forexRbot » December

Dollar: Expect Slow Grind Lower after US Data

admin — Fri, 16 Jul 2010 05:20:05 +0000

For the second month in a row, U.S. consumers cut back spending as the government led recovery slows. The U.S. economy has come a long way since entering into recession in December 2007 but the path to the exit has been long and exhausting.

German Consumer Sentiment Darkens Amidst Market Volatility

admin — Wed, 26 May 2010 02:36:08 +0000

German Consumer Confidence reading slipped to 3.5 from 3.7 forecast in the wake of turmoil in the currency and equity markets that gripped the region in the month of May. This was the first decline in sentiment since December of 2009 suggesting that consumers in the Eurozone’s largest economy are becoming more cautious about the prospects for economic recovery going forward.

Oil Affects US and Canadian Trade in Different Ways

admin — Wed, 12 May 2010 09:18:44 +0000

Despite the improvement in the manufacturing sector, the March U.S. trade deficit climbed from -$40.4 billion to to -$39.4B, the highest level since December 2008.

EUR/GBP Consolidates Inside Symmetrical Triangles

admin — Tue, 13 Apr 2010 05:20:42 +0000

An almost perfect symmetrical triangles pattern has formed on the EUR/GBP weekly chart recently. The consolidation is clearly visible and follows the previous uptrend that has ended in December 2008. A breakout from this pattern may signal a beginning of the next long-term trend. A continuation breakout (bullish) is more probable in this case, but it’s better to wait for the clear signal. The price is quite close to the triangle’s apex, suggesting that the culmination is near. The are only two problems with this pattern: the spikes in the middle (both upward and downward) get out of the borders and a little downward slope of the triangles. These deviations are insignificant, in my opinion, and won’t cause any troubles for the traders. You can click the image below to see the full-size chart:

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RBA Minutes Suggest A Pause

admin — Thu, 18 Mar 2010 05:20:27 +0000

The RBA released its minutes of the March meeting at 20:30 GMT today and the overall tone of the report suggested that Australian monetary authorities will proceed cautiously with any further rate hikes in the near term. The RBA policy officials noted that economic conditions continued to improve, stating , “Domestically, most economic indicators continued to point to a strengthening in economic activity. Staff estimates suggested that the national accounts, to be released the next day, would show economic growth of ¾–1 per cent in the December quarter. January data suggested that the labour market had continued to firm, consumption spending had held up reasonably well overall and a pick-up in dwelling activity was under way.”

Dollar Climbs on Mixed Data, ECB Statement

admin — Sat, 06 Mar 2010 06:21:03 +0000

The EUR/USD currency had a change on its positive trend today despite a fall in the U.S. number of pending home sales, as factory orders rose in North America and mainly thanks to an ECB statement affirming that stimulus will last as long as they are necessary to help the region’s economy to increase its pace of recovery. EUR/USD is falling and currently trades at 1.3565.

Pending Home Sales, a forward-looking indicator based on contracts signed in January, fell 7.6% to 90.4 from a revised number of 97.8 in December. The actual figures came considerably below forecasts which expected an increase of 1.4% in pending home sales.

U.S. factory orders advanced 1.7% in January from a previous revised advance of 1.5% in December. Forecasts expected a less expressive advance of 1.4% for new orders.

Nonfarm business productivity was revised from 6.2% to 6.9% during the fourth quarter of 2009, while forecasts expected the rate to be at 6.2% like the previous report.

Initial jobless claims were at 469k last week from a previous revised data of 498k applications. Forecasts were near the correct number expecting 472k applications.
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Dollar Bulls Are Looking Beyond Feb Payrolls

admin — Fri, 05 Mar 2010 17:07:07 +0000

Thanks to the better than expected U.S. non-farm payrolls report, the sun is shining brightly on the financial markets. Equities rose to their highest levels in more than a month while the dollar saw its strongest performance against the Japanese Yen since early December. The improvement in risk appetite helped to drive currency traders out of the safety of U.S. dollars and back into higher yielding and riskier currencies such as the Australian and New Zealand dollars. Forex traders even bought euros and sterlings despite problems in the hopes that a stronger U.S. recovery will reduce risk in the rest of the world. Whether the U.S. is able to live up to this tall task remains to be seen but at minimum, the better than expected non-farm payrolls report will make U.S. investors more optimistic and help to sustain risk appetite in the forex market.

Chinese Yuan Still Pegged, and US Treasury Purchases Continue

admin — Thu, 04 Mar 2010 06:21:28 +0000

It’s still anyone’s guess as to if and when China will allow the Yuan (RMB) to continue appreciating. You can see from the chart below – which shows the trading history for the RMB/USD December 2010 futures contract – that expectations of revaluation have eroded steadily since December 2009. At that time, it was projected that that Yuan would finish 2009 at 6.57 RMB/USD, 4% higher than the current level. Fast forward to the present, and investors now only expect a modest 2% appreciation rise on the year.

What’s behind the change in expectations? The answer is a combination of economics and politics. On the economic side, China’s trade surplus is much smaller than in recent years, as import growth outpaces export growth. “Double-digit annual growth in exports is all but assured in coming months due to a low base of comparison in early 2009, but…sequential growth momentum went into reverse in January, with exports down 16 percent from December.” Moreover, while GDP growth appears strong, it appears tenuously connected to exports and fixed-asset investment. In addition, if the Central Bank of China raises interest rates to counter property speculation, it will have even less room to maneuver in its forex policy if it wishes to maintain high GDP growth. In terms of politics, the CCP doesn’t want to lose a crucial bargaining chip in international relations, and it also doesn’t want to mitigate the threat to its political legitimacy posed by a prolonged economic slowdown.

On the other hand, China still desires to turn the Yuan into a global reserve currency, again both for economic and political reasons. In order to accomplish such a feat, one of the prerequisites would be dual convertibility. Financial institutions and foreign Central Banks are still extremely reluctant to hold RMB currency since it’s difficult to convert into other currencies. “Citing data from the Bank of International Settlements (BIS), it [Citigroup] said the renminbi’s share in the global foreign-exchange market turnovers was only 0.25 percent in 2007, ranked 20th in the world and fifth among Asian emerging-market currencies.” This is pretty incredible considering that China’s economy is the world’s third largest, and will only change when the exchange rate regime is loosened.

While some analysts predict that the Yuan will continue rising as soon as next month – and at least by a slight margin for 2010 – the modest pace of appreciation will ensure that China’s foreign exchange reserves continue to grow. They are currently estimated at $2.4 Trillion, and while their composition is largely a secret, analysts estimate that more than 2/3 is denominated in USD-denominated assets. Recently, there was a perception that China had begun to diversify its reserves out of Dollars, as US Treasury data indicated that its Treasury purchases had all but stopped. As it turned out, China had merely moved to conceal its purchases by conducting them through a UK Bank.

The biggest threat to the USD posed by China is not an end to the RMB peg – for such is unlikely – but rather a change in its structure. Currently, the RMB is pegged directly to the Dollar, which means that the Bank of China MUST stockpile its trade surplus in USD-denominated assets, namely US Treasury securities. If the peg were to shifted to a basket of currencies, however, it would have more flexibility in the denomination of its reserves. Until then, China’s forex policy will continue to favor the Dollar.

Dollar Benefits from U.S. Expansion

admin — Tue, 02 Mar 2010 06:20:43 +0000

The dollar pared much of the euro’s advance from last week as several reports in the U.S. indicated that economic improvements in the country are far more positive than the situation in most Eurozone member countries, as manufacturing increased for another month and personal spending rose beyond forecasts. The EUR/USD currency pair trades currently at 1.3505.

Personal income rose by 0.1% in January from a previous revised increase of 0.3% in December and below forecasts that suggested a rise by 0.5%. Personal spending rose considerably more, showing an advance of 0.5% from a previous one of 0.3%, while forecasts expected a growth by 0.4%. Core PCE price index remain unchanged while forecasts expected a rise by 0.1%.

ISM PMI Index was to 56.5 in February with a slighltly lower result for this index from a previous reading at 58.4. Forecasts expected this manufacturing index to be at 57.7. Readings above 50 mean expansion in the sector.

Total construction spending declined by 0.6% in January confirming numbers expected by forecasts, and from a previous decline of 1.2% in December.
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Will Weaker Chinese Data Force RBA To Keep Rates Steady?

admin — Mon, 01 Mar 2010 02:27:43 +0000

Weaker than expected Chinese PMI Data reversed a small short covering rally in risk FX as European markets opened for trade at the start of the week. Chinese CFLP Manufacturing PMI slowed to 52.0 from 55.8 the month prior which the HSBC gauge dipped to 55.8 from 57.4 in January. Both measures remained firmly in expansionary territory but declined for the second consecutive month after hitting their peak in December of 2009.