Spain Unveils Budget, Durable Goods Drubbed

The euro rebounded from the 200-day moving average after Spain released its austerity budget. The kiwi was the top performer while the US dollar lagged. Japanese employment, CPI and industrial production close out Asian trading for the week. Monday's Premium Insights were based on further risk on trades and are nearing their final targets, from euro to Aussie, cable, silver and gold. See below.

Spain released its budget in the highlight of a non-stop news day. The euro slipped to a session low of 1.2829 when the headlines from the budget were first released but it stormed back when Finance Minister de Guindos said the budget exceeded EU recommendations.

The market took this as a sign that Spain is preparing to ask for ESM aid and the euro stormed a full cent from its lows. We are skeptical because, in almost the same breath, Guindos said its unclear what the bailout requirements are.

US economic data was mixed but tilted to the downside. The final revision on Q2 GDP was terrible, knocking it down to 1.3% from 1.7% on multiple downgrades. The shocker was durable goods orders which fell 13.2% compared to -5.0% expected in the largest fall since Jan 2009. Volatile aircraft orders were a major drag but underlying signs were also soft. The upbeat news was from initial jobless claims, which improved to 359K from 378K.

The S&P 500 surged 1% after 5 days of losses on optimism about Spain spread. Risk appetite may be short-lived as signs of slowing global growth mount. Brazil slashed its 2012 growth estimate to 1.6% from 2.5%.

The market will get a sense of Japanese growth in the hours ahead. At 2330 GMT, Japan releases August employment and CPI. That is followed at 2350 GMT with retail sales and industrial production. At 0500 GMT, Japanese housing starts wrap up the data slate.

Monday evening's Premium Insights test the efficacy of integrating medium term oscillators into short-term momentum changes. These are show in the 3 charts of EURUSD (Monthly) and GBPUSD (Weekly & Monthly). Direct access to trades, charts and rationale can be found directly in here: http://ashraflaidi.com/products/sub01/access/?a=683 Non subscribers can join here: http://ashraflaidi.com/products/sub01/

-AB