Forex Blog

May Day resulted in some unexpectedly bad fundamental data releases from the United States. Labor market, income, spendings, construction and manufacturing were covered in today’s reports and none of them showed something optimistic for the dollar bulls; nevertheless EUR/USD was down today and the dollar managed to show some unfounded strength on the Forex market.

Initial jobless claims rose up from 345k (also revised up from 342k) to 380k last week, showing a further decline in employment.

Personal income rose 0.3% in March, while personal spending was up 0.4%. And, while spending was above the expected 0.2% growth, income growth was below the expectation of 0.4% growth last month.

Construction spending in March decreased faster than the analysts expected — it was down by 1.1% compared to February, while a 0.7% drop was expected.

ISM manufacturing index was reported to be unchanged at 48.6% in April — better than the expected drop to 48.0%.

Despite the fact that the ISM PMI for manufacturing sector is still below the significant 50 level and the construction spending continued to fall in February, today’s economic releases inspired the stock market’s rally and the strengthening of the U.S. dollar. EUR/USD fell down from 1.5763 to 1.5582, making this day’s fall already a second largest in the last two weeks.

Construction spending in February decreased at a lesser extent than the majority of the analysts expected — it fell 0.3% against the expected 0.9%. It fell 1.7% in January.

ISM report on manufacturing showed that PMI increased slightly in March and is now at 48.6% up from 48.3% in February, while it was expected to fall to 47.5%.

EUR/USD hit another historical maximum today - 1.4281 and then unexpectedly retreated back to 1.4220-1.4230 levels. A still strong resistance value lies slightly below 1.4300 which is preventing EUR/USD to shoot up to 1.4500 or even farther. Every trader now must look towards Fed’s Bernanke’s decisions and ECB’s Trichet’s reaction on Euro/Dollar overvaluation (of it is possible in open market).

Fundamental analysis now speaks more for the stocks market rather than currency exchange market. ISM reported on September PMI today with the notable decrease from 52.9% to 52.0%, which is below 52.5% expected value. Anything higher than 50% is still good, but it was a bad surprise for U.S. economy. Surprisingly it turned good for dollar - EUR/USD didn’t go above 1.4250 after this release. Nowadays, what’s bad for U.S. stock market is good for dollar in its currency pairs on Forex.

EUR/USD regained part of its losses, received earlier this day and yesterday, after some important but not encouraging data from United States. EUR/USD is still in the flat zone (speaking in long terms), but some strong intraday volatility hints for possible breakout with the direction still unknown.

PMI index by Institute for Supply Management (ISM) was reported today and came out by 0.1 point lower than expected decrease from 53.8 to 53.0 - at 52.9 level. This can hint for a probably weak position of the U.S. manufacturing sector, which will show itself in the later months.

Construction spending in July fell by 0.4% compared to the June amounts. It was much worse than the expected 0.1% fall. So the crisis in the real estate sector continues in time and strengthens in powers without any signs of recovering with all those money interventions by Fed.

Another day marked by U.S. dollar’s struggle to hold below the 1.3700 mark and get out of the bearish trend. EUR/USD is waiting for more bull power before turning back to rising or is just being corrected by some good yesterday’s economical news from United States.
ISM reported on Manufacturing PMI in July disappointed many dollar bullish traders as it came out at 53.8%, below the 55.5% expected, showing some possible problems in the manufacturing sector of the U.S. economics.
Previous week’s oil inventories report showed a great decline of 6.5 million barrels of crude oil, while commercial petroleum inventories fell by 0.7 million barrels. But total present volumes of inventories remain satisfactional.
Today’s news are less encouraging than usually - but one day doesn’t mean a lot in the economics. Further news releases will tell us what to expect from U.S. economy and USD.