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AUDIO - Financial Matters with Sam Seiden
The mastermind behind the Online Trading Academy’s Patented trading methodology, Sam Seiden joins Merlin to take a look at the new financial education program being rolled out. Sam points out why there is such a need for mass education in many areas of our lives, areas where big corporations have been teaching us to do the wrong thing! The duo also takes a look at Crude Oil and market timing principles.
Forex Weekly Outlook February 9-13 (based on forexcrunch article)
Glenn Stevens’ speech, Australian employment data, Mark Carney’s speech, BOE Inflation Report, US retail sales, Unemployment Claims and Prelim UoM Consumer Sentiment are the major market movers for this week. Here is an outlook on the highlights coming our way.
Last week Non-Farm Payrolls release exceeded forecasts with a 257,000 jobs gain in January, following 329,000 addition in the previous month. Economists expected a gain of 236,000 positions. However, the unemployment rate edged higher to 5.7% from 5.6% in December. Full-time positions edged up 777,000, reaching more than 120 million for the first time since July 2008. The strong job gain together with a smaller than expected rise in the number of jobless claims indicate solid economic recovery. Will this trend continue?
US Dollar Fundamentals (based on dailyfx article)
Fundamental Forecast for Dollar: NeutralThe Dollar came dangerously close to starting a speculative landslide this past week. Yet, once again fundamentals have stepped in keep the record-breaking seven-month bull trend intact. While the bull trend stands heading into the second week of February, there is relatively little conviction to launch forward with Monday. This past week’s NFPs have revived Fed rate expectations and deteriorating conditions in the Eurozone leverage a liquidity appeal for the Greenback. However, the policy contrast has likely reached its near-term limit and an anti-Euro haven may not provide the necessary degree of motivation to keep this pace.
Had it not been for the favorable outcome from the January employment figures this past week, the US Dollar may have very well dove into a correction. The headline data looked mixed – the net payrolls beat expectations by a modest 29,000 jobs while the unemployment rate unexpectedly ticked higher to 5.7 percent. Neither of these developments significantly alters the trend of improvement lauded by the Fed officials. The real surprise was in the underlying figures that the FOMC considered more ‘qualitative’. The participantion rate picked up from a near four-decade low, but it was the the 0.5 percent jump in wages (the biggest in seven years) and 2.2 percent pace that jump started the flagging rate speculation.
What the wage data represents is the potential genesis for inflation – the missing ingredient for hawkish conviction at the Fed. After the data was processed by the market, 2-year Treasury yields surged 24 percent (to 0.6435 percent) – the biggest move since December 7, 2010. Following suit, Fed Funds futures pricing the rate forecast through December added another 11 bps of expected tightening and the probability of a July hike rose to 52 percent. As we move closer the mid-year policy meetings (June 17 and July 29), speculation will intensify as data paths become clearer and time runs short. However, we are still four months out, and this week’s docket is light for data that is capable policy fodder. So while, the Dollar can maintain its advantage well enough; it will struggle to press it.
The burden facing the Dollar is largely a speculative one. Looking to speculative futures positioning in the COT report, we find this segment of the market is already long in record numbers (over half a million contracts). One-sided bets are prone to corrections from profit taking to de-levering. What’s more, the same strength that the currency has enjoyed for its favorable yield forecast can also turn it into a risk prone currency in the event of a broader risk aversion effort. Short-term FX positions looking to ride the yield disparity would be as motivated to unwind as those that were long traditional carry or equities. And, while the Dollar would eventually regain its footing should selling turn to pure liquidation; there is a large gap between speculative shakeout and liquidity scrambling.
Perhaps the Dollar’s most promising fundamental backer heading into the new trading week is a worsening of global confiditions that can hasten the demand for liquidity. This is especially true of the Euro where Greece’s debt standoff has found the country with one less important liquidity line and an accelerated time line issued by an unaccommodating European community. Another possible source of strength for the reserve currency is further fallout from global stimulus. We’ve already seen Switzerland’s central bank falter under the ECB’s efforts, and many others were already struggling before that. Cracks in the façade of complacency can quickly expose more systemic issues – such as asset bubbles.
USDJPY Fundamentals (based on dailyfx article)
Fundamental Forecast for Japanese Yen: NeutralThe Japanese Yen finished the week noticeably lower versus all major counterpart and pushed the US Dollar/JPY exchange rate through key resistance. Could this be the start of a larger USDJPY breakout? The interest rate-sensitive JPY was among the biggest losers as the US Dollar surged on a strong US Nonfarm Payrolls report. Yet a noteworthy drop in FX volatility prices suggests that relatively few expect similarly large moves ahead. Indeed, limited economic event risk ahead may keep US Dollar pairs in tight trading ranges—limiting our enthusiasm on fresh USDJPY-long positions.
Any substantial surprises out of upcoming Japan Trade Balance results, Industrial survey data, or Producer Price Index inflation numbers could force a Yen reaction. Yet traders have proven relatively indifferent to Japanese economic data, and sharp post-event moves seem relatively unlikely.
A strong correlation between the USDJPY and US Treasury Yields will thus keep us mostly focused on US economic data. To that end we’ll watch the upcoming US Advance Retail Sales report for potentially meaningful reactions from yields and the USDJPY. It thus far looks as though it will be a quiet week for the Japanese Yen.
And despite its substantial post-NFPs rally, the USDJPY remains in a broad consolidative range dating back to December highs. Only a break of significant resistance near January’s peak of ¥121 and eventually 8-year highs near ¥122 would change that. We subsequently remain somewhat bearish the USDJPY (bullish the Japanese Yen) through the foreseeable future.
GBPUSD Fundamentals (based on dailyfx article)
Fundamental Forecast for British Pound: NeutralThe Bank of England interest rate decision produced no changes in policy last week, leaving the British Pound without guidance on where Governor Mark Carney and company intend to steer going forward. The markets will look to dispel this uncertainty in the week ahead as the central bank publishes its quarterly Inflation Report. Officials have used the document and its accompanying press conference as the primary vehicle for announcing policy and outlook changes over recent years.
As we discussed in our first-quarter forecast, sinking Eurozone economic growth expectations have weighed heavily on BOE interest rate hike expectations since mid-2014. This is not surprising. The Eurozone is the UK’s largest trading partner: the share of total exports headed for markets on the Continent has been on the rise and is now hovering near a two-year high of 48 percent. That means that even as the UK economy has recovered from the 2008-09 recession, its sensitivity to headwinds from the Eurozone has increased.
With this in mind, it is no wonder that Mr Carney has recently remarked that policy normalization may come slower than previously expected. That much is likely to be reflected in the BOE’s updated forecasts for growth and inflation, both of which will probably edge lower. The larger question is whether this is likely to weigh on the British Pound.
The currency has been trending firmly lower alongside fading tightening bets for months, so much of the negativity to be expressed in the Inflation Report may be priced in already. Indeed, backing out priced-in expectations from Sterling interest-rate futures reveals traders don’t envision a hike sooner than the fourth quarter. OIS-based indications are even more pessimistic, pointing to no tightening until at least the beginning of 2016.
On balance, this suggests the British Pound may be disproportionately more sensitive to a hawkish surprise in the central bank’s rhetoric than a dovish one. The currency may not suffer too badly if the markets’ unwinding of rate hike bets is validated. If policymakers firmly remind investors that the BOE does not intend to join the increasingly wide-spread lurch toward stimulus expansion and maintain the next policy change will be to reduce accommodation, the UK unit may rise.
GOLD Fundamentals (based on dailyfx article)
Fundamental Forecast for Gold: NeutralGold prices plummeted this week with the precious metal off more than 4% to trade at $1231 ahead of the New York close on Friday. The losses come on the back of a stellar US employment report with shifts in interest rate expectations propping up the greenback at the expense of the yellow metal. Gold now looks to test a key support structure with the technicals suggesting that shorts are at risk near-term.
The November Non-farm Payroll report released on Friday showed the US economy adding 257K jobs last month, far surpassing the expectation for a print 228K. The move was accompanied by a massive upward revision to the previous month’s data from 252K to 329K with average hourly earnings topping expectations across the board. Although the unemployment rate did unexpectedly rise to 5.7%, the move comes alongside a 0.2% increase in the labor force participation rate, which was off its lowest levels since the late 1970s.
From a technical standpoint gold broke below the 200-day moving average on Friday for the first time since January 15th with the decline taking prices into the lower median line parallel of a pitchfork formation dating back to the November low. This trendline also converges on a median line off the July 2013 highs and could offer some near-term support. We’ll reserve this threshold as our medium-term bullish invalidation level with a break below targeting support objectives at $1206 & $1197. That’s said, shorts are at risk here with interim resistance seen at $1248/52 and $1268. We’ll be looking for a low early next week with our basic near-term focus higher while within the confines of the November median-line structure.
Nikkei forecast for the week of February 9, 201 find, Technical Analysis
The Nikkei as you can see initially fell during the course of the week but turned back around below the ¥17,500 level to form a hammer. The hammer of course is very bullish sign, and as a result we believe ultimately this market will form enough bullish pressure to break above the ¥18,000 level. With that, we are bullish and have no interest whatsoever in selling. We believe that the level below should continue to offer buyers, and that this market will ultimately break out and head to the ¥20,000 level.
DAX forecast for the week of February 9, 2015, Technical Analysis
The DAX as you can see broke higher during the course of the week, testing the €11,000 level. Ultimately pulling back though, and forming a shooting star of sorts. This is the second week in a row that we formed a shooting star, so a pullback from here makes a lot of sense. What frankly, we think that there is a lot of support below and it’s very likely that we will see the market test for support and find a supportive candle in order to start buying. On the other hand, if we break the top of the shooting star and clear the €11,000 level, this market should then go much higher.
NASDAQ forecast for the week of February 9, 2015, Technical Analysis
The NASDAQ broke higher during the course of the week, testing the 4800 level as you can see. With that, the market should continue to go higher we can break that level, as we should then head to the 5000 handle. With that being the case, the market looks as if it is ready to test that area and perhaps even go higher than that. We are most certainly in an uptrend, and as a result we are “buy only” at this point in time. We believe that the 4600 level below is in fact supportive.
S&P 500 forecast for the week of February 9, 2015, Technical Analysis
The S&P 500 as you can see broke higher during the course of the week, but struggled to get above the 2060 handle. Because of this, looks like we’re ready to continue consolidating, but we believe that ultimately the market will break higher. In the meantime, expect a lot of sideways action as far as long-term trades are concerned and as a result we have no interest whatsoever in placing a longer-term trade into we break out to a fresh new high. Any trading in this market probably going to be off of shorter-term charts.