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Consumer Credit Falls Off A Cliff

Discussion in 'Forex Daily News & Outlook' started by mercaforex, Sep 9, 2009.

  1. mercaforex

    mercaforex New Member

    Jul 1, 2009
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    By Mercaforex

    The USD continued to slump against the major currencies as traders began to return from their holiday weekend. The greenback took it on the chin across the board in early trading from Europe as it found itself against the ropes for much of the day’s session. The USD did regain some footing later on as the equity markets began to give back some of their gains. The U.S. released its Consumer Credit figures yesterday and they turned in a bleak performance with a startling minus -21.6 billion number compared to the estimated drop of -3.8 billion. This outcome does not bode well for retailers and future holiday shopping. It cannot be stressed enough that consumer spending is the integral ingredient for the American GDP and if the public is not willing to part with their money and chooses to save it will continue to put various parts of the U.S. economy under a vast amount of pressure.
    The reasons being given for the poor value in the USD yesterday brought about a wide array of opinions, including fear of the greenback’s status as a reserve currency withering to the belief held by some that a global recovery is underway. However, the crux of the matter is that market conditions continue to show a broad disconnect and what we have seen is that equity markets have held onto their gains and once again turned in another day of gains when all was said and done. The U.S. will be light on economic data today, but investors may find some ‘juice’ from various government officials, including President Obama as the healthcare package debate ramps up. Tomorrow the weekly Unemployment Claims will be forthcoming along with Trade Balance data. Until tomorrow’s figures are released investors will probably take yet another back seat to traders who are swift enough to take advantage of market gyrations. The USD showed considerable weakness yesterday but did manage to bounce off of its lows and the greenback may find that its ability to stand properly is tested again today.

    The EUR gained well against the USD on Tuesday as weak greenback sentiment generated a stronger trend for the European currency. The positive move of the EUR came on the heels of a rather bad German Industrial Production report showing a fall of -0.9% compared to the forecasted gain of 1.6%. However, it must be noted that the German Trade Balance numbers did show an improvement and perhaps this helped cheer investors. Today the German Final CPI statistics are on calendar and are projected to have an outcome of 0.2%. The question regarding the CPI from Germany is whether or not it will show any significant inflation. For a few months now, officials have been keen to say that deflation is not a threat to the European economy and it will be of interest to see if they get yet another opportunity to try and ‘spin’ the inflation/ deflation data. Tomorrow the French will grab the spotlight and give us a more rounded view of the European economy with their Industrial Production numbers, Non Farm Payrolls, and Trade Balance figures. The EUR has performed rather well the past few trading sessions as it has maintained consistent pressure on the USD.

    Sterling strengthened on Tuesday against the USD and began to push its way into the higher part of its earlier summer trend against the greenback. The U.K. did release its Manufacturing Production numbers yesterday and they turned in a gain of 0.9%, beating the estimate of 0.3%. Also carrying an improved number were the Industrial Production figures, which had an outcome of 0.5%, bettering the forecast of 0.3%. Today the U.K. will release its Trade Balance statistics and this report is anticipating slightly better numbers. Tomorrow the BoE will release the MPC decision regarding its key interest rate. Few if any investors expect the interest rate to be changed and what they will look for will be any grain of evidence from the Bank of England on its economic outlook. Having said that, traders can be forgiven if they assume they will hear that the economy is showing some signs of improvement but a real recovery will be a gradual and tough process – which has become a de facto motto seemingly of many international central bank officials. The GBP was strong on Tuesday and it looks as if its backers may be ready for another push today.

    The JPY continued its push with new highs against the USD on Tuesday. The Bank of Japan as of yet has expressed little desire to step in and stem the strength of the JPY. However, it must be a troubling prospect for Japan that its currency is so strong, in consideration that their export companies are the major part of its economy and would prefer a weaker JPY. Gold broke the 1000.00 USD mark and traded above the hurdle much of the day as traders seem to be growing in courage regarding the precious metals bull run. The JPY has done well on momentum growing from various trading corners and its recent success must continue to be watched.

    Volume Returns, Dollar Falls

    All is well in the American Equity market. As we push back towards 1039 many may question why we are seeing such strength. I am waiting for a downturn but at the moment I have to play the trend. As the USD continues to weaken, we are seeing other markets trade higher. The SPX is trading strongly, and after studying the daily, a one hour, and a 5 minute chart, all signs are pointing to continued strength. We just need to break past resistance of 1026.1. Support 1018, 1014.6, 1001.5, 992.25, 980.62 Resistance 1026.1, 1028.4, 1039.5

    Tuesday saw us trading over the Magic $1000 mark. However while we powered up to $1007.60, sellers came in and at the close we were right back at 1000. While this could be profit taking by many who don’t believe that there is much left in this rally, it will be important for us to hold over $1000. At the moment there is some weakness on the day but after 6 green days, you would expect this market to take a breath. Support 997.35, 989.95, 984.6, 971.75, 968.10 Resistance, 1007.60, 1012.4, 1032.3

    The faltering USD gave the European currencies the catalyst they needed to push higher and break through strong resistance levels. We opened up just near support, and sprung up 3 cents in just a few hours. Only once we touched 1.6587 did traders start to think about taking profits, and we saw some retracement begin to occur. Keep a close eye on the US Dollar today as it may try to regain its footing. However if it fails to do so, we can continue to push up and trade the higher end of this trading channel. Support 1.6442, 1.6322, 1.6188, 1.6113, 1.5982 Resistance 1.6587, 1.6662, 1.6743, 1.7042

    The Euro, the GBP and the rest of the currency basket measured against the USD all showed strength yesterday. We managed to break above the resistance of 1.4449 earlier than I had hoped, and thus the ascending triangle never truly formed, but we did show a lot of strength. The same GBP recommendation plays true with the Euro. Support 1.4480, 1.4465, 1.4449 Resistance, 1.4522, 1.4535.

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