InvestMacro FX

By Fast Brokers – The GBP/USD is finding support in our 2nd tier turned 3rd tier uptrend line once again as the Greenback depreciates across the board.  The Dollar’s broad-based depreciation is a bit odd considering the crude and the S&P futures are moving lower today in reaction to the SCI’s freefall during the Asian trading session.  Since we haven’t witnessed any discernable deterioration in economic data today, we are attributing the S&P’s decline as a psychological reaction to the downturn in the SCI.  Hence, investors should refrain from reading too far into the S&P’s present pullback.  We can tell you theme today is one of a weaker Dollar, highlighted by large gains in the EUR/USD and losses in the USD/JPY.  Meanwhile, gold is caught in the headwinds with little sense of direction.

Investors are becoming more comfortable with the GBP/USD after Britain’s GDP number came in one basis point above expectations on Friday.  However, investors should keep in mind the rest of Britain’s data was disappointing, including disconcerting outlooks for both consumer sentiment and business investment.  As a result, the Pound continues to experience a relative weakness, signified by the incessant rise of the EUR/GBP.  Britain will have a chance to redeem itself tomorrow when it releases its Halifax HPI, Manufacturing PMI and Net Lending to Individuals data points.  While we expect the Halifax data to impress since British housing data has been a bright spot lately, the more significant event will be to see whether Britain’s Manufacturing PMI can expand on its return to growth.  If so, the Pound may receive a boost of buy-side activity.

Technically speaking, the GBP/USD must deal with our 2nd and 3rd tier downtrend lines along with 8/28 highs.  After these technical barriers, the currency pair should have a clear shot at its psychological 1.65 level.  However, even if the Cable’s upward momentum should carry the currency pair beyond these resistances, we can create many more downtrend lines if need be.  This is the price the Cable must pay for experiencing such an aggressive pullback over the past month.  Britain’s mixed data won’t cut it, and the GBP/USD will need an impressive showing on all fronts to piece together a more meaningful rally.  As for the downside, the Cable has a little our 2nd and 3rd tier uptrend lines along with 8/27 lows to fall back on.  If these technical cushions don’t hold, the GBP/USD should experience considerable support in its psychological 1.60 level.  Meanwhile, investors should take note that our 3rd tier uptrend line is reaching an inflection point with our 1st and 2nd tier downtrend lines over the next 24-48 hours, indicating a forthcoming area of high volatility.  The multiple inflection points are not surprising considering the important British data hitting the wire soon.

Present Price: 1.6277

Resistances: 1.6294, 1.6313, 1.6340, 1.6379, 1.6416

Supports: 1.6251, 1.6212, 1.6181, 1.6146, 1.6119

Psychological: 1.60, 1.65

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 – The USD/JPY is reacting negatively to the inflection point of our 2nd tier uptrend and downtrend lines.  Investors continue to favor the Yen in the wake of a shift in Japanese governmental power to the DPJ.  Investors are speculating the DPJ’s more conservative fiscal stance will result in a stronger Yen as we recognize similar pullbacks in both the EUR/JPY and GBP/JPY despite the Greenback’s broad-based depreciation.  To exacerbate the rush to the Yen, Japan reported some positive economic data today for a change of pace.  Prelim Industrial Production, Retail Sales, and Average Cash Earnings all exceeding analyst expectations.  Hence, investors have just another incentive to favor the Yen over the Dollar.  However, investors should keep in mind Japan’s wave of economic data over the past week has been negative for the most part.  Investors will be paying close attention to China’s Manufacturing PMI data late Monday.  If China’s economic data continues to cool down, the USD/JPY may hit a bottom since investors will be concerned about the impact this will have on China’s demand for Japanese exports.

Meanwhile, the USD/JPY is drifting uncomfortably far away from our 1st tier and 2nd tier uptrend lines, indicating a retest of July lows.  As a result, it will important to see whether the USD/JPY can recover from today’s pullback and climb into the safety of our 1st tier uptrend line.  Regardless, the USD/JPY is burning bridges while flirting with the idea of retesting yearly lows.  Therefore, it’s safe to say the USD/JPY’s downward momentum is in the driver’s seat.  The currency pair has quite a battle ahead of itself to the topside.  Focus will return to China, the U.S. and Britain with Japanese elections and economic data out of the way.  As a result, we will monitor which correlations come into play over the next 24 hours.

Present Price: 92.73

Resistances: 92.98, 93.17, 93.27, 93.54, 93.74

Supports:  92.73, 92.55, 92.36, 92.08, 91.91

Psychological: 95, 90

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.

Source: ForexYard

The dollar was slightly more volatile over the past week than usual, and the explanations for this have been getting trickier by the day. As for this week, forex traders are advised to take positions on trades, as a string of data releases coming out of U.S., Europe and Japan are likely to affect the greenback’s main currency crosses.

Economic News

USD – Dollar Finishes a Volatile Week Ahead of the Non-Farm Payrolls

The Dollar underwent a volatile trading week against the major currencies. The EUR/USD was traded between the 1.4200 and 1.4400 levels without showing a clear direction. The Dollar continued the rising trend against the Pound, yet saw bearish activity against the Yen.

The greenback’s unstable trading week took place largely due to the mixed results published from the U.S economy. While the Consumer Confidence report showed a surprising improvement in consumers’ confidence regarding their financial outlook. Also, the housing sector continues to show signs of recovery as 433,000 New Home Sales were sold during July, marking a 9-month record. The Preliminary Gross Domestic Product (GDP) dropped by 1.0% in the second quarter of the year, showing that the American economy continues to contract, despite some optimistic reports.

In addition, the weekly Unemployment Claims report showed that 570,000 individuals have filed for unemployment insurance for the first time during the past week, questioning that the employment conditions in the U.S have entered a recovery process.

Looking ahead to this week, many impacting data is expected from the U.S economy, and above all the Non-Farm Employment Change report which is expected on Friday. The main publications for this week will include the Pending Home Sales on Tuesday. A positive result could strengthen the notion that the housing sector is recovering, which could boost the Dollar. The Manufacturing Purchasing Managers’ Index on Tuesday is also likely to create strong volatility in the market. Yet the Non-Farm Payrolls on Friday is likely to affect the Dollar the most. Traders are also advised to follow the ADP forecast on Wednesday, as its results have proven to impact the Dollar in the short-term.

EUR – EUR Recovers before the Weekend on Positive German Data

Last week, the Euro saw volatile activity against the major currencies. The EUR first dropped against the Dollar, just to rise back up. The EUR saw a strong bullish trend against the Pound, as the EUR/GBP pair rose over the 0.8820 level. However, the Euro dropped almost 400 pips against the Yen.

The EUR began last week’s trading with falling trends largely due to the positive economic data published from the U.S economy. However, as the week proceeded, a batch of positive economic data saw light from the Euro-Zone as well, jumping the Euro back up. The German Business Climate report saw an 11-month high, proving that businesses in Germany feel the economy is on the right track to recover from the global crisis.

Also last week, the German Consumer Climate index rose by 3.7 points, marking a 15-month record, supporting the sentiment that the German economy could be the first leading economy to pull out of recession. Considering that Germany holds the largest and strongest economy in the Euro-Zone, a continuation of such data is likely to strengthen the Euro against the major currencies.

As for this week, many interesting publications are expected from the Euro-Zone. The German Retails Sales is scheduled on Tuesday 06:00 GMT. This report measures the total value of inflation-adjusted sales at the retail level, and is considered to be a reliable indication for an economy’s health. A positive data is likely to boost the Euro. Another publication that traders are advised to focus on is the Revised Gross Domestic Product (GDP) expected on Wednesday. Current expectations are that the European GDP has dropped by 0.1% during the second quarter of the year. However, a surprising result is likely to affect the Euro, and traders should be prepared.

JPY – Japanese Elections Support Yen Towards 7-Week High against USD

Last week, traders that went long on the Yen saw nice profits. The Yen rose close to 300 pips against the Dollar, sending the USD/JPY towards the 92.50 level. The JPY also rose against the Euro, and marked over 600 pips rise against the Pound.

It seems that the Yen was boosted last week much due to the end of election uncertainty following a win for the opposition Democratic Party of Japan. The elections’ end even supported the Yen up to a seven month high against the Dollar. Another reason for the Yen’s appreciation last week is the trade balance report which was published on Tuesday. This report measured the difference in value between imported and exported goods during July, and delivered a 0.19T figure. This means that the Bank of Japan (BoJ) is succeeding in its target to recover the Japanese economy with strong exporting activity. The BoJ keeps its low interest rates mainly for this purpose, and it seems that as long as Japanese exports will continue to expand, the Yen is likely to rise further and further.

As for the week ahead, a batch of data is expected from the Japanese economy. Traders are advised to focus on the monetary Base and the Capital Spending reports, as they are likely to create large volatility in the market. The Capital Spending report measures the total value of new capital expenditures made by businesses, and thus tends to have a large impact on the Yen.

Crude Oil – Crude Oil Recovers to $73 a Barrel

After starting last week with sharp losses, Crude Oil managed to recover and to resume towards $73 a barrel. Two main reasons led to Crude Oil’s recovery since mid-week. First, optimistic data from Germany and the U.S have increased speculations that demand for energy will rise. A very relieving assumption is that as the global economies’ condition will improve, demand for oil will rise in accordance. The other reason was the drop of the Dollar against the Euro and the Yen. As a commodity, Crude Oil is traded in Dollars, and thus a drop of the Dollar usually leads to a rising trend for oil, and vice versa.

As for the week ahead, traders are advised to follow the leading publications from the major economies, as they are likely to dominate Crude Oil’s value. Traders should also bear in mind that positive data from the major economies is likely to create speculations regarding energy demand which tends to boost crude oil. In addition, the Crude Oil Inventories report is scheduled for Wednesday. This report is also likely to have a large impact on crude oil’s value and traders should follow its outcomes.

Technical News

EUR/USD

The typical range-trading on the hourly chart continues. The daily RSI is floating in neutral territory. However, there is a fresh bullish cross forming on the 4-hour chart’s Slow Stochastic indicating a bullish correction might take place in the nearest future. Going long might be a wise choice.

GBP/USD

There is a fresh bullish cross forming on the 4-hour Slow Stochastic indicating a bullish correction might take place in the nearest future. The upward direction on the daily MACD also supports this notion. When the upward breach occurs, going long with tight stops appears to be a preferable strategy.

USD/JPY

The pair has recorded much bearish behavior in the past several days. However, the technical data indicates that this trend may reverse anytime soon. For example, the daily chart’s Slow Stochastic signals that a bullish reversal is imminent. An upward trend today is also supported by the 4-hour chart’s Slow Stochastic. Going long with tight stops may turn out to pay off 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. The 4-hour charts oscillators are not providing a clear direction either. Waiting for a clearer signal on the hourly chart might be a good strategy today.

The Wild Card – Gold

Gold prices rose significantly in the last week and peaked at $955.45 an ounce. However, the 4-hour chart’s RSI is floating in the overbought territory suggesting that the recent upwards trend is losing 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.

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.

By GCI Fx Research

€

The euro moved lower vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4320 level and was capped around the $1.4390 level.  Data released in the U.S. today saw July personal income growth at 0.0%, up from June’s revised -1.1% decline.  July personal spending printed at +0.2%, down from June’s revised print of +0.6%.  Also, the July personal consumption expenditures deflator was off 0.8% y/y, worse than the 0.4% June reading.  At the core level, the July core rate up 0.1% m/m and 1.4% y/y.  Finally, the University of Michigan consumer sentiment indicator came in at 65.7, above the prior mid-August reading of 63.2 but below the July reading of 66.0.  The common currency failed to sustain its gains through the North American session as U.S. equity prices retreated in the session.  St. Louis Fed President Bullard was on the wires earlier and dovishly said the Fed needs to see much more “convincing” economic data before contemplating an increase in rates.  In eurozone news, the European Commission’s economic sentiment indicator improved to 80.6 from a reading of 76 in July.  Many economists believe the eurozone economy will expand around 0.5% q/q in the third quarter.  Bundesbank reported German banks expect a modest increase in lending volumes in the second half of 2009 and in 2010, corroborating the central bank’s assessment there is no credit crunch in the eurozone’s largest economy.  German Chancellor Merkel today reported the German economy might contract 5% or 6% in 2009.  Euro bids are cited around the US$ 1.3900 figure.

¥/ CNY

The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥93.40 level and was capped around the ¥94.05 level. All eyes are focused on this weekend’s general election in Japan where the long-incumbent Liberal Democratic Party looks poised to lose its stronghold on power to the Democratic Party of Japan.  Some Japan-watchers believe this will result in increased Japanese government bond issuance to finance the expected increase in public works spending.  It is unclear how a DPJ victory would impact the yen.  Japan is expected to battle deflation through early 2012 and will need all the help it can get from its slumping export sector through a weaker yen.  Many data were released in Japan overnight.  First, the July unemployment rate rose to 5.7% from 5.4 in June, the largest print since World War II and significantly above expectations.  Second, the July nationwide consumer price index was off 0.3% m/m and off 2.2% y/y with the core rate off 0.2% m/m and 2.2% y/y.  The Tokyo-area August consumer price index was up +0.3% m/m and +0.1% y/y with the core component flat m/m and off 0.2% y/y.  Other data saw July all household spending off 2.0% y/y while the trade surplus for the first ten days in August printed at ¥48.08 billion, off 69.2% y/y.  The Nikkei 225 stock index climbed 0.57% to close at ¥10,534.14.  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 ¥135.00 figure and was supported around the ¥134.00 figure.  The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥153.60 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥88.90 level. In Chinese news, the U.S. dollar lost ground vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8256 in the over-the-counter market, down from CNY 6.8273.  Chinese Premier Wen this week said the markets need to avoid being “blindly optimistic” about the global economic recovery and added China must maintain its “moderately loose” monetary policy and “active” fiscal policy.  PBoC has reported it will ensure “reasonable and ample” liquidity.

Daily Market Commentary provided by GCI Financial Ltd.

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

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

By Fast Brokers – The USD/JPY is weakening despite disappointing Japanese data combined with positively mixed U.S. numbers.  This combination of economic data would normally be a positive catalyst for the USD/JPY due to the outperformance of the U.S. economy vs. the Japanese economy.  Furthermore, the added signs that the global economic recovery is spreading would usually lead investors to sell the Yen and snatch up riskier currencies.  However, the trading today seems to be more focused on the governmental election taking place in Japan.  It seems the LDP will lose power for the first time in 50 years.  Investors are speculating that the DPJ’s more conservative fiscal approach may result in a stronger Yen.  Hence, we see the Yen appreciating not only against the Dollar, but also against the Pound and the Euro as well.  Furthermore, even though we’ve received some positive economic data from the West, the consumption-oriented numbers left something to be desired.

U.S. and British consumer confidence readings showed little improvement while U.S. Unemployment Claims and Personal Spending remain at discouraging levels.  Furthermore, Core Durable Goods Orders came in two basis points below analyst expectations earlier this week.  Lastly, China has decided to reign in its liquidity to try and deflate asset bubbles.  The combination of these economic developments does not bode well for the demand for Japanese exports.  Hence, Japan’s struggling economy may not have much relief in sight.  Japanese consumer prices are sinking while household spending declines, both are ramifications of rising unemployment.

Negative economic data and a shift in governmental power seem to have investors favoring the Yen.  The USD/JPY is trading back below our 1st tier and 2nd tier uptrend lines, a risky move technically.  All of the sudden the USD/JPY is reconsidering a test of July lows.  Meanwhile, the
USD/JPY has several difficult downtrend lines bearing overhead, telling us momentum is turning in favor of the bears again.  Japan will release more important economic data to kick off the next trading week, including Prelim Industrial Production, Retail Sales, and Average Cash Earnings.  The combination of a governmental election and more key economic data should result in rising volatility.  Additionally, investors will receive important economic data from the U.S., China, and the EU.  Therefore, investors should fasten their seatbelts and keep an eye on the shifting fundamentals.

Present Price: 93.52

Resistances: 93.42, 93.27, 93.08, 92.85, 92.68

Supports:  93.47, 93.88, 94.08, 94.25, 94.44

Psychological: 95

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 – The EUR/USD has popped above our key 4th tier downtrend line after the combination of better than expected U.S. and British GDP data with an encouraging EU Services Confidence number has motivated bulls to re-enter the risk pool.  The S&P futures are knocking at the door of their previous 2009 highs while the 30 Year T-Bond futures drop like a rock.  To top the cake, gold is registering an explosive move to the topside.  As a result, all of the EUR/USD’s correlations are indicating a bullish movement approaching.  It appears the volatility we were anticipating is finally kicking in.  The EUR/USD’s ascent past our 4th tier downtrend line is a key technical move in our eyes since it runs through August highs.  Hence, the EUR/USD may be headed for a larger leg up with a high probability of retesting these August 5th highs.  We notice volume is picking up on the buy-side, highlighted by the 1-hour chart.

Even though America’s better than expected GDP number passed by without a flinch, Britain’s GDP number is driving home the fact that the global economy is stabilizing.  However, there are a few cautionary notes hiding behind the silver lining.  U.S. Unemployment Claims aren’t dropping as quickly as projected and Japan’s economy is taking a beating.  Furthermore, it remains to see what impact tighter liquidity in China will have on the EU’s manufacturing base.  If China cools down, the EU’s rebound may hit a speed bump since Chinese demand has been fueling the global economic recovery. Regardless, the S&P futures may be the driving force behind the EUR/USD’s next leg up as they distance themselves from 1000 and head to new highs.  Investors aren’t discouraged by the mixed economic data and are buying into the concept of a lasting recovery.  Hence, even though China may tap on the brakes, rising U.S. demand for EU exports could more than compensate from the slowdown in the East.

The EUR/USD’s technical obstacles to the topside will likely be August highs and the meat of the 8/3-8/6 trading range.  Beyond these levels the next level of significance is the currency pair’s psychological 1.45 level.  As for the downside, the EUR/USD has multiple uptrend lines, intraday lows, and our support levels to fall back on.

Present Price: 1.4367

Resistances: 1.4373, 1.4383, 1.4397, 1.4410, 1.4424

Supports: 1.4340, 1.4327, 1.4310, 1.4297, 1.4281

Psychological: 1.40, 1.45

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 – The Cable has finally found bottom on our 2nd tier uptrend line, logging encouraging movements to the topside as the EUR/GBP pulls back.  Despite mixed economic data, investors are choosing to run with the better than expected GDP data from both Britain and the U.S.  As we anticipated, the flush of British data is appeasing Cable investors by taking their minds off of the BOE’s recent injection of liquidity into Britain’s QE package.  The fact Britain’s GDP came in a basis point better than expectations shows the BOE’s monetary shock may be more cautionary than preventative.  However, Britain’s stream of data comes with a red flag since CBI Realized Sales, Prelim Business Investment, and GfK Consumer Confidence were all weaker than analyst expectations yesterday.  Hence, British consumption is still struggling to approach pre-crisis levels, and the sharp decline in business investment is certainly disconcerting.  Therefore, we’re not sure how long the Pound’s resurgence will last, and the excitement surrounding an oversold Cable may fade quickly.  On the other hand, the S&P futures are knocking on the door of their previous 2009 highs while gold surges well past $950/oz.  Since the Cable is positively correlated with both of these investment vehicles, the currency pair should be inclined to participate with any immediate-term run to the topside in either U.S. equities or precious metals.

Technically speaking, the GBP/USD must deal with our 3rd tier downtrend line and 8/25 highs.  After these technical barriers the currency pair will need to overcome its psychological 1.65 level, no easy feat.  Furthermore, even if the Cable’s upward momentum should carry the currency pair beyond these resistances, we can create many more downtrend lines if need be.  This is the price the Cable must pay for experiencing such an aggressive pullback over the past month.  Britain’s mixed data won’t cut it, and the GBP/USD will need an impressive showing on all fronts to piece together a more meaningful rally.  As for the downside, the Cable has a little more breathing room for now.  The GBP/USD has 8/17 and 8/27 lows along with our 1st and 2nd tier downtrend and 1st tier uptrend lines serving as technical cushions.

Britain will keep the data train rolling next week by releasing its Halifax HPI, Manufacturing PMI, and Net Lending to Individuals on Tuesday.  Additionally, we’ll receive more economic data from the U.S., Japan, China, and the EU.  Least we mention there is an ECB monetary policy decision on Thursday.  Hence, today’s volatility should carry over into the next trading week.

Present Price: 1.6341

Resistances: 1.6367, 1.6394, 1.6410, 1.6427, 1.6455

Supports: 1.6337, 1.6302, 1.6277, 1.6261, 1.6247

Psychological: 1.60, 1.65

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.com

The United Kingdom Gross Domestic Product fell for the fifth straight quarter but was revised slightly better than previously esimated according to a report by the Office of National Statistics. The U.K. GDP data showed that quarterly GDP fell by 0.7 percent in the April through June quarter following a decline of 2.4 percent in the first quarter of 2009. The second quarter GDP contraction was previously estimated in a July report to have fallen by 0.8 percent. The first quarter decline had marked the largest decrease since the 2.6 percent fall in the second quarter of 1958.

On an annual basis, the second quarter GDP fell by 5.5 percent from the level of the second quarter of 2008 and marked the largest annual decline since 1955 when records were first kept. The 2009 first quarter had registered an annual decline of 4.9 percent.

Contributing to the decline in GDP was a decrease in total production output by 0.6 percent. Despite this decrease, the production output was significantly better than the 5.1 percent decrease of the first quarter. Also contributing to the second quarter’s GDP fall was a construction output decrease by 2.2 percent while services output fell by 0.6 percent and manufacturing declined by 0.2 percent. Household expenditures decreased by 0.7 percent while government expenditures rose by 0.8 percent in the second quarter.

Source: ForexYard

Forex trading to today are set to be driven by a batch of data from both the U.S. and Britain. The main release from the U.S. today that traders are waiting for is the Consumer Spending, also known as the Personal Spending report from the U.S. at 12:30 GMT. Forecasts put the figure at roughly 0.2% in July, about half the increase of June. However, the rise is mainly owed to the cash-for-clunkers program. Despite this, a positive figure may actually hurt the USD, as such a result could increase risk appetite. Therefore, in order to take advantage of end-of-week market behavior, open your positions in the USD, EUR, and GBP now.

Economic News

USD – USD Falls Steeply on Thin Trading and Market Optimism

After a period of steady appreciation, the USD took a sharp nose dive at the end of European market hours to close yesterday’s trading at 1.4364 versus the EUR, 1.6284 against the Pound, and 1.0877 against the CAD. The greenback fell due to several reasons that are linked to thin summer trading.

First, with Crude Oil advancing from industrial growth worldwide, the USD is experiencing some downward pressure from commodity purchases. With growth being forecast on the horizon, safety investments like the USD are losing some of their appeal. While the Gross Domestic Product (GDP) of the United States shrank less than expected, many economists are anticipating a rally in US stocks, Crude Oil prices, and riskier investments. These all point to further downward pressure on the Dollar in the days ahead. As such, yesterday’s sharp drop was inevitable.

If today’s figures on Personal Income and Personal Spending in the US confirm the rising trend of growth, the USD could see some added downward pressure. The University of Michigan’s Consumer Sentiment report will also give credibility to these assumptions if it reveals market optimism is on the rise. Traders may anticipate a bearish Dollar if economic news continues to support these latest trends.

EUR – EUR Remains Bullish at End of Month Trading

The EUR’s bullish rally against all major currency pairs continued yesterday with a surprising reversal to the EUR/USD’s recent downtrend coming at the close of European markets. Closing at a surprising 1.4364 against the greenback, the EUR made significant gains on recent boosts to market optimism, risk appetite, and thin market trading. As the month comes to an end, a significant level of position shifting takes place and some trends may see a reversal at the start of September.

Market data from the Euro-Zone and Britain has lately put a positive spin on the 16-nation currency. Germany’s Ifo Business Climate report on Wednesday showed an improvement to investor confidence in the German economy and other data yesterday continued adding momentum. While Britain’s economic figures may also show positive data, the level of confidence in the British banking system, as well as their influx of cash from their quantitative easing program, has put a downward spin on the GBP. This trend may not come to an end anytime soon, but end of month trading usually generates enough volatility to surprise even the most veteran traders.

As for today, the Euro-Zone isn’t scheduled to release any significant reports, but the British government will release its Revised GDP figures showing that Britain’s economy likely shrank by 0.8% last quarter. Switzerland will also publish its KOF Economic Barometer today, measuring the relative strength of the Swiss economy. This report has the potential to add a level of volatility to the CHF not typically experienced in the average trading week.

JPY – JPY Ends August with Batch of Poor Data

Yesterday was a day of bearishness for the Japanese Yen. Losing on all fronts, the JPY finished the day at 134.48 against the EUR, 152.35 versus the GBP, and stable at 93.64 against the Dollar. With the recent surge in market optimism, combined with thin trading at the end of the month, the Japanese Yen has faced surmounting downward pressure as safe-havens are losing their appeal.

Adding to this downward momentum was a batch of negative data releases from Tokyo at the start of Friday’s trading session. Household spending, Japanese CPI, and Japan’s Unemployment Rate all showed worse than expected numbers, with unemployment climbing to 5.7% last month. Closing out the month with such abysmal data definitely does not help the JPY’s strength.

Crude Oil – Crude Oil’s Appeal as Alternative Investment on the Rise

The appeal of Crude Oil investments rose yesterday after the US Dollar weakened on thin trading, growing risk appetite, increasing demand for energy, and end of month investment shifting. As Crude Oil prices rose for the first time in 3 days, investors flocked to the commodity as an alternative investment. Failing to breach the $70 support level, the price of a barrel of Light Sweet Crude subsequently rose back to $72.68 by the end of Thursday’s trading hours.

With global economies beginning to show signs of recovery, and countries such as Australia already on their way to substantial growth, energy prices are expected to pick up in the near future. Likewise, as strength returns to the market, the safety of the US Dollar will fall alongside it, adding further support to Crude Oil prices. A near-term target of $75 a barrel has become a popular goal for many speculators as a result.

Technical News

EUR/USD

The pair soared yesterday by 115 pips to the 1.4356 level. The 4-hour and daily chart’s oscillators seem to be showing misleading signals. However, the RSI of the hourly chart shows the pair above the 70 mark, signaling that a downward reversal is imminent. The MACD of the hourly and weekly charts also support a downward correction for the pair today. Going short with tight stops may turn out to pay off today.

GBP/USD

Despite much Bearishness in this cross this week, the GBP/USD cross went higher yesterday. On the one hand the daily chart’s Stochastic Slow supports this upward correction to continue. However, on the other hand, the RSI and MACD of the hourly chart and the Stochastic Slow of the 4-hour chart supports a bearish reversal for today. Going short with tight stops may bring big profits today.

USD/JPY

The USD/JPY pair has been range trading between the 93.19 and 94.56 levels in the past several days. The Stochastic Slow of the daily chart and RSI of the daily chart support a bullish move for today. However, the MACD of the daily charts supports a possible bearish trend for today. Entering the pair when the signals are clearer seems to be the right choice for traders today.

USD/CHF

The pair went through a dramatic bearish correction yesterday. This was despite rising over the previous several days. The RSI of the weekly chart supports a further drop in the pair for Friday’s trading. This move is also backed up by the MACD of the weekly chart and Stochastic Slow of the daily chart. Entering the popular trend now doesn’t seem to be a bad idea at all.

The Wild Card – Crude Oil

Crude Oil has resurrected yet again as the top bullish commodity in Thursday’s trading. The black gold currently stands at the $72.60 level. Today’s technical data supports another possible upward move for Crude. This is mainly supported by the hourly chart’s Stochastic Slow and 4-hour chart’s MACD. So if you forex traders want to take advantage of this popular commodity now, then enter Crude as soon as possible as end-of-week trading kicks in.

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.

By GCI Fx Research

€

The euro moved lower vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4220 level and was capped around the $1.4280 level.  U.S. equity markets were pinched lower as traders continue to speculate the Chinese government may try to slow its industrial sector, probably to the detriment of global growth.  Richmond Fed President Lacker hawkishly said the Fed may not need to purchase the entire US$ 1.25 trillion in mortgage-backed securities it has been authorized to purchase by the end of the year.   Data released in the U.S. today saw second quarter gross domestic product decline an annualized 1.0%, unchanged from the previous estimate, while the second quarter GDP price index fell to 0.0% from 0.2%.  Additionally, core personal consumption expenditures were unchanged at 2.0%, matching forecasts.  Other data released today saw weekly initial jobless claims fall to 570,000 from a revised 580,000 while continuing jobless claims printed at 6.133 million, down from 6.252 million.  This week’s U.S. economic data have added to the perception that the U.S. economy has likely bottomed out, though some bears are quick to note that the impact from the pending commercial real estate crisis has not been fully discounted by markets.  The Federal Reserve is seeking a delay in the disclosure of the identity of companies that received funds from its emergency lending programs.  In eurozone news, GfK reported German September sentiment improved to 3.7 from 3.4 in August.  Also, Germany’s inflation rose unexpectedly improved to 0% in August on a harmonized basis after declining an annualized 0.7% in July.  Other data released today saw loan growth to private sector borrowers in the eurozone decelerate significantly, off 0.4% m/m. Additionally, the ECB reported its annual M3 money supply indicator grew 0.3% last month.  ECB policymakers this week have been quite cautious in their assessments of the economy, noting it is unlikely they’ll move to unwind their monetary stimuli anytime soon.  ECB rate-setters will next convene on 3 September and are unlikely to change monetary policy at that time.  Euro bids are cited around the US$ 1.3900 figure.

¥/ CNY

The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥93.35 level and was capped around the ¥94.30 level.  The yen strengthened across the board as traders were loath to assume too much risk during a period of decreased market liquidity.  Vice finance minister Tango reported G20 central bankers and finance ministers will discuss the global economy and regulation of the financial markets when officials convene in London next week.  Ongoing concerns that China will curb excess growth in the industrial sector continue to result in yen weakness.  China remains a major engine of global growth and a weakening in industrial activity could precipitate slower global growth, thereby decreasing demand for higher-yielding assets.  The repatriation of overseas yen assets back to Japan is also benefiting the yen.  On the political front, Democratic Party of Japan leader Yukio Hatoyama published an editorial that suggested Japan should work with other Asian countries to create a single regional currency “and aspire to move toward regional currency integration.”  It is likely that Hatoyama will become the next prime minister on 30 August if his Democratic Party of Japan defeats the long-incumbent Liberal Democratic Party.  There is growing speculation the Bank of Japan may extend its forecast for the end of deflation into early 2012 from early 2011, and this suggests the central bank will keep its ultra-easy monetary policy unchanged from quite some time.  The Nikkei 225 stock index lost 1.56% to close at ¥10,473.97.  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 ¥132.90 level and was capped around the ¥134.45 level.  The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥151.05 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥87.30 level. In Chinese news, the U.S. dollar gained ground vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8273 in the over-the-counter market, up from CNY 6.8266.  Chinese Premier Wen this week said the markets need to avoid being “blindly optimistic” about the global economic recovery and added China must maintain its “moderately loose” monetary policy and “active” fiscal policy.  PBoC has reported it will ensure “reasonable and ample” liquidity.

₤

The British pound moved lower vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.6155 level and was capped around the $ 1.6245 level.  Cable reached its lowest level since 13 July.  Bank of England Deputy Governor Bean reported it may take years to assess the efficacy of the central bank’s ₤175 billion asset purchasing program on account of “transmission lags.”  Bean added the impact of the bond purchase program has been “moderately encouraging.”  Cable offers are cited around the US$ 1.6355 level.  The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.8820 level and was supported around the ₤0.8770 level.

CHF

The Swiss franc appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.0660 level and was capped around the CHF 1.0705 level.  UBS reported buying back assets from the Swiss National Bank is not an “immediate concern.”  Swiss National Bank member Jordan this week reported it “isn’t time yet” to reverse its expansionary monetary policy, adding interest rates “will remain low.”  He also verbally intervened against further franc strength, saying it will be prevented “resolutely.”  U.S. dollar offers are cited around the CHF 1.0790 level.  The euro moved higher vis-à-vis the Swiss franc as the single currency tested offers around the CHF 1.5240 level while the British pound moved lower vis-à-vis the Swiss franc as the single currency tested bids around the CHF 1.7255 level.

Daily Market Commentary provided by GCI Financial Ltd.

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

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