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Big Week Of Data And Earnings
The USD fought its way off of the ropes on Friday. Just as the greenback appeared that it may get knocked down for the week against the EUR and GBP, the USD staged a bit of a comeback and showed that it still has some fight left in it. The Existing Home Sales figures were released and produced a better than expected number with a mark of 5.57 million compared to the estimate of 5.37 million. However the USD was propelled mainly from ingredients on Wall Street. Equities dropped on Friday and also worth noting, is that share prices finished with their first declining week since the early part of October. It will be a quiet day of economic data from the U.S., but quarterly earnings will continue to be published today and the remainder of this week will have a big impact on the currency markets – particularly the USD.
Although today will be calm with economic reports, things will build this week with significant numbers that should create volatile trading sessions. Tomorrow the CB Consumer Confidence figures and the S&P/CS Composite-20 HPI will be released. On Wednesday Core Durable Goods and New Home Sales will be published. And if that isn’t enough to cause nervousness, Thursday actually will be the most critical day of statistics with the Advance GDP and weekly Unemployment Claims being brought forth. Throw the dynamic of more than 150 of the S&P 500 companies issuing quarterly reports this week, among them energy and consumer companies, and it absolutely promises to be a hectic. Wall Street’s price action last week may have highlighted some skepticism and a lack of fundamentals. One aspect of the earnings that could be factoring into caution, is that companies are tempering their profit estimates and this in some cases has been below market expectations. In other words the ‘whisper mill’ of certain analysts and investors has been subjected to less optimism. It could be an extraordinary week taking into consideration the amount of economic data and corporate reports due. The USD is still lingering near its lows against the EUR and the greenback is certain to be put to a strenuous test in the coming days.
The EUR finished the day slightly negative against the USD but not by much. The EUR has essentially held onto significant gains made the past couple of weeks and has not seen much downward price pressure during this time. The Europeans published an avalanche of Flash PMI data on Friday and its results were mostly positive but the reports were balanced by a negative German Ifo Business Climate reading. Also it should be noted that although the Flash Manufacturing PMI data was improved from Germany, the Services numbers came in below expectations. Today the GfK German Consumer Climate reading is due and is projected to turn in an outcome of 4.5. The week will be a relatively quiet one of economic data for Europe, tomorrow money supply figures are on schedule and that will be followed by inflation reports as the week progresses. The EUR finds itself in an uncomfortable position. It is trading at highs against the USD and this is doing the European economy little good. Look for the EUR to remain dollar centric this week as investor sentiment continues to move according to risk appetite.
The Sterling suffered the most miserably on Friday as the U.K. produced a poor Preliminary GDP outcome. Investors were hoping to see an improvement in the U.K.’s economic picture but instead they had cold water thrown on them when the Prelim GDP turned in a stunning decline of -0.4% compared to the forecasted growth of 0.2%. The GBP was punished quickly upon this news as the Sterling dropped from relative strength against the USD back to a rather languishing position. British Prime Minister Gordon Brown was quick this weekend to try and counteract the poor economic data by saying that he believes the U.K. will show growth by the end of the calendar year. Since Brown’s political future is in question he will certainly try to give the sunniest outlook possible and unless the economy pulls a breathtaking reversal his days are numbered. It will be a quiet day of data from the U.K., tomorrow the Nationwide HPI is on schedule. The Sterling will have the full attention of traders today after having been battered on Friday.
The JPY continues to turn in a rather tight band of trading against the USD. It did lose a smidgeon of ground going into the weekend and shows signs of stubborn consolidation. Gold also did little by the end of Friday and for the week produced little in the way of change as the market tries to find a direction. With so many critical economic risk events taking place this week, the JPY and Gold may find themselves good barometers of the total marketplace.
Written by: Robert Petrucci, Chief Commodity Expert and Forex Analyst.
The Humpty Dumpty Effect: Is The S&P Teetering On The Wall?
Friday’s weak trading is the first real sign of the hesitation traders are feeling towards pushing this market higher. With 150 companies reporting earnings this week, the smart money is being cautious about piling heavily into this market. A couple of bad reports could push Humpty Dumpty (the American Equity market) off the wall and I am not certain that “all the kings horses and all the kings men” (the government) will be able to put him back together again. Support 1074.2 1060.9, 1020.3 Resistance 1086.2, 1095.8, 1101.4, 1132.2, 1153.8
Last week’s recommendation still holds true: “I would like you to recall how a few weeks ago, we discussed how important it was for a product to consolidate. Well that’s exactly what it looks like gold is doing at the moment. In the previous example I had used a one hour chart to show what an effective trade this could be. Today we are looking at the daily chart and it is obvious how after a large push up the market has to take time to breath, and accept the new price range it has reached. At the moment we expect a higher push higher based on these technical’s, but as always, make sure you don’t throw everything you own into this trade, and play it with the appropriate amount of caution. Manage your risk!” (We are using a four hour chart today in order to highlight the range that is currently being traded) Support 1059.5, 1050.5, 1047, 1042.5, 1024, 1019.65, 1009.65 Resistance 1061.35, 1064.25 1070.6.
The Sterling is once again acting weak. Last week it rallied higher, showed strength, broke through levels, and finally seemed to be finding life again. However as we neared the 1.6741 level, followed by a catalyst of a bad GDP report the market crumbled and seemed to “head towards the light at the end of the tunnel”. At the moment we are holding near support of 1.6239. If we are not able to hold this level, expect this market to push towards the lower end of the trading channel. This continued weakness could be the final push out of this trading channel, and 1.55 or 1.53 could be on the horizon for the once Noble Pound. Support 1.6239, 1.6113, 1.5919, 1.5776, 1.5707 Resistance 1.6324, 1.6399, 1.6444, 1.6467, 1.6591, 1.6636, 1.6692, 1.6741, 1.7042
The Euro continues to be one of the strongest performers in the Basket of currencies we like to pick from. Each time we near the trend line we bounce off, form a nice buying tail, and push higher. At the moment we are looking to buy any price near the trend (for a relatively low risk trade), expecting this currency to push higher. If we break over resistance of 1.5060 we could see trading at around 1.5284 within a couple of weeks. Our first close below the trend line on a daily chart could be the beginning of a small retracement towards 1.4842. At the moment this currency should continue to climb, but it might be getting a bit long in the tooth. Support 1.4981. 1.4943, 1.4844, 1.4761, 1.4673 Resistance 1.5062, 1.5083, 1.5144, 1.5284
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