The next three days have the potential to be the most active for trading in years; for traders, this week could be bigger than the Super Bowl/FA Cup/Grand Final/Grey Cup all rolled into one. A number of threads that have been driving market action over the last several weeks and months may all come together with several highly anticipated events scheduled over Wednesday through Friday. USD has been soaring in recent months on speculation that the Fed may become more hawkish, steamrolling over everything in its path, particularly gold, JPY, EUR, GBP, crude oil and resource dollars (CAD, AUD, NZD). In so doing, however, the greenback has become extremely overextended technically against its peers, setting the stage for a potentially big reaction to Wednesday’s FOMC decision. Although another $10B taper looks fully baked in, the statement, member projections and press conference may have a big impact on trading with traders looking for guidance on when the Fed may start to raise interest rates and how aggressive their follow though may be, a series of increases as the Fed has done historically, or a few hikes then pause as some central banks have done like the RBNZ, ECB (who later reversed course) or the Bank of Canada. CAD may be active this afternoon with Bank of Canada Governor Poloz speaking at lunchtime on currencies. The Fed decision may have an immediate impact on trading in major paper currencies like JPY, AUD and CAD, plus hard currencies like gold and commodities like crude oil. The reaction in EUR and GBP, however, may be stronger later in the week as Thursday beings their own developments. The ECB starts its stimulus program that day with the first trance of its new LTRO loans. How that goes may impact EUR but also gold, which has tracked the size of the ECB balance sheet in recent years. Its rare that a Fed meeting is NOT the main event of the week, that distinction falls clearly on Thursday’s Scottish referendum. With results due later in the evening UK time, perhaps around the time US exchanges close. Since the potential for a close vote became clear recently, speculation surrounding the implications of the result have roiled the FTSE and GBP pairs which have the potential to be very active on the result with the direction depending on which side wins. The too close to call race heading down the stretch appears similar in many ways to the October 30, 1995 Quebec referendum where the NO side squeaked out a narrow win. In that case, the S&P/TSX index rose 1.0% on voting day, 1.81% on the day after the results were known and 4.8% within a week of the No vote. The Canadian Dollar (CAD) was flat on voting day, rose 1.4% the day after but then tapered off and was up only 0.8% after a week. I don’t have past data to suggest what might happen if the Yes side wins, but it’s reasonable to expect that choice could also generate a big move in GBP pairs and the FTSE which could spill over into European markets and gold on the political and financial uncertainty such a decision could create. The results of the Scotland vote appear likely to impact trading right through Friday, but on top of that we could see significant action in technology stocks to wrap up the week. The Alibaba IPO, which is expected to be the largest or second largest IPO ever, is scheduled to price on Thursday with trading expected to start on Friday. Finally, but by no means least, Apple’s iPhone6 goes on sale in several countries Friday. The on-sale date of previous iPhone models has historically been an active day for trading in Apple shares. It’s a busy week but one full of potentially major events that could set the trend for trading for weeks and months to come. It looks to be quite active with the potential for significant moves and reversals that may create significant opportunities for nimble traders. Now is not the time to be complacent. Economic News Economic reports released overnight and this morning include: US producer prices street 1.8% Canada manufacturing sales street 1.1% China foreign investment (14.0%) vs street 0.8% and previous (16.9%) UK consumer prices 1.5% as expected UK retail prices 2.4% as expected UK producer input prices (7.2%) vs street (6.8%) UK producer output prices (0.3%) vs street (0.2%) UK ONS house prices 11.7% vs previous 10.2% Germany ZEW current 25.4 vs street 40.0 Germany ZEW expectations 6.9 vs street 5.0 Eurozone ZEW expectations 14.2 vs previous 23.7 Economic reports due later today include: There are no major releases in North America later today.
Markets prepare for three days chock full of potential trading opportunities and action
20:00, 15 September 2014