Month: February 2009

By GCI Fx Research

€

The euro depreciated vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2605 level and was capped around the $1.2750 level.  Traders are closely monitoring U.S. equity markets after it was announced Citigroup preferred equities would be converted into common equity and the U.S. government would take up to a 36% stake in the troubled banking giant in exchange for its bailout investment.  This dilutive move will likely coincide with a partial or full suspension of dividends from Citigroup and some dealers are suggesting the price could fall below the US$ 1.00 figure soon.   Data released in the U.S. today saw preliminary Q4 GDP growth off 6.2%, a very bad print, while the Q4 GDP price deflator reversed and moved higher +0.5%.  It was also reported that personal consumption expenditures were up +0.8% q/q.  Other data released in the U.S. today saw the Chicago Business Barometer improve to 34.2 in February while the final February University of Michigan consumer sentiment indicator fell to 56.3 from 61.2.  In eurozone news, German consumer price inflation was up a stronger-than-expected 0.6% m/m and 1.0% y/y in January but economists do not believe this is the end of the strong disinflationary pressure in the eurozone’s largest economy.  On a European Union-harmonized basis, German consumer prices rose 0.7% from January and were up 1.0% from February 2008.  The EMU-16 unemployment rate climbed to 8.2% in January from 8.1% in December, the fifth consecutive monthly increase, while Germany’s jobless rate ticked higher to 7.3%.  Additionally, EMU-16 consumer price inflation fell to 1.1% y/y in January from 1.6% in December, the lowest rate since July 1999.  The higher unemployment and lower inflation data render it increasingly likely the European Central Bank will reduce its main refinancing rate by at least 50bps next Thursday.  Euro bids are cited around the US$ 1.2475 level.

¥/ CNY

The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥97.10 level and was capped around the ¥98.60 level.  The yen snapped back overnight as risk appetite at month’s end withered.  There is a growing perception the Aso government is trying to engineer a weaker yen to contend with Japan’s beleaguered economy and some U.S. legislators are already verbally intervening against this perceived policy response.  Data released in Japan overnight were quite weak.  First, January overall housing starts were off 18.7% y/y.  Second, January construction orders were off 38.3% y/y to ¥578.9 billion.  Third, January industrial production was off 10.0% m/m and 30.8% y/y, underscoring the extremely weak condition of the manufacturing sector.  Fourth, January overall retail sales were off 2.4% y/y.  Fifth, the January jobless rate printed at 4.1%, down from 4.4% in December. Sixth, January all household spending was off 5.9% y/y. Seventh, the January core consumer price index was unchanged y/y, the weakest print in sixteen months and the latest evidence that deflation may be materializing.  Core CPI for the Tokyo area rose a provisional 0.6% in February.  The Nikkei 225 stock index climbed 1.48% to close at ¥7,568.42.  U.S. dollar offers are cited around the ¥104.15 level.  The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥122.65 level and was capped around the ¥125.50 level.  The British pound moved higher vis-à-vis the yen as sterling tested bids around the ¥137.35 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥82.70 level.  The Chinese yuan depreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8405 in the over-the-counter market, up from CNY 6.8361.

₤

The British pound came off vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.4110 level and was capped around the $ 1.4325 level.  It was reported the U.K. government will be increasing its stake in Royal Bank of Scotland to 84%.  Most traders believe Bank of England’s Monetary Policy Committee will ease interest rates next Thursday.  Additionally, traders expect the central bank will be granted operational authority from the government to monetize its balance sheet to finance asset purchases, a credit easing policy akin to recent policy directives from the Federal Reserve.  Many dealers the London G20 meeting in April will be a seminal event for the global economy.  Cable bids are cited around the US$ 1.2330 level.  The euro moved lower vis-à-vis the British pound as the single currency tested bids around the ₤0.8875 level and was capped around the ₤0.8945 level.

CHF

The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.1760 level and was supported around the CHF 1.1635 level.  The pair came off during the North American session as demand for U.S. assets weakened.  Swiss National Bank President Roth announced his retirement effective the end of the year and reported the current global financial crisis is “likely to be felt for a long time.”  U.S. dollar offers are cited around the CHF 1.2130 level.  The euro and British pound came off vis-à-vis the Swiss franc as the single currency tested bids around the CHF 1.4765 level and the British pound tested bids around the CHF 1.6545 level.

Daily Market Commentary provided by GCI Financial Ltd.

GCI Financial Ltd (”GCI”) is a regulated securities and commodities trading firm, specializing in online Foreign Exchange (”Forex”) brokerage. GCI executes billions of dollars per month in foreign exchange transactions alone. In addition to Forex, GCI is a primary market maker in Contracts for Difference (”CFDs”) on shares, indices and futures, and offers one of the fastest growing online CFD trading services. GCI has over 10,000 clients worldwide, including individual traders, institutions, and money managers. GCI provides an advanced, secure, and comprehensive online trading system. Client funds are insured and held in a separate customer account. In addition, GCI Financial Ltd maintains Net Capital in excess of minimum regulatory requirements.

DISCLAIMER: GCI’s Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be U.S.ed as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.

The U.S. economy contracted in the fourth quarter of 2008 by the most since 1982 according to the latest release by the U.S. Commerce Department. The preliminary estimate report released today showed that the U.S. Gross Domestic Product contracted at an annual rate of 6.2 percent in the October to December 2008 quarter. Today’s release surpasses the advance fourth quarter report that was released on January 30th and showed a 3.8 percent contraction.

The third quarter GDP fell by 0.5 percent while the second quarter GDP grew by a 2.8 percent. Today’s GDP numbers surpassed the 5.4 percent contraction that the economic forecasts were expecting for the fourth quarter.

Contributing largely to the decreased GDP for the fourth quarter was a second consecutive quarterly decline in consumer spending which makes up approximately two-thirds of U.S. economic activity. Consumer spending decreased by 4.3 percent in the fourth quarter after decreasing by 3.8 percent in the third quarter and produced the lowest reading since 1980.

Exports declined sharply from the third quarter as exports of goods and services decreased by 23.6 percent in the fourth quarter after increasing by 3.0 percent in the third quarter. Imports declined in the fourth quarter by 16.0 percent following a decline of 3.5 percent in the third quarter.

Forex Market – US Dollar falling after GDP report.

The U.S. dollar has been falling in forex trading following the worse than expected GDP release but has still shown gains for the day against most of the major currencies.

The euro is lower versus the dollar today as the EUR/USD has declined from today’s 1.2733 opening(00:00 GMT) to trading at approximately 1.2705 in the morning of the US trading session at 11:04pm EST according to currency data by Oanda. The euro is climbing back versus the dollar after reaching an intraday low of 1.2602.

The British pound has fallen so far today versus the American currency from the 1.4298 opening to trading at 1.4254 dollars per pound but is advancing higher after the GDP report. The dollar is trading virtually unchanged against the Japanese yen at the time of writing as the USD/JPY has gained slightly from its 97.61 opening to trading at 97.64 yen per usd. The dollar has gained against the Canadian dollar after opening at 1.2544 earlier today to trading later at 1.2681.

The USD is falling against the Swiss franc after opening at 1.1652 to trading at the 1.1624 exchange rate. The Australian dollar has lost ground as the AUD/USD has declined from 0.6454 to 0.6412 while the New Zealand dollar has fallen from 0.5062 usd per nzd to trading at 0.5028.

GBP/USD Chart – The British Pound surging higher against the US Dollar in Forex Trading after the release of the U.S. GDP report(Hourly Chart).

Source: ForexYard

President Barack Obama’s announcement that the budget deficit is set to hit $1.75 trillion or 12% of GDP is likely to lead to a bearish Dollar in the medium-long term. Meanwhile, forex traders are advised to follow constant daily developments coming out of the U.S. economy, such as the release of today’s quarterly U.S. GDP figures at 13:30 GMT. These figures are likely to determine the Dollar’s bullishness going into next week’s trading.

Economic News

USD – Dollar Floats on Faltering Economy

The Dollar gained against several of it major currency pairs, such as the EUR currency cross in early trading yesterday. However, those gains were quickly eroded as a glut of poor economic data from the U.S. helped to drive the pair back to its opening price level. The market absorbed less than stellar economic reports from the U.S. economy. Poor production data, lower housing numbers, and an increase in new unemployment claims took the energy from the EUR bulls and sapped the earlier gains from the EUR/USD. The pair began the day at 1.2716 and rose to a high of 1.2809. The USD closed up vs. the EUR by only 2 pips at 1.2732. The release of more poor performing data from the U.S. helped to sap the added risk taking in the forex market and the currency pair ended the day near its opening price.

Against the Dollars other currency crosses, however, it lost some ground. The Dollar closed down 25 pips vs. the JPY at 97.58, reversing 3 days of gains. This may have been due to better-than-expected economic figures released from Japan. The GBP/USD made a slight correction in yesterday’s trading, as the Pound closed up 52 pips on the Dollar to 1.4297, making some amends for the previous days 300 pip decline against the greenback.

It should be taken into account that the market largely didn’t react overly negatively to President Barack Obama’s announcement that the U.S. government will run a $1.75 trillion budget deficit. This amounts to roughly 12% of U.S. GDP. The reason for this may be that traders still have confidence in the new president. However, if Obama fails to help kick-start the American economy after 6 months, then traders are likely to realize that Obama’s talk is substance, and not addition. This may on effect lead to a bearish Dollar in the medium-long term.

Later today, there are several important economic data releases coming out of the U.S. The most important of these publications is the Prelim quarterly GDP figures at 13:30 GMT. Analysts have forecasted that the U.S. economy is contracting by 5.4%. Combine this and further long term pressures of such a large budget deficit and we could see the Dollar depreciate against the EUR, perhaps to the 1.2800 level. However, if the results turn out to be better-than-expected, then the EUR/USD pair may reach 1.2650 by late trading.

EUR – GBP Moves on British Bank Bailout

The GBP appears to have offered some stability in Thursday’s trading. This comes about as Britain announces its most recent banking bailout. Yesterday, the British government unveiled a plan to protect banks from future losses related to bad debt. The plan was announced to backstop British banks that have lost billions of Pounds in the global financial crisis. This plan may ensure that British banks keep lending in spite of the large losses.

The new plan helped to increase risk taking in early trading yesterday, resulting in the GBP rallying against the Dollar and the EUR. However these gains dissipated as the day wore on, as risk sentiment disappeared. The GBP/USD closed at 1.4297 from 1.4245 Wednesday. The Pound also gained some ground against the EUR, as the pair closed down 33 pips at 0.8904.

A week banking system that has suffered losses from toxic debt has characterized the may put downward pressure on the GBP in the coming weeks. This is likely to continue as more pressure may fall on British bank regulators to nationalize the ailing banking system amid the global financial crisis. Royal Bank of Scotland (RBS) has in effect already been nationalized by the most recent capital injection by the British government. Further involvement could put help to depreciate the GBP against its major crosses.

JPY – JPY Free Fall Continues

The JPY continues to fall against the major currencies, but the selling in mass of the Yen was briefly halted by better-than-expected production data. The USD/JPY fell early this morning as preliminary industrial production fell by 10%. While the number appears to be drastic, traders were prepared for a much larger drop. When this did not occur, the JPY was given a large boost. The pair closed at 97.58, down 25 pips from yesterday’s opening.

This production data is a stark reminder of the economic situation in Japan. Concerns regarding the fundamental weakness in the Japanese economy are having traders push the USD/JPY to its highest level in almost 4 months. The recent gains for the JPY may not hold as the market is very negative on its outlook for the Japanese economy. Further appreciation could take place in the USD/JPY and send the pair back to the 98.50 mark by the end of today.

Oil – Crude Oil Surges on Renewed Supply Cut Fears

Crude Oil experienced a sharp rise in prices yesterday as the Organization of Oil exporting Countries (OPEC) signaled it may be ready to make more supply cuts in the future. The price of Crude Oil jumped close to 5% yesterday to close at $44.48, up from $42.76. The United Arab Emirates (UAE) said it would reduce production supplies to Asia. This leads some Oil analysts to believe that more production cuts may be in store from the Oil cartel at their next meeting in March.

It appears OPEC may follow through on its promised supply cuts. In the past OPEC has announced future supply cuts, but member nations have sometimes been reluctant to comply as the drops in production lead to falling revenues for OPEC members. Recent data shows that the member countries have been steadily reducing their daily supply counts. This may lead to a further price appreciation for the commodity, perhaps to the level of $46 by the week’s end.

Technical News

EUR/USD

Narrow range trading continues as the pair did not make a significant move in either direction, and is currently traded around the 1.2745 level. However, the 4 hour chart’s RSI is floating near the bottom border, suggesting that the possible next move might be a bullish one. When the upwards breach occurs, going long with tight stops appears to be preferable strategy.

GBP/USD

The typical range trading on the hourly chart continues. Both the daily RSI and Slow Stochastic are floating in neutral territory. However, the pair currently sits near the bottom border of the 4 hour chart’s RSI, suggesting an upward correction may be imminent. When the upwards breach occurs, going long with tight stops appears to be preferable strategy.

USD/JPY

The price of this pair appears to be floating in the over-bought territory on the daily chart’s RSI indicating a downward correction may be imminent. The downward direction on the 4-hour chart’s Momentum oscillator also supports this notion. Going short with tight stops might be the right choice today.

USD/CHF

The pair has been range-trading for a while now, with no specific direction. The Daily chart’s RSI providing us with mixed signals. All oscillators on the 4 hour chart do not provide a clear direction as well. Waiting for a clearer sign on the hourlies might be a good strategy today.

The Wild Card – Crude Oil

Crude Oil prices rose significantly in the last week and peaked at $44.50 a barrel. However, 4 hour chart’s RSI is floating in an overbought territory suggesting that a recent upwards trend is loosing steam and a bearish correction is impending. This might be a good opportunity for forex traders to enter the trend at a very early stage.

Market Analysis provided by Forex Yard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

By GCI Fx Research

€

The euro gained ground vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2810 level and was supported around the $1.2680 level.    The common currency moved higher on account of a couple of factors. First, the Obama administration announced a US$ 3.55 trillion budget plan for 2010 and that would push the deficit to a record US$ 1.75 trillion.  Taxes will be moving higher for taxpayers earning the most money, Medicare will be cut, and more financial assistance would be provided to troubled financial institutions.  U.S. Treasury issuance will likely need to rise by record amounts to finance the Obama spending plan.  Data released in the U.S. today saw January durable goods orders off 5.2% m/m and 23.3% y/y.  Also, January new home sales were off 10.2% and months of inventory climbed to 13.3.  The U.S. housing market continues to weaken precipitously.  Other housing data saw January housing starts off 16.8% with building permits off 2.9%.  Also, weekly initial jobless claims climbed to 26-year highs last week, up 36,000 to 667,000, while continuing jobless claims were up 114,000 to 5.112 million, the highest level since at least 1967. In eurozone news, German February consumer price inflation will be released tomorrow.  February EMU-16 consumer confidence fell to a record -33 and EMU-16 January private sector loan growth eased to 5.0% from an annualized 5.8% growth rate in December.  Also, mortgage lending growth eased to 1.0% from 1.5%.  Additionally, the German GfK consumer climate index rose 2.6 points in March, beating expectations of a decline.  The ECB reported M3 money supply fell 0.8% m/m and nearly 25% y/y, the steepest monthly decline since at least 1980.  Euro bids are cited around the US$ 1.2475 level.

¥/ CNY

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥98.70 level and was supported around the ¥97.30 level.  There is increasing speculation that Japan is covertly orchestrating a weaker yen to counter its deepening economic recession.  U.S. House of Representatives Financial Services Chairman Frank is urging Japan to not devalue the yen through “massive currency market interventions.”  Data released in Japan today saw sales conditions at Japanese small and mid-size firms at their lowest levels since 1984 with the February index at -44.6, down from -37.4 in January.  The Nikkei 225 stock index lost 0.04% to close at ¥7,457.93.  U.S. dollar offers are cited around the ¥104.15 level.  The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥126.05 level and was supported around the ¥123.80 level.  The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥141.65 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥84.75 level.  The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8361 in the over-the-counter market, down from CNY 6.8369.

Daily Market Commentary provided by GCI Financial Ltd.

GCI Financial Ltd (”GCI”) is a regulated securities and commodities trading firm, specializing in online Foreign Exchange (”Forex”) brokerage. GCI executes billions of dollars per month in foreign exchange transactions alone. In addition to Forex, GCI is a primary market maker in Contracts for Difference (”CFDs”) on shares, indices and futures, and offers one of the fastest growing online CFD trading services. GCI has over 10,000 clients worldwide, including individual traders, institutions, and money managers. GCI provides an advanced, secure, and comprehensive online trading system. Client funds are insured and held in a separate customer account. In addition, GCI Financial Ltd maintains Net Capital in excess of minimum regulatory requirements.

DISCLAIMER: GCI’s Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be U.S.ed as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.

By CountingPips.com

Economic news out of the U.S. today showed that durable goods orders declined more than forecasted and decreased for the sixth month in a row in January. Durable goods orders in the United States fell 5.2 percent in January to a total of $163.8 billion according to news released by the U.S. Commerce Department today. January’s total was $5.2 billion less than December’s total which  saw a revised decrease of 4.6 percent from November.

Durable goods are products manufactured in the U.S. and generally considered to last more than three years.  Market forecasts had been expecting that durable goods orders would decrease by approximately 2.5 percent for the month.

New orders for durable goods excluding transportation fell by 2.5 percent in January following a revised decrease of 5.5 percent in December. Market forecasts were predicting a decrease of 2.2 percent.

January’s results for shipments of durable goods decreased by 3.7 percent and fell for the sixth straight month. Unfilled orders decreased 1.9 percent in the month while durable good inventories decreased 0.8 percent after sixteen straight months of increases. January nondefense orders for new goods fell by 2.7 percent while defense orders for capital goods decreased by 35.3 percent.

U.S. New Home Sales fall to record low in January.

New Home Sales in the United States declined in the month of January to stand at the lowest level on record according to data released by the Department of Commerce today. Purchases of new single family homes fell to an annual rate of 309,000 in January,  a 10.2 percent drop from December. January’s annual rate of new homes sold is 48.2 percent lower than the that of January 2008 and marked the lowest annual sales rate since the beginning of the report first released in 1963.

January’s results were worse than market forecasts which were expecting an annual rate of 324,000 new sales and a monthly decline by 2.1 percent. The median sales price of new homes in January fell by 13.5 percent to $201,100 while the average sales price was $234,600.

Weekly Jobless Claims rise.

A separate government release by the U.S. Labor Department showed that weekly initial U.S. jobless claims increased in the week that ended on February 21st to its highest level since 1982. New jobless claims grew to a total of 667,000 unemployed workers, an increase over the prior week by 36,000 workers. A 4-week moving average of newly unemployed workers rose by 19,000 from the prior week to a total of 639,000.

Workers seeking continued unemployment benefits increased to the highest level on record since the report began in 1967. Continuing jobless claims grew by 114,000 workers to a total of 5,112,000 unemployed workers for the week ending on February 14th.  The four week moving average of continuing claims grew by 89,250 to a total of 4,932,250 unemployed workers.

US Dollar mixed in forex trading today.

The U.S. dollar has been mixed in forex trading today against the major currencies after making strong moves in yesterday’s trading.  The dollar has gained versus the Australian dollar,  Japanese yen and New Zealand dollar while falling against the British pound, Canadian dollar and Swiss franc.

The dollar is virtually unchanged against the euro at time of writing as the EUR/USD trades at 1.2738 in the afternoon of the US trading session at 4:09pm EST after opening the day at 1.2735 according to currency data from Oanda.

The British pound has increased today versus the American currency as the GBP/USD has gained from 1.4246 to trading at 1.4305 dollars per pound. The dollar has advanced against the Japanese yen today as the USD/JPY has gained from its 97.84 opening to trading at 98.33.

The dollar has declined against the Canadian dollar after opening at 1.2545 earlier today to trading at 1.2520 later. Meanwhile, the USD has also declined against the Swiss franc from 1.1699 to trading at 1.1648.

The Australian dollar has lost ground versus the USD as the AUD/USD trades at 0.6489 after opening today at 0.6501 while the New Zealand dollar has also fallen versus the USD and trades at 0.5081 after opening at 0.5112.

USD/JPY Chart – The US Dollar advances today versus the Japanese Yen and looks to be on its way to 100 yen per dollar for the first time since November.

By Sean Hyman

Lately, I’ve been asked a lot about where I see the U.S. dollar going in 2009. So let address this for a moment.

Specifically, I think the dollar will gain against the Japanese yen (USD/JPY pair will rise) throughout 2009.

While formerly, the yen and dollar rose as the Dow crashed, you will notice that the yen is backing off quite a bit even as the Dow sits on its lows as of this writing. Yet the dollar still rises as the Dow falls.

See the chart below.

Yen rally plays out but the dollar strengthens even still!

Therefore, I think for the dollar/yen pair, the bias will be in the favor of the dollar and against the yen overall throughout 2009 no matter what the stock market does from here.

HOWEVER, when it comes to how the dollar does against most other currencies such as the Euro, Australian dollar, etc. it will very much hinge on how stocks hold up.

If the Dow breaks to fresh lows and holds below them, then it is likely that the dollar will continue its strength against these foreign currencies BUT if the Dow and other U.S. indices halt their slide and head higher overall from here, then I think risk aversion dies down and that will hurt the U.S. dollar and cause foreign currencies to rise up against it once again.

So right now, I’m bullish on the USD/JPY pair and even bullish on gold. However, stocks are on the fence right now. They can’t stay there forever. So we’ll have a break one way or the other, sooner rather than later.

Once we get a decisive breakout, then we have our new found direction on the dollar. Therefore, my focus will remain on being long (buying) the USD/JPY pair until stocks get off the fence and make a distinctive move to either side. Once this happens, then the trend will be in place for the dollar for the remainder of the year minimally.

About the Author

This post was provided by Sean Hyman, Head Instructor at mywealth.com. See his blog at http://www.mywealth.com/blog.

Source: ForexYard

Despite forecasts for a depreciation of the Dollar, many economists are now saying that the negative housing data released from the United States yesterday may actually bolster the USD. These contradictory claims are a result of the recent economic recession which has many investors going against forecasts in exchange for a safer investment. The USD appears to be the safest investment, as traders are moving en masse to buy into the greenback.

Economic News

USD – USD/JPY Climbs Back to November 2008 Prices

The greenback was traded near the highest level against the Japanese Yen since November. This came about from speculation that the U.S. durable goods report may show a decreasing figure, adding to the drop in home sales which boosted the currency’s appeal as a refuge from the global slump. Analysts expect the Dollar to remain the safe-haven currency of choice in the coming days, as investors are still concerned about the global economic outlook.

The USD traded at 97.53 Yen from 97.39 Yen late in yesterday’s New York trading hours. Against the EUR, the USD was at 1.2716, from 1.2723 yesterday, losing some of its momentum against its primary currency rival.

Contrary to forecasts, the greenback may rise against the EUR and GBP after an unexpected reduction in last month’s U.S. Existing Home Sales report led to an appreciation of the nation’s currency. The National Association of Realtors reported yesterday that purchases of existing homes in the U.S. fell 5.3% in January to an annual figure of 4.49 million, the lowest level since 1997! Apparently, the negative housing data has triggered more USD buying, especially against the EUR, keeping the U.S currency in demand as the safe-haven depended on during this global economic uncertainty and risk aversion.

However, any optimism that the global economy could be recovering might prompt investors to sell the Dollar and buy riskier assets and currencies. Several market players expect the USD to fall sharply once demand for Treasury and agency debt eases and the U.S. current account deficit swells. Once this happens, traders will start investing in other regions, such as Europe.

EUR – GBP Drops on Signs the British Recession is Deepening

The Euro-Zone currency fell more than 1% against the Dollar on Tuesday after European Central Bank (ECB) President Jean-Claude Trichet stated that the financial system was under severe strain, hampering an economic recovery. The economies which make up the Euro-Zone contracted by the most in at least 13 years, pushing the region into a deeper recession. The German economy also contracted the most in 22 years, a government report showed today.

The British Pound dropped against the USD and EUR fueling speculation that the Bank of England (BoE) will likely cut Interest Rates next week. The GBP weakened 1.7% to 1.4238 against the USD. Against the EUR, the Pound depreciated 0.9% to 0.8953. The Pound also slipped from the highest level in almost three months versus the Japanese yen as the Office for National Statistics said Gross Domestic Product (GDP) contracted the most since 1980!

The Pound extended losses after one of the BoE’s policy-makers, David Blanchflower, stated that Britain’s recession may intensify significantly in the coming months. Analysts say that the underlying fundamentals remain weak and that is having a short-term impact on the Sterling. The BoE meets to decide its Interest Rates next week. Policy-makers already cut the benchmark rate to 1%, a record low, and signaled they’re willing to create money to help stimulate the U.K economy, which will likely drive the value of the GBP lower in the short-term.

JPY – Yen Declines as Japanese Economy Gets Worse

Japan’s currency slid to a 3-month low against the USD after Japan’s trade deficit widened the most in more than two decades, denting its allure as a refuge from the financial crisis. It also weakened versus the EUR after the government said exports tumbled 46% in January, signaling the slump in the world’s second largest economy is deepening. It depreciated to 124.43 per EUR, the lowest level since Jan. 9th. Against the Dollar, the Yen continued to drop to 97.75, the weakest level since Nov. 11th.

The Japanese economy’s contraction last quarter was the worst since 1974 and analysts predict the slump may drag into the next fiscal year. Output may shrink a record 4% starting April 1st, according to some economists. Bank of Japan (BoJ) officials said last week that the economy will remain in a severe state next quarter and companies will struggle to obtain financing as investors shun risk. The bank, which lowered the key overnight lending rate to 0.10% in December, last week said it will buy corporate bonds for the first time in order to stem the credit squeeze.

Oil – Crude Oil Rises Above $42.50 a Barrel

Crude Oil climbed 6% to above $42 a barrel on Wednesday, after a U.S. government report showed a sharp drop in gasoline inventories in the world’s top energy consumer. The U.S. Energy Information Administration (EIA) reported a 1.7% rise in demand for fuel over the four weeks prior to February 20th. Further support for Oil prices came from reports this week of high compliance by members of the Organization of the Petroleum Exporting Countries (OPEC) with deep production cuts agreed last year to stem the slide in oil prices. The 11 OPEC members with quotas, excluding Iraq, reduced output by 3.8% to 25.3 million barrels a day in February.

The rise in Crude prices came despite a drop in the equities markets, with European shares hitting a new 6-year low. U.S. stocks fell after U.S. President Barack Obama’s first address to Congress shed little new light on how he plans to stabilize the U.S economy and shore up banks. Analysts expect that Crude Oil prices will probably start rising in the second half of the year as a drop in demand starts leveling off and OPEC cuts supply further.

Technical News

EUR/USD

Yesterday’s pennant formation apparently has not finished its development as the pair continues to consolidate towards the 1.2800 price level before making a significant breach. For the time being this pair continues to float between a distinct price-range. Buying on the lows and selling on the highs in this range appears to be a wise strategy today.

GBP/USD

There appears to be a bullish cross on the 4-hour chart’s Slow Stochastic, signaling an imminent upward correction to the down-trend seen throughout this week. With the weekly Momentum oscillator shifting into a sharp upward direction, it appears this pair may be due for a trend reversal. Going long with tight stops might be a good strategy today.

USD/JPY

The price of this pair appears to be floating in the over-bought territory on the RSI oscillators of both the 4-hour and daily charts, indicating a downward correction may occur in the near future. With a bearish cross forming on the daily chart, this downward move may take place later today. Going short with tight stops might be a wise choice.

USD/CHF

After two violent breaches of the upper border on the hourly chart’s Bollinger Bands late yesterday, this pair now appears to be settling down into a more neutral position. However, the Bollinger Bands on the daily chart are beginning to tighten, indicating that another violent movement may occur in the near future. Traders may want to wait for the breach then swing.

The Wild Card – EUR/JPY

For the past two days this pair has been trading in a very solid range, with distinct highs and lows. However, the 4-hour and daily chart are beginning to signal that this pair is due for a downward correction. The price appears to be floating in the over-bought territory on the RSI of both charts; and, the daily chart indicates that yesterday’s trading ended with a doji formation, signaling relatively strong pressure for a reversal of the recent uptrend. Forex traders can benefit from this knowledge by entering their short positions early and riding the impending wave.

Market Analysis provided by Forex Yard.

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Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

GCI FX Research

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The euro fell sharply vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2715 level and was capped around the $1.2900 figure.  The markets reacted mostly favourably to President Obama’s speech last night and are closely scrutinizing Federal Reserve Chairman Bernanke’s testimony before the U.S. House of Representatives this morning.  Bernanke reported inflation is unlikely to be a problem over the next few years and dealers await details on the Fed’s upcoming new facility to stimulate consumer borrowing.  The major question on traders’ minds deals with the possible nationalization of some major banks.  Wall Street currently believes the Obama administration will revert to nationalization as a last resort, even after acquiring sizable minority equity positions in banks.  The markets are currently focusing on the possibility the government will acquire a 40% stake in Citigroup.  Data released in the U.S. today saw January existing home sales decline 5.3% to an annualized 4.49 million rate, nearly a twelve-year low.  The median house price declined 14.8% y/y and these data were weaker-than-expected.  In eurozone news, European Central Bank member Ordonez said the global recovery depends on the U.S.’s response to the crisis and said recent news and data have not been optimistic.  Bank of Italy’s EuroCoin economic growth indicator for February fell to -0.63% in February from -0.21% in January, indicating the eurozone economy has worsened over the past month.  Data released in Germany today saw Q4 GDP off 2.1% q/q.  The European Central Bank is expected to reduce interest rates by 50bps in March.  Euro bids are cited around the US$ 1.2475 level.

¥/ CNY

The yen lost marginal ground vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥97.35 level and was supported around the ¥96.35 level.  Prime Minister Aso talked the yen lower through verbal intervention yesterday after meeting with President Obama, saying both leaders agree the U.S. dollar must remain the world’s key global currency.  He noted “If confidence in the dollar is damaged, it would cause significant effects.”  Aso also indicated the U.S. did not seek increased asset purchases from Japan.  Most traders expect Bank of Japan will increase asset purchases in the coming months to help steer market rates of interest lower.  The Nikkei 225 stock index gained 2.65% to close at ¥7,461.22.  U.S. dollar offers are cited around the ¥104.15 level.  The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥123.10 level and was capped around the ¥125.15 level.  The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥137.65 level while the Swiss franc came off vis-à-vis the yen and tested bids around the ¥82.95 level.  The Chinese yuan depreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8369 in the over-the-counter market, up from CNY 6.8368.

₤

The British pound slumped substantially vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.4230 level and was capped around the $1.4605 level.  Data released in the U.K. today saw Q4 gross domestic product growth decline 1.5$ q/q and 1.9% y/y, the largest decline in eighteen years.  Notably, consumer spending declined at its fastest pace since 1991 in the final three months of 2008.  Cable bids are cited around the US$ 1.4160 level.  The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.8950 level and was supported around the ₤0.8810 level.

Daily Market Commentary provided by GCI Financial Ltd.

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DISCLAIMER: GCI’s Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be U.S.ed as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.

U.S. Existing Homes sales decreased more than expected in the month of January according to the monthly report produced by the National Association of Realtors. The NAR report showed that existing-home sales including single family homes, co-ops and townhouses decreased 5.3 percent in January to a seasonally adjusted annual rate of 4.49 million units. Last month’s dip in sales followed the unexpected increase of 6.5 percent in existing-home sales in December.  The January sales data surpassed  economic forecasts that were expecting an increase in sales of 1.1 percent for the month.

On an annual basis, January’s existing-homes sales are 8.6 percent below the January 2007 sales level. The median sales price for existing homes in January registered at $170,300, down 15.3 percent from the January 2007 level which saw a median price of $199,800. Total housing inventory showed a decrease in January by 2.7 percent to a total of 3.60 million homes.

NAR chief economist Lawrence Yun commented on the real estate market in January, “Given so much stimulus package discussion in January, some would-be buyers simply sat out for clarity and certainty on the nature of housing stimulus. The housing market will soon get a lift from very favorable buying conditions – not only from improved affordability, but also from the stimulus of an $8,000 first-time home buyer tax credit, and higher conforming loan limits that will allow more people to tap into 50-year low mortgage rates.”

Data on new homes sales in the U.S. is scheduled to be released tommorow at 15:00 GMT by the U.S. Census Bureau.

Forex Market – US Dollar makes gains in forex trading today.

The U.S. dollar has been stronger so far today in forex trading against all the major currencies as the dollar has shown gains against the euro, Canadian dollar, Australian dollar, Japanese yen, Swiss franc, New Zealand dollar and British pound.

The euro has fallen versus the dollar today as the EUR/USD has dropped from today’s 1.2831 opening(00:00 GMT) to trading at approximately 1.2727 in the afternoon of the US trading session at 2:36pm EST according to currency data from Oanda.

The British pound has dropped lower today versus the American currency from the GBP/USD’s 1.4537 opening to trading later at 1.4201 dollars per pound. The dollar has advanced against the Japanese yen today as the USD/JPY has gained from its 97.17 opening to trading at 97.38 yen per usd. The dollar has gained against the Canadian dollar after the USD/CAD opened at 1.2458 earlier today to trading later at 1.2531.

The USD has also advanced against the Swiss franc as the USD/CHF has gained from the 1.1625 opening to trading at the 1.1693 exchange rate. The Australian dollar has lost ground versus the dollar as the AUD/USD has declined from 0.6511 to 0.6469 while the New Zealand dollar has fallen from 0.5142 usd per nzd to trading at 0.5098 later today.

GBP/USD Chart -The British Pound Sterling falling sharply versus the US Dollar today in Forex Trading.

By Adam Hewison

I have to start out by stating that “I love the forex markets.”

But what’s this?
Here we are going to hell in a handbasket in the US, yet everybody wants to own dollars.
Go figure.

I have to say that the dollar may be the lesser of all evils in the financial world. Here’s what I mean by that statement: I heard that a Chinese businessman who lives in Hong Kong said that the stimulus plan would not work in China, simply because there is so much corruption.

I guess in the US we only have a few bad applies, while China it’s almost like they have orchards full of bad apples.

But I digress…

Let’s take a look at the US Dollar versus the Japanese Yen (USDJPY). A few weeks ago, I did a video outlining my predictions for this very cross.

USD/JPY Video

Well, after being stopped out of our first position for a small loss, we had another signal based on our daily “Trade Triangle” technology, which issued another entry signal at a very good level. The level is clearly indicated on the chart and you’ll see this level in my new video for this cross.

The video, as always, is free of charge and there’s no need to register. This is an educational trading video to show you one of the most important technical chart formations and how to incorporate our “Trade Triangle” technology to come up with big winners.

For as long as I’ve been in the investment game (over 3 decades), this simple formation continues to show itself year after year.

Enjoy the video, and please feel free to make your comments known on our blog. Before I forget, here’s the link to the first video we did on the USD/YEN cross a few weeks ago.

See the Video…

All the best,

Adam Hewison
President, INO.com
Co-creator, MarketClub