FOREX TIPS: October 2011

Saturday, October 29, 2011

FOREXYARD: Forex News Blog

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Swiss KOF Barometer in Decline
Japanese Unemployment Falls 0.2% in October
British Consumers Increasingly Pessimistic
Weekly Fundamental FX Preview – US Monetary Policy Back in Focus

Posted: 28 Oct 2011 07:19 AM PDT

This morning's publication of Switzerland's KOF Economic Barometer revealed an economic outlook that has dipped somewhat since last month's reading. A combination of economic indicators is now portraying economic conditions slightly more pessimistically than before.

The measure only fell by approximately 0.2 points from 1.00 to 0.80, a measure that still falls within optimist territory, but only slightly. The Swiss economy has fared relatively well over the last several years, only recently falling from a gouging effect brought on by an artificially strong currency.

Japanese Unemployment Falls 0.2% in October

Posted: 28 Oct 2011 07:17 AM PDT

A surprise indicator from the Japanese economy this morning revealed an employment sector growing modestly through the autumn months. Expectations were for a worsening of the unemployment situation in Japan due to the decline in manufacturing and industrial production lately.

The actual results produced a surprise uptick in optimism about Japan as unemployment fell this past month from 4.3% to 4.1%. The report tends to have less impact on the value of the JPY, though it is a significant indication of job growth in the struggling island economy.

British Consumers Increasingly Pessimistic

Posted: 28 Oct 2011 07:04 AM PDT

A survey conducted of roughly 2,000 British citizens asking them to rate their views on the state of the economy found that pessimism is growing in the UK. The report, issued by GfK NOP, reported a decline by two base points in their survey measure.

The findings were only mildly below forecasts, which expected no change from last month's reading of -30. The actual report came in at -32, making the pessimism only slightly higher, but still ominous given the news surrounding the rest of Europe to the south and east of Britain.

Weekly Fundamental FX Preview – US Monetary Policy Back in Focus

Posted: 28 Oct 2011 06:23 AM PDT

Today's consolidation in the G10 currencies is not too surprising given the awesome rally the majors put in yesterday and in particular for the month of October versus the USD. The start of the new month will be highlighted by both the FOMC meeting as well as Friday's NFP jobs report with particular emphasis being placed on Ben Bernanke’s press conference Thursday.

In the month of October markets stood next to the cliff and slowly backed away with rallies of 11.8% in the Dow Jones Industrial Average and a 6% gain for the EUR/USD. Though yesterday's impressive move for the EUR do not come without their doubts as questions swirl regarding the EFSF leverage capabilities, Chinese political requirements for participation in the EU rescue, and new disheartening French growth prospects.

US Q3 GDP has helped to keep the double dip recession talk at bay though today's flat core PCE price index is a stark reminder of the deflationary pressures that still linger in the US economy. Thus Wednesday's FOMC meeting/statement/Ben Bernanke press conference will be highly anticipated as some FX players have begun offloading USD in preparation for a third round of quantitative easing. With the addition of the FOMC press conference to the Fed's tool chest of communication tools, might Ben Bernanke sow the seeds for QE3 here?

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Friday, October 28, 2011

FOREXYARD: Forex News Blog

Advance US GDP Supports Growth Prospects
Prelim CPI in Germany Sees Zero Growth
Japanese Retail Sales Plummet 1.2%
Market Sentiment at a High following European Agreement

Advance US GDP Supports Growth Prospects

Posted: 27 Oct 2011 06:17 AM PDT

Thursday release of Advance GDP in the United States underscored a plausible increase in the nation's economic growth. As an early indicator of economic expansion in the world's largest economy, this indicator is highly important to gauging the direction of the market.

Expectations for today's GDP release were for a very moderate upturn from last quarter's early reading with a 2.4% growth priced in. The actual result was only mildly higher with a figure of 2.5% growth. This supports recent measurements of an American economy expanding modestly throughout the fourth quarter.

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Prelim CPI in Germany Sees Zero Growth

Posted: 27 Oct 2011 06:12 AM PDT

The preliminary reading on the consumer price index (CPI) in Germany this morning revealed utter stagnation. The reading was expected to show a 0.1% increase in consumer inflation, a dismal reading on its face, but the actual results being lower than this have so far pulled back on the EUR in today's trading.

CPI is an interesting measure of the growth rate of the prices consumers pay. The economic forces which influence inflation are varied and numerous and it seems difficult to assess what impact such figures have except to say that Germans are not paying more for their consumer goods. On its face it sounds positive, but the indication is that the German economy isn't growing, which can result in negative growth should it persist.

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Japanese Retail Sales Plummet 1.2%

Posted: 27 Oct 2011 06:06 AM PDT

Expectations for this morning's retail sales data out of Japan were for zero growth, which would have been a step in the right direction had it occurred. Unfortunately, the level of consumer spending on retail items in Japan fell by approximately 1.2% in October.

The impact has so far been muted by the Bank of Japan's (BOJ) interest rate statement which saw the nation's rates held near zero percent and few comments worthy of note. The yen is still trading mildly bullish, though some setbacks have been seen from recent data.

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Market Sentiment at a High following European Agreement

Posted: 27 Oct 2011 05:01 AM PDT

Following the European agreement to leverage the remaining EUR 290 Bn in the EFSF up to EUR 1.0 Trn, increasing banks' Tier 1 capital, a 50% haircut on Greek debt, and the removal of the ECB from the EFSF, financial markets have taken off with the "risk on" trade performing well. The EUR, AUD, and European equities are trading at their highest level this month.

Now that a deal in principal has been reached surrounding the European debt crisis with the details to be hashed out at a later date, markets will begin to turn their attention back to fundamentals and that means US GDP numbers which are due out later today. Expectations are between 2.4-2.5%. Two scenarios could play out:

1. GDP outperforms and the risk on trade continues to fire on all cylinders.
2. The Q3 data underwhelms the markets and the USD has reached its low for the day.

While previous data releases hint at a strong Q3 reading, short term technical indicators are beginning to show price divergence as seen on the EUR/USD daily chart's stochastic. The rising trend line from the October low comes in at 1.3830 with resistance at the 200-day moving average at 1.4100. Cable's 8 cent rally has failed to overtake its 100-day moving average for the 3rd day in a row and initial support for the GBP/USD is found at yesterday's low of 1.5890. Cable may have resistance at its 200-day moving average at 1.6135.

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