UK CPI Better Than Expected!!!!
Surprisingly, the market yawns and a very muted reaction occurs from the Forex markets.
At TradeFX we expected the GBPUSD which has recently traded range-bound between 1.6200 and 1.6350 to use thsi news to finally break out of that range. However, Forex traders seem to be viewing the CPI figure as unimpressive, due to the assist of rising energy prices to the number.
Also, the figure continues to be below the BoE’s 2% target and therefore, Forex traders may be worrying that further stimulus from the BoE will occur.
Currently, the GBPUSD is trading at 1.6270, which iis 20-30 pips above its pre news level, but way below its earlier highs of the day of 1.6315.
December 15, 2009
UK CPI Better Than Expected
December 8, 2009
Is the Gold Rally Over
After running up like there is no tomorrow, gold has hit its first major correction and fallen from its highs of around 1225 last week to a low of just above 1135. Today its is currently finding support around the 1135/45 area, but the question remains if the bull market in gold is over.
In a WSJ article about the drop in gold they quoted traders as believeing that the rally in gold wasn’t done yet:
Although gold’s rally isn’t seen as over yet, traders and analysts said the metal could correct down to $1,100 a troy ounce, especially if the dollar continues to rebound.
At TradeFX we agree with this assessment. Gold has been rallying on basically any news, bad job outlook, good job outlook, inflation worries, rates going higher, rates going lower, etc. Therefore, it seems like commodity traders are buying gold based on its long term outlook and as it has rallied. traders were worrying about “missing the rally” and bought the precious metal speculatively. This has caused a major move lower now that the initial uptrend has been breached. However, with inflation worries still real, and central banks hesitant to raise interest rates, demand for gold should continue.
November 19, 2009
Gold to $2000?
As written about in the past, Gold appears to be taking the same direction that Crude Oil took when it skyrocketed up from 80 at the end of 2007 to nearly 150 in mid 2008.
Yesterday, Gold hit 1150 and ever since hitting breaking 1000, gold prices have risen on various types of news days. It has rallied on worries that job losses will cause dollar devaluation. However it has also risen on better than expected job numbers that indicated a potential healthier economy and potential increase demand. Also, it has rallied when the dollar has weakened, but only made slight corrections on dollar strength. Therefore, it appears that speculative money is beginning to pile into Gold, causing “buying on the dip” to occur.
If Gold follows oil’s pace of 2008, than $2000 is sure to follow. Will this happen? One possible clue to look for is a $100 in a day move higher in gold. If this occurs, it could be conveying that speculative money is taking over gold prices, and hard commodity (those guys that actually own physical gold) don’t have enough supply to sell into the markets.
November 4, 2009
FOMC Meeting Today
Today, the US Federal Reserve (FED) will be conducting their Federal Open Market Committee meeting, better known as the FOMC meeting. At 14:15 EST on the 4th, the FED will release their FOMC statement which reflects any changes they may take in regards to controlling the US’s monetary policy.
Monetary policy meetings almost always lead to volatile moves in the Forex market, as Forex traders eagerly await to hear new information from Central Bankers regarding interest rate changes and monetary policy. The US’s FOMC statement is no exception and probably is the most awaited meeting from worldwide central banks, as their moves can cause ripple effects throughout the entire Forex world.
Currently, the FED has reduced interest rates to record lows of 0-0.25% and has been a big buyer of US treasury bonds. These moves have flooded the market with dollars, and caused the dollar to devaluate against major currencies. This has all caused the Dollar Index, which measures the dollar against global currencies, to plunge to 2009 lows. Forex traders are waiting to hear from the FED some sort of “exit strategy” from their current stimulus inducing policy that may lead to a rebound in the dollar.
During the September FOMC meeting, the FED stated that they would continue to purchase Treasury assets through Q1 2010, thus hanging their August forecast of a Q4 2009 exit. They also stated that inflation remained muted and therefore there was no reason for them to hurry to raise interest rates.
Forex traders hate uncertainty, and with the FED back-peddling on their initial exit strategy goals and stating that they don’t know when rates will ever rise, the dollar has bared the brunt of the FOMC’s policies. Looking ahead, November 4th should lead to another volatile move in the Forex markets. If the FOMC states a definitive game plan for when they might raise rates and discontinue bond purchases, than it is possible that a large dollar rally may occur. However, if the FED continues to waffle on their future actions and disappoints the market, then it is likely we could once again see new lows for the dollar.
October 27, 2009
US Consumer Confidence Misses Expectations
Consumer Confidence was released at a worse than expected 47.7 and the bad news caused stocks to fall and the dollar to strengthen.
What caused the miss? It is important to realize that the number tracks consumer sentiment and may not reflect actual retail sales purchases. However, at TradeFX, we believe that three items may have contributed to the weak number.
1) Loss of jobs isn’t getting better and if responders to the Consumer Confidence survey haven’t lost their job, they definitely know someone who has and is suffering.
2) Just when it seemed that Oil and other commodity prices were stabilizing, they have shot back up and caused increased worries of inflation and high prices.
3) The stock market and financial recovery has overshot itself. Therefore, after an extended period of expanding optimism, expectations may have gotten too aggressive.
October 23, 2009
Pound Continues to Soar
The GBPUSD broke above Wednesday’s high and has hit 1.6660. The move was quite remarkable as it occured with UK Retail Sales numbers being worse than expected. Along with increased risk appetite which hurt the dollar, it is possible that the GBPUSD is also benefiting from momentum from Wednesday’s MPC Minutes which were more hawkish than anticipated.
Looking ahead,the GBPUSD has created great support at the 1.6500 figure and is creating a nice upward trend to challenge the 1.7000 level. For thsi to occur, we will probably need CBI Realized Sales to be better than expected.
October 15, 2009
US CPI Matches Expectations
Both Core and non-Core US CPI were at 0.2%, which was more or less at consensus. Although the numbers aren’t great, they were still positive and are a welcome change from the -1.3% year over year change.
The initial results led to the dollar strengthening, as Forex traders are seeing improvement in the US economy. However, the dollar’s moves have been short lived, as the EURUSD is back to its pre-news level.
What may be of greater importance as the day goes on was the US Initial Claims numbers which were a much better than expected -514K. If the equity markets begin to get excited about this number, we may see rallying in the markets which could lead to further risk taking in the Forex markets.
October 13, 2009
UK CPI Sinks
September UK CPI dropped to a lower than expected 1.1% level versus 1.3% expectations. The number caused the pound to sell off and the GBPUSD briefly hit a new October low of 1.5710.
The numbers may lead to continued negative sentiment of the pound as traders may fear that the BoE will increase its monetary policies to stimulate the UK economy. With a long term inflation goal of above 2%, Forex market participants are anticipating increased actions to occur.
At TradeFX, we believe that negative sentiment will continue against the pound as the market is uncertain about what they may do. On the other hand, if the BoE announces a set policy and removes doubts about their future policies, even if it is accommodating, it may lead to pound strength.
October 1, 2009
SNB Intervention?
The Swiss Franc dropped sharply today, and traders speculated the SNB may have intervened in the market by selling the Swiss Franc to to counter strengthening. The SNB has openly commented that they will work to curb strength against the Euro and as such the EURCHF flew up from 1.5075 to a high of 1.5238. The SNB didn’t comment above the move, but it is believed though that they see the 1.5000 level and the line in the sand to protect, and with the EURCHF near month lows, they used the opportunity to intervene.
Reuters ran a news story that the move may have been caused by the SNB battling against banks that are buying the Franc to repay back debt that is Swiss denominated. At Trade FX, we believe that there may have been end of the quarter trading moves that influenced today’s trading.
September 29, 2009
Little Reaction from G-20
After an extended weekend of G-20 meetings, the impact on the Forex markets has been muted. The US dollar got a boost as President Barack Obama was seen in Photo-Ops and made charismatic speeches that may have improved global sentiment towards the US as the weekend began. As a result, the USDJPY was back above 90.00 and the EURUSD traded back below 1.4600. But, the moves were short lived as US equities markets traded higher thanks to M&A activity that indicates value still exists in the equity markets. The stock moves caused traders to sell the dollar in favor of higher yielding currencies.
Looking ahead, trading will probably remain choppy until Friday’s US Non Farm Payrolls number is released. With an emphasis on jobs recovery, this