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Forex Daily News | Forex Articles | Forex Information
Monday, 01 November 2010 07:15

UFXBank Forex Outlook: Euro Trying to Break Above 1.40 Level

USD Dollar (USD) – The Dollar traded mixed with the majors currencies today. The GDP came out as expected at 2.00% and the Chicago PMI came out at 60.60, better than the expected 57.50. The Stock Markets in the U.S. closed mixed with the Dow Jones rising 0.04% and the NASDAQ unchanged. Crude Oil fell against the dollar and closed below $82 a barrel. Gold (XAU) advanced by $19.87 and closed at $1362 an ounce as investors chose to turn back to a safe haven, gold. Today, the price index is expected unchanged at 0.10% and the ISM Manufacturing Index is expected at 53.60 vs. 54.40 previously.

Euro (EUR) – The dollar fell for a third day against the euro in Forex trading on speculation that the Federal Reserve will take more credit-easing measures amid signs of a stagnant recovery in the world’s largest economy. The Dollar did, however, strengthen to 1.3900 with the opening of the Asian market at 08:03 Tokyo time. Holding above the support level of 1.3930 keeps the momentum positive for the pair. Overall, EUR/USD traded with a low of 1.3957 and with a high of 1.3983. Today, no economic data is expected.

EUR/USD – Last: 1.3993

Resistance

1.4036

1.4077


Support

1.3934

1.3798

British Pound (GBP) – The Pound closed at almost the same rate as it had opened (last Friday). However, during the night it fell below the support level of 1.6000 and returned to trade around 1.6050 levels. Holding the rate above 1.6050 will keep the momentum bullish for the pound. The net lending to individuals came out 0.40B, worse than the expected 0.90B. Overall, GBP/USD traded with a low of 1.6022 and with a high of 1.6060. Today, the Manufacturing PMI is expected at 53.00 vs. 53.40 previously.

GBP/USD - Last: 1.6055

Resistance

1.6070


Support

1.5996

1.5750

1.5660

Japanese Yen (JPY) – The Japanese Yen weakened versus the Dollar with the opening of the market in Asia, earlier today. The Yen declined 0.8 percent reaching 81.40 per Dollar. Trading above 80.50 will keep the momentum bullish for the Dollar. Overall, USD/JPY traded with a low of 80.23 and with a high of 81.43. No economic data is expected today.

USD/JPY-Last: 80.52 

Resistance

80.86

81.08

81.44

Support

80.23



Canadian dollar (CAD) Canada’s dollar gained for a second consecutive month after the   Federal Reserve said that it  will spur global growth. The GDP came out at 0.30%, as expected.  Overall, USD/CAD traded with a low of 1.0180 and with a high of 1.0197. Today, no economic data is expected.

USD/CAD - Last: 1.0166

Resistance

1.0204

1.0243

1.0299

Support

1.0156


 

Published in UFX Bank Daily Review
Friday, 29 October 2010 13:13

UFXBank Forex Outlook: Euro at 1.39...for now

USD Dollar (USD) – The Dollar lost gains across the board in Forex Trading as investors preferred to invest in higher yielding assets in a volatile trading session as traders expect to FED's monetary policy meeting next week. The Initial Jobless Claims came out 434k better than expected 455k. The Stock Markets in U.S. closed mixed with Dow Jones losing -0.11% and the NASDAQ advanced by 0.16%. Crude Oil closed with no significant change from yesterday at 82$ a barrel. Gold (XAU) gained and jumped back to 1343$ an ounce as investors choose to turn back to safe haven gold. Today, the GDP is expected at 2% vs. 1.7% previously. Chicago PMI is expected at 57.5 vs. 60.40 previously. The Michigan Consumer Sentiment Index is expected at 68 vs. 67.9 previously.

Euro (EUR) – The Euro jumped up again to the 1.39 zone, covering previous 2 days loses. The fluctuation is still valid till some fresh news will cause the pair to break through to new prices. Holding above the support level of 1.3880 keeps the momentum positive for the pair. Overall, EUR/USD traded with a low of 1.3763 and with a high of 1.3944. Today, the CPI is expected at 1.7% vs. 1.8% previously. The Unemployment Rate is expected unchanged at 10.10%.

EUR/USD – Last: 1.3900

Resistance

1.3980

1.4040


Support

1.3880

1.3840

1.3740

British Pound (GBP) – The Pound gained versus the dollar and attempting once again to approach the 1.6 area. More optimism was seen for the Sterling as speculations that BOE will delay another round of asset purchases. The Nationwide HPI came out -0.7% worse than expected -0.3%. The CBI Realized Sales came out 36 worse than expected 40. Holding above the support level of 1.59 keeps the momentum positive for the pair. Overall, GBP/USD traded with a low of 1.5760 and with a high of 1.5977. Today, the net lending to individuals is expected at 0.9B vs. 1.5B previously.

GBP/USD - Last: 1.5945

Resistance

1.5980

1.6070

Support

1.5900

1.5820

1.5760

Japanese Yen (JPY) – The Japanese Yen gained versus the Dollar and the pair fell again to the 81 area from 82 on speculation that the FED will keep supporting the stimulus and by that reducing the demand for U.S. assets. The Interest Rate Decision came out unchanged as expected at 0.1%. The Tokyo Core CPI came out -0.5% better than expected -0.8%. Breaking the support level of 80.40 might push the pair to new lows. Overall, USD/JPY traded with a low of 80.82 and with a high of 81.76. No economic data is expected today.

USD/JPY-Last: 80.58

Resistance

80.90

82.00

82.30

Support

80.40



Canadian dollar (CAD) – Canada's dollar gained versus the U.S. dollar as weakness of the greenback was seen across the board but still the pair is supported by the 1.02 zone. Holding above the 1.0160 support level might rebound the pair back to 1.03 zones and push it higher. Overall, USD/CAD traded with a low of 1.0180 and with a high of 1.0285. Today, the GDP is expected at 0.3% vs. -0.1% previously.

USD/CAD - Last: 1.0212

Resistance

1.0220

1.0340

Support

1.0160

1.0080

 

Published in Forex Articles
Saturday, 30 October 2010 07:02

Euro May be on Verge of Major Reversal

Contributed by: DailyFx

Euro_May_be_on_Verge_of_Major_Reversal

EURUSD – Sharp swings in EURUSD sentiment warn that the Euro may reverse or enter a period of consolidation through upcoming trade. The ratio of long to short positions in the EURUSD stands at -1.25 as nearly 56% of traders are short. Yesterday, the ratio was at 1.00 as 50% of open positions were long. In detail, long positions are 11.8% lower than yesterday and 13.4% stronger since last week. Short positions are 10.3% higher than yesterday and 6.6% weaker since last week. Open interest is 0.8% weaker than yesterday and 5.9% below its monthly average. The EURUSD SSI ratio flipped to net-long yesterday for the first time since the pair traded near 1.26. A more sustained swing to net-long would give clear contrarian signal to go short the EURUSD.

Published in Forex News
Saturday, 30 October 2010 07:02

Stocks Flat Despite GDP and Consumer Sentiment Data

Contributed by: DailyFx

U.S. Session Key Developments

* GDP Grew at Annual Rate of 2 percent
* Reuters/University of Michigan Confidence Report Fails to Meet Expectations

Stocks Flat Despite GDP and Consumer Sentiment Data

U.S. Markets fluctuated between gains and losses throughout much of the day, but ended the session closing slightly higher. The DJIA experienced the best October since 2006, gaining 3 percent throughout the month. The S&P 500 was up 3.7% for October, the best performance since October 2003. The October rally in the markets was sparked by investors’ speculation that the US Federal Reserve will pursue further quantitative easing in order to stimulate the economy. Data released Friday indicated that the economy expanded in the third quarter at a slightly faster pace compared to the previous quarter, but growth remains too weak to cut unemployment any time soon. GDP, the value of all final goods and services produced in an economy, rose at an annual rate of 2 percent after climbing 1.7 percent in the previous quarter. Economists had expected a 2 percent growth. Also, consumer sentiment data from Reuters/University of Michigan showed the consumer mood darkened at the end of October, while the Chicago Business Barometer edged up from September and topped expectations.

DJIA 30 / 11,118.49 / +4.54 / +0.04%

The DJIA held onto a strong gain at the end of the trading session on Friday. Chevron fell 2.9 percent after the oil major’s third quarter earnings and revenue significantly missed analysts’ expectations. Merck dropped 2.2 percent as the company’s earnings excluding items topped estimates, but revenue fell short of forecasts. Microsoft was among the Dow’s best performers, with a 1.7 percent rise. The company’s first quarter profit rose 51 percent, benefiting from strong demand for Windows 7. Microsoft is also the Dow’s best performer this month, up 9.1 percent over the period.

S&P 500 / 1,183.26 / -0.52 / -0.04%

The S&P 500 closed flat at the end of the day. Among stocks in focus, Genworth Financial tumpled 9 percent. The life insurer’s operating earnings unexpectedly fell as stronger international operations could not offset weakness in life and mortgage insurance. S&P Equity Research cut its target price on Genworth’s shares following the report. Monster Worldwide surged 25 percent. The employment website operator reported stronger than expected forecast in its third quarter. The company has experienced growth in revenue, bookings, and deferred revenue since early 2008.

NASDAQ / 2,507.41 / +0.04 / +0.00%

The Nasdaq Composite Index closed in positive territory, as basic materials lead the advance with a 1.36 percent gain. 8 out of the 10 sectors rose at the end of the trading session. Health Care and Oil & Gas were the two sectors that declined, with a 0.34 percent and -1.18 percent fall respectively.

Published in Forex News
Saturday, 30 October 2010 07:02

It's Hunting Season for Traders Next Week

Contributed by: DailyFx

The US GDP report was disappointing. I wasn't banking so much on a certain direction as I was just looking for a sharp increase in volatility. If we were able to generate significant price action; it would have been possible to force necessary breaks (dollar, S&P 500, treasuries) early. That would lead us to a much more dynamic devolopment in next week's trend development. As it turns out, the crowd is far too enthralled with the wave of event risk next week - with a particular interest in the FOMC rate decision. This means that we are more likely to see an explosive breakout and aggressive trend development. We need to be ready for this possibility. Given the dense round of risk; I don't want to map my expectations out in too fine a detail; but I think there are a few scenarios that are worth thumbing through in my head. Focusing on the Fed's decision, I think a stimulus program that meets or exceeds the popular consenus ($100 billion injection per month for 5 or 6 months), will lead to follow through on dollar selling and perhaps an advance in risk appetite. That said, the magic of stimulus advancing capital markets will likely wear off quickly; and the S&P 500 will eventually correct. For the most dramatic effect, we'll look for a program below expecations or no program at all. Risk appetite will fall apart and people will have to cover their dollar shorts wholesale.

For my positions heading into next week, I have been knocked out of my pound trades. With the BoE scheduled to meet next week (and seen holding steady), there has been a boost in relative fundamental strength. This lead my reduced-EURGBP range setup to be stopped at 0.8675 and I won't consider flipping this as a reversal until next week. My half-size GBPUSD short was also stopped at 1.6020 as the pair eyes 1.60 as a possible major breakout going forward - with the right encouragement. From my other positions, I am still holding exposure to next week's festivities. My the remainder of my EURUSD short is still in place; but my stop has been trailed to break even after taking the first half. My have to redevelop this one with a bigger trend development (same with GBPUSD). The rest of my positions were Aussie based and peformed well. EURAUD hasn't really put any progress; but it already took its first target and the rest is icing. My AUDCAD was deep in the green in the morning before it retraced. There is obviously a have push to get this thing moving into its reversal - let's just hope the RBA decision and Canadian jobs figures doesn't turn things around. And, my small AUDNZD short has proven to be the best position of the group.

Looking at opportunities next week, the combinations are boundless. For the dollar's volatilty and potential trend, my interests run from EURUSD and GBPUSD to USDJPY and USDCHF. May even look to NZDUSD early next week as it makes a double top (though that can easily fall victim to a false break). There are many crosses that are peaking my interest as well; but the only thing on par to a major dollar breakout is CADJPY.

Published in Forex News

Contributed by: DailyFx

British_Pound_Rally_To_Gather_Pace_As_BoE_Maintains_Current_Policy

British Pound Rally To Gather Pace As BoE Maintains Current Policy

Fundamental Forecast for British Pound: Bullish

* U.K. 3Q GDP Tops Forecast
* Lending Activity In U.K. Unexpectedly Improves
* US Dollar Crowd Sentiment Underlines Risk of Reversal

The British pound made another run at 1.6000 heading into November, and the U.K. currency may continue to trend higher over the following week as market participants scale back speculation for another round of quantitative easing. The Bank of England is widely expected to maintain its current policy next week as the economic recovery in Britain slowly gathers pace, and the central bank may drop its dovish tone as inflation continues to hold above the government’s 3% limit for price growth. As a result, we may see the GBP/USD make its way towards the 23.6%Fibonacci retracement from the 2009 low to high around 1.6220-30 in the coming weeks, and the pound-dollar may continue to pare the decline from earlier this week as it maintains the upward trend from May.

A Bloomberg News survey shows 38 of the 40 economists polled forecast the BoE to hold the benchmark interest rate at 0.50% and maintain the asset purchase target at GBP 200B, while investors are pricing a 4% chance for a 25bp rate hike according to Credit Suisse overnight index swaps. As speculation for further easing subsides, the British Pound could show a bullish reaction to the rate decision even if the central bank refrains from releasing a policy statement and we expect board member Andrew Sentance to push for another 25bp as the economic outlook improves. However, MPC board member Adam Posen may spark a three-way split within the central bank as he maintains a highly dovish outlook for future policy, and market participants will certainly look towards the BoE minutes due out on November 17. However, as the central bank is scheduled to deliver its quarterly inflation report on the 9th, comments from Governor Mervyn King could take some steam out of the minutes as investors weigh the prospects for future policy. Nevertheless, the BoE minutes should be able to carry its own weight as we look forward to the vote count, and a three-way split within the MPC could bear down on the recent rally in the British Pound as the central bank stands ready to move monetary policy in either direction.

However, currency traders may show little reaction to the BoE interest rate decision given the slew of heavy event risk scheduled for the following week, and the GBP/USD may hold steady ahead of the highly anticipated FOMC interest rate decision as investors expect the Fed to expand quantitative easing further. At the same time, U.S. non-farm payrolls are forecasted to increase for the first time in five-months, with market participants projecting employment to increase 60K in October, and the release could harbor a comprehensive outlook for future price action as investors weigh the outlook for global growth.

Published in Forex News

Contributed by: DailyFx

Japanese_Yen_Will_The_Currency_Finally_Reach_Its_Peak_This_Week

Japanese Yen: Will The Currency Finally Reach Its Peak This Week?

Fundamental Forecast for Japanese Yen: Bearish

* Yen Little Changed as Bank of Japan Details Asset-Buying Plan
* Yen Strength Leaves Some Scratching Their Heads

The Japanese yen continued to benefit from its safe haven status this week amid uncertainty in the global economy, but the advance in the currency may begin to lose momentum as governments and central banks aim to take the necessary steps to stabilize their economies. JPY traders will now shift their focus to the Bank of Japan interest rate decision. With interest rates already in the range of 0 to 0.1 percent, the central bank is running out of options. Looking ahead, the BoE and FOMC rate decision in conjunction with the nonfarm payrolls releases next week may be the catalyst needed for the Japanese yen as the strengthening currency continues to weigh on the country’s exports.

The yen is considered a safe haven because the current account surplus reduces Japan’s dependence on borrowing from abroad. It is important attribute and note the yen’s rally to its safe haven appeal because once major economies begin to stabilize; the yen will rapidly depreciate. From a fundamental basis, consumer spending is likely to remain at depressed levels on the back of a weak labor market and deflation. At the same time, businesses will remain reluctant to add onto their payrolls so long as uncertainty remains, and in turn, households will continue to save rather than spend. Consumer confidence in the region is now at their lowest level since March of this year, and will keep downward pressure on consumer prices.

For this upcoming week, the economic docket in the world’s third largest economy is relatively light; however, JPY traders will place the spotlight on the Bank of Japan interest rate decision. At last month’s meeting, the central bank introduced a 5 trillion yen asset purchase program in order to “encourage the decline in longer-term interest rates and various risk premiums to further enhance monetary easing.” This emergency stimulus is an addition to the 918 billion yen package in September. At this upcoming meeting, traders are pricing in a zero percent chance that policy makers will hike rates twenty five basis points, according to the credit Suisse overnight index swaps. This assumption is accurate as the policy board recently pledged to maintain a virtually zero interest rate policy until annualized inflation climbs back into the range of 0 to 2 percent. Not to overlook, labor cash earnings and vehicle sales are on tap, but the FOMC and BOE rate decision may dictate yen price action this week and into the subsequent week due to the fact that the yen is rally on the back of weakness in some of the major economies.

Taking a look at price action, specifically the USDJPY, the pair is looking to test the key 80.00 level, with a break below exposing the record low of 79.70. Upside risks remain capped by the 20-day SMA, and until we see a clear break and close above this level on the back of positive U.S. fundamentals, I do not rule out further downside.

Published in Forex News

Contributed by: DailyFx

Gold_Re-Couples_With_Risky_Assets_Looks_to_FOMC_for_Direction

Fundamental Forecast for Gold: Neutral

* Gold vs FX Correlations Fade But NZD Relationship Holds Strong
* Breakout, Momentum Trading Strategies Favored for Gold Exposure

Gold re-coupled with the risky asset side of the sentiment dichotomy in October. Indeed, prices now show a 0.81 correlation reading with the MSCI World Stock Index – a benchmark for risk appetite – on 20-day percent change studies. This seems to make sense: the central issue driving risk over recent weeks has been the likelihood that the Federal Reserve was preparing another round of quantitative easing. Such an outcome is supportive for shares given the overwhelming evidence of a broad-based economic slowdown through the end of 2010; it is supportive for gold given the metal’s store-of-value properties, making it an attractive hedge should the central bank’s policies overshoot and let loose undesirable inflation.

Looking ahead, this puts the spotlight on the FOMC monetary policy announcement due Wednesday. The whisper number circulating around the markets seems to be $500 billion in additional asset purchases. This much has likely been priced in already and may not prove market-moving as a standalone outcome. Rather, should this materialize, the focus will fall on the language of the Fed statement will prove most market-moving as traders size up how much more (if anything) the central bank plans to do and what parameters it is watching to guide its thinking. A dovish-leaning statement hinting the Fed is on standby with more firepower promises to boost gold along with the spectrum of risky assets; alternatively, should Ben Bernanke and company come off as uneasy or reluctant about QE, the opposite result can be expected. Needless to say, the same range of outcomes applies in the event that the asset purchase amount is more or less than is expected.

Published in Forex News

Contributed by: DailyFx

North American Commodity Update

Commodities - Energy

Skepticism in US GDP, Promise of Fed Stimulus Keeps Oil Bound to its Month-Long Trend

Crude Oil (LS Nymex) - $81.43 // -$0.75 // -0.91%

The lack of progress made by crude this past week speaks clearly of the speculative market’s bearings heading into what is one of the most fundamentally important weeks we have seen in months. Friday’s session was prone to another dramatic bout of volatility; but the early morning selling would see yet another sharp intraday reversal – very similar to the aggressive move from this past Wednesday. All this price action taken into account, the commodity remains bound to the same congestion pattern that has defined price action through the entire month. A descending trend channel has whittled down the active range of the market to a mere three dollar gap between $83 and $80. It shouldn’t come as a surprise that this stability has developed before the long-awaited FOMC rate decision – which speculators have used as a rallying point for bullish ambitions on speculative assets since September.

With a mind towards the event risk ahead, it is still surprising that the energy market would not experiencing a greater level of volatility – and perhaps even some level of trend development – through Friday’s session. Top event risk through the period was the release of US GDP. The advanced, third-quarter reading came in-line with the official consensus for a 2.0 percent annualized pace of expansion. Looking more closely at the breakdown, the personal consumption gauge (accounting for approximately three-quarters of activity) marked its strongest performance at 2.6 percent since the fourth quarter of 2006. However, the report was generally considered discouraging given the cooling in fixed investment, the plunge in building and the heavy contribution by inventories. Where this data’s real value comes from is its use as a benchmark to next week’s FOMC rate decision. The speculative markets have been adjusting their expectations for this particular event for a few months now. With the official announcement of the group’s stimulus decision, traders will finally see whether they were justified to bid risky assets in the hopes that a Fed capital injection would boost the markets for an easy profit. This leverages a very specific need from this particular event. If the support falls short of what was expected, the markets will quickly correct to account for the overzealous positioning. In addition to the FOMC decision, BoE and BoJ decisions will likely carry weight. A range of manufacturing reports and Friday NFPs will also direct.

From the purely objective side of the supply-and-demand curve, oil traders will keep an eye on inventory figures after this past week’s 5 million barrel surge in DoE holdings (the largest since June). In the meantime, volume on the active December Nymex crude contract cooled a modest 2 percent from Thursday’s turnover (290248 contracts). Activity was generally tame all week long. More interesting was the 9 percent increase in net speculative longs in the COT data to 178,824 contracts (a six-month high).

Crude Futures Chart (Daily)

Both_Gold_and_Crude_Find_Stability_Within_Larger_Ranges_Ahead_of_FOMC_1

Commodities - Metals

A Week-End Rally Eases Pressure of a Trend Reversal ahead of Next Week’s Wall of Event Risk

Spot Gold - $1,359.40 // $15.35 // 1.14%

A well-funded rally Friday would push gold through $1,345 resistance to end two-weeks of congestion and relieve pressure on a potential trend reversal. Since the precious metal pulled back from its record highs a few weeks ago; the selling pressure has moved the market down to the test the larger, ascending trend channel that developed back at the end of July / beginning of August. This move conveniently averts the need to decide on a major trend ahead of major fundamental waves scheduled for next week. That said, it is worth noting that gold’s rally is largely unique. The commodity put in for its first back-to-back rally of more than 1.0 percent since June 7th; and we hadn’t seen an equivalent move in equities, Treasuries or even the dollar.

The deviation in performance between gold and risk-based assets is far from remarkable. It has become more of the norm recently because sentiment itself has been relatively stable. What is far more interesting is the breakdown of the inverse correlation between metal and dollar. Gold has increasingly derived its strength from the diversification away from fiat currencies and particularly the US dollar (which also happens to maintain its own appeal as a safe haven). Friday’s US GDP reading for the third quarter had the opportunity to influence both markets evenly; but the dollar was ultimately little moved on a trade-weighted basis after the data crossed the wires. This growth reading was founded on questionable support; but it was far from the type of reading that would leverage the argument for a much larger stimulus program from the Fed next week.

Looking out over the next week, the scheduled event risk is exactly what a gold trader that is looking volatility would ask for. Wednesday’s FOMC rate decision is key as the market has been speculating on this particular event for months now – driving up its expectations for that capital markets will climb; and the greenback will be subsequently devalued. We will see whether these were reasonable, underrated or overrated expectations. A surprise on this front that leads to volatility in the dollar would almost guarantee the same from the precious metal. What’s more, it will be important to avoid tunnel vision. The Bank of Japan has moved up its next rate decision by three weeks for a reason. Further, the BoE, ECB and RBA are set to convene.

For trading activity into the end of the week, volume on the active December futures contract rose a mere 4 percent from the previous day’s activity level to 154,006 contracts. Equally measured was the 4 percent drop in net speculative long positions by the CFTC through the week ending October 26th to 239,086 contracts. More remarkable was the 11th consecutive declines in ETF holdings – measuring a total 0.8 percent decline from a record high.

Spot Silver - $24.75 // $0.76 // 3.17%

Silver would borrow its enthusiasm from gold Friday to put in for the biggest rally since the October 8th drive that propelled the market to a new level of amplitude and record high at the same time. And, with this advance, the metal wouldn’t be able to take out the intraday highs set three weeks ago; but the close was the highest in 30 years. For activity levels, December contract volume was 16 percent higher while CFCT net speculative longs dropped 6 percent.

Spot Gold Chart (Daily)

Both_Gold_and_Crude_Find_Stability_Within_Larger_Ranges_Ahead_of_FOMC_2

Published in Forex News

Contributed by: DailyFx

* Dollar Crosses a Fundamental Hurdle in GDP to Focus all its Attention on Next Week’s FOMC
* Japanese Yen May Soon Respond to its Own Fundamentals as the BoJ Amplifies its Stimulus Effort
* Canadian Dollar Struggles for Gains Despite Favorable GDP, Focus on Dollar and Jobs Next Week
* British Pound Teeters on the Verge of Trend as the BoE is Faced with a Stimulus Opportunity
* Australian Dollar one of the Few Currencies with an Encouraging Future ahead of RBA Decision
* Euro to take its Bearings from the Dollar Rather than ECB Next Week

Dollar Crosses a Fundamental Hurdle in GDP to Focus all its Attention on Next Week’s FOMC

With Friday’s outcome, the dollar has committed itself to a specific fundamental path going forward – one that is far more prone to volatility and wide open to meaningful trend development. The greenback had the opportunity to offset some of the heady event risk associated with next week’s Federal Open Market Committee (FOMC) rate decision. All that was needed was a strong move for the dollar to end the week that pushed the currency into the beginnings of a new trend before liquidity was swallowed up by the weekend. This was not a wholly unrealistic expectation given the event risk for the day. Nevertheless, the growth, stimulus and risk implications that the advanced third quarter GDP reading held would prove a dud for market movement. Looking for true fundamental momentum, the best opportunity for a dollar rally would come via a move in equities and other risk-sensitive markets. That said, the S&P 500 would ultimately bide its time with a narrow range and reduced level of volume. As long as this benchmark for investor sentiment is held to its steady, two-month rising trend channel; the greenback will be under pressure. That said, even this risk-positive, dollar-negative drive has lost its impetus recently. Altogether, this makes for the perfect scenario for next week’s event risk.

Looking at the scenario’s for Friday’s GDP release, there were two general potential outcomes (completely unrelated to the actual performance of the data): either the market would decide to ignore the indicator or use the report’s clout to leverage risk trend and perhaps stimulus speculation. In the latter scenario traders would take advantage of the greenback’s tumble over the past few months in reference to expectations for a second round of asset purchases to either fuel continuation or a reversal of the prominent trend. However, it seems the masses would rather wait for proper confirmation before committing themselves to greater exposure. That said, the growth data is not simply a write off. Annualized growth through the third quarter of 2.0 percent represents a relatively stable – if muted – pace of recovery. In reality, a measured pace of expansion is preferable at this stage of the game as it is far more sustainable. Looking into the component data, it is encouraging to see personal consumption (which accounts for approximately three-quarters of economic activity) growth 2.6 percent – the best clip since the fourth quarter of 2006. At the same time, the 1.44 percentage points added by the $115.5 billion in inventory buildup, the 2.0 percentage points subtracted by trade and sharp contraction in construction gives enough reason to question the United States’ future.

Turning our focus to the future, we should actually interpret the influence of Friday’s GDP reading on next week’s top event risk: the Fed’s rate decision. Skepticism over the sustainability of expansion would build the argument of a larger stimulus package; but this data was relatively stable – so the outcome for this event is still wide open to interpretation. Heading into the release, the popular consensus is a $100 billion injection per month for five or six months. Yet, there has been rumor that some of the Primary Dealers the central bank polled for expectations of size and time frame of the eventual program were voting $1 trillion. If the Fed’s intentions are not to disappoint, the dollar may be in trouble.


Japanese Yen May Soon Respond to its Own Fundamentals as the BoJ Amplifies its Stimulus Effort
It is difficult to pontificate the virtues of the Japanese yen. Pushing record or multi-year highs (depending on which pair we are looking at), it is difficult to justify the currency’s sustained advance given its anemic yields, structural growth problems, long-lasting credit troubles and the increasingly aggressive effort by the government and central bank to stem the yen’s advance. That said, when a speculative trend is in place, it can sometimes be difficult to curb the steady influx of capital that is directed by the herd. The coming week has a unique opportunity to finally break this speculative drive. First, the FOMC rate decision could open the doors back up to investment capital that has been consistently rerouted to Japan as an alternative. Furthermore, the Bank of Japan will likely do its part with a follow up rate decision (moved up three weeks) that is scheduled coincidently just after the Fed’s meeting. This unusual meeting will bring clarity to stimulus efforts and maybe a larger package.

Canadian Dollar Struggles for Gains Despite Favorable GDP, Focus on Dollar and Jobs Next Week
Given the economic ties between the US and Canadian economies, it shouldn’t come as a surprise that the loonie was looking at the performance of the US 3Q GDP reading (and the greenback’s reaction to it) rather than the August growth reading from Canada. That said, the 0.3 percent pick up was nonetheless impressive. Next week, the dollar will lead again; but Friday’s employment figures will weigh in.

British Pound Teeters on the Verge of Trend as the BoE is Faced with a Stimulus Opportunity
There was a general improvement across the board in second tier indicators for the UK Friday. Consumer confidence, net credit, mortgage approvals and money supply (as a measure of inflation) all rose. For next week, the pound could prove the sleeper currency of the week. The BoE rate decision has been written off after the UK’s 3Q GDP reading; but there is still the possibility that stimulus expansion is in the cards.

Australian Dollar one of the Few Currencies with an Encouraging Future ahead of RBA Decision
For most of the major policy authorities out there, the optimistic option is to hold while the realistic choice is to loosen the monetary reins to support growth. This isn’t the case with the Aussie dollar and RBA. Next week’s RBA rate decision comes with a 22 percent probability of a 25 bps hike. That said, should the rest of the central bank’s take a dovish lean, this will be a defacto boost for the Aussie dollar.

Euro to take its Bearings from the Dollar Rather than ECB Next Week
Not to be left out of the fundamental mix, the euro has its own central bank rate decision to contend with next week. The only problem is that the ECB has been the most consistently neutral group out there. Instead, the euro is likely to find its direction and pace through the performance of the US dollar. As EURUSD is the most liquid currency pair in the world, a move by the greenback will lead to the opposite drive for the euro.

Published in Forex News
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Which is the Best Forex Broker you have traded with?

Interview with Matthew Sheppard

Senior Forex Advisor at XForex


1. What is your name and position?

Hello, my name is Matthew Sheppard and I am a senior forex advisor at XForex.

2. What is your experience and professional background?

In the last 6 years I had filled several positions in financial institutions such as a stock broker, a foreign exchange desk manager, a financial consultant and in my recent role I serve as a senior Forex advisor for XForex which is an online forex company.

3. What type of clients you deal with?

We deal with clients on all levels from the beginning stages to the more advanced trading levels.

4. Does most of your business activity come from the online or offline world?

Because of our high presence on the web, most of our business comes from the online world.

5. Why should a trader pick XForex from all forex brokers?

Aside from all the benefits that XForex offer like commission-free trading, 24/7 online support, high leverage (200:1), XForex offers educational and learning trading experience that you won’t find anywhere else..

Our team of experts and financial trainers provide personal assistance and guide clients to financial success. We provide daily analysis and market reviews to our clients giving them a better understanding of the market and helping them trade profitably.

6. From your experience, what advice would you give a person who wants to enter the forex world?

My advice to the beginning trader entering the Forex world is as follows:
  • Learn the market and understand what you’re getting into.
  • Research and find the broker that suits your needs and wants. Look for a good offering but more importantly customer service, don’t go for the low rates offer without being certain they have a good customer service department. From my extensive experience in the Forex world your key to success will be your client-broker relationship. I can honestly say that at XForex they put an emphasis on servicing clients, which is so important.
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