August 9, 2009

Stocks continued their rally on Friday with the major US indexes jumping one percent each as the unemployment figures fell for the first time in 15 months. The release of US unemployment data always makes for a raucous day in both currency and equity days and Friday was no exception, but even the downtrodden US dollar found a way to join the party and rallied a bit against some of its major rivals. Even more surprising was the fact that the dollar rallied in conjunction with stocks. Friday’s gains took the Dow Jones Industrial Average to a fourth consecutive weekly gain and the venerable index now rests at its highest levels since November 2008.

The Labor Department’s news also helped the S&P 500 cap a nearly 15% four-week run. The measure of the 500 largest US companies is now up almost 50% since, leaving some market observers to opine that stocks may be due for a breather. That could be a boon for the greenback, which finished last week at a seven-week high against the yen and turned in its first weekly gain against the euro in nearly a month.

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Weekly Forex Report

August 1, 2009

With optimism spreading that the global economic recovery is underway, US equities turned in their best July performance in 20 years. The Dow Jones Industrial Average tacked on 725 points, or nearly nine percent, for the month, and the S&P 500 turned in its best July performance since 1997. All of this spelled doom for the dollar as the greenback approached its year lows against six major rivals by Friday’s close.

Economic reports are starting to buttress the fortunes of equity investors, renewing risk appetite in the process. Last week started with a spate of cheery housing data in the U.S., with a report on Monday showing new home sales rose 11% in June. That was followed by a report on Tuesday that told the market home values in 20 metro areas across the States rose for the first time since October 2008. The icing on the cake was Beige Book and GDP news that was not nearly as bad as either report could have been. In fact, the US GDP report issued on Friday showed a meager one percent contraction in economic activity during the second quarter. 

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Weekly Forex Report

July 25, 2009

It was another stellar week for US equities, meaning it was anything but for the US dollar. Stocks extended their rally for a second consecutive week with all three major US indexes closing up roughly 4% on the week. A spate of bullish earnings reports from US corporates has sent renewed risk appetite and that may lead to a troublesome longer-term trend for the US dollar. Not even glum earnings reports from Nasdaq heavyweights Amazon (AMZN.NSDQ) and Microsoft (MSFT.NSDQ) could subdue the bullish tenor in US equities.

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Weekly Forex Report

7/19/09

Last week was a almost a perfect storm of sorts for US equities, as better-than-expected earnings combined with an options expiration week to lead stocks higher on the week. The tech-heavy Nasdaq surged 7.4% on the week, turning in its best weekly performance in a decade. The Dow Jones Industrial Average turned in its first weekly gain since June 12 and the S&P 500 was up nearly 7% on the week, as well. This sign that risk appetite is no longer waning was enough to punish safe-haven currencies such as the US dollar and Japanese yen and both were down on the week against the Euro.

Since we are less than two full trading weeks into US earnings season, it stands to reason that if more upside earnings emerge, that will bolster the fortunes of other currencies that display an intimate correlation to the performance of US stocks, such as the British pound, Canadian dollar and Australian dollar. We are not going to commit to an overly bullish posture on US stocks quite yet, but last week’s news was certainly more good than bad and if that continues, it should present forex traders with the opportunity to exploit that scenario for significant gains against the greenback.

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Weekly Forex Report

July 10, 2009

With a fourth consecutive weekly decline for the Dow Jones Industrial Average and another sour performance for the S&P 500, it is probably safe to say at this point that the rally in US equities is not only tapering off, but that it has likely ended. Summer doldrums are apparently setting in as the number of buyers to combat sellers is waning and that is not the best of news to head into earnings season with. Second-quarter earnings have started to trickle in in the States, though the earnings spigot will start to flow with full force next week.

This is obviously noteworthy to forex traders because if we can see robust surprises to the upside from these quarterly reports, a new round of buying could start and leader investors away from the comforts of the US dollar and into riskier currency fare. We’re not going to bet on that scenario playing out as both the dollar and the Yen rose against the Euro last week, indicating sentiment may be shifting and risk appetite may be declining. All that said, Goldman Sachs lowered its three-month outlook for the greenback, but boosted its 12-month view on the basis that the Federal Reserve’s “aggressive easing” cycle will be coming to an end.

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