FOREXYARD: Forex News Blog | |
- Pound Defies Inflationary Pressures
- US Economic Data Looks to Support Dollar Gains
- Russell 2000- Technical Update
- DAX 30 May Turn Bearish
- Currencies Experiencing Wide Swings from Heavy News Week
| Pound Defies Inflationary Pressures Posted: 17 Feb 2011 08:01 AM PST
Despite the knee jerk reaction by traders following yesterday's Bank of England inflation report, UK interest rates are expected to rise, just not as fast as previously expected. If yesterday's price action in the GBP/USD was any indication of what is to come, we may have a situation of buy the rumor, sell the fact. Traders may have gotten ahead of themselves as many priced in three 25 bp rate hikes this year by the BOE. BOE Governor Mervyn King said a similar statement yesterday in regards to preparing the market for increasing rates. Comments such as these directly contrast the previous day's letter to the Chancellor of the Exchequer on why inflation is higher than expected; rising commodity prices and an increase in VAT. Similar to the ECB, the Bank of England faces the challenge of fighting inflationary forces without sabotaging Britain's economic recovery. A premature increase to the interest rate would directly impact unemployment figures as well as average earnings, slowing two economic indicators the BOE takes into account when setting interest rates. The most recent data published this week shows the rate of inflation rising by 4% on an annual basis. Unemployment figures are also lower as the British economy continues to shed jobs with a loss of 68K jobs since December. Monthly Nationwide Consumer Confidence numbers also slid to 47 from 49. Given the miserable economic data, it is not surprising the BOE's hesitation to raise British interest rates. In a rising interest rate environment, these three data pieces may only fall further. The pound has been supported this year versus the dollar to the tune of 3.4% as the market has expectations of increasing British interest rates versus the US which is still easing monetary policy with the implementation of QE II. Yesterday's price action of the GBP/USD had traders selling the pound following the bearish commentary by King, sending the pair below the 1.60 level. Solid bids were apparent at this price and the buying of the pair has continued into today's trading. Expectations for higher interest rates should continue to support the GBP/USD as traders buy the rumor and sell the fact. Targets for the pair are the February high of 1.6230, followed by the November 2009 high at 1.6880. |
| US Economic Data Looks to Support Dollar Gains Posted: 17 Feb 2011 04:32 AM PST
The dollar was mixed at lunch time of the European trading session with the Swiss franc strengthening broadly on safe haven bids. US inflationary data along with weekly unemployment numbers are due up shortly. Following yesterday's Fed Meeting Minutes release which showed the Fed's upbeat tone for the US economy, the dollar shed its gains versus the major currencies. Spurring the shift in sentiment was news of Iranian war ships sailing for the Suez Canal in route to Syria. Safe haven bids were seen as traders moved into the Swiss franc on news of the ships movement. The franc gave back some of its gains following the Iranian decision not to sail the ships, but bids for the franc remain strong both against the dollar and the euro. The EUR/USD is currently trading down at 1.3545 after opening the day at 1.3579. The EUR/CHF is down at 1.2965 from 1.3020, while the USD/CHF is lower at 0.9570 from 0.9588. Traders will now turn their attention to economic data due out from the US this afternoon with the release of US Core CPI and weekly unemployment claims at 13:30 GMT. Expectations are for a stable Core CPI with a rise of only 0.1%. Unexpected inflationary pressures would be a catalyst for the greenback. EUR/USD support is found at Monday's low of 1.3430, followed by the rising trend line from the June 2010 low which comes in today at 1.3050. Resistance is located at last night's high of 1.3610, a level that coincides with the current trend line falling from the January/February highs. Also expected this afternoon is testimony from Federal Reserve Chairman Ben Bernanke who is set to testify in front of the Senate Banking Committee. The Fed's tone in yesterday's meeting minutes was more optimistic than expected as the central bank forecasts the US economy to grow between 3.4% and 3.9%. As such, traders may be looking for rising US rates or for the Fed to end the QE II program prior to the full purchase of $600B worth of government securities. Both events would be dollar supportive. |
| Russell 2000- Technical Update Posted: 17 Feb 2011 02:03 AM PST
A bullish movement in Russell 2000 has pushed a number of technical indicators into the over-bought territory. As I will demonstrate below, Russell 2000 may very well be heading for a reversal, as a bearish cross has taken place on the Slow Stochastic. In addition, the Williams Percent Range indicates that the price of this cross currently floats in the overbought territory, signaling downward pressure. Forex traders can take advantage of this impending movement by having their Entry Orders in place to capture this reversal. Don't forget your Stops and Limits!
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| Posted: 17 Feb 2011 12:01 AM PST
DAX 30 rose significantly in the past month and peaked at 7440 level. However, the daily chart is suggesting that a recent upwards trend is loosing steam and a bearish correction is impending. Forex traders can take advantage of this imminent downward movement by entering short positions at an excellent entry price. • Below is the daily chart for DAX 30 by ForexYard. • The technical indicators used are the Slow Stochastic, MACD and Williams Percent Range. • Point 1: There is a "doji" candlestick that has formed on the chart, indicating that a reversal should take place. • Point 2: The Slow Stochastic indicates a bearish cross, signaling that the next move may be in a downward direction. • Point 3: The Williams Percent Range has peaked near at the 0 marker, which means that there may actually be a strong level of downward pressure. • Point 4: The MACD indicates an impending bearish cross, which may signal a downward movement is going to occur in the near future. DAX Daily Chart |
| Currencies Experiencing Wide Swings from Heavy News Week Posted: 16 Feb 2011 11:49 PM PST
Following yesterday's heavy news day, currency values appear to be experiencing wide swings in value. The US dollar took a dive versus most of its currency rivals, while the euro regained much of last week's losses. As this week begins to come to a close, the rest of this week's busy calendar events appear poised to continue pushing forex values into volatile price shifts. Here is a roundup of today's leading events: The monthly release of the Core Consumer Price Index (CPI) represents the change in price of goods and services in the United States, minus the food and energy sectors. It is one of the primary inflationary gauges used by the Federal Reserve to determine whether or not interest rates should be raised. If the Core CPI only rises by 0.1%, as expected, then the impact on the US dollar should be limited. A drastically different figure than what is forecast could affect the USD, but direction is unclear at this point. 15:00 GMT: USD – Philly Fed Manufacturing Index Approximately 250 manufacturers are surveyed in Philadelphia to create this index which measures industry growth in one of the largest manufacturing cities in the United States. This month's survey is set to reveal continued expansion in the manufacturing sector of Philadelphia's economy. However, the rate appears to be slowing as forecasts are expecting a decline in the level of the diffusion index. |
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