Hi Folks.
Welcome to the Summer Doldrums, a term I did not invent but one I use a lot during July and August (and honestly, several times in June this year). For Forex traders it means most, if not all of Europe has left home and is now reading a book on a beach somewhere. This means both Volume and Volatility are missing from the markets which leads to a lot of trade signals that go nowhere. For Futures traders, we get a little more volume than the FX folks, but volatility tends to be lower over the month of August. You'll still see some nice price runs from time to time, but don't expect to see the back-to-back-to-back-to-back sort of 10 point runs we get the rest of the year.
What that means is FX traders are better off taking the month off as well, while Futures traders just need to reel in their expectations a bit (or a lot).
But above all, it means protect your capital at all costs. Don't blow up an account thinking it's going to be trading as usual over the next 4-5 weeks and place targets accordingly. Smaller consistent wins are going to be the order of the day, and once Fall gets here (well, everywhere else except Florida) you can start scouting out those 10 and 20 point winners.
Ok, end of sermon. On with the Forecast.
SUNDAY: A pair of Yellow Folder numbers, one from Japan (monetary Base y/y) at 7:50 p.m. and not likely to move prices any, and one from Australia (MI Inflation Gauge m/m) at 9:00 p.m. which is also not a source of tradeable price action, and also has the distinction of being from a country with an unnamed Bank Holiday today (although FF notes most banks don't observe this one, whatever it is) but scheduling a number release when the banks are closed for the day tells you all you need to know about how important they think the MI Inflation Gauge is.
MONDAY: Asian/London Session: We start the real week of trading with a Red Folder offering from Switzerland, the Swiss m/m. As noted in previous forecasts, not all CPI numbers are created equal to the US version, and the Swiss seem to go out of their way to prove it. The last 3 months register 13, 7 and 15 pips in the half hour after release. Not even close to being worth the risk of placing a trade. The saddest part is, from here it just gets worse. 3:00 a.m. Spanish Unemployment has been so bad for so long, n one even pays attention to it any longer. Swiss Manufacturing PMI at 3:30 a.m. and of the last 3 months numbers, 2 cracked 20 pips, so maybe this one is worth a watch. 4:30 a.m. brings the Sentix Investor Confidence number and it rarely if ever breaks 20 pips, so pass. Canada has a bank holiday today as well (remember the Secret Australian Bank Holiday from last night?) At least they gave it a name: Civic Day. Tonight's numbers are even more unimpressive, so pass on all of those.
USA Session: At 10:00 we get Factory Orders, which has never been behind any sort of measurable price action, and a floating Loan Officer Survey, which has had a similar lack of impact whenever it finally decides to show its face. At least we have a number dropping on a Monday, although I could say there is no news today and be technically correct. Huge Pass on both.
TUESDAY: Asian/London Session: We start with a pair of French reports at 2:45 a.m. (Budget Balance and Industrial Production). This is the first time I've seen these two drop at the same time, and they are pretty much unrelated. Over the last 3 months neither one posted anywhere near a 20 pip move as a standalone report. Maybe together they can muster the momentum to break 20, but given it's summer, I seriously, seriously doubt it. So pass. After that is the Final Services PMI number from across the continent )Spain 3:15; Italy 3:45; France 3:50; Germany 3:55; Eurozone 4:00; Great Britain 4:30). Usual rules apply. Alone, none of these amount to much but as a group might start a small trend. So watch for the trend. Trend? Trade in the direction of. No Trend? No Trade. Eurozone PPI at 5:00 a.m. usually amounts to little. Canadian Trade Balance at 8:30 is one of the lesser numbers (ignore the massive candle from last month as it was the US Nonfarm Payroll that propelled the USDCAD to greater heights, not this number). Evening numbers all come from New Zealand, and the Red Folder Employment Change (think Non Farm Payroll but nowhere near as good) looks good in Red but rarely manifests a 10 pip move So no.
USA Session: Trade Balance at 8:30. It's beginning to move in the right direction but so far, that doesn't translate into pips. So pass. The Final Services PMI at 9:45 is universally ignored in favor of the 10:00 a.m. ISM Services PMI, which does have a history of moving the chart around and should be worth watching. Ignore that Tentative ISM/TIPP Economic Optimism report since they can't be bothered to release it at the same time each month, thus the Tentative. And when it does finally come out, markets ignore it, so you aren't missing anything. Lastly we get the API Oil Report after the oil market is done for the day.
WEDNESDAY: Asian/London Session: A day composed almost entirely of Yellow Folder numbers, and they are pretty much all deserving of that lowly status. The only exception (in terms of folder color) is the New Zealand Inflation Expectations q/q number at 11:00 p.m. which FF lists as a Beige Folder, meaning moderately important. No idea who thinks this, as the last 3 numbers have landed in the 5 pip range. So much for the Beige Folder status. Pass.
USA Session: Crude Oil at 10:30, Fed Speak at 12:45, a Bond Auction at 1:01, and more Fed Speak at 2:00. Aside from Oil, a whole lotta nothing.
THURSDAY: Asian/London Session: Japan leads us off with a Leading Indicators number at 1:00 a.m., but unfortunately this number rarely cracks past 10 pips, so Pass. Some German numbers at 2:00 with not much history of moving things around, and the rest of the early Euro numbers are junk. However, at 7:00 a.m. the Brits have their Interest Rate Decision and they are expected to cut by another quarter point, from 4.25% down to 4.00%. If they follow through with the cut, you'll see some decent action. If they balk and leave the rate as is, you'll see a LOT of price action, as everyone is already betting on the cut and there will be a mad scramble to start hedging bets. At 10:00 Canada releases the Ivey PMI number, which FF says is a Beige Folder report. Like most FF color decisions, this one is just as baffling as the others. Rarely a 20 pip trade and not at all in the last 3 months. So pass. We end the evening with Japan's Household Spending at 7:30 p.m. (no big deal) and the combination of bank Lending and Current Account at 7:50 p.m. There is also the BOJ Summary of Opinions related to their last Interest Rate decision, but it's a report, not a number. It could have some effect on price action, depending on contents, but it's not anything we can work with. Just know it's out there. As for the 2 7:50 p.m. numbers, they come out as a pair regularly and just as regularly fail to reach 20 pips in price action. So pass.
USA Session: At 8:30 a.m. we get the Weekly Unemployment number, along with a couple of lesser numbers with no history of sparking any price movement. So it all hinges on the Weekly Unemployment number, and honestly, this one hasn't been carrying its weight for a while. 3 weeks ago it was paired with Retail Sales and a bunch of other numbers and made an honest showing of 35 pips. But two weeks ago it was a standalone number and only coughed up 17 pips, and last week paired with the Core PCE barely made 18 pips. So this week isn't looking all that promising. Given we have so little to work with this week, maybe keep an eye on your charts at 8:30 just because we don't have anything else going on of note. But don't be surprised if 8:30 comes and goes and the markets just yawn. At 10:00 we get Wholesale Inventories and some Fed Speak (pass on both); 10:30 is NatGas; 30 year Bond Auction at 1:01 and Consumer Credit at 3 p.m., which is long after almost everybody has gone home, particularly in August. Pass.
FRIDAY: Asian/London Session: Japan starts us off with the Economy watcher's Sentiment number at 1:00 a.m., which rarely moves more than 15 pips. Pass. At 3:00 a.m. we get the Swiss SECO Consumer Climate number, which does little to nothing for price action, even on days when they release it a minute early, which they did the last 2 months in a row. So be aware of that if you plan to trade it or watch it...it could already be out by the time you open the chart. 7:15 a.m. is British Fed Speak and at 8:30 a.m. the Canadians release their Employment Change number (think NFP). I've mentioned in the past that most of the bigger Canadian numbers are known to really push the USDCAD chart around some, and you'd think this would be one of them. But in the last 3 months, twice this number came out alone, and in the third month it came out at the same time as the US NFP. The pip movement in the 30 minutes after release totaled 15, 35 and 18 pips. Guess which one is the pip count for the date the NFP came out at the same time? The question sort of answers itself. So maybe if you don't have anything else going on, take a shot on this one. But be ready to bail at the first sign of trouble so you can grab at least a handful of pips. Just probably not 20 or more.
USA Session: Fed Speak at 10:20 a.m. That's it. I told you it was summer doldrums time.
See you next week.
Jeff
