| USD Forecast to Continue Bullish as Market Uncertainty Rises Posted: 11 Feb 2011 11:00 AM PST 
With the US dollar still rising against its primary currency rivals, many expectations appear to point towards a continuation of strength heading into next week. But is this really the case? Recent dollar gains may be attributed to a number of factors. Among them are fluctuations in risk appetite from tensions in Egypt as well as renewed debt concerns in Europe; positive data out of the American economy; shrinking oil prices leading to cheaper transportation and industrial costs; and the rollover unwinding of USD short positions. Technical fluctuations and cycles also appear to have been a major factor over the past week, as a number of reports have shown. Heading into next week, however, we should expect to see three interrelated trends. First is an expected increase in liquidity from a dizzying array of economic reports next Tuesday and Wednesday. Most of these calendar events will carry a direct impact on currency values in the major economies of Britain, the United States, Switzerland, Australia, New Zealand, and the broader euro zone. Secondly, market uncertainty will likely rise next week. This is due to the aforementioned multitude of calendar events which will only give cause for an increased level of confusion about the direction of various economies. Some believe that more data adds more certainty, but history has often taught us that this is not the case when it comes to global economics. In short, more data means more points of information to hold in one's mind when making a decision for a trade. More mental clutter often leads to a decreased ability to accurately analyze the market. Third, the level of uncertainty, and thus risk aversion, will no doubt feed into the USD long positions opened over the last few days. This will also have the effect of driving commodity prices lower, or at least holding them steady through the middle of next week. The only element which will create an opposing trend in the dollar's value is if the majority of economic reports out of Britain and Europe reveal renewed strength and optimism, otherwise investors appear to be more likely to continue to hedge their portfolios with USD long bets.  |
| USD May See Upward Correction Today Posted: 09 Feb 2011 11:06 PM PST 
After falling against most of its main currency rivals yesterday, the US dollar may be able to rebound today with the release of this week’s US Unemployment Claims. In addition, significant news out of the UK is likely to contribute to what appears likely to be a volatile trading session. Here is a roundup of the day’s main news events: 12:00 GMT- GBP Official Bank Rate Analysts are debating whether the Monetary Policy Committee in England will decide to finally raise national interest rates from their current level of 0.50% when they make their official announcement today. Traders will want to pay attention to the bank rate announcement, as well as to a possible MPC Rate Statement which may or may not occur today. Should interest rates go up, sterling is likely to see a very bullish day against its main currency rivals. 13:30 GMT- USD Unemployment Claims The employment situation in the United States continues to be one of the key indicators of overall economic health in the US. Last week’s unemployment figure came in better than expected, and led to substantial gains for the USD. This week, analysts are calling for a figure of around 411K, which if true, would represent another decline in unemployment in America. Following the bearish day the dollar had yesterday, today’s news may provide the USD with the necessary boost to recoup some of its recent losses.  |
| Can Crude Maintain its New Rally? Posted: 02 Nov 2010 05:22 AM PDT
Oil prices received a boost yesterday after Saudi Oil Minister Ali Naimi suggested consuming countries are happy with oil between $70 and $90 a barrel, raising the price ceiling by 10$ from the previous range of $70 – $80. Oil received an additional boost following the release of better than expected manufacturing data from the U.S and China. Oil has advanced this year despite rising inventories as investors bet demand will increase as global economic substantiates. It appears that prices are heading back to around $85, with further room to appreciate. One major block in crude's resurging rally is the outcome of the U.S. Federal Reserve’s policy meeting on Tuesday and Wednesday. It is widely expected that further quantitative easing measures will be announce in order to recharge the lackluster U.S economic recovery. The only question is the size of the second "stimulus". Oil prices tend to have an inverse relation as oil is denominated in U.S. Dollar and a weak currency makes the commodity cheaper and therefore more attractive to investors. If the scope of the intervention is smaller than expected it is likely the greenback will regain some strength, putting pressure on oil prices. Tomorrow's release of U.S inventories is expected to show an increase of 1.7 million barrels last week, after a 5 million barrel jump the previous week. It seems, however, that despite the markets oversupplied, prices remain moderately steady. A bigger than expected increase, none the less, will likely suppress oil prices in the short term, pushing them back to below $82.  |
| Can we Expect Another Rally for Gold prices? Posted: 29 Oct 2010 03:08 AM PDT
After reaching a record high of $1,376.70 an ounce on Oct. 14th, Gold prices have been falling steadily ever since, stabilizing around the $1335 level. Can we expect another rally for Gold prices? The answer may come after next week's FOMC meeting minutes on Nov. 3rd. Gold has been gaining from the start of the recession. Investors often turn to the metal as an alternative investment in times of financial instability and more recently as a hedge against inflation. This became the main fear as central Banks around the world embarked on the path of quantitative easing, pumping money in to the ailing economy in order to spark growth. However, such extreme measures can often lead to an oversupply of currency in the market and therefore, inflation. With the U.S economic recovery struggling to take hold, the Federal Reserve is again facing the decision of whether or not to expand quantitative easing. News of such deliberations propelled Gold prices to record highs during October. Prices have since dropped 4% on profit taking, accelerated by reports from the WSJ this week that the second round of quantitative easing would happen at a moderate pace. Originally investors were expecting a much larger amount to be pumped into the economy. This anticipation weakened the USD, making commodities such as Gold cheaper. The value of the USD will again be behind Gold's levels heading to next week and beyond. Investors are predicting that monetary easing will lead to a sharp devaluation of the Dollar, which combined with inflationary fears will likely boost Gold prices. However, this scenario is based on the assumption the Federal Reserve indeed undertakes further quantitative easing measures at sufficient levels. The recent slew of positive economic data from the U.S puts some doubt to these expectations. Gold will likely see a sharp drop if the Federal Reserve decides to take small steps or no steps at all combating the stagnating growth. In such a case we may see gold prices recede back to around $1200 throughout November. Another major indicator to affect Gold prices next week will be the Non-Farm Payroll Data which will be released Friday, Nov. 5th. As unemployment remains the main concern for the Federal Reserve, the data will likely affect their assessment of the U.S economic recovery as well as provide expectations for their next meeting. While it is unlikely Gold prices will reach Oct. 15th levels as the hysteria over monetary easing subsided and investors believe Gold has become overbought, any negative data from the U.S will likely push Gold prices higher, possibly to levels around $1350 – $1360.  |
| US Advance GDP Report Posted: 28 Oct 2010 08:26 AM PDT
Tomorrow the advanced version of the US 3rd quarter GDP is expected to be released at 12:30 GMT. The GDP is the annualized change in the inflation-adjusted value of all goods and services produced by the economy. The GDP estimate is the first of three for the quarter, with the other releases scheduled in November and December when more information becomes available. Being the earliest, the Advance release tends to provide the most market volatility for the USD and its crosses. The GDP data will be the most watched economic report of the week. The expectation is for a slight recovery from the previous quarter, with an expectation of 2.1% growth, an improvement from the 1.7% of the previous quarter. The rise in growth for this quarter is largely attributed to higher consumer spending. The GDP data will likely join the slew of various economic indicators released this past week that showed improvement in the U.S economy. However, the release is still unlikely to brighten the gloomy long term outlook for the economy, marred by the persistently high unemployment rate. Economists continue to anticipate Nov. 2nd-3rd FOMC meeting will likely yield expansion of quantitative easing measures as the economic recovery, though showing signs of improvement, continues to be slower than expected. This outlook continues to weigh on the USD. While the greenback recovered this week from its record lows, particularly versus the ERU and JPY, aided by the slew of better than expected economic data released throughout the week, it is unable to maintain its gains and ultimately recedes most of them. With tomorrow's release the USD is expected to follow this week's trend. If the result of the GDP is as expected or higher the greenback will likely appreciate versus its rivals, possibly moving 50-100 pips. However, traders should be cautious of a possible downward correction as investors will likely be uneasy with a strong Dollar heading to next week's FOMC meeting minutes.  |
| Is the U.S Housing Market Seeing a Long Awaited Recovery? Posted: 26 Oct 2010 08:03 AM PDT
With the upcoming Nov.2 -3 FOMC meeting and the speculation of expansion of quantitative easing by the Federal Reserve the main focus of the markets, this week's economic data is expected to have great effect on investors' expectations. The main indicators to watch are the Housing and Consumer Confidence publications. The housing market, which was at the heart of the financial crisis, remains a drag on the economic recovery of the U.S as well the poor consumer confidence, mostly driven by the relentlessly high unemployment rate. However, some stability may be finally evident in the embattled industry. According to Monday's report, the sales of U.S. existing homes rose in September by the most on record with purchases increasing 10% to a 4.53 million annual rate from 4.12 million in August. Further indication of a rebound in the housing industry may come from tomorrow's report of New Home Sales which is also expected to show an increase from the previous month. While the industry's recovery will likely be dragged as the unemployment rate is forecasted to remain above 9% throughout 2011, it seems that the industry has already hit bottom. Consumer confidence may also see some recovery this week as the CB Consumer Confidence which was released earlier today, rose more than expected. A similar rise in confidence is expected from the revised UoM Consumer Sentiment report, due Friday at 13:55 GMT. The increase in confidence may coincide with next week's mid-term elections which are expected to see Democrats losing their majority in Congress. The USD has been seeing a shaky recovery this week, aided by the positive data releases. A continuation of better than expected data releases throughout the week will likely boost the USD further, mainly by adding greater uncertainty to the quantitative easing expansion speculations. With the FOMC meeting minutes release on Nov. 2nd and the mid-term elections on Nov. 3rd, next week is expected to be very volatile for the USD and its crosses.  |
| Is there Light at the End of the Tunnel for the USD? Posted: 14 Oct 2010 10:39 AM PDT
During today's trading, USD/CAD briefly broke parity for the first time since April and the AUD/USD pair is nearing parity. The USD also declined to a record low versus the CHF today, as well as to a new 15 year low versus the Japanese yen. The recent negative sentiment regarding the greenback is due to bets the Federal Reserve will increase purchases of government debt, i.e. quantitative easing as soon as their next meeting in November. The release of today's weaker than expected data only strengthened the case for further monetary easing. The number of Americans filing first-time applications for unemployment benefits unexpectedly increased last week. Jobless claims rose by 13,000 to 462,000 in the week ended Oct. 9. This indicates that though the economy is not likely to go to a double dip recession, the recovery is much slower than hoped and will take longer to recover than anticipated. The prospect of a prolonged unemployment rate around 10% is one of the main reasons the Federal Reserve is considering extending monetary easing policies. Further bad news came from the trade deficit numbers, which showed the deficit widened more than forecast in August. The deficit with China reached a record level for the month as imports climbed. Irritation in the U.S and Europe grows as China is restraining the Yuan to aid exports; friction over exchange-rate and trade policy dominated discussions at the IMF's annual meeting in Washington this month. Tomorrow Federal Reserve Chairman Ben Bernanke is expected to speak about the future of the monetary policy. The FOMC committee is currently divided on how to proceed with its monetary policy. While some expanding its asset purchases program, others feel that it may not have much effect on the unemployment levels in the long run. While it is very likely the Fed will indeed resume asset purchases in the near future, the biggest question is how much. The current expectation, in light of the dismal economic data being published recently, is for a substantial amount. However, considering the level of disagreement among the FOMC members, the numbers may prove to be much smaller than expected, which will ultimately give the USD a much needed boost.  |
| How Will Today’s FOMC Meeting Affect the USD? Posted: 20 Sep 2010 06:12 PM PDT
With the FOMC meeting minutes expected to be published today at 18:15 GMT, the main question is whether or not the Fed will hold off from further purchasing securities or decide to expand the stimulus further and thus its balance sheet. With the economy showing signs of slowing for the past two quarters and unemployment enduring at 9.5% or higher for the past year, speculations began to surface the Fed will resume its quantitative easing program in order to stimulate the flailing economy. The negative economic indicators that were published over the past few weeks reinforced this assumption. The Fed is also trying to avoid deflation. The Core CPI, U.S. consumer prices excluding food and energy, rose 0.9% in July from a year earlier, the smallest increase in four decades. It seems, however, that there is much debate within the Central Bank as well as among investors on how the Fed should continue. Members of the Federal Open Market Committee are divided over whether to renew quantitative easing which is essentially a large-scale asset purchase program. Several members believe the Fed has already done enough and that there are impediments to growth unrelated to monetary policy such as uncertainty regarding taxes and regulatory policy as well as the lagging housing sector. The Federal Reserve has kept the benchmark interest rate at almost zero since December 2008 and bought about $1.7 trillion in securities. Additional quantitative easing can have adverse effects on inflation in the longer run as this move essentially pumps cash into the economy. Analysts are also divided in their assumptions, largely due to the fact that the latest data has been slightly better than expected. Manufacturing in August expanded at a faster pace than forecast as factories added workers and increased production. Private employers increased payrolls by 67,000 last month, exceeding economists' estimates. The Federal Reserve's move is important not only for the USD but for other currencies as well, particularly the JPY as the Bank of Japan has recently intervened in the market in order to weaken the Yen. Japan's economy is highly dependent on export and therefore a strong currency can hinder its economic recovery. However, due to speculation of further monetary easing by the Fed, Bank of Japan Governor Masaaki Shirakawa's attempts may be hindered as quantitative easing contributes to a weaker USD.  |
| How Will the Federal Reserve’s Next Move Affect the USD? Posted: 24 Aug 2010 03:24 AM PDT
If at the beginning of the year the Federal Reserve was talking about starting to tighten monetary policy and exit strategies, abundance of negative economic data in recent months has led the Fed to discuss possible future actions to push the flailing American economy back to life. While the Federal Reserve's early actions, mainly reducing the interest rate to almost zero and engage in massive securities buying programs have kept the U.S economy out of a deeper recession, the recovery seems to be much slower than anticipated, with unemployment rates remaining at uncomfortably high levels and inflation a whole 1% below the target rate. These two issues are also the main concern areas for the Fed; one of Bernanke's main goals is to avoid deflation, a decrease in general price level of goods and services. Another major issue dragging down recovery is the housing market. Housing led the U.S. out of seven of the last eight recessions; however, home sales collapsed after a federal tax credit for buyers expired in April, dragging down the manufacturing led expansion, which began in the second half of 2009. The Federal Reserve's next meeting will be taking place this weekend in Jackson Hole, Wyoming. The most controversial issue expecting them is the decision of whether or not to print more money and extend their securities purchases. These two actions will expand the Fed's portfolio's further; the portfolio is the Fed's major monetary tool. Another issue is how quickly to act? And if it does decide to act, should it take small, cautious steps or large, dramatic ones? While the Fed and most private forecasters still expect faster growth in 2011, and few economists are predicting outright deflation, few if any economic indicators in recent months support this assumption. Federal Reserve governors seem to be quite divided over how and when to act next. Some even question whether to act at all. Richard Fisher, president of the Dallas Fed, and others expressed a concern that Fed moves might be ineffective, arguing that businesses weren’t using already ample, cheap credit to fund investments because they were uncertain about many other problems, including government deficits and new financial regulations. Investors should pay close attention to the next few meetings as they will likely have great affect on the USD. The greenback has been gaining recently on return to safety as it is considered a safe haven currency. The USD has been gaining despite negative economic data as investors shied away from riskier assets. Furthermore, as the U.S is the world's largest economy, any economic slowdown is likely to affect global recovery, slowing it down as well. It is expected that if the poor economic conditions continue, the USD will continue to strengthen versus riskier counterparts, however, in case the Fed does decide to expand its monetary easing program this trend may reverse. Excess amounts of currency flooding the markets tend to be very negative for the currency. With shaky economic fundamentals, any excessive intervention by the Fed may hurt the greenbacks status. It will be interesting to see the developments over the next few months as they will likely have profound effects on the US economy and subsequently global economic recovery as well.  |
| Forex News: Will Riskier Assets Stay on Top Today? Posted: 01 Aug 2010 10:59 PM PDT
As we start off the week, risk taking seems to be the predominant sentiment in the marketplace. Both the EURand U.K. Pound are making gains on the U.S. Dollar and Yen. Today, traders will want to pay attention to a number of events that are likely to generate heavy market volatility. Here is a roundup of today’s most significant economic indicators. 08:30 GMT: GBP Manufacturing PMI The monthly British Manufacturing PMI is a leading indicator of economic health. The PMI is a survey of about 600 purchasing managers, who are asked about the relative levels of economic health in the U.K. Markets tend to be influenced by the PMI, as the manufacturing sector typically reacts quickly to any changes in the British economy. Last month’s figure of 57.5 signaled a healthy expansion in the manufacturing sector, and led to solid gains for sterling. This month, analysts are forecasting a slightly smaller figure of 57.1. If the PMI comes in as predicted, it would still show growth for U.K. manufacturers, and will likely lead to further gains for the pound. 14:00 GMT: USD ISM Manufacturing PMI Like its British counterpart, the U.S. ISM Manufacturing PMI is a monthly survey of American purchasing managers, who are asked to rate the relative levels of current business conditions. Seeing as how the manufacturing sector has been one of the only positive signs in the U.S. economy over the last several months, this report’s importance has grown significantly as of late. Last month’s figure of 56.2 signaled industry expansion, and led to significant, but temporary dollar gains. This month, analysts are forecasting a smaller figure of around 54.2. If true, the dollar may see some temporary growth against its major counterparts, giving traders an excellent opportunity to make some quick profits on the greenback.  |
| Disappointing Macro Overshadowed Good Corporate Earnings Posted: 29 Jul 2010 12:53 AM PDT
Yesterday’s trading ended flat for the EUR/USD pair but volatility was high. Traders moved from selling the EUR before European session started, to buying the EUR before U.S. trading session started and eventually the pair finished near the day opening rate. The pair ranged $1.2965 to $1.3040. Any move below 1.2965, would signal a correction while any move above 1.3040 would signal another rally. Other currencies such as the EUR/JPY and USD/JPY are beginning to form correction signals. It is still early to decide if yesterday was a beginning of a correction or a single day of profit taking. Looking for today, lack of important news events is expected to keep trading calm as analysts’ learn yesterday’s data, but tomorrow more news from the U.S. should put more light on the economy. Volatility should rise toward next week which is the first week of August and hold plenty of macro data and important news events. Traders should start to plan trades and positions for next week as it is going have a lot of impact on currencies and we are likely to wildness large movements in prices. Here is a roundup of the day’s main economic indicators: • 12:30 GMT, U.S. Unemployment Claims – This report measures the number of individuals who filed for unemployment insurance for the first time during the past week. If the end result will be lower than the expected 457,000 – the Dollar might rise against the majors.  |
