The Week Ahead for the US Markets: June 21-25

The U.S. market moved positively last week due partly to a glimmer of hope in the Euro zone The S&P 500 Index has risen from 1,091.60 to 1,117.51 by 2.4%, and Dow Jones Industrial Average closed at 10,450.6396 on June 18, increasing by 2.3% from the point 10,211.0703. The NASDAQ Composite has inclined from 2243.6001 to 2309.80 by 3.0%.

Overall Consensus: Slightly bearish As Existing Home Sales and New Home Sales were expected to fall, the U.S. market week ahead is estimated to move negatively. Moreover, GDP is expected to be adjusted downwards.

The coming week will be mainly dominated by economic indicators. Here is the outlook for major events in the U.S. market.

Monday, June 21

10:00 AM The U.S. Census Bureau will release Retail Trade Quarterly Financial Report for the 1^st quarter of 2010. After-tax profits averaged 3.0 cents per dollar of sales for retail corporations for the 4^th quarter 2009. This is 0.7 cents above that for the previous 3 months.

Tuesday, June 22

10:00 AM The Existing Home Sales for May will be released. Existing home sales in April was 5.77 million, rising by 7.6% in an annual basis. However, the supply on the market increased 11.5%.

Wednesday, June 23

10:00 AM The U.S. Census Bureau will announce New Home Sales for May. Sales of new one-family housed in April were 504,000 in a seasonally adjusted annual basis, 14.8% above the revised March estimate of 439,000.

10:30 AM EIA Petroleum Status Report will be published, providing the crude oil inventories at the end of previous Friday. U.S. commercial crude oil inventories at the end of last week increased by 1.7 million barrels from the previous week, closing at 363.1 million barrels. Furthermore, the average world crude oil price on June 11 was $70.09 per barrel, $0.88 less than last week’s price, but $1.85 above the price of one year ago.

2:15 PM FOMC meeting announcement will be published. The Federal Open Market Committee (FOMC) can determine short Interest rates in the U.S. and whether add or subtract credit markets liquidity. FOMC meeting will announce its policy decision as the arm of the Federal Reserve

Thursday, June 24

8:30 AM Durable Goods Orders for May will be released. New orders for manufactured durable goods in April were $193.9 billion by increasing $5.6 billion or 2.9%

8:30 AM Jobless claims for the last week will be announced. Jobless claims released last week increase by 12,000 from 460,000 in the June 5 week to 472,000 in the June 12 week. However, the four-week average slipped slightly to 463,500.

Friday, June 25

8:30 AM GDP (third estimate) for the 1^st quarter of 2010 will be released. The second estimate of GDP growth was adjusted down to 3.0% at an annual rate from the initial estimate of 3.2%. Moreover, the GDP price index at the second estimate was revised up to 1.0% in an annual basis from the initial 0.9%

9:55 AM Consumer Sentiment for June 2010 will be published. The Consumer sentiment can reflect the strength of consumer spending directly. The consumer sentiment index increased to 75.5 in the mid-June reading from 73.6 for the final reading of May, obtaining the best level since the January 2008 (78.4).

Key words for the week ahead

Retail Trade Report, Existing Home Sales, Crude oil inventories, FOMC, Durable Goods Orders, Jobless Claims, GDP, Consumer Sentiment

The Week Ahead for the USD: June 21-25

The US Dollar pulled back against all of its major counterparts last week. The dominating reason was that the confidence in Euro market was buoyed since Spain announced to sell 3.5 billion euros of bonds at the auction. Compared with optimistic Euro market, the US market released its disappointing import prices for May on last Tuesday.

Overall consensus: Neutral. The US economy keeps on recovering at a relatively stable pace. The CPI and PPI released last week signaled a healthy level of inflation. Also, the rising US stock market showed an improved confidence. Consequently, the USD will not fluctuate too much.

The upcoming week will be dominated by economic indicators, of which the home sales, FOMC statement and GDP seems especially important. Here is the USD forecast for this week (All the following time is US Eastern time).

Monday, 21 June

No major scheduled events.

Tuesday, 22 June

At 10:00 am, the US will release the Existing Home Sales data. As a spark for the US financial crisis’ home sales are playing an increasingly important role in measuring how well the economy recovers. The existing home sales have continued increasing (from 5.02M to 5.77M) since March 2010, and also all the actual data outperformed the forecasts in these three months. The result is likely to be better than the forecast now (6.23M).

Wednesday, 23 June

The busiest day of the week as three important reports are going to be released.

To begin with, at 10:00 the New Home Sales following Tuesday’s existing home sales. The new home sales for March and April were 411K and 504K respectively, and the sales in April reaches a 20 months’ high. Considering the housing starts in May were lower than forecast by almost 10%, the new home sales data for May should also be lower, this is likely to be bad news for USD.

Crude Oil Inventories will be reported by the Energy Information Administration 30 minutes later. The inventories last week are 1.7M.

Later in the day, the Federal Reserve will publish the FOMC (Federal Open Market Committee) statement at 2:15 pm. The previous statement refers to the re-establishment of FOMC’s temporary U.S. dollar liquidity swap arrangement with the Bank of Japan. The statement could have a great impact on the US Dollar crosses, and thus investors should focus on the changes in the FOMC statement

Thursday, 24 June

The Census Bureau is going to release the Core Durable Goods Orders at 08:30 am. The core durable orders decreased 1% m/m in April, and are expected to increase 1.1% m/m in May.

At the meantime, the Department of Labor has to release the Jobless Claims. The jobless claims have been under-expected since the beginning of the April 2010. The previous jobless figure is 472K, and it is expected to be 461K.

Friday, 25 June

One of the most important economic indicators, GDP is scheduled to be released. The GDP increase rate in the third quarter of 2009 was 2.2% q/q and then jumped to 5.6% q/q, and the expectation for the first quarter of 2010 is 3% q/q. If the figure is greater than expectation, it shows that the economy recovery is healthy, thus a good piece of news. Otherwise, it will definitely weaken the US Dollar.

After that, at 09:55 am, University of Michigan will report the Consumer Sentiment. Its forecast for June arrives at 75.5, which is a two-year high. In light of the report published on 11 June by University of Michigan, it has already suggested that consumer confidence rose more than expected in June. Hence, consumer sentiment may outperform forecast figures also.

What Important?

Existing Home sales and the FOMC rate announcement will be the key new events for early on in the week. Core Durable Goods and the GDP will be the market movers for the end.

Key Words for the Week

Existing Home Sales, FOMC, Core Durable Goods, GDP

The Week Ahead for the EUR: June 21-25

In a near three-week peak against the dollar, the Euro topped at 1.2415 and closed at 1.2373 in the course of the past week. The rise in the Euro seems more based on the idea that the panic in the euro-zone is abating. As a matter of the fact, extremely short net positions seem to have been reduced. Over the past few days, the Bank of Spain announced its intent to publish stress tests on Spanish banks, denying that this move was in any way related to the rumors about the Spanish need for emergency credit line that rocked markets at the beginning of the week. The decision, also backed by the European Commission, may enhance transparency, but it seems unlikely that all banks will turn out to be not at risk. Furthermore, some EZ16 Treasuries are still under attack, Spain’s ten-year hitting a new record 238 basis points over Bunds, likewise Ireland at 302 and Greece widening to 712. On Monday Greece lost its investment grade rating with Moody's downgrading Greece's credit rating from A3 to Ba1.

Overall consensus: Correction phase, Bearish bias remains. The EUR has performed well in recent sessions though it seems probable that this is a corrective rally rather than a broad based recovery. Overall, sentiment on the euro is less negative.

Next week will see the release of several key Eurozone sentiment indicators, including the German IFO business climate index, GfK Consumer Confidence, and PMI's for manufacturing and service sectors, as well as the speech from Trichet on Monday. Here’s an outlook for this week’s events, and an updated technical analysis for EUR/USD.

Monday, June 21

The week starts with the speech of Jean-Claude Trichet in Brussels. The President of the ECB will testify on Economic and Monetary Affairs before the European Parliament. As this speech comes early in the week, any comments about the state of the economies will cause moves.

Tuesday, June 22

The Ifo research institute will publish a closely watched report on German business climate. In the survey more than 7,000 businesses are polled about their expectations for the next months. Unlike the ZEW survey, the Ifo report has been on the rise almost each month in the past year and a positive surprise was also recorded on April when score passed the 100 point mark. A small drop can be expected this time. Consensus forecast: 101.20. Previous: 101.50.

Also on Tuesday, the European Central Bank will release the figure for the Europe’s Current Account. After two months of deficit, the EU current account, consisting of good (trade balance), services and money, has turned positive last month with a figure of euro 1.7 billion. This surplus will probably continue, but it is predicted to narrow down to 1.3 billion this time. The reading is a seasonally adjusted data where the good portion has no impact in the currency as a duplicate of the Trade Balance data released in the course of the last week.

Wednesday, June 23

Early on Wednesday, a measure of the German Consumer Climate for June will be published by the Gfk group. For this important indicator, more than 2,000 German consumers are surveyed. After the unexpected fall in May of 20 basis points, another drop is likely to follow turning the figure from 3.5 to 3.3 points and putting yet another weight on the Euro.

Between 7:00 to 8:00 GMT, the earliest purchasing managers’ indices for the manufacturing and services sectors will be released by France, then Germany and then for the entire continent. These crowded releases usually shake the currency. All the scores are above 50, meaning economic expansion, and they are all predicted to drop slightly down.

German Flash Manufacturing PMI is predicted to decrease from 58.4 to 58.3 points. On the other hand, the services sector is somewhat lagging behind, in Europe’s largest economy, and it’s predicted to go down from 54.8 to 54.5 points.

France Europe’s second-largest economy enjoys a super strong services sector, according to PMI. However, the high score of 61.4 will probably shrink to 61.2. The Manufacturing sector is expected to drop from 55.8 to 55.3 points.

Finally, the all-European Flash PMI will be published. The services sector is expected to stay stable at 56.2 points, whereas the manufacturing sector will probably see a small decrease from 55.8 to 55.5 points. Note that all the numbers are above the critical line of 50 – marking economic expansion.

Finally on Wednesday, a highly regarded survey coming from the small nation of Belgium, will reflect the situation of the Euro-zone’s economies. The score unexpectedly worsened from -2.4 to -4.9 in May and is likely to be even worse this time, with a forecasted -5.1. The more negative score means that businesses are now more pessimistic.

Thursday, June 24

Published at 6:45 GMT, the French Consumer Spending is expected to show growing confidence among consumers. Europe’s second largest economy saw a disappointing dip in consumer spending last month but this is expected to change now, with a rise of 0.30%. This can help the Euro.

Later in the day, the value of the new orders that European manufacturers received for the month of April will be published. After last month surprising rise in orders, 5.2%, a correction is expected this time, with a rise of only 1.6%. Learning from the past, a drop won’t be a big surprise.

Friday, June 25

Non major market moving events for the Euro.

The Technical View

Run Euro run! Last week saw a continuation of a euro correction, the euro found a brief head wind around the 1.2350 area, after a roughly 100 pip pull back over the next day the bulls again took the Euro higher. The market stopped 20 pips shy of our 1.2440-1.2460 major resistance area.

A reminder that the overall down trend, remains very much intact at the present moment as we are just about to kiss a major trend line area. In our last Technical View we discussed the importance of the 1.2440-1.2460 area it is likely that this area will remain a cap for the market in short term.

If the Euro does see some weakening next week, an initial area to watch for support is the 1.2241, with a major area below from 1.2110-1.2170 (this area had been a battle ground for many weeks now)

What’s Important?

In terms of the fundamentals Trichet’s speech on Monday and the German Ifo Business Climate report will have the biggest impact. The 1.2440-1.2460 remains our major resistance, with 1.2110-1.2170 support on the technical side.

Key Words for the Week

German Ifo Business Climate, Trichet, 1.2440-1.2460 Resistance, 1.2110-1.2170 Support