Month: November 2009

Source: ForexYard

After a week of greenback recovering this week promises to provide high volatility. Interest Rate announcements are expected from the U.S, the Euro-Zone and the U.K. In addition, the Non-Farm Employment Change for October will be released on Friday. In short, sharp fluctuations are expected, with plenty of opportunities to make large profits.

Economic News

USD – A Week Packed With Economical Data Expected

During last week’s session the Dollar managed to recover against most of the major currencies. The Dollar saw a 300 pips rise against the Euro, and the EUR/USD pair is trade near the 1.47 level. However, the Dollar continued to weaken against the Japanese yen.

The Dollar’s recovery appears to be mainly psychologically. Last week did not provide sustain data showing that should have supported the Dollar. It seems to be that the fact that the EUR/USD reached the 1.50 level, a very poor level for the Dollar, the market promptly corrected this situation with a bullish trend for the Dollar.

Last week’s data mainly showed that the U.S economy is yet to be seen as a recovered economy. The housing sector, the main reason for the recession, is far from returning to levels seen before the crisis began. The employment condition continues to deteriorate, and the weekly Unemployment Claims rises every week.

Nevertheless, the upcoming week has the potential to create mayhem in the market, as various extremely-impacting news publications are expected from the U.S economy. The main data that traders should focus on is likely to be the Federal Funds Rate and the Non-Farm Employment Change. The Federal Funds Rate is in fact the U.S interest rates announcement for November. Currently, analysts expect the FED to leave the rates at their low level, lower than 0.25%. If the FED will surprise and hike rates, it is likely to boost the Dollar. The Non-Farm Employment Change measures the change in the number of employed people during October, excluding the farming industry. Analysts forecast the 173,000 have lost their jobs during October, and that could be the best figure in 14-months. This also has the potential to boost the Dollar.

EUR – European Interest Rates Announcement Expected This Week

The Euro dropped against all the major currencies during last week’s trading session. The Euro lost 300 pips against the Dollar, 300 pips against the Pound and over 600 pips against the Yen. Two main reasons have led to the Euro’s downfall last week. One, the economic data from the Euro-Zone has failed to reach analysts’ expectations. The German Consumer Climate, a leading indicator of consumer spending, saw a 4.0 end result, failing to reach expectations for a 4.5 result, falling for the first time in 14 months. The German Retail Sales dropped by 0.5% in September, also showing that the German economy still experiencing difficulties to fully recover. Considering that Germany contains the strongest and biggest economy in the Euro-Zone, the negative data has weakened the Euro. The second reason for the Euro’s downtrend seems to be the recovering Dollar. Furthermore, it appears that if the Dollar’s correction will proceed, the Euro might continue to weaken.

Looking ahead to the following week, the main data expected from the Euro-Zone will be the Minimum Bid Rate scheduled for Thursday. The Minimum Bid Rate is the Euro-Zone’s interest rates announcement for November. The Minimum Bid Rate currently stands on 1.00% and analysts expect it to stay this way. However, if the European Central Bank will surprise and hike rates, it will have the potential to reverse the Euro’s bearish trend, and to lift the Euro back up. Traders should also follow the British interest rates announcement whish is due at the same day.

JPY – Yen Strengthens Against the Majors

The Yen saw an extremely bullish session during last week’s trading. The Yen rose over 600 pips against the Euro and over 500 pips against the Pound. The Yen even saw a rising trend against the recovering Dollar, and the USDJPY pair dropped to the 89.20 level.

The Yen’s bullish correction appears to be a direct result to the positive data published from the Japanese economy. The Japanese Unemployment Rate dropped to 5.3%, its lowest rate in 4 months. The Japanese Preliminary Industrial Production rose by 1.4% in September, beating expectations for a 1.1% rise. This means that the inflation-adjusted value of output produced by manufacturers rose by 1.4% in September as opposed to August. The Yen strengthened despite the fact that the Bank of Japan (BOJ) left the Japanese Interest Rates at 0.10%, the lowest level in the industrial world.

As for the week ahead, many interesting news publications are expected from the Japanese economy. Traders should focus on two main events: the BOJ Governor Shirawaka speech on Wednesday and the Monetary Policy Meeting Minutes. On these events the BOJ will most likely reveal its future plans for the Japanese economy, and this is likely to impact the Yen.

Oil – Crude Oil Drops on Global Recovery Concerns

Crude Oil saw an extremely volatile session last week. Crude oil was traded between 77$ to $82 a barrel during the week, showing sharp ups and downs. In conclusion, crude oil lost a little portion of its value, as it is now traded for $77 a barrel.

Crude oil dropped on concerns that global recovery may take longer than expected, and thus demand for energy might be damaged as a result. The Negative data which was published during the previous week, especially from the American and the German economies, has dented confidence for a swift global recovery. In addition, the strengthening Dollar also contributed to the oil’s downtrend. Crude oil, just like other commodities such as gold, is traded in Dollars. When the Dollar appreciates, oil tend to drop and vice versa

As for this week, the leading data from the U.S. and the Euro-Zone are likely to influence on oil the most. The main publications that traders should follow are the interest rates announcements from the U.S, the Euro-Zone and Britain and of course the U.S. Non-Farm Employment Change. A surprising release from any of these publications is likely to have an immediate impact on crude oil’s value.

Technical News

EUR/USD

There appears to be a bullish cross forming on the 4H 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

It seems that the Cable has limited its bullish correction after peaking at the 1.66 price level. And now, a bearish cross on the hourly chart’s Slow Stochastic indicates that the general downtrend might extend. Going short seems to be the preferable choice today

USD/JPY

The typical range trading on the 4 hour chart continues. Both the hourly RSI and Slow Stochastic are floating in neutral territory. On the contrary, the daily chart is showing a moderate bearish momentum with diminishing strength. Forex traders are advised to wait for a clearer signal before entering the market with this pair

USD/CHF

There is a very distinct bearish formation continues on the hourly level, as the pair is now floating in its lower section. In addition, all oscillators on the daily chart are pointing down, suggesting that the downward move might extend. Going short might be the right strategy today.

The Wild Card – GBP/AUD

There is still a bearish configuration on the 4H chart, indicating that the momentum is still down. The RSI is floating around 50, which supports the notion that there is still room to run. In the shorter time frame there is a bullish cross forming on the hourleis Slow Stochastic indicates that there might be a small bullish correction before the bearish move resumes. Forex traders can maximize profits by selling on highs and taking advantage of a currently bearish trend.

Forex 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.

GDP Quickly Loses its Affect, Rate Decisions Ahead

Investors experienced a rollercoaster ride last week as economic data had a major impact on the currency market. Even though the major news came on Thursday in the form of a better than expected GDP result, the news quickly wore off on Friday as the markets dropped lower. Friday’s session was a major turnaround as the market nosedived and closed down sharply for the week.  The S&P 500 index finished the week down 4 percent or 43 points at 1036. The Dow Industrial average settled unchanged for the month.

The market started the week on the defensive side, led down by transportation, financials and healthcare stocks. Even though previous news from large names, such as IBM, helped to prevent a major drop, consumer confidence numbers prevented the previous week’s momentum from continuing.  Tuesday and Wednesday the market continued to show weakness as market participants waited for the US GDP release on Thursday.  The correlation between dollar strength and US equity market weakness was extremely strong during the week, as the dollar rebounded from oversold levels.  As one can see on the chart below, the Dollar jumped higher for the week along with an S&P sell-off.

Thursday was the major day of the week as a wave of news hit the boards.   Japanese industrial production expanded for the seventh month in September, the longest run in 12 years. Output climbed 1.4% from a month earlier, more than the 1% expected. The US released new on Gross Domestic Product (GDP), which came out much better than the consensus.  Gross domestic product expanded at a 3.5% seasonally adjusted annual rate in the third quarter, a rise that leaned heavily on government spending. Some of the largest components of growth came from spending on cars and house building, two areas propped up by federal programs.  Out of the 3.5% growth, approximately one percent came from sales of motor vehicles and parts. Auto sales were accelerated by the “cash for clunkers” trade-in program.

On Friday, Consumer spending and the Chicago Purchasing Managers Survey took the stage. Consumer spending tumbled 0.5% in September with the end of the “cash for clunkers” auto trade-in program, while incomes remained flat. According to a published Commerce Department report, analysts are now concerned that the economic recovery could lose steam in the absence of government help, despite projected figures.

U.S. Economic Data

The Dollar Bounces Higher for the Week

The dollar stole the show last week, rebounding against most major currency pairs as traders looked for a safe haven in the currency market. The Euro was hammered during the week, selling off 5 big figures.  Economic figures released Friday by the European Union’s statistics agency Eurostat showed the rate of unemployment in the 16 countries that use the euro rose to the highest level since records began in 1999.  The euro-zone jobless rate inched up to 9.7% in September from 9.6% in August. Eurostat said 184,000 people joined unemployment rolls across the euro zone in September following a rise of 165,000 in August. That brought the total number of jobless to 15.3 million.  The figures showed that 3.2 million people have lost their jobs in the year as of September. From a technical point of view, the EUR/USD came down to an important trend line on Friday, one that will be closely watched by traders. A break of support could lead to low levels.

Last week’s sell-off was broad based and even had an impact on the British Pound. Even though the Pound has showed relative strength against its counterparts over the last week, headlines added to the pressure, preventing it from rallying.  News from Nationwide that UK house prices gained 2.0% y/y, the first increase in 19 months and an improvement Gfk consumer confidence to -13 from -16 had little lasting impact. Looking forward, the pound is likely to come under pressure ahead of next week’s events including the BoE meeting where the MPC is expected to extend Quantitative Easing (Q/E) after the contraction in Q3 GDP.

On the other side of the globe, the Bank of Japan announced that it would phase out emergency measures, put in place to help ease credit conditions, in coming months.  As expected, the program of buying commercial paper and corporate debt will be allowed to expire at the end of this year. Other programs including paying interest on excess reserves will however continue.  With a low rate environment, together with low inflation one can now understand why the news was positive for the Yen, helping it to gain strength against the Dollar, Euro and Pound.

The Week Ahead

Looking forward, a wave of important economic data will be released this week, including the market moving NFP result.  The data released on Friday, will show whether recent growth figures are government backed or whether unemployment has reached its top. One must note that higher unemployment levels often mean that the end consumer is avoiding purchasing due to lack of work. Furthermore three central banks are schedule to release their rate decisions. Even though all the banks are expected to maintain current rate levels, investors will be observing their statements to see whether a healthy economic turnaround will lead to rate hikes in the future.

Market Analysis provided by eToro

Disclaimer: Trading in the Foreign Exchange market might carry potential rewards, but also potential risks. You must be aware of the risks and are willing to accept them in order to trade in the foreign exchange market. Don’t trade with money you can’t afford to lose.

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