FOREX TRADING

The U.S Dollar rose against most other major currencies Tuesday, as comments by Ben Bernanke eased concerns that policy-makers won’t act decisively to head off inflation spawned by efforts to counter the credit crisis. The Federal Reserve Board chairman’s testimony was favorable for the USD, as his assessment on the U.S. economy revived the greenback’s safe-haven appeal.

USD – Dollar Rises on Increased Risk Aversion

The U.S. Dollar rebounded while U.S. stocks retreated yesterday after initial gains were overshadowed by cautious outlooks on the economy from corporate executives and Federal Reserve Board Chairman Ben Bernanke. As a result, the USD finished yesterday trading session 100 pips higher against the GBP at the1.6410 level. The greenback also saw bullishness against the EUR and closed at 1.4175.

U.S. government debt prices rose sharply on Bernanke’s comments that an easy money policy would likely be needed for an extended period. Moreover, risk appetite had increased in the past few days after stronger-than-expected U.S. corporate earnings. The latest to report higher-than-expected quarterly results was manufacturer and Dow component Caterpillar Inc. yesterday.

Looking ahead to today, the most important economic indicator scheduled to be released from the U.S. is the Crude Oil Inventories report at 14:30 GMT. Traders will be paying close attention to today’s announcement as it has the potential to boost the USD in the short-term. Traders are also advised to follow Federal Reserve Board Chairman Ben Bernanke’s testimony at around 14:00 GMT. This testimony is very important as it is very likely to impact the Dollar’s volatility. Traders are advised to watch closely, as this is likely to set the pace of the USD going into the rest of the week’s trading.

EUR – EUR and GBP Erase Gaines on all Fronts

The EUR weakened against most of its major currency rivals yesterday on concerns CIT Group Inc. may file for bankruptcy, renewing demand for a refuge. By yesterday’s close, the EUR fell against the JPY, pushing the oft-traded currency pair to 133.17. The EUR experienced similar behavior against the CHF and closed at 1.5160.

The British Pound also fell against the U.S Dollar as a report showed the U.K budget deficit climbed in June to the highest per month since records began in 1993, fueling concern the government will struggle to find buyers for its assets. The drop pushed the GBP down from near the highest level this month against the Dollar. The budget shortfall rose to 13 billion Pounds from 7.5 billion a year earlier. Gilts reversed earlier declines after Federal Reserve Board Chairman Ben S. Bernanke told Congress that policy makers will keep Interest Rates “exceptionally low.”

Today, there is plenty of economic news coming from the Euro-Zone that will determine the GBP and EUR levels by the end of today’s trading. From the Euro-Zone, there are the European Industrial New Orders, and French Consumer Spending figures. From Britain, the most important news will be the MPC Meeting Minutes and CBI Industrial Order Expectations figures. All these news events will be important in helping set the strength of the GBP and EUR in this week’s trading.

JPY – Yen Strengthens on Bernanke Testimony

Japan’s currency rose against most of its major counterparts after Bernanke mentioned that at some point the Fed “will need to tighten monetary policy” to counter the emergence of an inflationary problem. The Yen also advanced from near a 2 week low against the U.S dollar on speculation Japanese exporters bought the currency after its 1.8% decline last week.

Traders today have very little fundamental news emanating from Japan as the only indicator being released is the trade balance report. Analysts forecast the figure to increase from its previous reading. This indicator typically generates small amounts of volatility. However, the USD and the GBP appear to be clutching the reins of today’s market. Traders would be wise to note its future direction as it usually carries a heavy impact on the other currencies.

Crude Oil – Oil Stabilizes after Steady Appreciation

Crude Oil slid down slightly, to just above $65 a barrel, on Wednesday, after data showing an unexpected rise in U.S. crude stocks underscored worries about persistently weak demand from the world’s top oil user. The U.S. crude oil stockpiles rose unexpectedly last week as domestic refining activity slumped, the American Petroleum Institute (API) said on Tuesday. However, firm equity markets and a weak Dollar could lend some support to Oil, analysts say.

Crude prices climbed 8.7% for the past week as investors bought futures on expectations of higher fuel demand. Optimism that the worst of the global recession is over followed gains in U.S. leading economic indicators and as financial service companies said earnings climbed.

Article Source – Greenback Rebounds from 6-Week Low

The British Pound is likely to look past minutes from the July meeting of the Bank of England with traders unlikely to be treated to anything that has not already been priced into the exchange rate, leaving the currency to continue taking cues from risk sentiment. Germany’s IFO survey of business sentiment is also on tap.

Key Overnight Developments

• Australian Inflation Falls to the Lowest in a Decade
• Euro, British Pound Turn Lower in Asian Trading

Critical Levels

The Euro traded lower in the overnight session, losing as much as -0.4% against the US Dollar. The British Pound followed suit, testing as low as 1.6391 against the greenback.

Asia Session Highlights

Australia’s Consumer Price Index printed in line with expectations with the annual pace of inflation falling to 1.5% in the second quarter, the lowest in a decade. Continued downward pressure on consumer prices looks likely as tumbling wholesale costs filter into the final price of products. Australian Treasurer Wayne Swan said “inflation is expected to remain subdued over the near term as the effects of the global recession continue to impact on the domestic economy.” This bolsters the case for additional rate cuts from the Reserve Bank of Australia in the months ahead. Indeed, RBA Governor Glenn Stevens said as much even as the bank kept rates unchanged in July, noting that “the outlook for inflation allows some scope for further easing of monetary policy.”

Euro Session: What to Expect

Germany’s IFO Survey of business sentiment is expected to rise for the seventh consecutive month in July, pointing to continued improvement in firms’ 6-month economic outlook. Still, the reading is expected at 90.1, a print below the 100 “boom-bust” threshold, suggesting conditions are still deteriorating albeit at a slower pace. Some recovery is to be expected as the government’s 82 billion euro fiscal boost filters into the broad economy, but the big question in Germany as well as most anywhere at this stage is whether growth is sustainable after stimulus cash dries up. As it stands, the latest economic forecast from the International Monetary Fund (IMF) reveals that the Euro Zone will stand apart from other industrialized economies in seeing economic growth continue to contract in 2010, pointing to a comparatively slower return to higher interest rates that will keep the Euro on the defensive against most major currencies.

Minutes from the July meeting of the Bank of England are unlikely to prove particularly market-moving this time around, with traders unlikely to be treated to anything that has not already been priced into the exchange rate. The bank made no changes to benchmark interest rates or the quantitative easing program, saying they will “review the scale” of their unconventional easing measures in August as they release their quarterly inflation report. From here, next week’s GDP report is likely to be the key to the market’s expectations on the future direction of monetary policy. Initial cues are favorable: London-based think tank NIESR has reported the economy probably shrank just -0.4% in the second quarter, the slowest pace of decline in a year. Still, the British Chamber of Commerce has urged policymakers to expand their asset-buying scheme by 25 billion pounds, saying a recovery is “not guaranteed”, a sentiment that has been echoed by the Shadow Monetary Policy Committee (a group of independent economists that meet at the London-based Institute of Economic Affairs). On balance, British Pound price action is likely to continue taking its cues from risk appetite, with the sterling’s trade-weighted average value now 87.8% correlated with the MSCI World Stock Index.

Written by Ilya Spivak, Currency Analyst
Article Source – British Pound to Look Past Bank of England Minutes, Trade on Risk Sentiment (Euro Open)

In the last three months alone, the Brazilian Real has risen by an impressive 15% against the Dollar alone. What’s driving this impressive importance? The lead paragraph for one article offered the following encapsulation: “Brazil’s real climbed to the highest in more than nine months as stronger-than-estimated corporate earnings, rising equities and higher metal prices bolstered the outlook for Latin America’s largest economy.”

These factors certainly represent a good starting point for any analysis of the Real. As signs continue to emerge that the global economy – and China specifically – have turned a corner in their fight to overcome recession, commodities will likely continue to rally, which is excellent news for Brazil bulls. In addition, “May industrial production and especially retail sales came in stronger than expected, following incipient signs of improvement in labor and credit conditions, consumer and investor confidence, and inventory levels.” As a result, after a modest contraction in 2009 (the bulk of which took place in the first quarter), 2010 is expected to mark a return to solid growth, with estimates ranging from 3.5% to 4.5%, rising to 5% in 2011.

The Central Bank of Brazil, however, is not necessarily on the same page. Last week, it cut rates to a record low of 8.75%, in order to ensure that Brazilian monetary policy remains easy enough to support growth. While this is an unwelcome development for carry traders, there are a few mitigating circumstances. First, considering that Brazilian inflation is projected to average 4.5% in 2009, this still affords investors a solid 4% real return, without factoring in currency fluctuations. Second, Brazilian rates are still significantly higher than levels in industrialized countries, such that the interest rate differential which makes Brazil attractive has been carefully preserved. Finally, while precise forecasts vary, the Central Bank is expected to begin hiking rates as soon as the end of this year, with further hikes throughout 2010.

The Central Bank has also been busy on other fronts. Thanks to a healthy trade surplus, its foreign exchange reserves are burgeoning, recently touching a record $209 Billion. This figure well exceeds Brazil’s outstanding debt, which gives it great flexibility in determining how to allocate these reserves. Already, the Central Bank has begun to pare down its holdings of US Treasury securities, in search of higher-yielding alternatives. In addition, the Central Bank has taken to intervening regularly in the forex spot market, in a vain effort to stem the rise of the Real.

In the short term, analysts are now lining up around various technical levels, backed by little real fundamental analysis. “Moreover, without fundamental economic news showing better times ahead for the U.S. economy, principally, then the BRL1.90 support will remain cemented in place,” offered one analyst. “You show me some more good news and the support will be closer to 1.85,” argued another. It looks like traders are just looking for excuses to keep bidding up the Real.

Another MetaTrader expert advisor was added to my site today — MACD Pattern. It’s based on the MACD patterns (Moving Average Convergence/Divergence), specifically for EUR/USD H4 chart. It shows quite interesting back-test results but, unfortunately, has also two major problems. First, it has more than 27% maximum relative drawdown (that’s more than $6,000 drop during one moment). Second, it doesn’t explicitly control bar opening and uses stop-loss and take-profit levels, which means that the backtests aren’t very accurate and the resulting data had better be treated very skeptically. But 60% profit over the course of less than 19 months is quite nice. Here you can see the test results graph (click to enlarge):

A strong drawdown can be seen close to the end of the test — its reason is unknown to me, but I guess it’s tolerable.

You can also view the complete testing report. Go directly to MACD Pattern expert advisor page to download this EA or get more information about it. If you don’t like MACD Pattern, you can check other MetaTrader expert advisors.
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A new trading e-book has been uploaded to my site today. It’s Money Management and Risk Management by Ryan Jones. As the title of this book goes, it’s about money management — one of the most important parts of Forex trading (and not only Forex, but any other financial trading that involves risk and probability). The author wisely divides the money management into two kinds — the proper and improper money management. Where the first type refers to the one that always keeps in mind both the risk and reward parts of each trading action, while the improper tries to amplify the importance of only one of those to vital parts. Unfortunately, the majority of traders, especially newbie traders, that see the possibilities opened by the on-line Forex market and its huge leverage, fail to see the full picture and all the more so they can’t apply the proper money management to their trading strategy. But now you can download this book to learn more about the proper money management:

• Money Management and Risk Management

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Yesterday’s rally on Wall Street, which led to a devaluation of the major safe-haven currencies such as the USD, was led by a decision from CIT, a large financial firm, in favor of a $3 billion bankruptcy protection bailout. The resultant boost in confidence led stock markets into a strong rally, followed by a declaration from the Bank of Japan (BOJ) that their economy may no longer be getting worse. All of this optimism has helped to increase risk appetite and lower the appeal of safe-haven investments.

USD – Dollar Tumbles as Stock Markets Rally

The Dollar tumbled to its lowest level in over a month vs. the EUR, as Wall Street rallied on Monday. The rally was initiated by U.S. commercial finance company CIT board approving a $3 billion rescue package. The USD’s subsequent devaluation and Wall Street’s gains yesterday were also owed to increased risk appetite, as traders were taking into account continued optimism from the 2nd quarter, following last week’s optimistic results from U.S. banks. Adding to optimism for the U.S. economy, U.S. housing data released yesterday points to stabilization of the U.S. housing sector.

The Dollar Index touched 78.799 on Monday, the lowest level since the 3rd of June. The USD tumbled against the JPY by over 70 pips to 93.92, as traders ditched the greenback for higher yielding assets. The GBP/USD jumped by 120 pips to 1.6518, as the GBP acted positively to the optimism in the banking sector. The EUR/USD closed nearly 60 pips higher at 1.4214, as the USD’s safe-haven status is dissipating as signs of global economic recovery are in the making. It seems that as long as global equities rally, the USD will continue to slide vs. the major currencies.

Looking ahead to today, there are some crucial releases that are set to come out of both the U.S. and Canada. Canada is set to publish both the BOC (Bank of Canada) Rate Statement and Overnight Rate at 13:00 GMT. The results of these are set to determine the USD/CAD rate in the coming week. At 14:00 GMT, U.S. Federal Reserve Chairman Ben Bernanke will testify before the Financial Services Committee in Washington, DC. This is significant for future U.S. monetary policy. Surrounding this event, the forex market is likely to experience heavy volatility.

EUR – EUR Hits 6-Week High against USD

The EUR hit a 6-week high against the USD yesterday, as U.S. and global equities rallied. This was owed to optimistic U.S. and European data in the past week. Also, the U.S. largely led the rally, as U.S. financial firm CIT’s bondholders agreed to $3 billion of emergency financing to prevent bankruptcy. The GBP also hit a 3-week high against the USD due to global banking industry expectations. The 2 things that helped the Pound gain yesterday was risk, as traders felt comfortable in diversifying their investments due to renewed optimism.

The EUR/USD cross hit as high as the 1.4250 level on Monday, before closing at 1.4210. This bullish pattern of the pair is much owed to the USD’s safe-haven status declining as the global economic recovery kicks in. The GBP/USD closed at 1.6518, while the EUR/GBP cross finished lower by 30 pips at 0.8603. Much of the GBP’s bullishness recently has been owed to rising energy prices and the recovery of the banking sector, as the British economy is very dependent on these 2 industries.

Today, we can expect economic news releases from both Europe and Britain. Switzerland is set to release her trade balance figures at 06:15 GMT. A high figure will be good for the CHF, as this would show a higher surplus of exported goods during the previous month. Britain is set to release public sector net borrowing figures at 08:30 GMT. A lower than forecasted 15.7 billion Pounds may help the GBP today, further adding to recent optimism in the British currency.

JPY – JPY Climbs on CIT Rescue Plan

The JPY climbed against a number of its currency pairs yesterday, as a result of the rescue plan by the shareholders of U.S. finance company CIT. This automatically helped spread the rise in equities from the U.S. to Japan. As a result, the JPY climbed against its major currency pairs. The JPY climbed against the USD by 70 pips to 93.92, as investors put their money in higher yielding assets. The Japanese currency also made gains vs. the EUR, to close 64 pips higher at 133.34.

The strength of the Japanese currency may be owed to the fact that the Japanese economy has bottomed out. Therefore, forex traders are willing to put more of their money in the Japanese currency, as the global economic situation improves. Additionally, as this occurs, investors are beginning to pour their money back into Japan. The result will therefore lead to a stronger Japanese currency for the foreseeable future. We may see the USD/JPY drop below 93.50 in today’s trading.

Crude Oil – Crude Oil Hits a 2-Week High

The price of Crude Oil hit a 2-week high of $65.86 yesterday, before closing at about $65.30. Crude prices rose on Monday for a number of reasons. There was much optimism coming out of the U.S., spurred by the CIT rescue plan. In turn, the equity rally in America led traders to diversify their investments. Thus the USD declined, which helped boost the price of Crude Oil. The gains in commodities extended throughout the day.

There are some investors now that are talking of a price correction in Oil. However, if there is enough optimism to support the price of Crude, there is no reason that prices won’t rise to over $66 per barrel of Crude in today’s trading. This could come sooner rather than late, providing that the U.S. Dollar continues to plummet. In addition, optimism from U.S. Federal Reserve Chairman Ben Bernanke’s speech may add to possible gains to Crude prices later in the day.

Article Source – CIT Bailout Adds to Risk Appetite, Safe-Havens in Decline

The British Pound may see selling pressure in European hours as the UK Public Finances report shows the government’s monthly cash shortfall rose again in June, boosting fears that mounting fiscal debt may lead to a reduction in the UK’s sovereign credit rating. Switzerland’s Trade Balance figures are also on tap.

Key Overnight Developments

• Bank of Japan Says Global Economic Growth Faces Downside Risks
• Australia to Recover from Recession Later This Year, Says RBA
• Euro, British Pound Pare Gains Against US Dollar in Asian Trading

Critical Levels

The Euro saw a bit of selling pressure in overnight trading, testing as low as 1.4190 to the US Dollar. The British Pound also retreated, slipping -0.3% against the greenback.

Asia Session Highlights

Minutes from June’s Bank of Japan policy meeting said conditions in the global economy have “begun to stop worsening” and credit markets are “starting to regain stability”. Turning to Japan itself, the bank echoed familiar sentiments, saying that exports will continue to recover “mainly due to progress in adjustments in overseas inventories” while private consumption remains relatively weak “as the employment and income situation [is] likely to become increasingly severe”. On inflation, the BOJ said that the pace of consumer price growth is likely to turn negative, reflecting the declines in the prices of petroleum products, stabilization of food prices, and overall economic weakness. On balance, policymakers concluded that uncertainty surrounding the outlook for the global economy [remained] high” and warned that “risks to the outlook were still tilted to the downside” despite some early signs of improvement.

Meanwhile, the Reserve Bank of Australia released minutes from their July policy meeting. Policymakers struck a positive tone, saying the Australian economy has proved “more resilient than expected” as fiscal and monetary measures have been effective in stoking demand. The bank added that the full effect of lower interest rates is yet to be felt, with downside risks diminishing and the economy to recover later this year. Still, Glenn Stevens and company cautioned that the Australian labor market is likely to “remain soft for some time” and reiterated that they have “scope” to cut interest rates even though current policy is “consistent with fostering growth”. Perhaps most interestingly, the RBA said that exports have been “remarkably strong” on demand from China, a far different story than what is being seen in the latest Trade Balance figures.

Separately, New Motor Vehicle Sales rose for the third consecutive month in June, adding 5.7% following a 5.4% increase in the previous month. In annual terms, sales fell -7.2%, the smallest decline in nearly a year. The improvements are likely linked to the government’s aggressive stimulus efforts, including over A$12 billion in cash handouts to households. The big question going forward is if current momentum can be maintained as the flow of stimulus cash dries up. The RBA’s optimistic posture notwithstanding, the labor market continues to suffer, erecting barriers to a meaningful rebound in demand.

Euro Session: What to Expect

Switzerland’s Trade Balance surplus may continue to contract in June as the country’s top trading partners in the US and the European Union continue to struggle with recession, weighing on export sales. That said, the possibility of a move higher in the headline figure does exist: the UBS Consumption Indicator that forecasts the trend in private spending in the coming 3-4 months fell to the lowest level in over 5 years in May, hinting at lackluster domestic demand that could weigh on sales of foreign-made goods and trim import volumes. Recent trends in the Swiss Franc are supportive of such an outcome: the currency has declined 2.4% in trade-weighted terms since the beginning of the year, a trend that makes Swiss goods comparatively cheaper for overseas buyers while cutting into domestic consumer’s purchasing power of imported products.

Turning to the UK, June’s Public Finances report is set to show that the government’s monthly cash shortfall rose to 20.2 billion pounds from 18.8 billion in the previous month. The gap swelled for the first time in three years in 2008, rising 22.7%. Continued shortages will add to fears that mounting public debt may lead to a reduction in the UK’s sovereign credit rating. Indeed, a survey of economists conducted by Bloomberg expects the overall budget deficit to average 12.4% of GDP through 2010, amounting to the worst fiscal position of any G10 nation.

Written by Ilya Spivak, Currency Analyst
Article Source – British Pound Vulnerable as UK Cash Shortage Rises, Threatening Credit Rating (Euro Open)

After a brief pause, China’s foreign exchange reserves have resumed their blistering pace of growth: “The reserves rose a record $178 billion in the second quarter to $2.132 trillion, the People’s Bank of China said today on its Web site. That dwarfs a $7.7 billion gain in the previous three months.” Considering that the global economy remains embroiled in the worst recession in decades, this is frankly incredible. [Chart below courtesy of WSJ].

As far as currency traders are concerned, this development has two important implications, the first of which concerns the Chinese Yuan (also known as RenMinBi or RMB). A quick parsing of trade and capital flows data reveals that the majority of the $178 Billion came from unconventional sources. “The trade surplus was $34.8 billion in the second quarter and foreign direct investment was $21.2 billion.” Currency fluctuations (i.e. the depreciation in the Dollar relative to other major currencies) can explain a small portion, “leaving the bulk of the increase in the reserves unaccounted for.”

In short, most of the capital now flowing into China is so-called “hot money,” chasing a piece of the action in China’s surging property and stock markets. The benchmark stock index has risen 75% this year, making it the world’s best performer. In short, China is once again “caught in a squeeze similar to the one that bedevilled policymakers earlier this century, with a flood of hot money trying to force the government’s hand on the currency.” Either it allows the RMB to resume its upward path against the Dollar, or it raises interest rates rapidly to head off inflation. With the money supply now growing at an annualized rate of 30%+, the government is running out of time on this front.

The second implication concerns the composition of China’s reserves. You can recall that in recent months, Chinese officials have become more vocal about ending the Dollar’s role as the world’s reserve currency, and have even taken token steps towards achieving that goal. But the latest analysis suggests that when push comes to shove, China is still firmly behind the Dollar: “Estimates suggest around 65% of China’s official holdings are in U.S. dollar assets, and the remainder are denominated in euro, yen, sterling and other currencies. This mix has been relatively stable as the Chinese government continues to place the bulk of its reserves in U.S. Treasury securities.”

In fact, “stable” is an understatement. While other Central Banks are gradually paring their holdings of US Treasuries, China is adding to its own stockpile. Already the world’s largest holder of Treasuries, China added another $38 billion in May, for a total of $800 Billion. “On the contrary, Japan, Russia and Canada were sellers of US assets in May. Japan, the second-biggest international investor, reduced its total holdings by $8.7 billion to $677.2 billion.” Meanwhile, Zhou XiaoChuan, governor of China’s Central Bank has endorsed the current composition of reserves: “Despite the $800 billion in U.S. Treasuries, it is a diversified portfolio overall.” This certainly represents a step backwards for Mr. Zhou, who only a couple months ago was leading the charge for a global reserve currency.

Perhaps over the longer-term, it can begin to take steps to dislodge the Dollar, but for now, it appears that China has accepted the status quo. As one analyst observed, “We do expect China to increase its purchase of gold and other commodities over time, but these markets are just not big enough to make a meaningful dent in the structure of the overall FX holdings. For example, if China decided to hold 5 percent of its current $2 trillion reserves in gold, it would need to buy …the equivalent to about one year of world production. For other hard commodities, the cost of storage is high and prices fluctuate wildly.”

China did recently appoint a new official (an economist trained in the US) to manage its reserves. “The move isn’t likely to fluster foreign-exchange markets or herald any change in China’s exchange-rate policy and reform.” Still, Chinawatchers are advised to continue to monitor the situation closely for any signs of discontinuity.

Looking at the weekly chart of the EUR/USD currency pair it’s easy to say that it’s currently trading in some kind of a long term triangle pattern with the narrowing boundaries. Although, the upper boundary offers a strong resistance far below 1.5000 level, there is a high probability of the bullish breakout. Fundamental analysts talk about the inevitable dollar’s weakness that will come soon as the global economy starts to recover from the crisis. On the other hand, the U.S. dollar still remains a global reserve currency, while the euro still haven’t managed to gain the proper reputation, which suggest a bearish breakout in EUR/USD. And what do you think about it?

Note: There is a poll embedded within this post, please visit the site to participate in this post’s poll.
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Trend indicators seem to be the most popular ones among the Forex traders. Indeed, Forex market is quite trendy and if a trader manages to catch this trend in its early stage and exit not long after the trend ends, considerable profit can be made. Today, a new free Forex indicator for trend detection was uploaded to my site. It’s quite accurate and shows where the trend starts and also where it ends; the zone without a trend is marked with a straight horizontal line, which also serves as some kind of support and resistance level. This indicator is easy to use but you had better be aware of the fact that it’s redrawing on the current bar and thus only completed bars can used as signals:

• Easy Trend Visualizer Indicator

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The U.S. dollar has ceded further ground on Monday as concerns about the U.S. economy abated and broadly improved corporate earnings lifted risk appetite and regional stock markets. The weak U.S. dollar had traders pushing up commodity prices. Crude remained relatively steady above $64 a barrel, after rising 2.5% on Friday on positive U.S. housing data that revived hopes of a global economic recovery.

USD – Dollar Declines on Concerns About the U.S Economy

Last week the U.S dollar saw bearish trends against most of the major currency pairs. The Dollar dropped over 200 pips against the EUR and over 300 pips against the Pound during last week’s session. The Dollar weakened last week despite rather positive indications from the U.S economy. Economists said that although the earnings and data from the housing sector suggest the U.S. economy is showing signs of a recovery investors are still reluctant to pour capital in to it.

It seems that the positive figures from the U.S economy has lead investors to believe that the world is showing real signs for pulling out of recession. Expectations are that an improvement in the U.S economy situation will be resulted in an improvement in different economies as well, especially the European ones, and this has raised the European currencies against the U.S dollar.

There is little U.S. data to drive the market this week, so the focus will be on Federal Reserve Chairman Ben Bernanke’s semiannual monetary policy testimony to Congress. Traders will be seeking clues on whether the Fed will begin unwinding some of the huge stimulus measures it undertook at the height of the U.S. financial crisis.

EUR – EUR Soars against the Majors

The EUR rallied last week against all the major currencies. The EUR’s most significant appreciation was against the Japanese yen, as the pair rose over 400 during last week’s session. The EUR also marked a bullish session against the U.S dollar and the British pound.

The EUR soared last week as a result of some relatively positive data from the Euro-Zone leading economies. Both the German and the European ZEW Economic Sentiments delivered positive figures, proving that investors and analysts continue to hold their optimistic view regarding the European financial condition. The two reports have failed to reach expectations, yet the final result was still positive enough to strengthen the EUR. The slide of the Dollar also contributed to the rising EUR, and as a result, traders who went long on the EUR last week saw nice profits.

Looking ahead to this week, many interesting economic publications are expected from the Euro-Zone. The data that should affect the EUR the most will probably be from the leading economies such as Germany and French. The Purchasing Manger’s Index from the leading economies is expected on Friday, and currently analysts forecast rather positive results for the indices. If the actual results will be similar to predictions, traders might see the EUR continues its bullish trend.

JPY – Yen Bullishness Halts

Last week may have signaled the end of the JPY’s bullish trend. The Yen has weakened against all the major currencies including the Dollar, the EUR and the Pound.

During last week, the Bank of Japan (BoJ) has decided to leave the Japanese Interest Rates at 0.10%, which are the lowest rates in the western world. It seems that the Japanese chiefs have managed to weaken the JPY. The Japanese leaders feel that a weak Yen will support the export of the country, and thus will improve the general economic condition. In addition, the Tertiary Industry Activity reports has shown that the change in the total value of services purchased by businesses dropped by 0.1% on June. This means that businesses in Japan are cutting off spending, proving that Japan has yet to pull out of recession. If the BoJ will continue with its policy to depreciate the Yen, and the financial reports from Japan will continue to show negative figures, the Yen could depreciate further.

As for the week ahead, many significant data is expected from the Japanese economy. Yet the most significant report seems to be the Trade Balance, which is scheduled in Wednesday. The report will show the difference in value between imported and exported goods and services during May. Current expectations are for a very positive result. If the actual result will indeed be similar to forecasts, this will mean that the BoJ succeed in supporting the Japanese export, and might strengthen the Yen.

OIL – Could Crude Oil Reach $70 a Barrel?

Crude Oil marked an extremely bullish session last week, rising from $58 a barrel up to $65 a barrel. The bullish trend came mainly as a result of the better than expected U.S data and the weak U.S dollar.

Oil’s gains on Friday were boosted by a government report that showed construction of new homes and the issue of building permits in the United States rose more than expected in June, signaling a potential economic recovery.

In addition, the demand for Crud Oil in the U.S has an immense influence on the value of oil, and thus, when positive signals from the U.S economy are likely to create speculations that demand for oil will rise soon.

Looking ahead to this week, traders should continue follow the leading indicators from the U.S economy, as they seem to have a very string influence on Crude Oil prices. Traders should also closely watch for the U.S Crude Oil Inventories report on Wednesday, as this report has proven to have an immediate impact on Crude oil’s prices.

Article Source – Traders Focus on Commodities as USD Slides

The US Dollar tumbled as Asian stock exchanges surged 2.4% to on news that US lender CIT will avoid bankruptcy while commodities advanced, boosting financial and resources-linked issues and trimming demand for the safe-haven currency. German Producer Prices are on tap in European hours, with expectations calling for the biggest decline in 22 years.

Key Overnight Developments

• UK House Prices See Smallest Decline in a Year, Says Rightmove
• Australian Producer Prices Fall More Than Expected on Stronger Currency
• US Dollar Falls on Stock Gains as CIT Avoids Bankruptcy, Commodities Rise

Critical Levels

The Euro pushed sharply higher in overnight trading, adding 0.6% against the US Dollar. The British Pound mirrored its continental counterpart, testing above the 1.64 level. The greenback tumbled as Asian stock exchanges surged 2.4% to on news that US lender CIT will avoid bankruptcy while commodities advanced, boosting financial and resources-linked issues and trimming demand for the safe-haven currency.

Asia Session Highlights

UK House Prices grew 0.6% in July after falling -0.4% in the previous month according to Rightmove, an online listing of for-sale properties. In annualized terms, prices fell -3.1%, the smallest decline in a year. Rightmove commercial director Miles Shipside said buyers interest was rising on “growing confidence that we’ve passed the bottom”, adding that the number of people looking at property listings on Rightmove’s website is “much higher than we would expect” for this time of year. Still, Shipside warned that a robust recovery is far from imminent: “With only seven [major] lenders remaining in the lending game, including three government-backed institutions that are prioritizing their balance sheets over new lending, we are set to bump along the bottom for some time yet.” That said, loans for house purchases have steadily moved higher having hit a record low in November 2008, printing at the highest level in a year in May. On balance, rising unemployment may prove to be the largest barrier to a sustained rebound in real estate prices: the jobless rate is expected to top approach a whopping 9% by the end of this year, trimming incomes and hindering Briton’s ability to pay their mortgages. This is likely to boost repossessions, flooding the market with fresh supply and sending property values downward.

In Australia, the Producer Prices Index fell more than economists expected, shedding -0.8% in the second quarter to bring the annual pace of wholesale inflation to 2.1%, the lowest in 5 years. A stronger Australian Dollar was the likely catalyst behind the result: the Aussie added a whopping 10.4% in the three months through June, making imports cheaper in terms of the domestic currency. Slower PPI growth foreshadows downward pressure on consumer inflation in the months ahead as cheaper wholesale costs are passed on via a lower final price tag. This bolsters the case for additional rate cuts from the Reserve Bank of Australia. Indeed, RBA Governor Glenn Stevens said as much even as the bank kept rates unchanged in July, noting that “the outlook for inflation allows some scope for further easing of monetary policy.”

Euro Session: What to Expect

German Producer Prices are set to fall at an annual pace of -4.1% in June, the most in over 22 years. The reading implies continued downward pressure on consumer prices in the months ahead, threatening to push CPI into negative territory for the first time since 1986 as lower wholesale costs filter into the final price tag. The onset of deflation in Euro Zone’s largest economy is all but certain to take the currency bloc as a whole along the same trajectory, threatening to commit the region to long-term stagnation as consumers and businesses are encouraged to wait for the best possible bargain and perpetually delay spending and investment.

The European Central Bank has seemingly struggled to formulate an effective policy response thus far. Jean-Claude Trichet and company have focused on banks as the vehicle through which to make money cheaper and put a floor under falling prices, promising unlimited lending to the region’s financial institutions including an unprecedented 442 billion euro in 12-month bank loans as a means of de-facto monetary easing. The bank will also implement a 60 billion bond-buying scheme. To the ECB’s credit, borrowing costs have indeed moved lower: although the bank publicly maintains target interest rates at 1%, it has allowed the average cost of overnight lending (referred to as EONIA) to drift far below that. Indeed, borrowing in Euro has been consistently cheaper than doing so in British Pounds since late June, even though the Bank of England’s stated interest rates are substantially lower at 0.5%. However, the lower cost of credit between banks has not translated into lending, and so has offered little stimulus to the overall economy. Indeed, loans to Euro Zone businesses and households grew just 1.8% in May, the lowest since records began in 1991. Banks may be choosing to hang on to cash as a buffer against $1.1 trillion in as yet unrealized losses linked to the subprime mess, according to the IMF, as well as the fallout from looming defaults and/or devaluations among the EU’s newly-minted central European members. In any case, deflation is all but certain to take firm hold of the currency bloc if the ECB does not ensure that looser monetary conditions translate beyond the interbank market.

Written by Ilya Spivak, Currency Analyst
Article Source – US Dollar Falls on Stock Gains as CIT Avoids Bankruptcy, Commodities Rise (Euro Open)

Sometimes it’s necessary to copy all your MetaTrader chart settings to another PC or save them while you are reinstalling Windows on your current PC, or in case you are moving to a new broker and have to download their platform. If you keep only one or two charts open — that’s not a problem, but if you keep more than 10 open charts and each of them employs some custom settings it’s a real pain to set up them on a new platform manually. It’s easy to avoid doing such work by using the Profiles feature in MetaTrader platform. Here’s a brief tutorial on how to move all your chart settings from one platform to another:

1. Save all your current charts in your current platform to a new profile:

2. Give this profile some distinctive name:

3. It’s now available as a separate folder in your MetaTrader’s directory in the «profiles» folder. You can copy it and then paste into the same «profiles» folder in the new platform’s directory (on your new PC or in your new broker’s platform):

4. Finally, load a new profile by selecting it in the Profiles menu in your new platform:

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Read the rest of Copying MetaTrader Chart Settings — Tutorial (21 words)

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