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Monday, 20 October 2014

Week 43 trading stubs, lots of contradicting signals across


Strength of JPY anticipated last week played out nicely in the first part of the week, especially GBP/JPY shorts were hitting far targets on consistent basis. Coming week has lots of contradicting signals across the major currencies, therefore will be staying away for the most part. The only clear signals in my book for the week are in AUD/JPY and CAD/CHF pairs. In terms of events to shake the markets, BOC will have its rate announcement on Wednesday, worth watching CAD pairs going into this event. More detailed description of events can be found below.

Weekly Currency Board

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Prime Risk Events (UTC time) 

21 October

Reserve Bank of Australia minutes (October), 1.30am: Having kept rates on hold at its last meeting, with a rather ‘status quo’ update – the current problems such as a below-trend outlook remain, and the minutes should shed more light on this. Market to watch: AUD/USD

China retail sales, industrial production (September), GDP (Q3), 3am: This plethora of Chinese data will be a key event for the market, with industrial production and retail sales forecast to increase over the previous month. Meanwhile the more important GDP number is expected to show a drop quarter-on-quarter to 1.95% from 2%, but an acceleration to 7.58% YoY from 7.5%. Markets to watch: Hang Seng   China A50   Nikkei 225   AUD/USD   USD/JPY   copper,  mining stocks

US existing home sales (September), 3pm: These are expected to slow to an annual rate of 4.9 million in September. Markets to watch: US indices, dollar crosses

22 October

Bank of England minutes (October), 9.30am: These minutes could be less important given the apparent shift in thinking over the past week, as events force central banks to shift to a more dovish stance. Markets to watch: GBP/USD   EUR/GBP

US CPI (September), 1.30pm: Both the year-on-year and the month-on-month rate are expected to increase, to 2.1% and 0.3% respectively. Markets to watch: US indices, dollar crosses

Bank of Canada rate decision (October), 3pm: Since most other central banks are moving back to a more dovish stance, the likelihood is that the RBC will leave rates at the current 1%. Market to watch: USD/CAD

23 October

China HSBC manufacturing PMI (October, preliminary), 2.45am: Last month’s reading was 50.2, so a drop into contraction territory could spook markets and undo the good work of the data earlier in the week. Markets to watch: Hang Seng   China A50   Nikkei 225   AUD/USD   USD/JPY   copper,  mining stocks

German manufacturing and services PMI (October, preliminary), 8.30am: Both these numbers are forecast to edge back slightly, adding to the bearish outlook for Germany. Markets to watch: DAX   EStoxx 50   EUR/USD    EUR/GBP

Eurozone manufacturing and services PMI (October, prelimary), 9am: Fortunately the services number is forecast to rise slightly, to 53.28 from 52.4, but the manufacturing number is expected to shed 0.02 to hit 50.28. Markets to watch: EStoxx 50   EUR/USD   EUR/GBP

UK retail sales (September), 9.30am: YoY growth is expected to accelerate to 4.01%, but the MoM figure is going to be less cheery, dropping to -0.14%.  Markets to watch: GBP/USD   EUR/GBP

US initial jobless claims, 1.30pm: These hit their lowest level since 2000 last week, providing a much-needed bit of good news. More of the same will reassure equity markets still further. Markets to watch: US indices, dollar crosses

US manufacturing PMI (October), 2.45pm, leading indicators (September), 3pm: The first reading on this is forecast to drop to 57.07 from September’s 57.5. Meanwhile leading indicators (which are designed to indicate potential developments in future economic data) are expected to show growth of 0.7% from August’s 0.2%. Markets to watch: US indices, dollar crosses

Eurozone consumer confidence (October, first reading), 3pm: As befits the dire situation in the currency union, the reading is expected to slump to -12.11 from -11.4 in September, a development that should continue to worry both politicians and central bankers. Markets to watch: EStoxx 50   EUR/USD   EUR/GBP

24 October

UK GDP (Q3, first reading), 9.30am: The first estimate is forecast to show QoQ growth slowing to 0.83% from 0.9%, while the YoY rate moves up to 3.85% from 3.2%, which might prove to be modestly bullish for GBP/USD. Markets to watch: GBP/USD   EUR/GBP

US new home sales (September), 3pm: The annual rate is forecast to slow to 460.9,000 from an August reading of 504,000. Markets to watch: US indices, dollar crosses


The pair bounced of 3σ lower channel last week pointing to likely bounce of the lower levels it was testing recently. See the bullish cypher pattern forming below that has potential to confirm this bias. 

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