Further Dollar Strength Ahead?

As the week comes to an end, there is mixed feelings in the dollar camp, with the EUR/USD moving like a rollercoaster reaching 1.3610, a weekly high, then retracing the following day to 1.3470. From the start of the week we saw the dollar firming in most of the pairs and with the market eyeing up the CPI data and the Housing data, there was choppy trading all across the board.

After a poor CPI data result and a frankly awful NAHB housing index, the EUR/USD skyrocketed towards 1.36, which after it broke the level, immediately reversed towards support of 1.3570. However, yesterday the dollar bulls were happy again as more data came out of the US and Housing Starts were better than expected, the same with Industrial Production. The market was clearly caught by surprise as most forecasts predicted a bad number.

Today we had more news coming out which again was slightly mixed as Jobless claims printed a lower than expected number, but Leading Indicators was much worse than expected. By the time the better than expected Philadelphia Fed Manufacturing Index came, the market was buying the dollar all across the board, with EUR/USD dropping down to new lows for the week of 1.3470.

With most of the important data gone, the question is what happens now for the greenback? As we have mixed data almost every day, it’s hard to predict what the future will be for the dollar, and the market will need more signs in order to assess what the next move of the Fed will be.

Furthermore, another important event of the week was the Bank of Japan’s rate announcement which was once again unchanged and from what Fukui told the press there is no hurry at all for the Bank to hike its interest rates any time soon. This news along with a worse than expected GDP was welcomed with a hard sell off in all yen related pairs, giving the chance for EUR/JPY to print new lifetime highs once again and USD/JPY to break important level of 121. The curry trades become very popular again as rates differential grow even bigger with GBP/JPY becoming even more lucrative after the last rate hike of BOE.

Today is the start of the G8 meeting of Finance Ministers which will be monitored closely by the market for any mention of yen weakness or further global imbalances. If there is indeed mention of the recent weakness in all yen pairs then we might see a yen rally all across the board and maybe a chance of some curry unwinds which is widely expected to happen soon. However, if the G8 comes and goes without anything important being mentioned then there is scope for further yen weakness all across the board.

Look out for any breakouts in recent ranges in EUR/USD as it threatens the 1.34 level and if that breaks then there is a chance of further loss in the pair. For the moment the 1.36 level stands as good resistance level if that breaks then there is good chance of revisiting 1.3670, highly unlikely for now though as the negative dollar sentiment has calmed down a bit, so there is a chance of a consolidation towards 1.33 before that happens.

This Weeks Data Might Give Dollar A Boost

Another week has ended with more life time high’s reached all across the board. The EUR/USD finally broke 1.3666 and staged a rally towards 1.3690 and the EUR/JPY also managed to break the important level of 163, when the pair climbed its way to a new life time high of 163.30.

Although the week was not busy data wise, due to the markets important psychological levels there was a lot of trading action driven mainly by negative US data. With the new week started and a busier economic calendar coming out of the US, it will be very important to see how and if the euro will perform on those high levels near 1.37.

So far the dollar has started on a positive note, with the EUR/USD not being able to sustain its gains at 1.3680. With better than expected ISM Manufacturing data and Prices Paid coming out of US yesterday, we saw a boost in all dollar related pairs with EUR/USD breaking 1.36 and trying to break the support level of 1.3585 and USD/CHF finally coming out of its recent 1.20-1.21 range and posting new weekly highs at 1.2180.

Although the greenback is not in the clear yet, this weeks payroll data is the one thing on traders minds, which may help the dollar bulls make a relief rally that has been needed for some time. It will be interesting to see the ISM Non Manufacturing data come out tomorrow in order to see if all the talk of the economic slow down is actually becoming fact.

Furthermore, the EUR/USD is still at very high levels and we see that the market is trying its best to push the pair up on every chance it gets with main target to break the 1.37 level and move further up. We believe that at those levels it will be difficult to accomplish that so easily, however given the fact that US keeps the negative economic data coming, the 1,37 may come sooner rather than later.

As the main event is Non Farm Payrolls all eyes will be there on Friday analyzing every aspect of the news while analysts already speculate a lower figure. Even though this number is difficult to predict, we might have some clue today from the ADP report.

So, as the week progresses and more volatility appears, we should be looking for more trading chances and maybe for a dollar rally at the end of the week, providing that data is not all doom and gloom, and maybe there is a small hope that the US economy is not as bleak as everyone seems to make out.

Is Dollar Ready To Regain Its Losses?

Last week we saw the dollar taking a hit from most currencies and the EUR/USD breaking a psychologically important level of 1.35. With few pieces of economic data coming out of the US, the only event worth seeing was the FOMC minutes, PPI and Trade Balance. All these events were better than expected with FOMC minutes being on the hawkish side.

The PPI headline number was bit higher although its core number was unchanged, and the Trade Balance was lower for the second time in a row beating the forecasts that expected it much wider above 60. All these events were not seen by the market as good news for the dollar and therefore the greenback continued its slide all across the board with Euro the main winner of the week.

We also had the G7 meeting this weekend, which traders were watching closely for any mention of the weakness of yen and strength of euro. However nobody said a word about yen or euro so Monday saw an uptake on all curry trades with EUR/JPY hitting new life time highs of 162.40 and EUR/USD getting dragged up towards 1.36. The market seems to be waiting for an excuse to push the Euro higher, and the lack of worry from European and Japanese officials gives them the green light to do this.

As we said last week, it was very important for EUR/USD to break the 1.35 level for any upside strength towards the 2004 1.3660 target. The pair was within tight ranges for most of the week as there was not enough news to support big moves, however it managed to not only break 1.35 but closed the week at 1.3530, its daily high.

What happens this week though? Will EUR/USD sustain its gains and push for more strength towards life time highs? Or will it find enough selling pressure to start the correction process which is widely expected? Only data and time will tell.

This weeks calendar is looking busier, starting with US Retail Sales, TICS, Empire Manufacturing, CPI, Housing Starts, Industrial Production and last but not least the Philadelphia Index. There is also quite a bit of data coming out of the Eurozone too, so get ready for a busy trading week with the possibility of big volatility.

It is imperative for the Dollar bulls to see some good news for the US currency this week, as they need to be relieved from the pressure that seems to have been built up recently, mainly from the US economic slowdown and the trade relationship with China.

The market will be looking to see better numbers on Retail Sales in order to go back to buying the dollar, as a better number will give confidence that at least consumer sector is not suffering too much. Another thing to watch is the CPI core number, which could print higher this time after Fed officials all stated that inflation risks are still there and if they see proof they will act on it.

With many currency pairs still at life time highs and EUR/USD doing a great job in getting close to printing one, watch out for any correction which is awaited by many traders. It will also be interesting to see the high levels of EUR/JPY or EUR/USD, how will officials react and if there will be any kind of verbal intervention in order to prevent further upward pressure.

So, get ready for what seems like an exciting week with lots of data and many promising trading pairs.

EUR/USD Ready To Break 1.35?

With the Easter Holidays gone and traders back at their desks, we anticipate lots of trading action this week after a few days of very low volatility. Firstly, let’s revisit last week’s busy calendar including news from the ISM Manufacturing and non Manufacturing as well as Non Farm Payrolls.

All week there was pressure on the dollar, with the greenback losing ground against most currencies due to bad numbers from the ISM data and higher oil prices due to geopolitical risks. As we said in last week’s article, what saved the day for the dollar was the better than expected payroll data, plus the unemployment rates dropping to 4.4% from 4.6%.

However, although the market moved about 40 pips, this was not strong enough to take the EUR/USD below 1.3330, mostly because of the Easter Holidays and the lack of volume in the markets. Holiday Monday was a very slow day for all currency pairs, with the big move coming overnight when EUR/USD printed 1.3445 before consolidating back to 1.34.

This week we see euro bulls being in control with one thing on their minds: to revisit the all time highs of 1.3666; a level that was last reached at the end of 2004. We had the FOMC minutes yesterday which although hawkish, it was not enough to stop the dollar from falling against most of the other currencies. With EUR/JPY at all time highs 160.85 and curry traders back, the only thing that can save the day for the greenback are today’s rate decisions and the accompanying statement from Trichet.

With the ECB’s rate decision just around the corner, market players and analysts expect the rates to be left unchanged. However, will this be the Trichet statement that everyone is waiting for in order to determine the future for the European Central Bank rates? There is a lot of speculation that Trichet might not be as hawkish as expected due to the higher levels of EUR/USD, just below 1.35-levels, which can hurt exports as the euro is too expensive.

We believe that once again ECB will make it hard for us to know what their future plans are and therefore they might try to buy time by being vague and unclear about monetary policy. We are at a point where whatever Trichet says there will be a high level of volatility in the markets. If he is dovish, euro will sell off and therefore distance itself from 1.35, but if he is hawkish then 1.35 will be broken and a revisit to 1.36 could be inevitable.

Coming to the end of this week, a slow one data wise, look for more volatility on Friday with the US Trade Balance being the main event alongside the PPI. If we see more bad data out of US, the greenback really might continue its fall and the FED might decide to change its hawkish stance; at least for now.

So, enjoy the rest of the trading week and remember that many currency pairs like AUD/USD, EUR/CHF, EUR/USD, EUR/JPY are at critical levels, therefore watching them closely is imperative if you are looking for a good level to trade. Also this weekend we have the G7 meeting which we will be monitored closely for any mention of yen weakness and euro strength, plus any more insight in the dispute between China and the slowing of the US economy.

Will Payroll Data Save The Dollar From Further Losses?

What a week this has been, with some important indicators coming out of US and on top of that, some geopolitical news commanding a lot of attention. When the week started we saw a lot of dollar weakness due to worse than expected Housing Data, a trend that continued with lower Durable Goods numbers and the EUR/USD hovering around 1.3350.

The other big event of the week was Bernanke’s testimony in front of the Joint Economic Committee, an event closely watched by the market for any indication that the economy is slowing and a rate cut will follow sooner than later. However, although Bernanke was aware of problems in the Housing Market mainly due to sub prime mortgage problems, he once again surprised markets by saying that the Fed is more concern about inflation risks to the upside rather than anything else.

With the traders being caught unawares by his hawkishness, the dollar was bid all across the board, with the EUR/USD breaking 1.33 and moving towards new weekly lows of 1.3285. This figure found tremendous support and it could not break it to the downside.

As the week was ending, more good news came out of the US with the GDP surprising most by printing a better number, and then Chicago Purchasing Manager printing a much better than expected headline number too. This was mainly due to new orders coming in.

Once the market broke down the number and analysed every bit of it, it was obvious that in addition to ‘prices paid’, the Employment numbers were lower too. In fact, overall, the number was more trouble than originally thought. So once again traders could not commit to buy the dollar and therefore any potential move was muted.

The weeks big action came not from data though, but from the US Department of Commerce’s statement which announced imposed trade sanctions on China’s paper imports; a move that was clearly seen as a tougher approach on China by the market.

After this announcement, the dollar sold across the board, with traders worrying that more tariffs could be imposed, and therefore more instability, could occur between US and China on the matter of the revaluation of their currency. This shows that the US cannot wait any longer for China to act on their currency and they are taking some action.

News was welcomed with a big move in all currency pairs with EUR/USD climbing up 100 pips in just a few minutes, towards 1.34, which due to profit taking and the last day of the month, it closed at 1.3350 for the week.

With the Easter Holidays just around the corner we might see a lot of trading volume this week, as Non Farm Payroll Data come out this Friday. Dollar bulls are waiting for this news with great anticipation, as they are hoping the number will be strong enough to boost the dollar and give it its long awaited chance to break higher.

However, this week we also have other economic data from the US such as the ISM Manufacturing, a very important indicator for signs of further slowing in the Manufacturing Sector, and ISM Non-Manufacturing data later on. Both of these indicators are currently above the psychological level of 50, so if we see any numbers lower than that we could see the dollar weaken all across the board.

Most important though, is the NFP, and with analysts forecasting a slightly better number this week, we need to see how the Employment Sector is performing. Any surprises on the downside will again give more excuses for traders to sell the greenback and take EUR/USD a step closer to 1.35.

Also this week watch out for RBA rate decision which although expected to remain unchanged, there is a lot of speculation at the moment that the Bank of Australia will raise its rates due to a string of better economic data in the recent months. Don’t forget that AUD/USD is at 10 year highs at 0.8160 and therefore a hike could trigger the pair to make tracks towards 0.85.

As well as RBA rate decision, we have the BOEs rate decision on Thursday, which again is expected to remain unchanged. However there is a lot of speculation that the Bank will hike again, with many believing that this will happen on May, with others speculating that it may happen sooner than that.

So, as you can see there are enough events to keep us interested for the week and many opportunities for trading action in most currency pairs. The main things to watch for are the EUR/USD approaching psychological level of 1.35, GBP/USD trying to have another go at psychological level of 2.00, and AUD/USD threatening to move even higher. These pairs could give us good selling opportunities as they all seemingly have one common goal: the top.

Enjoy your week, and have a lovely Easter Holiday.

Gloomy Outlook For The Dollar

With the EUR/USD printing new yearly highs of 1.3410 before consolidating back to the 1.33 level, another gloomy week for the dollar bulls ended. Despite this, it was certainly a week full of trading action, with events like the FOMC rate decision and a variety of Housing related data being released.

As we mentioned last week, the main thing that was weighing on the dollar these days was the sub prime problems, which was making investors think twice before buying it. As the sentiment became quickly dollar negative, any bad news out of the US was welcomed with a hard sell off in dollar related pairs. The first piece of news was relatively dollar bearish, with the NAHB Housing Market Index printing lower figure than expected, and the market set the tone for dollar sales which continued through the week.

As expected, the Fed decided to leave rates unchanged once again, leaving the market staring in its crystal ball as it tried to predict their future plans. We believe that the Fed’s statement was not as bad as market perceived it as although it was on the bearish side, the phrase ‘additional firming may be needed’ was nowhere to be seen. As normal though, the Fed was vague and the market struggled to interpret their actions and predict further moves.

Sometimes this can be frustrating and Wednesday saw traders sell off the dollar by almost 100 points after the statement and stocks rallied for the first time in days. This indicated that market is trying hard to see clearly, but when uncertainty creeps in the dollar is immediately sold. These moves don’t last long though, and sure enough, the Euro rejected the 1.34 level very fast. The EUR/USD fell to the 1.33 level, but Friday’s better than expected Housing data led it to break 1.33 and close the week at 1.3285.

But is the market now ready to buy the dollar and forget the so-called slowing of the economy? Perhaps Friday’s better-than-expected Existing Home Sales figures will be enough for the market to forget the Housing problems that weigh in the economy? Closely observe this week’s Housing data to assess any impact this news may have had.

Today saw the New Home Sales print a very disappointing seven-year-low figure, taking the EUR/USD up to 1.3345. This bad news was welcomed with a great sell-off in all dollar related pairs, causing great concern among market traders that a crisis in the economy may not be too far away.

Later in the week we have Consumer Confidence and Durable Orders to look forward too, plus the Chicago Purchasing Manager which we think will determine the dollar’s direction; perhaps even forcing the EUR/USD to new yearly highs of 1.35 if the news is bad. Furthermore, we have some news from the Eurozone and Germany’s IFO, which will need to be watched in order to see how the European economy performs.

Bernanke will be testifying in front of the Joint Economic Committee, which will be interesting, especially if he downplays the problems in the Housing Sector or if he admit to any problems. Expect second thoughts concerning rate hikes if he does. Most analysts believe that the next move by the Fed will be a rate cut, however as their policy always is so hard to read, we might end up being none the wiser.

One thing is for sure, all these bad indicators are making the market very nervous about the state of the economy and while there is not much data coming out this week, expect this feeling to continue, and the EUR/USD to stay in a tight range, until an event triggers an upward rather than downward move.

Will This Week Help Dollar Recover?

Another week has ended where we saw a complete dollar sell off all across the board, especially against the Euro. Traders seemed to loose their faith in the US currency as they quickly put aside better than expected inflation data. Since the start of this week there has been a bearish dollar sentiment which seems to getting stronger by the day.

Last week saw worse than expected retail sales figures coming out for the month of February, which was welcomed by the dollar, leading to further selling all across the board. With EUR/USD trading above 1.32 there was scope for more dollar losses, but data coming out later on in the week didn’t affect the greenbacks performance.

Furthermore, we had the PPI out slightly better than expected, however the market didn’t seem to care and kept selling the dollar anyway. The same thing happened with TICS data which was better than expected and since the last months figure was very poor, the dollar related pairs got a bit of boost.

Nevertheless, traders still were not convinced of any progress in the economy and were not prepared to buy the dollar. Many speculate that due to slowing of the economy, the Fed will be ready to act accordingly and maybe even think of easing the rates sooner rather than later, as most economic fundamentals out of US are disappointing.

Last week we saw the Euro breaking important psychological levels, with EUR/USD reaching new year highs at 1.3345. As we finished the week with the CPI data, the numbers were really mixed as although there was a slight increase in the headline number, the core figure was neutral. This didn’t give too much breathing space for the dollar, which gained about 30 pips but stayed above 1.33 and closed for the week at 1.3315.

Another thing that weighs on the dollar is the problems in the sub-prime mortgage market after news of the New Century company being in trouble and ready for bankruptcy. After the news hit the wires that the lenders were struggling to meet bankers’ demands and the company was suspended from trading at the NYSE, we saw a dramatic sell off in the Stocks as investor’s worries for the slowing of the economy worsened. That alone gave more excuses for traders to sell the dollar as speculations about a bleak future in the economy started to occur.

What will be the future of the dollar this week? With a not so busy economic calendar this week we have a few important things to watch, with Housing data being the main star of the week. As there is so much uncertainty and nervousness regarding the future of the Housing Market, investors will be watching closely and analyzing every single piece of news coming out.

Firstly we have the NAHB Housing Market Index following by Housing Starts and Buliding Permits, plus the Existing Home Sales. Also we have the FOMC meeting this week with the Feds rate decision fully expected to be left unchanged. Although the market doesn’t expect any surprises from the Fed, all analysts will be looking for any hints of easing their monetary policy in the near future. That will certainly influence the recent fall of the dollar, with EUR/USD maybe breaking the important level of 1.34.

However any surprises on the upside for any news this week might give the dollar a boost and put euro strength on hold for now. We believe that traders will try their best to push the EUR/USD pair towards new highs if the sentiment remains dollar negative this week.

So, get ready for some serious trading action as we head towards the first set of important news and let’s hope that this choppy action in the capital markets will calm down this week with Stocks starting to correct.