Tuesday, September 7, 2010

FOREXYARD: Forex News Blog

FOREXYARD: Forex News Blog

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Swedish Krona Running Into Support Levels

Posted: 06 Sep 2010 02:57 AM PDT

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The USD/SEK is fast approaching both a minor and a major support level as the bearish trend looks set to continue.

The long term downward trend for the Swedish krona continues at the falling trend line from the June high. A downward sloping 20-day simple moving average also supports the resumption of the downward trend.

As the pair heads lower, the USD/SEK is coming into a congestion area from February until May. This should serve as a resistance area for any upward correction near the price of 7.3000 (R1).

The first support comes in at 7.1650 (S1) from the beginning of August.

The second major support is found below the March and August low at 7.0400 (S2).

USDSEK

Kroner Sees Major Gains Against EUR and USD

Posted: 06 Sep 2010 02:09 AM PDT

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An increase in risk taking as of late has led to significant gains for the Scandinavian kroner against both the US dollar and euro. Positive news, most importantly Friday’s US Non-Farm Payrolls figure, has led to increased confidence in the pace of the global economic recovery. The figure, while still negative, came in well above expectations, and led to a significant boost for more volatile assets. Chief among these assets have been the Scandinavian currencies.

EUR/SEK has tumbled almost 1000 pips over the last week and is currently trading around the 9.3020 level. The Swedish krona saw significantly more gains against the greenback, with USD/SEK falling over 2000 pips in the same amount of time. Meanwhile, over the last week, the Norwegian krone saw gains of 1650 and 2200 pips against the euro and dollar respectively.

Whether the kroner can maintain its current bullish trend will largely be determined by global news events in the week ahead. Traders will want to pay attention to the UK Manufacturing Production figure and Official Bank Rate on Wednesday and Thursday respectively. The US trade Balance and Unemployment Claims figures, also set to be released on Thursday may generate significant volatility for Scandinavian crosses. Should any of these news releases come in above these forecasted levels, the kroner will likely maintain its upward movement.

Dollar Tumbles Following Non-Farm Payrolls Release

Posted: 06 Sep 2010 12:16 AM PDT

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The most significant trend in last week's trading was the bearish U.S. dollar. The dollar fell last week following several positive economic releases form the U.S. economy. Reports have shown that confidence in the U.S. regarding current and future economic conditions has unexpectedly risen in August. In addition, the number of contracts to purchase U.S. previously owned houses unexpectedly rose in July by 5.2%, beating expectations for a 1.3% fall. The Non-Farm Payrolls report on Friday also provided better-than-expected figures. This has eased concerns that the economy is falling back into recession, and as a result turned investors to look for higher-yielding assets, such as the euro.

It currently seems that for as long as the U.S. economy will continue to provide positive signals, the dollar might weaken further, especially vs. the euro.

As for today, U.S. banks will be closed in observance of Labor Day, and no significant publications are expected from the leading economies. Traders are advised to follow global equity markets as positive trading is likely to put further bearish pressure on the dollar.

EUR/USD and the Double Crossover Method Trending System

Posted: 03 Sep 2010 12:12 AM PDT

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The Euro is coming back versus the dollar with the EUR/USD ending a period of range trading. Bearish bets on the euro have eased, and this is apparent in the latest technical buy signal, the golden cross.

One of the easiest and most common trending systems to use is the Double Crossover Method. This simple system uses two moving averages. The most-used combinations are the 5 and 20 days, along with the 10 and 50 days. Some traders also prefer to use a different moving average. Some prefer the exponential moving average or the weighted moving average.

For the EUR/USD daily chart below, we will be using the 5 and 20 day simple moving averages.

A buy signal is given when the faster, 5 day moving average (green) line crosses above the slower, 20 day moving average line (red).

A sell signal is given when the faster, 5 day moving average line (green) crosses above the slower, 20 day moving average line (red).

Since the last signal (sell) in mid-August, the system underperformed with a loss close to 100 pips. The system works the best when the markets are in a trending phase. For traders who use the double crossover system, the last two weeks have been a range trading environment which is not preferred. The previous buy signal that was triggered in early June was much more profitable, netting somewhere around 640 pips.

Certainly other parameters must factor into the equation before a trader takes a position in the market. As the markets may only be in a trending phase 50% of the time, with the other half of the time spent in a range trading period, traders need to identify where the long term trend is and if indeed the market is showing signs of a trending environment.

One tool for identifying the trend is the ADX indicator. This discussion won't dive into the specifics of the ADX indicator, but it is used to identify a trending environment versus a range trading environment.

Looking to the far right edge of the chart below, traders can see the 5 day moving average line should cross above the 20 day moving average line by the end of today's trading. Once a cross is made, this is a signal for those traders who use the double cross over method to close out short positions and go long on the EUR/USD.

EURUSD

Non-Farm Payrolls to Highlight Today’s Trading

Posted: 02 Sep 2010 11:20 PM PDT

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Central banks and investors around the world are worried about the outlook for the U.S. economy. Whether these fears are accurate or misplaced will hinge on tomorrow’s non-farm payrolls report. The outcome of the NFP release is important because it will not only affect the market’s appetite for U.S. dollars but also the Federal Reserve’s decision about monetary stimulus. If non-farm payrolls beat expectations, it would reduce the need for more monetary stimulus but if the labor market report disappoints, it could force the Federal Reserve into action.

Today's leading news events:

12:30 GMT: USD – Non-Farm Employment Change

We expect U.S. August Non-Farm payrolls to show a decline from 131k to 101k in August due in large part to dismissals among temporary Census workers. A drop in jobs in the private sector can sure happen now, after all of August's figures have been terrible. The unemployment rate is expected to edge up to 9.6% from 9.5%.

As usual, USD/JPY will have the cleanest reaction to the non-farm payrolls report while high beta currency pairs such as the EUR/USD, GBP/USD and AUD/USD will respond to risk appetite. Be forewarned however as Non-farm payrolls are a notoriously volatile piece of data to trade as revisions and expectations can also impact the market’s reaction.

14:00 GMT: USD – ISM Non-Manufacturing PMI

Complementing the manufacturing sector, the services sector has also performed well last month (54.3 points) and will probably dip this time to 53.6 points. If this figure shrinks once more today we could see some selling pressure on the greenback, with EUR/USD reaching as high as $1.2930

EUR/CAD Consolidating towards 1.3700

Posted: 01 Sep 2010 10:31 PM PDT

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The euro has been regaining its composure against its smaller North American counterpart due to recently boosted risk appetite. The Canadian dollar, to the contrary, has been under pressure lately due to a decline in crude oil futures as well as concerns that growth in the Canadian economy may be stagnating. As a result, we can see the value of the EUR gaining against the loonie in a consolidating wedge formation.

- We can see on the daily chart below that the price has indeed been trading within a wedge formation which began in June. The price is currently finding support near 1.3400.

- The upper barrier of this consolidation point also rests at the 38.2% Fibonacci retracement line. The consolidation price target appears to be 1.3700 and there is nothing in our technical indicators which suggests this consolidation will not be met.

- We can also see an ascending pattern on both the Stochastic (slow) and MACD/OsMA, which support the continued upward movement in the direction of this consolidation level.

EUR/CAD – Daily Chart
EURCAD - Daily Chart

EUR and GBP Boosted due to Higher Risk Appetite

Posted: 01 Sep 2010 09:52 PM PDT

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Upbeat US data gave riskier currencies a rare boost yesterday, as investor confidence in the global economic recovery went up. A batch of new data today will largely determine whether the currencies like the euro and UK pound will be able to extend their gains.

Here is a roundup of the day's main news events:

11:45 GMT: EUR Minimum Bid Rate

The Minimum Bid Rate is the euro zone's short term interest rate for refinancing operations. Interest rates are considered one of the more crucial indicators in any economy, and as such, continuously lead to market volatility. While a change from the existing 1.00% rate is not predicted, traders will want to also pay attention to any surprises from the ECB press conference, scheduled for 45 minutes after the rate is announced.

Should the ECB voice any optimism regarding the pace of the euro zone economic recovery, riskier currencies like the euro and sterling will likely extend their bullish trends throughout the day. At the same time, if the ECB voices pessimism regarding Europe's pace of recovery, safe haven currencies like the USD could make a comeback.

12:30 GMT: USD Unemployment Claims

The US weekly Unemployment Claims figure measures the number of people who filed for first-time unemployment insurance over the last 7 days. With the employment situation at the forefront of the US economic recovery, this figure has consistently led to market volatility.

Last week's unemployment figure came in slightly below expectations, resulting in a boost for riskier currencies. This week, analysts are predicting a slight increase in unemployment. If true, traders can expect the safe haven currencies to stage a slight comeback in afternoon trading. At the same time, this figure is notoriously difficult to predict. Anything below the forecasted number may lead to risk taking, and a boost for the euro.

ADP Foreshadows Sharper NFP Drop; USD Under Pressure

Posted: 01 Sep 2010 05:53 AM PDT

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The US Non-Farm Employment Change report, or Non-Farm Payrolls (NFP) for short, is a strong indicator of market activity in one of the world’s largest economies. As such, this report carries a significant impact on the value of the US dollar (USD) through various channels, both direct and indirect.

These channels have very broad implications for analysts. For instance, if the number of employed people in the US is increasing, we can deduce that more jobs are being created and the US economy is on its way to recovery. A negative reading may be reflected with a sharp flight away from the greenback. A positive figure, however, could help the USD halt its latest decline against the other major currencies.

The US experienced a rapid rise in employment from January through June with the 10-year census hiring by the US federal government. However, those recently employed by the Census Bureau have now been counted, and we’ve seen US employment figures decrease just as rapidly over the past two months since those numbers are no longer included in the data.

With Wednesday's ADP report verifying the recent pause in employment growth across the US, a number of analysts are now expecting Friday's release to be a bit more ominous than previously thought. With private sector employment showing a cut of 10,000 jobs, the addition of the federal government's cuts from the Census Bureau should show nation-wide employment in a much worse position than ADP's private sector figures. We have seen the downward pressure building on the US dollar this entire week as a result.

At the moment, the NFP appears to be showing an expected 101,000 jobs lost in August. However, if today’s ADP figures are any sign of what to expect, a reading much lower than -101K may be developing. I wouldn’t be surprised to see the NFP forecast revised before Friday’s release to reflect this expectation. Tied in with this expectation is a pricing in of a weaker USD. We’ve seen the greenback dropping steadily against most of its currency rivals this week, likely due to a rise in risk appetite following positive news from China and Australia, but also from an expected slow-down in American economic recovery.
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