So when does bad news become good news for QE?
More importantly, has it happened yet? The disappointment of not only today’s headline miss on NFP but also a downward revision for July had the Dow Futures sinking early, and even now, it remains below the key 13,308 resistance level. This slide below 13,000 is (current) evidence that the NFP despite its weak showing is not bad enough for traders to think it forces the Fed’s hand. However a mixed message is coming from the U.S. Dollar Index which is finding near-term support at 80.20.
The dollar’s weakness along with the Dow’s weakness sends a mixed message about the expectations of QE. A weak dollar would suggest its certainty and a very weak dollar would point to some promptness. I, for one, have a difficult balancing mediocre to slightly disappointing data with a Fed that would act before the election.
If the dollar’s slide is due to the jobs number then the move lower could be caused by investors betting on another wave of stimulus. But why wouldn’t the Dow rally? The answer partly lies in the 244 point rally from yesterday…is there any reason to rally more based on such a dramatic move? Are there bulls willing to hold equities and a Dow long position above 13,000? The S&P is fairing a little better.
(As long as I am discussing the S&P, I should also mention that I have my eye on APPL as well since there is talk that Apple is going to come out with a service to rival Pandora (which if you haven’t noticed is a strong name) Who’s to say this won’t be a great move for Apple? I suspect it will. I also suspect Apple is going to have a nice income from the adaptors they will be selling for 10 bucks a pop to allow the soon-to-be-date large pin connector devices to the new smaller pin connector that will undoubtedly be on the new iPhone and iPads…)
But why is a forex trader going off on an AAPL tangent? Because to gauge equities strength we must understand the heavily weighted names in each index and the equities index will offer insight into U.S. dollar movement and QE discounting.
In the meanwhile, after launching higher through 81.20, the AUD/JPY is retracting back to the 38.2% Fibonacci which will (unfortunately for AUD/JPY bears) be near-term support.
Past performance is not indicative of future results
The Dow Futures have pulled back from today’s early high at 13,324 but have not sold off as bulls are unwilling to participate at the higher highs but are in no mood to sell their long positions or engage short sells. The short covering of yesterday put a squeeze on the bears who are likely not ready to aggressive short into the weekend. Is the NFP terrible for stocks today? Not too bad and that means that the QE crowd is still hanging on.
As an active forex trader and Chief Currency Analyst for InterbankFX.com I do write for a number of sites all over the web and I am happy to say that I will be posting updates at www.IBFXconnect.com. My Activity Board will feature the trades from my trading account as well as intraday commentary.
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