golearnforex @ 4:23 AM, Thursday November 26 2009
Year End:
Thanksgiving in the U.S marks the beginning of the Holiday
Season. The day after Thanksgiving known
as Black Friday marks the commencement of the Holiday shopping season. Many analysts view this particular season as
one of the most important shopping seasons in recent history. The idea is simple. If the consumer stays home and sales are down
significantly it may be the final nail in the coffin for many retailers who are
still struggling from sluggish sales and hard to find credit.
The following are some important economic data releases to
watch heading into the final month of 2009.
Economic data releases related to the Consumer, Housing, and the Federal
Reserve will capture forex trader’s attention the most. Let’s take a brief moment and highlight the
key releases under those 3 sectors.
Consumer - “Retail Sales” will enable traders to gauge
consumer spending and the impact on the retail market and its trickle-down
effect. The “Unemployment Rate” will be
a good indicator of whether the consumer will derail, assist, or possibly be
neutral in a pending recovery.
Housing - “Home Sales” both new and existing will continue
to be very important as this is the sector that nearly caused the financial
collapse. As many as 1 in 4 home owners are underwater so it is vital that home
sales and home prices stabilize.
Federal Reserve - comments, minutes, and meetings dictate
financial policy. Any speculation of a possible rate increase will strengthen
the Greenback. The reason behind why the
FED may want or need to raise rates will be secondary to the actual intimation
of a hike.
An additional variable to consider heading into year-end
will be liquidity. There are many
ingredients that feed into this equation.
Many funds are up huge this year and want to lock in profits for their
year-end closing of the books. This is very important given last year’s massive
losses. Therefore you can expect typical end of year slack in volume. Another factor that affects liquidity will be
the actual hoarding of cash by corporations and banks in order to shore up
balances sheets before they report their financials. To this effect, we have already seen the 3
month T-Bill turn a negative yield as these institutions sock cash away.
Barring some catastrophic event most analysts believe that
the Dollar will continue to depreciate. Here are some suggestions for trading
the market. Firstly, let’s look at today
(Nov. 25th) we had positive prints for Jobless Claims and New Home
Sales. Positive means that things are less negative. The economy is losing fewer jobs but still not adding any new ones either. The Dollar tanked on the news (see chart
below) as its G-10 rivals advanced smartly.
Until the news turns truly positive (and not just less
negative) it allows traders to take risks.
Traders view the economy as stabilizing but not to the extent that the
FED can raise rates. When data releases
are negative the impact is measured in “derailments”. Derailments are defined as the potential to
slow or even reverse a global recovery.
In summary, go short on the Dollar on news which is positive (meaning
less negative than the prior month). Go
long the Dollar against the currencies that appreciated the most against it
when truly negative data prints.