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Columbus Day Trading

Discussion in 'Forex Daily News & Outlook' started by mercaforex, Oct 12, 2009.

  1. mercaforex

    mercaforex New Member

    Jul 1, 2009
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    By Mercaforex

    The USD managed to gain going into the weekend against all the major currencies. Though the greenback’s rather poor performance this summer and early this fall remains a talking point, the USD has pushed back from the low end of its range versus the EUR and JPY. The action between the USD and the GBP is an interesting example of perspective. Though many investors have been talking down the greenback’s strength, in actuality the Sterling has underperformed even against the USD. The Trade Balance numbers were published from the U.S. on Friday and the number came in worse than expected. Today is the Columbus Day holiday in the States and while the equity markets will trade, it will essentially cause lower than usual volume in the currency markets since banks will be closed.
    Besides quarterly reports continuing to be presented by corporations this week, investors will be awaiting a critical Retail Sales report that will be brought forth on Wednesday. The hangover that consumers have had to deal with has been rather troubling taking into account that high unemployment remains a problem. The previous Retail Sales report was better than expected but there are concerns that the so-called ‘cash for clunkers’ program which has ceased, will prove that the climb in the previous figures was because of stimulus money being pumped into the American economy by the government. The U.S. stock market finished last week at high water marks and though this has been greeted by enthusiasm, caution does continue to swirl on Wall Street with the advent of earnings season upon us. The USD had a rather wicked week of trading and it must be noted that there appears to be a rather high degree of conflicting expectations. The Federal Reserve has been adding to this deluge of contrasting opinions as several prominent members have publically stated a variety of statements the past week. The USD may continue to find additional momentum today if caution remains in the marketplace.

    The EUR turned in a rather lackluster day of trading on Friday as it gave back some its gains to the USD, however it does remain at the relative high end of its range against the greenback. German Trade Balance numbers were issued before going into the weekend and it turned in a slightly disappointing figure. Today will be a very quiet day for data, the Germans released their WPI early this morning and it showed a decline of -0.2% missing its estimated gain of 0.2%. Tomorrow the ZEW German Economic Sentiment reading is on schedule and this may prove of interest to investors. The EUR has held onto the high end of its range against the USD the past week but it still has pervasive questions. The European economy has structural problems that seemingly are not being addressed regarding its employment situation and an inability to manage the downturn. This because the policies of most European governments continue to foster a large ‘social net’ insuring stability for its citizens, however growth may be harder to attain because there is a lack of maneuverability for companies and governments and this has some investors worried about ‘stagnation’ becoming a problem for the continent. The EUR will find that its value continues to hinge on risk appetite the next few days.

    While many commentators continue to discuss the relative weakness of the USD, it has been somehow missed by some that the Sterling has underperformed even the greenback the past few weeks. The GBP has taken a beating and finds itself at the weaker part of its range against both the USD and EUR. The BRC will release is Retail Sales Monitor and the RICS House Price Balance figures will be published today. Tomorrow the Bank of England will bring forth its Inflation Letter and Wednesday will see Claimant Count Change figures. The Sterling has come under pressure as U.K. investor sentiment appears to have continued to sour. However it must be remembered that the U.K.’s problems are a mirror reflection of many other major economies. One possible additional point of pressure for the Sterling may be that the U.K. government is rather weak and that investors may feel that economic policy is in rather unstable water. The Sterling opens this week having faced consistent headwinds and until proven otherwise this is likely to continue.

    The JPY gave back some of its gains against the USD on Friday. This happened as ‘talk’ emerged that several Asian nations may be trying to intervene and counter the strength of their currencies and the lackluster USD. Exporting nations, such as Japan, are facing problems in the wake of their currencies being too strong and the obstacles this causes for businesses which are a critical element of their economic engines. The JPY will be a focal point for many traders this week.

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