Wall Street is Showing Signs of Reverse


Master Trader
Jun 7, 2009
By Mercaforex
The U.S. dollar advanced against the major currencies through yesterday’s trading session, when stock markets worldwide started to show signs of retreat. The U.S. stock market finished yesterday’s trading session almost without change. In this sense, the NY Stock Exchange finished its trading session almost at the same levels that it had started with, showing a pause after last Friday’s trading session which reached the best figures for 2009. Yesterday, Wall Street started the trading session bullish, and with the progression of the day, the U.S. Stock Market started to go bearish, with the U.S. dollar advancing against the majors. The Dow Jones Index marked a small advance of 0.03%, the NASDAQ lost 0.1% while the S&P 500 retreated 0.05%. It is important to note that last Friday Trading session U.S. Federal Reserve President, Ben Bernanke, stated at a press conference that the U.S economy is showing good signs of recovery, and this words highly influenced Wall Street as optimism reined into the market. Some analysts warned that the bullish trend could be tested during this week, in particular, with the Consumer Confidence numbers and the Housing Market figures. It is important to note that the Housing Market started to show signs of stabilization, but consumers are still facing a difficult economic situation. An improvement in the Consumer Confidence data implied that consumers will spend more, and this will be a key factor for the U.S. recovery.
During yesterday’s trading session there was no economic data on the U.S. schedule, and because of that the greenback’s trend was determined mainly by Wall Street and the European economical data. As for today, the S&P/CS Composite-20 HPI will be published, which determines the annual change in the average price of a single-family home in 20 metropolitan areas with a forecasted a reading of -16.3% when previous reading was -17.1%. The Consumer Confidence figures will also be released today, which determines the mood of consumers in regard to economic conditions and is forecasted at 48.1, while previous reading was 46.6. As is logic to estimate, investors will follow today this data carefully, because a higher reading will point to higher consumer optimism, and when consumers are optimistic they tend to purchase more goods and services, which stimulates the economy. If Consumer Confidence numbers surprise the market and they come in low, the U.S. dollar could advance against the majors. As for tomorrow, we are waiting the Durable Goods Orders, the Core Durable Goods Orders and the New Home Sales, which determine the annualized amount of new residential buildings that were sold during the last month. Also for tomorrow the Crude Oil Inventories figures, which determines the weekly increase in barrels of commercial Crude Oil held in inventory by U.S. firms will be issued. These figures are going to have a high impact on the market, and investors may anticipate tomorrow´s forecast. If Crude Oil inventories fall, Crude Oil Value will advance and the U.S. dollar will retreat. However, if Crude Oil Inventories go above the forecast, the U.S. dollar will go bullish. Also the Housing Market figures are expected for tomorrow. The greenback should advance through today’s trading session if U.S. stock market shows signs of deterioration.

During Monday’s trading session, the Euro lost ground against the U.S. dollar, because we observed minimal changes in Wall Street and also in the main Bourse worldwide. The main Stock Markets closed almost at same levels of opening. Yesterday in the Euro Zone was issued the Industrial New Orders figures, which determines the worth of new purchase orders placed with domestic manufacturers for durable and non-durable goods and showed a number of 3,1%, well above the previous number of -0,5%. Once again we are watching positive numbers coming from Europe. Germany and France left recession behind, and analysts now started to be more optimistic regarding the entire European region. Nevertheless, when this indicator was issued, the Euro advanced against the majors, but when the trading day advanced, the Euro started to lose ground because of the stock market worldwide developments. As for today we are waiting the German GDP numbers, which determines the total worth of all goods and services produced by the economy and is forecasted a number of 0,3% without changes. Investors are mainly preparing themselves for the American Consumer Confidence numbers, which are going to impact highly in the market. This is a very sensitive indicator, because consumers play a key role in the U.S. economy, and when consumers are optimistic they tend to purchase more goods and services, which stimulates the economy. It is estimated that the Euro will be influenced by the U.S. dollar trend. As for tomorrow German indicators will be again on the scene, as is coming the German Ifo Business Climate Index and analyst estimated an improvement.

On Monday’s trading session the Sterling lost ground against the Euro and the U.S. dollar, as the main stock markets worldwide were hinting bearish signs. Yesterday were no economic risky events in the British calendar, but for today we are waiting the BBA Mortgage Approvals numbers, which determines the level of home loans issued by the BBA during the last month with a forecasted reading of 37.9K with a small improvement regarding the previous number. This number represents a good sign for the British economy, as large purchases tend to be made by consumers that are optimistic and confident in their financial position. Additionally, increased consumer borrowing tends to lead to increased consumption, a key driver of the overall economy. The UK is presenting some difficulties for economic recovery, and we are observing deflation signs. As for today MPC member, Charles Bean, will speak and this is going to be followed closely by investors, as lately we saw disagreements inside the BoE. If the stock market worldwide rebound, the Sterling will be able to advance against the mayors, nevertheless if BoE members continue to speak about new injections of money, the Sterling will lose ground, as concern about British Economy will be hint again by its highest monetary authority, namely the Bank of England.

The Japanese Yen advanced against the major currencies during yesterday’s trading session, as stock market worldwide showed some bearish signs. In this sense, risk aversion came to the scene and the Japanese Yen advanced. After Ben Bernanke´s speech, we saw a great impact on the stock markets worldwide, but finally we are starting to watch bearish trends on the main bourses. It is important to note that Crude Oil Value advanced by fifth consecutive time, and marked 10 month high numbers, although the U.S. dollar advanced. Crude Oil Barrel closed at 74.37 USD, gaining 48 cents regarding last Friday, after peak 74.81 USD per barrel. Last Friday Crude Oil Value strengthened because U.S. Federal Reserve President, Ben Bernanke, stated that the worst of the recession happened and he observed “good” signs to the short term in the U.S. economy. The U.S. is one of the main Oil consumers, and the demand for this commodity could improve if the U.S. economy leaves recession. It seems that Crude Oil Value for the moment won’t break the psychological barrier of 75 USD. Yesterday, Crude Oil Value was traded surprising investors, as the U.S. dollar also went bullish and the stock markets showed bearish signs. As for tomorrow we are waiting the U.S. Crude Oil Inventories, and will be the main factor to determine if Crude Oil Value will break the 75 USD per barrel.