It seems to me over the weekend we have had a lot of news that is focusing the markets attention to the pending fiscal cliff. Although ultimately I think that U.S. lawmakers will find some sort of “mini deal” recognizing the severity of the implications of the fiscal cliff, the risk at the moment (in my opinion) is public sentiment shifting weighing both on the markets (nervousness) and employers as they weigh in the risks of the possible gridlock and pull back on hiring.
Here is an article from Reuters outlining the “rough ride” the markets may be dealing with as we head into the end of the year.
Although most experts think we will avoid the fiscal cliff, the FT sees some different point of views from lawmakers. One of my favorite quotes from the article: “Washington is a town that’s focused on what’s right in front of its nose.”
I thought this was an interesting article in the WSJ online about how emerging markets could really benefit from the recent Fed’s actions of quantitative easing.
Of course, our weekend would not be complete if we did not get some recent news on what Spain may need as political and economic pressures mount.
On the calendar this week don’t forget it is the first full week of the month, which means it is NFP week as we get the latest read on employment in the U.S. as well as Canada. But first, tonight we get the official read on China Manufacturing PMI at 9pm ET. Early tomorrow morning we get GBP Manufacturing PMI and US ISM Manufacturing PMI later in the morning. Mid day the Fed Chairman is delivering a speech in Indianapolis. Late Monday night/Tuesday morning we have the RBA rate decision. Early Tuesday morning we have GBP Construction PMI and later that evening AUD Trade Balance. Wednesday we have Services PMI in GBP, ADP Non Farm in the US and ISM Services PMI. Later that evening we have AUD Retail Sales and Building Approvals. Thursday is going to be a very busy day with both the BOE and ECB rate decisions. As always, the ECB press conference will get the majority of the attention. In the US we will get weekly Unemployment Claims and CAD IVEY PMI. Later that afternoon we will get the FOMC meeting minutes. And then (if that wasn’t busy enough) the BOJ will have their rate decision. On Friday we will have jobs data from the US and Canada and also Canadian Building Permits.
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Here are some charts and notes on what I am seeing currently:
Let’s start off with the e-mini futures. The 127% extension of both last year and this year has contained prices post QE3. If you were listening to my daily broadcast prior to the QE announcement you would have know the 1460 level was coming into view and should get tested if QE was announced. Now that we have rejected there, the rest of the previous resistance and now trend line support is around the 1400 to 1405 area. I would classify this as the “bull/bear” line in the sand.
The AUD/USD is testing the 200 day SMA currently and also is testing last week’s lows. Although not noted on this daily chart, last weeks lows are important since it was a 61.8 retracement. However, while in this big daily triangle formation, the key test will be the lows at 1.0170 which if broken, could bring in a double top targeting the lower end of the triangle near .9800.
EUR/USD is also testing its 200 day SMA currently, and if we get a decisive break below 1.2800 the uptrend line at 1.2630 looks to get tested. The 50 and 100 day SMA’s will more than likely come into play as support on a move to those levels.
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