with its PPI figure for March.

On Friday the 13th, the markets could be spooked by Chinese GDP for the first quarter of 2012 as well as U.S. consumer sentiment data. Bear in mind that Fed head Ben Bernanke is set to give a speech on the same day, which could usher in extra volatility for the comdolls.

Now let’s take a look at the significant inflection points on our comdoll charts:

Significant Levels to Watch Out For


AUD/USD USD/CAD NZD/USD
Week Open (WO)
1.0298
1.0125
0.8185
Previous Week High (PWH)
1.0466
1.0000
0.8264
Previous Week Low (PWL)
1.0243
0.9888
0.8125
Top Weekly ATR (tWATR)
1.0420
1.0210
0.8282
Bottom Weekly ATR (bWATR)
1.0176
1.0041
0.8089
Other significant levels
1.0250, 1.0320
0.9875, 1.0030
0.8100, 0.8270

In case you’re wondering what ATRs are all about and how I computed those figures, make sure you check out my entry explaining my trading strategies.

If you’ve got any trade setups you’d like to share, you know where to reach me!

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Good luck in your trades this week, buddies!

Happy time

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