FOREX TRADING

Japan came out from recession in the second quarter, but much of this was due to government spending with private-sector demand continuing to dwindle. Equities in the Asian country took notice, shedding 2.57% at 00:07 EST. Euro price action lost for a second day, touching upward sloping support dating back to May 6.

Key Overnight Developments

• Japan Comes Out From Recession, But Private Spending Contracts
• Foreign Direct Investment Into China Worse-Than-Expected (more…)

US Dollar: Is This the Turn Markets Have Been Waiting For?

Fundamental Outlook for US Dollar: Bullish

-    US Retail Sales disappoint and the US Dollar rallies
-    Federal Reserve’s interest rate decision sparks impressive US Dollar volatility
-    Forex options and futures sentiment suggests USD may continue rallying

The US Dollar fell near fresh year-to-date lows versus the Euro and other major counterparts, but a sharp end-of-week reversal suggests that the downtrodden Greenback could stage a larger recovery. Impressive S&P 500 rallies played a large role in dollar weakness. A late-week US University of Michigan Consumer Confidence nonetheless proved sharply disappointing, and the key risk sentiment barometer turned notably lower into the week’s close. The strongly-correlated safe-haven US currency continues to take its cues from risky assets, and a true turnaround in stocks could herald an accelerated USD correction. We feel that a sustained US Dollar rally is almost inevitable, but timing the turn remains extremely difficult and we’ve thus far been early in our calls for Greenback strength. Increasingly one-sided sentiment nonetheless that Friday’s USD rally could be the start of a bigger move. (more…)

What currency is the best performer in the world? Yes, The Brazilian Real has been one of the world’s best performers in 2009, having moved up by a solid 25%. The currency is now around pre-credit crisis levels, and is even closing in on an 11-year high. While you consider that just six months ago, most analysts were painting doomsday scenarios and anticipating currency devaluations and bond defaults for the entire continent, this is pretty incredible! (more…)

Trading system with ADX indicator involves the following signals:

ADX staying below 20 level — there is no trend or the trend is weak.
ADX moving above 20 level — trend is strong.
ADX passing 40 level — trend is extreme.
ADX value rising — trend is going stronger, falling — trend is weakening.
+DI stays on top of -DI — uptrend is in place.
-DI stays on top of +DI — downtrend is in place.
Two DI cross — trend is changing.

Details
The Average Directional Index (ADX) describes a presence or absence of a trend. ADX advices on the strength of the dominant forces that move market prices here and now.

In other words, ADX advices on trend tendencies: whether the trend is going to continue and strengthen or it’s about to lose its positions. (more…)

The Greenback anticipates the release of U.S. Core CPI at 12:30 GMT. The reason this publication is so significant is due to it being a leading measure of U.S. economic growth and inflation. A positive figure is probably to help the US Dollar gain strength throughout today’s trading. The US Dollar will also be affected by its yesterday’s bearishness, as there perhaps a slight correction in the greenback. Traders should open their USD positions now in order to make maximum profits from end-of-week trading. (more…)

Asia session trading saw Reserve Bank of Australia Governor Glenn Stevens use sharper rhetoric in discussing the sure thing of arising the overnight cash rate from “emergency” levels. This comes just hours before CPI data from half-way around the world, is expected to point toward deflation. Unexpected growth in the Euro-Zone, nevertheless, might derail this estimate and may cause inflation to actually publish in positive territory.

Key Overnight Developments

• RBA’s Stevens Conjures ‘Emergency’ Rate Increase Speculation
• New Zealand Retail Sales Unexpectedly Gain in June

• Some Bank of Japan Members Wanted to Extend Program (more…)

What was the weakest currency on last year? The Korean Won was one of the world’s weakest currencies- and that’s saying a lot while you look at how many currencies tanked at the onrush of the credit crisis. The Won lost almost half of its value, driven by fears that Korean creditors would be not able to pay their foreign debts. Since March, nevertheless, the currency has rebounded by an impressive 25%, as the government took action: “To avoid a crisis, South Korea forged a dollar-swap agreement with the U.S., Pumped up money into the banking system, boosted fiscal spending, set up funds to replenish bank capital and cut rates.” (more…)

After having a mild reverse coming after the press release of yesterday’s Federal Funds Rate policy statement, the USD today looks poised for a come-back. At the opening of the US Forex market today at 12:30 GMT, traders will get a look of US retail sales and unemployment claims which are both expected to show a continuation of growing in the United States helping the USD recover some of yesterday’s losses. (more…)

Across the last week, the Forex markets have been abuzz with chatter about how the US recession will soon come to and end, followed by a quick and healthy recovery. According to investor logic, the result would be move up in inflation and interest rates. This optimism was partially deflated today, as the Federal Reserve bank conducted its annual monetary policy meeting.

Excluding a brief uptick in June (see chart below courtesy of the Cleveland Fed), investors had long come to expect that the Fed would leave its benchmark Federal Funds rate unchanged, at 0-.25%. At the same time, there was a strong belief that the Fed would begin to hike rates at the end of 2009, and comment accordingly in the press release that accompanied its monetary policy decision. Barron’s predicted yesterday: “The financial statement will acknowledge some improvement in the U.S. economy, although it will imply that this nascent growth reflected in recent gross domestic product reports is fragile and will be monitored closely. This will leave open the specter that interest rates could be increased at some point in the future.” (more…)

On yesterday’s trading, the Yen kept going to be the dominant currency in the forex market. When almost of the major currencies attended fluctuate without marking a sustained trend, the JPY strengthened on all fronts, and currently looks to be this week’s top investment. On today’s trading, the most fascinating data will come at 18:15 GMT, as the Federal Funds Rate for August will be announced. The main question is whether the Fed will hike rates in light of recent positive economic data. Such a turn of events could create mayhem in the market, and traders are advised to be prepared. (more…)

The Cable British Pound climb up as the first of March has been nothing short of spectacular: “Improving economic data have helped the Cable advance 14 percent versus the US Dollar this year and 12 percent versus the Euro.” Due mainly to a recovery in risk appetite and the concomitant belief that the Cable had been oversold following the onset of the credit crisis, investors began pouring hot money back into the UK. As recently as two weeks ago, one analyst intoned that, “Longer term, we’re in part of an uptrend for the British Pound. I do not think this is over.” (more…)

A late WSJ headline reads, Good Economic News Threatens the Dollar, and resumes the Dollar’s trading pattern as follows: “Demand for the U.S. currency continues to erode amid a tide of more encouraging economic data and corporate earnings that have fed a thirst for more high-risk assets such as stocks, commodities, and growth-sensitive currencies.”

Less than two weeks after that article was published, the Dollar climbed up by a healthy 2% against the Euro in only one trading session, as US labor market circumstances bettered slightly: “The U.S. unemployment rate fell in July for the first time in 15 months as employers cut far fewer jobs than expected, giving the clearest indication yet that the economy was turning around from a deep recession.” When technically some other 250,000 jobs were lost and economists estimate that the employment rate will arise past 10% before peaking, investor sentiment is still at a high. (more…)

The German wholesale prices are looked to have contracted by a sharp amount in July after labor data placed significantly weaker-than-expected. And Asia Forex saw the Bank of Japan state that circumstances in the country had bettered after a resurgence in exports and industrial production, but flunked to afford any hints as to whether the bank would raise its policy rate at any time in the upcoming months.

Fundamental Overnight Developments

• Australian Business Confidence climbs up to Two-Year High

• Bank of Japan Says Conditions Are Improving

• China Exports Surge on Rise in U.S. Demand (more…)