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.

FOMC Meeting, QE3, Gold & the USDJPY

If you are looking for a proxy on expectations of from forex traders on what the Fed will at its upcoming FOMC Meeting, you don’t need to look much farther than the USDJPY.  After gathering momentum and hitting 79.00 last week, the pair has been in a nosedive since last Friday’s Non Farm Payrolls release.  The drop was a result of statements from last month’s FOMC Minutes that the Fed was ready to act if the US economy didn’t improve.  These words were then backed up by Fed Chairman Ben Bernanke at Jackson Hole.  As such, going into the Non Farm Payroll report, the overwhelming belief was that a poor figure would tip the scales in favor of Fed actions.  Therefore, with the NFP missing expectations, forex traders have been shorting the dollar in favor of the yen.

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.

Bernanke Speaks, Gold and the Aussie Could Move

Coming Up This Week

• Canadian GDP
• Fed Chairman Ben Bernanke Speaks

Ready or not it Bernanke time. We and the rest of the financial world have spent the week talking up Fed Chairman Ben Bernanke’s upcoming speech at the Jackson Hole Symposium. We are finally here, and as mentioned on Monday, it been a fairly choppy trading week as many Forex traders are on the sidelines or trimming their trading activities in prelude of the speech. Traders are hoping to hear from the Fed Chairman an update of whether the Fed is ready to apply further monetary stimulus at its upcoming FOMC Meeting. In the Fed’s previous meeting, they hinted to that fact, but doubts have risen of whether they actually will make changes. If Bernanke fails to give much clarity about the matter, we could see a fall in equities and the dollar rally.

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: 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.

Gold Upside Breakout

Gold Upside Breakout

Very quietly, prices of gold have risen back above 1600.  We wrote positively about Gold a few weeks ago that it was only a matter of time before the global monetary stimulus being enacted would start to rekindle inflation talk.  In truth, the recent rally probably had more to do with the overall risk rally that took place last week.  But, even before the hike back above 1600, the seeds were being put in place as prices were seeing support at 1570.  Also, after hitting a 2012 low, Gold has been in a steady uptrend (see chart).  The uptrend led to a triangle pattern forming.  

If you missed the first move, there could be more to come as Gold has broken out of its triangle pattern and looks poised to continue with its breakout. In trading this breakout pattern, a long trade would be in place until prices of Gold trade back below the downtrend that they had broken above.

One important item for Gold this week will be Friday’s Non Farm Payrolls.  The US Fed has stated that they prefer to take a “hold and see” attitude even as they admit US employment levels are weak.  Nonetheless, another bad number would ignite political pressure for them to act.  

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.

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.

Will Gold Find a Floor? UBS Comments

Things keep getting worse for prices of Gold lately.  The precious metal is currently in one of those “perfect storm” moments where it is unable to flex either its Safe Haven status muscles or catch a break as a commodity. This is being seen as recent news from Greece and the EU of further financial crisis was unable to lift prices of Gold.  In fact, the opposite was true as prices of Gold fell below its 1630 support levels last week and traded side by side lower with the falling Euro.  Similarly, the metal was unable to gain on the weekend news that China reduced its Reserve Requirement Ration by 0.5% to stimulate domestic demand.

Are you a Gold Bug? Jim Rogers and David Einhorn Are

Are you a gold bug? Views on whether to be in or out of gold are always a hotly contested subject.  Currently though, for of the happenings in the EU, on again off again US QE3 reports, Chinese slowdown, and BoJ intervention, Gold hasn’t done much of anything in the past few months.  Overall, since mid February, the precious metal has traded mostly between 1630 and 1690.  This lack of direction in Gold has caused an increase of chatter of what will be the next move.

Barclay’s Capital Loves Oil, Do You?

In a research report, Barclay’s Capital was out with positive research notes for oil prices for the remainder of the year.  The investment bank expects prices to remain strong as oil benefits from low spare capacity, geo political issues, and rising economic growth.  

Apart from oil, Barclay’s also expects precious metals prices to do well overall as demand remains strong for commodities.   Apart from commodities, Barcllay’s continues to recommend lowering exposure to Europe as its ongoing credit crisis could hamper investment results.

Gold Rebounds in Early Trading

After falling more than $150 since late February, prices of Gold have started to stabilize and are up over 3.0% since last week’s lows.  Industry reports have stated that the fall in prices was met with buying by global central banks to take advantage of the lower price points.

Bloomberg Survey Suggests 16% Rise in Gold Prices

Gold may have fallen $160 in two weeks from a February 29th high of 1792 to this morning’s lows of 1632, but Gold bugs continue to believe prices are poised to rally.  A recent Bloomberg survey of repsondents at Bloomberg’s Link Precious Metals Conference suggested prices could rise to $1897 by the end of the year, a 16% gain from recent prices.  Setting the move higher is a continuation of demand from global central banks and hoarding from private investors.

Dollar Continues Rally

Following no monetary policy changes from the FED at yesterday's FOMC Meeting, the Dollar has continued to rally.  Dollar bulls are being encouraged by the central bank's lack of mentioning any hints to an upcoming quantitative easing program.  As a result, the USDJPY has hit an 11 month high and the EURUSD has traded to a one month low.  Also, prices of Gold have fallen as worries of an escalation in US inflation has been removed.