FOREXYARD: Forex News Blog

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• Norwegian Economy Fights through Terrorist Crisis
• US Personal Spending and Income Growth Sluggish
• Australian Housing the Exception; Sees Decline
• New Highs for CHF and JPY
• Safe Haven Currencies Outperform to Start the Week

Norwegian Economy Fights through Terrorist Crisis Posted: 02 Aug 2011 06:24 AM PDT The initial response to the attacks in Oslo last week was a quick sell-off in Norwegian assets as investors fled uncertainty. The show of support by the Norwegian public, and solid economic numbers, however, has helped the Scandinavian giant regain much of its initial losses, and then some. Reports by Norway's Manufacturing Purchasing Managers Index (PMI) this week revealed an uptick beyond analyst forecasts and polls. Several forecasts had put the numbers between 55.5 and 56.1. The actual results, which came out at 56.5, trounced the expected range. Forecasters are also expecting the unemployment rate to hold steady at 3.4% in Norway come Thursday. These data reports are helping to drive many investors back into their Norwegian assets. Assisting the Norwegian kroner's (NOK) ascent this week is also a sentiment favoring commodity-linked currencies due to risk aversion in the global economy. Though oil prices have tumbled back towards $95 a barrel in recent days, the overall upwardly-trending strength of oil has remained a staunch price support for the NOK, and appears that it will continue to do so in the days ahead. Read more forex trading news on our forex blog.

US Personal Spending and Income Growth Sluggish Posted: 02 Aug 2011 06:21 AM PDT Reports issued by the US Bureau of Economic Analysis, a branch of the Department of Commerce, revealed sluggishness in American spending and income levels at the consumer level. Three reports – Personal Spending, Personal Income, and the Core PCE Price Index – concur that US consumption is stagnating through the record hot summer months. Personal spending stands out as the only indicator among the three to experience a contraction. Spending levels declined by approximately 0.2% in June. The other two reports each signaled a sluggish 0.1% growth, moderately below market forecasts. The news piles atop several other indicators of growing consumer pessimism which may lead the US dollar (USD) to make gains in the days ahead due to safe-haven asset purchases by global investors. Read more forex trading news on our forex blog.

Australian Housing the Exception; Sees Decline Posted: 02 Aug 2011 06:18 AM PDT While most other industrialized nations are publishing bullish housing data, Australia appears to be signaling a contraction in its housing market. Yesterday it was a report from the Housing Industry Association (HIA) which revealed an 8.7% decline in new home sales for June. Today it is the level of building approvals. The report, released by the Australian Bureau of Statistics this morning at 2:30 GMT, underscored a decline in the month-on-month issuance of building approvals by approximately 3.5%. Forecasts were expecting a 2.6% expansion in building permits from last month's decline of over 6%. Read more forex trading news on our forex blog.

New Highs for CHF and JPY Posted: 02 Aug 2011 04:53 AM PDT The US dollar was stronger versus the euro but the real movers have been the safe haven Swiss franc and the Japanese yen. Yesterday's dreadful US PMI numbers dragged Asian and European bourses lower keeping the safe haven currencies bid into today's North American forex trading session. Japanese officials are attempting to jawbone the yen lower with an increase of harsh rhetoric versus the strengthening currency. The stepped up speech-making over the past few days suggests the Japanese Ministry of Finance is leaning closer towards steps to stem the strengthening of the yen. Reuters reports the BOJ is ready to act should the yen appreciation prove to be destabilizing to the Japanese economy. To increase the effectiveness of any direct intervention in the forex markets the BOJ may accompany the JPY selling with an easing of monetary policy in the form of additional asset purchases. USD/JPY support comes in at the all-time low near 76.25 with short-term resistance at the falling trend line from the July 20th high at 77.80. The CHF hit a new all-time low versus the US dollar and the euro as traders continue to use the Swiss franc as the safe-haven currency of choice. The SNB may be less aggressive than Japan to step in and weaken the CHF. Last time the SNB sold the CHF the central bank suffered an embarrassing $21B loss on its long euro and USD positions versus the CHF. A such the downward trends of the EUR/CHF and the USD/CHF my continue. Data from Eurostat showed European PPI was flat for the month of June. Consensus forecasts for a 0.1% suggest inflation pressures are slowing, albeit by a small amount. Combining the inflation numbers with yesterday's Euro zone PMI data that was unchanged from a 2-year low suggests the ECB may have room to hold off on future interest rate increases as the EU economy slows. A break of 1.4150 and the EUR/USD may have scope towards 1.4100, a 61% retracement of the move from July 12th to yesterday's high. Yesterday's disappointing US ISM Manufacturing PMI surveys have put equity markets in the red while supporting the USD. The Nikkei finished down -1.21% while the FTSE 100 is lower by 0.65%. A Senate vote to raise the US debt ceiling is set for 16:00 GMT. While nothing is set in stone all indicators point to the legislation getting the OK and signed into law by Obama. A lack of important data releases on the economic calendar will keep market players focused on the debt ceiling vote as markets anticipate a heavy economic calendar tomorrow. The highlights for the day will likely be the ADP payrolls data and the ISM non-manufacturing survey. The ADP report has had a poor history of predicating Friday's jobs report while economists have had an even tougher time forecasting the payrolls report from the Bureau of Labor Statistics. Last month a surprise increase in the ADP report caused economists to increase their non-farm payrolls report only to overshoot the actual target by a wide margin. Read more forex trading news on our forex blog.

Safe Haven Currencies Outperform to Start the Week Posted: 02 Aug 2011 12:38 AM PDT The Japanese yen, Swiss franc, and US dollar all began this week's forex trading on a high note as the safe haven currencies rallied following disappointing US ISM manufacturing numbers. The Australian dollar was a down sharply in early trading today on a combination of the "risk-off" environment and a signal of caution by the RBA to raise rates given international influences. Key Economic Events: AUD – Cash Rate and Rate Statement – 04:30 GMT Actual: 4.50%. Expectations: 4.50%. Previous: 4.5%. As expected the RBA held interest rates steady but the Australian central bank signaled it would likely keep rates on hold given the headwinds in global economy. The Aussie slid across the board as traders likely expected a more hawkish statement. Support for the AUD/USD is found at 1.0890 and 1.0800. These levels may offer traders better entries into the uptrend as the RBA will likely continue to increase Australian interest rates given the elevated rates of inflation and excessive growth in the Australian economy. GBP – Construction PMI – 08:30 GMT Expectations: 53.2. Previous: 53.6. Yesterday's dreadful manufacturing PMI numbers were below the 50 boom/bust level and increase the chances of additional quantitative easing by the BOE. Support is seen at 1.6260. Fibonacci retracement targets from the July low come in at 1.6220 and 1.6125. USD – US Debt Ceiling Vote – TBA Yesterday the House approved a $2.4 trillion increase to the US debt ceiling and today the bill awaits a vote in the Senate. While the deal isn't perfect by any standards and leaves the heated debate over bloated entitlement programs for a later date expectations are for the bill to be approved today. In his weekly column in the New York Times, Nobel prize winning economist Paul Krugman points out the budget cuts will only further weigh on US economic growth with a reduction in government spending in a time where the US economy needs all the stimulus it can get. EUR/USD bias is to the downside as the pair has not been able to hold a bid above 1.45. Support is found at 1.4140 with a 61.8% retracement target at 1.4100 from the July low to the July 27th high. Resistance is located at the overnight high of 1.4280 and 1.4450. Read more forex trading news on our forex blog.

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FOREXYARD: Forex News Blog

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• Running with the Bulls… in China
• British Manufacturing Dip Drags on Pound Sterling
• Australian New Home Sales Down 8.7%
• Debt Ceiling Compromise Provides Only Short Term Dollar Relief
• Weekly Technical FX Preview – GBP/USD Shifting from Bearish to Bullish

Running with the Bulls… in China Posted: 01 Aug 2011 08:06 AM PDT Manufacturers working in conjunction with China appeared much pleased this morning after several reports on Chinese PMI signaled solid bullishness in the Asian giant's manufacturing sector. The core report on Chinese Manufacturing PMI showed an upward movement beyond the expected reading of 50.2, reaching 50.7 instead. Adding to the bullishness surrounding China's core PMI report, HSBC's concurrent report on Final Manufacturing PMI also highlighted a solid uptick from 48.9 last month to 49.3 this month. After the recent passage of a lift on the US debt ceiling, Chinese markets appear poised for sharp gains considering the close interconnection between the two economic rivals' national debt holdings.

British Manufacturing Dip Drags on Pound Sterling Posted: 01 Aug 2011 08:03 AM PDT A minor downtick in Britain's manufacturing purchasing managers index (PMI) helped drag the British pound (GBP) slightly lower in today's European trading sessions. Though the UK's housing sector was seen rising last week, a dip in manufacturing appears to be tearing into recent upswings in optimism. Mixed growth in several sectors has had traders on edge these past few weeks. Such reports out of the vital manufacturing sector give cause for concern as Britain struggles with regional debt woes and its own structural deficits. Risk appetite may be switched on this week, however, considering the recent passage of a debt ceiling increase in the United States. Should sentiment shift in favor of regional currencies, the GBP may find itself gaining throughout the week.

Australian New Home Sales Down 8.7% Posted: 01 Aug 2011 07:47 AM PDT An economic report from the Australian Housing Industry Association (HIA) remarked this morning that the sale of newly constructed homes declined in June by 8.7%, month-on-month. The previous month's contraction by 0.2% had spooked investors only mildly last month, but today's reading has many pulling away from the Australian dollar (AUD) in larger numbers. Housing data worldwide has been showing positive figures. Japan, Britain and the United States all posted significant growth in their respective housing sectors. The slump in Australian housing is bewildering to many who had anticipated a return to growth globally in the housing sector of industrialized nations.

Debt Ceiling Compromise Provides Only Short Term Dollar Relief Posted: 01 Aug 2011 05:01 AM PDT The relief rally the US dollar received was short lived following the compromise between Democrats and Republicans to increase the US debt ceiling. All of the majors are higher versus the USD with equity markets also posting solid gains. Given last week's poor Q2 GDP report traders may be positioning for another round of quantitative easing from the Fed though the bar for additional easing remains high. Traders took only a short pause in their dollar selling while market players continue to move into the safe haven currencies as the threat of a US credit rating downgrade by S&P looms and European peripheral bond spreads remain elevated. The USD/CHF is within striking distance of Friday's low and the yen has rebounded from this morning's initial spike higher to 78 in the USD/JPY. The overnight high coincides with a 50% retracement of the downtrend that began on July 20th. While intervention in the forex market by the Japanese Ministry of Finance remains a possibility the most recent CFTC data of the International Money Market shows speculators have increased their long yen positions to a level last seen in March (see chart below), a signal that hints at a reversal in the value of the USD/JPY. Asian and European equities were higher following the compromise over the US debt ceiling and data from China. Chinese manufacturing PMI was better than expected at 50.7 on expectations of 50.2 but the indicator declined from its previous reading of 50.9. This hints at a slowdown in the Chinese economy but deflects the hard landing scenario some analysts are calling for. British manufacturing PMI came in below expectations at 49.1 on consensus forecasts of 51.1. A reading below the 50 boom/bust level suggests a contraction in economic growth. This is the fifth consecutive month the survey has failed to meet expectations. The continued drop in manufacturing PMI suggests today's results are not a case of one off irregularities due to Japanese supply constraints but rather structural problems in the UK manufacturing sector. In the crosses sterling is trading on its lows for the day but cable has still managed to eke out gains versus. Appreciation in the GBP/USD should be contributed to fundamental dollar weakness rather than sterling strength. The pair has resistance at 1.6550 and support at 1.6260. EUR/GBP has resistance at 0.8870 from the falling trend line off of the July high. Support is located at 0.8700. Last Friday's disappointing Q2 US GDP of 1.3% was well below expectations of 1.7% and suggests the US economy continues to struggle despite ultra-loose monetary policy. Cyclical unemployment also has drag with the unemployment rate standing at 9.2%. The next major update to the US economic picture comes on Friday with the non-farm payrolls report. Traders may be selling dollars in anticipation of QE3 but the bar for additional Fed action remains high. Despite the gains seen on Friday and today the EUR/USD has traded sideways over the past 10-weeks. EUR/USD resistance is found at 1.4440 followed by last week's high at 1.4540 and 1.4580. A break here would likely shift the technical picture in favor of the euro. To the downside support comes in at 1.4320-40. Read more forex trading news on our forex blog.

Weekly Technical FX Preview – GBP/USD Shifting from Bearish to Bullish Posted: 01 Aug 2011 12:41 AM PDT EUR/USD The weekly chart shows a bullish engulfing pattern was followed by a false breakout above the trend line falling off of the May and July highs. A pullback from this resistance line formed a doji reversal candlestick which hints at declines in the EUR/USD. The 200-week moving average looks to be the first support at 1.4025 followed by the 200-day moving average at 1.3930. The rising trend line from the May low could also be supportive at 1.3830. To the upside 1.4580 will need to hold to maintain the bearish technical picture. A close above this level could go on to test 1.4700 and this year's high of 1.4940. GBP/USD Three weeks of consistent gains for cable are beginning to shift the technical picture from bearish to bullish. Sterling has moved above resistance levels that otherwise would have contained the pair. The first break occurred above the neckline of the head and shoulders pattern at 1.6185 and the second major break occurred at 1.6370 above the previous trend line rising from the May 2010 low. Initial resistance will be the May 31st high at 1.6550 followed by the April high at 1.6745. A move lower for the GBP/USD will likely test the base at 1.6260 followed by the previously broken trend line off of the April high at 1.6140. A breach of 1.6000 could have scope towards 1.5780. USD/JPY Yen strength has returned with a vengeance. Last week's candlestick closed with a shaved bottom indicating momentum is to the downside. This week's opening gapped higher but the price managed to hold below the current short term trend line from the July 20th high which comes in at 78.05. Additional resistance may be 79.60 and the 55-day moving average at 80.15 but the downside is calling. Support is found at 76.70 from last week's low followed by the all-time low from March at 76.11. A break here and we move into uncharted territory where the psychological support at 75.00 and 70.00 come into play. USD/CHF The Swiss franc is in a similar position as the yen as the USD/CHF moves into uncharted territory. Bias remains to be short but Monday's opening gap higher could create a Harami reversal pattern which may lead slight gains for the pair. A daily close will be needed for confirmation. Resistance is found at 0.8080 and 0.8275. A move higher to these levels would provide for potential short entries back into the long term downtrend with targets at the big round number at 0.7800. Read more forex trading news on our forex blog.

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