FOREXYARD: Forex News Blog

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• FX Technical Analysis – GBP/USD
• RBA Holds Rates Steady Despite Inflationary Pressures
• Another Blow to British Manufacturing; GBP at Risk of Downturn
• Euro Showing Signs of Weakness, Pound Tumbles
• Swedish Krona Top Performer, Oil Dip Weighs on Norway’s Krone
• Optimism Erupts in US on bin Laden Death, Supported by PMI Data

FX Technical Analysis – GBP/USD Posted: 03 May 2011 07:45 AM PDT Following today's release of disappointing UK Manufacturing PMI data, Sterling sold off sharply. Traders should be looking for a technical retracement to reenter at better levels. Looking at the daily chart for the GBP/USD, Sterling was sold today and looks to have found support near the 20-day moving average at 1.6460. Today's daily low came in at 1.6466. The support level at 1.6430 could be an area of interest for technical analysts. This price level coincides with the late April low and a 38.2% Fibonacci retracement of the April move higher. Below this key area further support is found at the mid-April low of 1.6165, followed by the rising trend line off of the May 2010 lows which comes in today at 1.5970. To the upside, the mid-April high at 1.6600 may prove to be resistive if only temporary. Traders should initially target a return to last week's high at 1.6745, followed by the November 2009 high at 1.6875 and the 2009 high at 1.7042.

RBA Holds Rates Steady Despite Inflationary Pressures Posted: 03 May 2011 06:49 AM PDT The Reserve Bank of Australia (RBA) announced this morning that it would hold its benchmark rate steady at 4.75% despite the recent surge in inflationary data releases. The result was a sudden downturn in Australian dollar (AUD) values across several of its currency pairings. RBA Governor Glenn Stevens remarked that the record rise in Aussie values should help prevent a breakout in prices, though inflation is expected to gain some momentum in the months ahead. The AUD/USD recently touched 1.1011, its highest mark since the first days of becoming a floating currency in 1983. The resistance and support garnered around the Aussie recently is generating enough pricing pressure, according to Stevens, to act as a natural monetary check. Prices are prevented from sky-rocketing out of control since interconnected costs and values would make such a rise unpalatable to consumers. With this stance by the RBA, it appears that speculation of a rate hike has been disappointed and investors are beginning to shift temporarily away from the Aussie in the short- to mid-term. The connection of the Australia dollar to commodity prices has also helped add weight on top of the Aussie's value considering the recent dip in oil and silver prices. Updating your outlook on the AUD may become necessary in the near-term considering the RBA's stance on monetary policy has shifted to one of hesitation. The recent string of inflationary figures had many analysts expecting a rate hike in the near future and began pricing in such information. The position that rates would be held steady while the AUD reaches record highs means monetary tightening will likely be delayed, possibly until 2012. This should begin to have effects on the value of the AUD, pushing against its latest bull-run.

Another Blow to British Manufacturing; GBP at Risk of Downturn Posted: 03 May 2011 06:43 AM PDT Today's figures out of the United Kingdom have put the pound sterling's (GBP) latest uptick at risk of getting pared as investors anticipate a slow-down in British manufacturing. Today's manufacturing PMI data disappointed traders with a reading well below expectations. This blow to the manufacturing and industrial sector of the British economy has begun to ram against the pound's April gains, putting it at risk of a downturn through May. While the Confederation of British Industry (CBI) did publish a better-than-forecast reading on industrial sales, the data came on the coattails of this morning's disappointing PMI figure and do not appear to have been enough to lift the pound today. This news comes after last week's highly distressing industrial new orders data revealing a sharp contraction in the industrial sector of the British economy. Britain was not the only nation affected by this downturn in industry. The sluggishness appears to be global with the euro zone, Japan and the United States each experiencing its own trek through the metaphorical mud. The pound was trading lower today as a result of this PMI downturn, with the GBP/USD falling to fresh 4-day lows and the GBP/JPY also sank with global investors turning to safe-havens. The shift into riskier assets late last week initially assisted the rise of the GBP, but this week's poor fundamentals along with a dip in commodity prices has begun to adjust a number of portfolio positions and causing the pound to lose strength in its legs as its pairs falter. Look to the pound continuing to lose support if global industry remains in a downspin.

Euro Showing Signs of Weakness, Pound Tumbles Posted: 03 May 2011 05:34 AM PDT The failure of the EUR/USD to advance above the 1.4900 level is beginning to slow momentum traders and profit taking in the pair has ensued. Versus the pound the euro is higher after weaker than expected UK manufacturing data. The USD/JPY is closing in on the 80 yen price, a level that could bring further intervention from the Japanese Ministry of Finance. The euro is showing a sign of weakness as the EUR/USD treads water for the 4th day in a row. The pair has failed to move above yesterday's high of 1.4900 and has encountered a bit of profit taking, trading as low as 1.4754 early in the morning before moving higher to 1.4780. European PPI m/m for March was in line with market expectations for an increase of 0.7%, but the reading is still the fastest increase in the past 2 ½ years. This should continue to pressure the ECB to raise interest rates again, perhaps in June or July. Currently the EUR/USD is caught in a consolidation pattern with support at 1.4750. A breach below this level could trigger stops and further selling to the 1.4650 – 1.4625 support level. The long term target remains at the 2009 high at 1.5140. Following a disappointing Manufacturing PMI release, the pound tumbled versus both the dollar and the euro. March PMI fell to 54.6 from 57.0 on expectations for no change in the survey. The report's negative tone was further emphasized with the previous month's reading adjusted lower to 56.7. The GBP/USD fell to 1.6467 from 1.6616. Traders may look to reenter long on the cable at 1.6430, a support level from late April that coincides with a 38.2% retracement from the April move higher. After the weak manufacturing number the EUR/GBP surged to a 13-month high at 0.8979, triggering stops above the 0.8940 resistance level. The next resistance on the weekly chart is found at 0.9150 off of the February 2010 high. The USD/JPY has slipped below the 50% retracement level from the pre-intervention low to the April high, falling to 80.70 on the day from 81.03. The pair continues to inch closer to the 80 yen line in the sand. At this price level the Japanese Ministry of Finance may feel the need to step in and intervene in the forex market to help weaken the yen.

Swedish Krona Top Performer, Oil Dip Weighs on Norway’s Krone Posted: 02 May 2011 11:11 PM PDT Little appears to be rumbling on the surface in the currency world of Scandinavia since last week. Sweden still dominates the forex market with record gains against all of its currency rivals. Norway has been growing steadily as oil prices surge and Denmark remains hesitantly linked to the debt fears of the euro zone. What we can analyze for future currency moves, however, is the happenings among the banking world of these Norse giants. Business headlines across the region have loudly proclaimed the rise of banking profits since the start of 2011, primarily Sweden's. Nordea Bank, the largest bank in the Nordic region, recently posted a surprise 15% jump in Q1 profits with a $1.1 billion surge. The sudden influx of capital appears to be connected with recent optimism in Sweden regarding its position of working to tighten monetary policy and further enlarge bank capital requirements for loans, analysts have said. A 2011 study also suggests that Swedes are among the Nordic region's best "savers." Leading news in Denmark is targeting the scandal of a transportation subsidiary, DSBFirst, which bilked the public coffers and failed to report on the reality of its own financial chaos, all while failing to produce results on effectively managing public transportation. The company also operates in Sweden which has recently threatened to strip DSBFirst of its operating license in Sweden should they fail to improve upon their current performance record. The impact of this scandal is not yet known for the Danish body politic. In currency news, the Swedish krona (SEK) remains atop the ladder for best performers of FY 2010-2011 thus far. The Norwegian krone (NOK) experienced a short dip yesterday as oil prices fell due to a sudden surge in the US dollar brought about by the optimism which rocked markets after the announcement that Osama bin Laden had been killed by US commandos in Pakistan. The rise in USD values was short-lived, however, and Crude Oil looks to be finding support as of this morning. Should the greenback persist in its recent bearishness, which appears to be supported by fundamentals and technical analysis, then the Scandinavian kroner should remain ahead of the crowd, remaining top performers among regional and global currencies.

Optimism Erupts in US on bin Laden Death, Supported by PMI Data Posted: 02 May 2011 11:06 AM PDT The US dollar received a surprise boost in today's trading following the announcement by President Barack Obama that al Qaeda headman Osama bin Laden was killed in a raid into a Pakistani town just north of Islamabad. The celebrations erupting throughout US cities created an atmosphere of euphoria that has assisted in a short-term rebound in optimism which lifted the dollar in today's early trading hours. Though bin Laden's death is not an event directly linked with market activity, the news came at a time when both Europe and Japan were experiencing thin trading environments from holiday celebrations. As such, this surge in excitement regarding the political sphere of American life spilled over into the illiquid market generating a mildly bullish bump to the greenback. The dollar quickly rebounded against a number of its rivals, with the EUR/USD pushing towards 1.4807 from its recent 17-month high of 1.4900. Economic data releases, however, have pushed the pair back into its bullish channel, currently returning to the aforementioned peak. Following this morning's announcement, the Institute of Supply Management (ISM) also published its Manufacturing PMI data, as well as its report on manufacturing prices, both of which showed higher than expected growth in production inflationary figures. The report coincided with data which revealed a 1.4% jump in construction spending, beating out forecasts for a 0.4% growth, which further supported the notion that May housing figures should be higher than April's. These economic data releases, along with the announcement of bin Laden's death, assisted in a short-term rise in greenback values, but also assisted in the rapid rebound as traders took cue to take profit on the dollar by remembering that very little is supporting its current rise outside of short-term speculation. The buck has now returned to its bearishness and appears to be on track to remain as such for the rest of the week.

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