FOREX TRADING

Positive Equities, And The Dollar Holds On

Overall, after a positive Asian equity trading session, in which the dollar index was pushed to a new low, the currency market started retracing throughout the morning European trade. Interestingly, this is happening on a day that equity markets are trading deep in the green, something that does not happen very often. The recent pattern has been that equity markets trade higher, which pulls the dollar lower.

Over the last two weeks of trading the currency market saw a general lack of momentum and volume, which usually appears near the end of an uptrend, signaling that the market needs a short-term retracement of the dollar selling. The currency market is trading in an overbought condition against the dollar.

Dollar Index Technical View: TheLFB Member Charts

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Majors Yearly High Swing Point

Overall, the dollar index strengthened throughout the Asian session, but as the market headed towards the European open, the dollar gave up to most of its gains. The pair most affected by the selling was the pound, which plunged 150 pips from the Asian session open. Right now, the currency market is close to the high of the current year, just waiting for a trigger to push the price action one way or the other.

Dollar Index Technical View:

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USD Lower, Stocks Surge, G-20 to Maintain Stimulus

• USD: Lower, IMF says USD still on the strong side, G-20 pledged to maintain stimulus, low Fed yields
• JPY: Higher, Japan tops China as biggest buyer of US debt, reserves rise to a new record
• EUR: Higher, EU Sentix rises, German exports surge, strong German industrial output
• CHF: Higher, unemployment at 11 year high, consumer prices fall, rising risk of intervention
• GBP: Mixed, supported by improving risk appetite
• CAD and AUD: AUD &CAD higher, tracking stocks, risk appetite, higher crude and record price of gold

Overview

USD traded sharply lower Monday pressured by a number of factors which included, stronger global equity markets, a pledge by the G-20 to continue with stimulus and a statement from the IMF that the USD is overvalued. The USD was also pressured by G-20 silence on USD decline. Speculation that the Fed will maintain low yields for an extended period coupled with the G-20 pledge to not withdraw stimulus until the global recovery is secure fueled demand for equities and sparked an improvement in risk appetite.

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Forex Market Stalls In U.S. Trade

Overall, the U.S. session proved to be rather dull, even though the dollar index set a new low for the current year. At the same time, the currency market failed to follow the equity and the commodity markets, which continued to advance during the U.S. session. Over the last few days of trading, the major pairs had small price ranges and very small trading volume; something that is not usually seen as positive.

Dollar Index Technical View:

4 Hour Chart: Short. Main price points: 75.00. Looking for: Wave V)

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Up And Down European Trade

Overall, the dollar strengthened during the first part of the overnight session, but the currency market turned around once the London session opened, when the European cash markets and the S&P futures started rallying to the upside. However, the market momentum was still somehow light, as the Japanese market was closed and ahead, the U.S. and Canadian markets share a Bank holiday.

The euro (Eur/Usd 1.4730) had a range of approximately 60 pips during the overnight session, between the neutral pivot point and the 20-day moving average. Over the last five days of trading, the 20-day moving average proved to be an important price point, which until now, the euro was unable to break at 1.4685.

The pound (Gbp/Usd 1.5770) broke below the 1.5800 support area during the European session, and reached the lowest value since late May. The pound has been in a downtrend for about a month, a time in which it lost almost 1000 pips, even though the other major pairs made new highs for the current year over the same period. The pound’s weakness comes as the BoE tries almost every possible method to fight deflation.

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Dollar Weakens Late In The Session

Overall, the price action seen during the U.S. session was fairly muted despite numerous high level reports being released. The only pairs to make significant changes on the day were the cad, which strengthened by 0.79 percent, and the pound which weakened by 0.55 percent. Manufacturing in the New York region has increased during September while retail sales surged during August, exceeding analysts’ initial forecasts.

The euro (Eur/Usd 1.4663) bumbled along the neutral pivot point at 1.4595 for most of the U.S. session. However, the dollar started to weaken near the middle of the session which pushed the euro above the recent ceiling at 1.4652 to test the R1 level at 1.4673. The pair was rejected shortly thereafter and began using the previous resistance at 1.4652 as support. (more…)

U.S. Reversal Holding During Asian Session

Overall, Forex Market trade desks in the U.S. session and the Asian desks seem all too happy to continue that trend during the session. It will be interesting to see what happens in the following European and U.S. sessions. A report released from RICS showed that house prices in the U.K. continued to rise in August.

The euro (Eur/Usd 1.4636) has found some strength during the Asian session for the second time. The pair is running into near term resistance at the 1.4650 level which was also the high of the previous day.

The pound (Gbp/Usd 1.6621) has strengthened by 31 pips or 0.19 percent in the early Asian session. The pair is finding intermediate resistance at the 1.6629 level which also acted as resistance during the previous session. Should this strength continue the pair will find more resistance at the 1.6740 area while the 20 and 50 day moving averages at 1.6420 and 1.6468 respectively, will provide support. (more…)

Japanese Yen Strength Continues

The yen is maintaining a firm tone and there will also be further speculation over capital repatriation to Japan which will support the yen. There is likely to be further institutional dollar support at current levels which will offer significant dollar protection and verbal intervention remain a significant risk. Overall, the yen should maintain a firm tone in the near term, but looks to offer little value without a corrective retreat to at least 92.20 against the dollar given the probability of strong support close to 90.0.

The US currency dipped to lows near 91.40 in New York on Thursday as underlying dollar sentiment remained weak with the yen also broadly resilient on the main crosses.

The Japanese data was weaker than expected with second-quarter GDP revised to a reading of 0.6% following a 0.9% preliminary increase, primarily due to lower inventories which will maintain some degree of caution over the outlook. The Chinese data was generally robust which maintained confidence in regional equity markets. (more…)

Big Day Economically In The UK Trading Bank Of England Interest Rate Decision
Cable opened Thursday in Asia at 1.6545 and has been trapped in a narrow 1.6525/1.6560 range ever since, with the market generally happy to sit on its hands ahead of tonight’s BOE MPC rate statement. JPY crosses were bid early on residual momentum from a positive night on Wall Street giving the risk appetite a boost, and buying for the Tokyo fix, with GBP/JPY opening on its lows at 152.15 and reaching a high of 152.60 before drifting lower postfix, currently 152.32.

EUR/GBP has been quiet so far, opening at 0.8801 and trading a narrow 0.8796/0.8805 range. A big day economically in the UK today with the release of interest rate statement, the Bank of England is widely expected to hold the benchmark interest rate at 0.50% and is likely to maintain its GBP 175B.

The EUR/USD opened the Asian session at 1.4560 after trading to 1.4605 during the US session when the USD fell sharply across the board on stops. The EUR/USD traded up to 1.4565/70 in early Asia on EUR/JPY buying out of Tokyo and a rumour that some of the EUR/USD buyers in recent days have been flows related to the recent purchase by China of 50 BLN USD worth of SDR-denominated IMF bonds. (more…)

The US Dollar firmed on Tuesday as share prices fell, prompting investors to shed perceived riskier currencies. In spite of better than anticipated numbers from the Institute for Supply Management, shares on Wall Street showed only muted enthusiasm to the data and quickly lost ground, lifting the U.S Dollar, which has tended to be used as a safe haven versus losses in equities. Ahead of the U.S. jobs data later today, traders said players were anxious about any negative surprises. As the market has become less sensitive to positive surprises from the U.S economic data, the effect of any weak figures would be bigger than the effect of any positive numbers.

USD – Dollar Boosts on Optimistic Manufacturing Data

The Greenback arose versus most of its major currency pairs yesterday as sharp losses in global stock markets offset stronger-than-expected U.S. manufacturing data and boosted the greenback’s safe-haven appeal. As a result, the USD finished yesterday trading session 150 pips higher against the EUR at the1.4216 level. The greenback also saw bullishness against the GBP and closed at 1.6155. (more…)

There were more signals that the U.S. economy was improving, as a string of positive data was released yesterday from the U.S. the most important was the Chicago PMI, which printed higher-than- anticipated figures in the month of August. This indicator is a primary gauge of manufacturing sector, acting as the main driver of the U.S. economy. On top of this good news, rise in demand for U.S. goods from abroad is also probably to help boost the U.S. economy in the coming months.

USD – Chicago PMI Data Pushes the USD Lower

Evidence is increasing that the worst of the global recession is passed. Business activity in the U.S., the world’s biggest economy, rose more than economists forecast in August, the Institute for Supply Management-Chicago Inc. said Monday. The Chicago PMI report is further indication that the U.S. economy is starting to improve; the data eased risk aversion among investors analysts said, with positive data negative for the Dollar and Yen.

The USD fell versus a basket of currencies due to the decline in U.S. equities, as fears that the recent rally has overheated. This decline was led by the 7% fall in China’s stock market index. As a result, the Dollar was hurt as traders fled to currencies such as the GBP and EUR. The greenback fell by about 50 pips to the 1.4336 level vs. the European currency. Against the British Pound, the Dollar slid by over 50 pips to 1.6283. The USD did make some gains, as the USD/JPY cross rose by 30 pips to the 92.95 level. Note, this is the first time in 3 days that the USD closed higher against the JPY. (more…)

Forex trading to today are set to be driven by a batch of data from both the U.S. and Britain. The main release from the U.S. today that traders are waiting for is the Consumer Spending, also known as the Personal Spending report from the U.S. at 12:30 GMT. Estimates put the figure at approximately 0.2% in July, about half the increase of June. Nevertheless, the arise is mainly owed to the cash-for-clunkers program. In spite of this, a positive figure may actually hurt the USD, as such a result could increase risk appetite. Consequently, in order to take advantage of end-of-week market behavior, open your positions in the USD, EUR, and GBP now.

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Greenback gained ground Wednesday versus the EUR and the British pound, after strong data on orders for new U.S.-made durable goods and new home sales comforted anticipations of an improvement in the economy. The US Dollar traded higher after the durable-goods orders report said orders for July arose by 4.9%, the largest growth in 2 years. Investors will be watching for the new U.S. jobs report today before making significant moves. (more…)

Later afternoon trading saw the price of Crude Oil take a nose dive as traders took profit. The price of Oil stalled at the $75 resistance level and fell significantly following the failed breach. Today traders will be tracking the release of the U.S. Crude Oil Inventories data along with the New Home Sales numbers for today’s market direction. (more…)

Last week noticed a sharp drop in the US Dollar’s value, specially versus the EUR and the CHF. The biggest question for this week is whether the Dollar will continue to see bearish trends against the major currencies, or reverse. It seems that the upcoming data from the U.S. economy will play a main role in this week’s trading, and traders are advised to follow these main publications closely. (more…)