Market Update: Traders Waiting Till Next Week?

Coming Up Today

• CAD GDP

After falling steadily throughout the week, the EURUSD finally saw buying demand yesterday on the back of an encouraging Italian bond sale. Also, better than expected US economic results on Thursday led to overall gains for equities which buoyed riskier currencies. So far, the EURUSD continues to see momentum as it trades at 1.2950 this morning and has nearly erased all of its earlier losses of the week.

Forex Trading Update - BoJ Follows the FED, ECB, ETC

Coming Up Today

• UK MPC Minutes
• US Building Permits & Existing Homes Sales

Earlier this morning the big story was that the Bank of Japan has joined the party as it announced at its Monetary Policy Meeting that it would increase its asset buying and loan program, by 10 trillion yen ($127billion) to 80 trillion yen. The move ends months of inaction from the BoJ which had been aggressive with applying economic stimulus earlier in the year before slowing down. The move is partially seen as a defensive play by the BoJ as forex traders expected that a potential run into the yen was possible after the US Fed activated its QE3 plans.

Non Farm Payrolls Preview

Coming Up Today

• UK Manufacturing Production
• Canadian Employment Change
• US Non Farm Payrolls

The ECB Meeting came and went yesterday. The big surprise was that Mario Draghi announced that the central bank had cut its GDP forecasts for the EU for 2012 and 2013. All that other bond buying stuff was as expected. In any event, on the news, the EURUSD tanked from about 1.2650 to 1.2560. But, that move was short lived as Forex traders quickly ignored the EU and took their cue from equity traders that were going bananas on the strong ADP Employment change and Initial Claims figures that were released. The news caused the S&P 500 to hit four year highs. As a result, rather than care about the cut in GDP forecasts, Forex traders put their attention on the fact that the ECB was in fact going to expand its bond purchasing program (big surprise!) and positive US news. The change in sentiment triggered an overall risk rally that continues this morning.

 Yesterday’s moves bring us to today’s Non Farm Payrolls. Based on last month’s better than expected data and yesterday’s ADP figure, it’s safe to say that Forex traders are expecting to see another positive result. Two items to watch are the USDJPY and Gold. The USDJPY spiked higher from around 78.40 to a high of 79.00 on the ADP news yesterday. Similariliy, prices of Gold fell as the dollar strengthened against other safe havens. However, until this morning, Gold’s weakness was minimal. As such, prices of Gold could see a sharp rally if the NFP fails to impress and expectations of QE3 entering the market. On the other hand, the USDJPY continues to look like a solid buy on positive US news. Although the Bank of Japan is setting pat itself and isn’t stimulating, it appears like Forex traders are looking for excuses to short the yen.  

Charts to Watch

EURCHF: Back from the dead, the EURCHF has sprung to life over the last few days. Currently the pair traded above 1.2100 this morning and has found support on its way. Traders should keep watching to see if another base forms in the pair to reveal support that was sitting at 1.2000 has climbed higher.

ECB Meeting Preview - Get Ready To Roll!!!

Coming Up Today

• Bank of England MPC Meeting
• ECB Interest Rate Meeting
• US ISM Services PMI

It’s crunch time for the ECB today as they hold their monthly interest rate meeting. Earlier in the week, ECB President Mario Draghi stated that they will do what needs to be done to preserve the Euro, even if this includes unlimited sovereign bond buying. With this backdrop, traders, analysts, media pundits, etc have been building up today’s meeting as a “do or die” session for the survival of the Euro.

A few of the headlines:
From the WSJ: Moment of Truth for Draghi's Plan
Bloomberg’s take: Draghi Credibility At Stake As ECB Tries To Save The Euro
The Financial Times: ECB adopts crisis role of IMF

But here’s the little secret, this is like the “gazillionth” time we have heard this type of talk. Whether its been EU Summits, the last moments of a bailout package announcement, or ECB Meeting, the market has given us numerous occasions of “now or never” situations. Basically, it comes down to this; the EU has tried cutting its deficits to strengthen its finances. While there have been deficit improvements, budget cuts have worsened the EU’s overall economy. As such, the ECB is currently betting on growth. They will fire up the printing presses and hope inflation doesn’t hit before growth does.  For traders, the key takeaway is the lack of much movement in the market. Although it seems a given that the ECB will stimulate, European stocks and the Euro are only slightly higher on the week. Therefore, it appears that the news is already being factored into the markets, and prices could tank as traders “sell on the news” or Draghi underwhelms with his plans.

Charts to Watch
GBPUSD: Keep your eyes on this one today. As you can see from the chart, the GBPUSD had hit resistance at 1.5900 for the past week. However, yesterday, the pair finally broke above this level and has been finding support at 1.5900. The chart indicates that buyers that were providing demand at 1.5750 have stepped to around the 1.5900 figure. With demand present, the GBPUSD could be set to explode if today’s news from both the UK and EU leads to risk buying in the market.

EURUSD: After moving steadily higher from mid-August, the EURUSD has begun to go sideways and has spent most of the past two weeks around the 1.2500 level. Overall, it appears that Forex traders are taking a “wait and see” plan with the EURUSD until after today’s meeting. As such, after consolidating, the pair could be primed to either breakout higher and get dumped, once more clarity about the EU’s futures is revealed.

Euro & Dollar See Strength Ahead of Jackson Hole

Coming Up This Week

• Preliminary US GDP
• US Pending Homes Sales
• Late Wedneday/Early Thursday – NBNZ Business Confidence and Australian Building Approvals

As expected, Forex traders continue to look ahead to Friday’s speech from Fed Chairman Ben Bernanke. As such, market moves have been muted. Although the gains have been small, it is worth noting that both the Euro and dollar are strengthening overall this week. As such, the dollar’s strength could be revealing low expectations that Bernanke’s will yield much new information about the Fed’s future actions. Also, the Euro’s strength could be an indication that Forex traders are becoming more comfortable with the rumored plans of monetary policy actions from the ECB.

Trading This Week - Jackson Hole Everywhere

Coming Up This Week

• Tuesday - US Consumer Confidence
• Wednesday – US Preliminary GDP
• Wednesday – Pending Homes Sales
• Early Thursday - NBNZ Business Confidence
• Thursday - Saturday – Jackson Hole Symposium
• Friday – Fed Chairman Ben Bernanke Speaks
• Saturday – ECB President Mario Draghi Speaks

It’s another week of trading. Last week featured some back and forth of potential Fed and ECB actions, which ultimately led to the Euro and global equities advancing. This week, the two central banks will stay in focus as Fed Chairman Bernanke is set to speak on Friday at the Jackson Hole Symposium, and will be followed by ECB President Draghi on Saturday. Analysts are split on whether the two central bank chiefs will shed any new light on their respective banks’ plans or not. Nonetheless, as the main news is back ended to the end of the week, it could lead to choppy market conditions.

Market Update: Traders Stuck in Doubt

Coming Up Today

• UK Revised GDP
• US Durable Goods

After the markets convinced themselves on Wednesday afternoon that the FOMC Minutes indicated a pending easing move from the FED and rallied, doubts have begun to emerge. Triggering the second thoughts was an appearance by St. Louis Fed President James Bullard where he stated “that U.S. data has been somewhat better since the July 31-August 1 Fed meeting.” Traders reacted by selling US equities yesterday, which triggered an overall move lower in riskier currencies. Of note, the Aussie continues to see selling pressure after Australian miners have been reporting gloomy forecasts. The news has raised expectations that the RBA will be forced to cut interest rates to compensate for the potential drop in economic growth from the country’s large mining sector.

Forex Update: EURUSD & GBPUSD Breakout

Coming Up Today

• CAD Retail Sales
• USD Existing Homes Sales
• FOMC Minutes

Coming up today, Forex traders will be focusing on the FOMC Minutes. A quick recap of the Fed’s actions; with the world expecting the central bank to go the way of QE3, they have held back on applying this strategy. This has been the even though they admit that unemployment is a problem and the EU’s financial problems are slowly effecting the US economy. Therefore, Forex traders will be looking for any clues whether any members in the Fed are starting to lean towards new stimulus. If not, than it could lead to weakness in equities which would be dollar bullish.

The Week Ahead, EURUSD In Focus

Coming Up This Week!!

• Tuesday RBA MPC Minutes (AUD)
• Wednesday US Existing Homes Sales (USD)
• Wednesday FOMC Meeting Minutes (USD)
• Thursday German & French Manufacturing PMI
• Thursday US New Homes Sales (USD)
• Friday UK Revised GDP (GBP)
• Friday US Durable Goods Orders (USD)
• Next Month… ECB Meeting, lots of speculation on what they will do

Market Update - EURUSD Rallies, AUDUSD Slips

Today’s News

• Canadian CPI
• University of Michigan Consumer Sentiment

The EURUSD firmed yesterday after German Chancellor Angela Merkel's reiterated her support for ECB President Mario Draghi's vow to do “whatever is necessary to save the Euro.” On the news, the EURUSD rallied from 1.2260 early yesterday to a current high of 1.2370. Interestingly though, the EU news spilled over to the global equity market which saw gains in prices. However, riskier currencies such as the Aussie and Kiwi have been trending lower. Elsewhere, the GBPUSD continues to hold above 1.5700 as it trades near its 1.5750 long term resistance.

UK In the Spotlight For Forex Traders

Coming Up This Week

• Tuesday-UK CPI
• Wednesday-UK MPC Minutes
• Wednesday-US CPI

The Olympics is over but Forex traders will continue to put their focus on England. This week we will see a slate of important economic events from the UK, starting with tomorrow’s CPI figures and then moving on to Wednesday’s Claimant Change and MPC Minutes data. All of this news occurs after last week’s Bank of England Inflation Report, where the central bank cut its 2012 growth forecast to 0.0%. The lack of much economic movement in the UK has affected trading in the GBPUSD which continues to be in a long term trading range without much follow through momentum.

Market Update: US Banks Told To Fend For Themselves

Coming Up Today

• UK PPI Input/Output
• Canadian Unemployment Rate
• US Import Prices

US regulators told five leading banks, which included BofA and Goldman Sachs to start preparing plans to prevent them from collapsing. The regulators are basically letting the banks know that they will have to fend for themselves and not to expect government help in the event of them experiencing financial problems. While the regulators weren’t specifically indicating that they believed a collapse was around the corner, the fact that they are out warning the US’s biggest banks has triggered a risk selling environment this morning. Charts to Watch

Market Update: BoE Report

Coming Up Today

• UK Inflation Report
• Bank of England’s Mervyn King Speaks
• Australia & New Zealand Employment Change (later tonight)

Risk selling is hitting the markets this morning. The question for traders is whether the rally that began after last Friday’s NFP has fizzled and we are back to worrying about the EU, or is the current weakness simply profit taking. Looking ahead, Forex traders will be focusing on today’s Bank of England Inflation Report. After seeing UK GDP falling by 0.7% in its latest Q2 report, consensus among traders is that the Bank of England will lower their growth forecasts to 0.0% for the year from their previous estimate of 0.8% growth in 2012. If they don’t take down their numbers, the BoE will need to offer a very convincing reason why they believe the second half will show improvements.  Charts to Watch  EURUSD: After a nice move higher, the EURUSD’s rally has hit resistance as it approached the 1.2400 figure. Currently, the pair has been consolidating between the 1.2330 and 1.2350 level. The current trading action suggests we could be seeing a potential breakout trade taking place if the EURUSD trades above 1.2400 resistance or falls below last week’s lows.  

 GBPUSD : Within a long term trading range of 1.5450 and 1.5750, the GBPUSD is also experiencing a short term range and has retraced back below 1.5600 after hitting a high of 1.5680 this week. As such, with momentum fading, the GBPUSD is vulnerable to a drop back below 1.5500 if today’s BoE report underwhelms.

 

Market Update: Non Farm Payrolls Loom

Coming Up Today

• UK Services PMI
• US Non Farm Payrolls
• US ISM Non -Manufacturing PMI

After Wednesday’s lack of a changes at the Fed’s FOMC Meeting, Forex traders are gearing up towards today’s Non Farm Payrolls report. The numbers come after ECB Chairman Mario Draghi shook up the Forex trading world yesterday by backtracking on his statement that the ECB “would do whatever it takes to preserve the Euro.” Draghi stated yesterday that the ECB would be proactive with its bond purchases. However he added that the German Bundesbank isn’t a big supporter of the initiative. The EURUSD plunged on the news falling to a low of 1.2130 compared to earlier highs of 1.2375. The drop caused massive confusion among trades who were initially buying the Euro on initial wire reports of the ECB extending its bond purchases. The initial spike was short lived as moments later Draghi clarified the ECB’s role.

Looking ahead, Forex traders continue to be watching Italian and Spanish yields which moved higher following the ECB’s meeting. Changes in yields are a barometer for trader’s sentiment towards the entire EU and have affected prices of the Euro. Also, the dollar will be in focus as a better than expected Non Farm Payrolls figure could extinguish any expectations that the Fed will act at its next meeting.

Forex Market Update: UK & US Data

Coming Up Today

• UK Manufacturing PMI
• US ISM Manufacturing PMI
• US ADP Employment Change
• FOMC Statement

We have a lot coming up today for Forex traders. Starting the day will be the UK’s Manufacturing PMI results. Remember, one of the week components to last week’s weak UK GDP results was manufacturing output. Therefore, expectations are probably not very high for today’s number.

Later in the day, US data will be dominating the headlines. First will be the ADP Employment data which is a precursor to Friday’s Non Farm Payrolls number. Followed by the afternoon’s FOMC Statement. Going into today’s Fed Meeting, Bernanke and Co. have been talking down another round of quantitative easing, even as they admit employment growth has been sluggish. As such, unless suddenly switch gears on their monetary policy approach, we can expect the Fed to remain in its “wait and see” pattern.

Forex Trading Update: Will the EURUSD's Gains Hold

Coming Up Together

• Advanced GDP
• University of Michigan Consumer Sentiment

After Wednesday’s worse than expected UK GDP sent the GBPUSD lower, Forex traders will be looking towards the US’s Advanced GDP figures today. Currently, the Fed seems content on holding off from applying its third round of quantitative easing even as employment levels continue to be weak. As such, it will be interesting to see what happens if the GDP figures are worse than expected, if it will even have an effect. On the other hand, a better than expected figure could “seal the deal” that quantitative easing is on hold for 2012. Such an event would be expected to be negative to Gold prices while boosting the USDJPY higher.

Euro Falls As ECB Cuts Deposit Rates

With the ECB dropping deposit rates to 0.0% starting today, the question among Forex traders is whether the central bank is purposely trying to weaken the Euro.  The effects were seen in yesterday’s Forex trading as the Euro was lost against all major currencies.  The EURUSD hit another 2012 low as it traded to 1.2225, while the EURGBP fell below 0.7900, its lowest level since 2008.  Also, of significance was the EURAUD which traded below 1.2000 today.  Even though the Aussie would be considered as a risky holding during the current risk selling environment, the positive carry rate for being short the EURAUD has triggered selling pressure to accelerate.

What in the world happened in the markets yesterday?

What in the world happened in the markets yesterday?


While all eyes were on the ECB yesterday, the EU’s central bank needed to share the spotlight with what seemed like every central bank in the world. The ECB cut its Interest rate to 0.75% from 1.00% and its deposit rate to 0.0% from 0.25% in order to offer cheap money for banks and provide potential monetary stimulus options. The ECB wasn’t alone as central banks in China, the UK, Denmark, and even Kenya were slashing rates or adding to their asset purchase programs yesterday. Simultaneously, the US issued better than expected ADP Employment and Initial Claims figures as a prelude to today’s Non Farm Payrolls figures.< p> The big surprise wasn’t the news as much as the market’s reaction. The ECB’s actions and subsequent statements from Chairman Mario Draghi led the Euro much lower with the EURUSD falling over 150 pips to a low of 1.2360. Also, equity prices failed to advance on the news with German, US, and French stock indexes all lower.

So what triggered the fall?


While central bank stimulus in the past could be expected to trigger a risk rally, after seeing these rallies fizzle quickly in the past, Forex traders are beginning to take a more realistic view of the world; IE-“if things weren’t bad, the central banks wouldn’t be getting involved.” The key for the future isn’t how much stimulus is being thrown towards the world but is it working? Therefore, we can expect to see stronger emphasis in on economic numbers in the near future.

Non Farm Payrolls


This all brings us to today’s Non Farm Payrolls figure. Regardless of yesterday’s employment optimism from the ADP Employment and Initial Claims numbers, the Non Farm Payrolls could go either way. Therefore, taking pre-NFP trades would be considered a crapshoot. Even after the figures are out they could be interpreted in two ways. A bad number could trigger an overall risk selloff and lead the dollar higher, or the dollar could tank as Forex traders bet on Fed creating inflationary policies. The opposite scenario could occur for a positive figure.

So what to do? Look for trends


Currently, the EURUSD has been building a base above yesterday’s lows of 1.2360 while finding resistance at 1.2400. As such, a break below 1.2360 could trigger additional selling as buyers at current levels jump ship. Similarly, if the EURUSD manages to trade and hold above 1.2400 it could short covering.
Elsewhere, Forex traders should keep their eyes on some of the outperformers of the week, specifically the Aussie. While falling yesterday, the AUDUSD is finding support above 1.0200 as demand has been building at those levels. As such, if we do see an NFP risk rally take place, the Aussie will be expected to be a leader again.

Tuesday’s Forex Trading Setups : EURUSD Ready to Fall?

EURUSD: We are getting to the point where we can officially say that they Euro rally is over.  If there was the official point where we can “stick the fork into it” it will occur if the EURUSD breaks below 1.2550 (see chart).  This level was the EURUSD’s initial post spike support level on Friday morning.  The pair again bounced off this level yesterday.  However, as the EURUSD has been failing to trade to any higher highs since Friday, it will be vulnerable to selling pressure if the 1.2550 figure fails to hold.  The lack of follow through momentum in the Euro contrasts to the GBPUSD and AUDUSD which are both holding their risk rally gains of the last few days.

Friday’s Forex Trading Setups: Will the EURUSD Spike Hold?

EURUSD

The EURUSD is higher on an agreement among EU leaders at its Economic Summit to allow repayment obligations of bank bailout funds to be junior to existing sovereign debt.  As such, the EURUSD is currently trading around 1.2600.  However, as seen by previous spikes higher in the EURUSD after EU related headlines that faded quickly, the pair could be vulnerable again today.  As such, before getting too excited about today’s EURUSD strength, Forex traders should watch where the EURUSD ends up today and opens next week.   If the pair falls back into its previous downward channel (see chart) it would reveal that Forex traders remain skeptical towards the pair and would be vulnerable to further weakness next week.  On the other hand, it the EURUSD manages to close the week above 1.2600 and holds onto its current strength, this would be a bullish signal for the pair.  Such a scenario would bode well for continued upside next week.