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FOMC Statement In Sight

Discussion in 'Forex Daily News & Outlook' started by mercaforex, Nov 4, 2009.

  1. mercaforex

    mercaforex New Member

    Jul 1, 2009
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    By Mercaforex

    The USD provided traders with a broad range on Tuesday as it moved in a rapid fashion but essentially found itself where it started against the EUR. Factory Orders in the U.S. were released but it did not meet expectations coming in at 0.9% instead of the projected gain of 1.1%. Nevertheless, the Factory Orders figures were better than the previous month’s. Wall Street turned in a mixed session. which highlighted that investors basically choose to sit on the fence as they await today’s FOMC results. The Federal Reserve is certainly not expected to raise interest rates but what all eyes will be on is the language the Fed uses as it speaks about its outlook for the U.S. economy. Not only is the Fed on the schedule today, but so are the ADP Non Farm Employment Change numbers as well as the ISM Non Manufacturing PMI data.
    The day could be filled with fireworks leading up to the FOMC Statement, this because the employment data comes out first and will be used as a barometer for the always important U.S. Non Farm Employment Change statistics on Friday. The USD has been taken lower for months per the trend against the EUR and part of the dynamic have been the positive results from Wall Street. While contradictions abound in the marketplace due to the financial crisis, traders have used the risk appetite correlation during this period in order to gauge the greenback. In broad market news yesterday, Warren Buffet’s Berkshire Hathaway announced that it is going to buy a very large controlling stake in Burlington Northern Railroad. However, this news failed to generate any upward momentum in the equity markets. The USD will trade under the shadow of the Federal Reserve today and traders will have to be ready to decipher the rhetoric the FOMC offers.

    The EUR turned in a rollercoaster of a day as it was taken lower against the USD but did manage to find enough backers to return it to a neutral finish line. There was no major economic releases from Europe on Tuesday leaving traders to watch the action from international stock markets, look at corporate earnings from the likes of UBS, and wait for the parade of central bank decisions that will begin erupting today. Europe will release its Final Services PMI data Wednesday and it is expected turn in the same reading as the previous outcome at 52.3. Also PPI statistics will be presented for the European Union and the estimate is minus -0.3%. While EUR investors may not have stayed awake in their beds worrying about today’s reports, it might be worthwhile to note that the PPI forecast is still gearing itself for deflationary numbers. Tomorrow the ECB will hold its monthly interest rate and monetary policy meeting and no major changes are anticipated. The EUR continues to trade near the upper end of its trend against the USD but has shown that it is running into headwinds recently.

    The Sterling proved once again that it has some backbone on Tuesday. Like the EUR it was taken lower in early trading against the USD but it did finish the day with a positive run. The U.K. released its Construction PMI yesterday and it did turn in a negative reading of 46.2 compared to the estimate of 47.2. However, the poor PMI outcome was overcome with a positive Halifax HPI result of 1.2%, which was higher than the forecast of 0.8%. Today the Services PMI statistics are on schedule and the projected number is 55.4, which would be a slight improvement over the previous one. Tomorrow the Bank of England will take center stage for GBP traders. The Sterling has proven a resilient and opportunistic currency to trade the past couple of months providing a wide range.

    The JPY finished the day slightly stronger against the USD in light holiday trading. A debate often rages about the perils of a strong JPY when taking into account its large exporting base. There are some proponents of a strong JPY who point out that Japanese companies have started moving their manufacturing companies overseas in order to take advantage of cheaper production costs. However, a large swatch of companies from Japan, remain homeward bound and are definitely suffering from a strong JPY. Gold broke record highs yesterday and it has proven that its consolidation the past couple of weeks signaled that investors were waiting for its next break out. Gold finished yesterday’s trading session around 1086.00 USD and needs to be watched carefully.

    Going For The Gold! Gold Soars Higher

    An interesting trading day yesterday as the SPX closed slightly higher than its previous close. But what drew my attention was how it traded relative to the dollar. While the dollar traded higher, the SPX tried to move lower but was unable to do so in any significant way. Once the dollar began to show signs of weakness the equity market found good support in the 1035 range, and was able to climb 10 points. The buying power in this market continues to amaze me, but since I, and thus you, as my readers are aware of it, than truly we are not surprised and can actually take advantage of it. At the moment we are still holding a nice downtrend on the daily chart. Play support and resistance. Support 1029.4, 1019.6, 1009.1, 992.25 Resistance 1046.36, 1052.2, 1061.9 1073.2, 1081.5, 1086.2, 1095.8, 1101.4, 1132.2, 1153.8

    Going for the Gold, this market is acting like a true champion. Weakness has been met by nice steady buying, and traders began to accumulate this commodity as it neared the 1024 support level. Once we held over 1042.5, there was a great opportunity to get long, and be positioned to profit from the powerful move that we anticipated. It is difficult to get in at this point and we will wait for some more consolidation before we add to our position. Place your stop around 1084.34 Support 1085.70, 1079.25, 1070.6, 1066.1, 1049.05, 1042.5, 1034.8, 1024 Resistance 1092.87, 1100 …… !

    Throughout my posts, there are many common themes, and today I will repeat myself once again. It is always critical to identify the kind of market you are trading. Is it trending or ranging? Well the Sterling is ranging. Obviously this means that we have to buy support and sell resistance. Now within a channel there can be other levels that can be used to create trading opportunities. Analyzing the daily chart, we can see how yesterday’s long recommendation played out perfectly. We neared support of 1.6249; buyers identified the opportunity, and were able to carry the market all the way up to 1.6454. If you were able to get into this trade you should have at least 150 pip profit as this trade continues to develop nicely. Support 1.6507, 1.6454, 1.6398, 1.6328, 1.6249, 1.6119, 1.5776 Resistance 1.6604, 1.6692 1.6741, 1.7042.

    The Aussie dollar had been trading within a well defined up trending channel since July. Notice the up step formation within the channel itself. Consolidation followed by a push higher, followed by consolidation, and so on and so forth. We have identified the type of market we are trading and now we must abide by the trading rules that this type of market dictates we follow. Buy support, and the lower uptrend line, sell resistance, and the higher uptrend line. Support 0.8915, 0.8788, 0.8544, 0.8098, Resistance 0.9111, 0.9328, 0.9476, 0.9654, 0.9849

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