THE JAPANESE YEN HAS BEEN EVEN STRONGER DURING JANUARY — THE YEN IS ALSO TURNING UP RELATIVE TO OTHER GLOBAL CURRENCIES IN UNWINDING OF CARRY TRADE AND MOVE TO SAFETY

The markets started off on a solid note on Monday, after the G20 showed minimal concern with regards to the weakness in the US dollar.  US equity markets surged, with DJIA and S&P up 2.0% and 2.2%, respectively.  Financials and industrials outperformed which lead the markets higher. The main message from the weekend G-20 meeting was that governments would maintain and back strong stimulus efforts to those economies which are now moving in the right direction to deal with the current recession.

On Wednesday there was a plethora of economic data out of Asia which stimulated confidence that global growth was on the mend.  The impressive retail sales figure (up 16.2% y/y vs. 15.7% expectations and 15.5% in Sept) and industrial production (which accelerated from a 13.9% y/y pace in Sept to 16.1% in Oct vs. 15.5% expectations) helped bolster hopes China will help the global economy to gain further traction.  This, combined with the better than expected Japanese machine orders which grew more than twice as fast as expected in Sept, reinforced faith in the recovery. Orders were up 10.5% m/m, much more than the 4.1% expected.

The Equity markets continued to hold onto gains for the week as market participants awaited the Jobless Claims number out of the US, which was scheduled on Thursday.  The U.S. Labor Department said in its weekly report that initial claims for jobless benefits fell by 12,000 to 502,000 in the week ended Nov. 7. That was the lowest level since Jan. 3. The previous week’s level was revised to 514,000 from 512,000.  Although analysts were expecting a drop to 510,000, optimists were hoping for a fall below 500,000.  The result disappointed and resulted in some profit taking, which caused the equity indices to drop and the dollar to rise.

On Friday, the EMU released its GDP which came out slightly worse than expected.   Euro-zone gross domestic product grew 0.4% in the third quarter, after dipping 0.2% in the second. This was the first quarterly expansion since the first quarter of 2008. On an annualized basis, the contraction in GDP eased to 4.1% from 4.8% in the second quarter. Economists were expecting the first estimate of third-quarter GDP to show that the economy had expanded 0.6% on a quarterly basis and contracted 3.9% on an annual basis.

Forex:

Even though the Dollar showed relative strength last week, it failed to present any major moves, appearing to be running out of steam.  The euro lost ground after failing to sustain gains above $1.5000 and dropped towards the end of the trading week. Even though traders preferred to cash in on recent gains, the currency managed to stay above the $1.4875/85 area (around the 20-day moving average and 38.2% retracement of the recent rally).  The Euro zone industrial production data was somewhat disappointing, and increased by only 0.3% m/m in Sept (0.5% exp). On the upside, economic data also showed that Germany’s output jumped 3% in Sept and contributing to the slightly smaller than expected contraction in Germany’s GDP result for the third quarter.  Spain’s GDP also showed a better than expected result at -4.0% y/y vs. -4.1%. From a technical point of view, the Euro is now in danger of forming a double top, struggling advance above $1.50.  One must note that break below 1.48 could create a downdraft for the EUR/USD and lead to additional selling pressure.

The Australian dollar hit new highs for the year touching 93 cents against the US dollar.  Australian home approvals climbed by the most in six months in September, giving the RBA justification to hike rates in coming months. Though the central bank has pointedly used the word ‘gradual’ to describe the movement of interest rates in coming months, improving data continues to underpin speculation of sharper tightening.  The AUD/USD finished the week just under multi-year highs.

Pound came under pressure after the BoE’s King, commented after the release of the Quarterly Inflation report. The bank Governor talked about the benefits to the economy of a weaker pound and mentioned that it could help economic growth.  He also said he has an “open mind” on bond purchases, suggesting the BoE has not necessarily reached the end of Q/E.  The BoE said inflation is still expected to come in below the 2% target for most of the next 3 years before edging higher.  The Dovish comments had a negative impact on the sterling sending the cable down after posting hefty gains. Even though, fundamental data is pointing to further weakness, technical levels could hold strong, especially as the Sterling is now trading around prior resistance.

The week Ahead

Next week, a wave of data is going to be released, some of which will have a major effect on the intraday sessions.  On Monday the week will start off with US Retail sales and Business Inventories.  On Tuesday the market will need to absorb UK CPI and US PPI, Industrial Production and Capacity Utilization. During the week Australian Wage Price Index will be released, followed by UK BOE minutes and the closely watched US CPI figure. The number will be scrutinized by investors to make sure that inflation isn’t showing signs that could hurt economic growth. On Friday the BOJ will announce their interest rate decision. The bank is expected to hold at current levels of 0.1%.

We wish you successful trading!

Global equity markets soared last week, after strong earnings releases in the United States led the benchmark S&P 500 index to new highs for 2009.  The S&P 500 rose 16 points or 1.5% during the week, while the Dow Industrial index broke the psychological 10,000 level.  European indices such as the DAX and the FTSE made new highs for 2009, while Asian equity markets posted solid weeks after previously retracing from high level.

The markets started on a positive note on Monday, following the prior week’s rally in the equity markets.  The market leveled off on Tuesday prior to a wave of global economic releases and numerous earning releases from large caps. On Wednesday the markets shifted into high gear, after strong earnings numbers from Intel and JP Morgan (Tuesday evening and Wednesday morning respectively).

The markets also welcomed strong Retail sales on Wednesday which, excluding sales of autos and food sales, increased 0.5%. It was a welcome sign of consumer activity especially after one of the deepest downturns in history.  The headline number fell 1.5% in September with the end of the “cash for clunkers” program, but consumer spending rose in many categories, lifting hopes that the economic recovery is gaining momentum at the start of the holiday shopping season.

Global Economic Data Continues to Show Improvement

Also on Wednesday, Japan’s central bank held fast on interest rates, in an effort to spur lending and bolster the corporate-debt market. The ‘no change’ statement came despite recent improvement in the world’s second largest economy.  BOJ Governor Masaaki Shirakawa indicated that the central bank is still leaning towards stopping the purchasing of corporate debt as scheduled at the end of the year, though no formal decision was announced on the issue after a two-day policy board meeting.

In the United Kingdom, the number of people claiming unemployment benefits hit its highest level for more than 12 years in September, but the monthly rise was smaller than expected, hinting that the labor market may have seen the worst.  The number of people claiming Jobseeker’s Allowance benefit in September totaled 1.63 million, the highest level since April 1997, the Office for National Statistics said.

The euro zone saw its fourth straight monthly increase in industrial output in August, providing further confirmation that the region’s severe recession ended around the middle of 2009.  Industrial output in the 16 countries that have adopted the euro currency swelled 0.9% in August from July. The production data eased worries that the euro zone might slide back into contraction later this year or next, though some economists warned that growth would likely slow once government stimulus programs run their course.

The Pound Climbs Higher, USD/CAD at major Support

It was an interesting week for the sterling, climbing dramatically higher against the U.S Dollar. The Bank of England had a positive effect on the Sterling last week as Paul Fisher released an optimistic view on the UK’s situation, sending the GBP/USD six big figures higher for the week. Fisher said that the central bank may pause in its QE (quantitative easing) program and mentioned that he has confidence that the program is working as hoped. This came after a positive surprise in the jobless numbers. Even though the fundamentals for the pound are still negative, with interest rate differentials favoring other currencies, investors preferred the undervalued currency driving it up for the week. Next week’s Bank of England’s minute may ruin the party as analysts are expecting the bank to lay low for the moment and let its recent policy leak through the system.

From a technical point of view the GBP/USD bounced off trend line support and has now headed into range. Even though a minor trend line lies ahead, one could expect consolidation on this pair around current levels.

Similar to the British pound, the Japanese yen reversed during the course of last week.  The BoJ’s upgrade of the economy this week (the government assessment was more pessimistic) does not alter the view that BoJ rates will remain extremely accommodative for an extended period making the yen a primary funding currency.  The USD/JPY broke above its downtrend line (around ¥89.90) drawn off the dollar’s Aug peak, after establishing a base around ¥88.00 causing the 5 and 20 day moving averages to cross to the upside.  Yen losses are likely to shake out momentum traders that took advantage of the yen’s August and September rally.  With the yen uptrend abating, momentum traders, who pay to be long yen against higher yielding currencies, are likely to trim positions triggering further yen losses.  A break above ¥91.70 could present a long position to ¥92.90.

The Bank of Canada is scheduled to meet this week and is expected to stick to its previous statement; leaving rates unchanged thru mid-2010.  Concerns about C$ strength are unlikely to lead to an intervention, especially given limited potential for intervention success. Even though the chart is trading on weekly support, further Dollar weakness together with rising oil prices could lead this pair lower in the long term, to test support level 2.

The Week Ahead

Economic data will continue to have an effect on the intraday sessions this week. In the U.S the market will be watching construction output in the EMU and US NAHB housing index, two events that could cause movement.  Tuesday will also be an interesting day as the Bank of Canada will announce their interest rate decision.  With Australia paving the way, recently raising rates, the markets could be in for a surprise.

Furthermore, the second half of the week should be exiting as the US beige book, UK retail sales and Canadian retail sales are all expected to be released.  Friday’s session will be influenced by the big man’s comments (Ben Bernanke), mentioning the Fed’s outlook.

Global equity markets rallied significantly last week, as optimism about global growth returned to the markets.    The Dow Industrial average finished the week at 9864 reaching a 52 week high, two years after reaching an all time high of 14,198 points.

The S&P 500 Index (the broader market) rallied 46 points or 4.6% to settle the week at 1,071.  Optimism began early in the week after the Institute for Supply Management reported that its index of nonmanufacturing activity jumped last month to 50.9, from 48.4 in August, while its business activity/production index hit 55.1, from 51.3.  These positive results pushed the S&P 500 up 15 points or 1.5% at the start of the week, showing investors that the U.S economy is slowly crawling out of its recession. One must note that a number above 50 is classed as a positive sign and will often point to expansion.

Positive news continued to grip the market at the beginning of the week as the Reserve Bank of Australia increased its benchmark interest rate to 3.25% from 3.00%.  The surprising news pushed the US equity markets and Dollar counterparts higher, with DJIA and S&P rising 1.4% and 1.4%, respectively. On the Forex market the Australian Dollar soared higher reaching a weekly high of $0.9098.  European markets rose too, as DJ Euro Stoxx 50 ended up 2.7%.

On Wednesday night and Thursday the US markets received two surprises as Alcoa announced positive earnings and Jobless claims declined.  Net third-quarter profit for the aluminum giant was $77 million, or 8 cents a share, compare to expectations of a loss of 9 cents a share.  On Thursday jobless claims decreased by 33,000 to 521,000. Economists were expecting a decrease of only 11,000.

Positive Economic News is Bad for the Dollar

The dollar continued to trade on the defensive side, as currency traders were forced to digest a wave of economic news.  Following the RBA rate hike, the Australia dollar showed significant gains against the greenback.  This was compounded on Thursday after the Australian Economy also showed extremely strong gains in employment.   From a technical point of view the Australian Dollar has presented a phenomenal come back, breaking all Fibonacci levels, heading higher. Even though a pullback could take place, the current angle of the trend is signaling that this pair could be headed for its previous high.

The Canadian dollar set a new high for the year around C$1.0565 against the US dollar, using the unexpectedly strong Ivey PMI as a catalyst.  At 61.7 (vs. 56.2 exp), the Sep PMI report, showed the strongest result since July 2008.Despite the positive number one must note that the index is not seasonally adjusted and September tends to be a strong month regardless of economic conditions.

On Thursday after Canadian employment grew by 30,000 jobs, the Canadian dollar made new highs for the week.    The CAD/USD broke through recent tight range of 1.0630 – 1.1125, and is now presenting enough momentum to test the parity level.

Over in the Euro-zone, ECB President Trichet’s post-meeting press conference left little doubt that the ECB will leave both conventional and non-traditional policy measures unchanged well into 2010. To date the bank wants to ensure that the euro zone’s economy returns to a healthy state, characterized by proper economic growth. Even though Trichet stressed on the importance of the U.S Dollar following the ECB’s rate decision, his comments eventually led to a euro relief rally, as it became apparent that the ECB remains on a very low rung of the intervention ladder.  While the euro has since pulled back below $1.4740 with further support around $1.4680, the fundamental picture has not changed with new euro buyers likely to emerge on the pullback.

Gold and silver lead the charge this week in the commodity markets.  Gold hit a new all time high at $1067, while silver also hit a 2009 high at $17.91.  A strong technical breakout along with the growing demand for an inflationary hedge, pushed precious metals higher during the course of the week.  The moves gained momentum after the RBA increased its central bank rate, especially as gold and silver are known to be the best instruments to use as an inflationary hedge.

The Week Ahead

This week a wave of global economic data will be released, some of which traders will need to keep an eye on.  After a bank holiday on Monday in the US, Tuesday will start off with National Australia Bank’s Business Conditions (Sep), Consumer Price Index, Retail Sales in the UK, and the Zew survey of economic sentiment in the EMU.  On Wednesday eyes will turn to retail sales in the U.S and EMU Industrial Production.  Europe and the U.S will take center stage on Thursday as both are expected to release inflation data.  The week will end with Canada in the spot light, scheduled to release its Consumer Price Index.

Numerous events had an effect on yesterday’s session, driving Wall Street and the major currency pairs higher. The Bank of Australia surprised the markets, increasing their central rate from 3% to 3.25%. Gold jumped above the $1000 mark and rumors that the Dollar might lose its status as a major currency in the oil trade, helped to push the indices higher.  The S&P500 closed the session with a gain of 1.37%, while the Nasdaq finished higher by 1.77%.

The trading day started on a positive note, as the RBA mentioned that they expect the Australian economy to return to a normal state during 2010. The bank took certain measures against future inflation, raising their central bank rate.  The RBA finished their speech by mentioning that with inflation now around stable levels and growth likely to be close to trend over the year ahead, they feel that it is now time to start to remove the stimulus provided by monetary policy from the markets.

Even though all the Australian Dollar crosses felt an impact from the bank’s decision the AUD/USD showed the most movement, continuing higher within its recent trend. After bouncing off trend line support last week, the AUD/USD climbed during yesterday’s session reaching the middle of its current channel.

Gold Climbs to new Levels.

The buzz of the day was Gold, reaching an intraday high of $1042.32. Already during mid-day, European hours, this hot commodity broke its prior minor range and headed higher. Within a matter of a couple of hours, Gold broke all resistance levels and climbed higher. Gold finished the day around its highs and held at $1040 during the overnight session.

From a technical point of view Gold has now breached its prior high formed in early 2008. When taking a glance at the weekly chart below one can see that even though this commodity is trading around high levels, indicators aren’t yet pointing yet to an overbought situation. According to some analysts including J.P Morgan, Gold could see higher levels in months to come due to the current situation. With the Fed expected to keep interest rates at low levels, investors are now heading out of the U.S Dollar, rushing to counterparts, which include Gold.

Market Data to Watch Out For

Looking forward, today’s session will be characterized by investors preparing for tomorrow’s interest rate decision. Even though the markets are expecting a ‘no change’ statement from both the banks, recent actions by the RBA have shocked traders, showing them that anything can happen.

GDP is scheduled to be released shortly in Europe and is expected to show a -0.1% figure. In addition, Australia will continue to shake the market, releasing their employment figures later on during the trading day.

The Crisis of Credit Visualized

And then we have Steve Forbes from September last year with a reminder about the importance of a strong USD and what, in my opinion, is the only way to get the U.S. back to greatness; Value Adding and Innovation …

So now that you know the crux of the problem, this is where we are, one year later …

And finally, for your viewing pleasure, on the eve of two of the worst market crashes in history, let’s go back 80 years with two series of documentaries to see how the market destroyed so many lives then and how close the similarities are to our current time …

1929 – The Great Wall Street Crash & Great Depression: Part 1 of 6

1929 – The Great Wall Street Crash & Great Depression: Part 2 of 6

1929 – The Great Wall Street Crash & Great Depression: Part 3 of 6

1929 – The Great Wall Street Crash & Great Depression: Part 4 of 6

1929 – The Great Wall Street Crash & Great Depression: Part 5 of 6

1929 – The Great Wall Street Crash & Great Depression: Part 6 of 6

Here’s the other series on the same subject:

1929 Stock Market Crash Part 1 of 5

1929 Stock Market Crash Part 2 of 5

1929 Stock Market Crash Part 3 of 5

1929 Stock Market Crash Part 4 of 5

1929 Stock Market Crash Part 5 of 5

So that you don’t leave my blog uninspired and unmotivated, take this last video with you … if anyone knows the value of failure, I do and I can appreciate this message. Have a great day!!

[Conrad Alvin Lim]

Volatility returned to the markets last week as the bears took control and pushed the major U.S stock indices lower. The S&P 500 closed with a weekly loss of 1.84%, while the Nasdaq closed the week lower by -1.87%.  Profit taking seemed to be the theme of the week, prior to the employment report released by the Bureau of Labor Statistics (BLS) on Friday.  The equity market moves where rather ordinary and showed no irrational movement up until Thursday’s session.  Economic data had a major impact on Thursday’s U.S stock session as Initial Jobless claims showed that 551k people had filed for unemployment benefits, exceeding market expectations. Furthermore ISM manufacturing added to the sell-off as showing a worse than expected figure.  Even though the benchmark S&P 500 index received a major blow Thursday losing 2.6%, it was able to hold its 50 day moving average. To date it is poised to bounce after falling almost 6% since its high of 1080, earlier this month.

The major mover of the week was the US unemployment number which was released by the BLS on Friday.  The US lost 263,000 jobs in September and the unemployment rate increased to 9.8%.  Average expectations for this number were for losses of 175,000 jobs with Goldman Sachs at the high, near -250,000. Although the jobs number came in weaker that analysts had expected, one can see on the chart below that job losses are improving, since the low created in January of this year.

Forex Pairs on Major Support Levels

Consolidation was the major theme last week on the Forex market as participants took profits on their long positions ahead of the release of the employment result.  The resilient Euro also felt the pressure dropping against the U.S Dollar. After touching a high on Monday of 1.4719, the EUR/USD slid down to $1.4526 on Tuesday.  The beginning of the week was also characterized by light volume.  Comments from the ECB’s Trichet that a strong dollar is “extremely important”, created heavy trading in the Euro which persisted for the balance of the week.  The comments are not out of line with G7 policy and are not a step up the intervention ladder.  The Euro derived little benefit from the weekend elections in Germany and retail sales unexpectedly dropped in August, denting optimism about the strength of the recovery in the region.  Even though this pair has now come down to double support, continued pressure could push it back into the 6 big figure range,  which the currency pair traded in from May to mid September.

On Monday the Yen took a shot at reaching weekly support seen at ¥87.05.  The USD/JPY hit a low of ¥88.22, but softness in the US markets pushed the currency pair back above ¥89.  The numbers out of Asia failed to help the Yen during the week; Japan’s Q3 Tankan report demonstrated that business sentiment is continuing to improve in the third quarter after hitting a record low in Q1. The figures also revealed worse than expected forecasts for capital spending cuts and likely to weigh on thoughts regarding the sustainability of the current recovery.  On a positive note the unemployment rate fell to 5.5% in August down from 5.7% in July. The number exceeded market expectations, which were at 5.8%. Household spending also climbed by 2.6% in August, after dropping 2% in July. From a technical point of view the USD/JPY chart shows that the currency pair should attempt weekly support in the trading sessions to come if risk aversion continues to remain on the minds of market participants.

The Sterling also consolidated vs. the Dollar and the Yen this week after testing lows during Monday’s session.  The GBP/USD briefly broke 1.58 touching 1.5769 after breaking important psychological support level of 1.60 at the end of last week.  GBP/JPY broke through 140 hitting a low of ¥139.71 on Monday before bouncing back and consolidating around ¥143.  The Sterling gained after GFK consumer confidence came in much stronger than forecast, pushing cable back up above $1.60.  Credit problems that continue to persist somewhat eased this week but failed to help Sterling.  The BoE credit conditions survey mentioned that low funding costs, an improved economic outlook and lower default rates are expected to see lending rise in Q4.  Unfortunately the IMF disagreed with the BoE, warning that the UK is vulnerable to a credit shortage.

When taking a glance at the chart below one can see that last week’s trading session, ended mixed with the GBP/USD clinging on for support. Should support of $1.5853 break, this pair could be in stall for a nasty fall.

An Interest Rate Decision Week

Looking forward, market participants will have to keep an eye on interested rate decisions from the RBA on Wednesday, the BOE and ECB on Thursday. Even though no rate changes are expected, traders will scrutinize the comments that follow in order to receive a better clue of future monetary policy. Eyes will focus on the RBA rate decision as current economic data is showing that they are the closest to raising their rate. Even though a rate hike is unexpected this time round, hawkish words from officials could send the AUD/USD higher.  Earlier during the week, there will be PMI service reports from the US, UK and the EMU on Monday.  It will be interesting to see if the risk aversion continues, especially as the major currency pairs are now trading around critical support levels.

]]> http://stockmarketforbeginner.net/forex-weekly-market-review-oct-5-09/feed/ 1 http://stockmarketforbeginner.net/forex-weekly-market-review-sep-29-2009/ http://stockmarketforbeginner.net/forex-weekly-market-review-sep-29-2009/#comments Tue, 29 Sep 2009 11:45:26 +0000 Stock Market For Beginner http://stockmarketforbeginner.net/?p=1069 The Rally Stalls and Comes Down To Support

After two consecutive weeks of gains, the S&P 500 index stalled this week, closing by 2.25%. Most of last week’s trading sessions were characterized by uncertainty as neither bulls nor bears were sure of the upcoming direction. The first few days of trading were characterized by consolidation, which then led to a minor drop. The major event of the week was the US Federal reserve’s interest rate decision, as market participants waited for the announcement, as well as the Fed’s statement mentioning how they would deal with current security purchasing programs.  Market participants used Wednesday’s session as a pivot day, pushing the indices higher during morning hours, only to slam them down in the afternoon.  Although the news was neither bullish nor bearish, profit taking seized the day.  By taking a glance at the chart below one can see that despite the mixed signals going forward, most of last week’s selling pressure was due to profit taking. The bullish engulfing candle started the selling pressure which led the S&P500 back down to close just above support.

Crude oil was hammered during the week, dragging down the entire market and in particular the energy sector.    The XLE, an ETF of large energy companies was down almost 3% for the week.

Unlike previous trading weeks, economic data didn’t have as much as a positive affect this time round, showing investor’s that the pace of the economic recovery could be slowing.    The week started off with a disappointing Leading Economic Indicators figure, that increased by only 0.6% m/m, compared to a consensus of 0.9%.  Initial jobless claims and Existing Home Sales showed a mixed picture on Thursday.  Jobless claims released by the Bureau Labor of Statistics showed a decrease of 530k compared to a consensus of 560k. Existing Home sales came in less than expected at 5.1M, compared to the 5.35M homes expected.  Furthermore, housing data released on Friday showed that New Home sales were revised down to 4.29K, instead of the 4.4K previously estimated.  The one bright spot during Friday’s session was the Michigan Sentiment index which surprised to the upside, with a release of 73.5 compared to 70.5.

Dollar gains on a downbeat equity market

On the Forex market the Dollar was clearly the leader of the week, increasing dramatically against counterparts. The Pound was pounded last week, after BOE’s King mentioned that a weak sterling would help the UK economy’s adjustment process.  This statement drove the GBP/USD below $1.60 taking out multiple levels of technical support.    The pound will likely face increasing pressure as the UK government has expressed a preference for a weaker domestic currency, stating that the low level of its currency could help its exports.

The Australian dollar was fare better than most currencies against the US dollar, but also came under pressure, affected by the overall momentum in the markets.  Furthermore, news headlines also had an impact on last week’s trading week as the Australian press suggested that contrary to what Chinese officials have been saying, the bilateral relationship between the two is still strained. One must note that China is a major consumer of Australia’s raw commodities, something that also has a tremendous affect on the Australian Dollar. Similar to the rest of the currencies, the Australian Dollar lost its steam last week having an affect on all the AUD crosses. The AUD/JPY broke minor trend line support last week dropping to close the week at 77.699. One must note that even though the AUD/JPY could fall to lower levels a strong support level located at 76.5 lies ahead. A break of support could lead this pair down sharply to new support located near 72.00.

NFP Ahead

Next week the markets will start off on a quiet note but volatility will pick up as the week progresses. Tuesday will be headlined by GDP in the UK and consumer confidence in the Euro zone.  Wednesday will reveal construction spending in Japan, employment in Germany and ADP employment in the US.  Friday’s session will be the major event of the week as the US employment figures are scheduled to be released. Even though the numbers should show an improvement, the NFP index is expected to show job losses for another month, as the U.S economy tries to recover from its recession. Similar to last month’s figure, analysts are expected mixed signals as the NFP result is expected to show its smallest drop, while the unemployment rate is expected to jump to a whopping 9.8%. With the major assets now correcting, some of which located at critical support levels, it will be interesting to see this time round the impact of this result.

Time and date	Event	Currency	Previous	forecast
Tuesday, September 29th, 08:30 AM GMT	Current Account Final GDP q/q Net Lending to Individuals m/m	GBP	-8.5B -0.7% -0.6B	-7.7B -0.6% 0.3B
Tuesday, September 29th, 10:00 AM GMT	CBI Realized Sales	GBP	-16	-15
Tuesday, September 29th, 02:00 PM GMT	CB Consumer Confidence	USD	54.1	57
Wednesday, September 30th, 01:30 AM GMT	Building Approvals m/m Retail Sales m/m Private Sector Credit m/m	AUD	7.7% -1.0% 0.2%	2.7% 0.6% 0.2%
Wednesday, September 30th, 12:15 PM GMT	ADP Non-Farm Employment Change	USD	-298K	-194K
Wednesday, September 30th, 12:30 PM GMT	GDP m/m RMPI m/m	CAD	0.1% -3.8%	0.4% 3.1%
Wednesday, September 30th, 12:30PM GMT	Final GDP q/q	USD	-1.0%	-1.2%
Wednesday, September 30th, 11:50PM GMT	Tankan Manufacturing Index	JPY	-48	-32
Thursday, October 1st, 08:80 AM GMT	Manufacturing PMI	GBP	49.7	50.2
Thursday, October 1st, 12:30 PM GMT	Unemployment Claims Core PCE Price Index m/m Personal Spending m/m	USD	530K 0.1% 0.2%	531K 0.1% 1.2%
Thursday, October 1st, 01:00 PM GMT	Fed Chairman Bernanke Testifies	USD
Thursday, October 1st, 02:00 PM GMT	ISM Manufacturing PMI Pending Home Sales m/m	USD	52.9 3.2%	53.9 0.9%
Friday, October 2nd, 06:00 AM GMT	Nationwide HPI m/m	GBP	1.6%	0.9%
Friday, October 2nd, 12:30 PM GMT	Non-Farm Employment Change Unemployment Rate Average Hourly Earnings m/m	USD	-216K 9.7% 0.3%	-186K 9.8% 0.2%

Last week was characterized by additional Dollar selling as the greenback continued to drop on improving economic data and reassurance from government officials that the U.S economy is now on the right track, back to a recovery.  US industrial production rose a stronger than expected 0.8% m/m in August, while the July gain was revised up to 1.0% m/m from 0.5%.

President Obama took the stage numerous times during the week, stating that job losses are bottoming out and that the new impositions, tariffs, will not spark a trade war between the U.S and China. According to Bloomberg news, President Barack Obama stated that he is now very optimistic about the U.S getting a set of rules in place that will prevent another similar crisis to what the U.S economy has experienced over the past two years. Even though he did mention that the U.S economy is far from out of the woods, his overall tone was optimistic regarding the economic future. In addition Fed Chairman Ben Bernanke stepped up to the plate, mentioning that the current recession has ‘very likely’ ended.

The leader of the week was the euro climbing to new highs vs. the dollar. Even though there was little follow-through, the nature of the trend was a slow grind higher for the euro. The EUR/USD tested highs seen in December of 2008, and has now reached major resistance of $ 1.50.  When taking a look at the chart below one can see that the week was characterized by another leg higher, one that has now brought the EUR/USD into its early 2008’s range.

Renewed concerns about the UK banking sector acted as a catalyst to drive the British pound below important support of $1.6400. During Friday’s session a telegraph revealed that Lloyds’ banking group failed the FSA stress test and will have to remain under the government’s asset protection program for a while longer. Furthermore the regulator decided that the bank will require an extra £28bn to withstand bad debts.  The GBP/USD crashed during Friday’s session but seemed to hold its 100 day moving average which it is sure to re-test at the beginning of this week.  One must note that even though the GBP has shown relative weakness compared to other currency pairs against the Dollar, support of 1.6231 could prevent a major landslide.

The euro’s cross of its 20 day moving average also extended its gains against the pound last week, after breaking above the 50% retracement of this year’s falls.  The EUR/GBP broke above a weekly trend line, one which inspired bullish traders to take this pair higher. Due to a much higher return from the Euro-zone and further problems in the U.K, some which are expected to weigh on the Bank of England and prevent them from attempting to exit its quantitative easing program anytime soon, investors preferred to take the EUR/GBP higher for the week, reaching target resistance of £0.9

*courtesy of netdania.com

U.S data continues to prevail

During the week the US released inspiring economic data, which included the aforementioned industrial production as well as Retail Sales, and the Philadelphia Federal Reserve survey.    Retail sales jumped in August by the largest amount in more than three years, spurred by widespread gains beyond the expected increases of auto sales from the government’s Cash for Clunkers program.    The Commerce Department said Tuesday that retail sales rose a seasonally adjusted 2.7 percent last month, after falling 0.2 percent in July. It was the largest gain in three-and-a-half years and beat analysts’ expectations of a 2 percent increase.

The Philly Fed Survey, a broad measure of manufacturing conditions, increased from ?7.5 in July to 4.2 this month. The percentage of firms reporting increases in activity (27%) was slightly higher than the percentage reporting decreases (23%). Other broad indicators also suggested improvement. The current new orders index edged six points higher, from ?2.2 to 4.2, also its highest reading since November 2007. The current shipments index increased 10 points, to a slightly positive reading.

The positive data sparked renewed buying during the week on the equity markets, as the major indices continued to climb during the week. The S&P 500 touched new highs for 2009, closing the week higher by 25.5 points or 2.45%. From a weekly perspective, the S&P 500 continues to move away from its head and shoulder breakout pattern and now seems like it is heading for its 200 weekly moving average, located at 1250 points. Despite that fact, one must note that the daily chart is showing signs of being overbought. Current price levels could lead to a pull back before the next leg higher.

This week’s data:

Even though the economic calendar is relatively light on data next week the U.S should continue to lead the markets, due to an upcoming interest rate decision. Even though a no change status is expected by most traders, growing speculation that the Fed could raise rates in months to come are weighing on the investors. While the decision itself should pass with no major affect on the price movement, many will be observing the statement that is expected to be released shortly after. Furthermore when taking a glance at yields, one can see that the curve is now pricing in future rate hikes.

In addition to the awaited rate decision, the U.S will release its leading indicators, durable goods, existing and new home sales. The housing data will be closely scrutinized by investors especially as recent data has shown a dramatic improvement, compared to previous months. According to the National Association of Home Builders, confidence edged up again in September, despite an ease in single family starts.

This Week’s session were all about sentiment and official’s expectations, as President Barack Obama and Fed Chairman Ben Bernanke addressed the nation regarding the recent economic crisis. Furthermore, recent action by the U.S had a major influence on the last two trading days, as the U.S imposed tariffs, causing tension between the U.S and China. Despite stumbling in the early going, stocks worked their way higher to log their seventh gain, in eight session. The S&P500 closed the session with a 0.13% gain, while the Nasdaq jumped by 0.52%. From a technical point of view the S&P500 continued to climb, within its recent trend, hitting its upper resistance level.

Earlier session started off with China – U.S worries, as investors began to speculate that recent actions by the two governments could lead to a trade dispute between the two. One must note that the U.S has recently imposed tariffs on Chinese tire imports. During yesterday’s session China released that it will open a probe regarding the possible dumping of subsidies of chicken and auto products from the U.S

President Obama countered the negative session by stating, that job losses are bottoming out and that the new impositions will not spark a trade war. According to Bloomberg news, President Barack Obama stated that he is very optimistic about the U.S getting a set of rules in place that will prevent another kind of crisis that the U.S economy has experienced. Even though he did mention that the U.S economy is far from out of the woods, his overall tone was optimistic regarding the economic future.

During yesterday’s session Fed Chairman strengthened the presidents statement, mentioning that the currency recession has ‘very likely’ ended. The statement helped the intraday session, driving the indices and sentiment higher.

The Pound Gets Pounded

On the Forex market the Dollar presented a volatile session, bouncing up and down against counterparts. During the first part of the session the Dollar strengthened, but quickly lost its ground as the major pairs found support during the session.

The EUR/USD pushed higher, while the Pound dropped throughout the second half of the session. The GBP/USD dropped dramatically, by over 100 pips after BOE Governor King Mentioned tin his statement that he’s considering cutting reserve deposit rates as a “useful supplement” to monetary policy. Even though the better than expected housing and inflation data helped to cushion the fall, the GBP/USD closed the session down at $1.6490.

The major mover of the week was the EUR/GBP, climbing higher by over 100 pips. As one can see on the chart below this pair broke its trendline and horizontal resistance levels. One should note that this pair is now out of range and could be heading for target 1.

Market Data to Watch Out For

Unlike earlier sessions, economic data will have an influence on today’s session, starting with released from the U.K. Their closely watched average Earnings Index + Bonus figure is expected to show a drop compared to last month’s 2.5%, and should come out at 2.1%.

Furthermore their unemployment rate is expected to jump to 8%. During the session the U.S will take the stage, releasing a wave of data, including; crude inventories, NAHB housing market index and industrial production. In addition, eyes will focus on the U.S’s CPI figure, one should show a slight decrease.