Trading Tips and General briefing for this week
Stock markets and high yielding currencies managed to stabilize throughout last we investors took profits on short positions, allowing oversold market conditions to attempt a reset. Risk sentiment has been the main driver of market activity for most of this month and uncertainty arguments with respect to the future of the Eurozone has brought an intense round of buying activity into safe haven assets such as the US Dollar hard commodities, and consumer staple stocks. We did see something of a reversal last week, however, as evidence of progress in the Greek debt situation began to surface. The main question going forward will be the extent to which this short term rally can continue, as the argument can easily be made that the latest rallies are nothing more an an upward correction in a longer term downtrend.
General economic uncertainty and negative risk sentiment will likely remain one of the main drivers of investor bias and price direction but we could see some changes this week, as the significance of the next round of macro economic releases will be difficult to ignore. Most of the significant numbers will come out of the US, so as long as the Eurozone can keep from providing the markets with any major surprises, equity markets and high yielding currencies will at least have an opportunity to continue last week’s rally.
Markets Look Ahead to US Non Farm Payrolls
To start next week markets will see holiday thinned volumes as US trading is closed on Monday but when trading activity returns to full strength directional guidance will be given from the Dallas Fed manufacturing and Consumer Confidence surveys and this will be followed by the Pending Home Sales report on Wednesday. The real action starts on Thursday, however, as GDP growth data is released along with the Chicago PMI Report and the ADP Employment survey. The GDP figures are expected to show minor declines but the PMI and ADP figures are expected to show increases.
The ADP report is likely to get most of the attention, as this is generally viewed as a precursor for the Non Farm Payrolls report, which will be released on Friday. The Payrolls numbers will be the highlight of the week and define the level of volatility that will be seen in the coming sessions. Market expectations are calling for a monthly increase of 150,000 jobs, anything lower than this will likely be a drag on risk sentiment.
My Trading Recommendation in 50 Words:
Recent declines in the USD/JPY are presenting some excellent risk to reward opportunities, with prices unlikely to fall much further. Fibonacci support at 79.05 gives me a good entry for a one month call option, looking for a move back to 81.50 in the coming weeks.