Week Ahead – Fundamentals

Posted On 05 Jul 2015
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We had an incredible week last week even though it was shortened due to the public holiday in the US. This will will continue in the same vein.

Whilst relatively light on key data points, tomorrows referendum in Greece and a number of central bank rate announcements and the FOMC Meeting Minutes will ensure it remains lively.
Traders in the US who took a long weekend break will be coming to work fretting about their positions as brokers have once again lifted margin requirements for Euro currency pairs.
We should know the result of the Greek referendum by late Sunday night. Due to the public holiday there is no COT data. This will be released on Monday. Any noteworthy large commercial position changes will be commented on at that time.
USD:On Monday we have Non-Manufacturing PMI expected at 56.5.

Tuesday sees the release of the Trade Balance number thought to show the deficit widening to -042.8B.
Wednesday is the big day when we have the FOMC Meeting Minutes which traders will be analysing carefully to see whether the FED tone regarding when rates are due to rise.
On Thursday we have the customary Unemployment Claims numbers which is estimated to show that 277,000 joined the ranks of claimants.
Finally on Friday Fed Chairperson Yellen speaks.
EURO:Only one item this week but what a big one.
The Greek referendum on Sunday steals all the limelight and will keep officials from the EC, ECB and IMF, the dreaded troika busy all week.
Expect many and conflicting statements throughout the week.
The vote is far too close to call so as the polls come in on Sunday night there will be violent swings in the Euro.
It will be fun to watch if nothing else.
GBP: The week for the GBP starts on Tuesday with the announcement of Manufacturing Production expected at 0.2%.
On Wednesday we have the Annual Budget Release.
Thursday sees the Official Bank Rate which is expected to remain unchanged at 0.5% and the far more important MPC Rate Statement.
YEN:Only two key data points.
On Tuesday we have the Current Account number at 1.38T.
On Wednesday Core Machinery Orders expected to show a decline of 4.6%.
More importantly for the YEN is how far it can rally as risk around the globe continues to suffer as the carry trade is unwound.
AUD:AUD news starts on Tuesday when we have the RBA Rate Statement  and the Cash Rate number projected to remain unchanged at 2.00%. This is the rate that is charged on overnight loans between the banks.
On Wednesday we have the Employment Change figure thought to be a small 1,000 and the Unemployment rate at 6.1%.
CNY:Only one item of note for the CNY which is the CPI number on Wednesday expected at 1.3%.

More importantly however is how the Chinese stock markets are going to perform.

Even though the PBOC has cut rates, increased the assets traders can post as collateral for their margin trading the falls continued with the Shanghai Index falling below the 4,000 level again.
The Chinese falls have not as yet affected the major bourses besides the AUD and NZD it is just a matter of time if they continue to fall.
OUR VIEW:   Once again Greece, Greece and more Greece.
Currently the polls show both the NO’s and the YES’s neck and neck so the chances of a decisive vote either way is unlikely meaning that traders will be stuck at their screens from Sunday night onwards as the referendum votes are tallied.
A NO vote should result in initial EURO weakness but that may already be largely priced in whilst a YES vote should, at least on paper result in a rally.
Personally I am doubtful of either event.
What I am not doubtful about is that volatility will be high. margins have been raised, stops both for the longs and the shorts will be taken out.
The other asset class to follow closely are the Chinese stock markets all of which are now in official bear markets. perhaps a brief, short, sharp respite rally is on the cards?

Stay nimble. Good luck trading.


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