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USD Off Lows, Retail Sales Beat Expectations
- USD: Lower, Yellen appointed to the Fed, retail sales post unexpected rise, consumer sentiment dips
- JPY: Lower, BOJ may double QE, threat of intervention
- EUR: Higher, Greek debt fears fade, talk of German/French Greek rescue package, industrial output surged
- GBP: Higher, house prices jump, Conservatives expand lead in the polls
- CAD and AUD: AUD mixed & CAD higher, Canada’s employment growth beats expectations
Overview
The USD traded at a three week low Friday pressured by announcement that President Obama will nominate Janet Yellen as vice chair of the Federal Reserve. Yellen is a policy dove and her appointment will likely mean that the Fed will keep interest rates low for much of 2010. USD was also pressured by improving risk appetite as global equity markets rally. The EUR traded higher supported by diminishing concern about the Greek debt crisis and in reaction to report that Germany and France may be considering a $55bln rescue plan for Greece. GBP traded higher supported by report of a jump in UK house prices. Commodity currencies traded higher supported by stronger equity markets and improving risk sentiment with CAD supported by report of stronger than expected Canadian employment and BOC rate hike speculation. AUD gains were limited by speculation the RBA will pause in April. JPY traded lower pressured by report that the BOJ may double the size of its quantitative ease to ¥20trln and in reaction to increasing threat of BOJ intervention. US economic data was mixed with retail sales reported stronger than expected, Michigan consumer confidence posted a slight drop. Business inventories were unchanged. USD came off its lows as US equities turned lower after the release of today’s data. Focus turns to next weeks Fed policy meeting on March 16th. No Fed policy change is expected. Investors will be looking to see whether the Fed makes any changes in its policy statement in regard to the language of "extended period" for low rates.
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The dollar is under pressure to end the week after words from a powerful investment house jolted investors expecting further decimation of the single European currency into a spin by warning that the next 10 cents for the euro is more likely on the upside than the downside. An unexpected jump in retail sales has provided a lifeline to an ailing dollar on Friday morning, but in my mind the die has been cast in that the rationale for remaining short the euro has just become more perilous than ever.
U.S. Dollar – Despite predictions for a February slide in U.S. retail sales, the out turn was a healthy 0.3% rise as electronics sales jumped. Ex-autos, sales rose 0.8% proving that winter blizzards and car recalls failed to dampen the spirits of consumers. A smaller than forecast decline in job losses last week may have also played a role, while one could equally argue that rising confidence among newly hired workers bodes well for the March employment report amid a spring thaw. We’ll also get the latest reading for consumer confidence later today from the University of Michigan in its sentiment survey, which is predicted to rise from 73.6 to 74.0.
The dollar index is lower after Goldman Sachs predicted that dollar strength is tomorrow’s story, but that its performance against the euro is more likely to result in a medium term revisit to $1.45 so long as it remains above $1.35. The dollar also weakened on viable rumors that President Obama was about to nominate San Francisco dove Janet Yellen as vice chairman at the Federal Reserve. She recently stated that if she could vote for negative rates, indeed she would.
Continue reading Fundamental Analysis – Investors Question Sustainable Euro Weakness »
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USD Mixed, Trade Deficit Narrows as Exports Decline
- USD: Mixed, jobless claims decline, trade deficit narrowed by 6.6%, global recovery may be slowing
- JPY: Lower, Q4 GDP revised lower, BOJ ease speculation
- EUR: Higher, rumor of Russian intervention, SNB reaffirms its intervention policy
- GBP: Higher, inflation expectations at a two-year high
- CAD and AUD: AUD & CAD lower, China rate hike fears, Canada’s capacity use and trade balance improve
Overview
The USD and JPY opened lower Thursday despite weaker equity market trade and a modest dip in risk appetite as European and US equity markets traded lower. The USD received a temporary boost after the release of economic data from China which showed any unexpected rise in inflation and strong retail sales and industrial production. China’s inflation rate rose to a 16 month high accelerating by 2.7% in February. The Chinese inflation report generates speculation that China will raise interest rates sooner than expected as the Chinese economy may be overheating. Chinese rate hike fears dampened risk appetite, pressured equities and supported the USD. USD erased early gains with GBP supported by a BOE inflation survey which shows that inflation expectations in the UK are at a two-year high. Rising UK inflation expectations may dampen speculation that the BOE will expand its asset purchases. EUR traded mixed and remained range bound. The EUR was initially supported by report of Russian intervention to slow ruble gains and the SNB’s reaffirmation of its intervention policy. Commodity currencies were mixed with AUD gains limited by risk of a rate hike from China and report of weaker than expected Australian employment data. CAD traded lower despite report of stronger than expected Canadian capacity use and a bigger than expected Canadian trade surplus. JPY traded lower pressured by report of a downward revision in Japans Q4 GDP and by BOJ ease speculation.
S&P says that the USD will maintain its reserve role status as long as US financial markets are sound and government spending is sustainable. S&P went on to say that the US reserve currency status cannot be taken for granted. According to S&P foreign investors could begin to reduce USD holdings if the US fails to address its fiscal deficit and debt. S&P said that the US could lose its AAA credit rating if the government did not address the fiscal outlook. There was limited reaction to report that US February foreclosures were up but were the smallest in four years. US economic data was mixed with jobless claims posting a modest decline and the US trade deficit unexpectedly narrowed in January. The narrowing of the US trade gap reflects a bigger drop in imports than exports. Exports declined for the first time in eight months. USD traded higher after the release of the US trade balance as the report generates concern the global recovery may be slowing. Focus turns to Friday’s release of Michigan consumer sentiment.
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Daily Technical Analysis
EURUSD Outlook
The EURUSD didn’t make significant movement yesterday. Overall price still consolidation in range area of 1.3450/35 – 1.3735/50. The bias remains neutral both in nearest and medium term but the long term outlook remains bearish. For me, there are two technical events that must take place in this situation to give us clearer direction, a break above the major bearish channel confirming bullish reversal scenario towards 1.4025/50 or a break below the triple bottom around 1.3450/30 area to confirm bullish failure and continue the major bearish scenario towards 1.3100. Immediate support at 1.3530. Break below that area could trigger further bearish pressure re-testing 1.3450/35 area. On the other hand, break above 1.3735/50 area should be seen as a serious threat to the major bearish scenario at least targeting 1.3850 region.
Continue reading Forex Technical Analysis – Daily 03.11.2010 »
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USD Lower, JPY Pressured by BOJ Ease Speculation
- USD: Lower, inventories drop more than expected, stocks rally
- JPY: Lower, BOJ ease speculation, weak machinery orders
- EUR: Higher, German exports drop sharply, industrial production rises in Italy and France
- GBP: Lower, industrial production posted an unexpected decline, concern about UK debt rating
- CAD and AUD: AUD & CAD higher, strong Chinese trade data, stocks and crude rally
Overview
USD traded in a narrow range gaining versus JPY and GBP, and drifting lower versus the EUR and commodity currencies. JPY was pressured by BOJ ease speculation. Reuters reports that the BOJ may ease monetary policy next week. GBP traded lower in reaction to report of an unexpected decline in UK industrial production. EUR erased early loses sparked by report of a sharp drop in German exports. EUR rebounded in reaction to report of stronger industrial production data from Italy and France and gains versus the JPY. The commodity currencies continue to outperform trading higher in reaction to strong trade data from China. China’s exports rose 45.7% in February. The Chinese trade data generates optimism about the strength of the global recovery. Dovish comments from the Fed’s Evans had limited impact on the trade. Evans said the weak labor market will make the Fed keep accommodative policy for some time. The Bloomberg Professional Global Confidence Index finds that optimism about the USD is an 18 month high as the US economy shows signs of recovery. According to the survey, investors expect the US economy to grow faster than Japan and Europe and the Fed is expected to hike rates before the ECB and BOJ. Growth and yield differentials are moving in favor of the USD. The Bloomberg survey also states that investors have turned negative the EUR because of fallout from the Greek debt crisis. Jeremy Siegel a finance professor at University of Pennsylvania Wharton school of business says the US recovery is certain but the EU may splinter. A fresh sign that the US economy is recovering is a report that US job openings are at an 11 month high. This report suggests that US employers may be ready to start hiring new workers. US economic data was mixed with wholesale sales coming in higher than expected and wholesale inventories lower than expected. USD traded to the days lows pressured by a surge in the price of crude sparked by report of lower crude inventories. Focus turns to Thursday’s release of US jobless claims and retail sales and Friday’s release of Michigan consumer sentiment.
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Daily Technical Analysis
EURUSD Outlook
The EURUSD attempted to push lower yesterday. Price slipped below the minor bullish channel, bottomed at 1.3537 but closed higher at 1.3600 and now back inside the minor bullish channel. This fact should keep the bullish correction intact and potential false breakdown scenario which could trigger upside momentum testing 1.3735/50 area. The bias remains neutral in both nearest and medium term as price still consolidation but the major trend should remain bearish as long as price move inside the major bearish channel. Note that only a clear break below the triple bottom formation at 1.3450/35 area could be seen as the end of the bullish correction scenario. Immediate support at 1.3530 area.
Continue reading Forex Technical Analysis – Daily 03.10.2010 »
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USD Higher, EUR and GBP Pressured by Credit Warnings
- USD: Higher, risk aversion re-emerges on European debt worries
- JPY: Higher, supported by a return of risk aversion, leading index rose more than expected
- EUR: Lower, concern about Greek debt troubles, ECB’s Stark says debt places strains on monetary policy
- GBP: Lower, Moody’s and Fitch warnings on banks and debt, weak housing data, trade deficit widened
- CAD and AUD: AUD & CAD higher, Australia’s job ads strong, tracking equities, gains versus Europe
Overview
USD traded higher Tuesday supported by a return of risk aversion sparked by the re-emergence of concern about European and UK debt. Fresh worries over European debt were triggered by statements from Moody’s and Fitch ratings agencies. The EUR traded lower ahead of today’s meeting with Greek Prime Minister Papandreou and President Obama. Bloomberg reports that this meeting is unlikely to produce any significant offer of US aid for Greece. Papandreou says that Greece needs EU and US help to prevent speculative selling of Greek bonds and that borrowing at high rates will not be sustainable. GBP was pressured by a Moody’s warning that it may cut UK bank ratings as bailout support is withdrawn and in reaction to Fitch concern about UK deficit. GBP was also pressured by disappointing UK housing and trade data and election polls which suggest that the UK is headed for a hung parliament. Commodity currencies continued to outperform despite a sharp decline in the price of crude and a spike in risk aversion as equity markets traded lower. AUD downside was limited by strong jobs ads report and a rebound in US equities. JPY traded higher supported by today’s return of risk aversion. There were no major US economic reports released in today’s trade. The NFIB small business optimism index lost 1.3 points in February and Manpower says that hiring plans are in a holding pattern as a net 5% of employers said they expect to hire new workers in Q2. Focus turns to this week’s release of US jobless claims, retail sales and consumer sentiment.
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| Tags: Fundamental Outlook, Trade Balance | Categories: Fundamental Analysis |
Today, the U.K. will release trade balance for January in a calm day in Europe that lacks fundamentals. The British economy has shown improvement, according to the data released last week which showed that consumer confidence surged in February to a two-year high and services expanded at the fastest pace in three years.
Britain expanded 0.3% in the fourth quarter boosted by exports which jumped to 3.7% from 0.1%, while imports rose to 4.1% from 1.3%. Besides, services and manufacturing sectors are showing growth in the first quarter of 2010. However, the economy is suffering from a trade deficit, where it widened in December to the most since January 2009 as imports soared faster than exports.
Trade deficit reached 7.3 billion pounds where imports inclined 5.2%, while exports jumped 4.5% on the month. The trade gap in January is predicted to narrow to 7.0 billion pounds. Trade deficit non EU is estimated to narrow to 3.3 billion pounds from 3.5 billion pounds, while the total trade deficit to retreat to 3.0 billion pounds from 3.2 billion pounds.
Continue reading Fundamental Outlook – U.K. Trade Gap To Narrow In January On Pound’s Depreciation »
