Thread: Daily FX Market Outlook by AceTrader-1-3-2011

Market Review - 28/02/2011 19:49 GMT

Euro n cable rise on speculation Fed's Bernanke continues stimulative policy
The euro rose on Monday on speculation the Federal Reserve Chairman Ben Bernanke would iterate his supportive stance on the stimulative policy in his testimony at Senate on Tuesday n Wednesday. Despite the initial brief fall below last Friday's low of 1.3724 in Asian morning, buying interest at 1.3712 lifted euro up n the single currency eventually climbed to 1.3857 b4 retreating on active crossing selling especially vs sterling. Eur/gbp fell fm 0.8555 to 0.8480, eur/jpy dropped fm 113.35 to 112.80 while eur/chf declined fm 1.2861 to 1.2805.

The British pound rallied broadly on Monday as the market again speculated that the Bank of England will be pressured to raise interest rate earlier than the ECB n the Fed due to recent high oil prices. Cable rose fm Asian low of 1.6072 to 1.6152 in European morning n despite staging a brief pullback later, price then rallied abv last Wednesday's high of 1.6275 to as high as 1.6278 in NY afternoon b4 stabilising. Cross-buying in sterling versus euro n jpy also supported the pound as gbp/jpy rose sharply fm 131.31 to 133.32.

On the data front, eurozone final Jan. HICP came in lower-than-expected at 0.7% against a rise of 0.6% in the previous month, U.S. Personal income rose to 1.0% in Jan fm 0.4% in Dec. while Canada GDP in Dec. came out better-than-expected at 0.5% vs street forecast at 0.3% n the previous reading of 0.4%.

Irish election results over the weekend:
The Fine Gael beat the embattled Fianna Fail led by Brian Cowan, as expected, Enda Kenny's party had secured 70 seats of the 153 seats filled so far n is widely expected to form a coalition with the Labour party which had won 35 seats.

Data to be released on Tuesday includes:

Japan household spending, unemployment rate, Australia retail sales, current account, RBA rate decision, Swiss GDP n PMI, U.K. nationwide house price index, Germany unemployment rate n unemployment changes, eurozone manufacturing PMI, HICP flash data n unemployment rate, U.K. manufacturing n mortgage approval, Canada BoC rate decision, U.S. construction spending n ISM manufacturing.

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Market Review - 01/03/2011 20:21 GMT

Euro falls in NY as the rise in oil prices dents risk appetite

Euro fell on Tuesday as crude oil prices surged due to the supply disrupttions n more turmoil in the Middle East n North Africa, increasing demands for the dollar n the Japanese yen as safe-haven assets.

Despite the single currency's brief rebound fm 1.3786 to 1.3855 in European morning on Tuesday, price then traded in a volatile manner in NY morning during Federal Reserve Chairman Ben Bernanke's testimony to the Senate Banking Committee. Later, the single currency ratcheted lower to an intra-day low of 1.3762 in late NY trade as the intra-day decline in U.S. stocks accelerated on fears that high oil price would slow down global economic recovery. DJI tumbled 168 points or 1.38%.

The Fed Chief's Bernanke, in his prepared remarks before the Senate, said downside risks to growth have declined n the risk of deflation was negligible. He added that the surge in oil n other commodity prices probably won't cause a permanent increase in broader inflation n repeated that borrowing costs are likely to stay low. He later added that 'don't expect big impact on interest rates when Fed ends easing program'.

The British pound retreated fm a 13-month high on Tuesday on profit-taking. Cable initially extended recent ascent to a 13-month high of 1.6330 in European morning after triggering stops abv 1.6300 option barrier, however, lack of strong follow through buying together with the dovish remarks on sterling fm Bank of England Governor Mervyn King prompted investors to take profit n the pound then fell to an intra-day low of 1.6251 in late NY session.

Bank of England Governor Mervyn King said in his testimony to Parliament's Treasury Committee that increasing the benchmark interest rate to make a gesture in the fight against inflation would be self-defeating. He also said financial markets do not believe rate of price increase will persist; 'inflation pressures are back to target by mid 2011 but will not show up in Y/Y measure until 2012'.

The Japanese yen also strengthened broadly on Tuesday as investors flock to the yen as a safe-haven asset. Usd/jpy, eur/jpy, aud/jpy n gbp/jpy fell fm 82.24 to 81.74, 113.73 to 112.76, 83.75 to 82.98 n 134.13 to 132.97.

Data to be released on Wednesday include:

Japan business capex, Australia GDP, Germany retail sales, U.K. construction PMI, eurozone PPI, U.S. ADP employment n Canada PPI.

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Market Review - 02/03/2011 19:48 GMT

Euro strengthens to a 2011 high on ECB rate hike outlook

Euro rose sharply on Wednesday as higher-than-expected eurozone PPI fueled speculation that ECB may raise interest rate to curb inflation earlier than the Fed. Although euro dropped briefly below Tuesday's low of 1.3762 to an intra-day low of 1.3744 in Asian morning, price then ratcheted higher n intra-day rise gathered momentum after eurozone PPI surged to 1.5% M/M vs forecast of 1.1% whilst Y/Y figure jumped to 6.1%, the highest lvl since September 2008. The single currency eventually rose abv 1.3862 (Feb) to a fresh 2011 high of 1.3890 in NY mid-day on dlr's broad based weakness b4 retreating on profit-taking.

The British pound also rallied to a fresh 13-month high on Wednesday on dlr's broad-based selloff. Despite initial weakness to 1.6216 in Asian afternoon, cable rebounded n jumped to 1.6300 after release of stronger-than-expected UK construction PMI, Feb figure came in at 56.5 vs forecast of 52.8, Feb PMI was the highest in 8 months according to Markit/CIPS, citing news UK business growth. The pound eventually climbed to a fresh 13-month high of 1.6344 in tandem with euro in NY morning b4 stabilising.

The dollar blipped up to an intra-day high of 82.13 against the Japanese yen after the release of much better-than-expected U.S. ADP employment in NY morning, the usd/jpy pair then tumbled to as low as 81.57 b4 recovering in NY afternoon. The Swiss franc strengthened to a fresh lifetime low of 0.9202 in NY mid-day as the continued unrest in Libya n Middle East prompted investors to flock to the swissy as a safe-haven asset.

The nzd tanked fm 0.7482 to 2011 low of 0.7385 on Wednesday after Prime Minister John Key said he would 'welcome' an interest rate cut to boost the economy following last month's earthquake in Chrischurch.

The European Central Bank will hold its policy meeting on Thursday at 12:45GMT. Although the ECB is widely expected to keep interest rates unchanged at 1.0%, pay attention to the press conference after the rate decision as the ECB chief Jean-Claude Trichet may sharpen its anti-inflation rhetoric.

Data to be released on Thursday include:

Australia building approvals, Swiss retail sales, Germany, U.K. n eurozone services PMI, eurozone GDP, retail sales, ECB rate decision, U.S. jobless claims, productivity n ISM non-manufacturing.

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Market Review - 03/03/2011 20:24 GMT

Euro rallies as ECB's President signals rate hike next month

Euro soars broadly on Thursday after European Central Bank's President Jean-Claude Trichet said in a press conference following rate decision that 'rate hike in April is possible'. The central bank kept benchmark rates unchanged at record low of 1.0% as widely expected.

Trichet also said that inflationary risks are to the upside n 'strong vigilance' is required. He added that it is not appropriate to see big rate hike in April n it is certainly not start of series of rate hike.

Despite the initial choppy trading below Wednesday's high of 1.3890 in Asian n European sessions on Thursday, the single currency jumped across the board immediately after Trichet's hawkish remarks n the single currency eventually climbed to a near 4-month high of 1.3976 (EBS) in NY morning b4 trading sideways. Eur/jpy, eur/gbp n eur/chf rallied fm 113.10 to 115.18, 0.8480 to 0.8584 n 1.2788 to 1.3023 respectively.

The British pound went through a roller-coaster session on Thursday. Although the British pound traded sideways after rising to a fresh 13-month high of 1.5344 on Wednesday, cable tanked immediately after the release of weaker-than-expected UK Feb Services PMI, which fell to 52.6 fm the reading of 54.5 in Jan. Later, price rebounded swiftly fm 1.6261 to 1.6315 in tandem with the single currency, however, cross-selling in sterling versus the euro pressurised the pound again to a day low of 1.6254 in NY mid-day b4 stabilizing. Earlier, BoE Deputy Governor Charles Bean said that inflation next year may be higher than the Bank of England currently forecast, but that does not mean it shud necessarily tighten policy faster than markets currently expect.

The dollar strengthened against the Japanese yen n the Swiss franc on Thursday after a reported showed the U.S. claims for unemployment benefits fell last week to their lowest lvl in more than 2 1/2 year, fueling speculation that U.S. non-farm payrolls data due on Friday wud be stronger than expected. Usd/jpy rallied fm 81.73 to 82.53 whilst usd/chf surged fm 0.9232 to 0.9329 b4 easing in NY.

Data to be released on Friday include:

U.S. average hourly earnings, non-farm payrolls, unemployment rate n factory orders, Canada Ivey PMI.

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Market Review - 04/03/2011 20:19 GMT

Euro rises to a fresh 4-month high despite better-than-expected U.S. jobs report

The single currency rose for three consecutive days to a fresh 4-month high in a volatile New York session on Friday as the better-than-expected U.S. jobs data could not convince investors that the Fed could raise interest rates anytime soon.

After strong rally to 1.3976 on Thursday, euro traded sideways in Asian n European sessions ahead of the much-awaited U.S. jobs report. Later, despite euro's initial spike up to 1.4002 after the better-than-expected U.S. jobs data, price retreated briefly to 1.3940, however, renewed buying interest there lifted the single currency to an intra-day fresh 4-month high of 1.4009 b4 retreating again on cross-selling in euro vs jpy n chf together with profit-taking ahead of weekend.

U.S. non-farm payrolls increased by 192,000 in February versus the street forecast of 185,000 n the upwardly revised reading of 63,000 in January. The U.S. unemployment rate continued to edge lower to 8.9%, lowest since April 2009, fm 9.0% in January. The private payrolls rose by 222,000 in February against the upwardly revised reading of 68,000 in Jan.

The British pound was little changed on choppy Friday trading. Despite cable's brief but sharp selloff to 1.6235 after the release of lower-than-expected UK Halifax house prices, price then rebounded strongly to an intra-day high of 1.6306 b4 gyrating inside aforesaid range in NY trading.

UK Halifax house prices showed a decline of 0.9% in Feb M/M versus the previous reading of 0.8%.

The greenback weakened against the Japanese yen on Friday. Although the dollar extended Thursday's rally and jumped to an intra-day high of 83.09 after the U.S. jobs report, price then quickly retreated n later dropped to 82.22 on active cross buying in yen as eur/jpy, aud/jpy, gbp/jpy pairs tumbled 116.00 to 114.87, 84.00 to 83.13 n 135.12 to 133.67 respectively.

The Swiss franc strengthened against the greenback n euro on Friday due to hawkish remarks by SNB Vice President Thomas Jordan together with the escalation of violence in Libya. Although the usd/chf pair extended the corrective rise fm Wednesday's lifetime low of 0.9202 to 0.9332 in Australia, price then fell in European morning n intra-day selloff accelerated in NY session after the U.S. jobs report, the pair eventually hit a day's low of 0.9224 b4 recovering on short-covering. Eur/chf also tumbled fm 1.3025 to 1.2917.

SNB Vice President Thomas Jordan said in an interview with Swiss French language paper Le Temps published on Friday that 'current interest rate level not sustainable in medium term; still watching Swiss housing market carefully; housing market situation has not become more problematic but some causes for concern remain.

Data to be released next week include :

Japanese leading indicators n Canadian building permits on Monday.

Australian NAB business confidence, Japanese current account n economic watch DI, U.K. BRC retail sales n RICS house prices , Swiss unemployment rate, Germany factory orders, Canadian housing starts on Tuesday.

Australian W'pac consumer confidence, Japanese machine orders, U.K. BRC shop price index n trade balance, Germany WPI n industrial production, Swiss CPI, U.S. wholesale inventories on Wednesday.

Australian unemployment rate, Japanese GDP n domestic CGPI, German Import n Export, U.K. industrial production, manufacturing production, rate decision n asset purchase target, Canadian trade balance n import/export, U.S. Fed budget on Thursday.

German CPI, U.K. input/output PPI n PPI core, Canadian employment change unemployment rate, U.S. retail sales , U. Michigan survey n business inventories on Friday.

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An extreme example of how the Daily News can impact on the Daily Forex market is what happened on 9/11. On that fateful morning while most Americans were watching the horrors unfold in stunned silence and disbelief the dollar began to fall in value. Currency traders in far flung places noticed the fall and saw the news. As they too watched in horror many of them automatically traded the dollar against other currencies and made huge sums of money. They bought the U.K. pound or the Japanese Yen immediately.

Market Review - 08/03/2011 20:02 GMT

Euro falls on concerns over European debt woes

The euro fell on Tuesday as Moody's cut Greek debt rating on the previous session ignited investors' attention back to the lingering European debt woes. Yields on Portuguese and Irish debt rose to a record high. Despite the early recovery to 1.3989 in Asian midday, the single currency ratcheted lower in European session and price later declined to an intra-day low of 1.3862 in NY morning b4 recovering on short-covering together with the rally in U.S. stocks.

EU will intend to approve a 'comprehensive' package of measures at a March 24-25 summit in a bid to calm bond markets.

ECB policymaker Axel Weber said the European Central Bank's signal last week that it is ready to raise interest rates was 'quite necessary' to tackle firming inflation pressures. He added that policymakers needed to be vigilant to the risks posed by tensions in Arab countries and rises in the oil price.

On the other news fm Bloomberg, S&P saw more sovereign ratings downgrades for euro countries.

The British pound also fell on Tuesday, earlier, cable showed muted reaction to UK data at Asian opening when UK retail sales fell 0.4% on a like-for-like y/y basis in February (January's figure was +2.30%), a separate RICS data showed decline in UK house prices continued to ease in the 3 mths through February, after a 6-month slide. However, intra-day decline in euro dragged the British pound lower in European session and price later hit an intra-day low of 1.6125 in NY morning b4 recovering on short-covering.

The dollar strengthened against the Japanese yen and the Swiss franc on Tuesday as the slide in oil prices discouraged demand for both the yen and franc as the safe-haven assets. Usd/jpy surged from 82.21 to 82.86 whilst usd/chf rallied from 0.9262 to 0.9364.

Kuwait's oil minister said OPEC was in talks to boost oil production.

Data to be released on Wednesday include

Australian W'pac consumer confidence, Japanese
machine orders, U.K. BRC shop price index n trade balance, Germany WPI n industrial production, Swiss CPI, U.S. wholesale inventories, Canada New housing price index, and New Zealand Central Bank rate decision.

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Market Review - 09/03/2011 20:41 GMT

Euro little change after successful Portugal bond auction

The single currency was little changed as the successful Portugal bond auction eased the ongoing concerns about eurozone debt woes on Wednesday. Earlier, although euro traded narrowly in Asian n price dropped briefly below Tuesday's low of 1.3862 to 1.3855, lack of strong follow through selling prompted investors to close their euro short positions n the single currency then rose swiftly to an intra-day high of 1.3942 on talks that ECB stepped in to buy Greek and Portuguese bonds b4 retreating again in NY mid-day.

Portugal's Treasury Secretary Carlos Pina said Portugal sold 1 bln euros in bonds in an auction at a rate of record high at 5.993%.

News fm Reuters quoting French gov't source, reporting that EU Leaders will discuss situation in Portugal on Friday but not preparing any EU intervention. EU leaders will hold a summit at 24-25 March.

Cable rose on Wednesday after report showed that Britain's trade deficits narrowed as exports rose to a record. Although sterling traded sideways in Asian morning after resumption of recent decline fm 13-month high of 1.6344 to 1.6125 on the previous session, the British pound rebounded fm 1.6142 on talk of buying fm Middle East names n cable then strengthened to as high as 1.6244 after the release of narrower-than-expected trade deficit which came in at -4.17 bln pounds, the smallest deficit since April 2010, versus the economists' forecast of -5.10 bln pounds. Later, price retreated in NY morning in tandem with the single currency.

The Swiss franc rallied against the greenback n euro on Wednesday as a report showed Swiss CPI accelerated last month, fueling speculation that the Swiss National Bank would raise interest in the coming months to curb inflation. In addition, concerns over that the continued turmoil in North Africa n the Middle East especially in Libya also underpinned the Swiss franc as a safe-haven asset. The usd/chf tumbled fm 0.9370 to 0.9269 while eur/chf tanked fm 1.3015 to 1.2895. Swiss consumer price index rose by 0.4% m/m n 0.5% y/y in Feb. versus economists' forecast of 0.3% m/m n 0.4% y/y respectively.

Reserve Bank of New Zealand reduced official cash rate by 0.5% to 2.5%. RBNZ governor Alan Bollard said that 'rate move was to reduce the quake impact; stimulatory policies not right during reconstruction.' He added 'current policy will be removed when rebuilding starts but will take some time.' Regarding the future policy, he said it depends on data. Nzd/usd tumbled to as low as 0.7332 after the rate decision, however, price then staged a strong rebound to around 0.7375/80 b4 trading sideways.

Data will be released on Thursday include:

Australian unemployment rate, Japanese GDP n domestic CGPI, German Import/Export, WPI n current account, U.K. industrial production, manufacturing production, rate decision n asset purchase target, Canadian trade balance n import/export, U.S. jobless claims, trade balance n Fed budget.

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This is also the scenario when there is bad political news or news of a disaster. Natural disasters too, such as earthquakes, tsunamis or severe floods can cause currencies to fluctuate.
In fact nowadays scarcely a day goes by without some news breaking that can rock the currency boats.

For beginners in the Forex business don't be foolhardy enough to start daily forex trading based solely on the News Stories. Here is my advice to you for what its worth - purchase an automated system like the one I use, learn the ropes from your support team, do paper trading or demo trading for a couple of weeks and finally start trading small. Do not use leverage until you are very competent.

Market Review - 10/03/2011 20:45 GMT

Euro tumbles after Moody's downgrades Spanish credit rating

The single currency tanked in European session after Moody's lowered Spain's government rating on Thursday. Despite the initial brief recovery to 1.3925 in Asia morning, euro then dropped sharply to 1.3864 in Asia mid-day on dollar's broad-based strength after China posted a surprise trade deficit of $7.3 billion in February, its largest in seven years. Later, the single currency then fell further due to Moody's downgrade of Spanish sovereign debt rating in European morning, price eventually ratcheted to a day's low of 1.3775 in late New York trade.

Moody’s lowered Spain’s credit rating by one notch, to Aa2 from Aa1, with a negative outlook, warning of further rating cuts to come as it expected bank restructuring will cost more than twice what the government expected.

In the other news from Reuters quoting comments from German Chancellor Angela Merkel who said in a closed meeting with German lawmakers that Germany could agree to increase the lending capacity of Europe's European Financial Stability Facility (EFSF) rescue fund if lower-rated euro members contributed capital.

The British pound also tumbled broadly on Thursday after the Bank of England held rate unchanged. Earlier, cable fell in tandem with euro in Asian session and despite staging a brief rebound from 1.6123 to around 1.6195/97 in European morning, sterling then tanked broadly after the Bank of England's rate announcement. Price eventually hit an intra-day low of 1.6038 on dollar's broad-based rally before stabilising in late New York trade. Eur/gbp rallied from 0.8534 to 0.8609 while gbp/jpy tumbled from 134.35 to 132.95.

The Bank of England kept interest rates at a record low of 0.5% and maintained its asset-purchase program at 200 billion pounds, judging that Britain's economic recovery remains too weak to sustain an inflationary spiral.

The greenback also rallied against the three commodity-linked currencies on Thursday. Aud/usd and nzd/usd tumbled from 1.0118 to 0.9991 and from 0.7380 to 0.7322 respectively whilst usd/cad surged from 0.9684 to 0.9768.

First-time claims for U.S. jobless benefits rose last week from an almost three-year low, highlighting the uneven nature of the improvement in the U.S. labor market. The U.S. trade deficit widened more than forecast in January to the highest level in seven months as a surge in imports led by costlier crude oil overshadowed record exports.

Data will be released on Friday include:

German CPI, WPI and HICP final, U.K. input/output PPI and PPI core, Canadian employment change and unemployment rate, U.S. retail sales, University of Michigan survey and business inventories.

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