Ok, so I am trying to understand what is going on? I mean it used to be simple (kind of). The relationships are all out of whack.
We had a better than expected nonfarm. Dollar goes down. Why? Supposedly, because the NFP signaled that the economic situation was better so the dollar was not as necessary as a safe haven bid. Gold, at the end of the day held, but didnt make any spectacular breakouts. Commodities up (like oil and corn) Equities Up. Whats going on?
I dont trust this market.
Spoke to the head commodities guy at Bforex (just for the purposes of disclosure, they are my broker). He has much to say, and directed me to his market analysis which i follow daily regardless.
So, if I and the so called “experts” are this confused than what to do.
Well, on this he and I agreed. Trade. Don’t invest.
Investors are getting smacked. Get in Get out. Take your profits and minimize your losses but for gods sakes dont sit there and watch your money disappear. I Traded gold all last week, and am very happy with the results. At the moment, I’d rather trade it on the long side, but i dont trust the market. So i am standing aside.
The USD is as ridiculous as ever, and personally i dont know if the Eur has enough strength to punch through 1.3750. Would rather short it at those levels, BUT, I try not to fight market and rather go with it, so will wait to see some weakness.
Any thoughts? I would greatly appreciate knowing what the rest of the forex world thinks!
Below is one of the market recaps that I like to follow.
May 11th 2009, Sentiment Will Be King Today
The USD got rocked on Friday upon a much better than expected Non Farm Employment Change number. A result of minus �539K greeted traders who were told to expect an outcome of minus -590K and this provided the marketplace enough impetus to cause instant volatility. U.S. equities turned in a very positive day and showcased that risk appetite is increasing as emerging data from the States continues to hint that stability is returning to the economy. The official U.S. Unemployment Rate did rise to 8.9% but this met expectations and any skeptics that attempted to show their faces were beaten back. The U.S. will not be releasing any major data today and it is thus expected that today will see the residual affects from the past few trading session�s sentiment.
While the USD has gotten hammered and is now bouncing around the lower side of its trend against the EUR and GBP questions about this entire dynamic must be monitored closely. International bourses have turned in stellar results the past month but after considerable and dangerous declines the past year, one must ask if the sudden turnaround is too much and too fast. Optimism is finding a sounding board in the U.S., but caution must be garnered into the mix considering that even though some stability appears to have been found, that the employment numbers taken into context are only better because the previous reports were incredibly bad. On Tuesday the U.S. will publish their Trade Balance figures and on Wednesday the Retail Sales data will be brought forth. The USD will face an interesting week taking into consideration that it lost ground to the EUR and GBP based on positive news actually developing in the U.S. and that perceptions remain fragile. With U.S. equities continuing their climb last week, some investors are asking if they will continue to mount summits or fall off a cliff. The USD is bound to face continued pressure and its downward momentum will be tested as investors wonder when and if a rebound will occur.
EUR
The EUR ended the week with a flourish against the USD as it broke upwards and very much on the strong side of its range. While much of the move can be interpreted as dollar centric due to stronger risk appetite taking hold, other factors certainly must begin to be quantified. The EUR has had two solid weeks against the greenback and its ability to hold onto its gains must begin to raise questions among its skeptics. The German Trade Balance numbers turned in a better than expected number of 8.9B compared to the forecast of 7.7B. Also the German Industrial Production figures came in unchanged compared to a negative estimate of -1.3%. Today the French and Italian Industrial Production numbers will be published and the French number is anticipated to be minus -0.4%. Tomorrow inflation (or deflation depending on your outlook) is on schedule. Having turned in positive results in the face of another interest rate cut enacted by the European Central Bank last week and the introduction of �unconventional fiscal policy�, the EUR finds itself still confronted with detractors but has been strong. The true value of the EUR is likely to be a focal point for global traders this week.
GBP
The Sterling found additional room for upward momentum on Friday even in the wake of a negative PPI Input number. A rise of 0.7% was expected from the PPI Input figure, but an outcome of minus -1.0% was actually produced. It should be noted however that Output prices did climb by 0.6% compared to the forecast of 0.2%. What this data does is highlight that inflation remains stagnant within the U.K. as the affects of the recession continue to roil the business environment. Today the RICS House Price Balance are due and a figure of minus -70.2% is expected, the previous data produced a number of minus -73.1%. Tomorrow the Manufacturing Production survey is on tap. On Wednesday the Bank of England will issue their Inflation Report. In reality it will be a fairly quiet week of data from the U.K. and the Sterling will find itself under the auspice of trading which sees that the GBP tested as it stands near the highs of its range.
JPY
The JPY stayed within a consolidated range against the USD in the wake of international equity markets continuing their positive run. The JPY has maintained a fairly tight range against the USD as the marketplace has shown an increased amount of risk appetite. Gold continues to show that the marketplace has a high degree of caution as it trades near the high end of its recent range. All commodity prices it must said have traded higher the past week and this has led to various interpretations, one of which that says demand is increasing or has at least found a foundation from which to grow. The JPY remains a significant barometer of uncertainty and it will be watched carefully after last week�s tight range.
Written by: Robert Petrucci
Bforex Chief Commodity Expert and Forex Analyst