Month: February 2009

Consumer prices in the U.S. increased in January after falling for three months in a row according to a report released today by the U.S. Department of Labor. The Consumer Price Index increased by a seasonally adjusted 0.3 percent in January after falling by a revised 0.8 percent in December. Consumer prices had fallen by a record 1.7 percent in November and declined by 0.8 percent in October as energy prices came crashing down after registering record high levels in July 2008.

On an annual basis, consumer prices showed no change from the January 2008 level. Today’s data matched economic forecasts predicting a 0.3 percent monthly increase while the annual change slightly surpassed forecasts expecting an annual decline of 0.1 percent.

Contributing to the increase in consumer prices was a rise in the price for energy as the energy index increased by 1.7 percent in January. The gasoline index also rose by 6.0 percent in January after fallng by 19.3 percent in December. The energy index had declined for five straight months before January and is 31.4 percent lower than level of July 2008.

Core consumer prices, excluding food and energy prices, increased by 0.2 percent in January following no change in December. The annual change in core prices showed a 1.7 percent increase over January 2008 following December’s 1.8 percent annual increase. Market forecasts were predicting core inflation to register a monthly increase of approximately 0.1 percent and an annual increase of 1.5 percent.

US Dollar falling in forex trading near midday Friday.

The U.S. dollar has been under pressure in forex trading today against the major currencies so far today. The dollar has fallen against the euro, Australian dollar, British pound, Swiss franc, New Zealand dollar and Canadian dollar while trading slightly higher against the Japanese yen.

The euro has advanced versus the dollar for the second day in a row as the EUR/USD has gone from today’s 1.2592 opening exchange rate at 00:00 GMT to trading at approximately 1.2633 in the US trading session at 11:39pm EST.

The British pound has increased today versus the American currency from 1.4215 to trading at 1.4295 dollars per pound. The USD has declined against the Swiss franc from the 1.1800 opening to trading at 1.1771. The dollar has decreased against the Canadian dollar after opening at 1.2592 earlier today to trading at 1.2581 before noon.

The Australian dollar has also traded higher versus the USD as the AUD/USD trades at 0.6411 after opening today at 0.6394 while the New Zealand dollar has gained versus the USD and trades at 0.5063 after opening at 0.5038.

The dollar has advanced slightly against the Japanese yen today as the USD/JPY has gained from its 94.12 opening to trading at 94.28.

GBP/USD Chart – The British Pound advancing today against the US Dollar in Forex Trading and trading right below its 21-day simple moving average.

Source: ForexYard

The EUR/USD saw extremely high price volatility yesterday. When the pair reached its intra day high which coincided with the opening the New York trading session, it depreciated to its opening price for the day. Driving the appreciation for the Dollar was heavy losses in U.S. equity markets.

Economic News

USD – Dollar Volatility continues as Dow Hits 6-Year Low

The Dollar recorded another day of volatile trading on Thursday, as the U.S. equity market took a beating. The Dow Jones Industrial Average reached a six year low yesterday. One of the main reasons for this was the U.S. banking shares hitting a 17 year low. The shares of banks, such as Bank of America and Citigroup slid by 14% respectively. Equity markets can be used to measure the amount of risk in currency markets. This was reflected in yesterday’s trading of the USD.

Throughout the Japanese and European trading sessions, the EUR/USD steadily appreciated, touching on a high of 1.2759. But as the New York markets opened, the pair began a sharp reversal, ending the day near close to its opening level of 1.2591.

The Dollar also closed up vs. the Pound from 1.4269 to 1.4214. Britain’s currency is still very sensitive to developments in the U.S. This was also helped by a recorded swell in Britain’s money supply earlier today, and an increase in the U.S. PPI. Both of these therefore helped support the greenback. Against the JPY, the Dollar rose over 65 pips to close at 94.10 as investors continue to back the greenback’s safe-haven status vs. the JPY.

Traders are advised to pay close attention to Core U.S. CPI figures that are set to be published at 13:30 later today. The results of this may help keep the Dollar’s strength going into next week’s trading. It is also advisable to follow how Obama’s meeting with President Harper of Canada is displayed in the media prior to the opening of U.S. markets. The reason why this is important is because Obama spoke about his opposition of protectionism, contradicting his campaign remarks. Therefore, the Dollar may go bullish as investors realize he is even more of a capitalist than his Republican predecessor.

EUR – EUR Recovers from 3-Month Low against Dollar, then Reverses

The European currency made bullish gains against its major currency pairs in yesterdays trading. The most notable event in EUR trading was the European currency’s recovery against the USD as it hit a 3-month low in Wednesday’s trading. The EUR’s strength in early Thursday’s trading was owed to a number of factors, including German Finance Minister Peter Steinbruck tough rhetoric that Germany would back emergency measures to prevent the Euro-Zone economic situation from deteriorating further.

The EUR rose significantly but then reversed by nearly 160 pips against the USD to close at 1.2591. This was also helped by the Dow and U.S. banking stocks hitting lows not seen in over 6 years. The Pound lost over 60 pips against the EUR in yesterday’s trading to close at the 0.8858 mark. Some of this may be owed to Britain’s sensitivity to America’s weak banking sector. Against the JPY, the EUR rose by nearly 100 pips to close at 118.52. This comes about as Japanese equities declined and Japanese exporters reported that they may be shipping jobs abroad.

Today, there are many news events coming out of the Euro-Zone and Britain. From the Euro-Zone, investors are advised to follow the release of the Flash Services PMI and the Flash Manufacturing PMI figures set to be released at 9.00 GMT. Britain is set to release Retail Sales figures at 9.30 GMT. The results of these data releases may set the pace for the EUR and Pound going into the beginning of next week’s trading.

JPY – JPY Safe-Haven Status Comes under Threat

The JPY’s safe-haven status came under threat again yesterday, as Japan’s economy has become increasingly volatile to the global recession. Japanese equities slid yesterday as exporters reported more bad news owing to the strong Yen. Japanese carmaker Nissan said that it may export 130,000 jobs to Mexico. Additionally, the Yen also reacted negatively to the U.S. Stock Market dive, leading the Nikkei to dive 1.2% too. In the last few days of trading the Dollar has made some big gains against the JPY. This is mainly due to the fact that investors and forex traders are of the view that the Dollar will be the number 1 safe-haven currency during the current global recession.

The JPY dived against the Dollar by 60 pips to close at 94.10. The Yen lost over 100 pips vs. the EUR, marking its second straight loss against the European currency. Against the GBP, the JPY lost over 60 pips to close at 133.97. There is a possibility that the Yen’s behavior against its major currency counterparts in recent days may be partly owed to a correction in the value of the Yen. Therefore, this may not be as bad as it first seems. If things continue like this, however, then the Yen may help Japan’s economy recover quicker out of recession. Today, forex traders are advised to follow events coming out of Japan, the Euro-Zone, and the U.S., as these may help set a price level for the Yen against its major currency crosses going into the middle of next week.

OIL – Crude Oil Spikes on Better Inventory Data

Oil prices went to as high as $40.23 in yesterdays trading. However, by the close of trading the black gold was trading near $39.466, holding gains of nearly $2 from Wednesday’s closes. One of the main factors contributing to Oil’s gains was the U.S. Crude Oil Inventories Data. Crude stocks declined by 0.2 million barrels last week. Analysts had forecasted a rise in inventories by 2.9 billion. The other 2 factors that may have played in to Crude’s strength on Thursday were the Dollar’s weakness in early trading and a possible price correction in the black gold.

Crude prices may extend their gains today as investors may perhaps pursue take profits. This volatility of Oil in today’s trading is strongly dependent on Euro-Zone and U.S. data releases. Also, Crude may go bullish if investors feel that President Obama can handle the complex U.S. recession. The highest that Oil prices could reach by the end of today’s trading may be $41.00. If prices do hit this mark, they are likely to drop very quickly below $39 a barrel, as there is not enough confidence and physical demand to uphold this price level.

Technical News

EUR/USD

The Daily chart’s showing that the pair is still in bearish configuration. However, a bullish cross on hourly chart’s Slow Stochastic implies that an upwards correction might take place in the nearest time frame. When the upwards breach occurs, going long with tight stops appears to be preferable strategy.

GBP/USD

Narrow range trading continues as the pair did not make a significant move in either direction, and is currently traded around the 1.4220 level. The hourly chart’s Slow Stochastic is showing a fresh bullish cross suggesting that upwards correction might take place in the nearest time frame. When the upwards breach occurs, going long with tight stops appears to be preferable strategy.

USD/JPY

The bullish trend is loosing its steam and the pair seems to consolidate around the 94.15 level. The daily chart’s RSI is already floating in an overbought territory suggesting that a recent upwards trend is loosing steam and a bearish correction is impending. Going short with tight stops appears to be preferable strategy.

USD/CHF

The hourly chart is showing mixed signals with its Slow Stochastic fluctuating at the neutral territory. However, the hourly chart’s RSI is already floating in the overbought territory indicating that a bearish correction might take place in the nearest future. When the downwards breach occurs, going short with tight stops appears to be preferable strategy.

The Wild Card – Gold

Gold prices rose significantly in the last month and peaked at $975 for an ounce. However, daily 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.

A government release by the U.S. Labor Department today showed today that U.S. weekly continuing claims for unemployment benefits increased to the highest level on record since the report began in 1967. Unemployment continuing claims grew by 170,000 workers to a total of 4,987,000 unemployed workers for the week ending on February 7th. A four week moving average of continuing claims grew by 92,500 to 4,747,000.

New weekly U.S. jobless claims held steady in the week that ended on February 14th. New jobless claims grew to a total of 627,000 unemployed workers and matched the revised total from the week before. A 4-week moving average of unemployed workers rose by 10,500 from the prior week to a total of 619,000.

Producer Prices gain in January.

Other news released today showed that US Producer Prices increased by 0.8 percent in January after decreasing for five straight months according to a release by Department of Labor. Forecasts were expecting producer prices to increase by only 0.2 percent for the month following December’s 1.9 percent decline. On an annual basis, producer prices are down by 1.0 percent compared to January 2008. Core producer prices, excluding food and energy prices, grew by 0.4 percent in January following a 0.2 percent increase in December. On an annual basis, core prices have gained by 4.2 percent over the January 2008 level. Forecasts were expecting the core prices to increase by only 0.1 percent in January following December’s 0.2 percent gain.

US Dollar showing mixed results in forex trading.

The U.S. dollar has been mixed in forex trading today against the major currencies as the dollar has gained versus the Canadian dollar, Japanese yen and New Zealand dollar while falling against the euro, Australian dollar, British pound and trading virtually unchanged against the Swiss franc.

The euro has advanced versus the dollar for the first time this week as the EUR/USD has gone from today’s 1.2583 opening exchange rate at 00:00 GMT to trading at approximately 1.2669 in the US trading session at 4:48pm EST.

The British pound has increased today versus the American currency from 1.4270 to trading at 1.4286 dollars per pound. The dollar has advanced against the Japanese yen today as the USD/JPY has gained from its 93.47 opening to trading at 94.22.

The dollar has also gained against the Canadian dollar after opening at 1.2561 earlier today to trading at 1.2584 later. Meanwhile, the USD is virtually unchanged against the Swiss franc from 1.1733 to trading at 1.1739.

The Australian dollar has also traded almost unchanged versus the USD as the AUD/USD trades at 0.6432 after opening today at 0.6430 while the New Zealand dollar has fallen versus the USD and trades at 0.5121 after opening at 0.5094.

EUR/USD Chart – The Euro advancing against the US Dollar today in Forex Trading after declining everyday this week.

GCI Forex Research

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The euro moved higher vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.2760 level and was supported around the $1.2525 level.  The common currency snapped back after being given earlier in the week on escalating concerns about Eastern European and Western European banks’ exposure to asset problems in that region.  Austria’s central bank said the most important Austrian banks are well-capitalized with sufficient liquidity and can contend with problems in Eastern Europe. Many traders believe these latest developments in Eastern Europe are another reason why the European Central Bank will ease interest rates next month.  In U.S. news, the January headline producer price index rose 0.8% m/m, reversing some of December’s 1.9% decline, while the core PPI was up 0.4%, beating expectations of a 0.1% climb.  Core PPI was also up 4.2% y/y.  These data allayed some concerns that deflationary pressures were mounting in the U.S. though it is premature to conclude downward price pressures are stabilizing.  Other data released today saw weekly initial jobless claims remain steady at a revised 627,000 while continuing jobless claims jumped higher to 4.987 million, the highest level in 42 years.  Additionally, it was reported that the Philadelphia Fed’s manufacturing survey printed at -41.3 in February and that the U.S. January leading index gained 0.4%.  Dealers are paying close attention to the Obama administration’s plans to slow the foreclosures crisis in the U.S. with many traders concluding the plans amounts to moral hazard.  Euro bids are cited around the US$ 1.2475 level.

¥/ CNY

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥94.40 level and was supported around the ¥93.30 level.  The Japanese government downgraded its economic assessment for the fifth consecutive month, the longest period of consecutive downgrades since 2001.  The government reported the economy “is worsening rapidly while in a severe situation” and this is the most pessimistic the government has been since 1975.  Many Japan-watchers believe the Aso government will soon draft its fourth fiscal stimulus package since August.  Data released in Japan overnight saw the gross domestic product gap print at -4.3% in the October – December period, the worst print since the -4.5% figure in Q1 2002, and this means supply far exceeds demand.  This also reflects problems faced by Japan’s all-important export sector where the yen’s relative strength has eroded Japan’s trade surplus.  The Nikkei 225 stock index climbed 0.31% to close at ¥7,557.65.  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 ¥120.35 level and was supported around the ¥117.30 level.  The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥136.35 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥80.55 level.  The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8348 in the over-the-counter market, down from CNY 6.8378.

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.

Source: ForexYard.

The U.S. Dollar is increasingly being chosen over the Yen as the choice currency during times of heightened risk aversion. The contracting global economy helped to strengthen the Dollar yesterday as the Yen begins to lose favor as a safe haven currency.

Economic News

USD – Dollar Jumps on Safe Haven Trading

After a relatively negative news day, the USD still managed to appreciate against most of its currency counterparts. Analysts have declared a decreased risk appetite and market uncertainty as the culprits. The loss of risk appetite means that most traders are waiting for more steady market conditions before taking a position in higher yielding currencies. There is too much uncertainty right now with the various bailout plans. This factor has produced the recent “wait and see” attitude in the forex market. On top of that, we have negative figures such as yesterday’s Building Permits, which also adversely affect the market.

The price contraction has brought new fears after the cheapening of Oil and other raw materials because it could trigger deflation. In yesterday’s FOMC Meeting Minutes, Fed officials said that they lack the ability to counteract a deflationary spiral because Interest Rates are already too low. Deflation is considered for many as a danger to the economy. The resulting fall in prices may lead to consumers and businesses holding off on further purchases in expectations of even lower prices, sending the economy down a dangerous path. In addition, the Fed also pointed during its meeting that the committee held its Interest Rate near zero to prevent further damage to the already weak economy

USD trading will be interesting today as another batch of important economic data is expected to be released. Similar to yesterday, the news will start at 13:30 GMT with a series of economic indicators being released starting with PPI figures, unemployment claims and the Philly Fed Manufacturing Index. Surprisingly, almost all of these releases are expected to be higher than their previous figures meaning the USD could continue to show further bullishness today. Traders should stay close to the market today, as there is a strong chance to capitalize on the fluctuations which will likely follow these releases.

EUR – EUR Suffers from European Banking Woes

The EUR saw very little change in its overall value against the other currencies yesterday. While continuing with its recent downward trend, it has managed to remain rather calm in light of recent news from the Euro-Zone market. The EUR fell against the USD for a fourth day as the pair closed at 1.2500 levels. The 15 nation currency experienced similar behavior against the GBP as the pair dropped from 0.8920 to 0.8810 by days end.

Western European banks may be more severely hurt by an economic slowdown in Eastern Europe. These banks have lent to companies in Eastern Europe, investments that were sound as Eastern Europe’s economy grew at robust rates during the boom period of 2003-2005. But now recessions in these nations will threaten debt service capabilities, hurting Western Europe’s banks, which will weigh on the EUR and GBP

There will only be one data release from EZ today as the Italian Trade Balance will be announced during early trading. This indicator tends to have a relatively small impact on the market. A rising trend will have a positive effect on the nation’s currency. In addition, traders should pay close attention to the response of equity market to determine how to continue with EUR positions.

JPY – JPY Corrects as the Currency Falls out of Favor with Traders

The Yen continued to depreciate as investors are choosing the Dollar over the Yen for a safe haven trade. The JPY fell against the USD and closed around 93.65. Moreover; the Japanese Yen lost almost 150 pips versus the EUR, closing at 117.70 and just around 200 pips versus the GBP.

The world’s second-largest economy shrank at the steepest pace since the 1974 oil shock last quarter as a global slowdown triggered record declines in exports and output. Gross domestics’ product dropped an annualized 12.7% last quarter, more than twice as fast as declines in the U.S. and Europe. The economy may suffer a bigger contraction in the current quarter, which could weigh on the JPY.

Looking ahead today, the Japanese market should have a heavy effect on the JPY versus its major currency counterparts, as the Overnight Call Rate will be announced today The rate is expect to remain unchanged but traders should pay close attention to the BoJ Press Conference that will follow to look for expectations of Japan’s economic future. Later tonight, the monthly All Industries Activity Index is expected to be released with a negative figure. This should add bearish momentum to the Yen against its counterparts. If Crude Oil prices change drastically following the Crude Oil Inventories release, expect some more volatility on the JPY.

OIL – Crude Oil Traders Await U.S. Inventory Data

Crude Oil prices experienced another day of depreciation as the oft-traded commodity dropped below $38 in this morning’s early trading session. Oil prices traded down for the second straight day. Much of the bearish movement in Crude Oil can be attributed to fears of a drop in fuel consumption due to poor economic outlook in the major world economies.

With economic growth slowing in the U.S. and Europe, and another month of falling service industry numbers, Crude Oil may continue to see a depreciating value. As for today, the U.S. Crude Oil inventories figures will be released. Expectations show a drop to 2.9M from last week’s excessive 4.7M. Traders can, and should, expect wide market volatility around the 14:00 GMT release of these inventories figures because of Crude Oil’s recent drop below the $40 price level.

Technical News

EUR/USD

There appears to be a bullish cross forming on the daily chart’s Slow Stochastic, indicating that an upward correction is expected in the near future. However, almost all other oscillators are stuck in neutral territory, signaling that this pair may be less volatile than expected. Going long with tight stops might be the right strategy today.

GBP/USD

A bearish cross on the 4-hour chart is forming, signaling a potential price drop, while the Bollinger Bands are also tightening, pointing to an imminent volatile price movement. However, the daily chart’s Slow Stochastic indicates a recent bullish cross, signaling a possible upward movement. In the short-term traders may expect a downward correction, but longer-term traders may want to maintain their long positions today.

USD/JPY

The price of this pair appears to be floating in the over-bought territory on the 4-hour chart’s RSI and there appears to be an imminent bearish cross on the Slow Stochastic, indicating a downward correction may occur soon. The price also appears to be floating in the over-bought territory on the daily chart’s RSI which also lends support to this notion. Going short 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 Slow Stochastic is providing us with mixed signals, however it’s Bollinger Bands are tightening, implying that a violent breach may take place. Until that will happen, 4 hour chart reflects quite a stable fluctuation within a flat channel thus providing traders a chance to make profits from buying on dips and selling on highs.

The Wild Card – Gold

This commodity has been trying to massively correct the intensive bullish move, and is now trading around the 977 level. The sharp bearish channel is in a high spot at the moment and together with a bearish cross of the 4 hour chart’s Slow Stochastic it provides forex investors quite a good potential for short positions.

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.

U.S. housing starts, building permits and housing completions declined in the month of January according to data released by the Commerce Department on new residential construction. Housing Starts fell by 16.8 percent in January to a seasonally adjusted annual rate of 466,000 starts compared to December 2008. January’s total is down by a whopping 56.2 percent from January 2008 and marks the lowest level on record. Single-family housing starts fell by 12.2 percent compared to December.

Building permits statistics, used as a predictor of future construction, fell to a seasonally adjusted annual rate of 521,000 permits in January. This is a decrease of 4.8 percent compared to December and also the lowest standing on record for the Commerce Department permits data. January’s permits have seen a 50.5 percent drop from January of 2008. Single-family permits totaled 335,000 which was 8.0 percent less than December’s permit totals.

Housing Completions for January also decreased when compared to December as completions fell to an annual rate of 776,000 privately-owned housing completions. This is a decrease of 24.2 percent from December’s completion totals and 41.7 percent below the January 2008 level. Single family housing completions fell in January by 17.5 percent from December.

US Dollar mixed in Forex Trading.

The U.S. dollar has been mixed in forex trading against the major currencies today. The dollar has gained against the euro, Swiss franc, Japanese yen, Australian dollar and British pound while losing ground against the Canadian dollar and trading almost unchanged versus the New Zealand dollar.

The euro has declined versus the dollar everyday this week and declined from today’s 1.2594 opening at 00:00GMT to trading at approximately 1.2537 in the US trading session at 4:28pm EST. The British pound has decreased today versus the dollar as the GBP/USD has gone from its 1.4239 opening to trading at 1.4218 later.

The dollar has also been rising against the Japanese yen today as the USD/JPY has advanced from its 92.26 opening to trading at 93.78 later today. Against the Swiss franc, the USD has been gaining today after falling yesterday as the USD/CHF has climbed from its 1.1677 opening to trading at 1.1776.

The dollar has declined against the Canadian dollar after opening at 1.2629 earlier today to trading later at 1.2611 later. The Australian dollar has declined versus the US dollar after opening at 0.6392 today as the AUD/USD currently trades at 0.6379. The New Zealand dollar is virtually unchanged versus the USD with the NZD/USD trading at 0.5101 after opening today at 0.5094.

USD/JPY Chart – The US Dollar advancing against the Japanese Yen today in Forex Trading.

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The euro moved lower vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2510 level and was capped around the $1.2640 level.  Several factors continue to plague the common currency. First, Eastern European markets remain in rough shape. Credit default swaps on some sovereign debt are at all-time highs with Hungarian CDS rates around 550bps.  There is growing concern that western European banks may be forced to bail out their Eastern European subsidiaries.  Second, there are lingering rumours that some countries may leave the eurozone, an assertion that German finance minister Steinbrueck flatly rejected as “absurd” today.  Third, the European Commission criticized France, Spain, Ireland, Greece, Malta, and Latvia for their large budget deficits.  Fourth, the German government reported “The outlook for the current year remains strongly clouded for the time being. Current economic indicators signal that the decline of economic activities will continue in the first quarter of 2009.  The world economic conditions continue to hurt. In addition, there are the increasingly direct consequences of the financial market crisis, in particular through a tightening of banks’ conditions for companies’ funding.”  Most traders believe European Central Bank will ease interest rates by at least 50bps next month.  In U.S. news, January housing starts were off 16.8% while January building permits were off 4.8%.  Additionally, the industrial production index fell to 101.3 while capacity utilization moderated to 72.0 from 73.3 in December.  Also, it as reported the January import price index improved to -1.1%.  Traders cite an increasing likelihood the Obama administration may nationalize some U.S. banks with Citigroup and Bank of America as two possibilities.  Euro bids are cited around the US$ 1.2475 level.

¥/ CNY

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥93.95 level and was supported around the ¥92.10 level.  The yen came off across the board as traders chased dollar-bloc yields plays in the loonie, Aussie, and kiwi.  Bank of Japan reported it will restart its purchases of equities from banks on 23 February, a temporary program designed to help the ailing banking sector.  The total size of the central bank’s purchases will likely be around ¥1 trillion and BoJ could announce new measures at the end of tonight’s Policy Board meeting to expand corporate debt purchase operations.  The Nikkei 225 stock index lost 1.45% to close at ¥7,534.44.  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 ¥118.05 level and was supported around the ¥115.95 level.  The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥133.70 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥79.60 level.  The Chinese yuan depreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8378 in the over-the-counter market, up from CNY 6.8355.  The government rejected a media report that it is forecasting a depreciation in the yuan. The government reported China’s 2008 current account surplus was around US$ 440 billion.

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.

Source: FOREXYARD

Following the signing of President Barack Obama’s economic stimulus bill yesterday, the USD made modest gains against most of its currency rivals. In expectation of today’s housing data, the USD may continue to strengthen unless this news disappoints investor confidence.

Economic News

USD – Greenback Broadly Extends Gains

The Dollar continued to benefit on Tuesday amid heightened worries about the global economy and investors’ concern that Euro-Zone banks are highly exposed to financial turmoil in Eastern Europe. The greenback was also pushed higher after President Barack Obama signed a $787 billion stimulus bill into law yesterday. The bill passed both houses of Congress on Friday.

The U.S currency rose 1.4% yesterday to end the day at 1.2595 per EUR after earlier appreciating as high as 1.2564, its highest level since December 4th. Against the Japanese currency, the USD rose 0.8% to 92.44 Yen, not far from a one-month peak at 92.75 hit earlier today.

Although the U.S. economic data has painted a grim picture, with the New York Federal Reserve reporting its manufacturing activity index plunged to a record low this month, analysts say that the Dollar still remains just about the only short-term alternative for investors. It appears that foreign demand returned to U.S. securities in December, supported by ongoing safe-haven buying of Dollar-denominated deposits. As the market focuses on bad news from Eastern Europe, which plays an important role in the weakness of the EUR, and on the slide in Japan’s GDP, investors seek the relative safety of the greenback, hence broaden USD gains.

EUR – EUR Falls on Eastern Europe Concern

The Euro-Zone currency was traded near a 10-week low against the Dollar after a credit agency said it may cut the ratings of several banks with units in Eastern Europe, adding to concern that financial turmoil will deepen. The agency stated that the combination of higher provisions for bad debt, the rise in bank borrowing costs, and falling currencies, would weigh on the profitability of the banks concerned and erode their capital base. As a result, the EUR is likely to further extend its losses versus the greenback and the Yen on speculation the currency will fall on renewed concerns about credit markets, making the U.S. and Japanese currencies more attractive as havens.

The EUR was traded at 1.2579 from 1.2582 late in New York yesterday. It also was down at 116.31 Yen from 116.27. The European currency was also lowered 1.3% against the British pound to 88.45 pence per EUR yesterday after the Office for National Statistics said inflation slowed last month, prompting analyst speculation that the Bank of England (BoE) will reduce the pace of Interest Rate cuts.

Analysts now say that the main reason for the EUR weakness is from worry not only about the European regional economy but specifically those in Eastern Europe where currencies are falling rapidly across the board. The EUR was also under pressure on growing expectations that the European Central Bank (ECB) will ultimately have to play catch up on rate cuts made by the Federal Reserve and Bank of England. Market players anticipate Euro-Zone Interest Rates to fall below 1.0% later this year, with a cut to a record low of 1.5% in March.

JPY – Japanese GDP Data Increases Recession Fears

Japan’s economy, only months ago, forecast to be the best performing among the world’s most advanced nations, has now become the worst. Gross Domestic Product (GDP) shrunk an annualized 12.7% last quarter, the Cabinet Office said yesterday. Japan’s government is struggling to cope with the economic crisis, and may expand its stimulus plans by 20 trillion Yen to 30 trillion Yen to fund a supplementary budget for the fiscal year starting April 1, 2009. The second blight on the Japanese economy is the surge in the Yen currency. The JPY has climbed 17% in the past year; in today’s trading the currency was at 92.44 per USD.

As the global financial crisis deepened, investors reduced their carry trades, where they borrowed in low-yielding currencies to invest in nations where interest rates exceeded Japan’s. Investors’ focus is on whether the Bank of Japan (BOJ) will come out with specific policies to lower term rates. The BOJ has already cut its benchmark Rate to 0.1%, from 0.5% in October, in a bid to help spur the faltering economy. According to several analysts the BOJ policy-makers will likely keep borrowing costs unchanged on February 19th, leading the JPY to continue with its recent trends.

Oil – OPEC to Discuss Production Cuts; Oil Demand Falling

The Organization of the Petroleum Exporting Countries (OPEC) is looking to reduce oil supply further if demand is insufficient to absorb supplies, oil ministers said on Tuesday. OPEC, supplier of more than a third of the world’s oil, has raced to cut supply to match falling demand from a slowing global economy. OPEC next meets in March to discuss supply. Crude Oil Prices have fallen by more than $110 from the peak seen last July’s to now trade at $38 a barrel on Tuesday. Oil has mostly traded in a $35 to $45 range since December.

Analysts say that the economic outlook will continue to dominate the first half of 2009. The United States, Euro-Zone and Japan are all in synchronized recession, which is depressing fuel demand and sending Crude Oil prices down sharply from its record highs. Traders should watch for U.S. crude oil inventories data to be released by the American Petroleum Institute later on Wednesday and by the U.S. Energy Information Administration on Thursday. These will give an indication to the reserves held by large energy consumers like the United States.

Technical News

EUR/USD

A bullish cross appears to have just taken place on the 4-hour chart’s Slow Stochastic, signaling an imminent bullish correction to the recent downward trend. The price also appears to be floating in the over-sold territory on the 4-hour chart’s RSI which also lends support to this notion. Going long with tight stops might be the right choice today.

GBP/USD

The Bollinger Bands on the hourly chart are tightening, signaling an imminent volatile price movement. With the recent bullish cross on the daily chart’s Slow Stochastic, the imminent movement will likely be in an upwards direction. Going long with tight stops might be the preferable strategy today.

USD/JPY

After yesterday’s volatile price movements, this pair appears to have temporarily calmed down. The price appears to be floating in neutral territory on most oscillators and momentum appears to be showing a flat price movement. Waiting for a clearer signal might be the right choice today.

USD/CHF

The price of this pair appears to be floating in the over-sold territory on the hourly chart’s RSI, signaling an upward movement may occur in the near future. This pair, however, appears to be trading in a bullish channel. Traders can benefit by buying on the lows and selling on the highs of this up-trend.

The Wild Card – Silver

Silver has been trading in a steady bullish channel for the past few weeks with clear peaks and troughs. Following this commodity’s recent upward movement, traders can now see the price hovering in the over-bought territory on the 4-hour and daily charts’ RSI, combined with bearish crosses on their Slow Stochastic oscillators as well, all signaling the impending downward correction. Forex traders can benefit from this style of range trading by buying on lows and selling on highs as the price of Silver holds steady on this path.

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The euro moved lower vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2600 figure and was capped around the $1.2805 level. The common currency slid sharply on escalating concerns about western European banks’ exposure to problems at their Eastern European subsidiaries. There is market chatter about a pending implosion in the Eastern European banking industry following a bearish report from Moody’s Investor Service. Data released in the eurozone overnight saw the December EMU-15 trade balance print at -€700 million and for 2008 as a whole the eurozone recorded a record trade deficit of €32.1 billion. Other data saw the February ZEW economic sentiment index improve to -5.8. In U.S. news, President Obama will sign the US$ 787 billion economic stimulus bill in Denver today amid widespread criticism the emergency spending bill will do much to stimulate employment and the economy in the near-term. Data released in the U.S. today saw the February New York State Empire index worsen considerably to -34.65 from -22.2 in January while December net long-term TICS capital flows grew to US$ 34.8 billion. St. Louis Federal Reserve President Bullard speaks later in the day and trades will scrutinize his remarks to see if he talks about the Fed’s latest asset purchases. 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 ¥92.75 level and was supported around the ¥91.55 level. Finance minister Nakagawa resigned his position following his embarrassing episode of slurred speech at the Group of Seven meeting in Rome this weekend. Economy minister Yosano will assume Nakagawa’s portfolio and this ordeal is the latest problem for beleaguered Prime Minister Aso who currently suffers from a favourable rating below 10% and could be forced out of office by the Liberal Democratic Party ahead of this year’s election. Data released in Japan overnight saw January total machinery orders off 48.4% m/m and 84.1% y/y. The Nikkei 225 stock index lost 1.35% to close at ¥7,645.51. 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 ¥115.65 level and was capped around the ¥117.45 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥131.70 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥78.15 level. The Chinese yuan depreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8355 in the over-the-counter market, up from CNY 6.8249. Government official Zhang Xiaogiang reported the U.S. dollar may strengthen to between CNY 6.95 and CNY 7.00.

₤

The British pound came off vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.4125 level and was capped around the $1.4310 level. Bank of England Deputy Governor Bean talked about sterling’s recent depreciation saying “It is necessary to re-equilibrate the economy…and help close the current account deficit… It may be reflecting a little bit of overshooting.” Data released in the U.K. today saw January consumer price inflation fall 0.7% m/m and rise 3.0% y/y, its lowest level since March 2008. Core consumer prices fell 0.8% m/m and were up 1.3% y/y, an acceleration. Also, the January DCLG house price index fell 10.2%. Bank of England is expected to continue easing interest rates in H1, possibly as early as next month. Cable bids are cited around the US$ 1.3850 level. The euro came off vis-à-vis the British pound as the single currency tested bids around the ₤0.8830 level and was capped around the ₤0.8955 level.

CHF

The Swiss franc moved lower vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.1775 level and was supported around the CHF 1.1590 level. Data released in Switzerland today saw real retail sales climb 3.6% y/y in December. U.S. dollar offers are cited around the CHF 1.1815 level. The euro moved lower vis-à-vis the Swiss franc as the single currency tested bids around the CHF 1.4770 level while the British pound moved higher vis-à-vis the Swiss franc and tested offers around the CHF 1.6760 level.

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The Eurozone’s international trade deficit narrowed unexpectedly in December according to a data release from Eurostat today. The eurozone’s 15 countries that use the euro currency showed a trade deficit of 0.7 billion euros in December following a revised deficit of 5.8 billion euros in November. The decrease of the deficit was unexpected as market forecasts had expected the deficit to grow to 6.7 billion euros for the month.

December’s deficit also decreased when compared to December 2007 which registered a trade deficit of 3.9 billion euros. The eurozone trade deficit for all of 2008 registered 32.1 billion euros after registering a trade surplus of 15.8 billion euros for the total of 2007.

The trade deficit for all of the 27 nations in the European Union also decreased in December. The EU27 posted a deficit of 10.4 billion euros following a deficit of 23.6 billion euros in November. On an annual basis, December’s EU27 deficit was 7.3 billion euros smaller than the deficit of 17.7 billion euros in December of 2007. The total EU27 trade deficit for all of 2008 was 241.3 billion euros following a total 2007 trade deficit of 192.4 billion euros.

Forex Trading – Euro continues to fall versus US Dollar.

The Forex markets today have seen the US dollar mostly continue its strong run since the beginning of the trading week while the euro has been mostly weaker against the other major currencies. The US dollar has gained ground versus the euro, Australian dollar, New Zealand dollar and Canadian dollar while losing ground to the Japanese yen and British pound. The euro, meanwhile, has lost ground to the yen, pound, us dollar and the Swiss franc while gaining against the Australian dollar and New Zealand dollar.

The euro has fallen against the dollar as the EUR/USD declined to trading at 1.2583 dollars per euro at 12:56pm EST in the US trading session after opening the day at 1.2648(00:00GMT).

The British pound has advanced slightly today versus the dollar from 1.4219 dollars per pound to trading at 1.4225 dollars per pound. The dollar is trading a bit lower against the Japanese yen today as the USD/JPY trades at 92.32 after opening at 92.45.

The dollar has gained against the Canadian dollar after opening at 1.2496 earlier today to trading later at 1.2639. Against the Swiss franc, the USD is virtually unchanged from its 1.1736 opening.

The New Zealand and Australian dollars are both falling against the US dollar from their opening exchange rates. The NZD/USD currently trades at 0.5081 after opening at 0.5119 while the AUD/USD trades at 0.6351 after opening today at 0.6427.

EUR/USD Chart – The Euro falling against the US Dollar today in Forex Trading and trading below the level of the 21-day simple moving average(blue) and the 55-day moving average(red).