No underlying strength for the Euro?
Buying a Call yesterday would have netted a lot of pips as the EUR/USD pair moved about 120 pips before retracing to the 50% Fib level and starting to range
In the Asian session, not a lot of movement could be seen, but this is somewhat characteristic for that session. New Home Sales numbers for the US came out less than expected, at 350K. The previous of 369K was adjusted better, at 382K so the impact of the 350K number is even bigger. Mario Draghi, the President of the ECB and Mervyn King, the Governor of the Bank of England both speak today at the Global Investment Conference in London. The markets already responded to their speeches as we can see movement in EUR/USD and GBP/USD pairs
At 1.30 pm GMT, the Core Durable Goods Orders for the US will be released. A decrease is expected from 0.7% to 0.1%. US Unemployment Claims will be releases at the same time, forecast at 381K from 386K. The last important data comes also from the US, at 3.00 pm GMT: Pending Home Sales, forecast at 0.6%. Pending Home Sales numbers are referring to houses with a valid contract for sale, but awaiting the closing transaction.
What a day so far
Canadian Core Retail Sales came out better than forecast yesterday, at 0.5% from a forecast of 0.1%. Just like we expected, the EUR/USD pair made a new low yesterday in the second part of the day. This was followed by a quiet Asian session, with price slowly but steady moving up. But just when it seemed the pair would resume its decline, price started moving quickly up for an 80 pip climb and while writing this article, price did not stop. If you bought any calls, you made a good deal.
Bad news came out for the Eurozone today at 9.00 am GMT as the German Business Climate declined to 103.3 from a previous 105.2 and a forecast of 104.8; still, the pair continued to move higher. The Gross Domestic Product for the UK was a big disappointment: -0.7%, forecast -0.2% and previous -0.3%. Very important for the USA today are the numbers for the New Home Sales because a new home sale has a domino effect on the economy: a new house also needs furniture, appliances and other objects; the new home buyer also purchases a mortgage from the bank and pays a lot of other comissions. The numbers will come out at 3 pm GMT and are expected to be 372K from a previous of 369K
Will we see a new low today?
Well, Monday was pretty slow for the EUR/USD pair, just like we anticipated because no important news came out. Price made a new low, but the Euro soon recovered and returned inside the range where it remained for the rest of the day. A good strategy would have been to sell some puts and calls when price was inside the range.
Euro zone released the Consumer Confidence numbers yesterday and it was negative -22 from an expected -20 and a previous -20. Usually, on the EUR/USD pair, a quiet day is followed by one with more movement, but that is not a rule and anything can happen. The German Flash Manufacturing PMI was released this morning at 8.30 am GMT: actual 43.3, previous 45 and forecast 45.3. As you may know, the economy of Canada and that of the USA are correlated due to the Oil commerce and for other geopolitical reasons. That’s why we must keep an eye on the Core Retail Sales numbers being released by Canada at 1.30 pm GMT. The forecast for that is 0.1% from a previous of -0.3% so an increase is expected. Fed Chairman Bernanke will speak today about childhood education, but we don’t expect that to be a market mover. The last important data today will be the Flash Manufacturing PMI for the US, expected at 52.1 from a previous of 52.5.
A helping hand for Spain
Friday the Euro lost a lot of ground against the US Dollar even if the Eurogroup meetings brought good news for Spain, as all ministers agreed to recapitalize Spain’s financial institutions. A lot of traders saw this as a good thing for the Euro and expected the EUR/USD pair to move up. The drop in price could have something to do with the conditions imposed by the Eurogroup for the recapitalization, which include bank sector measures and will be gathered in a Memorandum of Understanding which will be signed in the following days.
We don’t expect a lot of movement today because no important data is due for release and sometimes Monday is pretty quiet. The market opened with a 30 pip gap and we might see EUR/USD go up to fill it. The first important data of the week was released by Australia at 2.30 am GMT and it was the Producer Price Index: actual 0.5%, forecast 0.3%, previous -0.3%. The only data that will be released during the day is the Euro Consumer Confidence. Currently European consumers are not too optimistic as previous and expected numbers are -20.
No volatility generated by the Unemployment claims
Well, not a lot of movement yesterday upon the release of the most important data of the week for the US. The numbers were positive 350K from predicted 376K and that is usually good for the currency. If there are less claims for unemployment, that usually means that more people have jobs and the economy is growing. However, this is not always the case and something else can be the reason for the decrease in the Unemployment Claims. Although the numbers were down, normally a good thing for the currency, the EUR/USD pair moved higher after the release so the Dollar lost some of its strength. This shows us again how unpredictable the market can be and this is why you need to adopt the appropriate binary strategy.
Today not a lot of data is released, the most important being the Producer Price Index for the US, at 1.30 pm GMT. This is also an indicator of inflation because if the producer price rises, this will later be reflected in the consumer price. The client will eventually have to pay more for the product. Previous -1% and predicted is -0.5%. The last important economic data for the day is the University of Michigan Prelim Consumer Sentiment. Be careful on Fridays as they can be unpredictable sometimes, just like Mondays. Take care of your money and have a great weekend!
United States Trade balance helping the US Dollar
This week was a slow one in terms of important data being released and yesterday the most important numbers were the Trade balance for the US and Canada. Both were released at the same hour, 1.30 pm GMT. US Trade balance was exactly as forecast, -48.7B, a slight increase from previous -50.6B, but still negative. Canada had worse than expected numbers for their Trade balance: actual -0.8B, previous -0.6B and forecast -0.5B. The two economies are highly correlated and as a consequence, their currencies are correlated. The oil commerce between the two countries has a lot to do with this correlation. We could see yesterday a break of Tuesday’s low in the eur/usd pair after some choppy movement
Waiting for the Unemployment claims
This morning’s movement in the eur/usd pair had no clear direction until a break of yesterday’s low. Now the market has a nice down trend, but a retracement is due to come today or the following days. The Bank of Japan released their Monetary Policy Statement and also the Overnight Call Rate which remained unchanged, at lower than 10%, just as forecast. Bank of Japan also held a press conference at 8.30 am GMT. The most important numbers for today are the Unemployment claims for the US at 13.30 pm GMT. A slight increase is forecast: previous 374K, forecast 376K. If the Unemployment claims numbers go lower that means there are more jobs and the economy is doing better. As a consequence, we could see the US Dollar strengthening some more against the Euro. If some weird strong movement is experienced, do not forget about the Straddle strategy.
Today some of us believed the eur/usd pair would go higher and put their money on it. But of course, this was not true as we could see. It was a false breakout. Among the binary traders I am sure there are a lot of Forex traders and you know what a false breakout is. If you are also familiar with the RSI indicator, you could see it already signaled overbought conditions at the time of the “breakout”. Not a good place to buy if you would ask me.
Euro could go a lot lower, even testing the 1.2000 level, but that is just a supposition, not a trade advice. Today no important data was released other than trade balance for China which was much better than forecast: 31.7B. Expected was 22.6B and previous was 18.7B.Also better than expected were the Manufacturing Production numbers for UK: 1.2%, previous -0.8% and forecast 0.1%
Probably tomorrow will be a quiet day as well because no important news is due to be released. Keep an eye on Trade Balance for the USD. Previous is -50.1B and expected is -48.5B. At 7.00 pm GMT the FOMC meeting minutes will be released and some volatility could be seen then.
Well, last week the Euro dropped a lot, but today we just had an approximately 50 pip range, very slowly moving upwards. Sometimes, Mondays can be like this and price just stalls, without strong movement. Of course, the slow movement today was caused also by the lack of data being released by the major economies of the world. In the days to come, it is possible to see more downward movement and some money being made buying puts.
The week opened with a small 10 pip gap that was quickly filled early in the morning. According to some statistics, gaps are filled 75% of the time so that alone can be a trading strategy. This is not proven though so it would be wise to check for yourself and see if weekly opening gaps are filled.
The Sentix Investor Confidence index was released today for the Euro, at 9.30 GMT and the fact that it was lower was no surprise, given the latest Euro trends. Actual data: -29.6; previous -28.9 and forecast -26.3
The most important data for tomorrow is the NZIER Business Confidence index for the New Zealand Dollar, Trade balance for China and the Manufacturing Production data for the GBP.
ECOFIN Meetings are tomorrow as well and the markets could experience some movement depending on what is decided there or if something is decided.
The strong level of support at 1.2290 was broken today as the Euro continued to drop. A test of this level is likely to come before heading for the next important level of support, at 1.2150
Canada released their numbers at 1.30 pm GMT. The good data contributed to the strengthening of the USD as the Canadian and US economies are highly correlated:
Building Permits: 7.4%, previous -4.4%, forecast 0.7%
Employment Change: 7.3K, previous 7.7K, forecast 5.1K
Unemployment Rate: 7.2%, previous 7.3%, forecast 7.3%
At the same time, The United States released their data: Unemployment Rate remained unchanged: 8.2% ; Non-Farm Employment Change: 80K, previous 77K and forecast 97K
Mario Draghi, the President of the European Central Bank will testify Monday at 1.30 pm GMT in front of the European Parliament, in Brussels. Traders try to interpret his words to get hints of where price might go. If he is very confident about that he says, probably the Euro will strengthen, but if he hesitates, not good things are expected for the single currency.
Bank of Canada will release their Business Outlook Survey later in the day and the day will end with the USD Consumer Credit being released at 8 pm GMT.
Today was the perfect day for a Straddle on eur/usd as it moved a lot in one direction. This strong move was expected due to the big amount of important data being released today, but the direction was harder to spot for traders.
The Official Bank Rate for the GBP was the first important data released in the day but was left unchanged, as expected. The Minimum Bid Rate for the Euro followed and although the outcome was expected, it generated a strong 160 pip move.
The numbers for the American Dollar were better than expected: ADP Non Farm Employment Change: actual 176K forecast 103K, previous 136K. The Unemployment Claims were fewer, showing economic growth. ISM Non Manufacturing PMI was lower, but still above 50, which shows a economy in expansion.
We expect another day full of movement tomorrow as the numbers for the Non Farm Employment Change will be released or the USD and also the Unemployment Rate.
Canada also releases tomorrow important data: Building Permits, Employment Change and Unemployment Rate.
The euro broke the 1.2415 level and if the data for the American dollar continues to be good tomorrow we might see a test of the 1.2290 level.