FOREX TRADING

Forex Trading – US Retail Sales Beat Expectations

admin — Fri, 12 Mar 2010 23:17:00 +0000

USD Off Lows, Retail Sales Beat Expectations

USD: Lower, Yellen appointed to the Fed, retail sales post unexpected rise, consumer sentiment dips
JPY: Lower, BOJ may double QE, threat of intervention
EUR: Higher, Greek debt fears fade, talk of German/French Greek rescue package, industrial output surged
GBP: Higher, house prices jump, Conservatives expand lead in the polls
CAD and AUD: AUD mixed & CAD higher, Canada’s employment growth beats expectations

Overview

The USD traded at a three week low Friday pressured by announcement that President Obama will nominate Janet Yellen as vice chair of the Federal Reserve. Yellen is a policy dove and her appointment will likely mean that the Fed will keep interest rates low for much of 2010. USD was also pressured by improving risk appetite as global equity markets rally. The EUR traded higher supported by diminishing concern about the Greek debt crisis and in reaction to report that Germany and France may be considering a $55bln rescue plan for Greece. GBP traded higher supported by report of a jump in UK house prices. Commodity currencies traded higher supported by stronger equity markets and improving risk sentiment with CAD supported by report of stronger than expected Canadian employment and BOC rate hike speculation. AUD gains were limited by speculation the RBA will pause in April. JPY traded lower pressured by report that the BOJ may double the size of its quantitative ease to ¥20trln and in reaction to increasing threat of BOJ intervention. US economic data was mixed with retail sales reported stronger than expected, Michigan consumer confidence posted a slight drop. Business inventories were unchanged. USD came off its lows as US equities turned lower after the release of today’s data. Focus turns to next weeks Fed policy meeting on March 16th. No Fed policy change is expected. Investors will be looking to see whether the Fed makes any changes in its policy statement in regard to the language of "extended period" for low rates.

Today’s US data:

February retail sales rose 0.3%, a reading of -0.2% was expected. Ex. autos retail sales rose 0.8%. March Michigan sentiment came in at 72.5, a reading of 73.6 was expected. January business inventories were unchanged with sales up 0.6%.

Upcoming US data:

Next week’s US economic calendar includes the March 15th release of March Empire State Manufacturing expected at 22 compared to 24.9 last month along with February industrial production, capacity use and March NAHB index. Industrial production is expected to rise by 0.1% compared to 0.9% last month. Capacity use is expected unchanged at 72.6. The NAHB Index is expected unchanged at 17. On March 16th February housing starts and building permits will be released along with February import prices. Housing starts are expected at 580k compared to 591k last month and building permits are expected at 610k compared to 621k last month. Import prices are expected flat. On March 17th February PPI will be released expected at -0.2% compared to 1.4% last month. On March 18th February CPI will be released expected at 0.1% compared to 0.2% last month. Q4 current account, initial jobless claims for week ending 03/13, leading indicators for February and March Philly Fed will also be released on March 18th. The current account is expected at -120bln compared to -108bln last quarter. Initial claims are expected at 457k compared to 462k last week. Leading indicators are expected to rise by 0.2% compared to 0.3% last month. Philly Fed is expected at 18 compared to 17.6 last month.

JPY

JPY traded lower pressured by firmer equity market trade, report that the BOJ may ease policy next week and by increasing threat of intervention. JPY downside was limited by repatriation flows ahead of Japan’s fiscal year end on March 31st and news of the appointment of Janet Yellen to the Federal Reserve Board. The Yellen appointment increases the odds that the Fed will maintain low interest rates throughout 2010 as she is seen as a policy dove. JPY experienced initial selling pressure in reaction to a Nikkei report that the BOJ may double the size of its quantitative ease at next week’s policy meeting to ¥20trln. JPY was also pressured by increasing risk of intervention. Japan’s PM said that Japan is ready to act if JPY moves sharply. Analysts at Morgan Stanley suggest that Japan is likely to intervene soon and sell JPY. Japan’s Finance Minister Kan said excessive JPY strength is undesirable but the value of the JPY should be decided by the markets as long as the rate is stable. Kan went on to say that intervention can be used against excessive Forex price moves. Japan’s economic data was generally positive with January industrial production revised up to 2.7% from 2.5% in the preliminary report and capacity utilization rose by 3.9%. JPY turned lower for the day after the release of stronger than expected US retail sales. Focus turns to next week’s BOJ policy meeting on March 16th and 17th.

Next week’s Japanese economic calendar includes the March 17th release of January tertiary activity expected at 0.4% compared to -0.9% last month. On March 18th January revised leading indicators will be released expected 2.5% compared to 3.8% in the original report. On March 19th January all industry activity will be released expected at 0.8% compared to -0.3% last month.

Key technical levels to watch in USD/JPY include support at 90.17 the March 12th low with resistance at 91.30 the February 23rd high.

EUR

EUR traded higher supported by improving risk sentiment sparked by BOJ ease speculation, speculation that the appointment of Janet Yellen to the Fed will encourage the Fed to maintain low yields throughout 2010 and in reaction to a surge in EU industrial output. Last month Yellen said that the US economy still needs extraordinarily low rates. EU economic data was positive with January industrial output reported to have surged by 1.7%. This was the biggest monthly surge in EU industrial production in almost 20 years. EUR was supported by gains in cross trade to the JPY with JPY pressured by BOJ ease speculation. EUR was also supported by diminished concern about the Greek fiscal crisis and a report that Germany and France may be considering a $55bln rescue plan for Greece. There is a growing sense that the Greek debt crisis may have passed. Sovereign debt risks in Europe remain and are likely to resurface in the future. This means that diminished concern about Greece may not last. A number of analysts are looking for a short-term rally in the EUR and a test of 1.4000 as focus shifts to improving risk sentiment and the risk of an imminent Greek debt default have significantly diminished.

Next week’s EU economic calendar includes the March 15th release of Q4 employment expected at -0.4% compared to -0.5% percent last month. On March 16th EU ZEW index for March will be released expected at 44.8 compared to 45.1 last month along with February HICP expected at -1.4% compared to -1.3% last month. On March 17th EU Q4 labor costs and wages will be released expected at 3.3% and 3% respectively. On March 18th EU January current account will be released expected at 9.1bln compared to 9.4mln last month. EU January foreign trade also be released on March 18th expected at 3.8bln compared to 4.4bln last month.

The technical outlook for the EUR is mixed as support holds above 1.3600. Expect EUR support at 1.3620 the March 11th low with resistance at 1.3840.

GBP

GBP traded higher supported by report of a sharp jump in UK house prices and UK election polls which indicate that the Conservative lead over Labor is growing. Research Academetrics Ltd. said that UK house prices rose at their fastest pace in seven years in February. The rise in UK house prices follows Thursday’s report that UK inflation expectations rose to a two-year high. These reports may discourage speculation that the BOE will expand its asset purchases and with a significant large short position in GBP, GBP may be ripe for a technical rally. The latest UK election poll shows that the Conservative party has a 13 point lead over Labor. The Conservative party has pledged to take action to reduce the UK deficit. If the conservative party can gain majority control of the parliament it would reduce the odds of a hung parliament and increase the odds of the UK government taking action to reduce UK government debt. Tuesday the Fitch rating agency said that the UK must take faster action to reduce its deficit or risk a downgrade of the UK this was credit rating. The UK election is expected to be held on May 6th. GBP has been underperforming because of concern about the UK economy and election uncertainty. Today’s UK house price data and election polls may help to reduce some of the concern about the UK election and UK recovery. Focus turns to Wednesday’s release of the BOE policy minutes for the March policy meeting. The trade will be looking at the minutes for clues to whether the BOE is considering a change in its asset purchases.

Next week’s UK economic calendar includes the March 17th release of January unemployment weekly earnings and the February claimant count. Unemployment is expected at 7.9% compared to 7.8% last month with the average earnings unchanged at 0.8% and claimant count at 27k compared 23.5k last month. BOE policy minutes will be released on Wednesday. On March 18th February money supply and public-sector borrowing will be released. Money supply is expected at 0.8% compared 0.6% last month. Net public-sector borrowing is expected -13bln compared to -11.7bln last month. Also on March 18th March CBI orders will be released expected at -34 compared to -36 last month.

The technical outlook for GBP is mixed as GBP trades back above 1.5000. Expect near-term support at 1.5027 the March 12th low with resistance at 1.5327 the February 26h high

CAD

CAD traded at its highest level versus the USD since July of 2008 supported by report of stronger than expected Canadian employment data, improving risk sentiment as equity markets rally and in reaction to speculation that the Fed will maintain low yields for an extended period in light of today’s appointment of Janet Yellen to the Federal Reserve board. Canada created 22,900 new jobs in February and the unemployment rate declined to 8.2% from 8.3%. The trade had expected Canada to create just 15k new jobs with the unemployment rate expected to be unchanged. Stronger Canadian employment growth follows recent Canadian economic reports which show increased manufacturing activity and higher inflation. Improving economic outlook in Canada will increase pressure on the BOC to consider an earlier rate hike. CAD has been outperforming supported by last week’s decision by the BOC to maintain steady monetary policy and signal a shift in its policy bias. In the BOC policy statement the BOC dropped reference to inflation risks being to the downside. This has encouraged speculation that the BOC may hike interest rates sooner than the Fed. The appointment of Yellen to the Fed may increase speculation that the BOC will act on rates before the Fed. A BOC rate hike could come as early as August. CAD is expected to test parity to the USD in the weeks ahead. As the CAD approaches parity it may increase the risk of verbal intervention from the BOC and Canadian officials. Canada’s Finance Minister Flaherty says he is always worried about CAD volatility.

Next week’s Canadian economic calendar includes the March 16th release of Q4 labor productivity expected at 0.1% compared to -0.2% last month. January manufacturing shipments will be released on March 16th expected at 1.3% compared to 1.6% last month. On March 17th January wholesale trade will be released expected at 0.4% compared to 0.7% last month. On March 18th January net foreign investment will be released expected at 8bln compared to 11.2bln last month. On March 19th January retail sales will be released expected at 0.7%% compared 0.4% last month.

The technical outlook for CAD is positive as USD/CAD trades below 1.0200. Look for near-term support at 1.0130 the July 25th low with resistance at 1.0248 the March 12th high.

AUD

AUD traded mixed despite improving risk sentiment and firmer commodity prices. AUD underperformed with gains limited by selling in cross trade to the CAD. CAD was supported by report of stronger than expected Canadian employment and BOC rate hike speculation. AUD gains were also limited by concern about the growth outlook in China. China announced additional measures to try and slow the pace of the real estate asset market appreciation. China raised the down payment requirement on real estate purchases to 50% of the purchase price to try and reduce the risk of a real estate bubble. Earlier in the week there were reports that China may be considering an earlier rate hike to try to slow what is perceived to be an overheating of the Chinese economy. Speculation about an earlier Chinese rate hike may dampen demand for the AUD because of concern the rate hike could hurt the global economic outlook. In addition, Chinese rate hike speculation could reduce the risk of the RBA hiking interest rates at next month’s policy meeting. The RBA paused in its rate hike cycle during February and attributed China’s efforts to curb lending as one reason for the pause. Last Tuesday, the RBA hiked interest rates 25bps to 4%. In the statement accompanying the RBA rate hike the RBA appeared to have a balanced outlook towards inflation, growth and future policy decisions. This has sparked speculation that the RBA may pause its rate hike cycle in April. The outlook for RBA policy will be key to the direction of the AUD. Thursday Australia reported that February unemployment rose by just 400 with unemployment unchanged at 5.3%. Slower Australian jobs growth may dampen RBA rate hike speculation. AUD price direction will remain linked to risk sentiment and the direction of equity markets.

Next week’s Australian economic calendar includes the March 17th release of Q4 dwelling unit starts expected at 7% compared to 9.4% last quarter.

The technical outlook for the AUD is positive as the AUD trades above 9100. Expect AUD support at 9056 the March 9th low with resistance at 9260.

By Michael J. Malpede

Easy Forex

Michael J. Malpede is Chief Market Analyst with Easy-Forex® and has previously been featured on Bloomberg TV, Bloomberg radio, Reuters, MarketWatch, Wall Street Journal, Chicago Tribune, Chicago Sun Times, Toronto Star and Nikkei press. In analyzing the markets, he draws from 29 years of Foreign Exchange Research as a Foreign Exchange Analyst.

Please note that Forex trading (OTC Trading) involves substantial risk of loss, and may not be suitable for everyone. This report is provided by Easy- Forex® for informative purposes only. In no way it is a recommendation by Easy-Forex® for you to engage in any trade. It is your sole responsibility and you will have no claims with regards to this report against Easy-Forex®. If you do not agree to this, you are strongly advised not to use this report. Hence, Easy-Forex® shall not be held responsible for any outcome of trading decisions, in regards with this report or similar reports.

Fundamental Analysis – Investors Question Sustainable Euro Weakness

admin — Fri, 12 Mar 2010 16:47:00 +0000

The dollar is under pressure to end the week after words from a powerful investment house jolted investors expecting further decimation of the single European currency into a spin by warning that the next 10 cents for the euro is more likely on the upside than the downside. An unexpected jump in retail sales has provided a lifeline to an ailing dollar on Friday morning, but in my mind the die has been cast in that the rationale for remaining short the euro has just become more perilous than ever.

U.S. Dollar – Despite predictions for a February slide in U.S. retail sales, the out turn was a healthy 0.3% rise as electronics sales jumped. Ex-autos, sales rose 0.8% proving that winter blizzards and car recalls failed to dampen the spirits of consumers. A smaller than forecast decline in job losses last week may have also played a role, while one could equally argue that rising confidence among newly hired workers bodes well for the March employment report amid a spring thaw. We’ll also get the latest reading for consumer confidence later today from the University of Michigan in its sentiment survey, which is predicted to rise from 73.6 to 74.0.

The dollar index is lower after Goldman Sachs predicted that dollar strength is tomorrow’s story, but that its performance against the euro is more likely to result in a medium term revisit to $1.45 so long as it remains above $1.35. The dollar also weakened on viable rumors that President Obama was about to nominate San Francisco dove Janet Yellen as vice chairman at the Federal Reserve. She recently stated that if she could vote for negative rates, indeed she would.

Euro – Earlier the euro reached $1.3796 ahead of U.S. retail sales and has subsequently pulled back to $1.3754. It remains to be seen which line of argument is stronger: The premise that the euro-bashing has gone too far remains my favorite, while I still see rising yields as a story supportive of the dollar in the second half of the year rather than today. The euro was earlier supported by surprising strength in data from January released this morning indicating a far healthier picture for industrial production than previously believed. In itself data showing a 1.4% annual increase in production compared to a forecast decline of 1.6% has radically shaken the sleepy Eurozone bears.

British pound - The pound is also much firmer against the greenback although the reason is possibly more driven by abatement to conviction surrounding a strengthening dollar today. Yet two sterling bullish events have transpired and the pound stands at $1.5135 post retail sales data from the States. First of all, a new political opinion poll apparently indicates less likelihood of stalemate as voters are warming to the Conservatives line of thinking. Second, a survey from Acadametrics claims a 1.9% increase in British home prices for February. However, the report is at odds with just about every other piece of data including bank lending and spotty data received from increasingly thin housing markets and I’d have to conclude that this report is merely a convenient peg on which to hang today’s sterling performance. The euro today buys a near unchanged 90.80 pence.

Japanese yen – The dollar surged against the yen after the retail sales and reversed its earlier losses. The yen is fast becoming the world’s whipping boy once again and its Prime Minister Hatoyama recently reflected that weakness among Japanese employers and manufacturers hardly sits comfortably with the high value of the yen. Japanese Finance Minister Kan also commented to the diet that he was prepared to sell the domestic currency in the event that the yen moved sharply adding further pressure to exporters while reducing the cost to importers and pressuring domestic prices. Next week the Bank of Japan concludes a two-day meeting and is tipped to expand a ¥10 trillion fund used to provide loans to banks as a means to encourage customer lending. The dollar is pushing on ¥91 this morning while the euro made gains to ¥125.

Aussie dollar - The Aussie failed earlier to sustain a breach above an intra-week peak at 91.93 U.S. cents and dealers used the stronger than forecast retail sales data as a reason to bag profits on the Aussie, which subsequently eased to 91.65 cents.

Canadian dollar -The loonie took a step closer to parity this morning spurred by a 20,900 gain by employers in a February employment report. The rate of unemployment declined to 8.2% helping drive the Canadian currency to 98.48 at its zenith this morning. It has subsequently pared gains to stand at 98.29 cents. Today’s high marks the strongest reading for the Canadian unit since July 2008.

Andrew Wilkinson
Senior Market Analyst

Interactive Brokers

Note: The material presented in this commentary is provided for informational purposes only and is based upon information that is considered to be reliable. However, neither Interactive Brokers LLC nor its affiliates warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither IB nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance is not necessarily indicative of future results.

This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities or other financial instruments mentioned in this material are not suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue. The information contained herein does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before investing, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

Forex Trading – Trade Deficit Narrows as Exports Decline

admin — Fri, 12 Mar 2010 00:12:00 +0000

USD Mixed, Trade Deficit Narrows as Exports Decline

USD: Mixed, jobless claims decline, trade deficit narrowed by 6.6%, global recovery may be slowing
JPY: Lower, Q4 GDP revised lower, BOJ ease speculation
EUR: Higher, rumor of Russian intervention, SNB reaffirms its intervention policy
GBP: Higher, inflation expectations at a two-year high
CAD and AUD: AUD & CAD lower, China rate hike fears, Canada’s capacity use and trade balance improve

Overview

The USD and JPY opened lower Thursday despite weaker equity market trade and a modest dip in risk appetite as European and US equity markets traded lower. The USD received a temporary boost after the release of economic data from China which showed any unexpected rise in inflation and strong retail sales and industrial production. China’s inflation rate rose to a 16 month high accelerating by 2.7% in February. The Chinese inflation report generates speculation that China will raise interest rates sooner than expected as the Chinese economy may be overheating. Chinese rate hike fears dampened risk appetite, pressured equities and supported the USD. USD erased early gains with GBP supported by a BOE inflation survey which shows that inflation expectations in the UK are at a two-year high. Rising UK inflation expectations may dampen speculation that the BOE will expand its asset purchases. EUR traded mixed and remained range bound. The EUR was initially supported by report of Russian intervention to slow ruble gains and the SNB’s reaffirmation of its intervention policy. Commodity currencies were mixed with AUD gains limited by risk of a rate hike from China and report of weaker than expected Australian employment data. CAD traded lower despite report of stronger than expected Canadian capacity use and a bigger than expected Canadian trade surplus. JPY traded lower pressured by report of a downward revision in Japans Q4 GDP and by BOJ ease speculation.

S&P says that the USD will maintain its reserve role status as long as US financial markets are sound and government spending is sustainable. S&P went on to say that the US reserve currency status cannot be taken for granted. According to S&P foreign investors could begin to reduce USD holdings if the US fails to address its fiscal deficit and debt. S&P said that the US could lose its AAA credit rating if the government did not address the fiscal outlook. There was limited reaction to report that US February foreclosures were up but were the smallest in four years. US economic data was mixed with jobless claims posting a modest decline and the US trade deficit unexpectedly narrowed in January. The narrowing of the US trade gap reflects a bigger drop in imports than exports. Exports declined for the first time in eight months. USD traded higher after the release of the US trade balance as the report generates concern the global recovery may be slowing. Focus turns to Friday’s release of Michigan consumer sentiment.

Today’s US data:

US jobless claims for week ending 03/06 declined by 6k to 462, a reading of 460k was expected. January trade balance narrowed to -37.3bln, a reading of -40.3bln was expected. Exports fell by 0.3% and imports fell by 1.7%.

Upcoming US data:

On March 12th February retail sales and March University of Michigan consumer sentiment will be released along with January business inventories. Retail sales expected flat compared to 0.5% rise last month. Michigan consumer sentiment is expected at 73.5 compared to 73.6 last month and business inventories are expected to rise by 0.2% compared to 0.2% decline last month.

JPY

JPY traded both sides of settlement with initial selling pressure attributed to report of a downward revision in Japan’s Q4 GDP, BOJ ease speculation and stronger Nikkei. JPY edged higher in reaction to strong economic data from China and mixed US economic data. China reported a sharp rise in inflation and stronger than expected retail sales and industrial production last month. The rise in China’s inflation and strong data increases the risk of an earlier rate hike from China. Chinese rate hike speculation sparked light selling of European and US equities and dampened risk appetite. US jobless claims declined by slightly less than expected and the US trade balance narrowed sharply as US exports declined for the first time in eight months. US imports also declined last month. The US trade balance report may generate concern about the strength of the US recovery and the global economy. Japan’s Q4 GDP was revised down to 0.9% from 1%. Japan’s annual GDP growth rate was revised to 3.8% from 4.6%, a reading of 4.1% was expected. Forex wires are filled with articles about the increased risk that the BOJ will ease monetary policy next week. The BOJ is under intense pressure from the Japanese government to take action to combat deflation. Q4 GDP deflator was revised to 2.8% from 3%. The downward revision in the deflator may add pressure on the BOJ to ease policy. The BOE policy board will meet on March 16th and 17th.

On March 12th January revised industrial output will be released expected at 2.5% compared to 1.9% last month.

Key technical levels to watch in USD/JPY include support at 89.94 the March 10th low with resistance at 91.30 the February 23rd high.

EUR

EUR traded mixed with early gains attributed to report of Russian intervention to weaken the ruble and SNB reaffirmation of its intervention policy. EUR gains were limited by diminishing risk appetite sparked by China rate hike fears and in reaction to report of a surprise narrowing of the US trade deficit. The Russian intervention and threat of SNB intervention helped to boost the EUR in cross trade. EUR gains were capped by selling pressure in cross to the GBP with GBP supported by report of higher UK inflation expectations. The threat of an earlier Chinese rate hike and the narrowing of the US trade balance sparked selling of equity markets and a dip in risk appetite. A breakdown of the US trade balance shows that exports declined for the first time in eight months. The export decline could be a reflection of weaker global demand and it also may be a reflection of the impact of the recent strengthening of the USD. Wednesday Germany reported a sharp narrowing of its trade surplus largely due to a 6.3% drop in exports. The drop in the German exports raises concern about the strength of the EU recovery because most of the recent rebound in economic activity has been driven by export sales. An earlier Chinese rate hike could dampen optimism about the global recovery. EUR gains were also limited by a statement from the ECB that interest rates are appropriate and that large fiscal deficits add additional burden on monetary policy. EUR remains vulnerable to concern about EU sovereign debt risk and ECB policy. The ECB is expected to remain on hold because of continued subdued EU inflation and uncertain outlook for EU sovereign debt risk. The ECB reconfirmed its commitment to provide liquidity to the banking system. EU sovereign debt risk reduces the risk of an earlier ECB exit from non-conventional monetary policy measures.

On March 12th EU January industrial production will be released expected at -1.5% compared to -1.7% last month.

The technical outlook for the EUR is negative. Expect EUR support at 1.3530 the March 5th low with resistance at 1.3706 the March 9th high.

GBP

GBP traded higher supported by a BOE survey which says that UK inflation expectations are at a two-year high. The rise in UK inflation expectations may dampen speculation that the BOE will soon expand quantitative ease. It’s important to note that the BOE also indicated that despite the rise in UK place expectations inflation risks remain muted. The BOE must balance the risk of inflation versus uncertainty about the outlook for the UK recovery. Wednesday, the UK reported an unexpected decline in industrial production. The decline in industrial production follows reports earlier this week of weaker UK housing price index and a widening of the UK trade gap. GBP gave back some of its early overseas gains after the release of a sharp narrowing of the US trade deficit. GBP remains vulnerable to concern about the UK general election and UK government debt. Tuesday the Fitch rating agency said that the UK must take faster action to reduce its deficit or risk a downgrade of the UK credit rating. The UK election is expected to be held on May 6th. The latest UK election polls indicate that the UK is likely to be confronted with a hung parliament. A hung parliament will make it difficult for the new UK government to piece together a strong enough coalition to agree to take action to reduce the UK deficit. Concern about the strength of the UK recovery and uncertainty about upcoming UK elections should limit demand for GBP.

The technical outlook for GBP is negative as GBP trades back below 1.5000. Expect near-term support at 1.4854 the March 2nd low with resistance at 1.5064 the March 9th high.

CAD

CAD traded lower despite report of stronger than expected Canadian capacity use and a larger widening of Canada’s trade surplus. Canada’s Q4 capacity utilization rose to 70.9, a reading of 69.9 was expected. Canada’s January trade surplus came in at 799mln, a surplus of 100mln was expected. Canada’s New Housing Price Index rose by 0.4% as expected. CAD decline was attributed to concern about a possible earlier rate hike in China and reaction to today’s US data. Stronger than expected Chinese data and higher Chinese inflation generates risk of an earlier Chinese rate hike. A Chinese rate hike may dampen optimism about the global recovery and could chill global export demand. US jobless claims fell slightly less than expected and the US reported a sharp narrowing of its trade deficit in January. These reports generate concern about the strength of the US recovery and dampen risk appetite. CAD has been outperforming supported by last week’s decision by the BOC to maintain steady monetary policy and signal a shift in its policy bias. In the BOC policy statement the BOC dropped reference to inflation risks being to the downside. This has encouraged speculation that the BOC may hike interest rates sooner than the Fed. A BOC rate hike could come as early as August. This week’s main focus will be Friday’s release of Canada’s unemployment rate for February. Consensus is that Canada’s jobs creation slowed in February. A weaker than expected Canadian unemployment report may take some of the steam out of BOC rate hike speculation. As the CAD approaches parity it may increase the risk of verbal intervention from the BOC and Canadian officials.

On March 12th February unemployment will be released expected unchanged at 8.3% with employment growth expected at 30k compared to 43k last month.

The technical outlook for CAD is positive as USD/CAD trades below 1.0500. Look for near-term support at 1.0225 the January 14th low with resistance at 1.0368 the March 3rd and high.

AUD

AUD traded mixed to lower with overseas gains erased in the US trading session. AUD initially traded higher despite report of weaker than expected Australian employment report and threat of an earlier rate hike from China. Australia’s February unemployment rose by just 400 with unemployment unchanged at 5.3%. Asian equity markets except for Japan traded lower in reaction to report of strong Chinese industrial production and retail sales data and an unexpected rise in China’s inflation. AUD also shrugged off a dovish policy statement from the RBNZ Governor Bollard. Bollard said that the New Zealand central bank could take a wait and see attitude before deciding whether rate hikes are needed and that rates may not have to rise as high as they did in the previous cycle. AUD turned lower in the US trading session pressured by a modest dip in risk appetite as equity’s weaken in reaction to today’s mixed US economic data. As noted above, US jobless claims came in slightly weaker than expected and the US trade deficit narrowed sharply last month. The narrowing of the deficit reflected a drop in exports and a sharp drop in imports. The combination of weaker US export sales and Chinese rate hike fears could dampen optimism about the global recovery and reduce demand for high yield currencies. Last Tuesday, the RBA hiked interest rates 25bps to 4%. In the statement accompanying the RBA rate hike the RBA appeared to have a balanced outlook towards inflation, growth and future policy decisions. This has sparked speculation that the RBA may pause its rate hike cycle in April. Today’s Australian employment report may increase speculation that the RBA will pause in its rate hike cycle next month. AUD price direction will focus on risk sentiment and the direction of equity markets.

The technical outlook for the AUD is positive as the AUD trades above 9100. Expect AUD support at 9056 the March 9th low with resistance at 9193 the March 10th high.

By Michael J. Malpede

Easy Forex

Forex Technical Analysis – Daily 03.11.2010

admin — Thu, 11 Mar 2010 11:12:00 +0000

Daily Technical Analysis

EURUSD Outlook

The EURUSD didn’t make significant movement yesterday. Overall price still consolidation in range area of 1.3450/35 – 1.3735/50. The bias remains neutral both in nearest and medium term but the long term outlook remains bearish. For me, there are two technical events that must take place in this situation to give us clearer direction, a break above the major bearish channel confirming bullish reversal scenario towards 1.4025/50 or a break below the triple bottom around 1.3450/30 area to confirm bullish failure and continue the major bearish scenario towards 1.3100. Immediate support at 1.3530. Break below that area could trigger further bearish pressure re-testing 1.3450/35 area. On the other hand, break above 1.3735/50 area should be seen as a serious threat to the major bearish scenario at least targeting 1.3850 region.

GBPUSD Outlook

The GBPUSD had a volatile movement yesterday. Price attempted to push lower, bottomed at 1.4873 but whipsawed to the upside and closed higher at 1.4975. While this fact may seem a little bit confusing if we look at shorter time frames, actually as you can see on my daily chart below, it was clear that price bounced back to the upside after found support at the major trendline support, which is the key support area at this phase. The main trend remains bearish but we need a clear break below the trendline support to continue the bearish scenario testing 1.4500 area. The bias is neutral in nearest term. Immediate resistance at 1.5000/50 area. Break above that area could trigger further upside correction towards 1.5200/50 region. Initial support at 1.4930 followed by 1.4873. Break below 1.4873 should continue the bearish pressure re-testing 1.4779 area.

USDJPY Outlook

The USDJPY attempted to push higher yesterday, slipped above 90.50, topped at 90.82 but still unable to move consistently above 90.50 so far. This fact could produce another false breakout scenario which could trigger a bearish momentum testing 89.50 area. The bias is neutral in nearest term but we are still in a major bearish outlook. The bullish correction scenario with technical target around 91.50 remains intact but we need a consistent move above 90.50 to continue the bullish momentum.

USDCHF Outlook

Boring, boring, boring. The USDCHF made another insignificant movement yesterday. As you can see on my weekly chart below, we have 5 Dojis so far indicating more than a month of indecisive movement as price still trapped in range area of 1.0888 – 1.0640. Well, always a look at the bright side that this situation is a perfect condition to learn to be patient and to see that doing nothing can be the best thing to do. My technical strategy remains to short around 1.0888 or long around 1.0640 with tight stop loss. Break above 1.0888 – 1.0900 area should continue the bullish scenario targeting 1.1000 while a break below 1.0640 should trigger further bearish correction towards 1.0507 area.

EURJPY Outlook

The EURJPY had a significant bullish momentum yesterday, slipped above the trendline resistance, but still unable to stay consistently above it. After bullish momentum triggered by the double bottom formation around 119.70 area, price is now facing a double top formation around 123.99 area. A failure to break above that area and break below 123.00 area should be seen as potential bearish scenario re-testing 121.70 area today. On the other hand, break above 123.99 area should be seen as double top bearish scenario failure thus trigger further bullish momentum at least targeting 125.15 and start a new bullish phase.

GBPJPY Outlook

The GBPJPY was volatile but indecisive yesterday. Price attempted to push lower, bottomed at 133.91 but whipsawed to the upside and closed higher at 135.55. On h4 chart below we can see that price re-testing the major trendline resistance again. As long as the trendline hold, the main trend should remain bearish. On the other hand, break above the trendline resistance should be seen as a potential threat to the current bearish scenario and could be a beginning of a new bullish phase at least testing 138.30 area. Immediate support at 134.80 area. Break below that area should trigger further bearish momentum re-testing 133.91 and keep the bearish scenario intact.

AUDUSD Outlook

The AUDUSD attempted to push higher yesterday, topped at 0.9192 but closed lower at 0.9152 and keep moving lower below 0.9140 at the time I wrote this comment. The bullish scenario remains intact but the failure to keep momentum above 0.9140 could produce a false breakout scenario which could trigger a bearish correction re-testing 0.9040 area. Immediate resistance at 0.9192 (yesterday’s high) followed by 0.9250.

FX Instructor LLC
www.fxinstructor.com

The information has been prepared for information purposes only. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. This information contained herein is derived from sources we believe to be reliable, but of which we have not independently verified. FXInstructor LLC assumes no responsibilities for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person’s reliance upon this information. FXInstructor LLC does not warrant the accuracy or completeness of the information, text, graphics, links or other items contained within these materials. FXInstructor LLC shall not be liable for any indirect, incidental, or consequential damages including without limitation losses, lost revenues or lost profits that may result from these materials. Opinions and estimates constitute our judgment and are subject to change without notice. Past performance is not indicative of future results

Forex Trading – JPY Pressured by BOJ Ease Speculation

admin — Wed, 10 Mar 2010 21:32:00 +0000

USD Lower, JPY Pressured by BOJ Ease Speculation

USD: Lower, inventories drop more than expected, stocks rally
JPY: Lower, BOJ ease speculation, weak machinery orders
EUR: Higher, German exports drop sharply, industrial production rises in Italy and France
GBP: Lower, industrial production posted an unexpected decline, concern about UK debt rating
CAD and AUD: AUD & CAD higher, strong Chinese trade data, stocks and crude rally

Overview

USD traded in a narrow range gaining versus JPY and GBP, and drifting lower versus the EUR and commodity currencies. JPY was pressured by BOJ ease speculation. Reuters reports that the BOJ may ease monetary policy next week. GBP traded lower in reaction to report of an unexpected decline in UK industrial production. EUR erased early loses sparked by report of a sharp drop in German exports. EUR rebounded in reaction to report of stronger industrial production data from Italy and France and gains versus the JPY. The commodity currencies continue to outperform trading higher in reaction to strong trade data from China. China’s exports rose 45.7% in February. The Chinese trade data generates optimism about the strength of the global recovery. Dovish comments from the Fed’s Evans had limited impact on the trade. Evans said the weak labor market will make the Fed keep accommodative policy for some time. The Bloomberg Professional Global Confidence Index finds that optimism about the USD is an 18 month high as the US economy shows signs of recovery. According to the survey, investors expect the US economy to grow faster than Japan and Europe and the Fed is expected to hike rates before the ECB and BOJ. Growth and yield differentials are moving in favor of the USD. The Bloomberg survey also states that investors have turned negative the EUR because of fallout from the Greek debt crisis. Jeremy Siegel a finance professor at University of Pennsylvania Wharton school of business says the US recovery is certain but the EU may splinter. A fresh sign that the US economy is recovering is a report that US job openings are at an 11 month high. This report suggests that US employers may be ready to start hiring new workers. US economic data was mixed with wholesale sales coming in higher than expected and wholesale inventories lower than expected. USD traded to the days lows pressured by a surge in the price of crude sparked by report of lower crude inventories. Focus turns to Thursday’s release of US jobless claims and retail sales and Friday’s release of Michigan consumer sentiment.

Today’s US data:

January wholesale inventories declined by 0.2%, a rise of 0.3% was expected and wholesale sales rose by 1.3%, a rise of 0.8% was expected.

Upcoming US data:

On March 11th initial jobless claims for week ending 03/06 will released expected at 460k compared to 469k last week. January trade deficit also will be released on March 11th expected at -40.3bln compared to -40.2bln last month. On March 12th February retail sales and March University of Michigan consumer sentiment will be released along with January business inventories. Retail sales expected flat compared to 0.5% rise last month. Michigan consumer sentiment is expected at 73.5 compared to 73.6 last month and business inventories are expected to rise by 0.2% compared to 0.2% decline last month.

JPY

JPY traded lower pressured by BOJ ease speculation, report of a decline in core machinery orders and stable corporate goods prices. Reuters reports that the BOJ is leaning towards easing monetary policy next week. According to the Reuters report BOJ board members are divided about how to justify the ease. The BOJ is under intense pressure from the Japanese government to take action to combat deflation. The BOE policy board will meet on March 16th and 17th. Japan’s January core machinery orders declined by 3.7%, this was slightly better than the market expectation of a 4.1% decline. The Japanese government raised its assessment of this sector. Recent improvement in Japanese economic data may make it more difficult for the BOJ to justify an ease next week but deflationary pressures continue with February domestic corporate goods prices reported at 0.1%. The annual rate of corporate goods prices fell by -1.5%. Risk sentiment and the direction of equities are key to the outlook for the JPY. Investors will also be closely monitoring BOJ policy outlook. There is increased speculation that the BOJ may soon ease monetary policy to combat deflationary pressures in Japan. Focus turns Thursday’s release of Japan’s Q4 GDP. The GDP report will be important to the outlook for BOJ policy. A stronger GDP report may dampen BOJ ease speculation. JPY may benefit from repatriation flows ahead of Japan’s fiscal year ended March 31st.

Q4 preliminary GDP will be released on March 11th expected at 1.1%. On March 12th January revised industrial output will be released expected at 2.5% compared to 1.9% last month.

Key technical levels to watch in USD/JPY include support at 89.94 the March 10th low with resistance at 91.30 the February 23rd high.

EUR

EUR traded mixed erasing early losses that were sparked by sovereign debt risk concern and report of a sharp drop in German exports. A warning from Fitch rating agency about the outlook for Portugal’s debt and a drop in German exports pressured the EUR in overseas trade. German January trade surplus narrowed to 8bln from 13.4bln last month. German exports declined by 6.3%. The drop in the German exports raises concern about the strength of the EU recovery because most of the recent rebound in economic activity has been driven by export sales. EUR downside was limited by report better than expected industrial production data from Italy and France and gains in cross to the JPY. EUR remains vulnerable to concern about EU sovereign debt risk and ECB policy. The ECB is expected to remain on hold because of continued subdued EU inflation and uncertain outlook for EU sovereign debt risk.

On March 12th EU January industrial production will be released expected at -1.5% compared to -1.7% last month.

The technical outlook for the EUR is negative. Expect EUR support at 1.3530 the March 5th low and 1.3433 the March 2nd low with resistance at 1.3712 the March 4th high.

GBP

GBP traded lower pressured by weaker than expected UK industrial production, concern about UK debt and uncertain outlook for the UK election. UK January industrial production was reported down 0.4%, a 0.3% rise was expected. The decline in the UK industrial production generates concern about the outlook for the UK recovery and may encourage speculation that the BOE will be forced to expand quantitative ease to boost growth. The weaker than expected industrial production report follows yesterday’s report of weaker UK house prices and a sharp widening of UK trade deficit. The BOE’s Posen said that he hopes that the BOE is finished with quantitative ease as he expects the £200bln asset purchases to help restore UK economic growth. Tuesday the Fitch rating agency said that the UK must take faster action to reduce its deficit or risk a downgrade of the UK s credit rating. UK Chancellor Brown said today that the UK will maintain its AAA rating. The latest UK election polls indicate that the UK is likely to be confronted with a hung parliament. A hung parliament will make it difficult for the new UK government to piece together a strong enough coalition to agree to take action to reduce the UK deficit. Concern about the strength of the UK recovery and uncertainty about upcoming UK elections should limit demand for GBP.

The technical outlook for GBP is negative as GBP trades back below 1.5000. Expect near-term support at 1.4854 the March 2nd low with resistance at 1.5064 the March 9th high.

CAD

CAD traded mixed consolidating near a seven week high versus the USD. CAD was supported by a rebound in the price of crude and in reaction to report of strong trade data from China. CAD has been outperforming supported by stronger than expected Canadian economic data, rising crude prices and improving risk appetite. Candidate reported stronger than expected February housing starts and faster than expected Q4 GDP growth. Crude prices have been approaching the $82 a barrel despite stronger USD. CAD price direction maintains a strong correlation to the price of crude. Widening of China’s trade balance contributes to improving risk sentiment and optimism about strength of the global recovery. Equity market gains however have slowed which limited demand for the CAD in Wednesday’s trade. CAD has been outperforming supported by last week’s decision by the BOC to maintain steady monetary policy and signal a shift in its policy bias. In the BOC policy statement the BOC dropped reference to inflation risks being to the downside. This has encouraged speculation that the BOC may hike interest rates sooner than the Fed. A BOC rate hike could come as early as August. Canadian interest rate swaps widened to a two year high versus US last Wednesday. The widening of the swap spread reflects increased speculation that the BOC will hike interest rates before the Fed. This week’s main focus will be Friday’s release of Canada’s unemployment rate for February. Consensus is that Canada’s jobs creation slowed in February. A weaker than expected Canadian unemployment report may take some of the steam out of BOC rate hike speculation. As the CAD approaches parity it may increase the risk of verbal intervention from the BOC and Canadian officials. Comments from the Canadian Finance Minister Flaherty seemed to reduce the risk of intervention. Flaherty said that the CAD strength reflects the outperformance of the Canadian economy and a strong CAD helps Canadian companies buy equipment more cheaply. The BOC on the other hand noted that strong CAD may be a drag on the Canadian recovery.

On March 11th Q4 capacity use and January trade balance. Capacity use is expected at 67.9 compared to 67.5 last quarter. The trade balance is expected at 0.50bln compared -0.25bln last month. On March 12th February unemployment will be released expected unchanged at 8.3% with employment growth expected at 30k compared to 43k last month.

The technical outlook for CAD is positive as USD/CAD trades below 1.0500. Look for near-term support at 1.0175 the July 28th low with resistance at 1.0368 the March 3rd and high.

AUD

AUD traded mixed with initial support attributed to report of strong Chinese trade data and gains limited by mixed Australian economic data and sideways price action in global equity markets. China reported that February exports rose by 45.7% and imports were up by 44.7%. China’s February trade surplus was reported at 7.6bln. The strong Chinese trade data generates optimism about the global recovery and fuels speculation that China may soon allow the Yuan to gradually appreciate. A gradual appreciation of the Yuan would be a way for China to try to slow its rapid economic growth. Earlier in the year China raised its reserve ratios and an implemented restriction on bank’s to try and curb lending. Because the Yuan is pegged to the USD the Chinese central bank has limited tools to control money supply and economic growth. Today’s Chinese trade report may encourage Chinese officials to consider Yuan revaluation as a tool to try to moderate growth and prevent the creation of asset bubbles in China. Australia’s March Westpac consumer confidence index rose by 0.2% and the Q4 NAB small business index rose by eight points to +13. January housing finance however dropped by 7.9%. Today’s Australian data follows yesterday’s report of a sharp increase in February job ads and strong NAB business conditions index. These reports suggest that Australia’s domestic economy is picking up strength. Stronger domestic data will increase pressure on the RBA to hike interest rates next month. Last Tuesday, the RBA hiked interest rates 25bps to 4%. In the statement accompanying the RBA rate hike the RBA appeared to have a balanced outlook towards inflation, growth and future policy decisions. This has sparked speculation that the RBA may pause its rate hike cycle in April. Focus turns to Thursday’s release of Australia’s February unemployment. A strong employment report would add fuel to RBA rate hike speculation. AUD price direction will focus on risk sentiment and the direction of equity markets.

On March 11th February unemployment will be released expected at 5.2% compared to 5.3% last month with the participation rate unchanged at 65.3

The technical outlook for the AUD is positive as the AUD trades above 9100. Expect AUD support at 9056 the March 9th low with resistance at 9200.

By Michael J. Malpede

Easy Forex

Forex Technical Analysis – Daily 03.10.2010

admin — Wed, 10 Mar 2010 11:07:00 +0000

Daily Technical Analysis

EURUSD Outlook

The EURUSD attempted to push lower yesterday. Price slipped below the minor bullish channel, bottomed at 1.3537 but closed higher at 1.3600 and now back inside the minor bullish channel. This fact should keep the bullish correction intact and potential false breakdown scenario which could trigger upside momentum testing 1.3735/50 area. The bias remains neutral in both nearest and medium term as price still consolidation but the major trend should remain bearish as long as price move inside the major bearish channel. Note that only a clear break below the triple bottom formation at 1.3450/35 area could be seen as the end of the bullish correction scenario. Immediate support at 1.3530 area.

GBPUSD Outlook

The GBPUSD attempted to push lower yesterday, bottomed at 1.4935 but closed higher at 1.4994. The fact that price still unable to make a clear break below 1.4950 area indicates that the bullish correction scenario remains intact but overall the pressure should remain to the downside. Immediate resistance at 1.5050. Break above that area could trigger further bullish correction towards 1.5200/50 area. On the other hand, clear break below 1.4950 area should continue the bearish momentum re-testing 1.4779.

USDJPY Outlook

The USDJPY attempted to push lower yesterday, bottomed at 89.62 and closed at 89.95. The main trend should remain bearish but bullish correction remains intact as long as price stay above 89.50 area and we need a break below that area to continue the bearish scenario retesting 88.50. Immediate resistance remains around 90.50 area. Break above that area should trigger further bullish correction targeting 91.50.

USDCHF Outlook

The USDCHF made another indecisive movement yesterday, still trapped in range area of 1.0888 – 1.0640 as you can see on my h4 chart below. Boring, but we have to patiently waiting. The best strategy remains to short around 1.0888 or long around 1.0640 with tight stop loss. Break above 1.0888 – 1.0900 area should continue the bullish scenario targeting 1.1000 while a break below 1.0640 should trigger further bearish correction towards 1.0507 area. As the main trend remains bullish, I am expecting a downside correction towards 1.0640 before continue the bullish move targeting 1.1000 area

EURJPY Outlook

The EURJPY attempted to push lower yesterday after rejected to move above the trendline resistance, bottomed at 121.45 but closed higher at 122.33. The bias is neutral in nearest term but as long as price move below the trendline resistance the main trend should remain bearish. Immediate resistance at 123.00. Break above that area should trigger further bullish momentum re-testing the trendline resistance. Initial support at 121.70/45 area. Break below that area should continue the bearish momentum testing 119.70 region.

GBPJPY Outlook

The GBPJPY attempted to push lower yesterday, bottomed at 133.91 but closed higher at 134.88. The bias is neutral in nearest term but the main trend should remain bearish as long as price stay below the trendline resistance. Immediate resistance at 135.50 followed by 136.10. Break above 136.10 area could be a serious threat to the current bearish outlook. Initial support at 133.90. Break below that area should continue the bearish scenario re-testing 132.00 area

AUDUSD Outlook

The AUDUSD attempted to push lower yesterday, bottomed at 0.9055 but closed significantly higher at 0.9137 and traded above 0.9140 area at the time I wrote this comment. This fact should trigger further bullish momentum targeting 0.9250 before aim for 0.9326 but we need a consistent move above 0.9140 area to confirm this bullish scenario. If price fail to do so and break below 0.9100, we should have a false breakout scenario which could trigger bearish momentum re-testing 0.9040 area.

FX Instructor LLC
www.fxinstructor.com

Forex Trading – USD Higher, EUR and GBP Pressured by Credit Warnings

admin — Wed, 10 Mar 2010 00:07:00 +0000

USD Higher, EUR and GBP Pressured by Credit Warnings

USD: Higher, risk aversion re-emerges on European debt worries
JPY: Higher, supported by a return of risk aversion, leading index rose more than expected
EUR: Lower, concern about Greek debt troubles, ECB’s Stark says debt places strains on monetary policy
GBP: Lower, Moody’s and Fitch warnings on banks and debt, weak housing data, trade deficit widened
CAD and AUD: AUD & CAD higher, Australia’s job ads strong, tracking equities, gains versus Europe

Overview

USD traded higher Tuesday supported by a return of risk aversion sparked by the re-emergence of concern about European and UK debt. Fresh worries over European debt were triggered by statements from Moody’s and Fitch ratings agencies. The EUR traded lower ahead of today’s meeting with Greek Prime Minister Papandreou and President Obama. Bloomberg reports that this meeting is unlikely to produce any significant offer of US aid for Greece. Papandreou says that Greece needs EU and US help to prevent speculative selling of Greek bonds and that borrowing at high rates will not be sustainable. GBP was pressured by a Moody’s warning that it may cut UK bank ratings as bailout support is withdrawn and in reaction to Fitch concern about UK deficit. GBP was also pressured by disappointing UK housing and trade data and election polls which suggest that the UK is headed for a hung parliament. Commodity currencies continued to outperform despite a sharp decline in the price of crude and a spike in risk aversion as equity markets traded lower. AUD downside was limited by strong jobs ads report and a rebound in US equities. JPY traded higher supported by today’s return of risk aversion. There were no major US economic reports released in today’s trade. The NFIB small business optimism index lost 1.3 points in February and Manpower says that hiring plans are in a holding pattern as a net 5% of employers said they expect to hire new workers in Q2. Focus turns to this week’s release of US jobless claims, retail sales and consumer sentiment.

Today’s US data:

No major US economic data was released in today’s trade.

Upcoming US data:

This week’s US economic calendar includes the March 10th release of January wholesale inventories and sales. Wholesale inventories are expected to rise by 0.3% compared to a 0.8% decline last month. Wholesale sales are expected unchanged at 0.8%. The February Treasury budget will also be released on March 10th expected at -200bln compared to -193.9bln last month. On March 11th initial jobless claims for week ending 03/06 will released expected at 460k compared to 469k last week. January trade deficit also will be released on March 11th expected at -40.3bln compared to -40.2bln last month. On March 12th February retail sales and March University of Michigan consumer sentiment will be released along with January business inventories. Retail sales expected flat compared to 0.5% rise last month. Michigan consumer sentiment is expected at 73.5 compared to 73.6 last month and business inventories are expected to rise by 0.2% compared to 0.2% decline last month.

JPY

JPY traded higher supported by a spike in risk aversion sparked by fresh concerns over European debt problems. Moody’s warned that it may cut UK bank ratings as bailout support is withdrawn and Fitch expressed concern about the UK deficit. The Greek PM said that borrowing at high rates was not sustainable and that Greece needs help from the EU and the US to rein in speculative attacks on the Greek bond market. Equity markets traded lower in reaction to European debt risk. JPY posted sharp gains in cross trade to the EUR and GBP in reaction concern that European debt ratings may be cut. JPY was also supported by report that the January leading index rose by 2.4% and by Yuan revaluation speculation. The IMF says that the Yuan may have to be revalued in the coming months as China adapts to the changing global economic outlook. JPY sometimes trades as a proxy for the Yuan and Yuan revaluation would likely boost demand for Asian currencies. Risk sentiment and the direction of equities is key to the outlook for the JPY. Investors will also be closely monitoring BOJ policy outlook. There is increased speculation that the BOJ may soon ease monetary policy to combat deflationary pressures in Japan. Focus turns to Wednesday’s release of Japan’s corporate goods prices Thursday’s release of Japan’s Q4GDP. The corporate goods prices report will be a key indicator of deflationary pressures in Japan. The GDP report will be important to the outlook for BOJ policy. A stronger GDP report may dampen BOJ ease speculation.

On March 10th February CGPI will be released expected to rise by 0.1% compared to 0.3% last month. January machinery orders will be released on March 11th expected at -5.2% compared to 20.1% last month along with Q4 preliminary GDP expected at 1.1%. On March 12th January revised industrial output will be released expected at 2.5% compared to 1.9% last month.

Key technical levels to watch in USD/JPY include support at 89.15 the March 5th low with resistance at 90.69 the March 8th high.

EUR

EUR traded lower ahead of today’s Greek-US meeting pressured by fresh concern about European debt outlook. Greek officials seek US support of Greek austerity measures. The Moody’s and Fitch ratings agencies issued new warnings about possible downgrades of the UK debt rating and this sparked selling of equities and the European currencies. EUR outperformed gaining versus the GDP but uncertainty about the outcome of today’s meeting between the Greek prime minister and president Obama revived concern about the Greek debt outlook. The US is not expected to offer much in the way of substantial aid to Greece. Greek officials want the EU and US to help prevent speculative selling of Greek bonds because the selling of Greek bonds substantially raises the cost of Greek funding of its deficit. EUR was also pressured by statements from the ECB’s Stark and Weber. Stark warned of the risk of global stagflation and that high levels of public debt will place additional strains on monetary policy. Stark’s comments suggest that the European debt crisis may delay the implementation of ECB exit strategies. Weber says that he sees a weak EU recovery. Weber’s comments fuel investor fears that the sovereign debt crisis in peripheral European nations would be a drag on the EU economy. EUR remains vulnerable to concern about EU sovereign debt risk and ECB policy. Focus turns to this week’s release of EU CPI. The ECB is expected to remain on hold because of continued subdued EU inflation and uncertain outlook for EU sovereign debt risk.

On March 10th EU CPI and current account balance will be released. On March 12th EU January industrial production will be released expected at -1.5% compared to -1.7% last month.

The technical outlook for the EUR is negative. Expect EUR support at 1.3530 the March 5th low and 1.3433 the March 2nd low with resistance at 1.3712 the March 4th high.

GBP

GBP traded lower pressured by fresh concern about the UK debt outlook and sovereign debt rating and in reaction to disappointing housing and trade data. Moody’s said that it may cut UK banks ratings as bailout support is withdrawn and Fitch said that the UK must accelerate cutting its budget deficit or face a sovereign debt downgrade. UK February RICS house price balance came in at 17 compared to 31 in January, a reading of 30 was expected. This marks the lowest UK house price balance since August of 2009. RIC’s house balance report suggests that the recovery in the UK housing market has slowed. GBP was also pressured by report of a widening of the UK trade deficit. The UK trade deficit widened to 7.9bln from 7.01bln last month. UK trade deficit is at its highest level since August 2008. These reports overshadowed report that February BRC retail sales rose by 2.2%. GBP was also pressured by the latest UK election polls which show that the Conservatives and Labor party are running neck and neck. UK elections are expected to be held on May 6th. The UK election polls suggest that neither the Conservative or Labor party will win a significant majority in parliament .This could lead to a hung parliament. A hung parliament may reduce the chance of the new UK government taking fast action to reduce the UK budget deficit. Rating agencies have put the UK on notice that if credible action is not taken to reduce the UK deficit the UK AAA sovereign debt rating is at risk or downgrade. Concern about the strength of the UK recovery and uncertainty about upcoming UK elections should limit demand for GBP. Focus turns to Wednesday’s release of UK industrial production.

On March 10th January industrial production and NIESR GDP estimate will be released. The January industrial production is expected at 0.3% compared 0.5% last month. NIESR GDP estimate is expected at 0.3%.

The technical outlook for GBP is negative as GBP trades back below 1.5000. Expect near-term support at 1.4854 the March 2nd low with resistance at 1.5197 the March 8th high.

CAD

CAD traded mixed initially pressured by weaker equity market trade, tumbling crude prices and a spike in risk aversion sparked by the re-emergence of concern about European debt. CAD downside was limited by gains versus Europe. CAD traded at seven week high versus the USD in Monday’s trade supported by a report of a sharp rise in Canadian housing starts, firmer equity market trade and a rally in the CRB index led by stronger crude prices. Canada’s February housing starts came in much higher than expected reported at 196.7k, the trade had expected a reading of 189.5k. CAD has been outperforming supported by last week’s decision by the BOC to maintain steady monetary policy and signal a shift in its policy bias. In the BOC policy statement the BOC dropped reference to inflation risks being to the downside. This has encouraged speculation that the BOC may hike interest rates sooner than the Fed. A BOC rate hike could come as early as August. Canadian interest rate swaps widened to a two year high versus US last Wednesday. The widening of the swap spread reflects increased speculation that the BOC will hike interest rates before the Fed. Canadian housing data follows last week’s strong Canadian GDP report and adds to BOC rate hike speculation. Canada’s Q4 GDP rose at its fastest pace in nine years. The BOC has confirmed that it plans to maintain steady rate policy through June 2010 but the odds of the BOC rate hike before year end are rising. This week’s main focus will be Friday’s release of Canada’s unemployment rate for February. Consensus is that Canada’s jobs creation slowed in February. A weaker than expected Canadian unemployment report may take some of the steam out of BOC rate hike speculation. As the CAD approaches parity it may increase the risk of verbal intervention from the BOC and Canadian officials. The BOC noted in its policy statement concern about the potential drag for the Canadian economy from strong CAD.

The technical outlook for CAD is positive as USD/CAD trades below 1.0500. Look for near-term support at 1.0225 the January 14th low with resistance at 1.0368 the March 3rd and high.

AUD

AUD traded mixed to firm with initial selling pressure sparked by a spike in risk aversion offset by strong Australian domestic economic data. Today’s AUD strength was impressive in light of weaker crude oil prices and rising risk aversion. Australia’s February NAB business conditions index rose to +8 compared to +3 in January and the confidence index rose to +19 from +15 last month. February job ads rose by 19.1% this marked the highest level for Australian job ads in over a year. These reports suggest that Australia’s domestic economy is picking up strength. Stronger domestic data will increase pressure on the RBA to hike interest rates next month. Last Tuesday, the RBA hiked interest rates 25bps to 4%. In the statement accompanying the RBA rate hike the RBA appeared to have a balanced outlook towards inflation, growth and future policy decisions. This has sparked speculation that the RBA may pause its rate hike cycle in April. RBA watcher McCrann that the RBA is likely to pause its rate hike cycle in April. McCrann however still expects the RBA to hike rates to 5% by year end. This AUD downside is also limited by Yuan revaluation speculation. Monday Reuters reported that China may be considering breaking its USD peg and Tuesday the IMF says that the Yuan may have to be revalued coming months. If China breaks its peg to the USD it may help to reduce global trade imbalances and boost the global recovery outlook. One note of caution, Chinese officials said they are wary about the outlook for gold. AUD price direction has a high correlation to the direction of the price of gold and Chinese demand for gold has been one of the major factors supporting the rise in the price of gold. Focus turns to this week’s release of Australia’s February unemployment. A strong employment report would add fuel to RBA rate hike speculation. AUD price direction will focus on risk sentiment and the direction of equity markets.

On March 10th January housing finance will be released expected at 2.5% compared to -5.5% last month. On March 11th February unemployment will be released expected at 5.2% compared to 5.3% last month with the participation rate unchanged at 65.3

The technical outlook for the AUD is positive as the AUD trades above 9100. Expect AUD support at 8985 the March 5th low with resistance at 9200.

By Michael J. Malpede

Easy Forex

Fundamental Outlook – U.K. Trade Gap To Narrow In January On Pound’s Depreciation

admin — Tue, 09 Mar 2010 06:55:00 +0000

Today, the U.K. will release trade balance for January in a calm day in Europe that lacks fundamentals. The British economy has shown improvement, according to the data released last week which showed that consumer confidence surged in February to a two-year high and services expanded at the fastest pace in three years.

Britain expanded 0.3% in the fourth quarter boosted by exports which jumped to 3.7% from 0.1%, while imports rose to 4.1% from 1.3%. Besides, services and manufacturing sectors are showing growth in the first quarter of 2010. However, the economy is suffering from a trade deficit, where it widened in December to the most since January 2009 as imports soared faster than exports.

Trade deficit reached 7.3 billion pounds where imports inclined 5.2%, while exports jumped 4.5% on the month. The trade gap in January is predicted to narrow to 7.0 billion pounds. Trade deficit non EU is estimated to narrow to 3.3 billion pounds from 3.5 billion pounds, while the total trade deficit to retreat to 3.0 billion pounds from 3.2 billion pounds.

Probably the reading will improve after the pound dropped nearly 2.7% versus the greenback in December and January. Growth in the coming period will mainly depend on the increase in exports after the pause of the APF program in February at 200 billion pounds. Last week, MPC members left both interest rate and APF program unchanged at 0.5% and 200 billion pounds in March.

It seems that the high inflation that rallied to 3.5% in January, the most in 14 months, caused the Governor of the Bank of England, Mervyn King, to write an open letter to the U.K Treasury stating why inflation was high above the bank’s target is capping the bank from the increasing the amount of APF to boost recovery that is still fragile.

On the other hand, government spending surpassed revenue by 4.3 billion pounds in January which makes the main concern for the U.K. in the coming period will be taming the skyrocketing budge deficit before witnessing far-reaching calamity like Greece.

The British Chamber of Commerce lowered its forecasts for 2011 to 2.1% instead of 2.3%. Also, the BoE lowered its growth forecasts to 3.2% in the second quarter next year, below the previous estimates of 4%. Still uncertainty is surrounding recovery due to the budget deficit woes and the political change that might take place in May when results of elections are announced.

Ecpulse

disclaimer: The content of ecPulse.com and any page in the website contain information for investors/traders and is not a recommendation to buy or sell currencies, stocks, gold, silver & energies, nor an offer to buy or sell currencies, stocks, gold, silver & energies. The information provided reflects the writers’ opinions that deemed reliable but is not guaranteed as to accuracy or completeness. ecPulse is not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trades currencies, stocks, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, stocks gold, silver &energies presented should be considered speculative with a high degree of volatility and risk