U.S. Employment decreases more than expected, Unemployment rate at 26 year high. US Dollar rises in Forex Trading.

By CountingPips.com

U.S. Nonfarm Payrolls employment data released today showed that jobs fell more than expected in June. The Department of Labor nonfarm payrolls report showed that U.S. payrolls shed 467,000 jobs in June following a revised drop of 322,000 jobs in May. 250150allcurrenciesThis was the eighteenth straight month that companies have shed workers and the unemployment rate jumped from 9.4 percent to 9.5 percent bringing the rate to its highest standing since 1983.

May’s job decline was revised lower to show a loss of 322,000 jobs from the original report of 345,000 jobs lost. The amount of jobs lost since December 2007 has now totaled 7.2 million according to the Labor Department and the unemployment rate has increased by 4.6 percent in that time span.

The June Labor Department report surpassed market forecasts that were expecting a loss of 365,000 jobs and almost matched the forecasts expecting the unemployment rate to reach 9.6 percent.

The decline in jobs was spread throughout most economic sectors with the exception of the education & health services sector which saw 34,000 jobs created in June. The service-providing sector was the hardest hit by job losses for the month as this sector lost 244,000 total jobs with professional & business services shedding 118,000 workers, retail trade cutting 21,000 workers and leisure & hospitality losing 18,000 workers for the month.  Government employment also declined by 52,000. The goods-producing sector lost 223,000 jobs for the month as the manufacturing sector cut 136,000 jobs and the construction sector lost 79,000 jobs.

US Dollar gains in forex trading today.

The U.S. dollar has been stronger in forex trading today against the other major currencies following the government jobs report. The euro, British pound, Swiss franc, Australian dollar, Canadian dollar and New Zealand dollar have declined while the Japanese yen has increased versus the American currency.

The EUR/USD pair has declined slightly from today’s opening rate of 1.4114 dollars at 00:00GMT to trading to 1.4009 at 11:27 am EST in the late morning of the U.S. trading session according to currency data by Oanda.

The British pound has fallen versus the dollar as the GBP/USD has declined from today’s opening level at 1.6464 to trading today at 1.6372.

The US dollar has fallen today against the yen as the USD/JPY opened today at 96.59 and has declined to trading at 96.02.

The dollar has gained today versus the Swiss franc as the USD/CHF has gone from the 1.0767 opening rate to trading at 1.0852.

The dollar has increased today against the Canadian loonie as the USD/CAD has advanced to trading around the 1.1611 level today after opening at 1.1488.

The Australian Aussie has fallen versus the US dollar today as the AUD/USD has declined to the 0.7950 level after opening at 0.8052. The New Zealand kiwi has also declined against the dollar as the NZD/USD has reached the 0.6284 level today after opening the day at 0.6385.

AUD/USD Chart – The Australian Dollar declining against the US Dollar today and falling below the 200-hour moving average in white.

Today's Forex Chart
Today's Forex Chart

U.S. Non-Farm Employment Change Data to Drive USD Volatility Today

Source: ForexYard

The forex market is expected to be extremely volatile today, as the U.S. releases the results of the Non-Farm Employment Change at 12:30 GMT. The EUR Minimum Bid Rate at 11:45 GMT and U.S. Unemployment Claims at 12:30 GMT are also expected to dominate trading for the USD, EUR, and GBP crosses. Traders are advised to enter the main currency pairs now in order to profit from risk appetite.

Economic News

USD – Dollar Plummets on Release of Poor Economic Data

The Dollar index continued its decline yesterday, trading at 79.619, down from 80.179 late Wednesday. The drop followed the release of the ADP Non-Farm Employment Change which showed worse than expected results. The drop was exacerbated by China’s request to discuss the issue of a new global currency at next week’s G8 Summit in Italy.

Increased risk appetite has been dominating trading lately, despite much pessimistic economic data. Recent bullishness in the stock markets helped fuel risk appetite among investors, putting further downward pressure on the Dollar. Worse than expected results no longer automatically push investors back to the safety of the Dollar, as risk tolerance remains high on positive equity prices. Furthermore, negative data from the U.S., along with an over-expanding budget deficit and inflation fears have caused concern over the greenback’s long term prospects. As a result, this has
further dampened Dollar sentiment.

With several major news releases ahead of the July 4th weekend, including the U.S Non Farm Employment Change and Unemployment Rate due at 12:30 GMT, and the ECB Press Conference at the same time, Thursday is expected to be a volatile trading day which may intensify the current trends.

EUR – EUR Boosted By Increased Risk Appetite

The EUR continued its advance against the USD yesterday, reaching its highest level in nearly a month. The European currency received an additional boost after the release of better than expected results from German Retail Sales. Since Germany is the largest economy in the Euro-Zone, it tends to have significant effects on EUR movements.

The EUR/USD pair hit as high as $1.4201 after the release of the U.S. ADP Non-Farm Employment Change report, which showed worse than expected results. However, the EUR/USD finished trading at 1.4115, whilst the the Pound Sterling was at $1.6464 from $1.6449.

Traders should pay close attention to the ECB Press Conference at 12:30 GMT as monetary policy and economic outlook will be discussed. Although the Interest Rate is expected to remain unchanged at 1%, the statement will provide insight to the Bank’s new covered-bond purchase program, as well as the progress of the quantitative easing program. This will provide direction for the EUR by possibly extending its recent gains.

JPY – JPY Gains against USD Ahead of Crucial U.S. Data Releases

The Yen gained against the Dollar ahead of the release of the U.S Non Farm Employment Change and Unemployment Rate which may show that unemployment in the U.S rose to the highest level in 25 years. To a certain extent, this spurred demand for the safety of the JPY. Traders should be aware that the USD/JPY pair will be the main pair to watch today as data is released from the U.S.

The Japanese currency has been suffering recently due to increased optimism and risk appetite among investors, who traded the relatively safe JPY for higher yielding riskier currencies. Although risk tolerance remains high in the market, worse than expected results from the U.S and Euro-Zone may help extend the JPY’s gains throughout the day.

Crude Oil – Crude falls Below $70 on Release of Inventories Data

Crude Oil fell by over $2.50, or 5%, to $69.01 a barrel on Wednesday. The drop came after the U.S. Energy Information Administration (EIA) released a report showing that Crude Oil Inventories are 18.3% higher than last year. Despite falling inventories in the past 4 weeks, demand continues to be weak, whilst supply remains abundant.

Despite recent gains in the equity markets and the continued weakness of the Dollar, Oil has had difficulties sustaining prices above $72. This is as demand continues to lag and inventories remain high. Today’s trading session may provide some boost to Oil prices as U.S unemployment data which is set to be released today may exacerbate the Dollar’s recent bearish trend.

Technical News

EUR/USD

The EUR/USD pair experienced much bullishness in yesterday’s trading, as it hit the 1.4200 mark. However, the pair has dropped since then, and the pair currently stands at 1.4120. The daily chart shows the pair trading in neutral territory. However, the chart’s 4-hour Stochastic Slow and hourly MACD signal that this downward momentum may continue. Going short with tight stops could lead to big profits today.

GBP/USD

The cross finished yesterday’s trading in neutral territory, and relatively unchanged at 1.6464. If you look at the daily chart’s RSI, we can see that the pair is in the overbought territory, and a sharp downward move could occur anytime soon. Entering this trend at an early trade may turn out to pay off as Thursday’s trading gets under way.

USD/JPY

The pair currently stands at the 96.60 level. It seems that USD/JPY’s recent bearishness may be short lived, as the chart’s 4-hour RSI indicates that there is still steam left in the pair. Additionally, the chart’s daily Stochastic Slow signals that we may be facing an upward trend today. Going long with tight stops may be a wise choice today.

USD/CHF

The pair has experienced much volatility in recent days, range trading between the 1.0700 and the 1.0920 levels. The weekly chart’s Slow Stochastic signal the pair will go bearish today. Whereas the hourly chart’s MACD signals an upward trend to take place for the coming day. Entering the pair when the signals are clearer may turn out to be a wise choice today.

The Wild Card – Crude Oil

Crude Oil has been hit badly in recent days, and currently stands at $69.20 a barrel. The daily chart’s Stochastic Slow supports a further bearish move for the commodity in today’s trading. This is also supported by the daily chart’s MACD. Going short with tight stops may turn out to be the safe bet for forex traders today.

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.

ADP Employment shows 473K job losses. Pending Home Sales rise. US Dollar trading lower in FOREX.

By CountingPips.com

U.S. employment data was released today in the form of the ADP National Employment Report and showed that U.S. private employment declined by less than the previous month but by more than expected. June’s nonfarm private employment fell by 250150bluecharts473,000 following the revised May decline of 485,000 jobs. May’s data was revised downwards from the original release of 532,000 jobs lost.

June’s data was worse than the decline of 394,000 jobs the market forecasts were expecting but was better than the three month average of 492,000 jobs lost in April, May and June.

The market-moving US Nonfarm Payrolls report for June is to be released tomorrow at 12:30 pm GMT because of the US independance holiday this week with market forecasts predicting a decline of 365,000 jobs after May’s 345,000 decrease.

ISM Manufacturing data improves but not at growth levels yet.

U.S. Manufacturing data, released today by the Institute for Supply Management, improved in June from May but showed that manufacturing activity failed to grow for the seventeenth straight month. June’s ISM Report On Business index readings for economic activity were at 44.8 percent following May’s 42.8 percent level. A score above 50 percent is considered to be growth and less than 50 percent is considered to be a contraction. The June score just about matched economic forecasts which were expecting the ISM index reading to register 44.9 percent. The overall economy, according to the ISM index, has expanded and grew for the second consecutive month in June after seven straight declining months.

Norbert J. Ore, chair of the ISM Business Survey Committee, commented on the report saying, “Manufacturing continues to contract at a slower rate, but the trends in the indexes are encouraging as seven of 18 industries reported growth in June. Most encouraging is the gain in the Production Index, which is up 12.1 percentage points in the last two months to 52.5 percent.”

Pending Homes Sales in US increase.

U.S. Pending Homes sales rose for the fourth straight month in May according to the monthly report produced by the National Association of Realtors. The NAR report showed that pending home sales contracts signed by buyers increased 0.1 percent in May following a revised 7.1 percent increase in April. May marked the first time since October 2004 that pending home sales had increased for four consecutive months.

Market forecastors had predicted the sales data would show no change or remain flat for the month. The pending home sales level is 4.6 percent above the May 2008 level.

NAR chief economist Lawrence Yun commented in the report about the increased sales figures this month, “Rises in contract activity show buyers are becoming more active even as they face much more stringent loan underwriting standards. Speedy clarification of the appraisal rules could smooth a housing market recovery and support the overall economy.”

US Dollar lower in forex trading.

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

The euro has advanced versus the dollar as the EUR/USD has gone from today’s 1.4034 opening exchange rate at 00:00 GMT to trading at approximately 1.4176 in the afternoon of the US trading session at 1:17pm EST according to currency data by Oanda.

The dollar has decreased against the Japanese yen after two straight increasing days as the USD/JPY has edged down from its 96.77 opening to trading at 96.42.

The British pound has increased today versus the American currency as the GBP/USD has gone from 1.6451 to trading at 1.6519 dollars per pound. The dollar has fallen against the Canadian dollar after the USD/CAD’s opening at 1.1616 earlier today to trading at 1.1470 later today.

The Australian dollar has traded higher versus the USD as the AUD/USD trades at 0.8096 after opening today at 0.8060 while the New Zealand dollar has fallen slightly versus the USD and trades at 0.6438 after opening at 0.6452.

Finally, the USD has declined against the Swiss franc today as the USD/CHF has fallen from the 1.0858 opening to trading at 1.0722.

USD/CAD Chart – The US Dollar fell sharply today against the Canadian Dollar in Forex Trading before finding support around the 1.1450 level.

Today's Forex Chart
Today's Forex Chart

ADP Employment Data to Drive the Majors Today

Source: ForexYard

The surprise drop in consumer confidence in the United States yesterday has resulted in a sudden buy-up in USD as investors flock to safe-havens. With a market that appears to be lacking a clear direction recently, major reports such as the CB Consumer Confidence report yesterday, and today’s ADP Non-Farm Employment Change report become that much more important to watch as more investors await their release before trading.

Economic News

USD – USD Trades Higher on Economic Outlook

The greenback gained Tuesday as a report on U.S. home prices showed that the pace of price declines may be slowing and manufacturing data from June came in slightly better than expected. The Dollar may extend its gains versus the EUR after a report showed an unexpected drop in U.S. consumer confidence for June, increasing demand for the safety of the world’s main reserve currency.

The USD traded at 1.4035 versus the EUR, following a 0.4% gain yesterday. The dollar also fetched 96.35 yen following a 0.3% advance. Tuesday’s data gave investors more reasons to buy the U.S Dollar. For months, improvements in the outlook for the economy, financial markets or other companies has led to stock gains and weighed on the USD, taken as a signal of reduced demand among investors to hold the safe-haven currency.

However, analysts have said that the Dollar may be near a turning point, after trading in a pattern closely correlated with equity moves. Investors have sold U.S. Dollars recently as stock markets and oil prices rose on an upbeat view for prospects of a global economic recovery, hurting demand for the greenback as a safe haven.

Investors now await the U.S. government’s high-profile monthly employment report. The jobs data is due on Thursday as U.S. financial markets will be shut on Friday for Independence Day.

EUR – EUR Holds Steady vs. Greenback and Rallies against JPY

The EUR gained versus the U.S Dollar on speculation European Central Bank (ECB) policy-makers will today signal that the central bank will keep Interest Rates on hold into next year to aid an economic recovery. ECB member Axel Weber said last week that the central bank has used up its scope to cut Rates. Policy-makers will leave the benchmark rate unchanged at this week’s meeting, according to analyst predictions.

There is also an improving sentiment in the Euro-Zone’s economic conditions. European economic confidence rose more than economists forecast in June, the European Commission in Brussels reported yesterday, signaling the region’s slump is abating. Analysts predict that the ECB will keep Rates at 1% for the foreseeable future. And that might turn the EUR further on the upside.

The European currency has advanced the most in 4 months against the Yen, last traded at 135.56 yen from 135.21 yesterday. When it reached 135.96 for a brief stint yesterday, this was the highest level reached since June 15. The EUR has risen 7.1% versus the Japanese yen this year and doesn’t seem to be losing any momentum.

JPY – Yen Declines as Investors Dump Safety Demand

The Japanese Yen weakened against the EUR and the Dollar yesterday after a report showed China’s manufacturing expanded for a 4th consecutive month, dampening demand for the relative safety of Japan’s currency. The JPY fell to 135.80 per EUR and weakened to 96.95 per U.S. Dollar from 96.36. The Yen also fell against 15 of the 16 most-traded currencies after an Australian report showed retail sales climbed for a 3rd month, giving investors more confidence to purchase higher-yielding assets.

Although, the Bank of Japan’s (BOJ) June Tankan corporate survey showed on Tuesday that big manufacturers’ sentiment pulled back from a record low hit 3 months ago, the improvement was smaller than forecast. The Yen edged down against the Dollar after the news but the market’s reaction was subdued overall as investors decided that it offered no surprise.

Analysts said that the market has considered all the positive factors that have come out and is starting to react more to negative factors. The market is lacking clear direction and is likely to stay in an adjustment period for now.

Crude Oil – Crude Oil Momentum to Rise Further

Crude Oil rose above $70 a barrel after an industry report showed the biggest decline in crude inventories since September in the U.S., the world’s largest user of the fuel. Also today, the Energy Information Administration (EIA) report will probably give a better direction to the market.

A U.S. Energy Department report today will likely show Crude Oil stockpiles declined 2 million barrels, according to economists’ estimations. A fall in crude inventories may cause the commodities market to move higher, and will reinforce Crude to stay at or go above current levels.

Oil prices yesterday spiked above $73 a barrel, which stood as the June high for more than 2 weeks, as the Dollar declined and escalating militant attacks in Nigeria raised concern that supplies may be disrupted. Crude Oil is set to extend gains amid this week’s volatility and may reach the $76 a barrel level.

Technical News

EUR/USD

This pair currently lacks clear direction. With most indicators either floating in neutral territory, or giving off mixed signals, this pair continues to trade in a distinct range. Buying on lows and selling on highs within this range is the most preferable strategy in this environment.

GBP/USD

There is a distinct bullish cross on the 4-hour chart’s Slow Stochastic and an imminent bullish cross on the hourly chart’s MACD. These two signals together indicate an impending bullish correction to yesterday’s sharp downward movement. Going long might be wise today.

USD/JPY

Yesterday’s volatile bullish movement in this pair has pushed the RSI on the hourly and 4-hour charts into the over-bought territory, representing the presence of downward pressure. The fresh bearish cross on the 4-hour chart’s Slow Stochastic supports the notion of a downward correction. Going short with tight stops appears to be preferable.

USD/CHF

Almost all indicators on this pair show neutrality as the price floats near the 1.0850 price level. With a bearish cross on the hourly MACD and a bullish cross on the 4-hour MACD, the direction of this pair is uncertain. Waiting for a clearer signal might be a good choice today.

The Wild Card – EUR/GBP

The price of this pair has been trading flat these past several days. However, the Bollinger Bands on the hourly and daily charts are tightening, signaling an impending volatile jump. With a bearish cross on the hourly MACD and the 4-hour chart’s Slow Stochastic, this volatile jump may very well be bearish. Forex traders have a great opportunity to enter early sell positions before this jump takes place and ride out the downward slope for profits!

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.

Fundamental Outlook at 1400 GMT (EDT + 0400)

By GCI Fx Research

The euro came off vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4000 figure and was capped around the $1.4150 level.  Three main factors contributed to the sell-off in the common currency.  First, EMU-16 May M3 money supply growth registered a twelve-year low with growth in loans to the private sector slowing to +1.8% from +2.4% in April.  Overall credit growth decelerated to +4.0% from +4.4% in April.  These data suggest that the fiscal and monetary stimuli being created in the eurozone are not reaching companies and consumers with banks apparently hording a lot of the liquidity.  Second, EMU-16 consumer prices were off year-over-year in June, the first negative reading since at least January 1997.  Eurozone CPI was off 0.1% y/y but this decline was less than expected and was anticipated by the European Central Bank on account of base year effects. Furthermore, the ECB is forecasting consumer price inflation costs will begin to rise again by the end of the year.  Nonetheless, today’s data suggest the ECB will not necessarily be in any hurry to lift borrowing costs further.  Third, Germany’s labour market continued to weaken this month with the number of jobless now around 3.410 million and the unemployment rate at 8.3%.  Some economists believe the number of unemployed workers may eclipse the politically-sensitive 4.0 million barrier by the end of 2009.  In U.S. news, many economic data were released. First, June consumer confidence printed at 49.3, down from a revised 54.8 in June and worse than expected.  Second, the June Chicago Purchasing Managers’ index improved to 39.9 from 34.9 in May with improvements in the production, inventories, employment, and prices paid sub-indices.  Third, the S&P/ CaseShiller home price incex fell to 139.18 in April from a revised 139.97 in March with composite home prices off 18.12% y/y from a revised -18.72% y/y in March.  The big news in the U.S. this week will be the June non-farm payrolls data that will be released on Thursday.   Euro bids are cited around the US$ 1.3435 level.

¥/ CNY

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥96.50 level and was supported around the ¥95.30 level.  Prime Minister Aso reported Bank of Japan’s monetary policy is not as effective during a recession where there are deflationary pressures evident.  Finance minister Yosano said one cannot assume bond yields will remain this low, especially when drafting the budget for the next fiscal year.  Yosano added the budget ceiling for the next fiscal year will be a record ¥52.7 trillion and said the impact of fiscal and monetary stimuli on the Japanese economy are not fully known.  Additionally, Yosano said the government is significantly concerned about unemployment.  It was reported overnight that the May unemployment rate ticked up to 5.2% from 5.0% in April while May household spending were up +0.3% m/m and off 1.3% y/y. Moreover, May overall housing starts were down a drastic 30.8% y/y and total May construction orders were off a staggering 41.9% y/y to ¥454.8 billion.  The Nikkei 225 stock index climbed 1.79% to close at ¥9,958.44.  U.S. dollar offers are cited around the ¥104.15 level.  The euro weakened vis-à-vis the yen as the single currency tested bids around the ¥134.35 level and was capped the ¥135.95 level.  The British pound moved higher vis-à-vis the yen as sterling tested bids around the ¥158.20 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥88.10 level. In Chinese news, the U.S. dollar moved lower vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8295 in the over-the-counter market, down from CNY 6.8325.

The British pound depreciated vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.6420 level and was capped around the $1.6745 level.  Bank of England Deputy Governor Tucker today indicated banks need to “radically  simplify their structures and provide more information about what funds they would use in an emergency.”  The U.K. Treasury today reported the BoE and the Financial Services Authority will obtain new powers to help prevent future crises.  There has been widespread media reports over the past couple of days indicating the U.K. Treasury will not change the central bank’s mandate to keep inflation under control  but will give the FSA new powers to control banks’ balance sheets.  Data released in the U.K. today saw the Q1 current account deficit narrow to -₤8.5 billion from -₤8.8 billion in Q4.  Also, Q1 gross domestic product was off 2.4% q/q and 4.9% y/y, the largest decline in 50 years, while Q1 total business investment was off 7.6% q/q and 9.7% y/y.  Additionally, Nationwide reported June house prices were up 0.9% m/m and off 9.3% y/y.  Cable bids are cited around the US$ 1.6125 level.  The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.8535 level and was supported around the ₤0.8435 level.

CHF

The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.0775 level and was capped around the CHF 1.0890 level.  Technically, today’s intraday low was right around the 61.8% retracement of the move from CHF 1.0630 to CHF 1.1020.  Data released in Switzerland today saw the UBS May consumption indicator decline to 0.77 from 0.91 in April.  U.S. dollar offers are cited around the CHF 1.1165 level.  The euro weakened vis-à-vis the Swiss franc as the single currency tested bids around the CHF 1.5230 level while the British pound moved lower vis-à-vis the Swiss franc and tested bids around the CHF 1.7855 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.

UK GDP declines by 2.4% in 1st Quarter. Pound falls vs. USD in Forex Trading.

By CountingPips.com

The United Kingdom Gross Domestic Product was revised lower today and fell by the most in fifty years in the first quarter of 2009 according to a report by the Office of National Statistics. The U.K. real GDP data showed that quarterly GDP fell by 2.4 percent in the January through March quarter following a  decline of 1.6 percent in the 250140twentypndsfreefourth quarter of 2008. The GDP decline was worse than the previously reported estimates of a 1.9 percent contraction and marked the largest decrease since the 2.6 percent fall in the second quarter of 1958.

On an annual basis, the first quarter GDP fell by 4.9 percent from the level of the first quarter of 2008 and marked the largest annual decline since 1948 when records were first kept. The 2008 fourth quarter registered a decline of 2.0 percent. Today’s data surpassed economic forecasts which were expecting the quarterly GDP to decline by approximately 2.1 percent and the annual GDP rate to fall by 4.3 percent.

The British pound has felt the effects of the news and has fallen versus most of the major currencies in forex trading today. The pound, at time of writing, has declined by over 150 pips against the dollar, by 45 pips versus the euro and by almost 100 pips against the Japanese yen.

GBP/USD Chart – Pound Sterling falling in forex trading versus the US Dollar today and trading under the 100 hour moving average

6-30gbpusd

USD Commentary

Our detailed commentary from last week both before and after the FOMC statement on Wednesday noted that we believe that the Fed’s comments would lead to USD strength in coming weeks. So far our theory has been tested as USD has fallen to levels that printed before the FOMC statement. EUR/USD is trading at 1.4110, USD/JPY at 96.11, and importantly GBP/USD cracked through the 1.6725 level. So we are on guard for any further USD weakness as we think we are at levels that could cause a long-covering push lower on USD (meaning higher EUR/USD and GBP/USD).

Lets not forget that our post FOMC statement theory of stronger USD is a long-term plan. If EUR/USD closes the week significantly higher that the 1.4100 level……and if GBP/USD can regain and hold the 1.6700 levels, then we may have to re-assess our strong USD expectations for the next few weeks. But for now we keep our strong USD plan in place.

Another challenge to our strong post FOMC strong USD theory is that the movement in the US 10 year note seems to have already made its large move. The US 10 year note yielded just above 4.00% about three weeks ago and is now hovering around the 3.5% level. As we noted last week, that is a huge move in a short time period.

We think the yield on the US 10 year note will have to break below 3.50% for much further USD strength. 3.50% is an important psychological level, yet we are seeing and hearing more and more commentary about rates moving towards the 3.00% level. This does conflict with our view of the 10 year yields by years end (we think higher), but with the extremely volatile trading of the 10 year note in the last 12 months, its possible we will see lower rates in the short term and then a move higher towards the end of the year.

This is the stuff we love about the global capital markets; they are like a spider web. If you pull on one corner of a spider’s web, then rest of the web has to shift to accommodate the external action. But the web does not move in a linear manner, the web’s movements depend on so many factors that it is never easy to determine which shape the web will have in the future.

Stay Nimble!

Stephen Leahy
Back Bay FX Services, LLC
www.backbayfx.com

Long Term Chart – Gold at Important Level

We have overlaid the below chart of daily price action in spot Gold with our favorite Bollinger Band (“BB”) settings. Within an overall trend of Gold moving higher, we have noted that recently any break through the midline (currently at 943.50) to the upside has been the start of a strong move higher. Moves through the mid-line to the downside have had limited runs lower.

We are watching where spot Gold closes (17:00 EST) both today and tomorrow to see if we can break higher and go for a strong run that will test the 980 – 1,000 levels. A close above 946 today or tomorrow will be enough to justify a long position for us.

Stay Nimble!

Stephen Leahy
Back Bay FX Services, LLC
www.backbayfx.com

Thanks to FX Solutions for the below image.

Rally in Equities Pushes Investors to Riskier Assets

Source: ForexYard

An extremely bullish day for the equity markets pushed investors back to riskier assets and away from the safe haven USD and JPY, causing them to plummet against their riskier counterparts. The rally in equities along with a weak Dollar has also helped push Oil prices above $73 for the first time in over a week. Today’s numerous economic data releases from the U.S, Euro-Zone and Japan promise another volatile trading day and will help determine if the current trends will continue throughout the week.

Economic News

USD – Dollar Plummets as Wall Street Rallies

The Dollar plummeted against the major currencies on Monday, as Wall Street rallied. The bullishness in the U.S. stock market also spread to Britain and the Euro-Zone. The Dow Jones rose by over 1%, while the S&P extended its best rally since 1998. Amongst the biggest gainers were banking stocks. The bullish stock market led to a fall in the Dollar across the board, as traders ditched the safe-haven USD for riskier assets in Monday’s trading. This was exasperated due to traders wishing to further their profits in stocks as the quarter comes to an end.

The USD slipped about 80 pips vs. the EUR to finish trading at 1.4115. This was helped as Euro-Zone economic confidence increased more than expected this month. The Dollar’s behavior was much the same against the Pound, as the GBP/USD pair rose 160 pips to the 1.6634 level. The GBP’s strength may have been owed to its dependence on U.S. economic optimism. However, against the JPY the greenback extended its rally for the second day, as investors dropped the “ultra” safe-haven Yen for the “less” safe-haven USD.

Looking ahead today, there is plenty of economic news that is likely to help determine the volatility in the forex market. The releases from the U.S. are set to be the key to today. Traders are advised to pay attention to the Chicago PMI at 13:45 GMT and CB Consumer Confidence at 14:00 GMT. It is also advisable to follow the direction of the equity market, as this could be a key factor in determining the Dollar’s strength later

EUR – GBP Boosted by U.S. Optimism

The Pound recorded a volatile, but bullish trading session yesterday against its major crosses, as it benefited from the optimism from the U.S. The rally in the British stock market was encouraged by Wall Street’s rally. What has been much of a pattern recently has seen the Pound rising whenever equities make significant gains in the U.S. and Britain. This may be explained by Britain’s dependence on the financial sector. With this sector doing well yesterday in the equities market lent the Pound a boost, helping us understand much of the behavior of the cable.

Both the GBP and EUR posted gains against the USD and JPY. The EUR/GBP was
32 pips lower at 0.8482. It seems that if global economies continue to prove, then we may see this pair continue to approach the 0.8400 level in the short-medium term.
The EUR was also helped yesterday by strong economic confidence figures from the Euro-Zone. This is a further signal that the economic situation in the Euro-Zone isn’t as dire as some analysts originally forecast.

Today, there is plenty of data coming out of Britain and the Euro-Zone that is likely to determine the GBP and EUR crosses in today’s trading against the major currencies. From Britain there is the release of the Nationwide HPI at 6:00 GMT and Current Account and GDP data at 8:30 GMT. From the Euro-Zone there is the publication of German Unemployment Change figures at 7:55 GMT and the CPI Flash Estimate at 9:00 GMT.

JPY – JPY Tumbles on Waning Safe-Haven Status

The Japanese Yen tumbled on Monday, as the Japanese and global equities recorded significant gains. Investors also lost confidence in the JPY yesterday, as Japan released figures showing that unemployment is at a 5-year high of 5.2%. Japan’s government fears it will hit 6% by mid-2010. Much of the JPY’s weakness is due to
traders dropping the safe-haven JPY for more risky assets. As of late, this seems to be equities and commodities.

The Yen slid for a second day against the USD by about 50 pips to 95.92. The EUR/JPY cross slipped to135.38 from 133.90. Against the GBP, the Yen slipped 235
pips to 159.63. The Yen’s volatile movement is set to continue in today’s trading. Later today, this will be even more so with the release of the important Japanese Tankan Manufacturing Index and Tankan Non-Manufacturing Index at 23:50 GMT.

Crude Oil – Crude Oil Surges Past $72 a Barrel

The price of Crude Oil surged passed $72 a barrel yesterday, rising an astonishing $4 to $72.68. This was fueled by 3 dominant factors. Firstly, there was yet another rebel attack in Nigeria, forcing the Shell Oil Company to close one of its refineries yesterday. Additionally, there was a bullish U.S. and European stock market session, leading to a boom in commodities, as investors sold-off safe-haven assets such as the U.S. Dollar.

Yesterday’s gains came on the back of some bearishness in Crude in recent days, as the commodity failed to hold above $70 a barrel. Recent reports by the International Energy Agency revealed that demand will wane for the foreseeable future. However, OPEC is unlikely to cut supply in their next meeting in September. If there are more positive economic signs from the U.S. in the next 2 days, then Crude could hit $75 by the end of the week.

Technical News

EUR/USD

A bearish cross appears to be forming on the 4-hour chart’s Slow Stochastic, suggesting a downward movement may be in the works. The price also floats in the over-bought territory on the daily chart, which supports this downward notion. Going short might be a wise choice today.

GBP/USD

The recent upward spike has pushed most indicators into the over-bought territory while also generating a number of bearish crosses on all charts. Waiting for the momentum to die down, and then going short would be a good decision today.

USD/JPY

With most indicators floating in neutral territory, this pair appears directionless. The bullish cross on the hourly chart’s Slow Stochastic signifies an imminent upward move; however, the bearish cross on the 4-hour chart’s Slow Stochastic suggests otherwise. Waiting for a clearer direction for this pair may be a good choice.

USD/CHF

This pair’s 4-hour chart shows an imminent bullish cross on the Slow Stochastic, which implies a coming upward correction. As the price floats near the over-sold territory on this chart’s RSI, the upward notion seems justified. Going long with tight stops might be a preferable strategy.

The Wild Card – USD/ZAR

This pair has entered a long and steady downward trend and doesn’t appear to be stopping. After the Bollinger Bands on the hourly chart tightened, a volatile downward movement occurred and there now appears to be bullish crosses on the 4-hour and daily chart’s Slow Stochastic and MACD. Contrary to these indications, however, is the fact that the downward momentum still has plenty of room to run. Sticking with the downtrend, forex traders should enter their short positions and finish riding out this profitable move.

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.

Risk Aversion and Commodities Put Downward Pressure on Kroners

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In Scandinavian news this week we have a few factors to consider. First is the purchase of 4 billion Thai Baht by Sweden which has helped boost Sweden’s market share and ability to conduct more long-term business in the South-Asian markets. Immediate impact, on the other hand, was a drop in the value of the SEK, which analysts anticipate will reverse in the near future.

Norway’s currency also appears damaged by recent volatility in the Crude Oil markets as the NOK is tied with commodities. If Crude Oil loses its support above $70 a barrel, as it has done repeatedly these days, we could see the Norwegian Krone take another hit. Good news for the NOK, however, is the sudden sharp rise in oil prices during the last 24 hours, which has helped push the commodities-tied currency to modest strength.

We can verify the connection to commodities by seeing the relatively flat-trading EUR/NOK as opposed to the strong fluctuations of the USD/NOK, which signifies a link to oil. If it fails to make a solid breach of its recent downtrend against the USD, traders should anticipate a sharply falling NOK in the days ahead (See chart below for technical analysis).

Overall, the Scandinavian currencies, with the exception of the Danish Krone, are losing strength to the USD and EUR as a rise in risk aversion damages these high-yielding currencies. The uncertainty of commodities markets puts a damper on currencies like the NOK. Also, the portfolio diversification of Swedish banks doesn’t appear to be over, which will lead to a short-term downfall in the SEK. Once the economy begins to pick up we should see a recovery for these currencies, which is the good news at the end of a bleak article such as this.

USD/NOK – 4-Hour Chart
usdnok-4hour

– Above is the 4-hour chart of the USD/NOK by ForexYard.

– The indicators used are the Stochastic and MACD.

Point 1: The recent uptrend appears to have been breached, suggesting a downward movement.

Point 2: The bullish cross on the Stochastic suggests an impending upward correction.

Point 3: As the price has crossed into the territory below 0.0, there is a chance that a bullish cross is in the works, supporting the notion of an upward move.

– While the downtrend appears to be broken, this may NOT be the case. The indicators presented here suggest that an upward movement is impending, which means this pair may have just been testing the lower border. Expect bullishness.