FOREXYARD: Forex News Blog

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• Where Were You When the US Defaulted?
• British Mortgage Approvals on Steady Track for Growth
• Australian PPI Sees 0.8% Q2 Growth
• Swiss Franc Reaches New Record on US Debt Concerns
• Weekly Technical FX Preview – GBP/USD Retraces to Broken Trend Line
• Canadian Prices Fall, Retail Sales Rise
• Euro Zone Industrial Sector Expecting Boom in Autumn?
• Australian Inflationary Data Gets Bump from Import Prices
• Swiss ZEW Economic Expectations in Sharp Decline
• Euro Zone Flash Data Disappoints, EUR Drops
• US “Gang of Six” Budget Plan Rallies Investor Risk-Taking

Where Were You When the US Defaulted? Posted: 25 Jul 2011 08:48 AM PDT Investors appeared anxious this morning following the high-tension debt talks between Senate and House leaders that resulted in walk-outs and partisan pot-shots on both sides. Republican presidential runners have hit the talk-show circuit blasting President Obama on failed leadership while Democratic congressmen slip similarly rancid attacks on the Republican leadership into newspapers and other various public mediums. The unease seen on Wall Street these past few days has given many investors a feeling of intense risk aversion heading into the final week of debt talks before the August 2 deadline is passed. US stocks appear ready to take a dive if talks fail. The resulting slips in market confidence will likely ripple throughout the global financial system as well. Analysts are already pointing to record gains seen in the value of the safe-haven Swiss franc (CHF) and Japanese yen (JPY) this week; both capturing headlines with their bullish runs. The US dollar (USD) finds itself in a pickle among this market maelstrom. Traditionally, the USD acts as a safe-haven during times of risk aversion — even when that risk is emanating from the United States. But there is a sense that investors are hesitant to move towards the greenback even though such moves can be felt in today's trading. Which direction the USD moves over the next two weeks will be of major interest to anyone involved in foreign exchange (forex) trading. If the US defaults on its debts for the first time, history will have been made and traders will be sitting on the front row of severe shifts in global capital and financial markets. You may one day be asked, "Where were you when the US defaulted?"

British Mortgage Approvals on Steady Track for Growth Posted: 25 Jul 2011 08:48 AM PDT The housing market, which has seen modest growth globally these past two months, was seen steadily advancing in Britain with this morning's publication of mortgage approvals in the UK. The British Bankers' Association (BBA) published its report on the overall number of mortgage approvals for the last month and revealed a figure slightly above forecasts. The expected result was for the approval of roughly 31,300 new mortgage approvals by Britain's primary banks. The report revealed that approximately 31,700 new mortgages were approved, supporting recent findings that the housing market is stabilizing worldwide through these summer months.

Australian PPI Sees 0.8% Q2 Growth Posted: 25 Jul 2011 08:47 AM PDT The Australian Bureau of Statistics published its latest quarterly findings on the nation's producer price index (PPI), a measure of inflation at the producer level of the economy. The report measures the percent change in inflation on a quarterly basis for Australia and is connected to the economic growth of the Australian economy. The forecast for this important quarterly report was for a mild 0.6%. The actual results of 0.8% has so far helped the Australian dollar (AUD) experience mixed swings in value as global investors grapple with debt concerns in the United States. The Aussie is typically linked to growing risk appetite and commodity prices. As either decline, so goes the AUD.

Swiss Franc Reaches New Record on US Debt Concerns Posted: 25 Jul 2011 04:21 AM PDT After opening higher in Asian trading the US dollar gave back its gains versus the majors. The notable mover of the day is the Swiss franc as the USD/CHF reached a new all-time low while the safe-haven franc has made significant inroads versus the euro. Sterling is lower as traders anticipate tomorrow's Q2 UK GDP numbers. US debt concerns are weighing on market sentiment in the forex market as traders move out of higher yielding currencies and into the safe-haven Swiss franc. As of last Thursday traders were eagerly seeking out higher yielding assets given prospects for debt resolutions in both Europe and in the US. Over the weekend a breakdown in US debt negotiations have reduced expectations for a compromise but most are still expecting some sort of agreement to be stitched together to stave off a default in the world's largest economy. This can be inferred from both US Treasuries and equity prices. The US 10-year is stronger at 2.96% while European equities are little changed and S&P futures look to open only slightly lower. If markets were beginning to price in a default by the US pressures would likely be felt in both the fixed income and equity markets. However, forex markets have responded otherwise with traders bidding the Swiss franc to a new all-time high versus the US dollar. Strong gains for the franc were also seen versus the euro after the EUR/CHF failed to close above its 20-day moving average last week. Against sterling the franc has moved sharply as the GBP/CHF encroaches on the pair's all-time low at 1.3037. Prior to tomorrow's Q2 GDP report sterling has fallen versus the dollar but the GBP/USD remains within its last two day's trading band. UK GDP is expected to slow with consensus expectations for a feeble 0.2% gain. Given the belt tightening in the UK budget and falling PMI numbers a decline in UK growth would not be too far-fetched. The pound could remain on its back foot should UK GDP come in below consensus forecasts, thus boosting the BOE's case for an ultra-loose monetary policy and an additional round of quantitative easing despite a headline inflation rate of 4.2%. This may knock the GBP/USD lower back to the July 18th low at 1.6000, a level that coincides with a 61% retracement target from the July low to last week's high. Resistance comes in at 1.6370 from the previously broken trend line off of the May 2010 low. Read more forex trading news on our forex blog.

Weekly Technical FX Preview – GBP/USD Retraces to Broken Trend Line Posted: 24 Jul 2011 11:58 PM PDT EUR/USD The EUR/USD has taken a step away from the edge after failing to get a close below its 200-day moving average and the price is testing the falling trend line from the May and July highs at 1.4450. Short term momentum is currently rising and break above this resistance line may find resistance at the peaks from July, June, and May at 1.4580, 1.4700, and 1.4940 respectively. However, a bearish tweezer candlestick pattern has formed on the daily chart from last week's highs on Thursday and Friday, strengthening the argument for the 3-month old resistance line to hold. Support is found at 1.4015, 1.3835, and 1.3780 from the rising trend line off of the June 2010 low. GBP/USD After dipping as low as 1.5780 which is the 38% Fibonacci retracement level from the May 2010 to April 2011 move, the GBP/USD has broken above both the neckline from the head and shoulders pattern and the resistance line falling from the April and May highs. The pair has now found resistance at the previously broken trend line from the May 2010 low and now serves as initial resistance at 1.6360. A move above this line will likely go on to test the May high at 1.6545 though sterling bears may make a stand before the April high of 1.6745. To the downside support may come in where the neckline and the previous resistance line off the April and May highs intercept at 1.6190. Additional support is located at 1.6000 and the July low at 1.5780. USD/JPY The reemergence of yen strength has taken the USD/JPY one step closer to its all-time low at 76.11. Falling stochastics on the monthly, weekly, and daily charts all point to additional declines in the pair. Initial support is found at 78.20 followed by the lower line from the falling wedge pattern from December 2008 which comes in at 77.50. A move higher may find resistance at 79.60 and 81.50. USD/CHF An attempt to push the USD/CHF higher ran into resistance at 0.8270. Since failing to hold any gains the pair looks to test the most recent all-time low at 0.8080. Any attempt to move the pair higher will likely encounter resistance at 0.8270 and 0.8385 from the falling trend line off the February high. Relative value sellers of the pair may also be lurking at 0.8550. Read more forex trading news on our forex blog.

Canadian Prices Fall, Retail Sales Rise Posted: 22 Jul 2011 06:12 AM PDT A clear correlation between this afternoon's data from Canada can be seen on today's economic calendar. News released by Statistics Canada today regarding its consumer price index (CPI) and retail sales underscores the country's economic stand-point. Canada's CPI, both nominal and core, revealed a sharp decline in consumer inflation suggesting a downturn in the price for goods and services. Concurrently, however, the northern giant published data that these price declines may have helped fuel resurgence in retail sales. The afternoon publication of sales figures showed a 0.5% increase in core sales, and 0.1% growth in the country's nominal data. Read more forex trading news on our forex blog.

Euro Zone Industrial Sector Expecting Boom in Autumn? Posted: 22 Jul 2011 06:09 AM PDT Data released by Eurostat this morning displayed an unexpected turn in the region's industrial sector. For the past few months industrial orders have been in decline as transportation costs soared and Japanese output dwindled following the recent earthquake and tsunami. This morning's release, however, signaled a 3.6% increase in new industrial orders for the euro zone in June, hinting at a resurgent leap in output for that sector of the region's economy. Expectations were for an increase of only 0.7% following last month's 0.1% contraction. The news could help the euro (EUR) regain some of its former strength during these times of risk aversion. Read more forex trading news on our forex blog.

Australian Inflationary Data Gets Bump from Import Prices Posted: 22 Jul 2011 06:06 AM PDT The Australian Bureau of Statistics released data this morning which countered a forecast expecting a downturn in consumer inflation. The percent change in price for goods purchased by importers rose 0.8% this quarter, beating an expected dip of 1%. Though the data has a delayed impact on inflationary adjustments, the news that import prices shifted higher, rather than lower, signals a continuation of inflationary growth at the consumer level in Australia. Over the coming weeks, the Australian dollar (AUD) may see some buying pressure as traders anticipate economic growth. Read more forex trading news on our forex blog.

Swiss ZEW Economic Expectations in Sharp Decline Posted: 21 Jul 2011 06:31 AM PDT The ZEW confidence reading on economic expectations in Switzerland highlighted a sharp decline in market sentiment for the next six months. The Swiss franc (CHF), a rapidly strengthening currency due to its safe-haven status, was seen trading hesitantly today after the ZEW published a report showing expectations plummeting. Switzerland's economy has weathered the financial storm moderately well, with relatively few economic difficulties since 2007. Whether this sharp downturn in economic outlook will carry a lasting effect on the CHF is yet to be seen. It appears though that investor flights to safety will continue to aid the Swissie as global market turmoil persists. Read more forex trading news on our forex blog.

Euro Zone Flash Data Disappoints, EUR Drops Posted: 21 Jul 2011 06:26 AM PDT As the EU Economic Summit gets underway, traders appear leery about the value of the region's staple currency, the euro (EUR). A choppy and chaotic market has reigned over traders today as a series of reports on flash manufacturing and services reveal stagnant growth in both sectors. The data releases have generated mild scorn as investors who entered mid-week with growing optimism returned to a pessimistic stance and fled back into safe-haven assets. The EUR was seen plummeting against the US dollar (USD), but had sporadic upticks throughout the day as volatility intensified. Read more forex trading news on our forex blog.

US “Gang of Six” Budget Plan Rallies Investor Risk-Taking Posted: 20 Jul 2011 07:13 AM PDT As the deadline to lift America's debt ceiling approaches, a group of six US senators have stepped forward with a last-ditch plan to tackle the country's budget crisis. The behavior of financial and capital markets over the past few weeks have been roiled by massive shifts into safe-haven assets as investors fled risk. Recent market behavior, however, indicates a shift back to normalcy. The bipartisan "Gang of Six" plan is to reduce the budget deficit by $4 trillion over the next ten years, including a tax increase that would raise $1 trillion in new revenues over the same period by closing several loopholes in the American tax system. The passage of such a deal depends largely on whether the GOP will accept the tax hikes included. It has long been assumed that Congress would not allow the US government to default on its loan payments, but as the deadline inched near both parties became piqued at the other's unwillingness to compromise. The resultant deadlock has riddled global markets with added uncertainty. This week, however, what we see is the price of oil moving higher while gold and silver enter a price decline; the US dollar is paring gains as investors opt for the euro; and Asian, American and European stocks are edging higher. These are all signs that investors are expanding their economic outlook and adjusting their portfolios to take on more risk following the economic data surrounding the US housing market, high earnings reports from several large companies, as well as optimism that the "Gang of Six" proposal stands the best chance yet of being accepted and passed. This in no way guarantees that the "Gang of Six" proposal will pass, only that investors view it as a solid starting point for resolving the budget crisis. A recent Republican plan to amend the US Constitution in a way that would have required the government to have a balanced budget failed to pass by the needed majority, and it will be interesting to see how the backlash from that failed initiative plays into the negotiations over this latest proposal.

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