As I've talked about so far this week, we've been pretty much expecting some 2-way action and consolidation from the EU and GU and that's pretty much what we've gotten. While I'm still not entirely sold on which way the next break will be, it seems a bit more likely that the next break will be lower, so watch 1.6274 on the GBP/USD and 1.4180 on the EUR/USD for confirmation of a clear turn lower that should continue over the coming days/weeks. A break of early August's highs around 1.4448 on the EU would negate that forecast.
In stocks, we're still likely in the final rally phase before the major turn lower, and this phase could last days or weeks. For shorter term plays, I would see any decent pullbacks or range-based consolidations as opportunities to go long on dips. If you do so though, keep a tight leash because if/when we start to near 1050 I'm going to look to start building a position trade short on equities if the setup looks right.
The metals look naturally unclear with the prospect of a stronger dollar and higher stocks pulling them in both directions at the same time. My recommendation is to hold a position trade short through the volatility because once things clear up, we'll be much lower than we are now and well underway in the ensuing decline. $991 and $15.20 in Gold and Silver are the spots if exceeded where I'll have to strongly reconsider that view, but as long as they hold... game on.
In news Tuesday, we had Consumer Confidence come in much better than expected, but the fact that it was coming in high was leaked ahead of time indirectly through an Obama announcement earlier, so much of the run up was unfortunately before the news, and the release itself was just a short spike and a reversal. That's usually what happens when such a report is leaked or there is a strong rumor that proves correct. In news Wednesday:
0400 German IFO Business Climate (89 expected) - This indicator has had only very small gains recently on less than 1.0 deviations, but the last 1.0+ surprise generated a pretty nice move, so I think that's a pretty good threshold to look for.
If it comes out at 90 or higher, EUR/USD should rally 40 pips.
If it comes out at 88 or lower, EUR/USD should sell off 30-40 pips.
If it comes out at 87 or lower, EUR/USD should sell off 40-50+ pips.
0830 US Core Durable Goods (0.9% expected) - This indicator has only been making minor price moves lately (20 pips or so) even on big triggers, so I plan on just skipping it until it does better for awhile.
1000 US New Home Sales (390K expected) - This report could see a good reaction with a smaller 10-30K surprise, but when that happens it's often hit or miss and even when it gets a good reaction, it can reverse after only a few minutes. I recommend just trading this one on a bigger trigger and staying out or focusing on technical trades if it comes in too close to expectations.
If it comes out at 425K or higher, EUR/JPY should rally 50 pips.
If it comes out at 355 or lower, EUR/JPY should sell off 50 pips.
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