Feb 26, 2010

Forex Crunch Pound Unimpressed From Better GDP

Forex Crunch Pound Unimpressed From Better GDP

Pound Unimpressed From Better GDP

Posted: 26 Feb 2010 02:06 AM PST


British GDP was revised to the upside, and even better than expected. This hardly helps the Pound, that struggles under a strong resistance line.

According to the second release of British GDP (Gross Domestic Product), the economy grew by 0.3% in the fourth quarter of 2009. This is an upwards revision from the initial release that showed only 0.1% growth.

The first release was a big disappointment. The long-suffering British economy hardly emerged out of the very long recession, and also this was in doubt, hurting the Pound. A growth rate of only 0.1% could be easily revised to no growth or even another quarter of recession.

This second release is already more convincing – 0.3% growth probably won’t be erased in the final release due in a few weeks. The British economy probably emerged from the recession.

Forex market reaction

There were expectations for an upwards revision to 0.2%, and the outcome was better than expected – 0.3%. GBP/USD rose towards the release, but fell back after it. The move was from 1.5250 to 1.5315 and back down afterwards.

The reason is mostly technical: After breaching the important support line at 1.5350 on Thursday morning, this line turned into a strong line of resistance. As the Pound got close to it, stop orders sent it back down.

This important release wasn’t enough to send it higher. GBP/USD is now trading in a range between 1.5350 and 1.5230. It already went lower – 1.5189. This is another support line.

The ultimate support line is at 1.5000, a very round number that already worked as a support and resistance line beforehand. If GBP/USD manages to break above 1.5350, the next resistance line is 1.5520.

With Mervyn King’s words weighing on the Pound, it will probably continue to stay weaker not only against the dollar, but also against the Euro and the Japanese yen. EUR/GBP is on the rise and GBP/JPY is falling.

Later in the day, the second release of American GDP is due. Here, there are expectations for a downwards revision, but the situation there is much better. I’ll probably update on the impact that this release will have. Stay tuned!

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Binary Options Demo Account

Posted: 26 Feb 2010 01:43 AM PST


Start Options, a provide of binary options, announced that traders can now check out their options using a virtual demo account. They are currently the only provider that provides this service.

I’m repeating my pledge to check their possibilities using a forex demo account. Up to now, a demo account wasn’t available in the field of binary options – not for stocks and not for forex binary options.

Now, Start Options are offering this service, which I see as essential for anyone trying a new trading field. If you wish to see it for yourself, you’re welcome to check them out here.

They also announced that traders of binary options can now trade from as little as $30. This low entry level makes such trading more accessible. Similar to a demo account, this allows testing of real trades but with limited risk for new traders.

More and more people use binary options for hedging forex positions. This is an interesting tool that is gaining more and more traction. As it becomes more popular, the services are getting better.

You can try it here.

Disclosure: I’m affiliated with Start Options.

Forex Daily Outlook – February 26th 2010

Posted: 25 Feb 2010 11:26 PM PST


The week ends with two revised GDP figures in Britain and in the US, as well as other moving figures. Let’s see what’s awaiting us today.

Early in the day, British GfK Consumer Confidence isn’t expected to move from the negative score of -17. This will stop months of slow improvement.  Nationwide HPI is an important housing sector figure. It’s predicted to rise by 0.4%, much less than the previous months.

The big release is the GDP: the initial release showed a fragile growth rate of 0.1%. Now we’re expecting an upwards revision of 0.2% in Q4. Only a small downwards revision is needed, and Britain will officially remain in recession. All eyes are on this event.

For the Pound’s technical levels, check out the GBP/USD forecast.

Australia’s last figure for the week is Private Sector Credit, which is predicted to rise by 0.2%, after a 0.3% rise last time.

For the Aussie’s important levels, check out the AUD/USD forecast.

German Prelim CPI is expected to rise by 0.5% after a drop of 0.6% last month. While the changes in German prices are stronger, the overall picture remains very stable, even too stable.

The all-European CPI reflects this quite well. CPI is expected to rise by an annual rate of 1%, confirming the initial release, and Core CPI is predicted to be revised upwards – from 1.1% to 1.2%. No rate hike in the horizon.

For more on the Euro, read the EUR/USD forecast and Casey Stubbs’ latest technical analysis.

The Swiss KOF Economic Barometer is an important gauge of the economy and will supply action for the Swissy, which already “enjoys” frequent SNB interventions.

In Canada, Current Account is expected to show a smaller deficit than last month – 8.9 billion. Note that the Canada’s trade balance is almost fully balanced, around 0. For USD/CAD levels, read the Canadian dollar forecast.

The main event is the revised American GDP release. The markets were positively shocked by the initial release of Q4 GDP – an annual growth rate of 5.7%, far better than expected. The initial market reaction was mixed, and the dollar gained only later. This number is predicted to be revised to 5.6%, still high, but lacking the essential rise in jobs.

More American numbers are expected – Chicago PMI is expected to dip from 61.5 to 59.3 points. The revised version of Consumer Sentiment from the University of Michigan is expected to be better – 74 points instead of 73.7.

Existing Home Sales usually have a strong impact on the markets, but the GDP release casts a shadow upon them. Expectations are for a small rise from 5.45 to 5.51 million sales.

That’s it for this week. Happy forex trading!

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