Daily FX Profit Signal October 30th, 2009

A possible bullish reversal occurred yesterday, specifically on the EUR/USD pair. The whole move started after the advanced reading of the US GDP. Digging deeper, we’ll find that autos accounted for a very large portion of this number, 3.5% growth vs. 3.2% expected. The bounce off 1.4680 coincided perfectly with the 61.8% retracement level from the recent low of 1.4500 to the high of 1.5060. With more econ data out tomorrow, we’ll see if this trend against the buck continues. Many analysts are still split between the economic recovery and a possible double dip recession. Many blame the stimulus plan for the better than expected data and say it cannot be sustained, others are saying that this will provide the stepping stone for further growth. Only time will tell.

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Daily FX Profit Signal October 29th, 2009

As we expected, the dollar stayed on track and made further gains. Data out of the EU and the US put pressure on short dollar positions and a flight to safety continued, along with declining equity prices. Durable Goods Orders and New Home Sales out of the US came in below expectations; fundamentally this would hurt the dollar but in recent months, bad data has helped the dollar as investors and traders fear that the recovery analysts are talking about may not be so quick, so money flows back into US denominated assets such as treasuries. We are biased for more dollar gains in the short term. We think the Euro will find a bottom near 1.45 and will not fall below 1.4380. We still expect the Yen to be the big winner this year, falling to 87 or 85 before the dollar finds support.

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Daily FX Profit Signal October 28th, 2009

Summary:  As we expected, the dollar stayed on track and made further gains, especially after consumer confidence was released worse than expected. The euro found support at 1.4780, the cable managed to gain a bit of ground to close at 1.6370 after bouncing off 1.6244, Yen rallied to fall below 92, and the Suisse continued to test the 1.0225 level, closing just under. We are still bullish on more dollar gains in the very short term, but we expect a bounce and more dollar losses to come. Everything right now depends on risk appetite. If equity markets continue to decline, the dollar will gain ground; if equity markets stay at these levels or go higher, the dollar will continue to lose ground. Even Fed comments about a strong dollar policy aren’t helping the buck.

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Daily FX Profit Signal October 27th, 2009

Many are calling yesterday’s sharp reversal the turnaround in the dollar. I don’t’ quite agree. We need to see a break of 1.4835 first, followed by strong selling at 1.4800. Before calling this a reversal, we then need to break 1.4500; yesterday’s movement could be consolidation before another run higher. Having said that, we definitely think there will be a reversal, however, yesterday’s move may be too early. The Euro found support exactly where we have predicted, the 1.4850 level. Over the next few days, we are biased for consolidation between 1.4880 and 1.4950, however, the euro could go as low as 1.4800 before finding more support. One thing helping the buck gain more ground will be the equity markets; the Dow fell below 10K once again, if selling persists, the buck will strengthen

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Economic Calendar 26 October - 30 October

DATE	TIME	CRNCY	EVENT	ACTUAL	FORECAST	PREVIOUS
Tue	14:00	USD	USD Consumer Confidence (OCT)	47.7	53.5	53.1
27-Oct
Wed	0:00	EUR	EUR German Consumer Price Index (YoY) (OCT P)	0.0%	0.00%	-0.30%
28-Oct	0:00	EUR	EUR German Consumer Price Index - EU Harmonised (YoY) (OCT P)	0.0%		-0.50%
	0:30	AUD	AUD Consumer Prices Index (YoY) (3Q)	1.3%	1.20%	1.50%
						49.1
	20:00	NZD	NZD Reserve Bank of New Zealand Interest Rate Decision	2.50%	2.50%	2.50%
Thu
29-Oct	8:55	EUR	EUR German Unemployment Change (OCT)	-26K	15K	-12K
	12:30	USD	USD Gross Domestic Product (Annualized) (3Q A)	3.5%	3.20%	-0.70%
	12:30	USD	USD Gross Domestic Product Price Index (3Q A)	0.8%	1.40%	0.00%
Fri	10:00	EUR	EUR Euro-Zone Consumer Price Index Estimate (YoY) (OCT)		-0.1%	-0.3%
30-Oct

 

Interest Rate Decisions
Interest rates decisions news flashes provide guidelines for the overnight lending rate which are bound to have an effect on businesses and consumers alike. An upward surge in the cost of living - inflation and a runaway economy is slowed by hiking the interest rates. Lowering interest rates rejuvenates an economy from the doldrums by enabling consumers to get easy credit thus increasing consumption. Currencies strengthen when interest rates move north and weaken when the rates move southwards.

Change in Employment
Change in employment index compares the employment to the unemployment rates in a certain economy. The index which is calculated by economist is used to predict future spending and consumption pertains which are likely to occur due to change of one of the parameters. An economy can either grow or contract depending on which of the two parameters changes.

Consumer Price Index (CPI)
CPI is one of the most reliable parameters used to gauge the extent of inflation on the economy. Every household spends money on some basic commodities and utilities, these items are collectively referred to as “the consumer basket”. By monitoring the changes in price of the consumer basket, economists are able to predict the interest trends. This is largely due to the fact that central bank will more often than not act to tame inflation by raising interest rates and vice versa. The adjustments of interest rates to keep consumer basket within the majorities reach will affect the underlying currency either strengthening or weakening it.

Retail Sales
Retails sales are good pointers of the state of the economy. When the economy is strong and growing, retails sales escalate and consumer are more willing to spend money on luxury goods. Conversely, a shrinking economy is characterized by a reduction in retail sales and cautious spending by consumers.

Trade Balance
This is simply the difference between total exports and total exports between two or more trading nations. Multinational trade involves the export and import of goods and services between nations. When one country exports more than it imports the net effect is a trade surplus. The reverse of this is known as trade deficit. Great emphasis is placed on Trade Balance Report as it shows the movement of goods and services between nations. Countries with trade surplus usually have stronger economies as there have more money in than what there are spending.

Gross Domestic Product - GDP
GDP is derived at by measuring the consumers’ ability to consume / afford goods and services produced within their economy. A strong GDP is a sign of a robust economy which should be checked for inflation - rising interest rates - while a weak GDP could be interpreted to indicate a recession meaning interest rates are likely to head south.

ISM Manufacturing Survey
This survey gauges the mood and sentiments of companies’ top brass, decision and policy makers towards inflation. The centerpiece of this survey is their take on business outlook - new business, production capacities, backlogs, inventory levels and manpower issues. A 50 points scale is used to interpret the findings with value 50 indicating expansion, while values below 50 are a sign of recession.

Daily FX Profit Signal October 26th, 2009

Summary:  The British Pounds was once again the standout loser on Friday following a much worse reading of the preliminary GDP reading, a contraction of .4% vs. an expected growth of .2%. The sterling fell to 300 pips to test 1.6300; currently trading just under the figure. The AUD joined the decline, falling to .9200. A break below .9180 may open room to test the .9100 level. The lack of follow through on the EUR/USD pair may open room for more of a reversal, currently trading just under the 1.5000 level. A lot of economic data will be released this week starting with Australian PPI, US consumer confidence on Tuesday, US New Home Sales and Durable goods Orders on Wednesday, US Advanced GDP on Thursday, and Canadian GDP on Friday along with US Personal Income and Spending. Non-Farm Payrolls will have to wait until the beginning of next week. Any of the data listed above will surely impact the fundamental outlook and can cause volatile swings in the market.

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