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.

EUR/USD reversed almost fully its previous weekly earnings today. It fell from 1.5642 to 1.5419 — that’s more than 1.4% in a single day. The euro, being fundamentally overbought, was doomed to a correction. But such a fast drop can mean something more than a short-term correction wave. Though the fundamental data that came out today in U.S. wasn’t very good for dollar.

Initial jobless claims last week increased to 378,000 from the previous week’s 356,000 (revised up from 353,000). The increase to 360,000 has been expected. This indicator is still very bad and is signaling that the employment market in U.S. is still suffering from the financial crisis.

Leading indicators isn’t very important indicator in Forex trading, but it can show the overall health of the economy in U.S. In February leading indicators index fell 0.3% — as expected.

Philadelphia Fed index measures the state of the manufacturing conditions. In March it improved slightly from the record low February’s -24.0 to -17.4. But its value is still very low and indicates the weakness of the manufacturing sector.

EUR/USD gained more than 100 pips today on the bad macroeconomic data coming out in U.S. This currency pair went up from 1.4714 at the opening of the Asian trading session to 1.4816 at the end of the New York session. GBP/USD also grew very fast today — from 1.9420 to 1.9622. The major trend movement against the European currency happened after the release of the Philadelphia Fed’s business activity index, which showed a significant worsening of the business markets’ situation in U.S., while some definite improvements were expected. It fell from -20.9 to -24.0 (it was expected to increase to -10.0).

Among other important statistical releases that came out today was the initial jobless claims count for the last week — it dropped down slightly — from 358k to 349k (a drop to 345k was expected by the market traders) .

U.S. commercial crude oil inventories again grew sharply — a gain of more than 4.2 million barrels was registered for the last week. It’s the fifth straight weekly gain and almost every time it was far above 1 million barrels. This helped to keep the oil price below the "sacred" $100 level today.

Euro tries to reclaim the pips it lost yesterday during one of the strongest falls of the recent days. Yesterday EUR/USD lost 152 pips or more than 1% of its rate. Today only a small recovering is seen with no more than 30 pips trailback, which can be easily accounted to the technical correction. Overall picture of the EUR/USD daily chart more and more reassembles the “head and shoulders” pattern. Some average fundamental data were released today and are not currently affecting the dollar.

Housing data from U.S. was disappointing today. Building permits in December fell by a larger extent than it was expected going down 1,162,000 to 1,068,000. Meanwhile the housing starts for the same month dropped to 1,006,000 from 1,173,000 (revised from 1,187,000).

Initial jobless claims fell down by 21,000 and were at just 301,000 last week, while growth from 322,000 to 335,000 was expected by the market analysts.

Philadelphia Federal Reserve’s business activity index in January unexpectedly fell to -20.9, the lowest value since the October 2001, when it fell down after 9/11 attacks.

U.S. dollar gained against other currencies today, showing a significant change in GBP/USD, along with a little less strong appreciation in EUR/USD. As no important positive data was released for USD, this growth may be accounted to the inertial buying of dollar and position closing on the previous good news and the loss of interest to carry trade.

Final numbers for GDP growth and GDP deflator in Q3 2007 were released today, but they didn’t change anything at all as they were known long before today. GDP growth remained the same - at 4.9%, a very high number for U.S. economy, GDP deflator was revised from 0.9% to 1.0% - an insignificant change.

Weekly report from the U.S. Department of Labor showed that initial jobless claims reached 346k - above the expected 335k and 12k above the previous 334k amount.

Leading indicators continued their decline in November - they fell by 0.4% - a slightly better then 0.5% dropdown in October, but worse than -0.3% that was expected by market analysts. On the bright side, leading indicators is not an important market parameter for Forex.

Philadelphia Fed November index disappointed dollar bulls with a -5.7 value, whereas October value was at 8.2 and a slight drop to 6.0 was expected by the market participants.

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.

Today U.S. dollar continued its way down the Forex market to historical bottoms of its rate against Euro currency. With EUR/USD hitting its new historical maximum at 1.4309, there is a little doubt now that dollar will stop euro reaching and breaking 1.4500 level. This is mainly caused by bad U.S. data coming out last weeks, which might mean another Fed rate cut by the end of the month.

First strike on dollar bulls was delivered today by the initial jobless claims report for the past week with 29k increase from the previous week - to 337k. Then the leading indicators by the Conference Board Inc. came out showing a 0.3% growth, which appeared as expected. But it is a very weak indicator that doesn’t mean a lot to Forex traders usually.

Second strike was Philladelphia Fed Business Outlook Survey showed a very strong decrease in the diffusion index of current activity from 10.9 in September to 6.8 in October, whereas even pessimistic market analysts were expecting to see 7.0 value.

To sum it up - it is a bad time to be long on dollar, but good to be long on EUR/USD.

A rich day for the economical news releases from United States was today.
First, the weekly initial jobless claims data came out at the better than expected level showing only 301,000 claims for the previous week which signals the continued moderation of the U.S. unemployment rate.
Second, the leading indicators came out unexpectedly low at -0.3%, while analysts were expecting a growth of 0.1%.
Third, Philadelphia Federal Reserve manufacturing index came out at 9.2 - nearly a half of the expected 14.0.
And, at last, today’s main news maker - FOMC minutes for the June 27-28 meeting were released today. The main idea of the minutes is that while the in the first quarter of 2007 economy grew at a slightly slowed down pace, the second quarter is more promising with the good news on industrial production and employment indicators; still the main concern for the Committee remain the inflation risks, while the GDP growth is estimated to be rather high in the rest of 2007.

EUR/USD is still ranging making this week pretty calm compared to some previous weeks which showed us an amazing volatility and trendiness. The main reason for this slow Forex market I can see in the rather neutral economic releases we’ve seen this week. While the number and the market importance of these releases were relatively low. Today the most important data were initial jobless claims which appeared 14K above expected number - 324K against 314K for the previous period (10K increase). Leading indicators, which usually don’t do much for the Forex came 0.1% higher than expected - at the level of 0.3%. Federal Reserve Bank of Philadelphia manufacturers report showed a notable improvement in May.