FOREX TRADING

USD Lower, CRB Rebounds, Geithner Sees Slow Recovery

• USD: Lower, Giethner predicts slow US recovery, Greek debt worries ease slightly
• JPY: Mixed, tracking equities, service sector sentiment improves
• EUR: Higher, Greek and Spanish credit default spreads narrow as EU says it will monitor Greek debt
• CHF: Higher, Swiss retails sales rise, gains in cross trade to the EUR
• GBP: Lower, election polls increase the risk of a hung parliament, fresh concern about UK debt rating
• CAD and AUD: AUD & CAD higher, Australian coal deal with China, Canadian housing starts rise 5.8%

Overview

USD traded mixed Monday with the main focus on sovereign debt risks in Europe. EUR experienced a modest recovery as EU officials and central bankers from the G7 said they were confident that Greece will be able to cut its deficits. Greek and Spanish default swap spreads narrowed a bit in reaction to the EU and G-7 pledge to monitor Greece’s deficit reduction plans. EUR gains were limited by report of a larger than expected decline in EU Sentix index. CHF traded higher supported by report of a sharp rise in Swiss retail sales. GBP continued to underperform pressured by concern about its UK AAA sovereign debt rating as UK polls released over the weekend suggest neither the Conservative or Liberal party will win a majority in parliament. Threat of a hung UK Parliament will increase the risk to UK sovereign debt rating. JPY traded mixed to firm supported by weaker equity market trade. Commodity currencies traded higher in reaction to a rally in gold and higher crude prices. AUD was supported by report that Australia has secured a huge coal deal with China. There was limited reaction to a statement from US Treasury Secretary Geithner that he does not see the risk of a double dip recession but he predicts a slow recovery for the US economy. Geithner went on to say that the US will never lose its AAA debt rating and that the US deficit will shrink. US December Employment Trend Index rose to 93.2 from 92.3 last month. The trade will continue to watch developments in regard to the fiscal outlook in peripheral European nations. (more…)

USD Higher, ADP Job Cuts Smaller than Expected

• USD: Higher, ADP employment beats expectations fueling recovery hope, non-manufacturing ISM rises
• JPY: Lower, pressured by improving risk sentiment and selling in cross trade
• EUR: Lower, EU commission endorses Greek debt proposals, services PMI revised higher, retail sales flat
• GBP: Lower, UK consumer confidence improves, services PMI posts an unexpected decline
• CAD and AUD: AUD & CAD lower, Australia trade deficit improves, China’s mortgage rates rise

Overview

USD traded mixed to firm Wednesday supported by report of above expectation January ADP employment report. EUR initially traded higher supported by report that the EU has endorsed the Greek proposal to reduce its deficit. EUR was also supported by report of stronger than expected EU January services PMI. GBP traded mixed with early support from report of a jump in UK consumer confidence. GBP gains were limited by report of an unexpected decline in UK services PMI. Commodity currencies were mixed with AUD posting a modest improvement in overseas as Australia reports improvement in its trade balance. CAD drifted lower despite report that economists have upgraded Canada’s 2010 GDP forecast with selling attributed to a modest setback in crude and the price of gold. A report that some Chinese banks have hiked mortgage rates dampens demand for commodities. JPY weakened in reaction to improving risk sentiment and selling in cross trade. US economic data was mixed. The challenger job survey said job cuts increased for the first time since July with January layoffs 59% higher than December of 2009. The surge in layoffs is due to downsizing in retail and telecommunications. The ADP employment report for January shows that employment dropped slightly less than expected and the decline in December was also revised lower. The ADP report suggests that US January nonfarm payrolls will turn positive. The USD edged higher after the release of the ADP report. Non-manufacturing ISM for January came in higher but slightly below market expectation. The non-manufacturing ISM index came in above 50 which suggests the service sector of the US economy is entering an expansion phase. USD consolidated its ADP gains after the non-manufacturing ISM release. FX markets remain range bound.

Focus turns to central bank policy meetings in Europe Thursday and Friday’s US January unemployment report. The ECB is expected to remain on hold and continue to outline exit strategies and the BOE is expected to remain on hold as well with the possibility of announcing a pause in its asset purchase program. USD headline unemployment is expected to post a 0.1% rise to 10.1% and nonfarm may turn slightly positive. (more…)

USD Higher, Q4 GDP Expanded By 5.7%, Best In Six Years

• USD: Higher, US Q4 GDP confirms faster growth, bond yields rise, consumer sentiment beats expectations
• JPY: Lower, Japan’s deflation accelerates, pressure on BOJ to ease, threat of intervention
• EUR: Lower, concern Greek fiscal troubles may spread, EU unemployment and CPI rise
• GBP: Lower, S&P says UK banking system less stable, UK house prices rise
• CAD and AUD: AUD lower & CAD mixed, India hikes its reserve ratio 75 bps

Overview

USD traded mixed ahead of today’s release of Q4 GDP. JPY was pressured by report of accelerating deflation in Japan and comments from the BOJ governor which suggests that the BOJ is ready to act against potential market turmoil. European currencies were mixed initially pressured by fresh concern about sovereign debt risk in non-core European countries with the GBP pressured by an S&P report which says UK banks are less stable. EUR downside was limited by report that the EU may be preparing a bailout for Greece. GDP downside was limited by report of rising UK house price. CHF rallied in reaction to report of better than expected KOF leading indicators. Commodity currencies traded higher rebounding from initial pressure sparked by weaker Asian equity market trade with support from statement from Chinese officials that they will keep monetary policy loose despite rising price pressures and better than expected GDP reports in the US and Canada. AUD gains were limited by speculation the RBA may be nearing a pause in its tightening cycle.

US economic data was positive with advanced Q4 GDP confirming faster US growth at the end of 2009 and Chicago PMI rising more than expected. Despite the acceleration of growth in the fourth quarter economists are concerned that the economic rebound may not be sustainable as fiscal and monetary stimulus is withdrawn and recent economic data shows the recovery in housing and retail demand slowing. Much of the improvement in Q4 GDP was due to increased auto production and rebuilding of inventories. Consumer spending and business investments remain weak. USD traded higher after release of stronger than expected GDP. The GDP report may have some analysts looking for an earlier FOMC rate hike. The GDP deflator however came out below expectations which suggest that inflationary pressures remain tame despite improving growth. Focus turns to central bank policy meetings in Australia Tuesday and Europe Thursday and Fridays US January unemployment report. The RBA is expected to hike rates 25 bps to 4%, the ECB is expected to remain on hold and continue to outline exit strategies and the BOE is expected to remain on hold as well with the possibility of announcing a pause in its asset purchase program. USD headline unemployment is expected to post a 0.1% rise to 10.1% and nonfarm payrolls may turn slightly positive. (more…)

USD Higher, Jobs and Durable Goods Data Disappoints

• USD: Higher, jobless claims declined less than expected, durable goods rise less than expected
• JPY: Mixed, pressured by improving risk appetite, retail sales declined more than expected
• EUR: Lower, Greek fiscal concern, rumors of Greek bailout denied, business confidence at a 10 month high
• GBP: Mixed, Chancellor Darling says UK plans to halve its deficit over the next four years
• CAD and AUD: AUD & CAD higher, Australia may speed up spending cuts, hawkish RBNZ

Overview

USD, JPY and EUR traded lower with GBP and commodity currencies trading higher Thursday. The decline in USD and JPY is attributed to improving risk sentiment sparked by President Obama’s proposal in the State of the Union address to reduce taxes on businesses to boost growth and in reaction to the FOMC January statement which says the US economy is in recovery. The FOMC also indicated that it plans to begin withdrawal of extraordinary stimulus measures. EUR was pressured by concern about sovereign debt risk in Greece as the Greek EU ten year bond spread is at its widest level since Greece adopted the EUR in 2001 and China’s central bank says the nation should not buy Greece’s debt. GBP continued to outperform and rallied to a five month high versus the EUR supported by comments from UK Chancellor Darling that the UK has the most aggressive deficit reduction plan amongst the industrialized nations. Commodity currencies traded higher tracking improving risk appetite, firmer equity market trade and in reaction to hawkish comments from the RBNZ. RBNZ governor says that the central bank will begin to withdraw stimulus mid-year. US economic data was mixed. Jobless claims declined by less than expected and durable goods posted a smaller than expected rise. These reports may generate concern about the strength of the US recovery and raise questions about the FOMC’s optimism about the US economic recovery. USD edged higher after the release of these reports as equity markets traded lower. The trade awaits news on Fed Chairman Bernanke’s nomination and focus turns to Friday’s release of US advanced Q4 GDP. (more…)

USD Pares Gains as Consumer Confidence Rises

• USD: Higher, spike in risk aversion as China’s tightens monetary policy, consumer confidence rises
• JPY: Higher, China to hike reserve ratios on two major banks, BOJ policy unchanged, cuts deflation forecast
• EUR: Lower, above forecast German IFO fails to boost demand
• GBP: Lower, UK GDP disappoints, UK crawls out of recession, Pimco’s Gross says avoid UK debt
• CAD and AUD: AUD & CAD lower, China’s reserve ratio hike discourages demand for high yield currencies

Overview

USD traded higher Tuesday supported by a spike in risk aversion as equity markets decline in reaction to report that China hiked reserve ratios on some of its banks. Tightening of monetary policy in China generates concern about the global recovery. GBP was pressured by a report of weaker than expected UK Q4 GDP.EUR traded lower despite report that German IFO came in above forecast. GBP and EUR were pressured by selling in cross trade to the JPY with JPY supported by safe haven flows as equity markets decline. JPY traded higher despite S&P lowering of Japans bond outlook to negative from stable. S&P placed Japan on negative watch due to concern about Japan’s rising debt load and lack of flexibility to deal with reducing the debt. Commodity currencies traded lower tracking the spike in risk aversion and weaker commodities with crude oil prices falling below $74 a barrel. There was limited reaction to report that Fed officials are considering adopting a new benchmark interest rate to replace the one used for the last two decades (Fed funds). According to a Bloomberg report Fed officials are considering interest on reserves as the new benchmark rate. Today’s US economic data was mixed with case Shiller home price index down and consumer confidence rising. USD came off its high after the consumer confidence report. Focus turns to Wednesday’s FOMC meeting and President Obama’s State of the Union address. (more…)

USD Pares Losses, Existing Home Sales Fall by 16.7%

• USD: Mixed, Bernanke expected to be confirmed for second term, US existing home sales fall sharply
• JPY: Lower, BOJ may be prepared to increase purchases of government debt and ease monetary policy
• EUR: Higher, Nowotny says ECB will use steady hand approach to withdraw liquidity
• CHF: Higher, Hildebrand says SNB to prevent excessive CHF appreciation
• GBP: Higher, BOE to keep its emergency asset purchase plan under review
• CAD and AUD: AUD & CAD higher, China pledge’s to maintain loose monetary policy

Overview

USD traded lower Monday pressured by speculation that Bernanke will be confirmed for a second term as Fed chairman and in reaction to weak US housing data. The Bernanke news helped to boost risk appetite and reduce safe haven demand for the USD and JPY. JPY was also pressured by BOJ ease speculation as Bloomberg reports that the BOJ may be willing to increase its purchase of bonds in an effort to boost the Japanese economy and contain JPY strength. EUR rallied supported by a statement from the ECB’s Nowotny that the ECB will implement a steady hand approach to withdraw liquidity and in reaction to report of good demand for today’s Greek bond auction. GBP edged higher supported by improving risk sentiment and short covering ahead of Tuesday’s release of UK advanced Q4 GDP. A statement from Chinese officials that monetary policy will remain loose generated demand for commodity currencies. Today’s US economic data was mixed with US existing home sales declining sharply and Dallas Fed manufacturing index posting improvement. The drop in US existing home sales partly reflects uncertainty about the US tax credit for first-time homebuyers. NABE survey says that businesses are expected to boost hiring and capital spending in the first half of the year as the economy posts slow recovery. The USD is expected to consolidate recent gains due to concern about the strength of the US recovery and the impact of new banking regulations proposed by President Barack Obama last week. Focus turns to this week’s BOJ and FOMC policy meetings, the president’s State of the Union address Wednesday and advanced Q4 GDP reports in the UK and US. (more…)

The USD and the JPY were the strong performers this week. The Greenback is breaking out of its recent consolidation mode. Risk aversion kept the Japanese Yen strong as the preferred safe haven currency. Commodity currencies are subdued, coming off December strength as gold made record highs. The risk aversion also pressured pairs such as the Loonie(CAD) and Aussie(AUD).

EUR/USD: Continuation After Consolidation

Daily and 4H: The EUR/USD is showing bearish strength. It looks like the 1.40 area is after all providing some short-term support as anticipated.

In the daily, you can see a swing projection to the 1.37/38 area. This is the short/intermediate term projection.

In the near/short-term. The market is rallying. This is an expected correction rally, so the strength should be inferior to that of the declining candlesticks.

Then there might be topping action around 1.4250 early next week. A hold there as resistnace would further confirm the bearish outlook to 1.37.

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USD Rebounds on Dovish ECB Rumor, Weaker Commodities

• USD: Mixed, China’s reserve rate hike seen as minimal threat to global growth
• JPY: Lower, BOJ may succumb to government pressure to ease monetary policy further in 2010
• EUR: Higher, Greek finance minister says Greece will not need a bailout from the EU or IMF
• GBP: Higher, BOE Sentance says interest rates may have to rise this year, industrial production rises
• CAD and AUD: AUD & CAD higher, rebound in risk appetite as concern about China tightening fades

Overview

USD traded lower Wednesday pressured diminished fear that Tuesday’s tightening in China will derail the global recovery. Equity markets stabilized in the US and Europe which contributed to a slight improvement in risk appetite and a rewind of carry trades. The pace of the withdrawal of liquidity in China will be key to the outlook for growth and risk appetite. So far Chinese tightening has been limited. An official at China’s central bank said that monetary policy remains reasonably loose. His comments helped to dampen fears that China’s tightening will derail the global recovery. GBP was supported by BOE rate hike speculation. The BOE’s Sentance said that the central bank may have to increase interest rates this year. EUR was supported by Asian central bank demand and a pledge from Greek officials that they will take action on the deficit. Greece’s finance minister said that Greece will not need an IMF or EU bailout. Commodity currencies rebounded supported by stable equity market trade. JPY traded lower pressured by diminished risk aversion and BOJ ease speculation. JPY was supported Tuesday by safe haven demand and unwind of carry trades. Wednesday finds a modest rebound in carry trades as the impact of China’s tightening fades. There was limited reaction to a statement from the Fed’s Plosser that he sees the economy emerging from recession and the Fed may begin to tighten even with jobless rate high. Plosser said that he does not see inflation pressures presently but that keeping interest rates too low too long could lead to a burst of inflation or sow the seeds for the next crisis. Plosser is a policy hawk and his views may not be representative of the majority of the FOMC. USD rebounded midsession as commodity prices declined and reaction to a rumor that the ECB may signal a dovish policy bias at tomorrow’s meeting. (more…)