Will These Bullish Triangles Follow Through? What started off as a high volatile week turned out to be a week of consolidation, as the major stock indices and currency pairs finished the week flat. Even though economic data had a major impact on the intraday sessions, Friday’s consumer spending erased any hope for an end of week rally, as the result showed that the economic rebound is currently being fueled on government spending. Personal spending came out at only 0.2%, compared to its last figure of 0.6%. As mentioned in previous reports, the Cash for Clunkers program has had an enormous impact on the U.S economy helping the auto industry to find some footing. In addition, the government has backed the recent rally due to their large percentage of consumption. When taking a glance at the chart below, one can see that over the past 2 years, due to the economic recession, total spending has increased dramatically. Furthermore when observing the blue section, one can see that Government spending accumulates for a fair portion of the current total spending. Despite the recent positive sentiment in the market, not all the fundamentals are backing the current rally. When observing recent consumer spending one can see that the consumer is still reluctant to purchase finished goods, due to the economic situation. According to some analyst’s and major investor’s such as warren buffet; if the end consumer doesn’t resume consuming, to help balance out the total consumption figure, the U.S economy could see further problems down the road. Furthermore according to Warren Buffet, lack of spending could also affect the Dollar as ensuing inflation could undermine its value. According to the U.S department of Commerce: PCE adjusted to remove price changes -- increased 0.2 percent in July, compared with an increase of 0.1 percent in June. Purchases of durable goods increased 1.8 percent, compared with an increase of 0.8 percent. Purchases of motor vehicles and parts more than accounted for the increase in July and accounted for most of the increase in June. Motor vehicle spending in July was impacted by the federal CARS program (popularly called “cash for clunkers”). Fundamentals aren’t still all there but Technicals are Showing a Different PictureFrom a technical point of view the major indices failed to rally higher last week, weighed down by Crude Oil. The drop in Oil was widely expected especially as the commodity had hit its 200 week moving average. Tuesday’s session had the most influence as crude dropped by over $2. The fall had an immediate affect on stocks and a rippling affect on various currency pairs. The AUD/USD and EUR/USD, two leading currency pairs both dropped at the start of the week coinciding with Oil’s fall. Even though fundamental data in the two regions, Australia and the Euro-zone, is still not back to a healthy situation, one can see that the various correlations are now having a stronger affect on the pairs, helping to drive them higher. Recent Oil strength has been accompanied by a stronger Euro and Australian Dollar, due to the U.S Dollar’s weakness. For further information about Commodity Currencies, feel free to visit dodjit’s school Three Charts of InterestThe upcoming week should be characterized by low volume as the start of September is known to be one of the quietist trading weeks of the year, due to the holiday season. Most veteran investors use the time take a small vacation from the markets or re-adjust their portfolios for the last couple of months of the year. On the charts, break out patterns are brewing as investors are increasing their risk for appetite. When taking a glance at the following charts one can see that they are all presenting bullish triangle patterns. One must note that even though the bullish triangle is normally characterized by a break to the upside, Friday’s data from the U.S could have a major impact on the markets. Similar to the first week of every month, the U.S will release its Non-farm Payrolls report and Unemployment rate. While a higher unemployment rate could weigh on the current rally, many are expecting that a small divergence from the consensus will only have a minor intraday impact, barely affecting the trend. Crude Oil Daily Chart AUD/USD – Daily Chart EUR/USD – Daily Chart
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