Market Update
The U.S. stock market made fresh five year highs today as the uptrend in price action continues. Unless a meaningful catalyst arises which sparks a sell off, the market should continue grinding higher. There are plenty of potential catalysts out there, but it's dangerous to trade them before they come to fruition.
Currencies
Australian CPI has come in lower than expected: Actual 0.2%, Expected 0.4%, Previous 1.4%. That should make AUD/USD the best currency pair to short if the market turns lower. Alternatively, NZD/USD should be the most attractive pair to go long if the market goes higher. Stops have accumulated above the swing highs on the daily charts in both of these currency pairs, so if the market begins to explode to the upside it would be dangerous to short these pairs before the stops get wiped out. Also, it pays to keep an eye on USD/JPY and the Japanese stock market. If Japanese stocks begin selling off, risk appetite in Asia should be dampened quickly leading to selling pressure on the Aussie and Kiwi. (Remember, there almost as many retail FX traders in Japan then in the rest of the world combined! They can have a significant impact on price!)
Potential Catalysts This Week
- U.S. political strife. The House Republicans are scheduled to vote their "no budget, no pay" bill through tomorrow. If Harry Reid says the bill has no chance of passing the Senate, traders may begin to price in gridlock.
- Earnings. (Apple reports tomorrow.)
- Chinese or German Flash Manufacturing PMI. (The print would have to be very bad.)
- US unemployment claims: Last week's print was 34K better than estimated. If we see another really good print the market could focus on the 6.5% unemployment rate tied to the end of QE.
- A possible flare up in the dispute between China and Japan over the Senkaku islands.
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