Forex Blog

USD recovered from its daily minimums against euro after the important fundamental reports were released today in U.S. EUR/USD has been trading with 70 pip gain today, but currently it’s trading near its open rate. Only net foreign purchases and Philadelphia Fed index showed some positive developments for the U.S. economy, while other releases were of a very little help for dollar bulls.

Initial jobless claims remained quite high last week — they rose 6,000 compared to previous week and were at 371,000 — just 1 thousand above the analysts’ expectation.

NY Empire State manufacturing survey index fell down in May from 0.3% to -3.2%. That’s not a big fall, but it’s negative and the markets will react respectively.

Net foreign purchases of the long-term securities were at $80.4 billion in March — above the revised February level ($64.9 billion revised down from $72.5 billion). Forecast for March purchases was at $62.5 billion.

Industrial production and capacity utilization both declined stronger than expected in April. Industrial production dropped 0.7% after growing 0.2% in March and with only 0.3% drop expectation for April. Capacity utilization declined from 80.4% to 79.7%, while the forecast was at 80.2%.

Philadelphia Federal Reserve index rose a bit in May — from -24.9 in April to -15.6 this month. It’s the highest reading of this index (which measures the U.S. business outlook) in five months.

The EUR/USD currency pair post some small drop today on Forex as the fundamental situation in U.S. economy looked better in April for the manufacturing sector. All of the reports that were released today in U.S. showed a positive dynamics for the dollar, helping it to go up against euro, pound and yen. EUR/USD is currently trading at 1.5784.

Producer Price Index in March grew at an unexpected pace — 1.1% compared to 0.3% in February and 0.6% consensus forecast for March.

NY Empire State Index report showed a sharp improvement in the manufacturing sector survey. The index went up from -22.2 to 0.6. It was expected to go up to -17.0 today.

Net foreign purchases of the long-term U.S. securities in February 2008 were also significantly higher than both expected and the previous month values — $72.5 billion. In January they were $57.1 billion (revised down from $62.0 billion) and in this month they were expected to fall to $60.0 billion.

The EUR/USD currency pair reached its new absolute maximum earlier today at 1.5902, but it has significantly corrected already and is trading around 1.5750 level.

The first falling indicator that went out today to negatively affect the financial situation on the global market and weaken the U.S. dollar further was the NY Empire State Index for March, it decreased from -11.7 to -22.2, its new all-time record low level. The economic analysts forecasted that it will go up to -5.

Industrial production and capacity utilization report was very disappointing too. Industrial production in February fell 0.5% after the January’s 0.1% growth and the 0.1% forecasted fall for February. Capacity utilization decreased from 81.5% to 80.9% (it was expected to fall to 81.3%).

Net foreign purchases of the long-term securities in January were very optimistic — they went up from $56.5 billion to $62.0 billion, showing that the foreign investors are still interested in the U.S. securities.

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 unexpectedly fell today after the moderate fundamental statistics were released in the United States. This currency pair declined from 1.4803 opening price to 1.4656 making it the largest daily drop for EUR/USD since December 14.

CPI (Consumer Price Index) in December showed a better than expected growth, increasing by 0.3% - still lower than in previous month (0.8%), but above the forecasted 0.2%.

Net foreign purchases of the long-term securities in November were at quite a high level - $90.9 billion, but lower than October’s $114.0 billion.

December’s industrial production stalled with 0% change, but that can be considered a good news, because the negative change has been expected. Industrial capacity utilization dropped slightly, going down from 81.6% (revised from 81.5%) to 81.4%.

U.S. crude oil inventories last week showed a gain at last increasing by almost 4.3 billion barrels after the previous report of 6.7 billion barrels dropdown.

Dollar continued to strengthen against major currency pairs (except the Swiss franc) even after the very pessimistic release of the December NY Empire State Manufacturing Index report, which fell down by 17 points to 10.3. Federal Reserve Bank of New York reported that the new orders and shipments declined significantly in December according to their survey.

Among the good news was the Treasury International Capital report for October - net foreign purchases of the long-term securities was at the pretty high number (compared to $15.4B revised for September) - $114 billion, showing some elevated confidence in the U.S. economy.

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).

EUR/USD hit its new significant bottom near 1.3455 level after dollar continued to grow on the high Euro liquidity level and good economical releases from U.S. Next technical support for EUR/USD lies near 1.3330 mark, so it is reasonable to expect some more USD rallying by the end of this week or next week.
Consumer Price Index (CPI) report, released by Bureau of Labor Statistics, showed 0.1% growth in July (as expected) compared to 0.2% growth in June.
Industrial Production report didn’t make any surprises too and came out with a 0.3% growth in July (in June it grew by 0.5%).
Net Foreign Purchases in July fell by $5.2B compared with June number and came out at $120.9B level, which is still historically high.