InvestMacro FX

By Fast Brokers – The Euro’s relative strength is paying dividends today as investors exit the Dollar following a surprise 25 basis point rate hike from the RBA.  We recognize broad-based weakness in the Dollar as a result, particularly against the Aussie and Kiwi.  Additionally, gold has rocketed to new all-time highs, a negative catalyst for the Dollar.  The RBA is the first central bank to raise rates following the massive flood of liquidity to abate the credit crisis.  Therefore, we’re witnessing the first reaction to the launch of global exit-strategies.  What we see so far certainly doesn’t bode well for the Dollar’s longer-term future.  The RBA’s monetary decision is heightening speculation concerning the ECB and BoE meetings on Thursday.  Last week Trichet made his first somewhat Dovish comments in quite some time by defending the interest of a stronger Dollar.  However, the ECB has been comparatively hawkish throughout the downturn.  Hence, there’s little reason to believe the central bank will act in a Dovish manner on Thursday, particularly after the RBA raised rates in confirmation that the global economy is functioning in an acceptable manner.

Despite the breakout in the AUD/USD and gold, the EUR/USD still faces multiple downtrend lines and September highs.  The EU released only light econ data last week.  Furthermore, the EU’s previous wave of PMI data came in negatively mixed.  Therefore, the EU economy is clearly facing headwinds in contrast to the RBA’s enthusiasm.  Hence, the EUR/USD may continue to lag behind the AUD/USD until the EU’s data sends an ‘all-clear’, giving more room to the downside in the EUR/AUD.  Meanwhile, all eyes will be on U.S. equities and the 3rd quarter earnings season which kicks off tomorrow with Alcoa.  Better than expected results particularly on the revenue side as a opposed to cost-cutting would be a positive catalyst for the EUR/USD since the currency pair still shares a positive correlation with the S&P futures.  Therefore, investors should keep an eye on the S&P’s interaction with present resistances and September highs.

Technically speaking, the EUR/USD’s recent movements have made a stronger argument for the near and medium-term uptrends.  While the near-term key will be topping our three tight downtrend lines and previous September highs, the medium-term key is the psychological 1.50 level.  If the EUR/USD can break past these aforementioned technical barriers near-term gains could really accelerate.  As for the downside, the EUR/USD has a few more cushions to fall back on, including multiple uptrend lines along with 9/25 and October lows.  That being said, the EUR/USD now has fewer technical obstacles to the topside than the downside.  Additionally, breakouts in gold and the AUD/USD bode well for the EUR/USD over the near-term.  Investors should keep a close eye on the EUR/USD’s interaction with its topside technical barriers, particularly as the ECB’s monetary policy decision approaches.

Present Price: 1.4745

Resistances: 1.4747, 1.4768, 1.44784, 1.4800, 1.4818, 1.4840

Supports: 1.4721, 1.4702, 1.4677, 1.4656, 1.4637, 1.4609

Psychological: 1.50, September Highs

Market Commentary provided by Fast Brokers.

Disclaimer: FastBrokers’ market commentary is provided for information purposes only and under no circumstances should be regardedneither as an investment advice nor as a solicitation or an offer to sell/buy any financial product. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained.

Risk Disclosure: There is a substantial risk of loss in trading futures and foreign exchange. Please carefully review all risk disclosure documents before opening an account as these financial instruments are not appropriate for all investors.

By Fast Brokers – Gold has bolted to new all-time highs after the RBA unexpectedly raised its benchmark rate by 25 basis points.  The RBA’s decision has resulted in a broad-based depreciation of the Dollar, particularly against the Aussie and Kiwi.  The concept of the RBA beginning its exit-strategy has sent a shock throughout the FX market, allowing gold to break free of its month long consolidation.  Gold blew past all of our downtrend lines, the psychological $1000/oz level and previous all-time highs.  This is clearly a bullish movement for gold in regards to the precious metal’s longer-term outlook.  Despite the broad-based depreciation of the Dollar coupled with a breakout in gold the EUR/USD and GBP/USD aren’t participating fully.  Investors are waiting for the ECB and BoE meetings on Thursday.  Since gold has been closely correlated with the EUR/USD, the currency pair’s reluctance of to break out of its own September highs could temper further gains in gold over the near-term.  However, full participation by the EUR/USD would only accelerate gold’s present upward momentum.  Gold’s current movements are so decisive that it’s irresponsible to place any resistances and supports on gold’s chart until the precious metal calms and forms a new base.  However, the psychological 1050 level could carry some weight should it be tested.   Meanwhile, investors should keep a close eye on the broad-based performance of the Dollar since it is more responsible for gold’s movements than U.S. equities.

Present Price: $1039.20/oz

Resistances: $1050/oz

Supports:

Psychological: $1050/oz

Market Commentary provided by Fast Brokers.

Disclaimer: FastBrokers’ market commentary is provided for information purposes only and under no circumstances should be regardedneither as an investment advice nor as a solicitation or an offer to sell/buy any financial product. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained.

Risk Disclosure: There is a substantial risk of loss in trading futures and foreign exchange. Please carefully review all risk disclosure documents before opening an account as these financial instruments are not appropriate for all investors.

By CountingPips

The Reserve Bank of Australia increased its interest rate by 25 basis points today to 3.25 percent and became the first G20 economy to increase its rate since the financial crisis.  The decision to raise the cash rate was unexpected by market forecastors and was the first rate change since April 2009 when the RBA decreased the rate by 25 basis points to the 3.00 percent level, a 49-year low.

Australia’s Glenn Stevens, Governor of Monetary Policy, said in his policy statement that, “The global economy is resuming growth. With economic policy settings likely to remain expansionary for some time, the recovery will likely continue during 2010 and forecasts are being revised higher.”

Australia’s economy fared better than most others throughout the economic crisis as a technical recession was averted.  In 2009, the GDP of Australia has risen for the first half of the year with a 0.4 percent increase in the first quarter followed by a 0.6 percent gain in the second quarter. Stevens said today that, “Economic conditions in Australia have been stronger than expected and measures of confidence have recovered” prompting the rate increase.

The Australian dollar surged after the rate increase news and advanced against most of the other major currencies. The Aussie has reached a new yearly high against the US dollar in forex trading and close to a new high versus the euro.

Also released out of Australia today was trade balance numbers which showed that Australia’s August trade deficit narrowed from July.  The deficit leveled at a seasonally-adjusted AU $1,524 million in August from a deficit of AU $1,783 million in July.  Imports fell by 3 percent while exports declined by 2 percent in August.

AUD/USD Chart – The Australian dollar surging in trading today against the US dollar after the RBA increased its interest rate by 25 basis points and becoming the first G20 to hike its rate. The AUD/USD is at a 2009 high and pushing towards the 0.9000 threshold.

By Elliott Wave International

As the major stock markets turned down in late 2007 and then started to rally in March 2009, many people who believed in fundamental analysis have begun to question its validity.

Famed technical analyst and Elliott wave expert Robert Prechter has long called for the bear market we are now in the midst of. (He views the rally of 2009 to be a bear-market rally not the beginning of a new bull market.) But over the years, his methods of technical analysis have been criticized. Here are his most succinct arguments as to why wave analysis outdoes competing forms of analysis.

Learn the Wave Principle and Other Forms of Technical Analysis. Elliott Wave International has just released The Ultimate Technical Analysis Handbook. This FREE 50-page ebook is dedicated solely to teaching reformed fundamentals followers to incorporate technical analysis into their own investing decisions. Learn more and download your free copy here.

*****
Excerpted from Prechter’s Perspective, re-issued 2004

Question: Suppose everyone agreed, “The Wave Principle is not always right, but it really is the answer”?

Robert Prechter: Well, let me begin my answer with a quote from a national financial magazine dated October 1977. “Over the last few years, the Wave Principle has gathered too much of a following and, therefore, it has less value today. Almost invariably, you can write off a technique when it gets too much of a following.” How does this statement look in light of the decade that followed it? “Elliott” had one of its greatest successes. Like the Energizer Bunny, it keeps going and going. And I believe its next success will be its biggest ever. The Principle itself is undoubtedly on an upward spiral of acceptance: three steps forward and two steps back.

Now let’s suppose that a large number of educated people accepted the Wave Principle, which is not an impossible idea for, say, a thousand years from now. There would still be room for differences of opinion on the market and the future. And there are countless other factors. Even people who practice the craft don’t necessarily take action when they get a signal. Unconscious doubt and worry often foil people’s actions. Very few traders have the emotional strength to turn even good analysis into profits.

Q: The Wave Principle is intrinsically contrarian. Does it have some built-in defense against becoming the consensus?

RP: I think so. The Wave Principle is a description of natural human behavior. This is what human beings are; this is part of their nature — how they behave. In order for markets to continue to go through these stages, a part of human nature must be to believe that such theories of mass psychology are incapable of being true — that is, something not worth examining. They must be primed to accept bullish arguments at tops and bearish arguments at bottoms. That means they have to be ever open to bogus theories of market behavior. How else will they create the patterns that fear, greed and hope produce?

Q:  How big is the pool of analysts who rely on the Wave Principle?

RP: I think there are quite a few people who are proficient in applying Elliott to past and present markets, say, perhaps 1% of all technical analysts, which is a pretty good number of people, I suppose. A lot of those are my subscribers, and they learned it through studying the Theorist. However, as far as the number of people proficient at applying the Wave Principle for forecasting market turns, which is significantly more difficult than applying it in real time, I think there are very few.

Q: This has been the basis of some criticism. To quote one critic, “relying on arcane methods does have one advantage. Interpreting the linear squiggles is left in the hands of the major heir to Elliott’s work.” How do you respond to those who contend that the complexity of the theory is a cover that allows you to retain the Wave Principle as your personal theory?

RP: With regard to any supposed self-serving secrecy, not only did I co-author a book on how to apply the Wave Principle, as well as reprint Elliott’s writings against protest from practitioners, but also I continually go into great — some might say excruciating — detail in each issue of The Elliott Wave Theorist explaining exactly what I think the market has done and will do, and why I think it. If there is any market letter that has educated potential competitors, it is mine. The reason is that the study of markets is more important to me than exclusivity, secrecy or power.

Q: Another common approach critics take when they try to dismiss Elliott as bunk is to refer to you as a mystic or a numerologist.

RP: A mystic believe in things for which there is no evidence, only desire. I do not consider myself to be a mystic at all. My approach is objective. The empirical basis of Elliott’s discovery speaks to that fact. So do the results of the trading competition [Editor’s note: Bob Prechter won the Trading Championship in options in 1984 with a stunning 444% gain. The next closest competitor showed an 84% gain.] Not once during any month since the independent rating services have been following market timers has a timer using a numerological approach such as “Gann” analysis ever placed in the top 10 rankings. Just as would be expected, such methods don’t work!

The true mystics are those who believe, for instance, that current economic performance is a basis upon which to predict stock market prices. There is no evidence for it. They just feel comfortable with the idea, so they espouse it.

Q: So you say that the challenge to validity is on the other side?

RP: You’re darn right, it is. I am no longer at the point where I feel that I have to justify the objectivity of the Wave Principle. I think the results have done that. Technical analysis is entirely rational and has proved itself. If someone goes back and looks at the record of Elliott wave writers over the decades, he will find a track record of forecasting success that is well beyond a random result of chance. If you can do that, the ball is in the other guy’s court. It’s up to him to show that this is luck or something. What’s more, the only challenge to a theory is a better theory, and I haven’t seen a contender yet.

Q: You don’t feel that you have been effectively challenged by any fundamental approaches?

RP: I think there’s a place for fundamental analysis of individual companies, but I am firmly convinced that you can make a very rational argument showing that fundamental analysis applied to overall market timing is like reading the entrails of goats. In fact, I presented such a critique in The Wave Principle of Human Social Behavior. If you think my ideas as presented here are controversial, just read Chapter 19 of that book.

Learn the Wave Principle and Other Forms of Technical Analysis. Elliott Wave International has just released The Ultimate Technical Analysis Handbook. This FREE 50-page ebook is dedicated solely to teaching reformed fundamentals followers to incorporate technical analysis into their own investing decisions. Learn more and download your free copy here.

Source: ForexYard

Growing speculation over the potential end to Dollar-based trading in the oil market has pushed the USD down against 14 of its 16 major counterparts yesterday. A report on Tuesday in the Independent newspaper revived the idea of ending a huge volume of trade of the world’s most liquid commodity – Oil in the U.S. Dollar, a potentially major sign of the greenback’s fading status. The Dollar weakened after the U.K.-based Independent reported oil-producing Gulf nations are seeking to move to a basket of currencies to settle transactions. Analysts said ending the use of the Dollar as the currency used to settle oil trades between countries would be an easy task, but a move to replace the currency in which oil is priced would require a massive effort.

Economic News

USD – USD Declines against Major Rivals as Equities Rise

The Dollar declined against most major counterparts Monday after some optimistic economic data pushed investors to move back into stocks and other risky assets. The USD declined against the EUR as stocks rose and a report showed U.S. service industries grew. The Dollar fell to $1.4691 per EUR from $1.4648 in New York yesterday. The Dollar declined to 89.02 Yen from 89.53 Monday.

The Institute for Supply Management’s index of non-manufacturing businesses, which make up almost 90% of the US economy, rose to 50.9 from 48.4 in August. 50 is the dividing line between expansion and contraction, meaning the index is showing expansion for the first month since 2007. The positive report helped lessen the bitterness from Friday’s Employment reports and, along with several recommendations by Goldman Sachs, has helped boost equity markets which weighed on the Dollar.

Investors will keep a close watch on the U.S. weekly retail sales data, the EIA energy outlook for October and the U.S. API weekly crude stocks report to uncover more clues about the USD movement.

EUR – EUR boosted by Growth in Manufacturing and Services

The EUR received a boost Monday by a report that stated that Europe’s manufacturing and services industries grew more than initially estimated. The EUR bought $1.4657, up from $1.4576 on Friday. The common currency traded at 130.79 Yen from 131.15 Yen. The British Pound traded at $1.5942, down about 0.1% from late Friday while the EUR rose 0.7% to 91.96 pence.

Europe’s manufacturing and service industries expanded in September for a second month, rising to 51.1, from 50.4 in the previous month. The EUR was also boosted by Ireland’s overwhelming approval of an agreement to overhaul the European Union’s decision-making process in Friday’s referendum.

Today traders will be focusing on the GBP with the release of the Halifax HPI at 8:00 GMT and the Manufacturing Production at 8:30 GMT. Better than expected results might provide a much needed boost for the Pound.

JPY – Yen Drops on Comments by Finance Minister Fujii

The Japanese yen retreated earlier against most of its major counterparts after Japan’s Finance Minister Hirohisa Fujii issued a warning that his nation is open to intervening in the currency market. The Yen traded at 131.14 per EUR, following a 0.2% decline. Japan’s currency was 89.53 per USD, after appreciating 0.3%.

Fujii’s position changed since his initial remarks when he took office in September. He previously opposed intervention in the foreign exchange markets in order to artificially weaken the Yen. However, the currency’s appreciation last week to an eight-month high of 88.24 against the Dollar began threatening exporters’ profits and thus Japan’s economic recovery. Since Japan is highly dependent on exports, a strong currency makes its exports too expensive and erodes any profit from an increase in trade.

With a light news day today with no news releases from Japan, U.S or Euro-Zone, Yen’s levels will likely be determined by equity movements as well as investors’ risk appetite.

Oil – Oil above $70 a Barrel

Crude Oil futures ended above $70 a barrel Monday, after an optimistic survey of the U.S. services sector reignited hopes for economic recovery. Crude Oil prices were also boosted by a rally in equities. Oil for November delivery climbed 46 cents to settle at $70.41 a barrel Monday. Futures have traded between $65.05 and $75 since Aug. 1.

Also helping Crude was the U.S. Dollar’s decline against most major currency counterparts after finance ministers from the Group 7 nations made no specific mention of the currency in a communiqué at their weekend meeting, disregarding its weakening status.

Along with Dollar levels, traders should also pay attention to third-quarter company earnings reports which will begin to be published this week since Oil levels are highly correlated with equity movements.

Technical News

EUR/USD

The bullish trend continues with plenty of steam as the pair now trades around 1.4700. The Slow Stochastic of the hourlies indicates that there is still more room to run. The next target price might be 1.4765. Going long with tight stops seems like the right choice today.

GBP/USD

This pair is in the midst of a narrowing upward channel and is now floating in the middle of it. The hourlies are showing mixed signals with its RSI floating in neutral territory. However, the Slow Stochastic of the daily chart is showing quite a strong bullish momentum, and the RSI confirms that the direction is indeed up. All indications are that there is more room for further upward movement and the preferable strategy today will be to go long on dips.

USD/JPY

There is a very accurate bearish channel forming on the daily chart, as the pair is now floating in the middle of it. A bearish cross on the 4-hour chart’s Slow Stochastic is also suggesting that the bearish move has more steam in it. This might be a good opportunity for forex traders to join a very promising trend.

USD/CHF

The pair is in the middle of a very intensive downtrend that still shows great momentum and on a bigger scale appears to have more room to run. The hourly chart is showing a strong bearish cross, and the 4-hour chart is also joining to that notion with the Slow Stochastic pointing to the continuation of the bearish movement. Being on the sell side appears to be the right choice today.

The Wild Card – Oil

This commodity has been on a sharp upward movement over the last day and this bullish correction is likely to stick around in the near future. All charts are still providing a mild bullish signal; however, there may be short-term corrections during this uptrend. Therefore, forex traders can maximize profits by buying on lows and taking advantage of this bullish 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.

Market Movers of the Day

Asia-Pacific

*New Zealand’s NZIER Business Confidence (3Q) climbed to 36, a 10-year high

Europe

*German PMI Services in September slightly below expectations at 52.1

*UK PMI Services in September better than expected at 55.3

*EU PMI Services in September better than expected at 50.9

*EU PMI Composite for September beats market forecasts at 51.1

*EU Sentix Investor Confidence October worse than estimated at -12.6

*EU Retail Sales fell in August 0.2%, less than forecasted

Americas

*US ISM Non-Manufacturing Index for September surprised for the better at 50.9

The Overall Sentiment

The sentiment was positive in Europe and the US with stock markets climbing spurred by better than expected economic data. The S&P gained 1.5%, the Dow added 1.2% and the Dollar declined against the majors losing the most against commodity-linked currencies. Oil ended above $70 and Gold advanced to $1017, its highest level in over a week. The US ISM Non-Manufacturing Index showed that the US service sector expanded in September for the first time in a year boosting risk appetite. The New Zealand’s Business Confidence rose to a 10-year high adding to the positive sentiment for riskier currencies and drove the Kiwi to a new 14-month high. The Aussie dollar appreciated as well ahead of the RBA’s rate decision approaching its own highest levels in over a year and the Canadian dollar advanced for a second day against its US peer. The Euro strengthened against the Dollar and the Pound on positive services sector PMI and Retail Sales dropping less than expected. The Pound didn’t capitalize on UK PMI Services figures beating market predictions and ended the day losing ground against most majors. The Yen recuperated from earlier losses against the Dollar amid declarations that puzzled traders coming from Japanese Finance Minister Fujii about intervening in the markets ‘if currencies keep moving in a biased direction’. Fuji refused to state whether the current behavior of the Yen fits the definition.

The Day Ahead

The day will start with important economic data coming from Australia. For August’s Trade Balance the country’s deficit is forecasted to have narrowed to 900M. Great attention has gathered around the Reserve Bank of Australia’s interest rate decision in the first of three central banks announcements this week as markets perceive the Australian economy in a good position for the RBA to raise interest rates in the near future. Although the forecast for the upcoming announcement point to an unchanged rate of 3% rumors circling the market suggest a surprise rate hike should not be discarded. In Europe the Swiss CPI is expected to remain at -0.80%, the same level than the previous month, and for the UK the Industrial and Manufacturing Production will shed light on the country’s current overall economic health. For the US session there’s no major data coming from the country. Canada’s Ivey PMI is expected to rise from its previous reading showing growing confidence in the direction of the Canadian economy. The day will close with the UK Nationwide Consumer Confidence where positive figures are expected and the NIESR GDP Estimate that attracts interest as it is a reliable estimate for the official GDP report.

Technical Analysis

CAD/JPY DAILY

After topping slightly above 90 in early August CAD/JPY corrected along a bearish channel alternating bullish and bearish cycles. The cross presents an opportunity to open a Short position as it currently trades near the upper boundary of the channel at what might be the beginning of a new downwards movement.

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.

© 2009 eToro Blog.

By CountingPips.com

U.S. Non-Manufacturing economic data, released today by the Institute for Supply Management, showed that non-manufacturing economic activity grew in September for the first time in 12 months. September’s ISM Report On Business index readings for economic activity were at 50.9 percent following August’s 48.4 percent level. The September score was slightly better than economic forecasts which were expecting the ISM index reading to register an even 50.0 percent. A score above 50 is considered to be growth and less than 50 is considered to be contraction in that sector. September marked the first month of growth in a year and the highest level since May 2008.

Most of the economic sectors tracked for September showed improving index scores with the exceptions of prices, new export orders and inventory sentiment.  The employment index increased by 0.8 percent in September while new orders increased by 4.3 percent and business activity grew by 3.8 percent.  Also showing higher levels for the month were supplier deliveries, inventories, backlog of orders and imports.

News out of Europe today showed that Eurozone retail sales fell by 0.2 percent in August after also declining by 0.2 percent in July according to EuroStat.  Economic forecasts were expecting a 0.4 percent decrease.  Year-over-year retail sales fell by 2.6 percent in August from the August 2008 level after an annual slide of 1.8 percent was registered in July.  Contributing to the lower sales in August was a decline of “non-food” sales by 0.6 percent while “food, drinks and tobacco” contributed positively to the data with a rise of 0.5 percent.

Fx Trading: US Dollar mostly lower.

The U.S. dollar has been falling in forex trading against the major currencies as risk appetite has increased today in the currency and stock markets. The dollar has gained against the British pound while declining against the euro, Japanese yen, Australian dollar, New Zealand dollar and the Canadian dollar. The dollar is trading almost unchanged versus the Swiss franc so far today at 2:42 pm EDT according to currency data by Oanda.

The U.S. stock markets have risen today with the Dow Jones currently advancing by over 100 points, the Nasdaq increasing around 20 points and the S&P 500 up by almost 15 points at 2:42pm.  Oil has edged up by $0.43 to $70.38 while gold has increased by $12.50 to stay above the $1000 per ounce level at $1,015.70.

NZD/USD Chart – The New Zealand Dollar flying high today against the US Dollar in Forex Trading and testing the 0.7300 level for the first time since September 22nd.

By Adam Hewison – It seems to me that we are at an inflection point in the economy. The government has blown pretty much all of its money and the economic recovery and the economy is still sputtering along. No surprise there.

So what’s going to happen? I believe that we’ll have another economic downturn which is going to push the dollar to new lows, push gold to new highs, and push the equity markets back down to their March lows.

Yes, I know it’s a scary scenario but that’s what could potentially happen. We are just looking for one or two more pieces to fall into place and then we could see the unfolding of a very dramatic set of economic conditions here in the United States.

This new video looks at gold, the dollar, and the S&P 500. I believe if you’re interested in your economic future you need to watch this video.

Watch the New Video Here…

As always our videos are free to view and do not require any registration. If you think this is an important video, I strongly suggest you share with your friends and comment about it on our blog.

All the best,
Adam Hewison
President of INO.com
Co-creator of MarketClub.com

Source: ForexYard

As the first week of October kicked off last week, traders witnessed a number of volatile jumps in the worlds 2 primary currencies: the EUR and USD. Optimism appeared to be on the rise in America while Europe was giving off signals of a lagging economy. The USD had pared a moderate percentage of its previous losses until employment data in the US hampered those gains and sent the EUR flying high. As a result, every other currency in the forex market was impacted in a similar way since these currencies have the ability to influence world prices. The question remains: Will this week’s data calm the market, or simply add fuel to the flames?

Economic News

USD – Poor Employment Data Diminishes Bullish Week

Last week the Dollar saw a volatile trading session against all of the major currencies. The greenback started last week with rising trends against the Euro and Pound, yet eventually returned to similar rates from the beginning of the week.

Last week’s early rally of the Dollar was mainly due to the positive Consumer Confidence survey on Tuesday. The survey showed that consumers in the U.S currently have a positive view regarding economic conditions such as labor availability, business conditions, and the overall economic situation.

Even though the survey failed to reach expectations for a 57.0 result, the mark above 50.0 boosted the Dollar. In addition, the Pending Home Sales rose for the 7th consecutive month, indicating that the housing sector in the U.S is showing recovery signals. On the long-term, a sequence of positive housing data is likely to support the Dollar, as many see it as the number one parameter in the economy’s condition.

However, the poor employment figures have halted and reversed the Dollar’s rising trend. The Non-Farm Employment Change report showed that the U.S economy lost 263,000 jobs in September, which was more than had been expected. This had investors questioning the economy’s recovery and pushed them away from the Dollar.

Looking ahead to this week, many impacting publication are expected from the U.S economy. The Non-Manufacturing Purchasing Managers’ Index (PMI), the weekly Unemployment Claims and the U.S Trade Balance are all likely to influence the market the most. Traders are advised to pay special attention to the employment figures since last week’s data has apparently made this one of the most urgent matters at the moment.

EUR – EUR Recovers before the Weekend

The Euro underwent a volatile trading week. As the week began, the Euro saw bearish trends against most of the major currencies, including the Dollar and the Yen. However, close to the weekend, the Euro saw a reverse of trends and managed to recover.

The Euro’s bullish trend came mainly as a result of the poor data published from the Euro-Zone last week. The German Preliminary Consumer Price Index (CPI) fell at a faster pace than expected. The report showed German CPI dropping by 0.4%, more than the 0.2% drop expected by analysts.

In addition, the German Retail Sales for August dropped by 1.5% as opposed to July. The Retails Sales measure the total value of inflation-adjusted sales at the retail level. The negative figures for both these German economic indicators have created speculations that the German economy’s recovery might take longer than expected. This has driven investors to look to safe-havens such as the USD.

However, just before the weekend, the Euro managed to recover most of its losses. The Euro’s appreciation came as a result of the poor employment data from the U.S. As for the week ahead, many interesting pieces of data are expected from the Euro-Zone. The most intriguing news is likely to be the Interest Rates announcement on Thursday. If the European Central Bank (ECB) will surprise and hike rates, a sharp rising trend might take place. Traders are advised to follow this publication very closely.

JPY – Yen Sees Mixed Results against the Majors

Just like the rest of the major currencies, the JPY saw mixed results during last week’s trading sessions. The Yen saw a changing trend throughout the week, and by Friday it returned to its former price levels.

It appears that the Yen’s volatility was due to the mixed results from the Japanese economy. Batches of both positive and negative data lead to a jumpy trading week. On one hand, better than expected Japanese Retail Sales figures and a better than expected Non-Manufacturing Index have shown that the Japanese economy might be doing better than many analysts claim.

On the other hand, the poor Manufacturing Index figures and the negative Core CPI result have questioned the stability of the economy. It seems that investors were left confused by the sharp differences of each publication, and a volatile session was inevitable.

As for this week, the most impacting data from the Japanese economy seems to be the Core Machinery Orders report, which is scheduled for Thursday. This report measures the total value of new private sector purchase orders placed with manufacturers. If the end result will reach expectations for a 2.2% growth, the Yen is likely to appreciate as a result.

Crude Oil – Crude Oil Remains Under $70 a Barrel

Crude Oil saw a sharp uptrend during last week’s session, and a barrel of crude oil was traded for over $71 a barrel. However, the bullish trend was halted and for the past few days a barrel of oil has been trading for under $70.

The main reason for the halt in the uptrend seems to be concerns that the U.S economy will take longer to recover. That is of course due to the poor employment data from last week. The logic behind it is that the U.S is the biggest energy-consuming nation in the world, and thus any deterioration in its condition might signal a decrease in fuel demand. In addition, another reason for lowering oil prices was the rising supplies from Russia.

Russia increased output by 1.7% in September, and the combination of dropping demand and rising supply has prevented Crude Oil from reaching above $70 a barrel again.

Looking ahead to this week, the high volatility in Crude Oil’s trading is likely to continue. Traders are advised to follow the leading publications from the U.S. and the Euro-Zone as they tend to have a great impact on oil prices. In addition, traders should also pay attention to the Crude Oil Inventories report on Wednesday. This weekly report usually leads to sharp change of prices for the black gold.

Technical News

EUR/USD

There appears to be a fresh bearish cross on the hourly Slow Stochastic, and an impending bearish cross on the hourly MACD, which suggests the next movement is most likely going to be in a downward direction. The relatively older bearish cross on the daily MACD, and subsequent downward sliding indicator, supports this notion. Going short appears to be today’s preferable strategy.

GBP/USD

The price of this pair has recently entered the over-bought territory on the hourly RSI, suggesting a level of downward pressure on its price. A bearish cross also appears imminent on the 4-hour Slow Stochastic, suggesting today’s primary movements could be in a downward direction. Going short may be a wise choice today.

USD/JPY

While the bearish cross on the hourly Slow Stochastic has finished, and the indicator is cascading downward, there appears to be another bearish cross forming on the 4-hour Slow Stochastic, suggesting another downward move is impending. Traders can benefit from this upcoming movement by entering short positions early and riding out the wave.

USD/CHF

The only clear indication on this pair seems to be the fresh bullish cross on the hourly Slow Stochastic, which suggests an upward correction is due to take place in the nearest future. However, the Bollinger Bands on the daily chart appear to be tightening which suggests that a volatile jump could happen later this week and traders should be on the lookout for indications regarding its direction. For today, going long might be a good short-term tactic.

The Wild Card – Gold

A bearish cross has recently taken place on the hourly Slow Stochastic for this commodity, suggesting an impending downward correction is imminent. The bearish cross on the 4-hour MACD supports this notion. Forex traders involved with the commodities market might want to consider going short on Gold in the next few hours as an overwhelming amount of evidence suggests bearishness for the day.

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.

The End of a Volatile Week, Three Rate Decisions Ahead

Volatility returned to the markets last week as the bears took control and pushed the major U.S stock indices lower. The S&P 500 closed with a weekly loss of 1.84%, while the Nasdaq closed the week lower by -1.87%.  Profit taking seemed to be the theme of the week, prior to the employment report released by the Bureau of Labor Statistics (BLS) on Friday.  The equity market moves where rather ordinary and showed no irrational movement up until Thursday’s session.  Economic data had a major impact on Thursday’s U.S stock session as Initial Jobless claims showed that 551k people had filed for unemployment benefits, exceeding market expectations. Furthermore ISM manufacturing added to the sell-off as showing a worse than expected figure.  Even though the benchmark S&P 500 index received a major blow Thursday losing 2.6%, it was able to hold its 50 day moving average. To date it is poised to bounce after falling almost 6% since its high of 1080, earlier this month.

The major mover of the week was the US unemployment number which was released by the BLS on Friday.  The US lost 263,000 jobs in September and the unemployment rate increased to 9.8%.  Average expectations for this number were for losses of 175,000 jobs with Goldman Sachs at the high, near -250,000. Although the jobs number came in weaker that analysts had expected, one can see on the chart below that job losses are improving, since the low created in January of this year.

Forex Pairs on Major Support Levels

Consolidation was the major theme last week on the Forex market as participants took profits on their long positions ahead of the release of the employment result.  The resilient Euro also felt the pressure dropping against the U.S Dollar. After touching a high on Monday of 1.4719, the EUR/USD slid down to $1.4526 on Tuesday.  The beginning of the week was also characterized by light volume.  Comments from the ECB’s Trichet that a strong dollar is “extremely important”, created heavy trading in the Euro which persisted for the balance of the week.  The comments are not out of line with G7 policy and are not a step up the intervention ladder.  The Euro derived little benefit from the weekend elections in Germany and retail sales unexpectedly dropped in August, denting optimism about the strength of the recovery in the region.  Even though this pair has now come down to double support, continued pressure could push it back into the 6 big figure range,  which the currency pair traded in from May to mid September.

On Monday the Yen took a shot at reaching weekly support seen at ¥87.05.  The USD/JPY hit a low of ¥88.22, but softness in the US markets pushed the currency pair back above ¥89.  The numbers out of Asia failed to help the Yen during the week; Japan’s Q3 Tankan report demonstrated that business sentiment is continuing to improve in the third quarter after hitting a record low in Q1. The figures also revealed worse than expected forecasts for capital spending cuts and likely to weigh on thoughts regarding the sustainability of the current recovery.  On a positive note the unemployment rate fell to 5.5% in August down from 5.7% in July. The number exceeded market expectations, which were at 5.8%. Household spending also climbed by 2.6% in August, after dropping 2% in July. From a technical point of view the USD/JPY chart shows that the currency pair should attempt weekly support in the trading sessions to come if risk aversion continues to remain on the minds of market participants.

The Sterling also consolidated vs. the Dollar and the Yen this week after testing lows during Monday’s session.  The GBP/USD briefly broke 1.58 touching 1.5769 after breaking important psychological support level of 1.60 at the end of last week.  GBP/JPY broke through 140 hitting a low of ¥139.71 on Monday before bouncing back and consolidating around ¥143.  The Sterling gained after GFK consumer confidence came in much stronger than forecast, pushing cable back up above $1.60.  Credit problems that continue to persist somewhat eased this week but failed to help Sterling.  The BoE credit conditions survey mentioned that low funding costs, an improved economic outlook and lower default rates are expected to see lending rise in Q4.  Unfortunately the IMF disagreed with the BoE, warning that the UK is vulnerable to a credit shortage.

When taking a glance at the chart below one can see that last week’s trading session, ended mixed with the GBP/USD clinging on for support. Should support of $1.5853 break, this pair could be in stall for a nasty fall.

An Interest Rate Decision Week

Looking forward, market participants will have to keep an eye on interested rate decisions from the RBA on Wednesday, the BOE and ECB on Thursday. Even though no rate changes are expected, traders will scrutinize the comments that follow in order to receive a better clue of future monetary policy. Eyes will focus on the RBA rate decision as current economic data is showing that they are the closest to raising their rate. Even though a rate hike is unexpected this time round, hawkish words from officials could send the AUD/USD higher.  Earlier during the week, there will be PMI service reports from the US, UK and the EMU on Monday.  It will be interesting to see if the risk aversion continues, especially as the major currency pairs are now trading around critical support levels.

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.

© 2009 eToro Blog.