The DJIA closed last Friday at 16,493.37 (-2.77% weekly), and lost in five trading days 468 points. S&P500 lost 53.5 points at 1,925.15 (-2.71% weekly) and Nasdaq closed at 4,352.64 (-2.09% weekly), down 82.75 points. Volatility jumped and the VIX index rose from 13.33 to 17.03, a signal that a market correction could be likely. Many factors suggest that Equities should retrace and US dollar rise in the coming weeks: Tapering is reducing liquidity that has been used to build long positions in risky assets, geopolitical tensions has increased and a sort of irrational exuberance avoided that the potential effect could be priced in the market. Equities are trading near record levels and there is a divergence between European and US equities, with the latters that have not retraced with the same timing the stocks of the Old Continent. Price/Earning ratio of many tech, internet stocks surpassed the level reached during the tech bubble and technically if some support levels will fail profit taking after a multiyear rally combined with short sellers activity could increase the acceleration of the distribution of prices. Precious metals lost ground for the third consecutive week: Gold lost 8.3$ at 1,295 $/oz (-0.64% weekly) and Silver lost 30 cents at 20.34 $/oz (-1.43% weekly). Crude Oil was one of the worst performer among commodities and plunged to 97.67 $/barrel (-4.33% weekly), down 4.42$. Natural Gas closed at 3.8 $/BTU (+0.53% weekly).
In the FX market EURUSD rose 1 pip to 1.3420 (+0.01% weekly) and Cable went down for the third consecutive week: GBPUSD lost 148 pips at 1.6825 (-0.87% weekly). USDJPY rose 78 pips to 102.59 (+0.78% weekly) and USDCAD gained 113 pips at 1.0921 (+1.05% weekly). If against Euro the Greenback was flat, against other currencies, both major and emerging, the US dollar gained ground in what can be called a risk reversal trading environment. The Swiss Franc lost 10 pips against USD and CHFUSD closed at 0.9056 (+0.10% weekly). The Australian dollar underperformed the New Zealand dollar when the 2 currencies are compared against the Greenback. AUDUSD dropped 78 pips at 0.9316 (-0.83% weekly) and NZDUSD lost 48 pips at 0.8506 (-0.51% weekly). On Monday the most relevant event in the economic calendar during the European Session will be the Swiss Purchasing Manager Index at 07:30 GMT. In US the ISM New York Index will be released at 13:45 GMT. On Tuesday the Australian Trade Balance at 01:30 GMT will increase the volatility of the Aussie dollar that will reach its peak during the RBA Interest Rate Decision at 04:30 GMT. Now interest rate is at 2.5% and the financial community will expect that the level will remain the same. At 09:00 GMT Eurozone Retail Sales will have an impact on EURUSD intraday range. In US many data will be released: at 12:55 GMT the Redbook Index followed by the Markit Service PMI at 13:45 GMT and Factory Orders at 14:00 GMT. At 14:00 GMT the ISM non manufacturing is expected to rise 0.3 points from the previous month when it was released at 56. At 22.45 GMT Kiwi dollar traders should pay attention to the New Zealand Unemployment Rate, expected at 5.8%. On Wednesday at 05:00 GMT Japanese Leading Economic Index will close the macro flow from the Asian session. At 08:30 GMT will be released UK industrial Prodution and then at 11:00 GMT will be the turn of US Mortgage Application, followed at 12:30 by the US Trade Balance. At 14:00 will be released the UK NIESR GDP estimate. At 14:30 GMT as usual in US Crude Oil will increase its intraday volatility during the release of the stocks change. On Thursday the Australian Unemployment rate, now at 6%, will be released at 01:30 GMT. The European session will be rich of events that will start with the Bank of England Interest Rate Decision at 11:00 GMT followed at 11:45 GMT by the European Central Bank Interest Rate Decision. At 12:30 GMT will be released the ECB Monetary Policy Statement and will be held a press conference. At 12:30 GMT US Job Claims data and at 14:00 GMT will be released in Canada the Ivey Purchasing Managers. At 14:30 GMT the weekly appointment with EIA Natural Gas Storage Change in US. At 19:00 will be released the US Consumer Credit Change and at 23:50 the Japanese Trade Balance. At 01:30 on Friday will be released the Australian RBA Monetary Policy Statement. During the Asian session in Japan will be released the Monetary Policy Statement and will be held a press conference as well. At 08:30 will be released the Trade Balance data in UK. In Canada at 12:30 GMT the Unemployment Rate data will increase the volatility of the Loonie dollar. At 14:00 GMT in US Wholesale Inventories will close the economic calendar.
