Tuesday, August 9, 2011

FOREXYARD: Forex News Blog

FOREXYARD: Forex News Blog

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US Dollar Still a Safe-Haven after Rating Downgrade

Posted: 08 Aug 2011 04:20 AM PDT

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Despite the lowering of the US credit rating by S&P the USD proved it is still the go to currency when risk sentiment falls. Multiple policy moves this weekend highlighted by an expansion of the ECB bond buying program failed to prevent a slide in equity markets.

A hodgepodge of policy action did little to impede the negative market sentiment. After initially opening weaker in early Asian trading the USD was bid following a rollover of European bourses. The Nikkei finished down 2.18% while the London FTSE was lower by 1% and the German DAX down 1.67%.

The ECB began buying Italian and Spanish debt with rumors of EUR 5 bn worth of purchases in the 5-year series of both countries. The purchases look to have temporarily succeeded in bringing the yields lower but the expanded bond program may come with a price tag of a bloated ECB balance sheet, reduced creditability as the ECB holds increased amounts of riskier debt, and potential for an higher values in the EMU money supply as large bond buyback programs may prevent the ECB from sterilizing the currency flows the central bank puts out into the market.

A statement from the G7 was released in early Asian trading and sounded supportive towards further intervention from Japanese officials but stopped short of supporting a coordinated policy of intervention to support the USD or weaken the JPY.

While equity markets sank the USD received a safe-haven bid and the EUR/USD was sold at 1.4400 this morning. It appears the ECB bond buying program has either failed to regain the market's confidence or was simply not large enough to provide a "shock and awe" effect. EUR/USD support comes in at last Friday's low of 1.4050 followed by the 200-day moving average at 1.3940. Sterling is also weaker versus the dollar but has a more positive technical tone. Resistance is found at 1.6475 with support at 1.6230 where the 55-day moving average comes in.

After reaching a new all-time low at 0.7525 the USD/CHF moved higher 100 pips on USD strength. AUD and Kiwi are off sharply as the commodity currencies continue to struggle in this "risk-off" environment. The NZD/USD is testing a trend line from the 2009 March low at 0.8330. A break here may test 0.8100 from the mid-July low.

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Weekly Technical FX Preview – How Low Can the USD/CHF Go?

Posted: 08 Aug 2011 12:49 AM PDT

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EUR/USD

An opening gap higher on Monday morning took the pair above its current downward sloping channel that contained the EUR/USD since late July. Selling into EUR/USD gains may be the right play as the pair has been unable to hold a bid above the 1.45 level. Initial resistance comes in at 1.4540 though a break above the June high of 1.4700 would likely reverse the negative technical tone. To the downside support comes in initially at last Friday's low of 1.4050 followed by the 200-day moving average at 1.3940 and the rising trend line from June 2010 which comes in at 1.3840.

EURUSD_Daily

GBP/USD

Cable looks to be supported after moving lower and receiving a bounce at 1.6220. This level holds the 55-day moving average and a 38% retracement from the mid- July low to the late July high. Resistance is found at 1.6475 followed by 1.6550. A break here and sterling could test the April high of 1.6750. 1.6220 is initial support followed by the 200-day moving average at 1.6085, 1.6000, and the July low of 1.5780.

GBPUSD_Daily

USD/JPY

The spike higher in the value of the USD/JPY due to Japanese government intervention was short lived as the 80 yen level was eagerly sold into. The pair has retraced 68% of its move from the August low to the post intervention high and may continue to move lower. A previously broken trend line from the late July move lower may be supportive but most likely only a short term pit stop on the way back to the all-time low at 76.25. Resistance is found at 79.50 and the post intervention high of 80.22. An additional round of FX intervention could take the pair to the long term trend line off of the 2007 high which comes in at 82.00.

USDJPY_Daily

USD/CHF

Even measures undertaken by the Swiss National Bank to weaken the Swiss franc have failed to give the USD/CHF a bid. On Monday morning the pair gapped lower to a new all-time low. Momentum is steadily falling and traders may want to continue to hold their shorts. Initial resistance stands at 0.7800 followed by 0.8080 and the downward sloping trend line from the February low at 0.8270.

USDCHF_Daily

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American Employment Sees Stellar Growth in June

Posted: 07 Aug 2011 11:58 PM PDT

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The American jobs market, as revealed by reports today and over the past few weeks, appears to be in a period of stellar growth. Despite the pessimism running rampant throughout global markets, and despite the severe downturn in US stocks this week, jobs appear to be returning in larger numbers.

The results from today's Non-Farm Payrolls (NFP) data highlighted a significant uptick in US job growth. Expectations were for the creation of approximately 89,000 new jobs. The report stated, in fact, that around 117,000 new jobs were formed over the past month instead. On top of the NFP report, Wednesday's ADP data on the private sector also showed similar growth, and Thursday's unemployment claims grew less than forecast.

The unemployment rate also declined from 9.2% to 9.1% alongside a 0.4% bump in average hourly earnings, month-on-month. Though many investors appear to be anticipating a return to recession, the summer employment reports don't seem to confirm this view. One of these outlooks is lagging behind the other; which one it is will be the question everyone asks at the start of next week.

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Germany Industrial Production Slumps

Posted: 07 Aug 2011 11:53 PM PDT

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A fear arising this week from the European Central Bank's (ECB) rate statement, and concurrent speculation over an Italian default, has been that regional growth is becoming stagnant. Today's industrial production figures out of Germany appear to confirm this view.

The agency Destatis released its report on German Industrial Production Friday at 11:00 GMT revealing a 1.1% contraction in the industrial sector of the German economy. Economists had forecast a meager 0.1% growth, anticipating a slow-down. But today's contraction signals a far worse scenario than some had anticipated. The value of the regional currency, the EUR, appears hit by the news as it enters a price slump ahead of the week's closing.

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British and Canadian Housing Still Rising

Posted: 07 Aug 2011 11:50 PM PDT

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Data on the housing markets in Great Britain and Canada today continued to provide ample evidence of a rebound in the fragile global housing market. The Halifax Bank of Scotland published its house price index (HPI) this morning, revealing a 0.3% growth in home values and beating out expectations for only a 0.1% climb. Canada also witnessed a hike in demand for new construction, as signaled by its Building Permits release.

Statistics Canada published at 13:30 GMT today a building permits report which contradicted market forecasts with surprise growth. Analysts were anticipating a decline in demand for new buildings by approximately 4.8%. The actual results showed a jump in demand by 2.1% instead. Both figures taken together, and in conjunction with similar reports from both countries and the United States over the past few weeks, underline the growing strength of the housing market while all other markets appear to be in decline.

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