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.

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: 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.

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: 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.

 

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.

GBPUSD Reacts to UK GDP

The UK released its 2^nd quarter GDP figures a few hours ago at a clip of -0.7 vs expectations of -0.2%.  Needless to say, the GBPUSD fell on the news, dropping nearly 100 pips from its highs to a low of 1.5468. The -0.7% GDP figure was affected by weak manufacturing and construction output.    On the political front, the GDP news is putting Chancellor George Osborne under fire as his austerity policies that he has implemented are cutting the UK’s deficit, but leaving the country exposed to recession.

Back to Forex and the GBPUSD
Even after falling on the news, the GBPUSD looks well bid as its longer term support of 1.5450.  If you take a look at the chart below, the GBPUSD has been in a two month trading range between 1.5450 & 1.5750.  The second chart shows the GBPUSD over the last few days where it had been falling on the overall strength of the dollar, before settling into a trading range just above its longer term support.

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.

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.

Dollar Rally Pauses

On the big surprises yesterday was the GBPUSD as it traded higher on negative remarks from the Bank of England's Governor Mervyn King.  The pair hit a high of 1.5650, and has since stayed comfortably above 1.5600.  The move was part of an overall drop in the USD yesterday which also saw the USDJPY trade lower, the AUDUSD higher, and the EURUSD going sideways, even as the Euro was weaker against other major currencies.

This leads us to today's trading where US economic data will be headlining the events later on in the day, as US Durable Goods Orders and Pending Homes Sales numbers will be released.  Depending on the outcome, it could cause a continuation of yesterday's dollar weakness.

EURUSD: As the chart below shows, the EURUSD hit a new low for the week yesterday on negative news from Italy, but quickly rebounded back around 1.2500.  The lack of selling momentum even with the Italian news indicated that Forex traders may not yet be ready to go full throttle on selling the pair.  As such, if today's US figures are worse than expected the EURUSD could be positioned to breakout higher if it trades above its 1.2520 intraday resistance.  

GBPUSD: After holding most of its post Inflation Report gains, the next step for the GBPUSD is to trade and hold above yesterday's highs.  On such a scenario, it would reveal that yesterday's buying momentum has staying power and could trigger a longer rally towards the 1.5800 figure.

Forex Today & The Week Ahead

While not much news is expected today other than the US’s New Homes Sales the week is slated to possibly be pretty exciting for Forex traders. Firstly, following today’s US housing figures, we will see further housing numbers from the US along with Durable Goods orders on Wednesday.  The US data will be critical to whether the USD will extend its rally following last week’s FOMC Meeting.

The big event for the week will be the EU Summit which starts on Thursday.  EU leaders will be discussing the future of bailouts, Eurobonds, and collective responsibility.  The Euro is expected to see volatility before and during the summit as Forex traders will be reacting to  news and rumors of the potential EU actions.

GBPUSD Analysis: CPI & Fibonaccis

UKCPI Figures are slated to be released today with the Bank of England than holding its Inflation Report shortly afterwards.  With the GBPUSD falling below 1.6000 support to a low of 1.5725 last week we decided to take a closer look on potential moves the pair could make following the figures.