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Parade Of Data On Its Way

Discussion in 'Forex Daily News & Outlook' started by mercaforex, Oct 28, 2009.

  1. mercaforex

    mercaforex New Member

    Jul 1, 2009
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    By Mercaforex

    The USD continued to gain against the EUR on Tuesday as the term ‘risk aversion’ began to show signs of life. The CB Consumer Confidence reading delivered a rather unimpressive outcome of 47.7, which was below the forecast of 53.7 and beneath the previous results of 53.4. The stock markets which have been turning in lackluster performances for a week found nothing about the consumer report to smile about and continued to show that its momentum appears to be souring. The Richmond Manufacturing Index did no favors for positive economic data either as it turned in a negative number too. Today the Core Durable Goods and New Home Sales numbers are on the schedule and both are expected to turn in better numbers than their previous publications.
    Tomorrow the Advance GDP will make its way in this parade of data and it carries an estimate which would be a substantial improvement - and therein lays the rub. Investors have been spoon fed positive outlooks by government officials for a few months. They have been told that stability surely will lead to growth. And although some have said that the recovery will take a long time to show real signs of vast improvement, Wall Street has seemingly bought into the brighter outlooks. The problem is that fundamental data and quarterly earnings continue to show a bumpy trajectory and that the path should not be expected to be an easy one. Risk appetite propelled the USD weaker for months as equity value increased coming off of its lowest points – literally the floor. The question for traders is how the market will react to the flurry of data the next two days. The USD appears to be at a critical juncture along with its partner Wall Street.

    The EUR continued to slump against the USD on Tuesday as pressure continued to come across the Atlantic via dollar centric sentiment. The broad M3 Money Supply and Private Loan numbers were released yesterday and produced cumbersome – troubling – figures. Basically what they showed is that money is being lent at a slower rate than hoped for and in fact the number of private loans decreased compared to the month before. Today Germany is scheduled to publish their Preliminary CPI figures and it carries an expectation of 0.1%. The inflation (or in this case most likely – deflation) number could cause an ill wind if it happens to come in negative. Tomorrow Europe will bring forth its Consumer Confidence statistics and on Friday the German Retail Sales figures are on the calendar. The EUR appears likely to remain under the direct glare of USD pressure today and traders should not be surprised to see volatility.

    The Sterling has regained its balance the past two trading sessions and maintained its value against the USD. The CBI Realized Sales figures were released and provided some positive momentum with a reading of 8 compared to the forecast of 6. The number also beat the previous month’s outcome comfortably which was 3. This report may have provided a counterbalance with the Prelim GDP statistics from last Friday, which made the GBP more than a little fragile. Today will be a quiet day of data from the U.K. but tomorrow Net Lending to Individuals and Mortgage figures will be brought forth. Also Gordon Brown may have actually helped bring some stability to the GBP when he remarked yesterday that the Bank of England in his opinion, should maintain their monetary policy which includes stimulus. Having seen two days of relative tranquility, the Sterling finds itself in a consolidated pattern but one that could change if the winds from across the Atlantic are strong enough.

    The JPY had a positive day as investors took most of the Asian bourses strongly lower. The JPY had lost ground against the USD in consolidated trading the past week with the poor results accumulating from the U.S. indexes, but yesterday’s negative slope on the Nikkei was worse than many of its counterparts. The JPY / USD remains a trade largely based on risk/ reward ratio. Gold traversed slightly lower also on Tuesday as it declined to around 1037.00 USD and continues to highlight that it trades in an inverse manner compared to the greenback.

    Monthly Charts Signal Dollar Strength

    Sellers prevailed once more as they pushed down the SPX/USD. Although yesterday’s move was only 12 points we continue to push lower and ended the day around 1063. I am looking for further weakness in this market. If we do not hold support of 1063, which I believe we won’t, we will continue to push lower to close the gap that was created on the 7th of October. This should be followed by a continued down move to the 1040.1 region to close another unfilled gap created on the 5th of October. I have been bearish this market since it traded at 980, however I have not lost money in recent weeks. Reason being, is that I do not like to stand in front of a moving train. As the market rose, any weakness was met by strong buying. The last couple of days have seen a reversal in sentiment. Any strength is met by strong selling. I will continue to sell until the technical’s show me otherwise. Support 1063.12, 1057.5, 1, 1040.1, 1020.3 Resistance 1073.2, 1081.5, 1086.2, 1095.8, 1101.4, 1132.2, 1153.8

    As the month draws to an end a large selling tail will probably form on the Monthly Gold Chart. A close below 1032.3 should signal the end of the amazing rally we saw in this precious metal. Our first real test will be the uptrend line around the 980 area. However between here and there we have a great trading opportunity. If indeed the market does close below 1032, I will be looking for a good entry on the short side. As always it will be vital to manage this trade cautiously. Over the last year we have climbed over $300, and it is obvious that in the long run there is strength. I am not one to pick tops or bottoms, but a “small” $50 down move is still a trading opportunity, as long as you understand that the bias for this market is still up. Support 1024, 1009.65, 1006.2, 986. Resistance 1035.7, 1042.5, 1047, 1061.35, 1064.25, 1070.6

    We discussed the monthly chart of this currency pair a few weeks ago. We tested resistance and gave back all the gains that were made when the safe haven factor played a significant role in trader’s investment state of mind. This latest candle occurs near months end and it seems like we will form a doji, or at least a bullish reversal candle. Obviously this signals US dollar strength on the horizon and must be a consideration for any future trades. Notice how we tested support, and bounced right back. It seems that the dollar has finally planted its feet and has stopped itself from continuing to slide down what has been a very slippery slope. At the moment, continued dollar strength is forecasted. Support 1.0589, 1.0416, 1.0205 Resistance 1.0795, 1.0992, 1.1125

    Dollar strength has pushed the Euro lower. What took 8 trading days to achieve was demolished in one session. We hit support, tested it the next day, and closed lower. Support became resistance and currently we are bearish this currency pair as long as we hold underneath 1.4844. The next target for this trade will be the bottom of the previous trading range, about 1.4480. This is a longer term trade and should be treated as such. What is important for us at this point is trade entry. Anything underneath resistance could be entry for a potential 4 cent trade. Keep in mind that your risk is small and as traders we must always consider this strong axiom “At what point is the market telling you that you are wrong?” In other words, don’t get out of the trade until you are certain that you are wrong! Support 1.4761, 1.4676, 1.4480, 1.4377 Resistance 1.4844, 1.4985, 1.5062, 1.5083, 1.5144, 1.5284

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