May 1, 2010

Forex Crunch Forex Weekly Outlook – May 3-7

Forex Crunch Forex Weekly Outlook – May 3-7

Forex Weekly Outlook – May 3-7

Posted: 01 May 2010 02:00 AM PDT


The first week of the month is always very busy: rate decisions in Australia and Europe and employment figures in Canada, New Zealand and the US – Non-Farm Payrolls – the king of forex. Add British elections as a special event, and you have a very exciting week. Let’s see the major events that expect us and their projected outcome and impact.

The US dollar index reached new highs, especially on worries from Europe. This week, the big flow of American indicators, with the best kept for last, is expected to continue the trend of dollar strength. I recommend reading my notes for Non-Farm Payrolls trading – this event is the most volatile release and should be handled with care. OK, let’s start:

  1. American ISM Manufacturing PMI: Published on Monday at 14:00 GMT. The US manufacturing sector has shown very good signs of recovery. In the past 8 months, the result has been above 50, indicating economic expansion. After surprising last month and reaching 59.6, further gains aren’t expected this time. This will rock the markets.
  2. Australian rate decision: Published on Tuesday at 4:30 GMT. The recent Australian indicators, such as employment and housing indicate that the economy is advancing more slowly. With CPI at 0.9% in Q1, Glenn Stevens doesn’t need to hike the rates soon – he’ll probably raise the Cash Rate to 4.50% a  sixth rate hike. Note that a surprise could still occur – last month saw such a surprise. The wording of the RBA Rate Statement will move the Aussie on future expectations.
  3. American Pending Home Sales: Published on Tuesday at 14:00 GMT. Existing and new home sales rose significantly more than expected recently. Also the last release of pending home sales, 8.2% rise proved that the housing sector is on the move. A smaller rise is predicted this time – 3.3%.
  4. American ADP Non-Farm Employment Change: Published on Wednesday at 12:15 GMT. Jobs in the private sector proved to be loosely correlated with the government’s NFP. Last month, ADP reported a loss of 23K jobs in the private sector, while the NFP sowed a gain of 123K jobs in this sector and 162K altogether. Still, this release always rocks the markets. A rise of 29K is predicted now.
  5. American ISM Non-Manufacturing PMI: Published on Wednesday at 14:00 GMT. Completing Monday’s release, the services sector is also advancing, although it’s slower than the manufacturing sector. Here, a score above 50 was seen for only three straight months. After jumping from 53 to 55.4 last month, only a small advance to 56.2 is predicted this time.
  6. New Zealand employment data: Published on Wednesday at 22:45 GMT. Employment figures are important everywhere, and even more important when they are released only once a quarter. A drop of 0.1% was seen last month, within expectations, but the unemployment rate leaped to 7.3%, far worse than expected. A significant drop in unemployment is necessary for a rate hike in New Zealand, but the unemployment rate isn’t expected to move.
  7. European rate decision: Published on Thursday at 11:45 GMT. Jean-Claude Trichet will leave the European Minimum Bid Rate at 1%. Despite seeing inflation picking up, European employment is still problematic and the debt problems make it a very bad timing for such a move. The markets will mostly shake on Trichet’s words in the press conference due 45 minutes after the release. Any comment about the debt issues will rock the beaten Euro.
  8. American Unemployment Claims: Published on Thursday at 12:30 GMT. The last sign before the Non-Farm Payrolls is a significant one – highly correlated. We’ve seen an alarming rise in this weekly release in the middle of April, and then we’ve seen it improving. Another improvement, from 448K to 442K will raise the expectations for Friday.
  9. Ben Bernanke talks: Begins speaking on Thursday at 13:30 GMT. Following the mellow rate decision and the expected growth rate, will Bernanke lower the expectations from the economy? This speech, in a conference in Chicago, comes less than a day before the Non-Farm Payrolls and could shake the markets.
  10. British elections: Thursday. Results due at 21:00 GMT. General elections will be held in Britain throughout the day. Gordon Brown’s ruling Labour party, James Cameron’s Tories and Nick Clegg’s Liberal Democrats are quite close to each other. A decisive result in the exit polls will help the Pound. The exit polls might not be decisive enough, so the uncertainty might continue until the official results are due. A hung parliament is feared.
  11. Canadian employment data: Published on Friday at 11:00 GMT. After many excellent months, Canada’s latest employment change rose by “only” 18K last month, below expectations. The unemployment rate remained at 8.2%, also a small disappointment. This time, both numbers are predicted to make small advances, helping the loonie in the battle for parity.
  12. Non-Farm Payrolls: Published on Friday at 12:30 GMT. The king of forex was finally positive last month – a rise of 162K jobs boosted the dollar and created hopes for a sustainable recovery. The unemployment rate remained at 9.7%. Another drop in the unemployment rate and more job gains are expected this time.

That’s it for the major events this week. I’ll later release specific currency coverages.

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Forex Links for the Weekend

Posted: 30 Apr 2010 02:00 PM PDT


After another exciting week in forex trading, the weekend arrived and its time for some long term articles. Here are my favorite picks from the web:

  • Macro Man discusses the similarities between the eve of Lehman Brothers’ collapse and the current Greek crisis in his amusing way.
  • Larry Greenberg sees a benign market environment for an economic recovery – yes, despite the deteriorating Greek crisis.
  • Adam Kritzer sees gold rising as an alternative currency – he shows the changing patterns in gold trading and compares it with EUR/USD.
  • James Chen launched his new book – Essentials of Technical Analysis for Financial Markets. Given Chen’s extensive knowledge and great technical analysis skills, this forex book probably stands out from the crowd.
  • Michael Storm, on Casey’s site, asks traders an important question – what are you searching for? Many traders don’t know what they are doing and why.
  • James Wooley gives a recent example of how a double bottom + divergence created a high probability setup for him.
  • Francesc Riverola states that forex needs to improve price execution on limit. Brokers didn’t provide the best possible price on limit orders during the big gap on April 12th. Time for a change!
  • Andrei reports about the release of the MetaTrader 5 Strategy Tester. He compares the differences between this version and the one for MetaTrader 4.
  • Michael Greenberg reviews a new social network in town – MeetFX, and discusses the different approach it takes.

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.

USD/CAD Parity Battle Continues on Slower Canadian Growth

Posted: 30 Apr 2010 06:26 AM PDT


Canadian monthly GDP rose by 0.3% in February, slower than expected. This sets the stage for a close above parity this week. Will the rate decision wait?

The rise of 0.3% missed early expectations that saw a 0.5% growth rate in February, although some economists saw this smaller growth rate. This was half of January’s growth rate of 0.6%. There are now growing signs that the battle for USD.CAD parity will continue:

The slower growth rate came despite a one time event on February – the winter Olympics that were held in Vancouver on February. The figure could have been lower without this event.

The slower growth could be the tipping for the rate decision. In the last decision, the BOC made it clear that a rate hike is coming – they removed the conditional comment and acknowledged the improving state of the economy. Yet the timing of the rate decision, either the upcoming decision on June 1st or the next one on July 20th, is still unknown. This figure could determine that the decision will fall on July.

The first release of American GDP, published at the same time, also fell short of expectations – an annual growth rate of 3.2% versus 3.4% that was predicted.

Also note that the RMPI – Raw Materials Price Index, published together with the GDP, rose by 0.8%, also less than 0.9% that was expected.

Mark Carney, in a speech yesterday, expressed his discontent with the recent strength of the Canadian dollar. Carney admitted that the loonie did have reasons to rise: the stronger economy and the higher oil prices back this rise, yet he hinted that the central bank was ready to act if speculators were to send the loonie higher.

USD/CAD is now trading at 1.0060. After finally closing under 1 last week, it will probably close above parity this week. It already traded under parity, at 0.9970 at the beginning of the week, and then almost reached 1.02 – the 2009 low. Most moves happened due to risk aversion / appetite moves on the Greek crisis, which is spreading to other countries as well. Now we have the impact of Canadian events as well.

Next Friday, we have employment figures in both North American countries. Both the Canadian employment change and the American Non-Farm Payrolls are predicted to rise – both are very important indicators. The battle on parity continues.

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