A Quiet Month For The Market

The Federal Reserve has raised the expectations of the markets that are now looking at their meeting in September as the crossroads of the U.S. monetary policy. The seasonality of August is the reason of the volatility on all financial markets, but probably there will not be any strong trend reversal on interest rates, equities and currencies. Concerning the United States, only the first part of the week (August 5th ) will be interesting, with the data on the Ism service, while for the rest of the week the statements of the officials are going to move the mood of the market.

IS THE RECOVERY GOING TO CONTINUE?

The PMI confidence indicators are showing that there is a recovery in Europe, with a rise over 50 points for most of the countries. Same goes for the UK, where the manufacturing Pmi rose more than 54 points, even allowing EurGbp to retrace after reaching the target (0.88) of the bullish head and shoulder figure that we had reported in late June. In the upcoming month, focus on German industrial production data (August 7th ) and English one (August 6th ). On August 5th , we will get the data concerning retail sales of Euroland and the English Inflation Report on August 7th.

THE AUSTRALIAN STORM

The bad data on the Australian real estate market have prompted the central bank to admit that further cuts in interest rates may be possible in the coming months if the economy continues to show signs of deterioration. Is it an admission of surrender for AUD? Probably this is true in the long term and is seems that the bear market has now dominated the market.

The excesses, however, appear remarkable and there is a chance of a technical rebound too. The week will be full of data: on August 5th retail sales, August 6th trade balance and houses price, on August 8th unemployment and August 9th the statement of economic policy of the Rba. Such a depressed sentiment on the Aussie has never occurred even in 2008 and the speculators on the futures market are very unbalanced on the short side, a great chance to try again to enter long in a contrarian optic.

TRADE OF THE WEEK

The data on inflation, retail sales and Chinese industrial production will be published in the coming week, and there’s a very interesting chart on the EUR/HUF cross. As we can see, a bearish sequence between March and May was followed by an upward reaction, firstly quite uncertain and then very directional in mid-July. Now we are facing the barrier of 300, a quite delicate resistance level that is joining the decreasing highs in recent months.

It is obvious that, in case of a bullish break, the trend of the coming months will be bullish, and target the absolute high of area 320. Anyway, also due to the overbought oscillators, we trust in a retracement towards the 200-days moving average of 293 to be exploited in a tactic key.