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Corporate Earnings Begin Their Parade

Discussion in 'Forex Daily News & Outlook' started by mercaforex, Oct 7, 2009.

  1. mercaforex

    mercaforex New Member

    Jul 1, 2009
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    By Mercaforex

    The USD turned in a tumultuous day of trading as it lost ground to the EUR and JPY but gained against the GBP. Without any major economic data to interpret from the U.S., traders were left to gauge their market sentiment and watch as equities climbed. Today will be another day of light releases with only Consumer Credit and the Crude Oil Inventories reports due. Investors will be gearing themselves towards quarterly earnings that will begin to be published from corporations and one of the key companies scheduled today is Alcoa, the aluminum giant. The currency market and in particular the USD has shown a direct correlation with risk appetite, meaning that as international bourses have performed well the greenback has struggled.

    Tomorrow weekly Unemployment Claims and Wholesale Inventories data will be brought forth. The Unemployment number is expected to show a slight improvement compared to last week and investors will monitor this figure closely considering the wave of negativity the previous jobless statistics caused. The gains on Wall Street have been met with welcome arms by many investors but when asked why stocks are performing so well the answer has been wildly debated. Whether or not it has been technical, bottom feeding, or a belief in growth, those participating in the surge have been rewarded. However important questions that shadow the equities are how quarterly earnings that are scheduled will affect the market? And what consumer spending will produce during the upcoming holiday season? These two factors will be crucial and provide plenty of fireworks in the weeks to come for Wall Street. The USD has seen its momentum directly affected by what is taking place in stocks and the song is likely to remain the same for the next few days.

    The EUR continued to find plenty of takers on Tuesday as it pressed ahead on both the USD and GBP. There was little in the way of economic data from the continent but today the German Factory Orders figures will be published. A gain of 1.3% is the estimate for the German report and investors will watch these numbers carefully taking into consideration that its economy is the most important for Europe. Tomorrow the ECB will release their interest rate decision which is not expected to change, taking into consideration that growth remains uninspiring and inflation has been impotent. The press conference held after the release of the interest rate data will likely provide volatility taking into consideration the strength of the EUR. Today’s trading action could be rather interesting considering that the EUR will essentially take its cue from the dollar while setting the table for tomorrow’s major risk event.

    The past two weeks have been sour for the value of the Sterling and Tuesday’s trading provided little change. The GBP did start to climb slightly against the USD in the early session, but upon the publication of the Manufacturing Production figure with a minus -1.9% outcome the Sterling came under almost immediate pressure. Industrial Production data proved negative also. The combination of the two rather poor reports emphasized that the U.K. economy faces further hurdles. Today will be a quiet day of statistics but tomorrow the Bank of England’s MPC interest rate decision is due. The Sterling after making some strides forward on Monday showed that it could not sustain its momentum and may face additional pressure. Investors are not only watching the GBP versus the USD, but they are carefully looking at the seemingly divergent results from the Sterling and EUR.

    The JPY gained versus the USD and it did this as the Nikkei moved ahead. The JPY has provided consistent gains versus the greenback the past two months. Gold surged forward on Tuesday breaking the 1040.00 USD mark per ounce and this move has not gone unnoticed. The merit of Gold’s move has been strong and it has mirrored the weakness from the greenback against the JPY and EUR.

    Riding The Magical Gold Train. Gold Makes All Time Highs

    We gapped up 7 points yesterday as Gold had sent the Futures soaring early on in trading. With the precious metal trading at new highs, the dollar continued to decline against a basket of currencies (except the GBP), and this in turn sent the markets higher. These cyclical events are almost like the chicken and the egg dilemma that mankind has struggled with for centuries. As traders, we can only trade off of what we know and see, and leave the philosophizing to those who want to try and justify what is truly happening in the economic climate that we are living in today. Some selling came in towards the end of the day and today we begin earnings season. This could lead to a serious change in sentiment. This gap will most likely be filled, However if we do not fill this gap shortly, expect this market to attempt to push past last week’s highs! Support 1047.2, 1040.8, 1038.8, 1020, Resistance 1060.4, 1065.1, 1074.8, 1080.2

    Gold jumped onto the Hogwarts Express and broke through all time highs! At time of writing we are trading well over $1040. For those of you who don’t know who Harry Potter is or that the Hogwarts Express is a magical train, all I am trying to say, is that the XAU/USD is flying. While many have been waiting for this move, others are trying to understand what power has pushed gold so high so quickly. Great trade setup’s on the one hour chart. Push up followed by consolidation, strong push up, followed by consolidation etc. Trade entry during the consolidation phase is fantastic as the risk is very low. This is one of the nicest trade setups I have seen in a long time. At the moment, I would be very hesitant to go short, as any selling might quickly be absorbed by overexcited buyers! Support 1043.5, 1033.8, 1021.33, 1014.55, 1007.5 Resistance 1048.35…!

    The Pound has not shown strength over the last few trading days, while other dollar valued products have. It’s interesting to see this divergence, and we must keep a close eye in case the Sterling decides to play some catch up. At the moment, we are trading near the lower end of the trading range and are looking like it is setting up to trade lower. Over the last two days we have seen attempts to trade higher, but sellers kept that from happening. Tomorrows BOE rate decision could “make or break” this currency and we are keen to hear the words that will be used to describe the decision. Support 1.5859, 1.5803, 1.5679, 1.5523 Resistance 1.5941, 1.6044, 1.6113, 1.6303, 1.6467

    The Euro currency has been trading very nicely over the last few days as Gold led the way in the battle against the Greenback. My only worry with this continued climb is that we have smacked in resistance of 1.4762 for the second time (on an up move) and the little voice in the back of my mind that keeps reminding me that things may have moved too far too fast. Support1.4682, 1.4669, 1.4644, 1.4591, 1.4561, 1.4480, Resistance 1.4762, 1.4842, 1.4908, 1.4967

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