Sunday Weekly EDGE 1-20-13

I hope you all are enjoying your weekend, and as a reminder, tomorrow’s equity markets will be closed in observance of the Martin Luther King’s holiday. The Wizetrade daily webinars will resume Tuesday morning, although tomorrow morning for the “London Calling” session Chris Asaro will be broadcasting for 2 hours.

Here are a few links that I would like to share with you for some weekend reading:

Here is a good blog from Zachary Karabell in Reuters about the never ending fighting of inflation. It’s a great read.

Also in Reuters, British Prime Minister David Cameron, is set to deliver his highly anticipated speech about Britain’s membership in the EU.

Although US equity markets are closed Monday, late Monday evening (Tuesday morning) the BOJ is widely anticipated to move on inflation targets. The problem (in my view) is the entire market is expecting it too. And the entire market is short a truckload of JPY, so the risk of “buy the rumor, sell the fact” is quite real. Last think US equity market bulls want to wake up to on Tuesday morning is a “ripping higher” JPY.

Speaking of the “bulls,” this is a pretty good article in Pragmatic Capitalism about the risk is really outweighing the rewards in the equity markets from a bullish standpoint.

Take the time to read this article in the Australian about current Central Banks actions.

On the calendar this week we have Monday: Eurogroup Meetings all day, BOJ rate decision. Tuesday: German ZEW, CAD Retail Sales, US Existing Home Sales, ECB’s Draghi speaking, AUD CPI. Wednesday: GBP MPC Meeting Minutes, CAD Rate Statement and Press Conference, China HSBC PMI. Thursday: German Flash PMI, US Unemployment Claims. Friday: German IFO, GBP Preliminary GDP, CAD CPI, US New Home Sales.

Earnings this week will be Tuesday: IBM, GOOG, TXN, VZ, JNJ, FCX and AMD. Wednesday: AAPL, SYMC, AMGN, ALTR and MCD. Thursday: MMM, VRSN, LUV, LMT, SBUX, BAX and JNPR. Friday: PG, HON, WY and HAL. There are other companies reporting this week, these are just some highlights.

Lastly, most of you know that my team and I broadcast daily from 7AM ET through the NY stock market close. To access our live webinars daily (which are free, and our live in the market analysis has been for 10 years now) just click on this link.

Here are some charts and notes on what I am seeing currently:

1-20-13AUDUSD

Another rejection at 1.0600 for the AUD/USD sets up for a 1.0400 test

1-20-13NZDUSD

Another .8400 rejection in NZD/USD sets up for another lower trend line test.

1-20-13USDCAD

Look at the very long term trend line the USD/CAD tested. Closer view:

1-20-13USDCAD2

I posted commodity currencies since they tend to take “lead” in relation to where other markets go. Specifically equities. That is why the next 2 charts are important:

1-20-13AUDSPX

Notice the divergence of equities and AUD/USD the last 2 weeks. Commodity currencies can lead from a week to a couple months historically on major tops and bottoms. So, it’s important if you are long equities to monitor this closely.

Especially when you have a longer term chart that looks like this:

1-20-13SPX

I posted this chart about 6 weeks ago as the USD/JPY was at 81.50 (ish) and called it the “re-correlation trade.” I thought equities would come down, and the AUD and USD/JPY would accelerate higher.

12-5-12AUDSPXJPY

Here is what it looks like today. Although equities have not fallen (yet, but have moved slightly higher) the AUD and NZD/JPY have accelerated higher to play catch up. You have to be careful as they close in together now:

1-20-13recorrelation

 

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About Blake Morrow

Blake Morrow is the Chief Currency Strategist for Wizetrade. Blake has over 15 years of trading experience and has been a co- owner of a Dallas based brokerage firm and LiquidTrader Technologies. Currently, Blake does analysis daily for thousands on individual traders, also has appeared as a regular analyst on WizetradeTV, Traders Television and MBT Vision. Blake has also managed 6 figure trading accounts and is a seasoned individual investor in equities and FOREX.