Fundamental Analysis And Forex Calendar For October 28 ~ November 1, 2013

Weekly Fundamental Analysis Review

Investors shift their focuses back to the fundamentals this week as the drama in Washington came to an end last week.  BLS released the long-delayed Nonfarm Payroll report on Tuesday, which once again confirmed that there will be no QE tapering in the upcoming Federal Reserve meeting this week, as employment condition has not improved since September.  Of course, the global market was obviously happy over this new development, as bad news in the U.S. is actually good news for the market due to the uninterrupted supply of stimuli by the Feds is expected through 2013.

The September Non-farm payrolls came in at +148K, v 180K of expectation, which was 32K below market expectations, but when counting the +24K upward revision from the August release, the total impact from a 3-month point of view was negligible to say the least… However, the Unemployment Rate fell to 7.2%, which is the lowest level since November 2008.  Needless to say, with the market still unsure about the effects of the Participation Rate, the only thing that’s sure at this time is that this release is not good enough for the Fed to taper.

In China, the Shanghai Composite fell 2.8% this week on PBoC reluctance to conduct open market operations.  Chinese money market rates rose all week long, with the overnight Shibor at its highest levels since June.  PBoC is expected to resume liquidity operations next week, but many analysts are calling this as a warning shot by the central bank to prepare the market for a tighter liquidity condition in the future to fight against rising inflation in China.

In Japan, the September CPI break out to +1.1%, ahead of expectations. However, the main reason for the surprise was the rapid increase in food prices – Core CPI, ex food inflation, remained subdued, though it posted its first non-negative number since 2008. The September trade numbers indicated another big trade deficit, the 15th in a row. Shipments from China, Japan’s largest trade partner, rose by 30.9% to a record high of ¥1.68T

In conclusion, USD is expected to be under pressure this week, with the majority of the market believing that the FOMC will not taper in October.  EUR is likely to be in demand, not only it broke the resistance level of 1.37000, but it’s now possibly heading to the 1.4000 level, and all it needs is a catalyst, which may come in the form of this week’s FOMC Statement, especially if the Feds were to acknowledge a weaker economy.  GBP is likely to remain in demand, with the MPC now being a bit more hawkish, we are going to see more traders going LONG if we get positive news out of UK this week.  JPY is likely to remain in a tight range, although the long-term downtrend remains unchanged, which means I’d be looking to SELL on rally.  CAD, AUD, and NZD are likely to follow market sentiment, and we could see risk appetite sentiment this week, which may support them.  However, we do have RBNZ rate decision this week, so I’d definitely pay attention to that.  CHF is at a strong resistance area against the USD, I would expect to see some weakness, especially in the long run, therefore I wouldn’t mind taking a long-term term trade to SELL the currencies against USD if market were to re-test the resistance again.

Forex Calendar For October 28 ~ November 1, 2013

1. Tue October 29, 2013 – 8:30am EST – US Core Retail Sales
2. Wed October 30, 2013 – 8:15am EST – US ADP NFP
3. Wed October 30, 2013 – 8:30am EST – US Core CPI
4. Wed October 30, 2013 – 2:00pm EST – US FOMC Interest Rate
5. Wed October 30, 2013 – 4:00pm EST – NZ RBNZ Interest Rate
6. Thu October 31, 2013 – 8:30am EST – CA GDP m/m
7. Fri November 1, 2013 – 5:28am EST – UK Manufacturing PMI
8. Fri November 1, 2013 – 10:00am EST – US ISM Manufacturing PMI