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Weekly Market Commentary
22nd April 2012
Provided by TA Knowledge
Welcome to the Weekly Market Commentary from DGCX, providing you with a snapshot of what's happening in the energy, precious metal and currency futures markets.
The commentary and analysis included in the DGCX Weekly newsletter is provided by TA Knowledge, a leading UK-based provider of news and intelligence.
Please note that the observations and views expressed in this newsletter do not reflect the views of DGCX and are solely the view of the writer (TA Knowledge).
Economic Data Overview
The most successful trading strategy for both commodities and currencies in the dollar / European bloc has been to question market extremes and look for established ranges to prevail. Last week the euro broke back below 1.3000 very briefly only to be swallowed up by fresh investor demand as doubts emerged about the strength of the US recovery. Both oil and gold attract new demand as they test their long term bull trends, but gains have been modest and volatility is decreasing. The strongest directional markets currently are dollar / yen and dollar/rupee as the dollar continues to register healthy gains against both currencies. These "direction-off" strategies seem to work at the moment, regardless of the news flow. Last week the market chose to focus on the lower than expected weekly jobless claims and poor housing starts data as evidence that the US recovery is beginning to flag. Better than expected German confidence numbers were seen as more important than continued destabilisation of the Spanish and Italian debt markets. Peripheral European debt is struggling to attract investors and governments must pay over 6% in these nations to attract funds. If this situation cannot be reversed, it will not be long before the crisis circuit breaker of 7% will be broken. There is still is no plausible solution in place to reverse this potential crisis.
Last week the market chose to ignore the very promising US corporate earnings which boosted stock markets and highlighted real economic performance. It is also interesting to see that volumes in US Treasuries have begun to decline as investors appear unwilling to take the substantial risk of a pick-up in growth or inflation when yields are just above their all-time lows. The sole destination for investors looking for a safe haven is the German Bund market. It is easy to see that Bunds will continued to outperform their poorer European neighbours, but centralising risk in Europe with no end to the overall debt crisis surely is questionable. The IMF now has a bigger war chest after last week's G20 meeting. However, both Brazil and China have shrewdly limited their commitment of additional funds as they look for Europe to produce a more plausible solution to its own problems. The policy amongst German and French leaders of slowing the process to what will have to be a much larger bailout fund as they attempt to get re-elected is not helping the debt problem and this weekend may not help the current French president.
In terms of the directional plays, next week will be important as Japan and India face important challenges in managing their currencies. The BOJ rate decision is expected to see no change in rates. However, announcements will be important as the new policy of reflating the economy and making the yen more competitive is here to stay and Japan has stated at the G20 does not want any more yen strength. India is running out of options to stabilize the dollar/rupee rate. The market is in intervention territory. Interest rates were reduced this week to boost the economy and while oil prices did not rally strongly, balance of payments problems are still a concern. Next week the FOMC decision is not expected to see any change but the minutes will be important as any sign of easier monetary measures would boost gold and silver prices. The market will also look at the US growth data and measures of inflation in Europe...Read more
