Forex Market Review And Upcoming News Calendar For November 4 ~ 9, 2012

It was a quiet week considering that US markets were closed for two days due to Hurricane Sandy, the only other time markets were closed for two consecutive days due to weather-related factors was more than a century ago in 1888. Markets opened again on Wednesday, however most traders were focusing on Friday’s NFP for direction as the market remained in a trading range during early week.

In US, the October jobs report was the main focus as traders were pleasantly surprised on Friday for the much better than expected release figure, +171K versus 120K.  Although the unemployment rate edged up to 7.9% from 7.8% in September,  the overall sentiment was rather positive for the USD as traders pushed European currencies lower until the end of the trading session on Friday.

In Europe, manufacturing PMI data for October was flat or slightly higher than September’s recessionary levels, but the key driver for the market was the never ending supply of rumors and speculations on the future of Greece, Spain’s bailout request date, and of course, whether or not Cyprus could reach the November 12 deadline to submit their bailout request to be considered for this year.  EUR/USD broke out to the lowest levels in weeks due to the uncertainty of the Eurogroup conference call on Greece in mid-week as the coalition government began in-fighting and threatened the vote for the new package of austerity needed to obtain the next tranche of funding. Disappointing manufacturing PMI data from Spain also highlighted the extent of the economic contraction in the country, meanwhile PM Rajoy kept the market on its toes guessing when Spain will finally make he request for bailout.

In China, both official and HSBC Manufacturing PMIs were better than expected, with the official figure returned above the 50 expansion threshold for the first time in months.  Market is now speculating that once the political transition is over in the next few weeks, China will announce some sort of stimulus as the last RRR reduction was over five months ago.

In the commodities space, crude prices declined to below $85 by end of the week, marking a new three-month low. Reasons for crude weakness were attributed to dollar strength after the US NFP release, exacerbated by the uncertainty in the eurozone.  In addition, there was another round of SPR release rumors late in the week which added more pressure to crude.

In Japan, JPY continued to soften after the BoJ press conference early week which outlined plans to further ease in their future policies.  JPY became the primary target of sell-offs on Friday as better US jobs data helped risk sentiment and drove safe-haven JPY lower; with BoJ expanded its asset purchase program by ¥11T to ¥91T on Tuesday, marking an unprecedented second consecutive month of expansion of Quantitative Easing by the BoJ, the USD/JPY topped the ¥80 handle and rose to a 6-month high above ¥80.65 on Friday.

In conclusion, I believe this is a crucial week for the Euro as the Eurogroup meet on the 8th to discuss Greece, should the discussion break down, then EUR will probably break the low end of the range and move beyond the 1.2800 level, but more than likely Greece will get the next tranche of payment, which means we may have a good opportunity to position BUY EUR on dips, or as close as it gets to the low end of the range, just around the 1.2800 level.  GBP should also be a buy on dips, as I believe recent news out of UK shows positive signs for the sterling, although I would recommend only enter at or below the psychological 1.6000 level.  JPY is definitely a sell currency, especially after the BoJ press conference; I’d recommend to buy all JPY crosses except for EURJPY, as there are several high-impact news scheduled out of Europe this week.  CAD is finally returning to strength, which means we should be BUYING CAD against other currencies, such as JPY… The key is to buy on dips, so patience is definitely recommended.  CHF lost sharply against USD last week, which means we may get a chance to buy the currency if the situation in Europe improves… USD is a neutral to bullish currency, but a strong US economy is usually not good for the USD, and with the Presidential election scheduled on Tuesday, I’d recommend to use caution. Most analysts agree that if Romney were to win, we should see strong USD; if Obama were to win, then USD should weaken… I’d recommend to wait for the election results before taking a long-term trade on USD.  AUD and NZD are both likely to remain neutral to slightly bearish this week, especially with RBA expected to cut rates further.  AUD will probably drop a bit, but from a long-term point of view, I’d probably look to buy the AUD around the 1.02 level since China may surprise the market and announce new stimulus measures.

Here’s the list of tradable releases for the week:

  1. Mon Nov. 5, 2012 – 4:28am EST – UK Services PMI
  2. Mon Nov. 5, 2012 – 10:00am EST – US ISM Non-Manuf. PMI
  3. Mon Nov. 5, 2012 – 10:30pm EST – AU RBA Interest Rate
  4. Tue Nov. 6, 2012 – 10:00am EST – CA IVEY PMI
  5. Wed Nov. 7, 2012 – 7:30pm EST – AU Employment Change
  6. Thu Nov.8, 2012 – 7:00am EST – UK BOE Interest Rate
  7. Thu Nov. 8, 2012 – 7:45am EST- EU ECB Interest Rate
  8. Thu Nov. 8, 2012 – 8:30am EST – EU ECB Press Conference