Friday, October 28, 2011

FOREXYARD: Forex News Blog

FOREXYARD: Forex News Blog

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Advance US GDP Supports Growth Prospects

Posted: 27 Oct 2011 06:17 AM PDT

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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

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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

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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

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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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