Key psychological levels in Forex continue to display that trading is anxious. The GBP/USD is battling under 1.26000, the USD/JPY is above 150.000 and the EUR/USD is below the 1.08000 level. Speculative Forex positions the past week were volatile.
The S&P 500, Nasdaq 100, and Dow Jones 30 all suffered declines last week. Forex and equity indices were turbulent because economic outlooks among financial institutions and their clients have become uneasy. The gaps suffered last week in the U.S equity indices are a clear indication of tension.
Inflation data via the Consumer Price Index numbers last week certainly threw a grenade into the markets. Yields on U.S Treasuries have shown nervousness due to murky sentiment regarding what the Federal Reserve will do over the next handful of months. This week is likely to remain choppy.
Perhaps yesterday's Presidents' Day holiday in the U.S has given folks a chance to calm their nerves, but it may have also given them more time to fret and worry about risks. U.S data in the coming days will be relatively light, but next week's economic reports which include GDP and Core PCE Price Index statistics will cause another dose of electricity to run through the financial markets. Until then behavioral sentiment generated by last week's higher than anticipated inflation results will remain a guideline.
Foreign Direct Investment numbers coming from China yesterday continued to show a troubling outlook for the nation as it battles deflation. While the Shanghai Composite Index has moved upwards since the lows hit in the first week of February, anxiety is being communicated about how the momentum is being attained via potential corporate 'buy backs'. China's economic outlook is a concern globally because of the potential knock-on affects.
The U.K's inflation results last week and rather recessionary undertones are also concerns. Global economies outside of the U.S are struggling with the higher values of the USD, price pressures and struggling to achieve growth. Combined with China's deflation, apprehension about stagflation in the 'West' is problematic.
Financial institutions and day traders have reasons to be nervous. Speculators looking for quick hitting wagers have been hurt by reactions from economic data recently. While it is tempting to say 'disregard the numbers and look at technical charts', the reality is that behavioral sentiment is rather jittery and results in Forex and equity indices are being hampered. As much as optimistic attitudes are needed for investing long-term, clear risk analysis should be used by traders who want to take advantage of momentary swings in value. Dangers reside.
Which brings us to the conclusion regarding the current state of behavioral sentiment and potential signals - Gold, remains around the 2020.00 USD price. The steady range of Gold when looking at a six month chart may be the best of evidence that financial institutions and investors are in a wait and see mode. The 2020.00 level in Gold is more than a curiosity via its technical trading the past handful of months, it points directly to a cautiously optimistic attitude regarding a change to Federal Reserve monetary policy in the future.
In other words, it appears many financial players hold onto the notion the U.S Federal Reserve will eventually turn dovish. The precious metal above the 2000.00 USD mark may indicate a belief the USD is expected to turn weaker. Yet, instead of saying the mid-term, it is almost tempting now to say 'eventually', this because the U.S central bank like the BoE, ECB and BoJ and Reserve Bank of Australia remain docile. Day traders will have to continue to be extremely cautious in the days ahead.
Tuesday, 20th of February, Canada Consumer Price Index - the inflation numbers will be watched by Forex traders as an indication regarding the stubborn CPI results being produced in many nations as a correlation.
Wednesday, 21st of February, U.S FOMC Meeting Minutes - the report will provide insights regarding what the Federal Reserve was thinking during its last monetary policy meeting. However, the results will likely not cause much of a reaction, because last week's CPI readings from the U.S has already altered the trading terrain.
Thursday, 22nd of February, Europe Purchasing Managers Index Manufacturing and Services - the reports which will come from across the E.U and Britain will nudge behavioral sentiment. Slight gains are being looked for in most of the reports, but the outcomes are actually expected to produce lackluster outlooks all below the important ratio of 50.
Thursday, 22nd of February, U.S PMI and Existing Home Sales - the manufacturing and services readings via the PMI results are expected to be negative. If the PMI numbers are weaker than expected this may spark some USD selling in Forex. Housing sales data is anticipated to show a slight rise, which would be intriguing and a potential sign buyers are hoping for cheaper U.S interest rates to develop mid and long-term.
Friday, 23rd of February, China New Home Prices - the housing sector in China plays an instrumental part of Chinese perspectives regarding wealth and economic health. The housing sector in China remains under a huge burden. Falling values in real estate is part of the deflation story in the nation and must continue to be monitored.
Friday, 23rd of February, Germany Final GDP - recessionary pressures are expected to remain strong in the country. Germany is seen as the 'workhorse' of Europe, but economic numbers from the nation have proven troublesome. The German Business Climate reading via the IFO will also be released, a slightly better outcome than the previous month is expected. The EUR/USD could move based on the sentiment generated via the data.
Comments