FOREX TRADING

ADP Signals Ongoing Weakness in Jobs, While Chicago PMI Signals Activity Remains Weak!

The U.S. economy continued to show signs of improvement in the second quarter of this year, as the pace of contraction eased noticeably from the first quarter of this year, as the economy contracted by an annual rate of 6.4% back in the first quarter, however, conditions improved drastically since then and the U.S. economy seems to be on its way to recover from the worst recession since WWII.

The U.S. economy contracted by 0.7% according to the final GDP estimate for the second quarter of this year better than median estimates of a 1.2% contraction and revised from the prior 1.0% contraction, whereas personal consumption declined by 0.9% only revised lightly higher from the prior reported 1.0% drop. (more…)

Daily Technical Analysis For Forex Trading

EURUSD Outlook

The EURUSD attempted to push lower yesterday, bottomed at 1.4527 but closed higher at 1.4583. Although bearish correction seems limited now, on h4 chart below we still have a valid bearish channel and the pair still able to move below 1.4595 for now, indicating bearish correction remains valid testing 1.4440 area. However price is now testing the upper line of the bearish channel and struggle around 1.4595 which could be a critical technical point at this phase. A violation to the bearish channel and failure to keep moving below 1.4595 could be a potential threat to the bearish correction and aim for 1.4720 and 1.4850 before targeting 1.5000.

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Confidence Drop as Americans Still Fear the Outlook for the Labor Market!

Consumer confidence retreated in September according to the U.S. Conference Board, as conditions are still challenging amid rising unemployment and tightened credit conditions, though the economy has been showing signs of improvement recently, yet consumers are yet to feel a drastic change over the outlook of the economy.

Consumer confidence dropped in September to 53.1 from the prior revised estimate of 54.5 and below median estimates, as the present situation index dropped to 22.7 from 25.4, while the expectations index dropped slightly to 73.3 from 73.8, whereas people saying business conditions were bad rose to 46.3 from 44.6. (more…)

Daily Technical Analysis

EURUSD Outlook

The EURUSD had a bearish momentum yesterday but not as strong as I had expected. Moving in a volatile market, the pair attempted to push lower, slipped below 1.4595, bottomed at 1.4563 but bounced higher at 1.4678 before closed lower at 1.4612 after Trichet’s comment. As reported by Bloomberg, Trichet said that strong Dollar is “extremely important”. I really want to see how the market react today and days ahead to this statement. Will it trigger a bearish reversal? Well, I think although that comment doesn’t necessarily trigger a bearish reversal, but at least provide some support to the Dollar. Why buying the Euro if the President of ECB prefer strong Dollar? Now let’s check on technical side.

On h4 chart below we still have a valid bearish channel so further bearish correction warning is still a live and kicking although rejection to consistently move below 1.4595 should keep bullish scenario intact. A violation to the upside of the bearish channel could potentially put the bearish correction to it’s end but for me only a break above 1.4850 should be seen as bullish continuation towards 1.5000. Immediate support at 1.4563 (yesterday’s low). Break below that area should trigger further bearish momentum targeting 1.4440 and 1.4190.

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No Call For A New Reserve Currency From The G-20

Growth will come from multiple sources

USD traded mixed Monday as the G-20 meeting ends without a fresh call to replace the USD as the world’s reserve currency. G-20 officials announced Friday that the G-20 will supplant the G-8 as the international economic council and include developing nations like China, Brazil and India. The G-20 proposes a comprehensive approach to rebalancing the global economy which will include assessments of fiscal and monetary policies, trade and Forex. The G-20 also pledged to increase representation of emerging market and developing countries. The G-20 communiqué made no mention of USD reserve status. World Bank President Robert Zoellick says the US should not take for granted USD status as the world’s reserve currency. Zoellick said there are a number of options emerging and that the G-20 meeting presents a good start towards increased global cooperation. According to Zoellick forces are shifting and now is the time to prepare for the fact that growth will come from multiple sources. Reuters reports that Zoellick said ‘we need a system of international political economy that reflects a new multi polarity of growth.’ (more…)

Daily Technical Analysis

EURUSD Outlook

The EURUSD bullish scenario is still intact by a rejection to move below 1.4595 and bounce to the upside on Friday. I think we are in no trading zone now and the bearish correction/reversal warning is still there. A look at my h4 chart below we can see that after violated the bullish channel the price retreat to the upside toward the bullish channel’s lower line which is normal, but we still have potential bearish correction/reversal.

Still on my h4 chart below, with another look from another technical point of view, can you see that the price is potentially making a head and shoulders pattern? After bouncing to the upside on Friday, we might see another upside movement, even to the 1.4766 resistance area, but that will only make the H&S formation perfect and we have another downside reversal scenario. The 1.4595 area is also the neckline of the H&S, which potentially trigger further bearish momentum if price fall below that area targeting 1.4440 or even 1.4190. This bearish scenario warning by H&S can only be canceled if price break above 1.4850 area, targeting 1.5000. Be patient and don’t rush jump into the market.

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Weekly Economic and Financial Commentary

U.S. Review

A Huge Week for Policy Announcements

• The U.N. General Assembly, G-20 and FOMC meeting overshadowed this week’s economic news. Stimulus efforts remain in place but some programs are approaching expiration and plans were announced for an orderly winding down of the Fed’s quantitative easing.
• This week’s key economic news included reports on new and existing home sales. New home sales rose 0.7 percent, whereas existing home sales fell 2.7 percent.
• Weekly first-time unemployment claims fell more than expected, dropping 21,000 to 530,000. (more…)

Durables Sink While Confidence Inclines Sending Mixed Signals about Recovery

The world’s leading economy continues to suffer the aftermath of the worst recession in over seven decades whereas housing data along with durable goods indicate that the credit crunch continue to hammer down economical activities due to tight credit conditions and high unemployment rates, whereas conversely consumer confidence continued to rise amidst the recent development seen in major sector such as the manufacturing and services sectors.

Starting with Durables that witnessed a severe decline beyond expectations due to producers slashing off production along with spending and inventories to cope with the current low demand in the United States whereas the Durable Goods Orders declined in August to -2.4% from the previous revised estimate of 4.8%, in addition Durables Ex Transportation remained unchanged during the same period compared with the previous revised estimate of 0.9%. (more…)

USD Rallies as Existing Home Sales Fall and Stocks Drop

• USD: Higher, jobless claims decline sparks risk demand, existing home sales drop sparks risk aversion
• JPY: Higher, supported by repatriation flows and Yuan revaluation speculation, exports fall 36% y/y
• EUR: Lower, German IFO business sentiment rises at a slower pace, Fed not prepared to withdraw stimulus
• GBP: Lower, BOE’s King says weak GBP will help rebalance UK economy
• CAD and AUD: AUD & CAD lower, Australian home sales rise, BOC concern about CAD strength

Overview

USD and GBP opened lower Thursday. USD was pressured by the FOMC policy statement which says that the Fed will keep interest rates low for an extended period. The Fed sees the US economy improving but not enough to withdraw stimulus. GBP was pressured by dovish comments from the BOE Governor King that a weak GBP will help to rebalance the UK economy and that weaker GBP was helping to cushion UK economic downturn. USD downside was limited by report of an unexpected decline in US August existing home sales. JPY traded higher supported by repatriation flows in front of Japan’s fiscal half-year end on September 30th and a report that G-20 officials may increase pressure on China to revalue the Yuan to help reduce global trade imbalances. EUR opened higher and rallied to a five month high versus the GBP.EUR gains were limited by report of below expectation German IFO business confidence and a statement from an IFO official that it’s not clear if the EU recovery is self sustainable. EUR/CHF cross traded at a three-month low. The weakness in the EUR/CHF increases the risk of SNB intervention. Commodity currencies were mixed rallying in early trade despite weaker crude prices with AUD supported by report of strong Australian home sales. CAD gains were limited by a statement from the BOC warning that strong CAD puts the Canadian recovery at risk. AUD turned lower tracking weaker US equities. US economic data was mixed with jobless claims falling to their lowest level since the week ending July 11th and existing home sales posting an unexpected decline in August. USD turned higher for the day after the release of the unexpected fall in August existing home sales. Stocks dropped in reaction to the home sales report. USD was also supported by report that the Fed may reduce the TSLF facility. Focus turns to the G-20 meeting. The G-20 meeting will be held on September 24th and 25th.The G-20 meeting may spark selling of the USD if the G-20 suggests that exchange rates will need to be adjusted to help correct global trade imbalances. (more…)

The Forex Road To Nowhere

Overall, the entire day of trading could have very well started just minutes before and after the FOMC reports. Other than this, the market traded with very thin momentum, unable to develop or sustain a trend. Even the pips gained during the FOMC interest rate decision were quickly retraced, and now most pairs are trading below Wednesday’s opening price and below the area where they were ahead of the FOMC.

Interestingly enough, the dollar index and crude oil diverged today for the first time over the last few weeks of trading. During the early U.S. session, a report showed that crude inventories surged, something that sent it lower by $3. Still, the dollar index failed to follow this move, but now it seems that the currency market is catching up. (more…)

France Spending Plummet for the Second Month, but Manufacturing and Service Head into an Expansion

Even after France, the second largest economy between the sixteen nations faced an unexpected expansion in the second quarter joining Germany, rising 0.3% on the quarter; they remain facing further downturns from the weakened spending levels resulting from the surging unemployment rates and consumer fears from the deteriorating household incomes. Businesses believe that improvements are taking place in the area, but it will take consumer some time before they see real changes especially when employers start easing the ongoing tension in all sectors.

The French Consumer Spending plummeted for the second consecutive month, falling 1.0% on the month and 1.3% on the year in August, as this ensuring the extended hesitation of the consumers. On the other hand, business confidence rallied to 85 levels from the previous 78 revised up to 79 levels. (more…)

Forex Technical Analysis Dialy 09.23.2009

EURUSD

The Euro versus Dollar pair surged to the upside to near our initial target for the intraday uptrend at 1.4875. We see in the above image that trading is within a bullish channel continuing the intraday uptrend with targets at 1.4960 yet with possibility of a slight downside correction to 1.4755 before rebounding back to the upside. The incline remains as far as 1.4665 is intact.

The trading range for today is among the key support at 1.4470 and the key resistance at 1.5135

The general trend is to the upside as far as 1.4135 remains intact with targets at 1.6000

Support: 1.4755, 1.4665, 1.4630, 1.4565, 1.4515
Resistance: 1.4875, 1.4900, 1.4965, 1.5000, 1.5075

Recommendation: Based on the charts and explanations above, our opinion is buying the pair from 1.4755 to 1.4875 and stop loss below 1.4665 might be appropriate.

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EUR Trades at a New One Year High Versus USD

• USD: Lower, Asian Development Bank says China and developing Asia to expand faster than expected
• JPY: Higher, pressured by central bank diversification and broad USD weakness
• EUR: Higher, ECB’s Weber says interest rates are appropriate and FX not out of line with EU data
• GBP: Higher, PM Brown says continued stimulus needed, drops to five month low versus EUR
• CAD and AUD: AUD & CAD higher, New Zealand’s current account improves, Can. retail sales decline

Overview

USD traded sharply lower Tuesday in reaction to report that the Asian Development Bank (ADB) raised China’s and developing Asia’s growth forecast. ADB expects China’s 2009 GDP to grow by 8.2% and by 8.9% in 2010 and raised developing Asia’s growth forecast to 6.4% from 6%. The USD selloff is also attributed to speculation that the FOMC will confirm that it will maintain ultra easy monetary policy well into 2010 and that the G-20 will call for a reduction in global trade imbalances that may require further USD weakness. Reuters reports that 24 years ago today major nations called for deprecation of the USD to help rebalance the global economy. President Obama is expected to call on the G-20 to help the US reduce its trade and budget deficits. The FOMC will conclude a two-day policy meeting Wednesday and are widely expected to hold policy steady and maintain the current level of quantitative ease. The FOMC is expected to turn upbeat about the US economy but hold off on tightening of monetary policy for some time to come. The G-20 meets on September 24th and 25th and are expected to focus on new global financial market regulation and global trade imbalances. According to UK PM Brown the G-20 will likely endorse maintaining fiscal and monetary stimulus and avoid an early withdrawal of stimulus. The ADB warned that withdrawing stimulus too early could lead to a double dip recession. Equities, crude and gold prices surged reflecting improving risk sentiment and speculation that G-20 nations will not withdraw stimulus anytime soon. The New Zealand dollar traded at a 13 month high versus the USD and led the assault against the USD supported by report of the sharp improvement in New Zealand’s current account deficit. New Zealand’s GDP debt ratio fell to 5.9%, the trade had expected a reading of -7.2%. The New Zealand dollar was also supported by report that dairy giant Fonterra raised its pay out to farmers by 12%. EUR traded at a one-year high versus the USD supported by improving risk sentiment and a statement from the ECB Weber that interest rates are appropriate and FX is not out of line with stronger EU data. CHF was supported by report of improving Swiss trade balance with exports reported up 2% in July and an upgrade of the Swiss 2010 GDP forecast. The Swiss government expects the Swiss GDP to expand in 2010. CAD traded higher despite report of much weaker than expected July retail sales. Optimism about the global recovery and speculation a weaker USD will be needed to reduce global imbalances are the driving factors for FX markets. (more…)

Will The Real Dollar Bulls Please Stand Up

Overall, the U.S. session had been light, with the major pairs trading on a thin volume and retracing the declines seen earlier in the day. Most pairs moved somewhere around 100 pips, but today’s most actives currencies were, surprisingly, the Canadian dollar and the Japanese yen. The slow trading seen throughout the U.S. session might be a consequence of the fact that the economic calendar was very light on Monday, and will remain light until the FOMC Rate Statement on Wednesday. On top of this, the Japanese session will remain closed until Thursday, which has a strong influence over the trading volumes recorded overnight.

The Dollar Index: Daily chart trend: Short. Main price points: 75.00-76.00. Looking for: Wave V This is one of three charts posted daily the Dollar Index, and one of thirty available each day for LFB members that cover global equity, oil, gold, dollar index, plus six major currency pairs. On a daily dollar index chart we can see that wave V is maybe not complete as yet, as we are still looking for an ending diagonal in the wave V position, with a blue wave IV) in progress. Prices needs to stay below the upper black resistance line, otherwise the shape of an ending diagonal will be invalidated. So long as the structure remains intact, we will be looking for a move lower, with wave V) near to the 75-76 support zone, where a huge long turning point may appear.

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Euro Area Lacks Fundamentals, but We Are Waiting for Some Good News Later This Week

A new week had started, and our concerns remain the same of the surging unemployment rates and low consumer prices, undershooting the ECB comfort zone affected by the ongoing weaknesses in the sixteen nations from curbed spending and weak confidence levels. We are sure that the euro area finally emerged from the worst recession since the euros establishment, but the ongoing downturns taking place from various sectors would diffuse back some clouds in our skies.

With all the actions taking place and improvements we can only say that the European Central Bank is in the waiting status, abstaining from taking further actions such as reducing or manipulating the benchmark rate along with other instruments waiting to see the effect of the previously injected aids. Because After all the taken measures by the Central Bank, improvements started to float on the surface brightening our outlook further giving out hopes to the businesses teetering on the brink of destruction. (more…)