The NZDUSD is in a situation similar to that of the AUDUSD. Unlike the AUDUSD, the NZDUSD completed its 5 waves down in an orthodox manner (rather than in a truncation). Short term resistance is at 7625, 7655, and 7685 but strong downtrend often result in shallow retracements (in other words, be careful not to wait for a rally to short that never materializes). From yesterday – “the decline from the November high unfolded in 5 waves and was succeeded by a sharp 3 wave retracement. Similarly, the decline from 7812 (one degree of trend less) unfolded in 5 waves and then experienced a sharp and deep retracement. A break of 7549 would shift focus to the December low of 7342.”
Intraday Analysis by Forexsoup
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Dollar Poised to Rebound on FOMC, US GDP
EURUSD: Rates in Focus as ECB’s Trichet Talks Down Outlook
Last week’s impressive Euro rally clearly looks to have owed to a parallel drop in credit-default swap (CDS) spreads from the currency bloc’s most debt-stricken periphery member states (the so-called PIIGS, meaning Portugal, Ireland, Italy, Greece and Spain). However, barring any unforeseen developments, the absence of scheduled event risk on the sovereign stress front this week may bring the monetary policy outlook back into focus. On balance, this seems to bode ill for the single currency after ECB President Jean-Claude Trichet backed off from the hawkish rhetoric accompanying the bank’s latest rate decision in an interview with the Wall Street Journal over the weekend. Preliminary German Consumer Price Index figures stand out on the economic calendar. Euro Zone Consumer Confidence and M3 Money Supply figures are also on tap.
GBPUSD: All Eyes on Bank of England Minutes for Policy Clues
Monetary policy expectations remain in focus as GBPUSD continues to track closely with the UK - US Treasury yield spread. This puts the spotlight on the Bank of England as it publishes minutes from January’s MPC meeting. The dramatic build in priced-in rate hike expectations for the year ahead (as tracked by Credit Suisse) suggests traders see the bank as likely to err on the side of price stability, stepping off the sidelines to raise rates as inflation continues to rise despite the threat that such action would pose to the nascent economic recovery, particularly as the government’s austerity program gains momentum.Indeed, the central bank argued throughout 2010 that inflationary pressure was temporary and would subside over the medium term without tightening. Clearly, this has proven wrong, hinting that putting off the issue for much longer threatens to become a credibility problem. A relatively robust fourth-quarter Gross Domestic Productreading will only add to the anticipation, with the annual growth rate set to print above its long-run average despite a shallow downtick from the prior period. With that in mind, traders will be keen to parse the meeting minutes for any clues on policymakers’ thinking ahead of February’s MPC sit-down, an event made all the more important given it coincides with the unveiling of an updated quarterly inflation forecast.
USDJPY: Spotlight Stays on US Yields, FOMC and US GDP on Tap
US Treasury yields remain most prominent in driving Japanese Yen price action, putting the spotlight squarely on the busy US economic calendar. Needless to say, the Federal Reserve monetary policy announcement and the preliminary fourth-quarter Gross Domestic Product reading stand out as top-tier event risk. For the former, traders will be most concerned with quantifying policymakers’ “threshold” for reducing or even suspending the second round of quantitative easing before its scheduled completion after hints at the existence of such a barrier suddenly emerged in Fed officials’ comments over recent weeks. Policymakers’ voting pattern ought to prove significant as well as five regional Fed presidents – including the hawkish Charles Plosser and Richard Fisher – will rotate into active positions on the rate-setting FOMC. Meanwhile, the GDP is set to show the annualized growth rate jumped to 3.5 percent, the highest in three quarters. Better yet, the outcome is expected to driven by the most robust pickup in private consumption in four years. This coupled with forecasts calling for stronger readings on Consumer Confidence, New Home Sales, and Durable Goods Orderspromise to push US yields higher, taking USDJPY along for the ride.
AUDUSD: Gold Correlation Hints Aussie Weakness to Continue
The Aussie’s bearings are best revealed via its clear correlation with gold prices, with the high yielder likely to continue following the yellow metal lower as investors’ dominant forecast for the evolution of the global recovery shifts away bullish and bearish extremes.Gold had thrivedon the back of its appeal as a store of value for bulls and bears alike, with theformer camp calling for runaway inflation courtesy of ultra-loose monetary policies while the latter projected renewed collapse as fiscal stimulus expired. However, investment demand suffered a major setback, with gold ETF holdings dropping precipitously over recent weeks. The reversal seems to owe to the combination of improving US economic data, rising sovereign stress in Europe and looming slowdown in China amounting to an environment where a back-slide into recession looks unlikely while pointing to a slow and uneven recovery over the years ahead. The increasingly apparent shift in the markets’ consensus toward this scenario bodes ill for the Aussie much the same as it does for gold. Indeed, a protracted recovery hints that major central banks will now get their chance to catch up as the RBA – until recently the leader in post-crisis monetary policy normalization – as Glenn Stevens and company look increasingly likely to sit on their hands for much of the coming year. The fourth-quarter Consumer Price Index report headlines local event risk.
NZDUSD: RBNZ Rate Decision to Yield Familiar, Dovish Outcome
The rising link between NZDUSD and yield spreads puts the spotlight squarely the Reserve Bank of New Zealand. The result may yet prove to carry little weight however after last week’s disappointing inflation report and pointedly dovish comments from Prime Minister John Key seemingly dashed any reason to suspect the central bank would abandon its accommodative posture.
EURUSD: Rates in Focus as ECB’s Trichet Talks Down Outlook
Last week’s impressive Euro rally clearly looks to have owed to a parallel drop in credit-default swap (CDS) spreads from the currency bloc’s most debt-stricken periphery member states (the so-called PIIGS, meaning Portugal, Ireland, Italy, Greece and Spain). However, barring any unforeseen developments, the absence of scheduled event risk on the sovereign stress front this week may bring the monetary policy outlook back into focus. On balance, this seems to bode ill for the single currency after ECB President Jean-Claude Trichet backed off from the hawkish rhetoric accompanying the bank’s latest rate decision in an interview with the Wall Street Journal over the weekend. Preliminary German Consumer Price Index figures stand out on the economic calendar. Euro Zone Consumer Confidence and M3 Money Supply figures are also on tap.
GBPUSD: All Eyes on Bank of England Minutes for Policy Clues
Monetary policy expectations remain in focus as GBPUSD continues to track closely with the UK - US Treasury yield spread. This puts the spotlight on the Bank of England as it publishes minutes from January’s MPC meeting. The dramatic build in priced-in rate hike expectations for the year ahead (as tracked by Credit Suisse) suggests traders see the bank as likely to err on the side of price stability, stepping off the sidelines to raise rates as inflation continues to rise despite the threat that such action would pose to the nascent economic recovery, particularly as the government’s austerity program gains momentum.Indeed, the central bank argued throughout 2010 that inflationary pressure was temporary and would subside over the medium term without tightening. Clearly, this has proven wrong, hinting that putting off the issue for much longer threatens to become a credibility problem. A relatively robust fourth-quarter Gross Domestic Productreading will only add to the anticipation, with the annual growth rate set to print above its long-run average despite a shallow downtick from the prior period. With that in mind, traders will be keen to parse the meeting minutes for any clues on policymakers’ thinking ahead of February’s MPC sit-down, an event made all the more important given it coincides with the unveiling of an updated quarterly inflation forecast.
USDJPY: Spotlight Stays on US Yields, FOMC and US GDP on Tap
US Treasury yields remain most prominent in driving Japanese Yen price action, putting the spotlight squarely on the busy US economic calendar. Needless to say, the Federal Reserve monetary policy announcement and the preliminary fourth-quarter Gross Domestic Product reading stand out as top-tier event risk. For the former, traders will be most concerned with quantifying policymakers’ “threshold” for reducing or even suspending the second round of quantitative easing before its scheduled completion after hints at the existence of such a barrier suddenly emerged in Fed officials’ comments over recent weeks. Policymakers’ voting pattern ought to prove significant as well as five regional Fed presidents – including the hawkish Charles Plosser and Richard Fisher – will rotate into active positions on the rate-setting FOMC. Meanwhile, the GDP is set to show the annualized growth rate jumped to 3.5 percent, the highest in three quarters. Better yet, the outcome is expected to driven by the most robust pickup in private consumption in four years. This coupled with forecasts calling for stronger readings on Consumer Confidence, New Home Sales, and Durable Goods Orderspromise to push US yields higher, taking USDJPY along for the ride.
AUDUSD: Gold Correlation Hints Aussie Weakness to Continue
The Aussie’s bearings are best revealed via its clear correlation with gold prices, with the high yielder likely to continue following the yellow metal lower as investors’ dominant forecast for the evolution of the global recovery shifts away bullish and bearish extremes.Gold had thrivedon the back of its appeal as a store of value for bulls and bears alike, with theformer camp calling for runaway inflation courtesy of ultra-loose monetary policies while the latter projected renewed collapse as fiscal stimulus expired. However, investment demand suffered a major setback, with gold ETF holdings dropping precipitously over recent weeks. The reversal seems to owe to the combination of improving US economic data, rising sovereign stress in Europe and looming slowdown in China amounting to an environment where a back-slide into recession looks unlikely while pointing to a slow and uneven recovery over the years ahead. The increasingly apparent shift in the markets’ consensus toward this scenario bodes ill for the Aussie much the same as it does for gold. Indeed, a protracted recovery hints that major central banks will now get their chance to catch up as the RBA – until recently the leader in post-crisis monetary policy normalization – as Glenn Stevens and company look increasingly likely to sit on their hands for much of the coming year. The fourth-quarter Consumer Price Index report headlines local event risk.
NZDUSD: RBNZ Rate Decision to Yield Familiar, Dovish Outcome
The rising link between NZDUSD and yield spreads puts the spotlight squarely the Reserve Bank of New Zealand. The result may yet prove to carry little weight however after last week’s disappointing inflation report and pointedly dovish comments from Prime Minister John Key seemingly dashed any reason to suspect the central bank would abandon its accommodative posture.
Attachments
Dollar Shows Limited Reaction to Consumer Confidence, What about the FOMC Decision?
Dollar Shows Limited Reaction to Consumer Confidence, What about the FOMC Decision?
Though the dollar would show signs of life early in Tuesday’s trading session; the benchmark currency would ultimately end the day once again in the red. At this point, we have seen the dollar slide for the third consecutive session on a trade-weighted basis and 10 of the past 12 days against its benchmark counterpart the euro. It may surprise some that the dollar has maintained this disappointing trajectory despite promising event risk that would emerge throughout the trading day. But, the reality is that it takes a greater degree of influence to knock speculators off established trends; and the updates we have seen simply don’t meet the necessary criteria. On the other hand, the greenback may not be doing as poorly as EURUSD suggests. Over the past week, we have made the effort to differentiate the dollar’s performance against its various counterparts to garner a better sense of its individual performance. And, while the world’s most liquid exchange rate is still set up in its bull trend, we see that the dollar has held up far better against the other majors. The commodity bloc is still restrained to congestion, the disputed safe haven pairs (USDJPY and USDCHF) are trading within January’s range and GBPUSD saw its strongest dollar move in six weeks.
With prominent fundamental catalysts due later this week, there is a natural tendency to defer major positions (and thereby trend generation) until market participants are sure of the outcome to these upcoming events. With this distraction, the market would see a limited response to the scheduled event risk through the day. On the economic docket, the housing sector was given a disappointing bill of health after the S&P/Case-Shiller composite home price index saw a 1.6 percent annual pace of contract through November while the FHFA’s own home price index passed the month unchanged. However, the top economic report was the Conference Board’s consumer sentiment survey for January. The 60.6 reading was far better than expected, an eight month high and drew a distinct contrast to the disappointing University of Michigan figure. Yet, it was the details from the report that was truly encouraging. According to the statistics, the percentage of respondents that said jobs were plentiful hit its highest level since March 2009 and the fraction expecting an increase in income over the next six months rose to an eight-month high. Perhaps this economic recovery is on a far surer footing that many are expecting.
Conjecture about the return of the consumer sector is hard to translate into immediate trading. The same can be said about President Barack Obama’s State of the Union address. There was a tangible shift from monetary profligacy to conservancy; but it will take some time before stimulus measures are unwound and deficits are reined in. In the meantime, we have two events ahead that can significantly alter the course of the dollar in the short-term. Of the two, the advanced reading of 4Q GDP is top risk; but that is later down the line. Tomorrow, the market’s attention will be on the FOMC rate decision. Given the stubbornly high level of joblessness, the absence of pressing inflation and Fed members’ commentary these past weeks and months; there is unlikely to be any meaningful change in the group’s policy stance. That said, these meetings are just as much about nuance as blatant changes. If the market interprets an early end to the stimulus program, the dollar will rally.
Dollar Shows Limited Reaction to Consumer Confidence, What about the FOMC Decision?
Though the dollar would show signs of life early in Tuesday’s trading session; the benchmark currency would ultimately end the day once again in the red. At this point, we have seen the dollar slide for the third consecutive session on a trade-weighted basis and 10 of the past 12 days against its benchmark counterpart the euro. It may surprise some that the dollar has maintained this disappointing trajectory despite promising event risk that would emerge throughout the trading day. But, the reality is that it takes a greater degree of influence to knock speculators off established trends; and the updates we have seen simply don’t meet the necessary criteria. On the other hand, the greenback may not be doing as poorly as EURUSD suggests. Over the past week, we have made the effort to differentiate the dollar’s performance against its various counterparts to garner a better sense of its individual performance. And, while the world’s most liquid exchange rate is still set up in its bull trend, we see that the dollar has held up far better against the other majors. The commodity bloc is still restrained to congestion, the disputed safe haven pairs (USDJPY and USDCHF) are trading within January’s range and GBPUSD saw its strongest dollar move in six weeks.
With prominent fundamental catalysts due later this week, there is a natural tendency to defer major positions (and thereby trend generation) until market participants are sure of the outcome to these upcoming events. With this distraction, the market would see a limited response to the scheduled event risk through the day. On the economic docket, the housing sector was given a disappointing bill of health after the S&P/Case-Shiller composite home price index saw a 1.6 percent annual pace of contract through November while the FHFA’s own home price index passed the month unchanged. However, the top economic report was the Conference Board’s consumer sentiment survey for January. The 60.6 reading was far better than expected, an eight month high and drew a distinct contrast to the disappointing University of Michigan figure. Yet, it was the details from the report that was truly encouraging. According to the statistics, the percentage of respondents that said jobs were plentiful hit its highest level since March 2009 and the fraction expecting an increase in income over the next six months rose to an eight-month high. Perhaps this economic recovery is on a far surer footing that many are expecting.
Conjecture about the return of the consumer sector is hard to translate into immediate trading. The same can be said about President Barack Obama’s State of the Union address. There was a tangible shift from monetary profligacy to conservancy; but it will take some time before stimulus measures are unwound and deficits are reined in. In the meantime, we have two events ahead that can significantly alter the course of the dollar in the short-term. Of the two, the advanced reading of 4Q GDP is top risk; but that is later down the line. Tomorrow, the market’s attention will be on the FOMC rate decision. Given the stubbornly high level of joblessness, the absence of pressing inflation and Fed members’ commentary these past weeks and months; there is unlikely to be any meaningful change in the group’s policy stance. That said, these meetings are just as much about nuance as blatant changes. If the market interprets an early end to the stimulus program, the dollar will rally.
Euro Confidence Fading as Disputes Over Coordination Overshadows EFSF Bond Sale
Euro Confidence Fading as Disputes Over Coordination Overshadows EFSF Bond Sale
The euro is riding off its own momentum at this point. If it weren’t the fundamentals of the past 24 hours would have driven the currency lower. Since the market learned of tentative proposals to coordinate the effort to solidify the region’s finances and a nascent hawkish bearing from the ECB, we have seen both drivers loose traction. Today, the EU sold a first round of 5 billion euros worth of EFSF bonds to 40 billion euros in bids. Yet, the encouraging outcome here is once again marred by Germany’s insistence that the bailout program is large enough.
Euro Confidence Fading as Disputes Over Coordination Overshadows EFSF Bond Sale
The euro is riding off its own momentum at this point. If it weren’t the fundamentals of the past 24 hours would have driven the currency lower. Since the market learned of tentative proposals to coordinate the effort to solidify the region’s finances and a nascent hawkish bearing from the ECB, we have seen both drivers loose traction. Today, the EU sold a first round of 5 billion euros worth of EFSF bonds to 40 billion euros in bids. Yet, the encouraging outcome here is once again marred by Germany’s insistence that the bailout program is large enough.
Headline News: Bank of England's Weale Joins Sentance in Calling For Rate Hike!!!
Bank of England's Weale Joins Sentance in Calling For Rate Hike
The central bank's monetary policy committee split three ways in its latest meeting, with Martin Weale joining Andrew Sentance in voting for an increase in the bank rate by 25 basis points.....
Read more by Forexsoup
Bank of England's Weale Joins Sentance in Calling For Rate Hike
The central bank's monetary policy committee split three ways in its latest meeting, with Martin Weale joining Andrew Sentance in voting for an increase in the bank rate by 25 basis points.....
Read more by Forexsoup
FOMC Maintains Fed Funds Rate, Continues Treasury Purchase Plan
Federal Reserve policy makers held the Federal Funds Rate between 0-0.25 percent, while maintaining plans to purchase $600 billion of Treasuries through June. The accompanying statement said that the economy continues to expand, though "at a rate that has been insufficient to bring about a significant improvement in labor market conditions." The Fed also stated that inflation is too low, and unemployment too high, to be consistent in the long-run with the central bank's mandate of stable prices and full employment. Policy makers did, however, recognize upward price pressures in commodities, but said that "measures of underlying inflation have been trending downward." The FOMC decision was a unanimous vote, as new voting members Charles Plosser and Richard Fisher supported maintaing the stimulus after indicating opposition to the move in November.
The currency market was relatively unchanged following the decision, although the U.S. dollar initially fell against the euro and its commodity counterparts on the Fed's decision to continue QE2 through its scheduled expiration in June. The greenback quickly stabilized, however, with traders looking ahead to durable goods orders, pending home sales, and the U.S. fourth quarter GDP reading later on this week.
by Forexsoup
Federal Reserve policy makers held the Federal Funds Rate between 0-0.25 percent, while maintaining plans to purchase $600 billion of Treasuries through June. The accompanying statement said that the economy continues to expand, though "at a rate that has been insufficient to bring about a significant improvement in labor market conditions." The Fed also stated that inflation is too low, and unemployment too high, to be consistent in the long-run with the central bank's mandate of stable prices and full employment. Policy makers did, however, recognize upward price pressures in commodities, but said that "measures of underlying inflation have been trending downward." The FOMC decision was a unanimous vote, as new voting members Charles Plosser and Richard Fisher supported maintaing the stimulus after indicating opposition to the move in November.
The currency market was relatively unchanged following the decision, although the U.S. dollar initially fell against the euro and its commodity counterparts on the Fed's decision to continue QE2 through its scheduled expiration in June. The greenback quickly stabilized, however, with traders looking ahead to durable goods orders, pending home sales, and the U.S. fourth quarter GDP reading later on this week.
by Forexsoup
US Dollar Forecast Turns Bearish Short Term
US Dollar Forecast Turns Bearish Short Term
* EUR/USD - Euro Forecast Remains Bullish in Short Term
* GBP/USD - British Pound Could Rally Further
* USD/JPY - Japanese Yen Trading Bias Unclear
* USD/CHF - Swiss Franc Sentiment Points to Trend Continuation
* USD/CAD - Canadian Dollar Could Continue to Strengthen
* GBP/JPY - British Pound Likely to Rally Against Japanese Yen
Continued crowd selling of the Euro, British Pound, Swiss Franc, and Canadian Dollar gives contrarian signal that these currencies could continue higher against the US Dollar through short-term trade. That said, recent Forex Futures and Options sentiment readings warn that the USD could soon set an important bottom on a noteworthy divergence between sentiment and currency price action. It is exceedingly difficult to time market reversals, but it is likewise difficult to ignore early signs that few options and futures traders are betting on and hedging against further US Dollar weakness.
Read more by Forexsoup
US Dollar Forecast Turns Bearish Short Term
* EUR/USD - Euro Forecast Remains Bullish in Short Term
* GBP/USD - British Pound Could Rally Further
* USD/JPY - Japanese Yen Trading Bias Unclear
* USD/CHF - Swiss Franc Sentiment Points to Trend Continuation
* USD/CAD - Canadian Dollar Could Continue to Strengthen
* GBP/JPY - British Pound Likely to Rally Against Japanese Yen
Continued crowd selling of the Euro, British Pound, Swiss Franc, and Canadian Dollar gives contrarian signal that these currencies could continue higher against the US Dollar through short-term trade. That said, recent Forex Futures and Options sentiment readings warn that the USD could soon set an important bottom on a noteworthy divergence between sentiment and currency price action. It is exceedingly difficult to time market reversals, but it is likewise difficult to ignore early signs that few options and futures traders are betting on and hedging against further US Dollar weakness.
Read more by Forexsoup
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USDJPY Enters the Spotlight As Traders Await the U.S. GDP Report
Fundamental Outlook
Economic activity in the world’s largest economy is expected to rise 3.5 percent in the fourth quarter after climbing 2.6 percent the quarter prior. Indeed, a reading in line with expectations will mark the highest level since the first quarter of 2010. Expansion will likely be due to a pickup in private demand. Meanwhile, the breakdown of the release may show that auto sales extended last quarter's gain as motor vehicles posted an impressive December return after showing normal returns n October in November. Growth in equipment and software may pare some of its gains, while nonresidential and residential investments is predicted to continue its southern journey.
Not to overlook, consumer spending probably provided a boost to economic activity. Spending is a key gauge heading into the GDP report due to the fact that it accounts for almost 70 percent of the overall economic activity. Tomorrow' report trails new and pending home sales data for the month of December which showed an increase of 17.5 and 2.0 percent respectively. Both readings bode well for the U.S. as many economists have been referring to growth in the world's largest economy as a homeless recovery because the housing market stayed at depressed levels longer than expected. All in all, the recent housing data paired a better than expected GDP release may provide the dollar with a much needed correction as the currency started the new year weighed by poor fundamentals.
USDJPY: The pair recently broke above descending trend line that remained intact since earlier this month. This level also coincides with the 100-day simple moving average. If price action can hold above this level, additional gains may be in the horizon. However, it is worth noting that our speculative sentiment index stands at 4.56and signals for losses in pair.
Read more by Forexsoup
Fundamental Outlook
Economic activity in the world’s largest economy is expected to rise 3.5 percent in the fourth quarter after climbing 2.6 percent the quarter prior. Indeed, a reading in line with expectations will mark the highest level since the first quarter of 2010. Expansion will likely be due to a pickup in private demand. Meanwhile, the breakdown of the release may show that auto sales extended last quarter's gain as motor vehicles posted an impressive December return after showing normal returns n October in November. Growth in equipment and software may pare some of its gains, while nonresidential and residential investments is predicted to continue its southern journey.
Not to overlook, consumer spending probably provided a boost to economic activity. Spending is a key gauge heading into the GDP report due to the fact that it accounts for almost 70 percent of the overall economic activity. Tomorrow' report trails new and pending home sales data for the month of December which showed an increase of 17.5 and 2.0 percent respectively. Both readings bode well for the U.S. as many economists have been referring to growth in the world's largest economy as a homeless recovery because the housing market stayed at depressed levels longer than expected. All in all, the recent housing data paired a better than expected GDP release may provide the dollar with a much needed correction as the currency started the new year weighed by poor fundamentals.
USDJPY: The pair recently broke above descending trend line that remained intact since earlier this month. This level also coincides with the 100-day simple moving average. If price action can hold above this level, additional gains may be in the horizon. However, it is worth noting that our speculative sentiment index stands at 4.56and signals for losses in pair.
Read more by Forexsoup
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New Zealand Dollar Falls as the Unemployment Rate Spikes
New Zealand Dollar Falls as the Unemployment Rate Spikes
The New Zealand Dollar fell notably after the government reported that the Unemployment Rate rose to 6.8% in the fourth quarter, much higher than the 6.5% consensus estimate and the 6.4% in the third quarter. The New Zealand labor market has failed to recover from the global economic downturn, in sharp contrast to neighboring Australia where the employment landscape has steadily improved.
The latest spike in the unemployment rate was spurred by a 0.5% quarter-over-quarter decrease in employment, much worse than the 0.2% increase that was anticipated. Employment remains 1.3% higher than a year ago, but a 2% reading was expected. Finally, the Labor Force Participation Rate declined to 67.9% in the fourth quarter from 68.3%.
by Forexsoup
New Zealand Dollar Falls as the Unemployment Rate Spikes
The New Zealand Dollar fell notably after the government reported that the Unemployment Rate rose to 6.8% in the fourth quarter, much higher than the 6.5% consensus estimate and the 6.4% in the third quarter. The New Zealand labor market has failed to recover from the global economic downturn, in sharp contrast to neighboring Australia where the employment landscape has steadily improved.
The latest spike in the unemployment rate was spurred by a 0.5% quarter-over-quarter decrease in employment, much worse than the 0.2% increase that was anticipated. Employment remains 1.3% higher than a year ago, but a 2% reading was expected. Finally, the Labor Force Participation Rate declined to 67.9% in the fourth quarter from 68.3%.
by Forexsoup
U.S. Nonfarm Payrolls Rose 36K in January Amid Forecasts of 146K
Nonfarm payrolls in the world’s largest economy rose a mere 36K in January after climbing a revised 121K the month prior amid economists’ expectations of 146K. Meanwhile, the unemployment rate fell to 9.0 percent to mark the lowest level since April 2009. Indeed, there was a lackluster performance in the dollar as traders digest the report and its implications for the U.S. economy.
Winter conditions in the U.S. likely dampened the labor force as approximately 916,000 workers said that they did not attend work. Taking a look at the breakdown of the release, the labor force participation rate fell to 64.2 percent, while construction payrolls dipped 30K. The 26 year low in the labor force participation rate is worrisome due to the fact that those individuals not included in the labor force surged to 86.2 million from 83.9 million. Furthermore, hourly earnings pushed 0.35 percent higher to mark the largest gain since the end of 2008. It is also worth noting that the seasonally adjusted underemployment rate came in at 16.1 percent to post the lowest level since April 2009.
Taking a look at the reaction subsequent to the dismal Nonfarm payrolls report, after the initial rally in the dollar, currency markets showed a lackluster performance. As the EURUSD holds its key support level at the 1.36 area, traders should not rule a slight reversal to the upside. Looking ahead, focus will now shift their focus to the European leaders meeting in Brussels as uncertainty surrounding the European Financial Stability Fund ability to purchase government bonds remain.
by Forexsoup
Nonfarm payrolls in the world’s largest economy rose a mere 36K in January after climbing a revised 121K the month prior amid economists’ expectations of 146K. Meanwhile, the unemployment rate fell to 9.0 percent to mark the lowest level since April 2009. Indeed, there was a lackluster performance in the dollar as traders digest the report and its implications for the U.S. economy.
Winter conditions in the U.S. likely dampened the labor force as approximately 916,000 workers said that they did not attend work. Taking a look at the breakdown of the release, the labor force participation rate fell to 64.2 percent, while construction payrolls dipped 30K. The 26 year low in the labor force participation rate is worrisome due to the fact that those individuals not included in the labor force surged to 86.2 million from 83.9 million. Furthermore, hourly earnings pushed 0.35 percent higher to mark the largest gain since the end of 2008. It is also worth noting that the seasonally adjusted underemployment rate came in at 16.1 percent to post the lowest level since April 2009.
Taking a look at the reaction subsequent to the dismal Nonfarm payrolls report, after the initial rally in the dollar, currency markets showed a lackluster performance. As the EURUSD holds its key support level at the 1.36 area, traders should not rule a slight reversal to the upside. Looking ahead, focus will now shift their focus to the European leaders meeting in Brussels as uncertainty surrounding the European Financial Stability Fund ability to purchase government bonds remain.
by Forexsoup
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Forex Weekly Trading Forecast - 07.02.2011
Forex Weekly Trading Forecast - 07.02.2011
* US Dollar Sees a Bounce but Fundamental Support is Lacking
* Euro Stages Major Turnaround - is this the Reversal?
* Yen Weakness Could Be Short-Lived, Consolidation Ahead
* British Pound: Risk Trends May Undermine Gains Hawkish BOE
* Australian Dollar Rally May Gather Pace As Growth Prospects Improve
* New Zealand Dollar Outlook Points to Additional Losses
By Forexsoup
Forex Weekly Trading Forecast - 07.02.2011
* US Dollar Sees a Bounce but Fundamental Support is Lacking
* Euro Stages Major Turnaround - is this the Reversal?
* Yen Weakness Could Be Short-Lived, Consolidation Ahead
* British Pound: Risk Trends May Undermine Gains Hawkish BOE
* Australian Dollar Rally May Gather Pace As Growth Prospects Improve
* New Zealand Dollar Outlook Points to Additional Losses
By Forexsoup
China Raises Key Interest Rate; Highly Correlated Aussie Takes A Dive
The Chinese central bank, the People’s Bank of China (PBOC), raised its key interest rates for the third time since mid-October in a bid to bring inflationary pressures under control. The benchmark one-year lending rate will increase to 6.06% from 5.81%, effective tomorrow. The one-year deposit rate will rise to 3% from 2.75% the PBOC said on its website today.
A rate hike in Q1 had been expected and rhetoric suggesting so from Chinese officials had supported the idea. Li Daokui, an adviser to the central bank, had recently said that it would be “understandable” if interest rates would rise as part of adjustments to policy during the quarter. Li went on to say that he expects policy to focus more on inflation and less on maintain fast economic growth. Consumer prices rose 4.6% in December and the economy expanded 9.8% in Q4, faster than the pace of the previous quarter.
Many consumers have also expressed concern about rising prices as companies across the economy raise prices and pass on costs to consumers. In a survey released by the PBOC in December, 61% of respondents believe consumer prices will be higher next quarter (Q1 2011) than they currently are. The survey also showed confidence that prices will remain in check is now at its lowest level in 11 years.
The highly correlated Australian dollar was immediately lower against the dollar, virtually erasing today’s gains. The Australian dollar is perceived to be the most exposed to the Chinese economy with a large portion of Australia’s resource exports heading to China. Any slowdown in Chinese growth would certainly be felt by the Australian economy and its currency. The raising of interest rates in China is generally seen to be risk averse since it could slow growth, any slowdown in Chinese growth is viewed to be negative for global growth. At a time when many nations are still recovering from recessions a slowdown in global growth could knock many back into recession. However, it is our opinion that the rate of growth in China at present is unsustainable and a slowing of growth toward a more sustainable annual rate of 8.5-9% would in fact be better for global growth since it will remove the risk of over-heating.
Across the wider FX market the response was muted, the commodity bloc, viewed as the most exposed to China, dipped modestly on shorter-term charts but on the day generally were little changed. Turning to the majors, the normal risk averse reaction did not follow after today’s hike, since it was largely expected and it is understood the PBOC has to act to tackle inflation, and most currencies remained bid against the USD.
More By Forexsoup
The Chinese central bank, the People’s Bank of China (PBOC), raised its key interest rates for the third time since mid-October in a bid to bring inflationary pressures under control. The benchmark one-year lending rate will increase to 6.06% from 5.81%, effective tomorrow. The one-year deposit rate will rise to 3% from 2.75% the PBOC said on its website today.
A rate hike in Q1 had been expected and rhetoric suggesting so from Chinese officials had supported the idea. Li Daokui, an adviser to the central bank, had recently said that it would be “understandable” if interest rates would rise as part of adjustments to policy during the quarter. Li went on to say that he expects policy to focus more on inflation and less on maintain fast economic growth. Consumer prices rose 4.6% in December and the economy expanded 9.8% in Q4, faster than the pace of the previous quarter.
Many consumers have also expressed concern about rising prices as companies across the economy raise prices and pass on costs to consumers. In a survey released by the PBOC in December, 61% of respondents believe consumer prices will be higher next quarter (Q1 2011) than they currently are. The survey also showed confidence that prices will remain in check is now at its lowest level in 11 years.
The highly correlated Australian dollar was immediately lower against the dollar, virtually erasing today’s gains. The Australian dollar is perceived to be the most exposed to the Chinese economy with a large portion of Australia’s resource exports heading to China. Any slowdown in Chinese growth would certainly be felt by the Australian economy and its currency. The raising of interest rates in China is generally seen to be risk averse since it could slow growth, any slowdown in Chinese growth is viewed to be negative for global growth. At a time when many nations are still recovering from recessions a slowdown in global growth could knock many back into recession. However, it is our opinion that the rate of growth in China at present is unsustainable and a slowing of growth toward a more sustainable annual rate of 8.5-9% would in fact be better for global growth since it will remove the risk of over-heating.
Across the wider FX market the response was muted, the commodity bloc, viewed as the most exposed to China, dipped modestly on shorter-term charts but on the day generally were little changed. Turning to the majors, the normal risk averse reaction did not follow after today’s hike, since it was largely expected and it is understood the PBOC has to act to tackle inflation, and most currencies remained bid against the USD.
More By Forexsoup
Forex Weekly Trading Forecast - 14/02/2011
# US Dollar May Have Set Important Low versus Euro
# Euro Confidence May Collapse if GDP Figures Feed Financial Concerns
# Yen Outlook Points to Further Losses
# British Pound Weakness To Be Short-Lived on Higher Growth, Inflation
# Australian Dollar Weakness Ahead As RBA Curbs Rate Expectations
# New Zealand Dollar Vulnerable as Rate Expectations Falter
Read more by Forexsoup
# US Dollar May Have Set Important Low versus Euro
# Euro Confidence May Collapse if GDP Figures Feed Financial Concerns
# Yen Outlook Points to Further Losses
# British Pound Weakness To Be Short-Lived on Higher Growth, Inflation
# Australian Dollar Weakness Ahead As RBA Curbs Rate Expectations
# New Zealand Dollar Vulnerable as Rate Expectations Falter
Read more by Forexsoup
U.K. Inflation Rises 4.0 Percent in January, GBP Tumbles Against Most Major Currencie
Consumer prices in the U.K. rose an annualized 4.0 percent in January after climbing 3.7 percent the month, which was in line with economists’ expectations. At the same time, core prices increased 3.0 amid forecasts of 3.1 percent. The gain in inflation marks the highest level since November 2008 and will lead Bank of England Governor Mervyn King to write a letter to the Exchequer George Osborne, explaining why prices are so high.
Looking, inflation is expected to stay stubbornly above the central bank’s target as the increase in value added taxes (VAT) places upward pressure on price growth. Meanwhile, gains in cocoa, cotton, and sugar will also lead to gains in prices going forward.
Taking a look at price action, the British pound pushed lower against most of its major counterparts as the data was already priced into the markets. GBP traders will now shift their focus to the Bank of England inflation report which will be released tomorrow at 9:30 GMT. As inflation concerns remain, an increase in the inflation report could lead the pound to pare some of its recent gains, while a downbeat tone pared with a dismal jobless claims release could extend Tuesday’s selloff. The last report suggested that prices would ease to around 1.5 percent by the end of 2012.
The GBPUSD reversed course at its overnight high of 1.6104 to currently trade 1.6037 following the U.K. inflation report. As technical indicators begin to paint a bearish picture, bears will look for aclose below 1.36 for confirmation of a reversal in the pair.
by Forexsoup
Consumer prices in the U.K. rose an annualized 4.0 percent in January after climbing 3.7 percent the month, which was in line with economists’ expectations. At the same time, core prices increased 3.0 amid forecasts of 3.1 percent. The gain in inflation marks the highest level since November 2008 and will lead Bank of England Governor Mervyn King to write a letter to the Exchequer George Osborne, explaining why prices are so high.
Looking, inflation is expected to stay stubbornly above the central bank’s target as the increase in value added taxes (VAT) places upward pressure on price growth. Meanwhile, gains in cocoa, cotton, and sugar will also lead to gains in prices going forward.
Taking a look at price action, the British pound pushed lower against most of its major counterparts as the data was already priced into the markets. GBP traders will now shift their focus to the Bank of England inflation report which will be released tomorrow at 9:30 GMT. As inflation concerns remain, an increase in the inflation report could lead the pound to pare some of its recent gains, while a downbeat tone pared with a dismal jobless claims release could extend Tuesday’s selloff. The last report suggested that prices would ease to around 1.5 percent by the end of 2012.
The GBPUSD reversed course at its overnight high of 1.6104 to currently trade 1.6037 following the U.K. inflation report. As technical indicators begin to paint a bearish picture, bears will look for aclose below 1.36 for confirmation of a reversal in the pair.
by Forexsoup
Bank of England Inflation Report Shows Inflation, Growth to Moderate
The Bank of England said this morning that inflation will likely remain high over this year and higher than the MPC thought three months ago. However, they do expect inflation to fall back next year, though uncertain unto what extent but possibly falling below the 2% target. Bank of England Governor Mervyn King said that there are large risks on both sides of the inflation outlook but it is “reasonable” to consider inflation easing in 2012.
On growth the central bank said that their outlook for GDP growth is lower than in November, the forecast remains for moderate growth in 2011. The central bank did, however, lower their 2011 GDP forecast on weak Q4 growth noting that the outlook for growth remains “highly uncertain”. Adding that there was a wider than usual range of forecasts and opinions among the MPC amid such uncertain times.
On balance then the inflation report mirrored what was said in Governor King’s letter to Chancellor Osborne, acknowledging the latest acceleration in inflation but maintaining that the MPC must steer monetary policy based on the CPI outlook over the medium-term. He added that there is no pre-commitment on rates, noting that some are ahead of the curve in terms of tightening expectations and timing. In short, with such a high degree of uncertainty the central bank is cautious in trying to predict exactly how things are going to play out and are keeping all the options open.
The pound was immediately weaker across the board, and against the buck it extended its morning declines, on the not-so-hawkish inflation report. With the central bank standing by its estimations that inflation will moderate into 2012 and even fall below target waning expectations of imminent rate hikes have taken some wind out of the pound’s sails. We remain dip buyers of the pound at this stage given that the Bank of England is still likely to be the next major CB to move on rates ahead of the ECB and of course the BoJ and Fed.
By Forexsoup
The Bank of England said this morning that inflation will likely remain high over this year and higher than the MPC thought three months ago. However, they do expect inflation to fall back next year, though uncertain unto what extent but possibly falling below the 2% target. Bank of England Governor Mervyn King said that there are large risks on both sides of the inflation outlook but it is “reasonable” to consider inflation easing in 2012.
On growth the central bank said that their outlook for GDP growth is lower than in November, the forecast remains for moderate growth in 2011. The central bank did, however, lower their 2011 GDP forecast on weak Q4 growth noting that the outlook for growth remains “highly uncertain”. Adding that there was a wider than usual range of forecasts and opinions among the MPC amid such uncertain times.
On balance then the inflation report mirrored what was said in Governor King’s letter to Chancellor Osborne, acknowledging the latest acceleration in inflation but maintaining that the MPC must steer monetary policy based on the CPI outlook over the medium-term. He added that there is no pre-commitment on rates, noting that some are ahead of the curve in terms of tightening expectations and timing. In short, with such a high degree of uncertainty the central bank is cautious in trying to predict exactly how things are going to play out and are keeping all the options open.
The pound was immediately weaker across the board, and against the buck it extended its morning declines, on the not-so-hawkish inflation report. With the central bank standing by its estimations that inflation will moderate into 2012 and even fall below target waning expectations of imminent rate hikes have taken some wind out of the pound’s sails. We remain dip buyers of the pound at this stage given that the Bank of England is still likely to be the next major CB to move on rates ahead of the ECB and of course the BoJ and Fed.
By Forexsoup
Breaking News: FOMC Upgrades 2011 GDP Forecast to 3.4%-3.9%
Breaking News: FOMC Upgrades 2011 GDP Forecast to 3.4%-3.9%
Breaking News: FOMC Upgrades 2011 GDP Forecast to 3.4%-3.9%
Pound Surges on Retail Sales Strength; Headwinds to Economy May Not Slow Gains
UK retail sales leapt higher in January according to the Office for National Statistics (ONS) climbing 1.9% from December, when freezing temperatures and snow kept shoppers home and retail sales fell by 1.4% The ONS said that the sharp downward revisions to December’s numbers are attributed to the harsh weather delaying data collection.
The stronger than expected numbers will certainly help allay fears after the UK economy contracted by 0.5% in Q4 2010, the strong January numbers will help traders see the contraction as a temporary weather-driven setback. It appears also that the introduction of a higher value-added tax (VAT) hasn’t crimped demand as many expected it to do.
However, headwinds may be on the horizon with the governments spending cuts set to cost 330,000 public-sector employees their jobs lowering the number of people willing to open their wallets and spend on consumer goods if their jobs are in question. This coupled with rising inflation in the UK, which hit 4% in January and will rise further according to the Bank of England Inflation Report earlier in the week, could sap demand for goods if retailers pass on too much of rising costs to the consumer.
By Forexsoup
UK retail sales leapt higher in January according to the Office for National Statistics (ONS) climbing 1.9% from December, when freezing temperatures and snow kept shoppers home and retail sales fell by 1.4% The ONS said that the sharp downward revisions to December’s numbers are attributed to the harsh weather delaying data collection.
The stronger than expected numbers will certainly help allay fears after the UK economy contracted by 0.5% in Q4 2010, the strong January numbers will help traders see the contraction as a temporary weather-driven setback. It appears also that the introduction of a higher value-added tax (VAT) hasn’t crimped demand as many expected it to do.
However, headwinds may be on the horizon with the governments spending cuts set to cost 330,000 public-sector employees their jobs lowering the number of people willing to open their wallets and spend on consumer goods if their jobs are in question. This coupled with rising inflation in the UK, which hit 4% in January and will rise further according to the Bank of England Inflation Report earlier in the week, could sap demand for goods if retailers pass on too much of rising costs to the consumer.
By Forexsoup
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