Volatility spiked 16.6% with the energy sector outperforming the broad markets led by crude oil closing the week 8.8% higher followed by heating oil 7.1% and natural gas 5.2%. The correlation we have been noting between the US dollar and commodities tighten sharply last week as the weakness in the US dollar helped propel the commodity currencies higher led by the Canadian dollar closing the week 3.5% higher. Canada is known to be one of the largest producers of oil out of the G 10 group. Although the US has become a major oil producer the greenback is not considered a commodity currency, instead it is viewed more as a safe haven currency. Crude oil futures will be starting the week at the top edge of the range box that began at the beginning of the year while the Canadian dollar broke out of its range by mid week. The euro finished the week in the middle of the range. In the week ahead the euro should be on the spotlight as Greek fears may start to rise which Ihould be good news for euro bears and may also help the Dax rally higher. The Dax is a blue chip stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange. The cyclical recovery in the Eurozone which is expected to be lengthened in the week’s flash PMI readings are largely offset by the ECB’s asset purchases and the drop in fixed income yields. Most German bunds now have negative interest rate yields.
In the week ahead I will continue to pay close attention to correlations between the major asset classes and rotation flows for an early indication to market direction. Will risk-off dominate the market sentiment? Will the US dollar retrace? Will the benchmarks breakout of the recent range or more consolidation? Join us this week in The Trading Room® TradeLAB and find out how we use correlations to uncover developing set ups with ideal trading opportunities.
Joe Rios
The Trading Room® TradeLAB – Global Trading with Quantitative Technologies
Join our trading community with RiosQuant trade coaches Agustin Criado and Joe Rios as well as the RQ members. Live demonstration of our pre-market quantitative analysis, real-time trading signals with RQ algorithmic technology, strategy performance review and Q&A session.
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Monday
10:05 AM CAD BOC Gov. Poloz speaks
12:30 PM AUD RBA Gov. Stevens speaks
9:30 PM AUD monetary policy meeting minutes
Tuesday
5:00 AM EUR German ZEW economic sentiment
8:30 AM CAD wholesale sales
Wednesday
4:30 AM GBP MPC official bank rate votes
10:30 AMCL crude oil inventories
9:45 PMCNY HSBC flash manufacturing PMI
Thursday
3:00 AM EUR French flash manufacturing PMI
3:30 AM EUR German flash manufacturing PMI
4:30 AM GBP retail sales
8:30 AM USD unemployment claims
9:45 AM USD flash manufacturing PMI
10:30 AM NG natural gas storage
Friday
4:00 AM EUR German Ifo business climate
8:30 AM USD core durable goods orders
10:30 AM CAD BOC Gov. Poloz speaks
