FOREX TRADING

U.S. Review

Economic Recovery Continues, but is it Enough?

• Economic indicators this week suggested continued economic growth. Factory orders, the Institute for Supply Management manufacturing index and employment all suggest continued progress.
• Yet the pace of the recovery still presents several fundamental challenges. First, construction spending is disappointing and for a society that has put so much emphasis on housing, there is a disconnect between aspirations and reality. Second, the pace of growth will not likely solve the budget shortfalls in many states or at the national level.

Economic Recovery Continues, but is it Enough?

Three important economic indicators this week suggested continued economic growth. Factory orders, the Institute for Supply Management Index and employment all suggested continued progress on the economic front. Factory orders increased 0.6 percent in February and the gain reported for January was revised higher. Factory orders have gained in 10 of the past 11 months and are now more than a third of the way back to where they were at their peak in July 2008. Specifically, new orders for non-defense capital goods ex-aircraft are up nine percent (annualized) over the last three months, consistent with our expectations for 8 percent or more gains in real equipment & software spending for this year.

(more…)

USD Mixed, EUR Rebounds in Cross Trade

• USD: Mixed, maintains gains despite rising equity markets, NASDAQ at new high for 2009
• JPY: Lower, exports declined at slowest pace in 14 months, five-year yield hits four-year low
• EUR: Mixed, supported by rebound in cross to CHF and GBP
• CHF: Mixed, EUR/CHF recovers from nine month low, SNB intervention suspected
• GBP: Lower, CBI says UK unemployment likely to rise in 2010
• CAD and AUD: AUD lower & CAD higher, Australia’s auto rise sales, Canada’s retail sales rise ex autos

Overview

USD traded mixed in Monday’s trade consolidating near a three-month high with the main focus on the volatility in the EUR/CHF cross. The CHF rallied to a nine month high versus the EUR then fell sharply in what appeared to be a large sell order from a major Swiss bank. It was unclear whether the CHF selloff was sparked by SNB intervention. SNB officials would not comment on the movement in CHF. CHF cross gains were attributed to safe haven flows sparked by escalating tensions between Iraq and Iran. European currencies traded mixed with the EUR firmer despite a statement from the EU commission that the EUR could be overvalued by as much as 7 to 8%. The EU commission went on to say that they see the EU recovery gaining momentum. GBP drifted lower pressured by the release of CBI forecast projecting more job losses in 2010 for the UK economy. Commodity currencies traded mixed with the CAD supported by rising crude prices. AUD drifted lower pressured by weakness in Asian equity market trade and RBA pause speculation. JPY drifted lower in reaction to report that Japanese exports continued to decline in November. There were no major US economic reports released in today’s trade. Dealers report that markets are thin reflecting the run-up to the Christmas holiday. Bloomberg reports that the fact that the USD remains firm as stocks rise to a new high for 2009 may be a sign that the worst is over for the USD as the inverse correlation equities continues to break down.

(more…)

Dollar Regains Some Ground Ahead Of Earnings Next Week

News and Events:

The USD has clawed back some ground today; DXY is strongly off its 75.77 lows (last at 76.25), a development attributed to Bernanke comments that the Fed would be ready to tighten rates once the economy improves. But in our minds the reaction is a little bizarre considering the remarks were identical to those published in a WSJ article dated 21 July this year: ‘I believe that accommodative policies will likely be warranted for an extended period. At some point, however, as economic recovery takes hold, we will need to tighten monetary policy to prevent the emergence of an inflation problem down the road.’. Nevertheless, the market chose to re-interpret the remarks as hawkish, causing EURUSD to retreat to 1.4700 support and gold to withdraw from the frontier to intraday support at $1046. The USD weakness trade has paid off fantastically in the past week, and we would not be surprised if a little profit-taking were to come ahead of next week’s spate of major earnings releases. Most of the heavy-weight financials will start reporting from Wednesday through to the start of the following week; the results of which will be pivotal to confidence in the financial system and economic sentiment going forward. The Q3 releases thus far have all been impressing to the upside, including aluminium giant Alcoa. If these early indicators are anything to go by, the USD could be in for further tough times ahead. ECB’s Trichet was steadfast yesterday in avoiding direct comment on levels of EURUSD, and with the weakest in the pack, GBP, getting a reprieve until the BoE’s November meeting, the feeling is that investors have the green light to continue current trends. The main data releases of the morning have been Norwegian CPI and UK PPI. The headline Norwegian print of 0.8% MoM in Sep vs. expectations of 0.5% has once again underlined the likelihood of a Norges Bank hike in the upcoming 28 October meeting, EURNOK dipped to a low of 8.2940, and it seems any rallies to get into this trade will be hard to come by with continually better than expected data releases. Meanwhile UK PPI figures were higher than consensus forecasts, but this was largely anticipated and GBPUSD has continued to grind lower as the USD continues its resurgence (last 1.5970). This afternoon the main item on the agenda will be Canadian Unemployment, which is expected to rise to 8.8% in Sep from 8.7% prior. USDCAD has spent the last few days toying with downside levels around 1.0530, but officials has expressed their concern that the labour market remains soft, so watch for surprises either way on this one. (more…)

Dollar Weakening As Foreign Investment Declines

Overall, the market saw some excitement during the day from pairs that normally are not so exciting, namely the aussie which advanced 1.31 percent and the cad which strengthened by 0.62 percent. Several key reports were released during the U.S. session, most notably was the fact that foreign investment flowing into the country has declined substantially.

The euro (Eur/Usd 1.4735) steadily gained on the day after a brief retracement to test the area near the neutral pivot point at 1.4635. The pair then broke above the R1 level at 1.4709 and used it as support in the late U.S. session. Overall the pair gained 70 pips or 0.48 percent on the day. (more…)

Important Week for the United States, as Inflation, Spending, and Manufacturing Fundamentals are Due to be Released

The world’s largest economy has been showing signs of improvement over the past few months, as several economic sectors started to show that the worst recession since WWII is coming to an end, while data this week is expected to show that recovery is undergoing and that the U.S. economy is on its way out of this recession.

The start this week will be the producer price index which is expected to show that prices on the producers’ level continued to ease on annual basis, as the ongoing recession continues to weigh down on prices, as demand levels are still subdued in general despite the recent increase in activity.

Meanwhile, the manufacturing sector which has been showing signs of increased activity over the past period is still expected to show recovery is undergoing, as both the NY empire manufacturing and Philadelphia Fed index are both expected to show some sort of improvement. (more…)

The dollar was mixed on Friday, sharply lower versus the yen but modestly higher against the commodity currencies. US consumer confidence rose more than expected, boosted by the recent rally on Wall Street. Wholesale inventories fell for a record eleventh straight month while wholesale sales gained, indicating a US economic recovery in on track. The S&P 500 fell 1.41 points to 1,042.73, the first decline in six days. The USD/JPY plunged following the penetration of the 91.50 support. The euro was flat. Sterling rose modestly, supported by higher UK producer-price inflation. The Australian and Canadian dollars declined as commodity prices fell despite China’s better-than-expected industrial production.

The dollar index fell for a sixth consecutive day, the longest loosing streak since the beginning of the stock market rally in March. Despite weakness in US stock market prices, the dollar index declined 0.13 points to 76.69 today, approaching the 76-area support. Stocks are overbought and usually weak in September/October, and the dollar usually appreciates during the same time. We believe there is a good chance that the dollar may find support despite strong downward momentum and solidly negative sentiment. (more…)

The Greenback is anticipated to go volatile today on U.S. Homes Sales data and the speech by Federal Reserve Chairman Ben Bernanke at 14:00 GMT. Bernanke is anticipated to discuss the economic crisis and recovery. With regards to the home sales data, the figure is anticipated to arise to 5.03 million, up from the previous figure of 4.89 million. Forex traders should follow both of these events closely as they’re set to determine the USD’s main crosses for Friday’s trading. (more…)

The US Dollar is set to go highly volatile today on the release of Advance GDP figures for the second quarter from the U.S. economy at 12:30 GMT. The forecasted results are -1.4%, significantly better than the first quarter results of -5.5%. The other matters that are expected to move the market today are the issue of the CPI Flash Estimate and the Unemployment Rate from the Euro-Zone. In order to earn some big profits today, open you positions in the USD, EUR, GBP, and JPY now, as Friday’s trading gets under way.

(more…)

The USD is set for another volatile action-packed trading day as this weeks’ trading comes to a close. The Dollar saw sharp moves against the EUR, GBP and JPY yesterday. This type of behavior is set to continue today as vital economic news is set to come out of the U.S. The economic events that are set to lead the forex market are the publication of U.S. Revised UoM Consumer Sentiment at 13:55 GMT, Federal Reserve Chairman Ben Bernanke’s Testimony and Treasury Secretary Timothy Geithner’s speech on U.S. economic recovery both at 14:30 GMT.

USD – Dollar Rallies vs. Yen on Economic Recovery Hopes

The U.S. Existing Home sales notched a 3rd monthly rise in June, and prices hit their highest since October. This fueled hopes the housing sector is finally on the mend, and many analysts hope this will help propel a broader economic recovery. According to analysts, the data suggests that the U.S housing sector is beginning to stabilize. This is a necessary component for a more meaningful U.S. recovery, and hence a stronger USD in the long term.

The U.S. Dollar soared against the Japanese Yen yesterday, due to the U.S. housing data. The USD rose 1.2% to as high as 95.30 vs. the JPY on Thursday. However, the pair finished trading at the 94.63 level. Against the EUR, the Dollar traded near a 7 week low at $1.4292, the weakest level since June 3. The pair finished trading much lower at the 1.4162 level. This was despite the greenback falling in early trading as the U.S. stock-index futures advanced on speculation that the worst of the recession may be over, prompting investors to purchase higher-yielding assets.

A number of analysts cautioned that the rally in risk sentiment on Thursday could be short-lived, as sentiment remains fragile and markets are probably quite near to seeing risk aversion returning to the forefront. This will be clearer to forex traders today, as 3 vital economic events are set to take pace in the U.S. These include the Revised UoM Consumer Sentiment at 13:55 GMT, Federal Reserve Chairman Ben Bernanke’s testimony at 14:30 GMT and Treasury Secretary Timothy Geithner’s speech on the economy also at 14:30 GMT.

EUR – EUR Hits 7 Week High Against the U.S Dollar

The European currency made gains against the U.S Dollar in early trading after data on U.S. jobless claims in the latest week came broadly in line with expectations. However, this was short lived, as the U.S. housing data was very optimistic, resulting in the pair closing far lower at the 1.4162 level. The EUR also fell against the GBP to the 0.8589 level as confidence returned to the British currency. However, the EUR/JPY pair was unchanged as demand for the safe-haven JPY fell yesterday.

The British Pound traded near the highest level this month against the USD, as advances in retail sales and mortgage approvals prompted speculation the recession in Britain is abating. In turn, this leads economists to the conclusion leading to speculation that the Bank of England (BOE) will increase its Interest Rate. The Bank of England reduced the main Interest Rate to a record low 0.5% in March. The Sterling also gained for a 2nd day against the EUR and the Yen as a government report showed Retail Sales increased last month at 4 times the pace forecast by economists.

There is much data coming out of Britain and the Euro-Zone today that is expected to determine the GBP and EUR crosses, as this week’s trading comes to a close. From Britain, the Prelim GDP and Index of services figures are set to be published at 08:30 GMT. From the Euro-Zone, the German Ifo Business Climate and Flash Manufacturing PMI are set to be released at 08:00 GMT. Forex traders are also advised to follow U.S. economic news too, as the market is set to be very volatile throughout the day.

JPY – Yen Loses Ground Amid Economic Recovery Hopes

The Japanese currency fell against the U.S Dollar and the GBP on Thursday, paring losses made the previous day. The JPY hit its lowest level in more than 2 weeks against the Dollar on Thursday, and a 3 week low against the EUR as traders in Asia sold Yen in anticipation of outflows from Japanese investors. The Yen also dropped versus the Swedish Krona and Norwegian Krone yesterday as Japanese financial companies prepared to raise at least 700 billion Yen ($7.42 billion) for funds that will be invested globally.

Much of The Japanese currency’s decline came about after the Finance Ministry said the contraction in the nation’s exports slowed to 35.7% in June from a year earlier. Japan’s trade data however provided hard evidence that the global economy is now on the mend, analysts stated. As the risk sentiment improves on the back of receding wariness about the prospects of the global economy, the Yen may weaken further against higher-yielding currencies.

Crude Oil – Crude Oil Eyes $67 a Barrel

The Crude Oil prices rose above $66 a barrel Thursday, ending at the highest level in 3 weeks at the $66.88 level. This came about as U.S. home sales data lifted stock markets and raised hopes for an economic recovery. Oil advanced 2.7% after the National Association of Realtors said home resales increased in June for a 3rd consecutive month.

Crude has risen in 6 of the recent 7 trading sessions. The rally came even after U.S petroleum data continued to show weak demand and rising inventories. Crude Oil and other commodities have tracked equity markets in recent months as analysts seek signs of a better economic outlook after the downturn cut world energy demand for the first time in a quarter of a century.

Article Source – Dollar Trading To Be Dominated By Bernanke and Geithner Testimony

After a almost 20% arise versus the US. Dollar, the British Pound has been rangebound for almost the full month of June, with one columnist likening the situation to a “pause for breath.” For him, this amounts to a irregular cessation on the Pound’s inevitable upward path: “Compared to long term levels, the pound was still better value than its peers. He said: ‘It’s still cheap – about 10% below it’s trade-weighted average at present.’ ” For others analysts, nonetheless, the picture is not so cut-and-dried.

Forgetting about buying power parity for a minute, there are a lot of factors which could halt the Pound’s rise. Most importantly is the British economy, which is still struggling to find its feet. “The U.K. economy will recover ‘mildly’ next year, according to the OECD, compared with a previous projection of a 0.2 percent contraction. Gross domestic product will drop 4.3 percent this year, against a March forecast of 3.7 percent.”
(more…)