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Factory Orders Today, FOMC Tomorrow

Discussion in 'Forex Daily News & Outlook' started by mercaforex, Nov 3, 2009.

  1. mercaforex

    mercaforex New Member

    Jul 1, 2009
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    By Mercaforex

    Range trading dominated the currencies on Monday as the USD traded lower early but did manage to bounce slightly back as things progressed. The U.S. did release economic data yesterday and both the ISM Manufacturing PMI and Pending Home Sales showed improvement. The PMI produced a reading of 55.7, which was above the expectations of 53.1. The housing sector got some better news as the Pending Home Sales figures had an outcome of 6.1% and this gain far outpaced the estimate of 0.2%. While this news helped spur Wall Street higher early in the American session, stocks did begin to soften as financial shares struggled. Today the States will publish Factory Orders and this will serve as a good measurement against yesterday’s PMI data. The Factory Orders are forecasted to rise 1.1% compared to the previous result of minus -0.8%.
    While the economic numbers from the U.S. were positive on Monday, investors will be hard pressed to be anything more than cautious today because of the looming FOMC meeting that is on schedule tomorrow. The market will await the Federal Reserve’s decrees anxiously. No one expects the Fed to raise their interest rates tomorrow but what remains vital are any hints about outlook and current monetary policy that will be given. Wall Street produced whipsaw trading yesterday and investors will be weary because of it. The USD has been a direct recipient of risk appetite for months now and this is not likely to change in the coming days. The greenback remains in an awkward range against the EUR and although the USD has shown some strength the past few days, it has not made a gigantic move and is in fragile territory. Traders should keep in mind the Federal Reserve’s meeting tomorrow and act accordingly.

    The EUR has had a fairly tight trading range when taken into perspective as of late. On Monday it did manage to push the USD around but as the day came to an end it did give back some of its gains. The EUR remains a fixture of pure sentiment and as long as investors show a desire for risk in the bourses it appears that the currency will outperform short term. The Final Manufacturing PMI for Europe was published yesterday and produced a reading of 50.7, which was below the estimate of 50.9. Today there will be no major economic releases from the European Union and tomorrow will see rather miniscule news too. EUR traders will be attentive to the action on bourses, dollar centric data, and the upcoming specter of the Central Bank meetings that will unfold over the coming days, including that of the ECB. The EUR and USD have put up a rather interesting wrestling match the past week and traders should expect the back and forth action to continue unless a major economic event unfolds that affects risk appetite.

    The Sterling had a rather wide range on Monday as it followed other currencies, picking up early speed on the greenback but falling back as the day wore on. The U.K. did release its Manufacturing PMI data yesterday and it came in with a figure of 53.7, which beat the estimate of 50.1 and the numbers also saw the previous month’s report revised upwards. Today the Construction PMI and Nationwide Consumer Confidence statistics are on the schedule and both reports are expected to show improvement. Tomorrow the Services PMI release will be forthcoming and the Halifax HPI is tentatively on the calendar. This groundswell of data will set the stage for investors who are already in a rather delicate state considering that the Bank of England’s MPC meeting will be unleashed on Thursday. The Sterling has produced rather unstable trading the past month and although it has shown some footing the past few sessions, the GBP remains under some perplexing shadows economically.

    The JPY finished the day in positive territory against the USD in rather reserved trading. Today is a holiday in Japan and because of that the currency may not provide typical volume. The JPY like the EUR finds itself in a rather uncomfortable position taking into account the massive importance that exports play within its economy. Gold gained on Monday against the USD as the greenback sputtered slightly. Having consolidated for a short while, Gold will be important to watch if it continues to inch up, it finished trading around the 1062.00 USD mark yesterday.

    Indecision In The Market Place Puts Humpty Dumpty In Precarious Position

    November 2cnd did not show signs of conviction in this market. During the fourth hour of trading we broke down almost 20 points, and spent the rest of the day sputtering up through the Fibonacci retracements, finally testing the 62% retracement level. Traders tried to trade this market much lower, but some serious buying came in and once again plugged the proverbial hole that seems to grow larger and larger each and every day. The dollar index did little yesterday to justify either of these moves, and indecision is still the common theme across the various markets. I would rather be a seller. Any close above the downtrend line would be my out. Be cautious as indecision can often be followed by very wide ranging moves that like yesterday (where the SPX ranged 20 points but closed less than one point from its open) end up doing nothing. Support 1029.4, 1019.6, 1009.1, 992.25 Resistance 1052.2, 1061.9 1073.2, 1081.5, 1086.2, 1095.8, 1101.4, 1132.2, 1153.8

    And then there was Gold! This was one of the few products to show conviction as we traded higher almost $20. Accumulation continued and we moved towards the higher end of the trading range. If you were able to get in yesterday, well done, perhaps tighten your stops, take some profits around $1065 and hold onto the rest in case we break over 1070.6. If you missed the trade, I would advise standing aside at the moment as we may range between 1070 and 1045. And until we reach the upper or lower extremities of this trading band it’s hard to find a safe entry point. Support 1049.8, 1042.5, 1036, 1024 1009.65, 1006.2, 984.5. Resistance 1061.35, 1064.25, 1067.6, 1070.6

    Considering the recent Dollar Sterling relationship, I am not surprised with yesterday’s activity in the Pound. When two markets have strong correlations, and one shows indecision it’s more than likely that the other will trade in a similar fashion. The GBP looks like it will push lower and test support of 1.6249. Both this level and 1.6119 will be important. If we are unable to hold above them, expect the pound to trade to the lower part of the range, and once again try and push out lower towards 1.55, 1.53. The best trade in terms of risk at this point would be a long around support. Tight stops will protect you from a large downside move, and will allow you to re-enter the position once the direction is confirmed. Support 1.6249, 1.6119, 1.5776 Resistance1.6488, 1.6604, 1.6692 1.6741, 1.7042.

    While the Euro did trade lower on the day (with a close above the open), this was almost expected considering the uncertainty across the various markets. It held support, and formed a nice selling tail. Not surprisingly, today we are trading lower and testing support of 1.4645. This market should trade lower to 1.4645. We are finally trading below the uptrend line on the weekly chart. Looking at multiple time scales we can see the weakness in this market. Once we touched 1.5062 in late October this currency began to tumble and we are trading 4 cents lower. I expect to see a further push down followed by a short lived bounce. We are seeing the classic consolidation followed by a break pattern that we have so often discussed. Support 1.4645, 1.4480, 1.4370, 1.4176 Resistance 1.4766, 1.4842, 1.4980, 1.5062, 1.5284

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