Hi Folks.
Welcome to what could be one of the biggest trading weeks of the year, at least from Wednesday afternoon onward. The US Fed is set to make another Interest Rate announcement Wednesday afternoon at 2 p.m. my time, and while the market is overwhelmingly expecting a rate cut, there is a large number of big traders who are taking an "I'll believe it when I see it" attitude towards the outcome of the Fed meeting, and this alone could propel a lot of trading over the next two days after release.
And if Powell convinces enough of the Board to hold off one more time from cutting, expect all hell to break loose.
So this could be a fun week to be a trader.
With that in mind, here is the forecast.
SUNDAY: The week starts like most Sundays, with a couple of numbers out of New Zealand (BusinessNZ Services Index at 6:30 p.m.) and Great Britain (Rightmove Housing Price Index at 7:01 p.m. my time...a minute after midnight London time). Neither have any history of making their base currency move about, and the GB number hits when GB is asleep, or should be, so you can safely pass on Sunday trading once again.
MONDAY: Asian/London Session: Frankly, they could cancel every single report due out today and make it an official "No News Day" and my money is on price action still doing exactly what it's going to do anyway. That's how much weight this lineup of reports brings to the charts today. Nada. And don't think the US Fed decision paralysis I mentioned earlier is confined to just the US charts. The saying is The Fed Sneezes and the World Catches Cold. So do not be surprised if there is a lack of activity in both ends of this session. There is some Super Fed Speak set for 2:30 p.m. my time when Lagarde from the ECB speaks at some French rubber chicken dinner event. So even that isn't likely to help price action much.
USA Session: At 8:30 a.m. we get the Empire State Manufacturing Index. That's it. For the entire day. And while I am old enough to remember a time when traders actually paid attention to the Manufacturing Index numbers (Empire, Richmond, Philly Fed) those days are long gone and these numbers are essentially ignored. If manufacturing really returns in full force to the US, then maybe someday we will once again roll out of bed early to make sure we can trade the aftermath. But today is not that day.
TUESDAY: Asian/London Session: The first decent session of the week starts with the less than decent Tertiary Industry Activity number out of Japan at 12:30 a.m. Still a non-mover and likely always will be. Pass. At 2:00 GB releases their version of the NFP called Claimant Count Change, along with some supporting numbers. This one has been very number reliant lately, meaning a miss from expectations means arguably decent price action, and last month was the 4th month in that streak, missing by just one tenth of a point and still seeing 24-25 pips after the drop. So watch the actual number and if it misses by even the smallest amount, start looking for an entry. At 5:00 a.m. we get both the German ZEW Economic Sentiment number along with the Euro ZEW as well. None of these posts create anything worth trading, so Pass. 8:15 CAD Housing Starts can be ignored because at 8:30 a.m. we get CAD CPI in all its variations. I've mentioned in the past this one is good for 20-40 pips most months and last month gave away 31 pips after release like it was Halloween candy. Definitely worth watching and trading. The 10:30 a.m. AUD Conference Board Consumer Confidence number is always an automatic Pass, and all the New Zealand numbers tonight get the same honor. Lastly we have the Japanese Trade Balance number at 7:50 p.m. It rarely posts more than 10-15 pips, and last month was an even bigger disappointment at 6 pips. So a definite Pass.
USA Session: Several numbers on calendar today, and the big one, unfortunately, is Retail Sales (Core and Overall). A couple of years back this one usually came out a day after CPI and PPI and while of slightly lesser importance than those two, would post respectable numbers that would generate enough price action to make them tradeable. But they have been a poor performer overall for a couple of years now Last month I mentioned that because it was dropping at the same time as three or four other numbers it might generate 20 pips, and as it turned out, two of the other numbers posted huge misses to the upside and traders saw 24 pips in the next 30 minutes. None of those other numbers are present today, so expect a sorry performance once again. Pass. The rest of the session is just economic noise and may be safely ignored.
WEDNESDAY: Asian/London Session: 2:00 a.m. brings us the second best trading opportunity of the day with the GB CPI number. Usually good for 20-40 pips, last month we saw 75 pips between the high and low of the 2 a.m. candle, with price making the trip up and down a couple of times. Those are the trades you want to be taking. Most definitely be ready for this one. The rest of the morning session is mostly a dumpster fire except for the CAD Interest Rate Decision at 8:30. Normally good for something in the 20 pip range, the last few decisions were forecast for the rate to remain at 2.75% and that was how it turned out. Today, the forecast is for a quarter point drop to 2.5% and that should generate a bit more action, even though the cut is all but already locked into place. Get ready to hit the trade buttons, CAD traders. Nagel from the German Buba speaks at 1 p.m. (Fed Speak = no trades) and we get the New Zealand GDP q/q at 6:45 p.m. This one looks good on paper but like almost all NZD numbers, disappoints on a regular basis. The one decent month we've seen the GDP actually push prices around, was a huge miss from expectations. Last month the number came in at .8%, just a tick ahead of the expected .7%. Price action result? 5 pips. Pasadena. Finally we get the monthly Australian Employment Change number, a red folder report only in the minds of the FF calendar people. Not usually a big mover, last month's tiny miss generated a whopping 6 pips. So unless you see a number that misses by like 10,000 jobs, pass.
USA Session: A couple of housing numbers at 8:30 a.m. that no one will pay attention to, Crude Oil at 10:30, and then, finally, the number we have all been waiting for, at 2:00 p.m. the US Fed releases their Interest Rate Decision. Bookies have the odds of a cut at 7-1 in favor, and Powell himself hinted at it during a speech in Wyoming at their retreat last month. So probably a cut. But a lot of traders have sidelined their money and will stay out of the market until they know for sure, meaning after the announcement at 2 p.m. No matter what the Fed does, I expect fireworks and lots of them, fueled on by whatever drivel comes out at the press conference at 2:30. Hopefully this will mark the end of the post-summer doldrums we've been seeing so much of the last couple of weeks.
THURSDAY: Asian/London Session: Tonight's session begins much the same way it did on Monday with a bunch of filler numbers that really aren't designed to move price around on any chart, until 7:00 a.m. when GB releases their Interest Rate decision. Currently at 4.00% it is expected to remain there for the time being. Of the three prior rate decisions, two were projected to be cuts and generated 100 and 67 pips. The third was projected to remain where it was prior to the meeting and it generated 45 pips. So either way you can expect some decent price action regardless of what happens with the number itself. The evening numbers are no better than the morning set, except at some point before midnight, Japan releases THEIR Interest Rate Decision. Since it is tentative we can't do much with it except be aware it is out there and could throw a grenade into the middle of the JPY charts. So be careful.
USA Session: 8:30 brings us Weekly Unemployment and Philly Fed Manufacturing Index. It seems Unemployment is always being linked with 2 or 3 other reports lately (last week was CPI which is why you saw a 100+ pip run after release). Today it's Philly Fed, which likely won't do much to help with price action. So maybe you'll see 20-25 pips, maybe not that many. It's probably worth watching simply because Unemployment is back on the Fed's Watchlist. But don't expect another 100 pip move like last week. And after 8:30 it's a steep decline in quality numbers. 10:00 a.m. is the Conference Board Leading Index number (extremely hard PASS), NatGas at 10:30 and at 4:00 p.m. we get the TIC Long Term Purchases, which measures the difference between the amount of securities bought by foreign entities versus US based buyers. Interesting concept but worthless as a trading number.
FRIDAY: Asian/London Session: We start this last session of the week with the Japanese press conference after their rate decision from last night. Again, the timing is a big surprise as they don't bother giving us a start time, so be careful JPY traders. At 2:00 we get the German PPI along with the GBP Retail Sales and Public Sector Net Borrowing. None of those generate more than 5-10 pips so even as a group they are a hard Pass. Finally, at 8:30 a.m., we get the CAD Retail Sales numbers, Core and Overall. A beige folder report, this one has been declining in terms of pip count after release for a few months now, so don't expect much. But given the complete lack of tradeable news for the day, it might actually turn into something worth watching. Probably not but you aren't going to be distracted by anything else this morning, so take a look. Just don't count on much.
USA Session: We started Monday with one lousy report (emphasis on the "lousy" part) and to close the week, we one-up Monday by having NO reports today. So enjoy the early start to your weekend.
See you back here next week.
Jeff
