Forex Blog

The EUR/USD currency pair reached its maximum level since February 11th today before the report on the retail sales was released in U.S. It showed a better than expected value but the dollar gained and reached its daily high before the report has been made available to the public. EUR/USD showed some retracement after today’s fundamental releases. It’s now trading near 1.3760 after reaching as high as 1.3796 today.

Retail sales were 0.3% up in February compared with the previous month. This increase followed 0.1% gain in January and was much better than -0.2% forecast.

The University of Michigan released its preliminary consumer sentiment index for March. It fell from 73.6 to 72.5, whereas a growth to 74 was expected by the currency traders.

Business inventories stagnated in January, following 0.3% drop in December. The forecast by the analysts point at 0.2% change.

EUR/USD is currently showing a perfect Doji candlestick patter on the chart as the traders reacted to the improved trade balance deficit of the United States. Meanwhile, the jobless claims remained near the same level as a week before, leaving the Forex traders no real guidance for the short-term future. EUR/USD is now trading near 1.3659.

Trade balance deficit decreased from $39.9 billion to $37.3 billion, as the imports fell faster than the exports. Markets expected a worsening of the deficit to $41 billion.

Initial jobless claims decreased from 468k (revised positively from 469k) to 462k in the last week. The expected decline was to 460k claims.

Other three important macroeconomic reports were released in U.S. yesterday:

Crude oil inventories rose by 1.7 million barrels during the previous week, while the total motor gasoline inventories decreased by 2.9 million barrels. Whereas a week earlier they both rose by 4.0 and 0.8 million barrels respectively.

U.S. treasury budget deficit soared to $220.9 billion in February — worse than $193.9 billion deficit during the same month a year ago. The forecasted value was at $222.0 billion, which was quite close.

Wholesale inventories declined by by 0.2% in January, following 1% drop in December 2009. The market participants expected a rise by 0.2% for this indicator.

DfxTrade is a new on-line Forex broker that was added to my site today. According to its website, the company is based in Hong Kong and operates globally except for the residents of the United States. For some odd reason their domain name is registered only until June 2010 (less than a half of a year left), which looks to be a rather disturbing trend among the new brokers. DfxTrade offers a custom Forex trading platform with the possibility of using custom indicators. It’s a stand-alone platform and it needs to be downloaded and installed first. MetaTrader platform isn’t supported by this broker. Other highlights are:

• PayPal, wire and credit cards as deposit methods.
• $200 minimum account size to start trading and 0.1 lot minimum trade size.
• Spread vary between 2 and 3 for EUR/USD.
• Offers trading with gold and silver.

IncoNeon is the latest Forex company that was added to EarnForex.com broker listing. It doesn’t yet have any reputation but it’s marketed quite aggressively. There is no regulatory information available about them, but it looks to be a Russian company. They offer $10 minimum account size (it’s a promotional minimum, the usual is $100) with the credit leverage up to 1:200. IncoNeon offers mini/micro-Forex trading and their IN Trader platform (a brand version of MetaTrader 4). But for some odd reason their website domain is registered only until October 2010 — that’s not very serious for the brokerage business. Other features of this broker are:

• Forex, CFD and futures are available for trading.
• Trading contests with real cash prizes.
• WebMoney is accepted as a payment method along with the wire transfer and credit cards.

Carry trade is a popular trading strategy that is based on buying a high-yielding asset with the low-yielding asset, so that the cost of loan is less than the yield of the asset you’ve bought. In Forex, carry trade is based on buying a currency pair with a high positive interest rate difference (swap) or selling a currency pair with a high negative interest rate difference. The good current examples of the long carry trade pairs are AUD/JPY, ZAR/JPY, HUF/JPY and of the short carry trade pairs — USD/ZAR and USD/HUF. Often such trades yield not only the interest rate difference but also a normal position profit based on the buy/sell price difference; this happens when the market becomes driven by the carry traders. But this strategy is also quite dangerous as the interest rates fluctuate and the currencies with the high yields are usually very unstable. During my more than 4 years long experience as a Forex trader I had a carry trade position open only once and it wasn’t very successful. And how about you?

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The long-term support line formed at a weekly timeframe chart of the EUR/CHF currency pair now holds even more strength as the price has shown a very interesting trend consolidation pattern during several last weeks. As you can see on the chart the currency pair remain in a fading bearish downtrend with each new candle smaller than previous. A weekly close below the support line may signal a strong downtrend tendency, while the sudden jump in the price rate may be considered as a beginning of the long-term upward trend. Click on the image below to see the full-size chart:

EUR/USD trend: sell.
GBP/USD trend: sell.
USD/JPY trend: buy.
EUR/JPY trend: buy.
GBP/JPY trend: buy.

The dollar is going to end this week trading near neutrality versus the euro as several days of alternating risk appetite and aversion moved markets both ways during the past 5 days. Today, better than expected employment data in the U.S. allow the dollar to end this week trading with a slight advantage versus the euro in the weekly comparison. EUR/USD currently trades at 1.3617.

Nonfarm payrolls were at -36k in February from a previous revised reading of -26k in January. This report brought more positive news than what forecasts suggested at -56k jobs.

Unemployment rate held at 9.7 percent in February, the U.S. Bureau of Labor Statistics reported today. Employment fell in construction and information, while temporary help services added jobs. Average hourly earnings increased by 0.1% compared to 0.2% — the average forecast for this indicator.

Consumer credit increased by $5.0 billion in January from a previous revised decline of $4.6 billion in the previous report. Forecasts were completely wrong expecting a reading of -$4.2 billion.

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.

The dollar continued to fall versus the euro this Wednesday despite positive data provided by the monthly ISM non-manufacturing report, as, once again, news involving Greece are the main factor influencing the EUR/USD currency pair’s trend, this time, on the euro’s side as Greece showed a new series of measures to tighten its budget deficit, which were received positively by traders. EUR/USD is currently at 1.3653.

Nonfarm payrolls were at -20k in February from a previous revised reading of -60k in January. This report came within the range of forecasts that expected -15k jobs.

U.S. crude oil inventories increased by 4.1 million barrels from the previous week. At 341.6 million barrels, crude oil inventories are above the upper limit of the average range for this time of year. Total motor gasoline inventories increased by 0.7 million barrels last week, and are above the upper limit of the average range.

ISM non-manufacturing index rose to 53.0 in February from a previous reading of 50.5 in January. This report came slightly above forecasts that expected this index to be at 51.