Forex Blog

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.

EUR/USD retraced back to 1.4200 level today after some very disappointing housing data came out in U.S. Overall situation continues to remain uncertain with the EUR/USD ranging between 1.4050 and 1.4250. It now formed a clear plateau pattern on the daily chart marking some major break in the Euro vs. Dollar struggle.

Housing report for September showed a further downfall in this economics sector with the decrease in both housing starts and building permits numbers exceeding pessimistic market forecasts. There were 1,191k housing starts (against 1,285k expected) and 1,226k new building permits (against 1,300k expected) this September.

Contrary to real estate sector bad news September CPI report showed a better than expected value - 0.3% against 0.2% expected, and that’s from the -0.1% in August.

Crude oil inventories report for the October 8-12 week showed a major increase in commercial oil inventories - 1.8 million barrels, which can easily compensate for the previous decrease by 1.67 million barrels.

EUR/USD reached its two month minimum and almost broker out of its long-term bullish trend today. World stocks markets continue to fall with the main reason lying in panic caused by the crisis in subprime lending U.S. sector. Cashing out of stocks papers causes also carry trade retreating with a huge buying back of JPY and USD (in a lesser dimension) for other currencies - thus the rally of JPY and USD. Even bad economical news from U.S. don’t stop from buying it for Euro.
Weekly employment data showed a little increase of the initial jobless claims - 322k from 316k previous week, while analysts expected a small decrease.
Housing data continue to come out worse and worse - housing starts came out to be 1381,000, while building permits - at 1373k, which is approximately 25k lesser than the market was expecting.

EUR/USD was ranging between 1.3385 and 1.3435 levels undecided - to go for a correction or jump back to the bearish trend which is seen since the first week of May. Such a slow motion in EUR/USD Forex can continue for the whole week. Especially after today’s U.S. housing data showed completely no effect on the Forex market. Although, the numbers came out in neutral level compared to the experts’ expectations, but they showed a moderate decline compared to previous values.