FX News Trading For The Week Of April 2-And Beyond

Something to note also:

Thanksgiving Holiday = Death to the USD.

Easter Sunday = Jesus re-lived. But will USD do the same? According to history, USD dies during Holidays.

If you are long USD, close em...

The Appetite For Risk Seems To Be Waxing:

There are some signs that point to a rally in equities and the G/J over the short term:

Weak headline number in the Tanken sent the NIkkei down-but the G/J held up nicely. Then yesterday-there was some bad news-weaker ISM and the sub-prime lender that is going bankrupt. Two weeks ago that would have put the market in a tailspin. The hand wringers would have been shouting "spillover"! "recession"!...but nothing happened. The DOW held up in the face of bad news and actually eeked out a few points.

The Nikkei then went good and the G/J went with it. The FTSE then went well and the G/J with it.

Markets of sick of the sub prime thing, and they're sick of looking for a Fed rate cut. They're done with it-it's old news. The market is in the mood for some risk taking and rallying. And when the market wants to take risk-the G/J goes well.

This leads me to think that the mid 237's are very possible by the end of the week. That doesn't mean price can't re-trace, but that the dips will likely present some good buying oppurtunities.

Boy who cried wolf syndrome.
All this subprime noise just wants attention for the national gov to help them...

I don't see it as a boy who cried wolf thing-the sub prime problem was a concern-it's just that the market has come to accept the chance that it will ultimatley turn out as Bernanke has outlined, with no spill over or hard landing in the economy.

So its like Bernanke telling the subprimes to "shutup"! you're just 1% of the housing market..

I think it Bernanke telling the markets that he doesn't see sub prime spilling over while the economy projects to be picking up in the 2nd half of the year to grow towards trend. That equals the Fed on hold until their projections turn out wrong-which hasn't happened at all yet...they've been incredibly accurate.

The weekly US Retail Sales and Housing Numbers Surprised to the Upside:

Further evidence that jobs and incomes are good and that consumers are continuing to spend. It's also likely that the NFP estimate is pretty good and there's a good possibility that Feb NFP will be unchanged or revised up.

We'll see if the $ trades up into the ISM, but overall the market feel seems to be on the upswing and the appetite for risk is there. The minor pull back on the Yen crosses could have been the result of the surprise Aud decision to hold rates against the backdrop of a 3.3% CPI and strong growth outlook. It seems the RBA is willing to wait for the next CPI report and there's a good chance the Aud wil stay supported above 80 until that number is released.

The market has gone past looking for a rate cut and it looks like Bernanke has really calmed things down with his assessments. The Fed projections so far have been very accurate and the language has been very clear despite the temporary confusion after the last statement. In hindesight-there didn't seem to be a need for any confusion at all.

I think one of the best decisions you can make as an investor is to follow what the Fed is saying very closely and make your investment decisions along their projections. They are probably the best economic forecasters in the world, their information is free and it's easy to understand. You have the best economic team working for you and it costs you nothing but a little time spent in reading what they're saying. If you're not up on it, let me summarize:

Housing-Sub prime so far has not spilled over and doesn't appear likely to do so.

Growth-Projected to turn up in the second half of the year to be at the sustainable, trend level of 2.5 to 3%. No recession and no hard landing.

Inflation-expected to moderate with the risks more to the upside.

Rates-the Fed will be there to lower rates should the economy warrant it and will raise rates if the info dictates that too. The economy will be very well managed.

Does that mean things will go up in a linear fashion without re-traces? Of course not. It does mean that market pull-backs are likely to be temporary and could represent buying oppurtunities as long as strong fundamentals or geo-political information does not contradict.

From what we've seen so far this week, the weaker then expected manufacturing ISM and sub prime lender bankruptcy hasn't deterred markets here or abroad. Markets seem determined to start the quarter on an upswing and the mood appears to be positive.

ISM Turns Out Weak:

A weaker then expected ISM was tempored by news the Iranians were set to release the UK sailors. Oil dropped a bit on the news of the impending realease. We'll have to see how the DOW plays out during the day and that will likely set the tone for the Nikkei and GBP/JPY later.

If the market does hold up thru-out the day-that indicates a really strong positive sentiment. The market would have survived both ISM reports...but let's see how it finishes.

Like the NY market, the Nikkei bounced off it's lows to finish fractionally higher and the GBP/JPY held again around the 234 level where it has repeatedly found support. Europe did about the same.

It looks like the appetite for risk is still very present in the markets as two bad ISM numbers were survived, amongst other negative numbers. The UK sailors were probably the best news of the week so far. The markets could be set to really move if and when it gets the proper push and if the NFP prints positive-push may come to shove. The kids on spring break have a reason to party while their moms and dads are still waiting (and hoping) for one.

Markets are likey to be very slow today with the holidays and The Masters. BB radio is broadcasting it live and that should tell you something. The appetite is there, but nothing's on the table yet...

NewstraderFx,

I hope you do not disappear for a while again...Great thread!

Thank you so much for the props-they're very appreciated.

Just a bit about the NFP-The Monster Employment Index has printed strongly for the 2nd month in a row. It's a good leading indicator, so today's report indicates April and last month's indicates tomorrows number. Perhaps Wall St. was up a bit on the optimism.

You may be thinking why I seem to focus on the GBP/JPY-actually I like all the JPY crosses-they really move and they're more about risk appetite then interest rates although rates of course play a part. What do I mean when I say they're about risk? Well besides carry trades, the Yen is the funding currency for many types of investments. The crosses go up when the Yen is borrowed, because it is then converted (sold) into GBP,NZD etc.

The story of the GBP/JPY (G/J) goes like this:

All the crosses except G/J have gotten back to their pre-crash levels and if you do a fib study of the crash-you'll see the G/J has been playing around the 786 all week. Fibs never cease to amaze me and it's at that level that the recent support has been. I traded a few bounces off that yesterday, I traded it this AM when it broke below and when it turned around, I traded it right back to that level. Then I said enough and watched The Masters on the comp.

The point is that there's almost 400 pips left to get to the pre-crash levels in the mid 237's. The bad ISM's choked it off, but the fact that it's survived, as did all the crosses and the equity markets as well, tells me the risk appetite is there. I can feel it.

This thing just needs a kick in the butt to get it goin. Hopefully the NFP will do an Adam Vinateri on it tomorrow.

What If They Gave a Party and No One Came?

That's pretty much what happened today off the NFP as the headline and revision both pointed up like a dog on the hunt. To bad because everything was there on the table for the taking. So now we're left with a question: are the goodies still gonna be there when traders get back?

There's a very good chance that everything's gonna gap on the open Sunday, with everything goin the $'s way and the JPY crosses poised to hit the Yen hard. I don't leave trades open over the weekend ususally-especially now with the geo-political risks-so something like that is only for the boldest of traders. On the flip side-I really don't see how this could gap down absent this happening so i'm gonna leave a small position open and hope for the best.

A good friend of mine also pointed something out to me that i'm hoping to use: If you look at the last couple of opens when price gapped-you'll notice that price moved to fill the gap, then resumed. What I would look to do with my open position is to hopefully catch the gap at the open, then watch for price to start moving down. If it does, i'll close and keep watching.

If it does go down and fill the gap-i'll look to get long again, because the crosses should really improve based on the strong NFP.

More to come later in the new thread...enjoy The Masters.