Posted: 30 Jan 2010 02:00 AM PST

After the surprising American GDP, the first week of February is loaded with major events: rate decisions from Britain, Europe and Australia, job figures from Canada, New Zealand and the US – the almighty Non-Farm Payrolls. Here’s an outlook for the major events of the week.

I’m trying a new format of the weekly outlook this week, somewhat similar to the specific currency coverages. Let me know what you think about it.

Apart from scheduled events, note the G7 meeting that start on Friday. Comments from there and towards this event might impact the markets.

American ISM Manufacturing PMI: Published on Monday at 15:00 GMT. This important indicator showed expansion in the past five months, reaching a high of 55.7 points last month. Purchasing managers are expected to show stability with the index stable at 55.7 points.
Australian rate decision: Published on Tuesday at 3:30 GMT. Australia’s high interest rate is expected to rise once again, this time to 4%. This is backed by an excellent job market and steadily rising prices. While this is expected, it will still boost the Aussie, as there were doubts about it.
American Pending Home Sales: This figure was a total disaster last month, falling by 16% (!). This came after strong rises and probably shows the impact of the effect of the government’s schemes, and also their pullout. A rise of 0.6% is predicted this time. A drop will hurt the dollar.
American ADP Non-Farm Employment Change: Published on Wednesday at 13:15 GMT. The “mini-NFP” doesn’t always foresee Friday’s Non-Farm Payrolls, but usually moves the markets. Economists were too optimistic in the past 8 months. Last month saw a loss of 84K jobs, and we’re expected to see the job loss slashed to 41K this time.
American ISM Non-Manufacturing PMI: Published on Wednesday at 15:00 GMT. Contrary to the manufacturing sector, the situation here is more fragile. The index was went around 50 in recent months, hardly rising above this important number to score 50.1 points. A rise to 51.3 points is predicted this time.
New Zealand Employment Data: Published on Wednesday at 21:45 GMT. Employment figures are important everywhere, and in New Zealand they are published only once a quarter – what makes them a huge market mover. Employment Change is expected to drop by 0.1%, less than last month’s 0.8%. The Unemployment Rate is predicted to rise from 6.5% to 6.8% – weak expectations for the kiwi.
British Rate Decision: Published on Thursday at 12:00 GMT. No rate hike is expected now – it will probably remain at 0.5%. This comes despite improving British employment and inflation. Mervyn King isn’t impressed. The focus will be on the BOE’s Asset Purchase Facility which is running out of money. If the bank expands it, the Pound will weaken. If they begin talking about a future rate hike in their accompanying statement, the Pound will rise.
European Rate Decision: Published on Thursday at 12:45. Also here, Jean-Claude Trichet isn’t expected to move the rate from 1%. There’s too much trouble in Europe. The market will probably shake, but no long-term effect will be seen, unless he makes some dramatic statement in the accompanying press conference.
American Unemployment Claims: Published on Thursday at 13:30. The last employment number before the NFP disappointed in recent weeks and made a retreat. It’s expected to improve from 470K to 461K. A drop below 430K is needed to be seen in order to turn the choppy trading around this publication into a bigger move.
Canadian job figures: Published on Friday at 12:00 GMT. 90 minutes before the American NFP, USD/CAD will get its first shocker. The Canadian job market has been OK last month, keeping most of the gains in the previous month. A rise of 15,300 jobs is expected in the Employment Change and the Unemployment Rate is expected to stay stable at 8.5%.
Non-Farm Payrolls: Published on Friday at 13:30 GMT. The king of forex is finally expected to be positive. In last month’s release for December, we’ve seen a fresh disappointing number of 85,000 lost jobs. On the other hand, November’s figure was revised to a minor but symbolic gain in jobs – 4,000. This time, the fresh number for January is predicted to show a rise of 20,000 jobs. This will be very good news. It’s important to note the revision for December and also the Unemployment Rate, which is predicted to remain at 10% for a third month in a row. This will move the markets for many hours and possibly many days.

That’s it for this very busy week. I’ll later publish specific currency coverages. In the meantime, here’s an interesting article I hosted a few days ago – about positioning data.

Want to see what other traders are doing in real accounts? Check out Currensee. It’s free.

Forex Links for the Weekend

Posted: 29 Jan 2010 02:00 PM PST

Here’s a nice bunch of forex-related articles for the weekend. All of them have a scope larger than a day’s trade, in a variety of subjects. Enjoy!

Adam Kritzer explores the correlation between gold and the Euro, and the dollar of course.
Kathy Lien sees the tight range trading in the Pound and points to the direction of the breakout – down.
Larry Greenberg analyzes the FOMC decision this week and sees it as less dovish for the long run.
Casey Stubbs provides an educational video about setting a profit target.
James Chen outlines his interesting forex trend trading philosophy.
Shaun Downey, a currency expert and Currensee’s chief strategist, awaits your questions. He’ll be answering them on video on a weekly basis.
Jay Norris provides 3 tips that take too long to learn on your own.
John Forman provides a guest post for Michael Greenberg and writes about the costs of retail forex trading and discusses about how to compare them. I was proud to host him here as well.

That’s it for now. Have a great weekend!

Want to see what other traders are doing in real accounts? Check out Currensee. It’s free.

Market Reacts Slowly But Powerfully to the Strong US Growth (Updated Post)

Posted: 29 Jan 2010 06:11 AM PST

Advance GDP for the fourth quarter showed a super-strong growth of 5.7%, much better than expected. The market’s reaction wasn’t strong at first. There are two reasons for this slow initial response.

The highest growth rate in 6 years doesn’t impress the markets at first. EUR/USD (in a lower range) traded at 1.3940, only 30 pips below the price before the release. GBP/USD and other pairs follow the same trend. The dollar is making gains, but not leaping. There was eventually great greenback strength, but it took a lot of time.

This figure was much higher than the 4.6% growth rate that was predicted. So why isn’t there a jump?

Update 15:00 GMT: EUR/USD drops to 1.3900. Other currencies lose ground as well. This happens as two more American figures are better than expected: Chicago PMI jumped to 61.7 points instead of dropping. The revised Consumer Sentiment from the University of Michigan was revised to 74.4 points, more than expected.

Update 23:00 GMT: EUR/USD totally collapsed. Most currencies followed with huge losses. Only the Canadian dollar didn’t lose a trading range.

1. The details

Looking into the details of this release, we see that manufacturers stopped erasing their stockpiles quickly – meaning that they produce more. This contributed most of the growth. This move by manufacturers came after they didn’t have too much of a choice.

But contrary to Germany, Japan, Australia and other countries, the US economy is mostly based on consumers – about 70%. Here the growth is much more moderate – only 2.2%. While this faster than last quarter, it’s already much more moderate.

2. The doubts

Looking back just at Q3, the initial announcement was a growth rate of 3.5% – a strong and joyful end to the recession. But this didn’t last long. The second release was already under 3% and the final release of Q3 GDP showed a more modest growth – 2.2%. More than a third of the growth rate was cut off between the initial and final releases. So how is Q4’s 5.7% going to turn out? Hmmmm

Looking at the job market, there are doubts also there. The last month of 2009 saw a disappointing drop in jobs, although November saw a small gain. The past week’s jobless claims weren’t too hopeful as well. Even if the growth rates stay, a “jobless recovery” isn’t enough for the economy – not enough for a rate hike and not enough for the dollar bulls to rage.

Next week’s Non-Farm Payrolls are super-important now.

Vote for it on Forex Factory!

Want to see what other traders are doing in real accounts? Check out Currensee. It’s free.