Going into to this trading week, markets where shaky about EU debt and the possibility of a Greek default looking more like something that is coming sooner than later. Throughout the Asian and European sessions equity prices were sent lower as more fears added to a possible downgrade from Greek debt by Moody’s. The USD saw some strength but the market remained sideways. This was adding more fuel to the fire as traders prepared for a bearish day for the US session but in late equity trading, sentiment became bullish on news from China.

The Financial Times reported that China is in talks of purchasing bonds from Italy.

The EUR/USD pair Ranged from 1.3693 to 1.3500. The Dow Jones Industrial average and S&P 500 closed higher as markets rallied back from down over 1% to close at +63.99 and +8.07 respectively. Gold prices lost some of its luster closing lower $39.10 (-2.1%) to settle at $1,820.40 a troy ounce.

Crude oil contracts ended higher up at $1.49 a barrel to settle at $88.73.

This week look out for: On the European front, any more news regarding any steps French and German banks take in relation to Greek debt.

On the US front, on Wednesday Producer Price Index and Retail sales at 8:30am (EST). What we may anticipate is not too much growth in PPI for August though Retail Sales can be higher from effects of Hurricane Irene on the East Coast where many consumers bought supplies. For a busy Thursday, Consumer Price Index data and Jobless Claim numbers at 8:30am(EST) followed by industrial production at 9:15(EST) and Philadelphia Fed Survey data at 10am(EST). CPI was strong in July and expectations are that there will be some growth in August. Jobless Claim data can be at a standstill where we had consecutive weeks of claims falling, but now looks like it’s over the 400k level. Industrial Production has been on the rise for the past couple of months but might be weaker in August. Finally, Philadelphia Fed Survey data might be weaker as July numbers where grim and might be in the same trend for August.

Going into today’s trading week, the dollar was mixed through the Asian to the US session. News over the weekend about the Bank of Japan and the Japanese finance minster, Yoshihiko Noda, considering easing monetary policy if the JPY rises further put bearish pressure on the currency. Global equities markets however were not as volatile as previous sessions.

The EUR/USD ranged today from 1.4346 to 1.4433. The EUR started out stronger in the overnight session, but the USD rallied back to recoup its losses later in the day.

On the equities front, the Dow Jones Industrial average and the S&P 500 ended higher after a choppy session, +37.00 (0.34% change) and +.29 (0.03% change) respectively. Commodities like oil rallied on the lower dollar in the early session and on some political tensions out of Libya. It settled at $84.34 a barrel, up $1.93 for the day. Gold also took flight up $45.60 to $1,897.80 a troy ounce, also from the weaker dollar in early sessions.

For the week ahead, look out for on the US front New Home Sales data in which we can see the gauge of economic momentum and if there is an increase in people’s confidence to buy a house. Then on Wednesday we’ll see Durable Goods Orders, which is a leading indicator of industrial production and capital spending. Thursday we have Jobless claim data, where we can hope that the trend takes a turn for the lower by staying below the 400k mark. Friday is an important day for data and speeches starting at 8:30 am (EST) with the Gross Domestic Product number in which we can comprehend the total value of the US production and economic activity. Then at 10 am (EST) Fed chairman Ben Bernanke will give a speech in Jackson Hole, Wyoming, where we have to pay attention to the language he uses on the status of the economy.

Equity markets globally took a very big hit coming into the US trading session upon news from S&P’s downgrade of U.S.’s Credit Rating which put more fear into traders. A downgrade from AAA to AA+ for the first time in US History. Also, News coming out of the EU where they plan to purchase more of Spanish and Italian bonds. President Obama said in a speech that the US will “still believe our credit is AAA and the world’s investors agree.” Risk aversion was the trade of the day where traders where looking for safe haven currencies like Japanese Yen, Swiss Franc and the US dollar. Gold was also a big mover today.

The EUR/USD was mixed throughout the day. It ranged from 1.4429 to 1.4128. The US very aggressive decline in equity markets where the Dow Jones Industrial closed below the 11,000 mark at 10,809.85 down 5.55% from Friday’s close lower at 634.76. The S&P 500 sank 79.92 or 6.66% to close at 1,119.46. Gold prices surged to over $1,700 to settle at $1,708.59 a troy ounce. Crude Oil fell $6.21 to close at $80.67 a barrel.

What to look out for this week is how the markets will react to issues about the status of the US and European economies. Tuesday the FOMC meeting Announcement where most traders anticipate that they will leave the Fed funds target unchanged to the range of 0 to .25%. Its more notably to observe the language they use regarding the consumer sectors and credit conditions. Then on Thursday, Jobless Claim data and International Trade report. Then on Friday news about Retails sales numbers and consumer Sentiment report

Over the weekend many traders were eying a possible resolution in Washington about the debt ceiling debate and concerns of a possible U.S. ratings downgrade. As we all know now, there was no agreement and the anxiety has carried over onto Monday’s trading session. Currencies against the US dollar benefited from these concerns. The USD/CHF was the best mover of the day as it fell to its all-time low of 0.8019. Commodity based currencies as well rallied as traders saw opportunities with the dollar weakness.

The EUR/USD ranged from 1.4415 to 1.4324. The Equity markets finished lower with the Dow Jones and S&P 500 closing down -88.36 and -7.58 respectively. Commodities like Gold reached record highs above $1,620 a troy ounce yet settled at $1,612. Sliver as well shined up 0.8% at $40.34 an ounce. Crude Oil closed lower to settle at $99.12 a barrel.

This week look out for Tuesday’s Consumer Confidence data and New Holes Sales report. Then on Wednesday Durable Goods Orders data where we can see some improvement in the manufacturing sector and the influence that have on capital spending will be reported. Thursday we have the Jobless Claims report and Pending Home Sales index, where we hope to see some relief in two sectors that have been struggling. Then on Friday we close the week with Gross Domestic Product data.

Worsening debt in Euro zone still fuels the risk aversion trade as EUR falls in early market trading. This was all triggered on Friday as eight European banks failed stress test. Adding to more uncertainly in the market mainly on the EUR as traders trying to see whether the ECB can resolve these issues effectively. Big trade today was currencies VS the EUR and with Gold.

The range for the EUR/USD $1.4133-1.4013 and settle to be over the $1.41. Commodity prices like Gold reach $1,606.20 a record high. Crude oil prices fell off $1.20 to settle at $96.04. Equity markets closed lower with the Dow Jones and S&P 500 down -94.57 and -10.70 respectively.

What to look out for this week starting with housing starts data tomorrow where we can see if there can be another rebound in a sluggish housing sector along with news on Wednesday of Existing Home Sales. On Thursday its a busy day with Jobless Claims data in we are hoping to see if it get below the 400k mark. Also, a press conference with Ben Bernanke at 10am (EST) and with Philadelphia Fed Survey data. To end the day at 4:30pm (EST) with Money supply report in where we can see any indication of inflationary pressures on the fed balance sheet.

July 14th, 2011

Yesterday’s market was one of the most extreme we have seen in a while. In his famed daily letter, Dennis Gartman went as far as to say yesterday was a top 10 most violent and bearish day he has seen in the forex market in 37 years! So with that said, was there any energy left for the markets today?

The EUR/USD traded a 307 pip range yesterday, with the daily low close to the open, and the daily high near the close. Today the market moved by only about half as much, retracing much of yesterday’s dollar losses. The market was unmistakenly quieter.

One of the big drivers of yesterday’s price action was the perception that in his testimony Fed Chairman Ben Bernanke was hinting at QE III. Today, he made, or at least tried to make clear that no such additional government spending is in the near future. Equities dropped on his words, but the dollar strengthened. Yesterday’s market was also driven by news that Obama stormed out of a meeting with GOP congressional leaders over the imminent increase of the debt ceiling. This had analysts in a tizzy, assuming the worst, that the US was headed down the same path as the PIIGS – Portugal, Italy, Ireland, Greece, and Spain, perhaps towards default. As the hours passed, and cool heads returned, the impact of the POTUS’ supposed walk-out died down and most expect, even assume, that the US will raise the ceiling when push comes to shove. As this realization set in, the dollar regained some strength.

Also fueling yesterday’s dollar decline was the Moody’s statement that the US is on “watch.” Sounds menacing! That news also faded to the background today as USD reports started to come out one after the next better than expected. First jobless claims fell by over 20,000, down to 405k. While this is still a bad sign to have so many consecutive months over the 400k level, it is one of the lower numbers we have seen in quite some time. Also, retail sales rose 0.1%, not a huge gain, but better than the negative expectation.

While the market lacked some of the electricity it had yesterday, traders who woke up this morning without a herd mentality, perhaps looking to sell on panic; panic about Bernanke, panic about Obama, panic about Moody’s – they likely had a good day.