Whats really moving the market today?

Thought I'd make this thread to try and steer away from technical analysis and focus more on the fundamental and strategic reasons behind daily price movements to try and get a clearer understanding of whats truly happening behind the charts.

The goal is to focus on the various participants of the markets (this may include Commodities, Equities, FX, Derivatives, etc.) It doesn't matter as long as we can focus our attention on what the guys that matter are truly doing or not doing and the reasons for their behavior.

It's not about trade calls or price predictions (directly) just an exercise in learning the who, what, where, when, why and hows of the market as a whole. Of course through understanding the goal is to make more accurate trade calls in line with the logic and current market behavior.

Charts are fine to post actually maybe necessary as long as they're supported by the reasons mentioned above and not just for some technical reason.

Anyone interested? If not I guess I'll just keep doing it in private, I just figured a discussion might get me more focused and introduce some new ideas.

Cheers

EDIT: This thread was originally posted in the Trading Discussion thread as that's more along the lines of where I wanted it to go so people are free to share and learn about a broad range of market characteristics. Unfortunately it got moved to the interactive forum so I just hope people don't get wrong idea, it's not meant to be about live trade calls although people are free to write what they want, trade calls are fine as long as they're backed by the reasons for that call. The FOCUS here is on market moving forces, not weather someone is a good price predictor because frankly we don't care. If you're gonna make a call all we care about is the reasons that lead you to that trade call. Hope that makes sense.

EDIT 2: I just want to add that posting analysis is not the only thing you can do here. Feel free to pose questions or thoughts you have about anything relating to the thread topic. It's up to you. Just please keep it on topic

I am in.

Cool Custos... Anyone feel free to kick it off with anything they feel is of note...

Perhaps there are some things to watch out for this week, important announcements, events, uncertainty etc.

I'm gonna wait until the markets open until I chime in personally as I just don't have time to do any research today but it's an open slather at this point. Feel free

Cheers

Hm well there are going to be some bond auctions, so there should be some volatility?

Just trying to get the ball rolling, don't really pay too much attention to this stuff but I'm starting to find it very interesting and would like to learn more. University econ didn't seem very applicable...


Edit:

Eurozone bond auctions, Greece/Portugal/Spain

This is good news, count me in. I was thinking of starting a similar thread myself but it seems I won't have to. It's getting a bit late here and I've a few things to add to my personal 'week ahead' file so I'm going to see tomorrow when I'm all fresh and have completed gathering info. Thanks for the initiative, CindyXXXX!

Next week movers in my oppinion would probally be.

The sovereign debt crisis in Europa should probally be on the top of the agenda.
I wan to see if the Eu finance ministers are gonna aprove the loan package for potugal, also i wanna see what attention the bring to Greece the outlook for it.

I wanted to see about the us budget debate if the US is gonna exceed there Debt ceiling once again.

Most important 1 are gonna be the philey Fed survey and the housing market this 1 is still verry poor for the us. I still see the usd strength as reason for the commodity sell of instead of the europe greece problem that 1 is more ignored by the ecb and the gdp growth last week was strong. I still expect the ecb to hike rates another 0.25 bps in jully.
The Us is in my oppinion still in deep shit and if the housing market is not gonna improve whe could even see a crisis sooner then whe think.

what will happen to euro if eu agrees to bail out $ 400 billion to Greece? will it drops drastically?

& what will happen if Greece will undergo debt restructuring? will euro rise because it will have less burden.

---Week 20, May 2011---

Carry-over themes from last week:

 

1. European sovereign debt worries
2. Commodities hanging in the balance, could go either way, though weaker growth from China would suggest a continuation of the correction, for more detail I would suggest you read this. Commodities started the week by recovering from the several standard deviation declines witnessed the week before but showed renewed weakness at the end of the week. Volatility should remain elevated, as for the direction, we'll see next week. Risk-on/risk-off should dictate most movements especially with sovereign debt worries in the focus again.
3. Strong figures from core European members coupled with comments from the ECB suggest a hike in July, fresh EU CPI figures out on Monday should confirm this
4. Fed’s Plosser: QE 2 done; Fed discussing removal of stimulus, sees possibility Fed will go on hold with policy, would like to get away from zero rates, even if just a little bit (LINK), Infl Risks To The Upside;Must Be Prepared To Act (LINK)

-----------In focus this week-----------

EUROPE

1. Eurogroup meeting on Monday, IMF chief Kahn was supposed to attend but apparently he was arrested for running around butt-naked in his hotel room harassing a maid (LINK); on the agenda: approving the bailout package for Portugal and discussing Greece and what to do about it
2. ECOFIN meeting on Tuesday
3. German ZEW expectations (Tuesday) are projected to decline slightly while current conditions remain at elevated levels

From Danske:
The Eurogroup meeting on Monday and the Ecofin meeting on Tuesday will receive a lot of attention. Portugal is expected to get its loan package approved and options for Greece will be discussed. We may get a first indication of a second loan package for Greece. There is little doubt that Greece will eventually need more money and/or a debt restructuring, see Greek debt restructuring difficult to avoid. The IMF’s Dominique Strauss-Khan will participate in the Eurogroup meeting, raising expectations of a bold announcement. Nevertheless, German Chancellor Angela Merkel has said that she will wait for the conclusions of the IMF’s fourth review (to be finalised on 30 May) before making any decisions, so expectations shouldn’t be too high.

Euro area HICP inflation is expected to be confirmed at 2.8% on Monday (there is a small upside risk). Focus will be on whether core inflation continues the recent upward trend. We think that it may climb from 1.3% to 1.5%. If so, there should be little doubt that Trichet will say “strong vigilance” at next month’s ECB meeting and hike rates in July.

EUOBSERVER / BRUSSELS -Greece's economy is expected to contract more than previously forecast this year, while its budget deficit will exceed the level agreed by international creditors, the European commission has said. The new estimates, contained in the EU's 2011 spring forecast published on Friday (13 May), are likely to reinforce calls for an additional Greek rescue package in order to stave off a possible default.

In its twice-yearly economic forecast, the commission kept its earlier forecast of 1.6 percent overall eurozone growth in 2011, but raised its inflation forecast for this year to 2.6 percent, up from the 2.2 percent predicted in February. (LINK)

UK Telegraph -- A global poll of almost 1,300 investors last week by Bloomberg indicated that the market believes a sovereign default by a euro-area nation is more likely than not. A total of 85pc said they thought that Greece would eventual default on its debt obligations, with more than half indicating that Portugal and Ireland would ultimately default as well. (LINK)

UNITED STATES

1. The US budget debate could resurface in the coming week, with the US set to exceed its debt ceiling once again
2. TIC data on Monday
3. Bernanke speaking on Monday, look for hints on the continuation of QE
4. FOMC Minutes released on Wednesday
5. US housing market data and the Philly Fed survey on Thursday

From Danske:
The main focus in the US will be data for Philadelphia Fed survey, which fell quite strongly last month. Philly Fed also disappointed sharply last year but the weakness was never mirrored in ISM. We look for a slight rebound to 20 in May from 18.5 in April as other indicators such as factory orders still point to decent growth in manufacturing.

The Empire survey is also released and will probably give back some of the gains seen in recent months. Next week is also the big housing week with data for housing starts, existing home sales, and the NAHB housing index. We look for a slight rebound in home sales but overall data is likely to still paint a downbeat picture of housing. FOMC minutes are also released but have lost some interest after the introduction of press conferences. US jobless claims will continue to be watched closely as recent data has pointed to some weakness. But it has also been distorted so we need more data to judge the underlying trend.

Finally the US budget debate looks set to resurface next week as the US debt ceiling is likely to be surpassed early in the week. Payments can still be made until early August, though, and hence politicians will probably take more time before striking a deal to avoid a US default.

JAPAN

1. Preliminary GDP figures released on Thursday
2. Monetary policy statement and call rate on Friday, press conference following the two releases

From Danske:
In Asia, the main event next week is the release of Q1 GDP in Japan. We expect GDP to have contracted 1.3% q/q AR following a similar contraction in the previous quarter. The main explanation is of course a very weak March in the wake of the earthquake and tsunami on 11 March. We expect domestic demand to have been broadly flat in Q1 and foreign trade to have subtracted slightly from growth. The
biggest drag on growth in Q1 has probably been inventories, which expect to have subtracted close to one percentage point from GDP growth in Q1. However, as seen in the chart, the biggest negative impact on GDP growth will be in Q2, where we currently forecast GDP will contract 4-5% q/q AR.

We do not expect any major news in connection with the Bank of Japan’s (BoJ) monetary meeting on Friday. BoJ is currently in wait and see mode, where it wants a clearer view of the impact on the economy from the earthquake before it decides on any additional easing measures. In addition, it should be remembered that there is already considerable room to purchase financial assets and expand BoJ’s balance
sheet within the easing measures already announced. Of its JPY10trn asset purchase programme, so far less than JPY4trn has been utilised. It appears that BoJ’s own macroeconomic forecast also assumes a contraction in GDP in Q1 and Q2 and for that reason it now looks most likely that BoJ will not expand its asset purchases further.
------------------------------------------------------------------------------
ALL comments from Danske are available here (pdf). They provide a weekly focus report and I use it to complement my own. There's just way too much going on and I can't handle it all on my own. If any of you are disturbed by the amount of text I put out you can just read the bullet points. The alternative is that I compile a pdf (long form) and only display the bullet point (short form) on the thread.

As previously mentioned, I will not be posting info on the UK, Canada, Australia etc unless it is a global theme that has the potential to affect other markets. I also left out information on currencies other than EUR, USD and JPY from Danske's report, but you can have a look at it yourself via the link provided above.

CindyXXXX,
is this what you were thinking about? A weekly preview and then as the weeks goes by, daily reports. If not let me know and I'll clean it up and go someplace else. Also, I've started a new thread for reviewing purposes. It's called the 'rear view mirror chart thread', check it out.

Hey bug thanks for that, please keep it, exactly what I was thinking about, thanks very much,

For better or for worse, I have some additional information that I would like to add to the weekly preview, but since forums don't usually send out subscription notices when a post is updated, I will have to make another post for the sake of the subscribers. Next week I'll try to put it all together in time so I won't have to separate the info into many posts.

THE COMING FRIDAY is option expiration day. Expect to see a pick-up in volatility.

US debt issues:
Bloomberg: Geithner Says Default Damage May Be ‘Irrevocable’
From the article: The U.S. is scheduled to reach the debt limit May 16 [that's tomorrow!]
I don't usually keep an eye on US debt auctions, but I want to be prepared just in case something happens this week. So, debt auctions this week:
Monday - 3 month Bill, 6 month Bill
Tuesday - 4 week Bill
Thursday - 10 year TIPS
The info on auctions and auction announcements is available here for free.

US inflation
Blog posts from Scott Grannis on the inflation picture in the US. I know this will play out over time and has little relevance next week with sovereign debt issues at the forefront, but these articles are important in the sense that they reconfirm the continuing weakness of the US dollar. The information gleaned from Mr. Grannis' and other people's articles tell me that any strength in the US dollar most probably be transitory.

Rising inflation points to rising bond yields
Federal finances are still in awful shape
Fed expectations are what is hurting the dollar
Swap spread update

nice thread.

Thanks please keep it going...

You're all covered as far as Europe, Japan and the United States are concerned, but for other countries (Great Britain, Canada, Australia, New Zealand, Switzerland) you'll have to find someone else. Right now I'm working on bringing in more information on commodities and bonds, but it's going to take a few days to sort it all out so that only the crucial info gets posted.

Also note that I will be making updates as the week goes by but only if and when something new and important shows up on the radar. For live updates forexlive.com should do pretty well and the FF calendar should also help cover some of it in terms of data released during the day. I don't particularly fancy copying each post from forexlive so I will be posting links to their market wraps. Here's an example of their market wraps covering today's Asian session.

me me...i'm here...

Sweet calendar man thanks for the link.

AUD/USD

(Just a warning this is just my interpretation of events and I can't guarantee accuracy, I'm still sort of new to this line of thinking, I just feel as the thread starter I should do some work of my own so I'm having a fair old crack here... if I'm wrong about anything please correct me, this is how we learn! If I'm really wrong then I should probably stop posting this publicly until I know a bit more. Feedback is more than welcome... Cheers)


16-May-2011

Where we’ve been…

The last 2 weeks have seen the AUD plunge against the USD from it’s record 1.100, down 500 pips. Opened this week at 1.0528 down from last weeks open of 1.0736

AUD

 

1. Gold has sold off dragging the AUD down with it
2. The ASX 200 has followed suit and is down as risk aversion across equity markets have taken hold in the past couple of weeks.
3. Last weeks employment figures completely missed expectations and fell well below prompting an expectation for the RBA to put a rate hike on hold.

USD

 

1. The increased uncertainty surrounding the situation in the EUROZONE with the sovereign debt crisis has caused a dumping of the EUR and increased demand for the USD. As the Dollar index and the EUR/USD are highly correlated it appears that the EUR makes up a large portion of the Dollar index and therefore the situation in the Eurozone could be a strong factor in the USD strength.

1. A stronger dollar weighed on oil prices by making commodities like crude more expensive for investors trading in other currencies.

The combined force of a plunging gold market, and increased demand for USD has led to the immense selling pressure placed upon the AUD/USD of late with poor economic data adding fuel to the fire.


Where we’re at…

Monday:

AUD

 

1. Data for new Australian home loans came in weaker than expected at -1.5% down from the expected 2.3% increase, as well as a decline in new motor vehicle sales down -3.5% from the previous month indicating an increased unwillingness for the Australian public to spend.

 

1. This is most likely due to the increasing inflation and expectations of rate rises in the following month dampening the demand for finance, however those rate rises may now be put on hold after the new employment figures of last week and so these two economic releases may see an increase and “adjustment” in the next month.

USD

 

1. Bernake….

Barrier option at 1.0500 seems to have been defended and the AUD has so far been range bound all day….

A sharp widening in interest rate differentials between Germany and the US is currently supporting the EUR and now seeing an intraday weakening of the USD across the board. AUD/USD now rallying


Where we’re going…

AUD

 

1. Tomorrows monetary policy may hold some clues as to confirmation of the holding of the rates, or perhaps the chance for a surprise.
2. There’s not much else in terms of important news announcements for the AUD.

USD

 

1. Bernanke is due to speak later today which could hold important clues about QE2.
2. FOMC minutes Wednesday
3. Employment claims to come out on Friday, probably not the markets main concern right now.

The situation in the Greece and Portugal debt situation and global risk factors should lead the way in the coming week the main factor for the AUD/USD with the focus on the USD. Euro group meeting today (right now) may lead to some clues as to potential outcomes for the current situation in EURO land (?)

Upcoming US Bond auctions during the week could add more buying pressure the USD(?) particularly with the risk aversion in play there should be a higher demand for “risk free” assets.

Options expiry on Friday should add some volatility to the market

EDIT: I just read a whole bunch of different articles from random sources I probably should have quoted them maybe, will remember next time

So, now we have Europe, United States, Japan and Australia covered. I wouldn't worry about the accuracy and about covering everything. Banks and media have whole teams of people to figure this out so we can't put too much pressure on ourselves here. After all, we're in the trading business, not the news business - we need just enough to make educated guesses. I'm sure our coverage will broaden a bit but also get standardized over time but for now it's still very early stages. Personally I'm working on putting together a check list of links and sources to streamline the process so I won't have to start from scratch every time I do it. I think you would benefit from having a checklist as well (there's a great book called Checklist Manifesto on this topic).

I don't trade AUD myself but from the looks of it I would say you got yourself covered.

---Week 20, May 16th UPDATE---

In the future I will be putting up links to forexlive's market wraps but they're having some major issues with their websites so no links for today

JAPAN

BBC - Japan consumer confidence index slides further in April
The mood of consumers in Japan has deteriorated further in April, as fallout from the devastating earthquake and tsunami continues to weigh on sentiment. The consumer confidence index fell to 33.1, down from 38.6 in March, according to the Cabinet Office.
The ministry also downgraded its assessment on consumer confidence. A reading below 50 suggests consumer pessimism.

FOREXLIVE - Moody’s: Possible Japan banks’ ratings downgraded if Tepco loans forgiven.
Moody’s says that forgiving the Tepco loans would hurt the creditworthiness of Japan’s banking and utility sectors. (LINK)
Also from forexlive
# Japan’s machinery orders +2.9% MoM, much better than the expected -9%
# Japan’s CGPI +2.5% YoY, up from 2.1% last time
# Moody’s: Asia-Pacific stable corporate ratings to continue, with exception of Japan

TOKYO (MNI) – Japan’s gross domestic product in January-March is
expected to have posted a second consecutive quarter-on-quarter
contraction, down a real 0.5% on quarter, or an annualized 1.8%, hit by
the March 11 earthquake disaster, according to an updated survey of 26
economists conducted by Market News International.

EUROPE

IMF chief Kahn arrested in NYC
Although the news media made a big fuss about it there's really nothing much to worry about. Kahn is a functionary of the IMF and his decisions reflect the IMF's position, not the other way around. Kahn is not a sovereign and IMF can function just as well without him - the leader is gone but the organization is still here. As for the currency market, there's really not much point in over-interpreting moves that happen during Sunday open in Asia as liquidity is extremely low. Do yourself a favor and don't read more than you absolutely need to on this topic.

FOREXLIVE - EUR press reports from weekend
* Trichet: There is no EUR crisis, primarily a crisis of public budgets, from Bild am Sonntag
* ECB Stark: Greece must step up it’s fiscal consolidation efforts, from Der Tagesspiegel
* IMF has doubts over allocating more credit to Greece and Olli Rehn says Greece must step up economic reforms, from Die Welt am Sonntag
* German FinMin Schaeuble: Reports on possible Greek restructure are speculation but if Greece isn’t able to borrow from international credit markets next year then alternatives must be sought, from an ARD television interview (LINK)

EU CPI in line with expectations

Draghi very likely the next ECB head, to replace Trichet late fall this year

FOREXLIVE - Widening German yield differential supporting EUR again (LINK)
This is very important as the positive yield differential helped propel the euro to 1.49. See my previous update with links to Scott Grannis' work and see the 2 year yield differential post on his blog.

FOREXLIVE - ECB maintains bond buyers strike
They haven't bought any bonds since they found out several weeks ago that they were stuck with the bonds and the EFSF would not take the portfolio off their hands. They hold EUR 76 bln of them. (LINK)


Bloomberg - Greece Pressed by EU to Sell Assets to Win More Aid
European finance ministers stepped up the pressure on Greece to sell assets and deepen spending cuts to win an increase of its 110 billion-euro aid package and more time to repay the loans.
“Greece also has a huge privatization potential and the Greeks should help themselves before calling for more money,” Austrian Finance Minister Maria Fekter told reporters before a euro crisis meeting in Brussels today. Greece is preparing a new economic-recovery program, including 76 billion euros of asset sales and spending cuts, to persuade European governments and the IMF to release the next 12 billion-euro loan in June. Greek yields continued to climb. (LINK)

UNITED STATES

TIC way lower than expected

BBC - US reaches $14tn debt limit and cuts investments
The US has reached its debt limit of $14.3 trillion (£8.6tn) and is taking measures to cut spending to avoid breaching it. Treasury Secretary Timothy Geithner has said that he will suspend investing into two large government pension funds. This delays any breaching of the limit to 2 August. (LINK)

WASHINGTON (MarketWatch) -- Fed hasn't decided exit strategy yet: Lockhart
The Federal Reserve hasn't decided on an exit strategy from ultra low interest rates and its $600 billion bond buying program, Atlanta Fed President Dennis Lockhart said Sunday, according to a transcipt of his remarks. "Some of my colleagues have already begun to weigh in on the details of exit. I will not do so today, but I think it would be a mistake to assume that these public conversations on exit are much more than an open discussion of the options the central bank should consider," he said. The Fed will communicate an exit strategy once it's clear the economic rebound is secure. "Once the expansion becomes more clearly sustainable, it will be appropriate to begin the process of normalization of interest rate policy and the Fed's balance sheet. The exact timing remains to be determined by the FOMC. I am confident that the committee will provide guidance when we have enough certainty that the guidance will provide more signal than noise to financial markets and the public," he said. (LINK)

Hello traders,
Hope i can express my fundy interpretation.

My view is there are 2 types of fundies :

The main drivers.
These are the interest rates set each month by each central bank ,all traders interpret every word officials say at meeting and try to assess what they might do with the rates next month, you have to assess what sentiment is for any currency you trade.
eg; eur are taking a raise rates policy,while usa seem to be a keep rates near zero.

Based on interest rates alone eur would move up against usd.

The next major one which some dont realise is oil.
Every single economy needs oil to fuel everything .
You got to know how oil effect the currency you are trading .
USA and japan are the biggest importers .
oil purchases are settled in dollars.
try to think of it different ,oil does not alter in value ,the supply has been constant for a very long time .
how many dollars you need to buy some however has changed a lot.
oil is a reflection of how weak or strong the dollar is .
dollar index against the eur is pretty useless because its the same chart upside down.

Indices are another one that helps ,if the usa indices for stocks are moving lower then things like eur /usd generally move lower.
The reason for this is that if the usa economy is looking strong traders like more risky investments like stocks ,they invest dollars into stocks thus lower dollar value raising the stock value .
Ever noticed some good statistics as you have posted on previous pages only to see the dollar weaken , if it made traders confident in the economy they may invest in stocks .

Keep in mind DOLLAR down--STOCKS up--COMMODOTIES down.

Always know what these 3 things are in relation to your pair.

Example background fundamentals:-

In relation to the most common pair eur/usd.

If trichet hawkish in his speaches in reference to interest rates and bernake is keepin em the same for the month.
US indices are up on the day.
OIl up on the day.

then if you see eur/usd moving down you need to know why!! and it would be unwise to take a short because when price start to move inline with the above major fundies which is bullish. that move is likely to continue were as the short could turn round at any point.

Intraday fundamental statistics can move price quite a bit but never alter the main trend set by the above drivers.

Eur/usd made a big move from the top ,but look at a chart of wti crude it had been dropping from a day or 2 before, eur even moved up 100+pips the morning before starting the big drop.

Hope this helps .

At the last meeting trichet didnt raise rates and his speech indicated they would even rise in june.

multiple margin increases in commodoties like oil,silver were raised adding weight to the correction.

But watch for the americans going in to syria ,iran is a neighbour and the fourth largest oil exporter.

If there is even a rumour that oil from iran will be disrupted then $115 /barrel will look cheap in the following months .

Clinton said last week they looking at ways to put pressure on syria .