Forex Investment and Currency Trading

The highlight of next week will be Chancellor Darling’s Pre-Budget Report to Parliament on Monday. Key data releases in the US include consumer confidence (Tuesday), personal income and spending, Chicago PMI, Michigan consumer sentiment and new home sales (Wednesday). In the euro area, we get German IFO (Monday), German preliminary Q3 GDP (Tuesday), German preliminary HICP/CPI (Wednesday), E15 consumer confidence, industrial confidence and German unemployment (Thursday) and E15 ‘flash’ HICP (Friday). Elsewhere, we get Canada retail sales (Tuesday), NZ trade data (Wednesday), Japan CPI and industrial production (Thursday).

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The recessionary pressures building up in the economy have started to develop momentum suggesting that the real GDP is more likely to decline for six consecutive quarters than the three generally anticipated by the consensus forecasters. A contraction of this duration will not only be the longest in the modern period but it will also increases the risk of a deflationary cycle taken root not only in tradable goods but in services as well. A cumulative 10.7% decline in real GDP suggests a surge in the civilian jobless rate into double digit territory or up a full 3.5% from the [...]

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U.S. 2 year yields

The trend is down and the support level at 1.02%.(2003 long-term trend low) gave way today.
This confirms the further easing by the Fed is inevitable.
U.S 10 year yields – U.S. 2 year yields

Should test 275 bps…..but big caution would be signs of long-term quantitative easing which could flatten this curve as prior medicine fails to work.
German – U.S. 2 year yields spread

The long-term trend has turned here and we target the 200-week moving average, which currently stands at -44 bps. Maintaining that U.S. 2 year yields are still in a downtrend and are unlikely to rise anytime [...]

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This is over 80 years of the S&P (re-constituted back to 1927), which shows a danger of a major long-term double top forming with a neckline at 768.
A decisive close below here (At least weekly) would complete this pattern and suggest a move to AT LEAST 385.
If we get this close that is the danger that we have to protect against. We are not saying that will be easy. We already know that after we got a weekly close last year above the 2000 high it was sustained for 2 weeks, got no follow through and ended up being a [...]

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