The week ahead

Sunday, 05 October 2008 2125 GMT: Thus it starts, the inauguration of my sleep-deprived life. Of course my short USDJPY trade finally took off — without me. So it goes. Lots happening on the fundamental front to justify directional trading, but in circumstances like these timing is still important so I’m in no rush to jump in. In my sights this week (all times in GMT):

Monday 6 October 
0300 BoJ rate decision
0830 UK industrial production (YoY and August)
0830 UK manufacturing production (YoY and August)
1230 Can building permits (August)
1400 Can purchasing managers index (September)
2301 UK NIESR GDP estimate (September)

Tuesday 7 October
0330 RBA rate decision
0500 Jap leading index (August)
0500 Jap coincident index (August)
1715 FED’s Bernanke speaks on economy
1800 FOMC minutes release
2301 UK nationwide consumer confidence (October est.?)
2330 Aus Westpac consumer confidence (October est.?)

Wednesday 8 October
0500 BoJ monthly report
0500 Jap econ. watchers survey (September)
0645 Fr trade balance (August)
0900 EZ GDP (YoY, Q2 final)
1215 Can housing starts (September)

Thursday 9 October
0000 Aus consumer inflation expectation (October)
0030 Aus employment (September)
0600 Ger trade balance (August)
0600 Ger current account (August)
0600 Ger wholesale price index (YoY, September)
0830 UK total trade balance (August)
1100 BoE rate decision
2350 BoJ minutes for September meeting

Friday 10 October
0545 Sw employment (September)
1100 Can employment (September)
1230 Can international merchandise trade (August)
1230 Can new housing price index (August)
1230 US trade balance (August)
1230 US import price index (YoY, August)

I’m thinking the chips are all but on the table for the USD, with the exception of the FOMC minutes which will likely add a bit more force to the downside. Now it is the Euro’s turn and, as is often the case, EZ leaders there can’t seem to act in any concerted way when it counts most. The market is looking to the European Union, the ECB, and banking leaders for action on limiting financial contagions. Will there be more bank failures and fire sales? Will there be a “bailout”? Will there be speculation of a rate cut at the next meeting or — gasp — sooner? Okay probably not sooner. Just like last monday, EURJPY is taking it in the shorts tonight (along with the other Yen crosses) but the Euro has held up relatively well against the USD and GBP.

Back to the JPY. I think the action across the board tonight, from New Zealand all the way around to the United States, is about the cutting of carry trades and the tanking of the Nikkei (already down 4%!). I haven’t read anything that spells it out, exactly, but the striking JPY appreciation over the past several days smells like a carry trade and Japanese equities exodus. The crosses are leading the way, dragging USDJPY lower — to 10300 as of this post, where Japanese exporters are undoubtedly waiting to pounce! It will be an interesting price level to watch.

Where will it stop? Will there be a massive shift back into the crosses at better price points, as has so often happened since I have been trading? Or will USDJPY be dragged all the way to it’s multi-year lows just below 9600? With economic prospects dimming in Australia and New Zealand, not to mention lower interest rate outlooks, it is very possible USDJPY mid-March lows will be tested sooner rather than later.

So, lots to look at this week. The economic and financial news events above are what I think will be the more important MMEs — Market Moving Events, a phrase first coined to my knowledge by Andrew Spanton.

Finally, I’m working off of a new trade plan template. This should streamline things a bit for me…but at the moment all me and my updated trading journal hear is the sound of crickets. No signals tonight — Sunday’s are off-limits, particularly when Auckland and Wellington open with gaps.