Saturday October 10, 2015 - 10:22:46 GMT
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Financial Markets Looking For Direction
John M. Bland
Markets Lack Leadership
Financial markets appeared to be looking for direction for the better part of the latest week. Again it looked like forex traders were following the lead of the equity markets. Equities are trying to form a bottom following the latest correction. In the S&P, many will be looking for that index to establish above the 200-day moving average at about 2060 before a bottom is thought to be in place. An obvious initial pivotal line is at 2000. One thing I always follow closely is the equity to Forex correlation trades. Generally the EURUSD is negatively correlated to the S&P, while the USDJPY is positively correlated.
Another source of uncertainty remains Fed policy. The confusing policy stance of the central bank has many investors on hold. One issue with the central bank has been the mixed signals being sent by the Fed governors in the press. It might be helpful if the central bank would come up with a party line and all speakers would adhere to it. The current Fed communication policy has been a source of instability for the markets. It needs fixing.
Forex Market Developments
Trading in the aftermath of the disappointing September and August (revisions) employment reports has been choppy while traders try to figure out where monetary policy is headed in the near-term. Many no longer are expecting a Fed rate hike until 2016, even though Fed speakers still talk about a rate hike "later in the year". Markets feel a policy move on October 28 is off the table. The central bank will see key U.S.employment data for October and November before its December 16 meeting. Unexpectedly strong data before that time could quickly put a December hike back in the frame. Trade in the most recent week has turned volatile.
The upcoming week is an active period for major economic data.
-- Monday October 12, JP/CA/US- Bank Holidays
-- Tuesday October 13, CN- Trade, GB- CPI, DE- ZEW.
-- Wednesday October 14, CN- CPI, GB- Employment, DE- Industrial Output, US- Retail Sales, PPI, Weekly Crude, Beige Book
-- Thursday October 15, US- Weekly Jobless, CPI, Philly Fed
-- Friday October 16, AU- Employment, EZ- Final HICP, GB- Trade, US- Industrial Production, JOLTS Survey, Preliminary University of Michigan
Be sure to refer daily Global-View to see the continuously UPDATED Economic Calendar and the Forex Forum for the complete list of key items (actual data, selected charts, etc.) as they are released.
John M. Bland
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