This coming week may be an opportunity where speculators can test their conspiracy thinking, perceptions of technical and fundamentals in unison. Experienced traders who typically have a high degree of skepticism about markets (particularly when results don't go in the direction they expected) may question late last week's results.
Without trumpets or too much hyperbole, was Friday before going into the weekend a 'false flag', this as the USD gained strength against many other major currencies. A lack of volume because of the Labor Day holiday coming in the U.S and Canada tomorrow may have affected the Forex landscape. While trading is largely done by computer programs in financial institutions, day traders should understand last Friday worked as a get away day to enjoy a long holiday weekend in North America.
Meaning financial executives largely escaped their offices because they have seniority and the ability to disappear while their 'underlings mind the store'. Essentially senior management often tells the staff that has to stay behind, "monitor and not touch the system". This could have left the door open for what appears to be a strange reaction in Forex upon what was in fact weaker data on Friday from the U.S via the Average Hourly Earnings which came in slightly below expectations, and less than stellar U.S GDP results on Wednesday the 30th of August.
Yes, also this past Friday the Non-Farm Employment Change numbers were fractionally better this month than anticipated, but the prior month's results were actually revised downward. And yet the USD remained strong. Is this because senior analysts, chief traders and risk management officers were absent on Friday?
Tomorrow the same folks will remain largely away from the markets too, meaning results should also be viewed with suspicion. Which sets the table for an intriguing Tuesday and Wednesday for all the major and minor currency pairs teamed against the USD. Gold and equity markets will need to be monitored closely too.
Some potential clues are that the price of gold stumbled slightly on Friday as the weekend approached, but this happened as the EUR/USD sank to a low for the week, and the GBP/USD came under renewed pressure. But again this happened in rather questionable circumstances. Important support levels technically may get tested tomorrow, but trading volumes should be examined. Gold in many respects held onto gains made earlier in the week.
Yes, there are reasons to be nervous in financial institutions, due to higher short-term U.S Treasury yields, concerns about the China economy, mortgage rate worries in the U.S and elsewhere, fears about credit availability for small U.S businesses. However, these troubles have not caused a massive meltdown in the most primal of trading venues yet - major stock indices.
September is a notoriously volatile month for equities and speculators who use CFDs to participate in the stock markets globally need to be careful. Correct, some well known 'traders' are talking about a coming selloff in the markets, but so far we have not seen a major decline in the NASDAQ, S&P 500 or Dow Jones 30 indices. Day traders should not and cannot underestimate the potential for volatility to occur suddenly. Successful speculative bets via limited funds often means having to practice patience and risk management.
Thus, as the week begins early this Monday, day traders should be careful. Please note that a lack of big trading volumes because of the absence of U.S and Canadian financial institutions will make tomorrow's results questionable. Opening the door for the potential of reversals on Tuesday, which might be abrupt as a 're-balancing' of sorts takes place as folks returning to their offices seek equilibrium perhaps with their adjusted outlooks.
Simply put the U.S Federal Reserve the past two weeks has seen the same lackluster U.S data as all global traders, and the U.S central bank is in no position to raise interest rates over the mid-term. It would be useful if the Fed voiced their insights regarding the weaker than expected U.S Gross Domestic Product results last week, and the lower than expected Average Hourly Earnings report seen before the weekend. However, do not count on the Federal Reserve to do the right thing.