Sep 25, 2010

Forex Crunch Forex Weekly Outlook – September 27 October 1

Forex Crunch Forex Weekly Outlook – September 27 October 1

Forex Weekly Outlook – September 27 October 1

Posted: 25 Sep 2010 02:00 AM PDT


A variety of important events awaits forex traders – GDP in the US, Canada and the UK, an appearance by Bernanke, a first hint for the upcoming NFP and more important events from all over the world. Here’s an outlook for the major market moving events.

We’ve seen a terrible week for the US dollar in the past week, although the FOMC meeting wasn’t as dramatic and bad for the US as the previous one. Choppy trading is expected in the last week of Q3. Let’s start:

  1. British Final GDP: Tuesday, 8:30. According to the first and second releases, Britain enjoyed an excellent second quarter – a growth rate of 1.2%. The initial release of 1.1% was a big surprise and pushed cable up. The second release, 1.2%, that didn’t help the Pound, will probably be confirmed now.
  2. US CB Consumer Confidence: Tuesday, 14:00. The Conference Board has shown a rather optimistic picture of American consumers last month, with the score jumping to 53.5 points. This 5,000 people survey is now expected to slide back to 52.5 points.
  3. Japanese Tankan Manufacturing Index: Tuesday, 23:50. This is one of Japan’s most important indicators. This official survey asks 1200 manufacturers about the current economic current conditions in the quarter. In Q2, the index surprised by finally rising above 0. The score of 1 point means small optimism about improving conditions. It’s now expected to rise to 7 points.
  4. Swiss KOF Economic Barometer: Wednesday, 10:30. This compound index reached a peak of 2.23 after a long and steady rise, but dropped to 2.18 last month. The strong Swiss economy will probably see another drop now, to 2.12 points
  5. European CPI Flash Estimate: Thursday, 9:00. European inflation has been on the rise and the Euro-zone is no longer in deflationary conditions, but it still hasn’t become to high – there’s no need for a rate hike. But, this time, the annualized number is expected to rise from 1.6% to 1.8% – something that can boost the Euro, raising the chance of a rate hike.
  6. US Final GDP: Thursday, 12:30. After a weak initial release of a 2.4% growth rate (annualized), the second release was awful, 1.6% and indicated a very significant slowdown in Q2. The final release will probably confirm this weak growth rate. The big question is if the US fell to contraction in Q3.
  7. Canadian GDP: Thursday, 12:30. Canada’s GDP has also slowed down in Q2, after a great Q1. As this country publishes GDP on a monthly basis, we’ll get a peak into Q3 with this release for July. It’s expected to negative, with a drop of 0.1%. While this is a small drop, the impact of contraction may significantly weaken the loonie.
  8. US Unemployment Claims: Thursday, 12:30. While falling off from the alarming numbers of over 500K, jobless claims refuse to drop to a number that will indicate a gain in jobs – under 430K. After rising to 465K last week, a drop to 457K is expected – within the same range.
  9. US Chicago PMI: Thursday, 13:45. This indicator, that surveys purchasing managers in the area of Chicago, tends to have a strong impact on currencies. It’s now expected to close a full year of positive scores, above 50 points, with 56 points, similar to last month’s 56.7 points.
  10. Ben Bernanke talks: Thursday, 14:00. The chairman of the Federal Reserve always rocks the markets, even if he speaks about issues not directly related to currencies. Bernanke will speak about the Dodd-Frank act on capitol hill and can also refer to the stability of banks and the economy in general.
  11. European Unemployment Rate: Friday, 9:00. Unemployment is Europe’s painful spot, with the rate refusing to drop from 10%. While the situation in Germany remains good, many other countries suffer. Spain, for example, has an unemployment rate of about 20%. The rate for the Euro-zone will probably remain at 10%, as it has been since the beginning of the year.
  12. US ISM Manufacturing PMI: Friday, 14:00. This important purchasing managers’ index has been above the critical 50 point mark for a full year. Also now, it’s expected to remain above this mark – meaning economic expansion. Yet it’s expected to drop from 56.3 to 54.6 points. This serves as the first important indicator towards the Non-Farm Payrolls one week later.

Let’s review the events. All times are GMT.

That’s it for the major events. Stay tuned for coverages on specific currencies, including technical analysis.

Further reading:

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Forex Reads for the Weekend September 25

Posted: 24 Sep 2010 03:00 PM PDT


After a long week of forex trading in the busy markets, its time to sit back and enjoy some long term articles before the new week starts. Here are my favorites from all over the web:

  • James Wooley discusses why its so hard to make money in forex day trading. Here are 5 points on when to go pro.
  • Kathy Lien compares the past week’s FOMC Statement with the previous one, word by word.
  • Larry Greenberg dives into all the problems that the US is facing and the meaning for currencies.
  • Francesc Riverola reports that retail forex trading is expected to triple in the coming years.
  • Michael Greenberg overviews a new and interesting site: Zignals.com.
  • Andriy reviews a new and free forex e-book.
  • James Chen teaches how to use Heikin Ashi charts in forex trading.
  • Adam Kritzer interviews Marc Chandler who states that “You win through discipline”.
  • Sophia Todorova describes a great way to build self-discipline in trading.

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

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EUR/USD Broke Above Significant Barrier on US Weakness

Posted: 24 Sep 2010 06:59 AM PDT


EUR/USD reached a fresh 5 month high, and more importantly broke an important resistance line. This comes on top of weak US data and good European data.

Euro/Dollar broke above the important barrier of 1.3435 – this was a stubborn support line back in February. The Euro didn’t fall below this point and it happened only at the end of March. After a struggle, this line was finally broken to the upside.

EUR/USD trades at 1.3465, up from 1.3320 earlier in the day. An attempt to break this line on Wednesday failed. This is the highest level since April 21st. The next level on the upside is 1.3530, followed by 1.37. Looking down, 1.3267 and 1.3110 will support the pair if it loses ground.

The Euro enjoyed a better-than-expected report from Germany – the Ifo Business Climate rose to 106.8 instead of falling. In the US, Durable Goods Orders fell by 1.3%, more than expected, but the core figure rose by 2%, higher than expected.

American New Home Sales came out almost as expected – an annual rate of 288K, just under 292K that was predicted, and close to last month’s 276K. This is a weak figure, but expectations were low.

EUR/USD enjoys risk appetite trading. The market prefers “risky” currencies such as the Euro over the “safe haven” dollar. The markets are currently disregarding the European debt problems, which haven’t gone away.

Bond yield spreads  between Ireland and Portugal over the benchmark German counterparts reached new highs, meaning that there still are worries about whether these countries can pay their debt. Nevertheless, the Euro enjoys a very strong rally.

Will it last?

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CFTC Babysitting Traders

Posted: 24 Sep 2010 05:57 AM PDT


Regulating US forex brokers is one thing. But preventing traders from opening offshore accounts is already another thing.  This is already significant “baby-sitting” and over “protection” opinion. Some brokers are already bringing clients back home. Will US traders be blocked from opening accounts with offshore brokers?

The talk about the new CFTC rules created a lot of angry reactions. Here’s a more creative one – a hip hop song by R.S. featuring L~Reece. The musical production is serious and the words are quite funny.

Thanks Francesc for the song.

And now let’s get more serious.I believe that the 50:1 leverage that was finally ruled is a plausible compromise from the original 10:1 limit that would have created serious damage to the US forex industry. The industry is growing up.

The worries come from the accompanying act – the Dodd-Frank act. It might force US traders to trade only with US brokers.

Michael Greenberg reports that FXCM UK will be repatriating forex accounts of US citizens back to the US by October 18th – the day which the new CFTC rules take effect. Here’s a quote:

All forex accounts for US residents trading overseas will be repatriated back to the US by October 18, 2010.

For US residents with FXCM UK, the switch back to FXCM US will most likely occur the weekend of October 15. The switch will occur over the weekend so that there is no disruption to your trading. The existing username and password you use to login to your account will also remain the same. US residents will receive information very early next week by email confirming the timeline.

Well, FXCM is a big and serious broker that complies to US rules. You may think that traders might just open accounts with offshore companies. It’s still uncertain if this option will remain in the near future, as foreign forex brokers might be blocked – if they get the same credit card classification as online gambling sites, trading with offshore brokers will be quite impossible for US clients.

Many things are still unclear.

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