What are your best trading ideas for the week ahead?
Iraqi government security officials report that they took control of the town of Jurf Al-Sakhar from Islamic State fighters on Saturday. The town is 50km to the south of Baghdad.
Earlier this week there were signs of defense forces gaining the upper hand in the siege of Kobani near the Turkish border in Syria.
US central command also said it conducted 22 airstrikes against ISIS in Iraq on Friday and Saturday.
Brazil holds a runoff election between President Dilma Rousseff and candidate Aecio Neves on Sunday.
Polls show Rousseff with a small but surmountable lead in the polls. The Brazilian market would prefer change and that may have some small spillovers into the global risk trade early in the week. If the results are close the forex market may open for the week before we know a clear winner.
Last week, Brazil’s Bovespa index was down 6.79% despite the massive rally in virtually every other equity index around the globe. Signs of relief came in a 2.4% rally on Friday.
There may be a slump on Monday if Rousseff is reelected but no matter who wins, expect the index to begin to turn play catch up with other markets by mid-week.
At worst, you might see something like the 2012 US Presidential election where the market slumped nearly 6% in the 7 sessions following Obama’s re-election followed by a non-stop rally through year-end.
At the same time, the market will also be digesting the results of the ECB’s stress test/AQR.
CNBC reports that a healthcare worker returning from Africa has been stopped at the Newark airport and quarantined.
Naturally, politicians and public health officials are going to be extra-cautious in the next few weeks as the finger-pointing begins.
Forex news for October 24, 2014:
- ECB draft doc says 25 banks to fail bank tests
- Fitch affirms Italy and Spain both at BBB+ with a stable outlook
- September 2014 US new home sales 0.467m vs 0.470m exp m/m
- Draghi repeats ECB ready to use other unconventional measures if needed – spokesman
- Russia rating affirmed by S&P, outlook remains negative
- Austrian finance minister says no surprises in bank stress tests
- Greece’s Samaras is looking for the bailout exit door
- French jobseekers hit fresh record high
- CFTC Commitments of Traders
- WTI crude down 84-cents to $81.25
- Gold down $1 to $1230
- S&P 500 up 14 points to 1959
- On the week, S&P 500 up 4.1% (Nasdaq up 5.3%)
One of the reasons Europe is sinking is that it has so many leaks. Nothing is kept secret in Europe and there’s now very little drama left in the stress test results after the major newswires obtained draft copies. It looks like 25 banks were asked to raise money and only 10 of 190 are on the naughty list.
No great trading theme developed in the FX market in US trading although stocks remained bubbly and that helped the US dollar but only mildly.
Ebola fears greatly dissipated and until there are signs about a genuine uncontrolled outbreak, I don’t think the market will flinch too hard on headlines any longer.
USD/JPY took a quick trip down to 107.78 early in US trading as stops were run on jitters but it bounced back quickly and we finish midway through the daily range at 108.13.
The Australian dollar put a bit of a squeeze on shorts early in US trading as the broad commodity complex did better. But the shine came off later in the day and AUDUSD drifted to 0.8797 from 0.8824.
Canadian dollar sellers are clearly lurking in the weeds and for the fourth consecutive day and test of 1.1200 in USD/CAD was rejected and the pair climbed back to 1.1239.
Have a great weekend!
- Outlook on the long term for Italy and Spain are stable
- Fitch forecasts Italy GDP to contract by 0.2% in 2014 followed by growth of 0.6% in 2015
Stable is nice but BBB+ isn’t exactly something to stake an election campaign on.
Forex futures market speculative positioning data from the CFTC Commitments of Traders report as of the close on Tuesday October 21, 2014:
- EUR net short 159K vs short 155K prior
- JPY net short 72K vs 101K short prior
- GBP net short 4K vs short 3K prior
- AUD net short 32K vs short 30K prior
- CAD net short 22K vs short 16K prior
- CHF net short 18K vs short 17K prior
- NZD net short 2k vs short 2k prior
Not much change, right across the board except in yen crosses. Looks like USD/JPY longs rushed to the sidelines last week and early this week on the rout in risk. I think what we started to see on Thursday was them rushing back in. The -72K leaves plenty of room for fresh shorts to push USD/JPY back 1.10.
Yen net at the least extreme since July, when USD/JPY was at 101.50.
This is a good buying signal if you were already thinking about USD/JPY longs.
No clarification yet in EUR/USD as key-support at 1.2605/1.2592 (pivot/minor 76.4 %) has not even been scratched yet, which however also applies for the now relevant resistance cluster at 1.2697/1.2706 (minor 38.2 %/pivot), notes JP Morgan.
“Only a breakout of this range would now provide an early indication whether we can expect another corrective leg up (wave c) towards the upper T-junction at 1.2959 (int. 38.2 %) or the straight resumption of the broader downtrend next,” JPM adds.
“Towards 1.2959 though, we’d see a very good risk reward given to re-establish a strategic short position,” JPM advises.
Same goes for cable, according to JPM, where the range trading affair goes on without giving us the final hint yet whether another up-swing might be missing or whether the broader downtrend has already been resumed.
“That said we need a range breakout between 1.5948/44 (minor 76.4 %/pivot) or a break above hourly neckline resistance (currently at 1.6170) to receive an early indication whether we are heading towards 1.6525/33 (pivot/int. 50 %) or for a test and possible break below key-pivotal support between 1.5852 and 1.5752 next,” JPM argues.
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It’s that time of year again when clocks start to change.
Trying to keep track of what time it is in London, Paris, New York, Tokyo and Sydney is a head-scratcher at the best of times but it finally starts to feel a bit easier after 5 months of stability.
No more. The confusion has started already. Ryan posted about how Mike will get less light and less sleep in the morning but it’s actually the opposite but it means the trip home from work will be in the dark.
If we could all switch clocks together (or not) it would be an easy exercise but there’s a one-week lag between Europe and North America.
Europeans turn their clocks back early Sunday morning and then North America does the same on Nov 2 (except Arizona and Saskatchewan).
Meanwhile, most of Australia doesn’t change the clocks but our beloved Eamonn is in Melborne where they do. Thankfully that was already dealt with early in the month (New Zealand as well). Of course, they move the clocks in the opposite direction.
For traders in the UK or New York, the bottom line is that the difference will be 4 hours — for a week. It means all the economic releases will feel like they’re coming out at odd times. For the next week, lots of eyes will be on our clocks at the top of the page.
The correlation is tight with stocks late in the week.
Some profit taking is hitting the S&P 500 after a banner week that included at 3.7% rally anyone who was long risk trades will be taking some off the table for some weekend champagne.
The earlier session low in USD/JPY was a spike down to 107.78, I don’t expect that to break.
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