FOREXYARD: Forex News Blog

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• Spot Gold Testing Psychological $1,600 Price Level
• Weekly Unemployment Claims Lower than Forecast
• US Retail Sales Reports Conflicted
• New Zealand GDP Grows 0.8% in Q2
• Dollar Consolidates Losses After Moody’s Puts US Rating on Review
• Inflation Data Key to QE3

Spot Gold Testing Psychological $1,600 Price Level Posted: 14 Jul 2011 07:28 AM PDT The price of spot gold climbed to a new all-time high following Moody's intention to review the US AAA rating. $1,600 is the next psychological resistance level and could be breached today as Fed Chairman Ben Bernanke will testify before the Senate. The rally in gold prices is quite remarkable with the commodity rising for the past eight consecutive trading days. Spot gold is currently trading at $1,590 after climbing as high as $1,593 earlier in the European trading session. Prices were bolstered yesterday by Bernanke's Congressional testimony as the Fed Chief left the door open for another round of quantitative easing. The threat of a US default and the potential for US interest rates to remain at low levels for an extended period of time has been supportive of the metal and will likely continue to do so until an agreement is reached between the President and Congressional Republicans. After bottoming at $1,477 on July 1st, spot gold prices have risen almost 8% along with the price of silver which is up 15% in the same time period. Read more forex trading news on our forex blog.

Weekly Unemployment Claims Lower than Forecast Posted: 14 Jul 2011 06:25 AM PDT This week's report on unemployment claims by the US Department of Labor continues to show over 400,000 new unemployment claims for the past week, but the data was lower than many analysts had expected; albeit mildly. Economists had estimated that approximately 413,000 new claims were filed in the US, but the afternoon's reading of 405,000, coupled with weakly optimistic Core PPI and nominal Retail Sales reports, helped give some weight to the idea that the US economy is in fact still growing, but that its pace of improvement has slowed significantly. Read more forex trading news on our forex blog.

US Retail Sales Reports Conflicted Posted: 14 Jul 2011 06:21 AM PDT The two major reports on retail sales out of the American economy this afternoon painted a mixed picture. The core value of retail sales saw zero movement, with an actual reading of 0%, below forecasts for 0.1% growth. The value of nominal retail sales, however, revealed a somewhat different picture. Nominal retail sales for July appear to have grown by 0.1%, beating forecasts which were expecting a contraction by 0.1%. Overall the data seems to cancel itself out and bear little weight on today's currency markets. But the broader picture does seem to favor very weak growth in the US retail sector, which both supports mild steps towards riskier assets by investors and a call for another round of quantitative easing in the face of such economic reports. Read more forex trading news on our forex blog.

New Zealand GDP Grows 0.8% in Q2 Posted: 14 Jul 2011 06:17 AM PDT Market forecasts had expected an insignificant level of growth in the south Pacific economy of New Zealand. The slightly-less-than-insignificant findings may bode well for the island economy. While true that both expected and actual figures show very minor growth in New Zealand's gross domestic product (GDP), the news that growth was beyond expectations should give a much-needed bump to the value of the New Zealand dollar (NZD) over the next several days. Giving additional weight to New Zealand's recent GDP growth was a house price index (HPI) report from the Real Estate Institute of New Zealand (REINZ) which showed the monthly change in home values move up 1.3% from last month's decline of 1.8%. Read more forex trading news on our forex blog.

Dollar Consolidates Losses After Moody’s Puts US Rating on Review Posted: 14 Jul 2011 04:57 AM PDT The greenback came off of its lows versus the majors a day after Moody's put the US AAA rating on downgrade for a review. This afternoon a slew of US economic data is due out as is additional testimony by Fed Chairman Ben Bernanke. Given the heightened volatility as seen in the first half of the week, the euro's recent gains may be vulnerable. The dollar extended its potential QE3 induced loss into early Asian trading after Moody's placed the US Aaa bond rating on review for a possible downgrade. The rating agency cited the possibility the debt limit will not be raised in time to prevent a missed payment on US Treasury Bonds. Most expectations are for Republicans and the President to piece together some sort of settlement in time for the August 2nd deadline. In the European session the dollar has come off of its lows versus the majors but the USD is still well within yesterday's ranges following a sharp rout of the dollar after Bernanke's testimony left the door open for QE3. A comparison of Bernanke's testimony yesterday with his last press conference following the Fed Funds decision shows the Fed Chairman's words did not differ from previous policy statements. It will be a hard sell both to politicians and other FOMC members for another round of quantitative easing given the CPI data from May that showed US CPI rising 3.6% y/y and core CPI climbing to 1.5% y/y. But the Fed would in all likelihood step in with QE3 if the economy took a turn for the worst or if deflationary forces began to appear. This makes today and tomorrow's inflationary data all that more important. The European financial elite are meeting in Rome today in an attempt to create an additional rescue package for Greece. Discussions will also center on Italy. Tuesday's successful debt auction helped the euro to recover from a 4-month low versus the dollar but Italian bonds are still trading at higher yields, as are the spreads between Portuguese, Greece, and Spanish debt with their German bund equivalents. The spread between the German 2-year the US-2 year note has dwindled to 91 bps in favor of the bund, a spread that continues to decline, thus supporting the USD. With the lower spreads on the 2-year notes and the EU that is clearly struggling to find a new solution to the debt crisis that will not create a credit event, traders should be weary of further euro gains versus the dollar. With the EUR/USD failing to move above its 100-day moving average at 1.4280 and the pair now testing the rising trend line on the hourly chart from the Tuesday low, his may be an opportunity for euro shorts to reassert themselves. A potential target may be back to the 1.4050 level which is roughly a 50% retracement from the move that began on Tuesday and looks to have ended early this morning. Read more forex trading news on our forex blog.

Inflation Data Key to QE3 Posted: 14 Jul 2011 12:08 AM PDT The Fed Chief sparked across the board selling of the USD when he left the door open for another round of quantitative easing, but it will be difficult for some FOMC members to support QE3 should US inflation continue to rise as was apparent in last month's CPI data. Today's Key Economic Events: EUR – CPI y/y – 09:00 GMT Expectations: 2.7%. Previous: 2.7%. EU inflationary pressures have been on the rise, thus the ECB has raised interest rates twice this year and another 25 bps of tightening is expected when Italy's Mario Draghi takes over the helm of the ECB to solidify his inflation fighting credentials, much in the way his predecessor Jean-Claude Trichet has done. A rise in EU headline inflation would likely boost the euro from its recent lows in the crosses as traders price in another interest rate increase. EUR/GBP resistance is found at the broken trend line beneath the May and June lows at 0.8870. USD – Unemployment Claims – 12:30 GMT Expectations: 413K. Previous: 418K. Last week's dreadful NFP jobs report underlines the position of the Fed and Bernanke, "until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established." Therefore an additional drag on employment may bring further inflows to the safe-haven Japanese yen. The USD/JPY has recently moved below its trading range and could continue to fall towards its all-time low at 76.11. USD – PPI m/m – 12:30 GMT Expectations: -0.2%. Previous: 0.2%. The Fed's strategy with QE2 was to avoid a deflationary environment by creating a burst of inflation. Yesterday Bernanke left the door open for another round of quantitative easing which led to dollar selling across the board. However, given the CPI data from May that showed US CPI rising 3.6% y/y and core CPI climbing to 1.5%, it may be a tough sell to other FOMC members to enact another round of quantitative easing for fear of the Fed losing its grip on inflation and its reputation. EUR/USD support comes in at 1.4160 from the rising trend line on the hourly chart. Resistance is found at the 100-day moving average at 1.4280. Read more forex trading news on our forex blog.

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