Forex Blog

This week ends far worse for dollar bulls than they may have expected. Only Wednesday was an uptrend day for the U.S. dollar, but it didn’t gain a lot that day. Friday brought in the break through the 1.4700 resistance level on EUR/USD. Some disappointing data on the net foreign purchases and the manufacturing survey were the most important causes of today’s dollar’s decline.

Export and import prices in January grew faster than expected and this can be a positive sign for U.S. economy. Export prices index increased 1.2%, while import prices index increased 1.7%. Expected levels of growth were 0.3% for both of them.

NY Empire State Index — compiled through a survey of manufacturing sector — showed a very sharp decline this month. It went down from 9.0 to -11.7. For the first time since May 2005 it slid down below the zero level .

Net foreign purchases of the long-term securities in December were at $56.5 billion, which is much lower than $76.0 billion expected. Now the inflow barely covers the U.S. trading deficit.

Industrial production and capacity utilization in January weren’t good or bad, they were at the same levels as they have been expected by the analysts. The industrial production grew by 0.1% (the same as in December), while the capacity utilization was at 81.5% (the same as revised December’s value).

EUR/USD is closing below 1.3900 level after a major rally earlier this week. The main driver for the growth were the market expectations for the FOMC to lower the interest rates by at least 0.25% next week, while last two days’ correction can be a reflections of some less confident traders, that are sure that if FOMC won’t lower rates or will stay with 0.25% decrease for a longer period, then markets will have to play back current growth. Lack of surprise data helped the second type of traders today.

U.S. export (excluding agricultural) and import (excluding oil) prices changed by 0.1% and -0.1% respectively in August, while July brought -0.2% and 0.1% respectively.

Retail sales were up by 0.3% in August, which is lower than both July growth by 0.5% and the same expected value for August.

Industrial capacity utilization in August remained at the 82.2% level as it has been in July, while the market was expecting decline by 0.2%.

Manufacturers’ and trade business inventories rose by 0.5% in July compared to 0.4% growth in June. This is a slightly more optimistic number than 0.3% growth expected by the market.

Euro still holds below the 1.3700 level after a major crisis on the world financial markets and currency interventions made by European and Japanese central banks. Dollar’s fundamental future isn’t looking bright, but from the technical side EUR/USD is turning the trendline down currently.
Yesterday’s initial jobless claims news release wasn’t very encouraging - 316,000 new claims - almost 10k higher than expected. This is a bad sign as the employment market looked better previous weeks.
Today export and import prices indexes were released - 2.8% and 1.5% respectively, which both much higher than expected numbers and previous months’ numbers.
Budget deficit in June came out at $36.3 billion dollars, while experts expected $34.0 billion dollars deficit.
Overall fundamental data this week came out worse than several last weeks and this can affect Fed’s decisions on interest rates change.