Forex Market Daily Review Jan,13

By eToro – After six straight days of gains, the major U.S stock indices finished yesterday’s session in negative territory. Negative sentiment was already felt during Asian and European hours, as Alcoa, the metals and mining giant, released poor results after Monday’s session. Unfortunately, the earnings season started on a disappointing note, as Alcoa missed analyst’s estimates, reporting a profit of only 1 cent per share, compared to an expected 6 cents per share. The stock closed yesterday with a loss of -11.06%, presenting extreme volume on the sell-off.

Fundamental data also had an impact on the trading day as the U.S released a worse than expected trade deficit of -36.40B. Exports rose 0.9%, the seventh consecutive gain, as demand was up for American-made autos, farm products and industrial machinery. Imports, however, rose a much faster 2.6%, led by a 7.3% rise in petroleum imports. Even though the larger than expected number is classed as negative for the U.S economy, it does however show that consumption is picking up in the broader market. One must note that recent results have shown that China’s exports have increase and hit an all-time high, with the U.S still dominating demand.

From a technical point of view the broader market index (S&P500) finished the session with a loss of -0.94%, dragged down by materials and financials. Consumer staples was the only sector out of the nine, that finished with a gain. When taking a glance at the chart below, one can see that despite yesterday’s drop, indicators aren’t yet pointing to overbought levels. This could indicate that yesterday’s drop was only a temporary correction.

Forex

On the Forex market, the Dollar index continued to linger around prior breakout levels, while individual pairs presented a volatile session. The sharp sell-off in the USD/JPY was countered by an increase by other pairs, especially the USD/CAD. While some were attributing the USD/JPY’s declines to bond yields, fundamental data also had an effect on the pair’s movement.

The USD/JPY dropped significantly yesterday after stalling around ¥93. The move was widely anticipated by technical traders as the chart had presented divergence already during Monday’s session and was trading on the edge of its recent trend line support. From a larger perspective the USD/JPY bounced off major trend line resistance (weekly chart).

The USD/CAD also presented traders with major movement yesterday, after Canada’s trade balance turned from a positive 0.50B to a negative -0.30B. Gains in energy products helped push Canadian exports up 1.1% during the month, while imports gained a 3.9%, more than enough to negate the impact of rising exports.

The Day Ahead

The economic calendar is packed with data today, starting with production figures from Italy and the U.K. The manufacturing and Industrial production in the U.K is expected to show an expansion of 0.3% for the month, after reporting a ‘no change’ last time round.

Throughout the session the U.S will take the stage releasing its Beige Book. This report summarizes the conditions in each of the 12 Federal Reserve districts covering the U.S. It gives a picture of economic trends and challenges in the U.S. An optimistic view should be taken as positive for the overall economy and could provide further strength to current trends.

Daily Forex 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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Forex Market Daily Review Jan,13

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