Forex Blog

U.S. dollar looks unsure whether to fall or to rise on the Forex market after some important macroeconomic indicators were released today. One of the most important data came out from the University of Michigan and Reuters - Michigan Sentiments Index, which represents consumer confidence. Consumer confidence is important, because it will determine future consumer spendings that in their turn fuel the U.S. economy growth.

Michigan Sentiments Index in November was 76.1; it fell by 4.8 points compared to its October value of 80.9. But according to over-pessimistic expectations (that were at 75.0), Michigan index did quite well this month. Of course, objectively it didn’t.

Initial jobless claims for the previous week were released today by the U.S. Department of Labor. They fell right into the market forecast value of 330k, lower than last week’s 341k (revised from 339k).

Leading market indicators are considered to be weak in their influence on markets behavior, but nevertheless their value for the October reflects current U.S. economical situation - decrease by 0.5%, below 0.3% expected drop and, of course, worse than 0.3% growth in September.

And with the U.S. commercial crude oil inventories another falling week, oil can be expected to see new record highs in the next days. Crude oil inventories decreased by 1.1 million barrels last week, following the 2.8 growth on previous week. High oil prices may hit dollar on Forex, pushing to the new bottoms.

EUR/USD is hitting its all-time record high level beyond 1.4800 after the pessimistic analysts’ forecasts on housing data appeared to be almost completely true today. Housing Starts for the October grew to a seasonally adjusted annual rate of 1.229 million, compared to 1.193 million in September and 1.175 million expected for this month. Meanwhile Building Permits dropped significantly - October seasonally adjusted annual rate appeared 1.178 million, compared to 1.261 million in September and 1.200 million expected by the market for this month. Significant dropdown in new building permits will eventually lower the housing starts numbers in future, thus the all-negative market reaction to this housing report.

Federal Open Market Committee released the minutes for their October 30/31 meeting today. As it was generally expected by the traders, the concerns of FOMC are slowly but surely moving from inflation to a possible economical slowdown on the background of the housing crisis, the subprime lending crisis and unemployment destabilization in U.S. These were also the first minutes to include Federal Reserve Governors and Reserve Bank Presidents projections of the future economy development. Actually, those projections don’t look very informative to me (with a high possible forecast error and all the numbers to close to the current), but it is a good sign that FOMC will share its views regularly and formally, without traders having to guess “what did they mean by that node”-style. Here is the introduction of the projections from the minutes:

The Committee then resumed its discussion of an enhanced role for the economic projections that are made periodically by the members of the Board of Governors and the Reserve Bank presidents. At this meeting, participants reached a consensus on increasing the frequency and expanding the content of the projections that in the past have been released to the public in summary form twice a year. They agreed to publish with the minutes a summary of participants’ economic projections made for this meeting and to release a press statement describing the plan for the future. The release of more frequent forecasts covering longer time spans and accompanied by explanations of those forecasts was seen as providing the public with more context for understanding the Committee’s monetary policy decisions.

I hope that FOMC will continue to improve its information sharing services and these projections will start to offer a more clear picture of the market to the traders soon.

Now you can read a new Forex article on my site - Scalping The Forex Market For Profits Every Day (by Dean Sauders). As you can guess from its title it is about scalping. This article offers an interesting scalping strategy based on the big amount of Weighted Moving Average. Basically, it is a support and resistance system traded on M1 charts with 24 different levels. Scalping this way gives trader an opportunity to enter multiple trades with low stop-loss. I recommend it to active traders that have access to low spread Forex brokers.

I’ve added a new Forex e-book to my site - The Forex Trader’s Cheat Sheet. It’s not just a book, but a real cheat sheet which can be used every time you consider opening a new position on Forex market. It has several pages of explanations on how to apply its statistical data and a printable version of cheat sheet for 5 currency pairs: GBP/USD, GBP/JPY, EUR/USD, USD/CHF and USD/JPY. As the authors say - it doesn’t tell you HOW to trade, it tells you WHEN to do it. But it also has recommendations on position target sizing. Forex Trader’s Cheat Sheet is based on the statistical data for H4 timeframe - you can consult it to determine if the trend which you are seeing now is going to last or is it at its end.

I’ve checked the performance of this cheat sheet combined with a simple moving averages cross system and it was quite good. I used GBP/USD on H4 timeframe on the last two months period. Near 80% of all generated trades were profitable with an average profit/loss rate of more than 2.5. Use it wisely :-).

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

EUR/USD stopped its fall today and jumped back up to 1.4670 levels on Forex after today’s Federal Reserve release on industrial production. In this October industrial production fell by 0.5% after 0.2% growth in September and median expectation at 0.1% for this month. That means that FOMC will probably need to adjust U.S. interest rates once again to stimulate economy growth.

With the decrease of industrial production, economy of the Unites States showed a decrease in industrial capacity utilization (which, of course, could be a cause for production drop). It fell from September’s 82.2% to 81.7%, while an insignificant difference was expected (82.0%).

While Henry Paulson of U.S. Treasury spoke that Government will conduct a “strong dollar” policy. Its hardly can be done with such economical indicators reports. “Currency will represent the U.S. economical growth” - that was the main idea of Paulson’s speech. But if economy is taking damage? Dollar will continue its demise.

Net foreign purchases of the long-term U.S. securities in September were at $55.4 billion. This is better than the August’s negative -$33.6 billion, but worse than expected number ($66.0 billion) and average 2006 monthly net foreign purchases ($97.2 billion).

These news aren’t that new, but for Forex traders it would be interesting to know, that Marketiva broker now offers world indexes (Dow Jones, Nasdaq 100, S&P 500, DAX and FTSE 100) and precious metals (gold, silver, platinum and palladium) trading. Metals are now part of the Commodities tab in Marketiva’s Streamster, which may hint for adding other commodities (think of oil) too. Spreads for the new instruments are higher than for currency pairs, but that’s OK, since other brokers also use high spreads on the less popular trading symbols. Spreads vary during the day and become lower during stock markets trading session periods.

The release of the not so good news from the U.S. economy caused a wave of bullish dollar speculation on Forex with the increased risk aversion sentiments among traders. Going back from stocks to bonds wasn’t prevented even by the fear of another possible cut rate before the year’s end. EUR/USD fell from almost 1.4700 to the powerful psychological support level of 1.4600.

Bureau of Labor Statistics published its consumer inflation data - CPI increased only by 0.2% in October, whereas 0.3% growth was mostly anticipated. U.S. Department of Labor gave its numbers for the previous week’s initial jobless claims - 339,000 - 14,000 higher than expected.

Crude oil inventories report finally gave a positive sentiment for the dollar bullish traders - there was a 2.8 million barrels growth last week. A good sign after some major decreases, which spiked oil prices to $100/barrel and depreciated dollar against other currencies.

Unexpectedly, Philadelphia Fed General Business Conditions Index increased significantly in November compared to October - constituting 8.2 against 6.8 in October with even more pessimistic forecasts for November.

I’ve updated Forex brokers description pages to use AJAX for broker rating system. So now you can vote for your favorite broker without having to reload a page. It’s not a big thing, but I think that my visitors should be able to do thing in a convenient way :-). If you didn’t rate your Forex broker yet, please do it now, it will take just a few seconds now.

After Bureau of Labor Statistics reported its statistical data for October Producer Price Index (which indirectly affects Consumer Price Index with a time lag) today, U.S. dollar began reclaiming some of its strength against major currencies. Most notably - against Euro which grew significantly against all majors today. After PPI report dollar went back from past 1.4700 levels to 1.4670 levels. PPI increased by 0.1% - lower than pessimistic forecast value of 0.3%, that was after September 1.1% growth. Core PPI didn’t change at all.

October Retail Sales came out at the expected level of growth, increasing by 0.2%, while September numbers were revised from 0.6% to 0.7% increase. The same situation was observed with September Business Inventories report - growth by 0.4% and previous month number revised from 0.1% to 0.3% increase.

Good PPI increases the chances for interest rates cut by Fed. But today Richard Fisher (Federal Reserve Bank of Dallas President) spoke about the Fed’s vision of U.S. economy growth as strong and inflation risks as a more important factor. Perhaps, lower producer prices inflation caused more demand for U.S. dollar basing on its increased buying ability.