Forex Blog

The currency market is affected by many news, which at a first glance not always seem to be related to Forex. Meanwhile there are many types of financial, political and macroeconomic news that influence the Forex trends directly. Forex news is the important part of the fundamental analysis, which is often taken into account by the medium-term and long-term traders. News following is different from news trading as the latter is a form of speculation aimed on short-term profits based on the instant rise of the market volatility immediately after the news release. News following allows you to understand the strengths and weaknesses of the economies that are represented by this or that currency. In my opinion, all Forex traders (except for, maybe, scalpers) should follow Forex news and be current with all the related events, as it greatly helps in making the right decisions in the market. Often, the technical situation on the charts lags behind the fundamental events that tend to change the trends. So, do you follow the news related to trading?

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The last time I’ve written about the gold bubble was almost a year ago when the commodity has been trading near its all-time high at $941/ounce. Since then, the gold managed to reach a new historical maximum at $1,226/ounce and retrace to near $1,050/ounce. So, what’s the current situation with it? Is it still a bubble? Is it already bursting? Is gold going to go up even higher? When will the gold bubble burst?

Unfortunately, there are no simple answers to these questions. Ask a gold bull or an average Joe and they will say that the gold is going to go up as the economy is tumbling and the paper money is worthless, while the gold has always been a real measure of value. Ask a dollar bull or a gold pessimist and they will say that the commodity has no future as the economy is going to recover soon, that the inflation is nonexistent and the gold is useless as a commodity. But today I’ll try to look at gold from the technical point of view.

The chart below shows the daily chart of the spot gold from August 2009 until now. It includes the head-and-shoulders pattern that has started forming since October 6 and has ended its formation on January 20, 2010. The ”shoulders” are marked with the letter “S” and the head is marked with letter “H”. The neckline is sloped because this “head-and-shoulders” pattern is bullish. The pattern broke out down on January 21. The gold continued to form a sloped resistance line, which now contains three price spikes. The probable target for this pattern breakout lies at the basement of the first shoulder:

The key level on the chart is the pattern breakout target that is located at $1,023/ounce. That lne can be reached during the next 7 weeks even if the gold is going to continue retracing to the resistance slope from time to time.

From the technical point of view this is a perfect pattern breakout, but what does a retracement to ~$1,023 means for gold in a long-term perspective? Is it a bubble burst? Definitely not. Of course, it may serve as a first step in a serious trend change or even may end in a steep drop to some years’ lows, but the pattern itself doesn’t mean a lot in a long-term perspective. I suggest watching closely for what happens next after the pattern is played out and the new technical data becomes available.

EUR/GBP formed a symmetrical triangles pattern on the daily chart near the end of this week. Although the pattern isn’t aligned horizontally to count as reliable, the price is currently located near the apex of the triangles and may break out of it soon. Since this is a continuation pattern, expect a bearish trend continuation as the most probable scenario as the pattern resolves. You can click the image below too see the full-scale chart of the currency pair:

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

The greenback is about to finish this trading week with considerable gains versus the euro as unemployment declined in the U.S., being that another evidence of a better economic health in North America than in Europe, which is still suffering, and is likely to continue suffering, from deteriorating public accounts in several nations using the single currency. EUR/USD climbs very slightly now and is at 1.3721.

Unemployment rate fell to 9.7 in January from a previous reading of 10.0 one month before.

Nonfarm payrolls were at -20k in January from a previous revised reading of -150k. Forecasts were more optimistic expecting an increase of 15k jobs, but even if actual data didn’t confirm the analyst’s opinion, a significant improvement could be perceived.

Consumer credit was the last USD report this week and improved significantly from the last reading, but still declined $1.7 billion from a previous revised decline of $21.8 billion. Forecasts were expecting grimmer figures, betting on a decline of $9.2 billion.

The U.S. currency climbed again versus the euro even if reports published today in North America weren’t surprisingly optimistic, as the Eurozone economic struggle is the main factor moving the EUR/USD currency pair. The ECB made comments today mentioning the rising budget deficits in some nation’s using the single currency, forcing the euro to fall sharply versus the greenback. Currently EUR/USD is at 1.3783.

U.S. factory orders advanced 1.0% in December, another increase from the previous revised grow of 0.6% in November. Forecasts expected a rise of 0.7% in new orders.

Initial jobless claims were at 480k during the past week from a previous number of applications of 472k (revised). Forecasts, once again, expected less applications at 461k.

Nonfarm business productivity preliminary numbers for 2009 last quarter were published today showing an increase at a 6.2% annual rate from a previous revised reading of 7.2%. Forecasts expected productivity growth to be at 5.7%.

After rising since the beginning of this week, the EUR/USD currency pair dropped today as risk aversion returned to markets, making investors to opt for the safety provided by the greenback once again. Positive employment data published today in the U.S. also reiterated the hypothesis that the North American economy is currently more solid than the Eurozone. EUR/USD erased yesterday’s advance totally and currently trades at 1.3918.

ADP employment report showed a decline of 22k workplaces in January, indicating better figures than what forecasts expected, at -31k positions. This report has been showing several consecutive monthly improvements, this time from the revised reading of -61k in December.

ISM non-manufacturing index rose to 50.5 in January from a previous revised reading of 49.8. The actual figures came slightly below forecasts that expected this index to be at 51.1.

U.S. crude oil inventories increased by 2.3 million barrels from the previous week. Total motor gasoline inventories decreased by 1.3 million barrels last week. Both inventories remained at above the upper limit of the average range.

Pending home sales published yesterday increased to 96.6 in December from a previous reading of 95.6 in November, an increase of 1.0% that came beyond forecasts that expected this number to rise just 0.4%.

Renesource Capital is a new on-line Forex broker based in Latvia. Its description has been added to EarnForex.com today. This broker offers two platforms to the Forex traders — MetaTrader 4 and Currenex (which is often considered as a more advanced solution for currency trading). The broker is regulated and licensed by the Financial and Capital Market Commission of Latvia; and since Latvia is a part of the European Union, this regulation is rather strict. Some features of Renesource Capital are:

• Except Forex, trade on CFD, futures, options, energies, bonds and shares.
• 0.4 lot minimum position size.
• $2,500 minimum account size.
• Deposit and withdrawal only via wire transfer.
• 0.8 pip spread on EUR/USD.
• Leverage fixed at 1:100.

The dollar started the week reverting last week’s trend versus the euro and dropped as risk appetite reappeared in markets this Monday, forcing equities up and declining appeal for the safety of the greenback. Personal spending and income increased in the U.S. adding appeal for riskier assets as ISM PMI index rose for another month. EUR/USD currently trades at 1.3915.

Personal income rose 0.4% in December, from a previous advance of 0.5% in November (revised). Personal spending had a less significant rise at 0.2% from a previous revised reading of 0.7%. Forecasts were very near actual figures, expecting income to grow 0.4% as it was confirmed and spending at 0.3%. Core PCE price index rose 0.1% as forecasts expected.

ISM PMI Index rose to 58.4 in january, the sixth consecutive increase from a previous reading of 54.9. Forecasts expected and advance to 55.5 to this index.

Total construction spending frustrated forecasts and declined 1.2% in December from a previous decline of 0.6%. Forecasts expected a decline of just 0.4%.

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