Forex Crunch British Growth In Doubt – Pound Falls |
- British Growth In Doubt – Pound Falls
- Positioning Data
- Forex TV Weekly Outlook
- Forex Daily Outlook – January 26th 2010
| British Growth In Doubt – Pound Falls Posted: 26 Jan 2010 01:57 AM PST
Britain’s initial GDP read for the fourth quarter is very weak, and the revised versions can easily erase it. The Pound reacted with a fall against the dollar and the Euro. Here’s a review of this important event and a look forward on the Pound. Britain’s first release of GDP was very weak – only 0.1%. Early expectations were for a rise of 0.4%. The unofficial NIESR GDP estimate expected a weaker outcome, only 0.3%, but it was even worse. The UK has been lagging behind other economies with an ongoing recession that went into Q3. The US and Canada exited recession in Q3, Germany and France in Q2. Australia never experienced recession. There were high hopes for a celebration, as Britain was expected to align with other countries. An initial print of 0.1% can be easily erased in the second and final prints. A revision to 0% growth or yet another quarter of recession are possible as they are within the margin of error. Another quarter of recession is terrible for the Pound. Hope can be found in the fact that the contraction in Q3 was upgraded from -0.4% to -0.2%, so maybe the final growth rate for Q4 will be better. But today’s release is definitely bad for the Pound. GBP/USD fell instantly. A gap in can be found in the 30 minute charts, and it was followed by a further drop. GBP/USD dropped from 1.6210 to 1.6130 at the time of writing, and the drop continues. An initial minor line of support appears at 1.6110 with a huge support line much lower, at 1.5720. There’s lots of room for more falls. For more technical lines, check out the British Pound forecast. Mervyn King is currently speaking and he may speak about this fresh and disappointing release. Learning from last week, he wasn’t too positive, and he could hurt the Pound as well. The Pound also lost ground against the Euro after a few weeks of EUR/GBP drops. EUR/GBP rose from 0.8680 to 0.8730, and also here the move continues. The downfall of the Pound can also be seen in GBP/JPY which fell to 144.30. Want to see what other traders are doing in real accounts? Check out Currensee. It’s free. |
| Posted: 25 Jan 2010 11:38 PM PST
Tim Mazanec is a CMT with 14 years of experience in Forex and global markets. He develops his forecasts with a combination of technical, fundamental and flow analysis and is a regular contributor on currensee.com. Positioning Data by Tim Mazanec The other day I was asked for my thoughts on Sugar. This came from a good friend so I took the request seriously and steered clear away from any and all fructose jokes that may have came to mind. He alluded to a few fundamental arguments that called for further appreciation in Sugar. I volleyed with some technical analysis viewpoints for potential projections and corrections in price, but in the end what really matters is the positioning of investors and traders in the market. Simply put, it's more important to know if the market is one-sided or if it is evenly split than to debate some of the supply and demand issues that may impact the price fundamentally. This is especially true for those that trade this sort of commodity and have very little knowledge of the underlying industry. Why do I bring this up? Have a look at EURUSD last week. While stock markets were reversing and the Dow Jones was doing its best to trade back below 10,000 there was a different story playing out in FX. EURUSD did break out of its 1.4250 – 1.4525 range that it had been trading in but it never seriously threatened trading below 1.40 last week. Why not? To me EURUSD is the ultimate gauge of global risk-taking and if stocks are reversing then shouldn't EURUSD be trading lower as well? One can certainly look to the COT report that is published by the CFTC, but the positions are from last Tuesday. When did last week's correction begin? Last Tuesday night / Wed morning when a Republican took the Senate seat in Massachusetts (adding uncertainty to the proposed US health-care system among other things). At the same time news that Beijing told banks to stop lending certainly made headlines in the rest of the world. Therefore, especially in this instance, the COT report will be viewed as dated when it is published (with a 3 day lag). The beauty of Currensee is that the MarketWatch table shows the positioning of traders and investors in real-time. If you go from Long to Short you will see the change right away, not 3 days later. There is also more than one way to view the MarketWatch data. One way is to view the currency pair and positioning by positioning volume. For instance, as of writing at midday on Monday (Jan. 25th, 2010) 75% of traders had moved to Long in EURUSD. Another way is to view the nominal amount of traders with a position at stake in a currency pair. In this case it is almost evenly split with the amount of traders Long EURUSD vs. traders Short EURUSD. How can that be useful for the events in the week ahead? Well among other items of interest in the remainder of the week is the potential confirmation of Ben Bernanke to a 2nd term as the Fed. Governor. If Bernanke is confirmed with the necessary votes then the markets will have a better guestimate as to what to expect from the Federal Reserve in 2010 (low rates). If somehow he fails to be confirmed and uncertainly regarding the prospects for US monetary policy increase then knowledge of how other traders are positioned is a powerful tool for a trader. If traders are still Long to the tune of 75% by volume in EURUSD and general market uncertainly increases then one would certainly think that some of those traders that are Long EURUSD will be reversing their positions and forcing EURUSD lower. It's not just US based events either as certainly speeches by BOE's Mervyn King and top economic data including Germany's IFO will gather the attention of traders this week. Although potentially more important is how traders are positioned going into these events that will dictate the price action afterwards. Want to see what other traders are doing in real accounts? Check out Currensee. It’s free. |
| Posted: 25 Jan 2010 02:02 PM PST
In the weekly outlook interview on Forex TV, I spoke with Julie Sinha about this week’s busy calendar, current trading ranges and possible breakouts. Want to see what other traders are doing in real accounts? Check out Currensee. It’s free. |
| Forex Daily Outlook – January 26th 2010 Posted: 25 Jan 2010 01:00 PM PST
After a slow day, we have a very busy day today, starting with a rate decision in Japan. Then, we’ll get to know if Britain exited the recession, an important European survey will shake EUR/USD and American consumer confidence will move the dollar. Let’s see what’s up today: Apart from the regular economic releases, a second term for Ben Bernanke will probably be approved in Washington, though there are doubts about this. An approval will help the dollar and the stock markets. The day starts strongly with a rate decision in Japan. The BOJ isn’t expected to move the interest rate from 0.1%, but might expand the emergency measures it makes to push the economy higher. The exact wording of the Monetary Policy Statement and the following press conference will move the Yen. In Switzerland, the UBS Consumption Indicator is expected to edge up from the current score of 1.28. In Europe, German Import Prices are predicted to rise by 0.1% after a 0.4% rise last month.French Consumer Spending is predicted to rise by 0.8% after disappointing with a squeeze last month. European Current Account is expected to show a smaller deficit this time: 2.8 billion instead of 4.6 billion last month. The most important release in Europe is the German Ifo Business Climate. This major survey has edged up month after month, and is expected to continue this trend by ticking up from 94.7 to 95.2 points. For more on the Euro, read the EUR/USD forecast and Casey Stubbs’ recent EUR/USD analysis. In Britain, there are high hopes that the recession will finally end. The preliminary release of GDP for Q4 is expected to be positive with a growth rate of 0.4%. The unofficial NIESR GDP estimate showed a growth rate of 0.3%. Just after the GDP release, BOE governor Mervyn King will make a public appearance and can sure shake the Pound. Last week he managed to keep the Pound down… Also in Britain, BBA Mortgage Approvals are expected to edge up to 45.3K, but this will be heavily overshadowed by the other events. For more on GBP/USD, read the British Pound forecast. In the US, S&P/CS Composite-20 HPI is predicted to show a smaller year-over-year drop in house prices. The CB Consumer Confidence will probably shake the dollar. It’s predicted to rise from 52.9 to 53.6 points. It recovered last month. Before the end of the day, Japanese Trade Balance surplus is predicted to rise. Australia’s MI Leading Index which is also expected to rise. For more on the Aussie, read the AUD/USD forecast. That’s it for today. Happy forex trading! Want to see what other traders are doing in real accounts? Check out Currensee. It’s free. |
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