Forex Market Update: Looking For the Next Move

Coming Up Today

• UK Public Sector Net Borrowing
• Canadian CPI
• Fed Member Lockhart Speaks

 Not a whole lot going on today as the markets continue to look for direction after last week's risk rally. Overall. not much has changed since last week's FOMC Meeting. In fact, it can be said that risk sentiment has actually risen with the Bank of Japan joining the party and increasing its own monetary stimulus plans. As such, with riskier currencies in the forex markets seeing weakness this week, we appear to be in a period of profit taking after the previous run-up.

Looking forward, forex traders may want to keep their eyes on EU sovereign debt yields, specifically those of Italy and Spain for an indication of whether the "good times" are set to continue or whether the longer term risk adversity theme is still in play.

Charts to Watch

EURCHF: Nothing new has occurred in the EURCHF but it continues to find support on any of its dips. Whether this is a precursor to another move higher remains to be seen, but it does indicate that buyers (SNB or someone else) are stepping up from their previous 1.2000 level.

GBPUSD: The GBPUSD is showing its resilience by shaking off yesterday’s weakness to trade back towards it week highs this morning. The return to its previous highs contrasts to other forex pairs such as the AUDUSD, EURUSD & NZDUSD that are still well off of their previous best levels of the week. As such, if the pair manages to trade and hold above 1.6275, it could lead to further bullish momentum to start next 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.

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: GBPUSD Seeing Support

Today’s News

• UK Claimant Change “Better Than Expected”
• UK MPC Minutes “No Changes”
• US CPI – Coming up at 8:30 EST

UK Claimant Change figures were better than expected this morning. Also, the Bank of England’s MPC Minutes revealed no changes from last month as all 9 members were in favor of leaving interest rates at 0.5%. On the news, the GBPUSD traded back towards the 1.5700 figure, holding currently just below. Coming up today, Forex traders will be awaiting US CPI figures. With the USDJPY finally gathering momentum as it nears 79.00 we could see additional momentum in the Forex pair after today’s CPI numbers. Also, a low reading could knock prices of Gold lower after they fell below 1600 again today.

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

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.

USDJPY Analysis: Fade Moves Until Friday

 Spain’s banking demise has triggered a week long risk off move in the Forex markets. As would be expected, the Japanese Yen has been gaining overall on its safe haven status. While the moves in Yen crosses such as the EURJPY and GBPJPY may continue to have follow-through downward momentum, the USDJPY could be a bounce candidate. As can be seen in the chart below, the USDJPY is dropping out of its two week long triangle formation. While such moves can often trigger a sustained breakout move in the direction that a Forex pair trades out of the triangle, fundamental news could hamper the technical moves in the USDJPY.

FOMC Minutes Preview

In early morning trading, the US dollar is unchanged after trading lower yesterday.  Yesterday’s dollar weakness occurred even as US ISM Manufacturing PMI data was better than expected.  Traders were especially noting to 3.0% in the employment component of the PMI survey.  On the news, US equities quickly moved higher, but the dollar was left out of the rally.  Looking ahead, Forex traders will be awaiting today’s FOMC Minutes release.  The FOMC data comes after traders have received mixed messages from FED members.  Last week saw Chairman Bernanke sounding dovish, and all but signifying that further easing was in the cards.  However, yesterday, Dallas Bank President Fisher stated that although tightening was a long time away, the Fed didn’t need to apply new stimulus at this time. 

Forex Market Update

Fed Chairman Ben Bernanke didn’t drop more hints yesterday in his speech to GW University students.  Unlike Monday’s talk where he outlined the need for further stimulus to boost employment growth, Bernanke stayed the course with the subject content, and discussed how the Fed has assisted the US economy in the last few years. Bernanke defended the Fed’s Asset Purchases and near 0.0% interest levels as being beneficial for the overall US economy.

GBPUSD Battle of the Banks

One of the great things about Forex trading is the various opinions on any Forex pair.  Chat rooms and forums will rarely see much of a consensus, with traders battling it out with their opinions.  Currently, we have such a battle in the GBPSUD from two leading banks in Europe.  On one side, Danish firm Danske Bank has recommended to clients to be buyers of the GBPUSD on nay dips with a target above 1.6000.  Contrasting their statements is German Commerzbank which believes the GBPUSD will see weakness as it tested but failed to cross above the 1.6000 figure. 

Bernanke to Markets “The FED is in Charge”

So, pretty much every Forex analyst (us included), spent the weekend writing up trading previews for this week talking about the plethora of US economic data coming out this week.  And how a positive run of economic news may finally cause the FED to lay off on its talk about a possible QE move.  Well, Fed Chairman Ben Bernanke wasn’t willing to wait until the end of this week to make any decisions and was pretty straightforward in his remarks to the National Association for Business Economics (the same members that earlier published a report showing a wide majority against QE).

Forex Traders Watching the US this Week

Coming up this week, US economic news is expected to lead trading action.  Impactful releases are scheduled for every day,; starting with today’s Pending Homes Sales, Tuesday’ Consumer Confidence, Wednesday’s Durable Goods Orders, Thursday’s Initial Claims numbers and concluding with Friday’s PCE Index.  Although each announcement on its own wouldn’t be considered to be a long lasting market moving event, the combination of five releases in a row could dictate the moves of the dollar as it trades towards next week’s Non Farm Payrolls release.

GBPUSD – Traders Await UK CPI

After trending higher yesterday, the GBPUSD is off this morning as it is trading around 1.5865, as Forex traders await UK’s upcoming CPI data.  Expectations for the year over year figure are 3.4% versus last month’s number of 3.6%.  Although the fall in inflation follows the Bank of England’s forecast that the UK’s rising inflation last year was only a temporary condition, it does raise the question of whether the fall is due to a soft economy.  As such, if CPI is seen dropping faster than expected, it could lead to pound weakness as Forex traders may interpret the news as proof of a further economic slowdown.