Thursday, October 27, 2011

FOREXYARD: Forex News Blog

FOREXYARD: Forex News Blog

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Q3 US GDP Could Outperform but Data may be Overlooked

Posted: 26 Oct 2011 08:35 AM PDT

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Typically US GDP is a high impact event in the foreign exchange market though tomorrow's data may be overlooked given the tensions in Europe and the continued talk of QE3 by the Fed.

Today US core durable goods orders for the month of September climbed 1.7%, handily beating consensus forecasts of 0.5%. The better than expected result combined with this past month's surprisingly positive NFP jobs report may help to shift investor expectations higher regarding tomorrow's Q3 GDP report. Consensus forecasts are for 2.4% growth but perhaps the US economy is growing at a faster pace than forecasted?

Unfortunately, this data may be overshadowed by growing expectations for QE3 regardless of the growth data as unemployment levels remain elevated. This could keep pressure on the USD despite the tensions in Europe and today's USD gains. A better than expected US GDP would also be positive for the "risk on" trade.

At print time the recent trend line rising from the October low remains intact with the EUR/USD failing to make a decisive break. A move below this line could find a bid at 1.3650 from where the October 18th low and the 20-day moving average converge.

Cable is down more than one cent today but yesterday's current account numbers speak well for the UK economy. GBP/USD failed to move above its 100-day moving average which is just above the 50% Fibonacci retracement from the April to October decline but the pair has support at 1.5850 from the top of last week's consolidation pattern. A deeper move could have sterling bulls lurking at 1.5780 from the rising support line off the October 12th low.

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US Durable Goods Orders Reported with Mixed Results

Posted: 26 Oct 2011 07:44 AM PDT

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The publication of the durable goods orders reports from the United States earlier this afternoon revealed a mixed sentiment regarding the manufacturing sector of the world's largest economy. The nominal figure came in with a reading slightly below forecasts with a 0.8% contraction. The core reading, however, beat forecasts with optimistic growth.

The core reading measures the same level of orders as the nominal reading, but excludes transportation items due to their heightened level of volatility. The core reading revealed a 1.7% increase in durable goods orders for October. This reading, which tends to have greater impact, gave several traders reason to be optimistic, but the downturn in transportation orders sends mixed signals about the direction of American manufacturing.

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Australian Core CPI Sluggish in October

Posted: 26 Oct 2011 07:27 AM PDT

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Consumer inflation, as reported by the Reserve Bank of Australia (RBA) this morning, seems to have held steady at 0.6% in October. But the Trimmed Mean CPI, which is similar to the Core CPI reading of other countries since it excludes the most volatile items, revealed sluggishness with only 0.3% growth despite forecasts for a higher reading.

The consumer price index (CPI) measures the change in price paid by consumers and represents one measure of economic growth. If prices are increasing, it can be due to any one or a combination of several factors including higher demand, rising energy costs, rising manufacturing costs, lower supply, longer transportation times (i.e. higher transportation costs) due to increased traffic during the holidays, etc. The sluggish reading suggests that the core of Australia's inflationary growth is being held lower which may affect the Aussie's (AUD) value over time.

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New Zealand NBNZ Confidence Report Halved

Posted: 26 Oct 2011 07:23 AM PDT

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The early morning's publication by the National Bank of New Zealand (NBNZ) regarding consumer confidence in October presented a rather ominous reading on consumer outlook in the Pacific island economy. The reading from September was published at a diffusion index reading at 30.3. This month saw the reading get more than halved with a release at 13.2.

The New Zealand dollar (NZD) has been trending sideways for several days and this morning's publication did appear to place pressure atop the Kiwi. Should tonight's rate statements by the Reserve Bank of New Zealand (RBNZ) come out dovish, we could see a wide sell-off in the NZD.

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EU Economic Summit is Today’s Highlight Event

Posted: 26 Oct 2011 03:54 AM PDT

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The economic calendar is full today with data from the US and the Monetary Policy Report from the BoC but traders will be squarely focused on news coming from the EU economic summit.

Expectations are for an agreement to be hammered home today regarding new capital injections into the European banking system but up until now the parties (in particular Germany) have been unable to agree to the respective haircut on Greek debt and just how the EFSF will be leveraged. One thing is for certain that Germany is dead fast against continued ECB involvement in EFSF. These decisions will likely be delayed until the next G-20 meeting on November 3-4 or the Ecofin meeting on the 7th. Today's announcement coming from the EU economic summit is expected around 17:00 GMT.

Currently the EUR remains in a tight trading range though a positive press release from today's meeting could change all that. The big round number of 1.4000 is only a stone’s throw away and the 50% Fibonacci retracement from the May high to the October low coming in at 1.4040. Should the market be disappointed by today's events the downside may offer 1.3820 as initial support followed by 1.3650 where the 20-day moving average lies.

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