Volume Spikes and Friday Key Reversals Indicate US Dollar Correction

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Volume spikes (on futures) and daily key reversals (CHFJPY, EURJPY, EURUSD, NZDUSD and USDCHF) suggest that a larger corrective move is probably underway. The implications are for USD and JPY weakness, strength in stocks and commodities, and weakness in US Treasuries. As written Friday, keep it simple; identify key levels and know what you’ll do when those levels are reached.
Euro Futures Continuous Contract (June 2012)


Prepared by Jamie Saettele, CMT
Friday’s volume was last seen on September 9th. A countertrend rally of nearly 400 pips materialized before the decline resumed. Expect something similar here. Resistance is expected at the breakdown level just above 12600 (12620/40).
Australian Dollar Futures Continuous Contract (June 2012)

Prepared by Jamie Saettele, CMT
Volume on the futures contract reached its highest level since October 4th. The rally that ensued at that point is unlikely to be duplicated but one should expect a move back towards 9900/40 before selling pressure reemerges. NZDUSD (not shown) carved out a key reversal Friday and expectations are for a move back towards at least 7680.
E-Mini S&P 500 Continuous Contract

": GDP US Thursday, Manufacturing ISM and NFP Friday highlight the week

Great attention was paid to the prospects worsening of growth for Asia and Europe, but a multitude of highly significant data of the United States at the end of the week will steal the spotlight, would it momentarily. However, with the recent comment by Federal Reserve, poor prints this week might further quantitative easing.
05/29 Tuesday / / 12: 00 GMT: EUR German Consumer Price Index (may P)
Pressure on prices in the largest economy in Europe seem to stabilize, with the release of may Consumer Price Index preliminary little change of figures from April. According to a Bloomberg News study, on a monthly basis, prices contracted by 0.1% in May (on a harmonized European Union unchanged price adjustment, m/m); on an annual basis, the CPI is stable to 2.1 per cent in May (on a harmonized European Union fit, unchanged price 2.2% y/y). European leaders have called for more action to help the nations who have difficulties of periphery, but the rate of interest by the European Central Bank is not removed because of fears of inflation in Germany. A low footprint will likely support the EUR; a strong impression will indicate the ECB is unlikely to adjust its policy and is thus negative for the EUR the key pair to monitor is EURGBP.
05/31 Thursday / / 12 h 30 GMT: gross domestic product of the United States USD (1 q S)
The second version of the headline quarter growth first reading in the United States will be disappointing. The Thursday report is expected to show that US GDP grew at a modest rate of 1.9% in the first quarter, decline in initial reading of 2.2 per cent. It is also not surprising in view of the fact that two of the largest trading partners of the United States - China and the - the euro faced down expectations for growth through the first months of the year. In light of the recent comments by Federal Reserve officials, it is clear that a third round of quantitative easing - the program which inflates the prices of assets, that the yields of the Treasury Board and dilutes the U.S. Dollar - is very much on the table. A low footprint could trigger a speculation more QE is on the way, which will be negative for the USD. a strong impression will keep the Fed on the sidelines, which will be positive for the USD. The key pair to monitor is USDJPY.
06/01 Friday / / 01: 00 GMT: Chinese Yuan PMI manufacturing (may)
Data on China's growth during the last few weeks have been largely disappointing, and report manufacturing may do little to address these concerns. According to a Bloomberg News study, the PMI manufacturing index will be 51.9 53.3 in April. This would be the biggest decline in a month-(1.4) since November-December 2010-(1.3). The preliminary reading of the private sector, HSBC PMI Flash, came to 48.7 for may, which suggests that a disappointment is indeed on the horizon. A low footprint will be bearish the AUD and NZD; a strong impression will be bullish for the AUD and the NZD. Key pairs to monitor are AUDJPY and NZDJPY.
06/01 Friday / / 12 h 30 GMT: USD non-farm payroll report and the unemployment rate (may)
It is the most important event on the record this week. After an unusually warm winter in which the US economy was on average employment growth of 246 K from December to February, growth in employment over the past months has been poor, with an average of 134.5 k in March and April. The period of seasonal reaction appears, with economists forecasting growth of 150 K in May. This could be helped by the growth of the wage of 160 K. As a result, the unemployment rate is planned to 8.1%. If the employment growth starts to pick up back - which is probably recent data market work weekly and monthly releases - while the Federal Reserve is likely to move away another package QE. A key aspect of the report to monitor is the participation rate, which is currently a minimum of three years. A low footprint could trigger a speculation more QE is on the way, which will be negative for the USD. a strong impression will keep the Fed on the sidelines, which will be positive for the USD. The key pair to monitor is USDJPY.
06/01 Friday / / 14: 00 GMT: USD ISM manufacturing report (may)
Manufacturing activity in the United States has continued to rise in may, according to the estimates provided by Bloomberg News. According to a survey, may Manufacturing ISM index shows expansion to 53.8, but below the April reading of 54.8. Read more 50.0 signals of growth; Thus, may report should show good growth at a slower pace. However, this would be the third consecutive reading above 53.0, a series that has not taken place since April-June 2011, when the index showed the prints of 59.7 (April), 54.2 (may) and 55.8 (June). In light of the recent comments by Federal Reserve officials, it is clear that a third round of quantitative easing - the program which inflates the prices of assets, that the yields of the Treasury Board and dilutes the U.S. Dollar - is very much on the table. A low footprint could trigger a speculation more QE is on the way, which will be negative for the USD. a strong impression will keep the Fed on the sidelines, which will be positive for the USD. The key pair to monitor is USDJPY.
Rate of probabilities of hiking / expectations of base Points
See DailyFX calendar for a full list, calendar and the forecast for the next few economic indicators consensus.

TradeTheNews.com European Market Update: Risk appetite finds numerous factors to feast upon in session; Greek PSI results set for release on Friday at 0600 GMT

Thursday, March 08, 2012 5:45:25 AM TradeTheNews.com European Market Update: Risk appetite finds numerous factors to feast upon in session; Greek PSI results set for release on Friday at 0600 GMT***Economic Data***

- (JP) Feb Preliminary Machine Tool Orders -8.6% v -6.9% prior
- (FR) France Q1 Final Non-Farm Payrolls Q/Q: -0.1% v -0.2%e v -0.2% prelim
- (FR) Bank of France Feb Business Sentiment: 95 v 96e
- (FR) France Jan Trade Balance: -€5.3B v -€5.2Be
- (CZ) Czech Feb Unemployment Rate: 9.2% v 9.1%e
- (CZ) Czech Jan Trade Balance (CZK): 29.6B v 22.0Be
- (TR) Turkey Jan Industrial Production WDA M/M: -3.1% v +2.5% prior; Y/Y: -1.3% v +3.8% prior; Industrial Production NSA Y/Y: 1.5% v 3.5%e
- (CH) Swiss Feb CPI M/M: 0l.3% v 0.2%e; -0.9%e v -1.0% prior
- (CH) Swiss Feb CPI EU Harmonized M/M: 0.1% v 0.1%e; Y/Y: -1.2% v -0.7%e
- (NL) Netherlands Feb CPI M/M: -0.8% v 0.7%e; Y/Y: 2.5% v 2.4%e
- (NL) Netherlands Feb CPI EU Harmonized M/M:1.0% v 0.9%; Y/Y: 2.9% v 2.8%e
- (SE) Sweden Jan Average House Prices (SEK): 2.322M v 2.078M prior
- (IC) Iceland Q4 GDP Q/Q: 1.9% v 4.4% prior; Y/Y: 2.7 v 3.8% prior
- (GR) Greece Dec Unemployment Rate: 21.0% v 20.9% prior (record)
- (ZA) South Africa Q1 BER Business Confidence: 52.0 v 38.0 prior
Fixed Income: - (HU) Hungary Debt Agency (AKK) sold Total HUF49B vs. HUF40B indicated in 2015, 2017 and 2022 Bonds
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations***
- Brazil Central Bank cuts rate by 75bps to 9.75% (more than expected)
- Rumors that PBoC could cut RRR and/or widen its currency trading band
- Australia Unemployment data softer than expectations
- Japanese current account hits record deficit
- Greek PSI participation deadline later today; EU official remain optimistic on the take-up; Results set for release on Friday at 0600GMT
- No surprises expected at BOE and ECB monetary policy meetings
Equities: FTSE 100 +1.1% at 5853, DAX +1.6% at 6780, CAC-40 +1.7% at 3449, IBEX-35 +1% at 8236, FTSE MIB +1.1% at 16,572, SMI +0.40% at 6129
- European shares rose ahead of Greek debt-swap deadline as rumors were rampant on the market that Greek PSI acceptance is high. ECB is also expected to announce its interest rate decision today expected to be unchanged at 1.0%. Economists expect bank to raise the inflation forecast above the 2% price-stability threshold which would limit further rate cutting. US economic data, namely the initial jobless claims, are also expected during NY morning.
- EADS [EAD.FR] was up following its strong quarter. Deutsche Post [DPW.DE] also rose following its results. Company also raised its dividend and predicted further growth in 2012 revenue. Air France [AF.FR] reported a wider loss than expected, even though revenues came in stronger. Company noted that H1 would be below previous year results due to a rising fuel bill and that FY12 remained uncertain
Speakers: - Greece gov't said to announce PSI results Friday, March 9th at 01:00 ET (06:00 GMT)
- German Econ Advisor Bofinger commented that the Greek debt swaps would go through but the country's debt burden would remain huge. He stressed that Greece needed to rethink its strategy and implement a real debt relief plan over the next year
- Former ECB member Stark commented in the German press that the quality of ECB balance sheet was alarming Stark noted that the Eurosystem's balance sheet was not only gigantic in its dimension but also alarming in its quality. He added that the structure of the balance sheet was a cause for concern because increasingly short-term debt claims were being replaced by long-term ones and this would make it more difficult for the bank to reverse its loose monetary policy
- Spain regions said to be unable to meet deficit target (This would contradict weekend press that all 17 regions would target budget deficits of 1.5% of GDP.
- SNB's Jordan commented that diversifying its currency portfolio was an ongoing debate but had yet to look at South Korean or Russian currencies at this time
- Hungary IMF representative Fellegi commented that the Govt sought an EU/IMF agreement asap and stresses that it had no "plan B'. The EU/IMF discussions were closely linked to infringement and it would discuss central bank law when it met the IMF in Washington DC next week. He added that Hungary had not received formal prerequisites of EU/IMF talks and that it would need such written prerequisite. Lastly he commented that Hungary would make the legislative changes needed for EU/IMF
- JP Morgan was said to submit proposal to China Advisory Group to promote CNY currency overseas use. JPM proposed that CNY be used for European Investment Bank (EIB) investment and debt offering
- S&P commented on China and saw increasing risks for developers with a negative rating action on Chinese developers likely to rise over the next 6 months.
- UN Food & Agricultural Organization (FAO) reports Feb Food Price Index at 215.3 v 212.8 prior. The FAO lowered its 2012 world wheat production to 690M tons from 700M tons prior
Currencies:
- Risk appetite was switching into a higher gear throughout the European morning. The focus remained on the Greek PSI and also on the ECB monthly press conference.
- There were numerous factors attributed to the jubilant sentiment and this paved the way for a weaker USD and JPY currency against the European pairs. There was market chatter circulating of a higher PSI acceptance level after reports surfaced that the debt swap results would be released on Friday, March 9th at 06:00 GMT. Earlier today there were rumors of a potential China PBoC RRR cut and lastly a press report from Wed that the Fed officials was said to be considering a sterilization option for potential future bond purchases was getting further circulation this session.
- Risk appetite had momentum coming into the session after various EU officials suggested sufficient support for Greece PSI and the country would to be able to enforce CAC (collective action clauses).
- The ECB press conference was likely to have Draghi throw the ball back to EU govts for reforms after the central bank performed the second 3-year LTRO operation last month.
- The EUR/USD was holding above the 1.32 level as the NY morning approached while EUR/JPY cross tested 107.60
Political/ In the Papers:
- The ECB's Mersch was said to be the one favored to replace Gonzalez-Paramo. The press article noted that Mersch is backed by Germany, France and other members that include Finland, Austria and Netherlands. Naming Mersch to the post would mean supporting criticism voiced by Bundesbank's chief Jens Weidmann. He has stated the ECB very carelessly handed hundreds of billions of euros to ailing nations while accepting dubious guarantees in return.
- Following reports from the 6th of March that Spain had reached an agreement with its regions on budget cuts, Spain press circulated reports that the regions cannot meet the deficit targets.
- The Telegraph analyzes the private sector holders of Greece's debt. Of the estimated €206B in debt, hedge funds and retail investors may hold about €54B, Greek banks €42B, Greek social security funds €20B, other Greek domestic accounts €10B, other European banks €30B, European insurers €10B, other European institutions €15B, other overseas and miscellaneous holders €25B.
- Volumes in foreign currency trading declined to six-year lows, as investors have become increasingly nervous from trading the euro, and central banks continued to maintain a hold on the value of their currencies - FT
- The Irish statistics department announced that employment increased by 10,000 in Q4 of last year for the time since 2007 although the average employment level for the entire year was approximately 38,100 lower year-on-year.
***Looking Ahead***
- (IS) Israel Q4 Preliminary GDP Annualized: No est v 3.2% prior
- 6:00 (CL) Chile Feb CPI M/M: 0.2%e v 0.1% prior; Y/Y: No est v 4.2% prior; CPI Ex Perishables & Fuel M/M: No est v 0.1% prior
- 6:00 (ZA) South Africa Jan Manufacturing Production M/M: No est v -1.3% prior; Y/Y: No est v 2.4% prior
- 6:00 (DE) Germany Jan Industrial Production M/M: +1.1%e v -2.9% prior; Y/Y: 1.1%e v 0.9% prior
- 6:30 (PL) Poland to sell up to PLN3.5B in 4.75% Oct 2016 Bonds
- 7:00 (UK) Bank of England (BOE) Interest Rate Decision: Expected to leave Interest Rate unchanged at 0.50%; Maintain Asset Purchase Target unchanged at £325B
- 7:30 (US) Feb Challenger Job Cuts Y/Y: No est v 38.9% prior
- 7:45 (EU) ECB Interest Rate Decision: Expected to leave Interest Rate unchanged at 1.00%
- 8:15 (CA) Canada Feb Housing Starts: 200Ke v 198.0K prior (revised from 197.9K)
- 8:30 (CA) Canada Jan New Housing Price Index M/M: 0.1%e v 0.1% prior; Y/Y: 2.5%e v 2.5% prior
- 8:30 (US) Initial Jobless Claims: 351ke v 351K prior; Continuing Claims: 3.40Me v 3.418M prior
- 8:30 (EU) ECB chief Draghi holds monthly post rate decision press Conference; March staff projections
- 9:00 (CA) Bank of Canada Interest Rate Decision: Expected to leave Interest Rate unchanged at 1.00%
- 9:00 (MX) Mexico Feb Consumer Prices M/M: 0.3%e v 0.7% prior; Y/Y: 4.0%e vs. 4.1% prior; CPI Core M/M: 0.5%e v 0.5% prior
- 9:00 (BR) Brazil Jan CNI Capacity Utilization: 81.7%e v 81.3% prior
- 9:30 (US) Commercial Paper Outstanding
- 10:30 (US) Weekly EIA Natural Gas Inventories
- 12:00 (DE) Germany Fin Min Schaeuble attends podium on Theme of Europe: Berlin
- 15:00 (GR) Deadline for bond holders to participate in Greece PSI debt swap
- 16:00 (KR) South Korea Feb Producer Price Index Y/Y: No est v 3.4% prior
- 18:00 (PE) Peru Central Bank Interest Rate Decision: Expected to leave the Reference Rateunchanged at 4.25%
- 20:30 (CN) China Feb Producer Price Index Y/Y: 0.1%e v 0.7% prior
- 20:30 (CN) China Feb Consumer Price Index Y/Y: 3.4%e v 4.5% prior Legal disclaimer and risk disclosure All information provided by Trade The News (a product of Trade The News, Inc. "referred to as TTN hereafter") is for informational purposes only. Information provided is not meant as investment advice nor is it a recommendation to Buy or Sell securities. Although information is taken from sources deemed reliable, no guarantees or assurances can be made to the accuracy of any information provided. 1. Information can be inaccurate and/or incomplete 2. Information can be mistakenly re-released or be delayed, 3. Information may be incorrect, misread, misinterpreted or misunderstood 4. Human error is a business risk you are willing to assume 5. Technology can crash or be interrupted without notice 6. Trading decisions are the responsibility of traders, not those providing additional information. Trade The News is not liable (financial and/or non-financial) for any losses that may arise from any information provided by TTN. Trading securities involves a high degree of risk, and financial losses can and do occur on a regular basis and are part of the risk of trading and investing. Daily Forex Market News
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