• Home ::
• Fundamental ::
• Market View

• Send
• Print
• Add To

FX Daily Update

This report has been deactivated

Dollar Up Again Thanks to Risk Aversion!

Mon, Jan 12 2009, 15:57 GMT
by Lena Manousarides

FXstreet.com Independent Analyst Team

This week sees payroll data done and dusted and the euro getting hit since its release, mainly due to risk aversion and new speculation that the ECB will ease even further - all the way down to 1%. The interest rate differentials are narrowing immensely, a good reason for euro bears to make their stand and continue selling!

A lot can be said about what went on last Friday as the number, although negative with unemployment reaching new highs at 7.2%, the dollar still came, saw and conquered with EUR/USD breaking on the downside fast and furiously! Market participants were once again in 'buy the rumor sells the fact' mode, obvious by the fact the dollar was being sold all across the board before the announcement! The very fact the US economic conditions continue to deteriorate, with more than 1.000.000 jobs lost within the period of two months, makes investors wary and unsure of what the future holds and risk aversion their only friend.

The EUR/USD has been traded heavily since early in the European open with the pair so far willing to break 1, 33. A clear break of this level will maybe meet with further selling towards 1.3230 ahead of 1.32. As long as the pair trades below 1.35 there may be scope for further losses in the coming days until Mr. Trichet says those magic words!

The economic calendar today is almost empty; however this week is packed with important events, starting tomorrow with the FED's Mr. Bernanke delivering a speech regarding the crisis and latest economic developments, which traders may monitor for any signals as to what the Bank will do next. Also this week we have the US Trade Balance, retail sales, PPI and CPI which more than likely will give the traders some idea of where things are heading regarding the dollar direction. The most important event though this week is the ECB's rate decision and the question is not if the bank will cut, but what Trichet will say to the press afterwards! So far traders are pricing in a rather dovish Trichet, however only on the day we will know more about the insights of the decision and what the future may bring. The recent comments by ECB officials have given the market the impression the bank is thinking seriously about lowering rates to 1% or even further if things don’t improve.

The oil also dived today trading below $40 per barrel, amid renewed worries of the economic slump; even though OPEC has made it clear they will cut supply in their next meeting! The worries regarding the supply and demand issue are just too high to deal with at the moment and therefore oil is getting the worst of all this! Many analysts predict the fall will continue for some time and if the oil fails to break higher within the next days, the drop may reach new lows closer to $30 per barrel.

Let’s see how the markets will continue today and what this week will bring us in terms of some kind of direction. The dollar seems strong against the pound and the euro and may continue to do so, as economic uncertainty and fear return to the markets…

Published on  Mon, Jan 12 2009, 15:57 GMT

Crunch Time for the Dollar!

Fri, Jan 9 2009, 12:19 GMT
by Lena Manousarides

FXstreet.com Independent Analyst Team

The big day is here, with markets trading within tight ranges waiting for the BIG number to hit the news in a few hours! The dollar has lost all of the gains it printed at the beginning of the week and now trades between 1.3650-1.3750 since the European opening. There is a certain feeling amongst traders that today’s number will shake and stir things even more, as it is expected to again be -550.000 which will make over a million jobs lost in the past couple of months in the US.

EUR/USD looks poised for further gains, judging by the daily charts, and a clear break of 1.3750 might lead to important resistance levels of 1.3850-80 and even higher. Traders are in a 'wait and see' mode at the moment and after the release of the number we will see how the whole thing will play out. Post-release levels to watch are 1.3780 -1.3820 on a break to the upside and 1.3620 ahead of 1.3580 on the downside. I personally favor the upside in case the number is higher than -600.000 which may put dollar on the defensive once again.

The pound is also trading within tight ranges and yesterday's BOE rate cut proved to be another case of buy the rumor sell the fact, as we saw the sterling gain heavily before the announcement and when the news hit the wires the pound lost its steam and went south once again! It is hard for the UK currency to sustain gains in this negative environment as traders don’t know what the next day will bring in the economy. The fact rates are at their lowest levels ever puts further pressure on investors and make the pound very volatile, with choppy moves seen all across the board. From now on traders will monitor the data in order to see what the next move will be and if King's words in front of Parliament a few weeks ago regarding a zero rate policy come true!

The economic calendar has many releases to keep us going today, with the PPI and Industrial production numbers being the first out of UK this morning, printing really low numbers once again! The fact the PPI has dropped dramatically and keeps dropping, only offsets new speculations that the Bank of England may cut another 50bps in the next monetary policy meeting. Soon we have the employment numbers from Canada which are expected to be slightly better than last month, plus the big event of the day - the payroll data out of the US. The official forecasts given are between -500 and -550k, but many analysts predict the number may reach really scary levels of below -650.000. My personal feeling is also negative, only because of the recent statistics, jobless claims and the continuing deteriorating economic conditions. It will be interesting to watch the unemployment rate which may reach 7%, which together with a negative number could really give the dollar a “slap” and wipe out all recent gains.

There is always a part of me wondering if the number is really negative and bad for the economy, if risk aversion makes a strong comeback in the markets and therefore the dollar could actually benefit for it. In this environment it is rather difficult to say one way or another with certainty, however recent trading activity showed that in the past few weeks the dollar has stopped benefiting from any kind of safe haven trading, as investors have come to realize that at times of deterioration and despair, the dollar is really not the way to go, therefore they have started to buy other currencies and commodities as a hedging strategy to protect themselves against any downfall in the economy.

Markets are at a standstill at the moment, with only a few hours to go until the payroll numbers and as today is the first payroll data of the New Year, things could get rather heated. Don’t forget that until markets absorb all the information given regarding the numbers, it is possible to see many whipsaws printed, however once the message of the number is clear to everyone, we should see the continuation of the move until New York closing. Beware of any fake breakouts which are very likely to occur due to the importance of today’s number, as it's too much for speculators not to take advantage of!

Published on  Fri, Jan 9 2009, 12:19 GMT

Dollar Direction May Be Determined this Week!

Wed, Jan 7 2009, 10:56 GMT
by Lena Manousarides

FXstreet.com Independent Analyst Team

What a day we had yesterday, with currencies moving like a rollercoaster and the euro together with the pound moving down more than 300 points early in the European session, only to reverse all losses later on just before New York closing! The week has already started with heavy trading conditions being printed all across the board and it is likely to continue in that manner until tomorrow, which is a big day for the pound with the BOE rate decision and also Friday's payroll data numbers.

EUR/USD is trading higher since last night and the next level to watch is 1.3620 ahead of 1.3680. If the later level holds as resistance then the pair might fail to break towards 1.38 in the next days. Traders are wary of committing further either way as more important data is coming out of the US, with the ADP report today which may give us the first feel of how the payroll data will be.

GBP/USD is trading much higher since yesterday and it was amazing to see the currency bouncing with great ease against the dollar and the euro, with the BOE rate cut expected tomorrow. The question is not if the bank cuts, but by how much! So far we have seen the sterling losing against the dollar and the euro, making one wonder when we will see the bottom - if at all - in the next few weeks. The economic crisis is deepening in the UK, but that is not news to traders, so now the next big thing which will either make or break the pound is the interest rate decisions. A cut of just 50 points is fully priced in so therefore we are not expecting big moves if that occurs. However, let’s not forget the words of Mr. King a couple of weeks ago that the bank is considering zero interest rates if not less! Some analysts are even predicting that the bank will start to struggle with deflation sooner rather than later! All this for sure may put further burden in the pound's direction but the important thing for now is to see how the markets will play the whole thing.

Today the economic calendar saw the German unemployment numbers, which came out way higher than expected, which makes analysts almost sure that low unemployment in Germany might be a farfetched dream - at least for the coming months. The recession is deepening in Europe also and markets are waiting to see how the ECB will react in the next monetary meeting. So many comments out of ECB members in the last days is making it obvious to the traders that the bank will cut by at least 50 points in the next meeting, The question is if Trichet will want to take it a step further and cut heavily below 1%. I personally cannot see that happening immediately as the bank always promotes price stability and that won’t be the case if rates go under! However, desperate times need desperate measures and we know it as well as we witnessed all central banks cut heavily in the last few months!

In other markets, gold and oil both surged yesterday, with gold making a comeback together with the euro against the dollar and closing above 860 and oil just above $50 per barrel. The geopolitical tensions we see in Gaza together with supply issues in the oil and OPEC threatening to cut further is making traders buy heavily these days, however it will be important to see how the week unfolds and how the payroll data will influence the price of the commodities.

Let’s see what today brings and how the traders position themselves for the important events of tomorrow and Friday!

Published on  Wed, Jan 7 2009, 10:56 GMT

New Year Starts with Dollar Strength!

Mon, Jan 5 2009, 12:48 GMT
by Lena Manousarides

FXstreet.com Independent Analyst Team

The first full working week of the New Year has started, with the euro weak all across the board and especially against the dollar! The move came early this morning following comments by ECB members that the bank is ready to fight inflation and won’t let it stay above 2% for a long period of time. These comments were taken in their stride by traders who now are pricing in further cuts for the next meeting.

EUR/USD is trading heavily since the European opening and looks poised for further losses as long as 1.3850 holds. The failure of the pair to break on the upside in the recent days indicates that traders may have 1.35 as target for now until Friday. The next level to watch is 1.3620 ahead of 1.3580.

The economic calendar this week looks very interesting and market participants are waiting to see the data out of the US with ISM Manufacturing, jobless claims and the mother of all data, the non-farm payrolls on Friday. The fact that last month we had a terrible number of -533.000 makes one wonder how much worse this month could be! The negative economic conditions in the US together with the ever growing jobless claims indicate that non-farm payrolls will continue to be negative for months to come. Also this week traders are waiting the BOE rate decision and forecasts want the bank to cut by further 50 bps. Many analysts predict that King and co might be tempted to lower the rates down to zero following Bernanke’s strategy. One thing is for sure, the pound is suffering no end from the recent deteriorating conditions and it looks like this may continue in the New Year.

Let’s not forget the FOMC minutes coming out on Tuesday, where we all should be aware of the language used in the Feds latest statement. The FED's latest move to cut rates down to 0, left traders wondering if deflation will be the next big thing in the US and Bernanke have to justify his action in front of Congress in the coming weeks - which won’t be an easy task!

Today we don’t have many important economic events and traders who are back from their holidays and are ready for a volatile week. With 2008 safely behind us everyone is wondering how the markets will play in the New Year and if the recent crisis deepens. So far we see the dollar strengthening across the board and the New Year to start with dollar strength. If we look back at recent years we can see that usually the dollar is stronger in January as traders reposition themselves after year end.

Furthermore, it seems the market is looking for another excuse to buy or sell the dollar and so far the news and monetary decisions haven’t quite managed to provide one. It will be interesting to watch the oil prices again as they rise towards 50, and any geopolitical events that might unfold and affect the currencies.

So, as you can see there are enough events to keep us interested for the week and many opportunities for trading action in most currency pairs. The main things to watch for are the EUR/USD approaching psychological level of 1.35, GBP/USD trying to have another go towards 1.40. These pairs could eventually find buyers at important levels as traders may want to take advantage of buying in dips.

So, stay tuned as there are a lot of goodies this week and you never know, we may finally get to see some breakouts in some of the USD related pairs.

Published on  Mon, Jan 5 2009, 12:48 GMT

Dollar Within Tight Ranges Ahead of Christmas…

Tue, Dec 23 2008, 11:10 GMT
by Lena Manousarides

FXstreet.com Independent Analyst Team

This week started with currencies trading within tight ranges, as Christmas Holidays took the stage and thin trading conditions are the theme from now until next week! The EUR/USD attempted to correct its Friday losses, by making a move to the upside towards 1.41; however this didn’t find many followers therefore the pair dived once again towards 1.39. It does look possible that the range for now could be 1.38-1.42 in the coming days.

The economic calendar today has some important releases out of the US, with GDP, existing home sales, new home sales and also consumer confidence. All data will be monitored closely by the market participants, however unless the numbers deviate much from the forecast, we don’t expect any major shift in the current muted trading environment. All numbers are expected to be lower than last month; however the markets now are aware of the bad economic conditions and therefore only better than expected news can really move the market.
This morning we had GDP out of the UK, with numbers worse than expected, but what really did it for the pound was GDP’s downgrade much lower, which saw the pound falling against the dollar and the euro.

EUR/GBP is trading marginally higher these days, and the monthly chart shows a rise of 1300 pips, a lifetime record for the pair, which usually does 200-400 pips maximum. What caused the big rise in the pair is the differential between interest rates and with traders already pricing in another rate cut from the Bank of England or even zero rates in the coming months, the pair is heading for parity sooner rather than later.

The oil and futures are also trading within tight ranges and traders are still wary of the economic deteriorations as well as the automotive industry which although it had a helping hand from the US government, still suffers and more than likely will continue to do so during the next year.

December has been a very volatile month so far, with euro advancing against the dollar aggressively over the last few days and traders squared their positions ahead of the New Year. The dollar is still the winner of the year however and the fact that it gained more than 40% against the pound and 30% against the euro with no economic fundamentals to support its move shows exactly the environment that we are experiencing at the moment and how unpredictable the next day’s trading will be.

I wish all of you a Merry Christmas and a Happy New Year and let’s hope for a better economic tomorrow during 2009, although let’s admit that is not hard to accomplish since 2008 has been a meltdown year! With economies suffering across the globe, the banking sector in a shambles, unemployment getting out of control, corporation layoffs reaching new daily highs, the only thing we can wish for is some stability in the markets and a new “bail out plan” which will actually bail out global economy from recession in the coming years...

Published on  Tue, Dec 23 2008, 11:10 GMT

The Dollar Fights Back!

Fri, Dec 19 2008, 15:01 GMT
by Lena Manousarides

FXstreet.com Independent Analyst Team

This week has been for sure one of the most volatile and eventful ones for some time now! Euro has staged an impressive 1300 points rally only to find a temporary stop at 1.4720 after it was clear that the “bosses” of ECB did not wish to see it rallying any further! The announcement came yesterday across the wires that ECB decided to lower its deposit rate by 100 bps in order to help lending between the banks. This move came on the back of serious euro appreciation, which saw EUR/USD climbing to the upside in dangerous speed. In the aftermath of the release, the pair lost all its gains and even dropped lower towards 1.42.

The euro correction is underway since yesterday and at the time of writing EUR/USD has fallen to new daily lows below 1.40. The fact that oil dropped below 40 dollars per barrel also is helping dollar appreciating and it will be interesting to see if the dollar continues its rally ahead of Christmas holidays.

Today the economic calendar is empty from important releases and therefore traders may take the upportunity and close their positions ahead of the weekend. So far dollar is strong across the board and threre is a sentiment amongst traders that the aggressive move we saw in the euro was likely to be contained for now as it is obvious that ECB is not keen on watching its currency skyrocketing towards 1.50 at this moment in time! After yesterday’s sudden move by Trichet and his pals’ to lower rates, traders speculate that the bank may pause its rates after all and eventually ease further in the coming months.

EUR/USD is trading on the defensive since yesterday and next level to watch for now is 1.39 ahead of 1.3870.If the later level gives way, the pair is likely to head south towards 1.37 which is the 50% retracement from the recent rally we saw this week. The daily chart shows that there might be further downside next week and especially if the pair closes below 1.40.

At the beginning of next week the markets are half operating therefore we might see thin trading conditions all across the board. Beware, as only a few players will be participating in the markets making trading quite volatile. The dollar might continue to be under pressure as more economic data might show further slowing in the economy, however come January and we might see the greenback strengthening again especially against the euro, as historically the first month of the year starts with dollar strength!

Published on  Fri, Dec 19 2008, 15:01 GMT

Euro is the New Flavor of the Month!

Thu, Dec 18 2008, 13:06 GMT
by Lena Manousarides

FXstreet.com Independent Analyst Team

The euro is certainly this week's star, with the EUR/USD making a remarkable rally of over 1000 points within the last few days and a similarity between the euro and the recent strengthening of the dollar back in October! Traders are placing their bets on the European currency and may continue to do so as the interest rates differential between Europe and US is growing by the day!

The EUR/USD continues to climb and to break important resistance levels and just this morning we saw another exaggerated move, mainly due to thin trading conditions, with the pair taking out 1.45 and moving up another 200 points in a few minutes, only stopping at 1.4730. Any pullbacks towards 1.45 could find more demand from euro bulls who wish to join in the madness! The next level to watch seems to be 1.4880-1.49; a very important resistance level.

Today we had some important data out of Euro zone and UK, with the German IFO coming out much lower than anticipated, however this didn't make the euro any weaker as traders decided to shrug off the number. The UK retail sales were better than expected, giving the pound a temporary boost, but not enough for the GBP/USD to break higher towards 1.57. The UK economy is still “under construction” and traders do not wish to place their bets on the sterling, at least for now. EUR/GBP is making new record highs daily now and parity seems possible even before the end of the year!

The economic calendar has a few more releases from the US, with jobless claims being one and traders will monitor the number closely thanks to the latest payroll number still fresh in everyone’s mind!
We are seeing the dollar weakening across the board at the moment and although this is not surprising in the aftermath of FED rate cuts and also deteriorating conditions, nevertheless, markets were not ready for such dollar losses such a short space of time! At the moment, the euro has made record weekly gains - more than 1400 points - and in such extreme market conditions we should be expecting these extreme moves. It looks like investors are trying very hard to get rid of their dollars after October’s gains and they have done it in a way that left everyone wondering: Is this euro rally real? Has it got more upside still to come? Was it a correction?

It is crucial to see how this week ends and with the Christmas holidays just a few days away, traders may wish to square their positions ahead of the New Year. Therefore, beware of any choppy action ahead of next week and a hefty correction form hear for the EUR/USD which can start any day now…

Published on  Thu, Dec 18 2008, 13:06 GMT

Time to Buy the Euro?

Wed, Dec 17 2008, 08:32 GMT
by Lena Manousarides

FXstreet.com Independent Analyst Team

What a day we had yesterday, with Euro bulls clearly back in control after the FED meeting, which saw the pair advancing more than 400 points and printing yet another multi-week high at 1.4150. In a surprise move yesterday, the FED showed its true agenda by easing the rates by 75 points leaving traders dumbfounded and the dollar in a slump. The interest rates are now at the lowest level ever – just 0.25% - and according to the statement after the decision, the bank is considering keeping the rates this low for some time and even taking a braver path and easing closer to zero!

EUR/USD has broken important resistance levels of 1.40 and moved another 150 points in a few minutes stopping only at the next important level of 1.4150 which was the 50% correction from the 1.6040 down to 1.2330. The European currency is looking strong and looks set for more gains towards 1.43. In order to say that the rally is sustained, any corrections on the downside should not fall below 1.3870 which should work as a good support level for now.

The FED has certainly delivered and therefore traders reacted in the aftermath of the decision in the only way possible. The very fact that interest rates differentials have changed dramatically in terms of the euro versus the dollar, makes the dollar less desirable to hold and EUR/USD a new profound carry trading pair! Trichet himself told the markets yesterday that ECB is thinking of pausing any further easing for now until new developments unfold and with FED keeping a zero stance, dollar cannot justify big gains from here onwards. Fundamentally speaking, we know the economy is deteriorating, inflation is nonexistent, unemployment is high, the credit crisis deepening and after the hefty rate cut the greenback cannot be used as a safe haven currency making traders search for a better yield.

Today the economic calendar has some important news out of the UK, with MPC minutes keeping traders at edge and also CBI realized sales. The pound has gained a lot against the dollar; however traders are aware of the UK economic conditions and the fact the bank may also pull a FED-style zero rate policy which could hurt the pound immensely. The real situation of the pounds weakness is showing through EUR/GBP, the pair which in the last year has appreciated more than 20% to new record highs and is now threatening to head towards parity.

It will be interesting to watch the reactions of the European markets this morning and also how the US will play the latest developments. I said in the previous months, that the euro rise will come unexpectedly and much like the boy who cried wolf, many traders may miss it as they will not believe it's happening! It looks like this week we have seen this scenario unfolding and the more the euro was rising, the more traders were reluctant to believe there is more to come. Well, let’s see where that rally takes us from here and if the dollar fights back; my feeling is that there is more upside to come and any corrections on the downside could be used as simple corrections.

Published on  Wed, Dec 17 2008, 08:32 GMT

Bernanke Could Make or Break the Dollar!

Tue, Dec 16 2008, 10:25 GMT
by Lena Manousarides

FXstreet.com Independent Analyst Team

Today is the day we all been waiting for…FED will tell us yet another month what their decision will be regarding the interest rates. The forecasts show that the bank might cut for 50 bps taking its rate down to 0.50%; however futures have already priced in a hefty 75 bps cut due to the latest deteriorating economic conditions.

Yesterday’s trading action found dollar bears clearly in control ahead of today’s FOMC meeting and the current market sentiment has returned to more “normal” conditions, where now we see negative economic data out of the US reflecting the US currency. Traders are losing their need to place their bets into the dollar for now and prefer to sell the greenback all across the board.

EUR/USD is trading higher since last week and continues to do so. Yesterday we saw a remarkable move to the upside, breaking important resistance levels and head towards 1.38. The daily highs were printed after the New York closing at 1.3740 which is the 38.2% correction of the whole move from 1.6040 down to 1.2330. Today the pair has retraced slightly what with traders not wanting to take more risks ahead of the decision. Next level to watch on the upside is 1.3780. It looks more than likely that after the FOMC decision later today, the pair will shows us its “true colors”.

The economic calendar has a few important releases today, with CPI out of UK which came slightly higher than expected, helping the pound sustain its recent upside move and also CPI out of the US, which will be monitored closely by all traders in order to see how the FED may act later tonight. The numbers are expected to come out lower and that will only fuel trader’s speculations that FED has the green light to go ahead and cut even more in order to stabilize the shrinking economy. Also we have Building permits and Housing starts out of the US, but these two are likely to be overshadowed by the other events.

Another interesting factor we see these days is that stocks do not follow dollars move and although we saw DOW JONES declining yesterday amid new worries for the global economy, dollar wasn’t bought as an aftermath, an event which we have witnessed many times in the last few months. Are traders aware now that the buck is not to be used as a safe haven currency? Although traders still buy the yen as risk aversion , however the dollar is not favored any more and that is yet to be determined if it will continue in the coming weeks.

One thing is for sure: Whatever happens later with the FED rate decision, the volatility is expected to be high at all times before and after the release. Traders will monitor the statement for any clues as to what the bank’s future plans are and how they assess the recurrent economic crisis. Bernanke has a tough job these days, and my feeling is if we see a heavier cut later today, that may be interpreted as a desperate and nervous move on FED’s part and be welcomed with another sell off wave all across the board…

Published on  Tue, Dec 16 2008, 10:25 GMT

Dollar Still Under Pressure…What Gives?

Mon, Dec 15 2008, 09:38 GMT
by Lena Manousarides

FXstreet.com Independent Analyst Team

A new week starts today and so far the dollar is still feeling the “wrath” of the euro, following the pair gaining more than 700 points since the beginning of last week. The market sentiment is slightly more positive these days and Asian session has so far gained more than 400 points on the back of investors’ confidence that the US government will save the automakers from failing.

We have seen in the last few days that risk aversion seems to be nonexistent and the correlation between the futures market and the currencies is losing its momentum. Don’t forget that in the last few months, the dollar was gaining across the board, especially against the euro, when we saw weakness in DOW JONES and the stock markets generally. What is happening? Have investors finally found their appetite for risk? Are they ready to say the economic conditions look a bit more hopeful? Not very likely I'd say, as the economic data is still bleak from the US and Europe and it's likely this situation will continue in the coming months.

One factor which plays an important role in the dollars sudden negative turn is the fact that the month of December usually finds traders closing their trading books for the year end, therefore adjusting their positions after the events of the year. Now, considering the greenback has gained so much during the last 6 months, making new multi year lows almost daily, it makes one wonder if it's time to book the profits and move on.

Today the economic calendar has a few important releases with TICS data out of the US and also the Empire State Manufacturing Index, which unless their number deviates a lot from the forecast there is not a lot of reaction expected. This week all traders will have their eyes and ears upon the FED’s monetary policy meeting tomorrow and although markets have priced in a 50 point rate cut, there are many who speculate that Bernanke could go even lower. Some analysts think the latest economic data, especially the payroll data, suggests that in desperate times, we need desperate measures and therefore the FED may cut 75 points and be done with it until signs of recovery can be seen. One thing is for sure, tomorrow the volatility will be huge and we may see whipsaw action before and after the release as traders will want to assess the decision and what it means for the economic future.

Today the EUR/USD is trading higher, printing yet another multi-week high at 1.35 before it retraced back towards 1.34. The trading action so far seems muted, with today being Monday, and also with traders not ready to commit either way before tomorrow’s interest rate announcement. Next level to watch on the upside is 1.3570. A clear break could open way to 1.36-1.3630. The daily trend is up and we need 1.3360 to hold for now in order to talk about further gains.

Let’s wait and see what happens and how traders will position themselves for tomorrow's FED decision, which is expected to make some noise in the markets and could even show us if the dollar’s recent weakness will continue.

Published on  Mon, Dec 15 2008, 09:38 GMT

Is it Time for Dollar Bulls to Back Off?

Thu, Dec 11 2008, 10:42 GMT
by Lena Manousarides

FXstreet.com Independent Analyst Team

Euro and Pound finally show some long awaited strength, with EUR/USD breaking important resistance level of 1.3080 early this morning and printing daily high at the time of writing at 1.3150. The pound followed euro’s strength but still is trading weak and so far GBP/USD did not manage to take out 1.50.

EUR/USD is trading heavily since the beginning of the week and a daily close above 1.31 may give euro bulls something to celebrate for now and eventually give the pair more upside strength towards 1.33. It will be very interesting to see how the pair moves after the New York open and if it can sustain its gains above 1.30. Any move below 1.30 in the coming hours may show us once again that dollar is getting bid at any correction.

GBP/USD is trading still on the defensive, and the main reason of pounds strength seems to be EUR/GBP making new record highs almost every day. The pound is much weaker than the euro and traders are betting that the UK economy is slowing much more the Euro zone according to the economic data and also the interest rates differentials. Don’t forget, that at the end of the day, what still matters in the markets are the interest rates and the expectations for further easing. Next level to watch for the pair is 1.5050 a good resistance level and also a recent top. A clear break of that level opens way towards 1.52.

Today the economic calendar has a few important releases out of US but not much happening in the Euro area or UK. Also we had the Bank of Switzerland rate decision earlier and the bank cut its rates as expected by another 50bps. USD/CHF is trading lower since yesterday, reflecting on EUR/USD and traders had already priced in a cut by 50 points, therefore they sold the dollar against the Swiss Franc in the aftermath of the decision.

The data to watch from the US are the trade balance later today, which is expected to be slightly better than last month; however the traders may give their attention to the other important news, the jobless claims, what with the latest payroll data being so negative. Either way, both economic events will be monitored closely by the markets and if we see a really high number of unemployment claims it will be another dent for the already negative market sentiment.

We are almost half way in December now, and we notice dollar weakening across the board and that as we said before was not surprising as historic data shows that the end of year always finds the buck sold. Don’t forget that traders are getting ready to close their trading books and square their profits and therefore that finds willing sellers in the dollar through December.

However, it will be very interesting to see how the New Year finds the markets and especially the dollar. My personal feeling is that sooner rather than later, the greenback may continue its gains against the euro and opt for the previous 4 year lows below 1.20.The days of glory for the European currency seem to be behind us for now, however as we know very well, markets moves in cycles and the time for the euro to rise may come if enough speculations gather, regarding a better European economic growth…

Published on  Thu, Dec 11 2008, 10:42 GMT

Euro and Pound Show Signs of Strength…

Tue, Dec 9 2008, 16:21 GMT
by Lena Manousarides

FXstreet.com Independent Analyst Team

Monday came and gone and markets managed to finish the day on positive territory. DOW JONES gained more than 300 points and NIKEI finished slightly up. The market sentiment was more positive after US government suggested a new stimulus plan for the automakers and traders welcomed the news by buying futures all across the board.

EUR/USD found a temporary resistance at 1.2960 late last night and since then the pair retraced back below 1.29. The very fact that the move did not find any followers towards 1.30 shows that every rally finds good sellers! A clear break of 1.28 which is now good support may eventually open the door for further losses towards 1.2750.However, let’s see how the euro bulls react after the US market open and if they will give it another go for 1.30!

Today the economic calendar had some news from Euro zone and UK, which were once again bad news for both economies and even though the ZEW data did not come out as bad as expected, euro still fell in the aftermath as numbers contracted once again which sawed Euro area suffering from global crisis. The UK data were once again very disappointing and pound got the worse of it by dropping more than 100 points!

The question is if the markets are ready to sustain yesterday’s gains or will “surrender” them in the name of risk aversion. Today we had more reports that came out of Sony, saying that the big corporation will let off more than 16.000 people worldwide and also the statistics showed that US companies will continue the layoffs for some time. The economic recession is getting deeper by the day and markets are aware that “a good day in stocks” can be easily reverse in a matter of a few minutes.

New York futures so far are slightly down, what with the negative news and all and traders are waiting to see what will happen with the “new” stimulus plan for the automakers. The trouble is, that all the efforts we see from new President and FED to tackle the economic slump, are failing to restore traders confidence and that is due to continuous negative economic events.

Also, another important event today, saw the Canadian dollar being a “victim” of the latest economic crisis, after Bank of Canada cut rates more than expected taking rates down to 1.50%. Traders did not expect that and sold the Canadian dollar against the buck. USD/CAD broke important resistance of 1.2630 immediately after the news and climbed towards 1.28.The pair found resistance at 1.2760 and retraced from those levels. If the move can build the gains, then we may have another try for double top at 1.30.

So, for today let’s see how the euro trades against the buck and if yesterdays charts are right to think that the single currency may have more gains in the coming days. Another positive daily close could indicate that dollar may be under pressure for now …

Published on  Tue, Dec 9 2008, 16:21 GMT

Could Dollar Weaken in December?

Mon, Dec 8 2008, 10:15 GMT
by Lena Manousarides

FXstreet.com Independent Analyst Team

A new week is starting today, with markets still shocked from Friday’s really negative employment data which saw -533.000 jobs printing for the month of November. This indicates how bad things are in the economy and that the worse may not be seen yet. According to official data, recession in the US has started since last December and is more than likely to continue in the coming years. The new President Barak Obama said so himself in an interview over the weekend, that “the economy will get worse before it gets better”…

Today the economic calendar is almost empty, with only important events being PPI out of UK in the morning and later a testimony by Trichet in front of the European Parliament regarding the economic crisis and the monetary policy. Traders will monitor Triche’s words closely after last week and try to determine what the bank will do in the next meeting. The fact that all recent European data are contracting, is making euro bulls think twice about buying the single currency against the dollar.

EUR/USD closed near its daily highs on Friday and is still trading within ranges of 1.2550-1.2850. A clear break of later level could lead the pair towards 1.2930 and potentially to 1.30. However, if risk aversion continues to “control” the markets, the pair does not have any chance of sustaining its gains any time soon. On the downside, if the pair holds 1, 28, it could fall back towards 1.25. A clear break of the later level could potentially open way for multi year lows of 1.2360.

The question that arises now is how long can the dollar continue to get bid all across the board? Is this situation here to stay? Will dollar continue its recent rally throughout 2009? Let’s think things through before we go buying the greenback! Last Friday’s payroll data showed how deep the recession is and that FED might cut its rates once again, which eventually can come back and haunt the dollar. The only valid reason we can give about dollar’s strength under false pretences is the risk aversion. Somehow traders feel safer buying the dollar and the yen in times of crisis and this is the key to dollars power. When this stops, and believe me it will at some point, traders may eventually make the dollar “pay” for all those moths of solid gains and risk appetite may once again return in the markets, making euro attractive!

It will be interesting to watch how US markets react today after Friday and if the gains we saw recently be able to hold for the next sessions. Market participants are in a great need of some positive sentiment and the very reason we saw DOW JONES gaining after the dismal payroll numbers was another proof that markets are oversold and traders can shake off bad news quite easily. After all they have done so for so many months…

Published on  Mon, Dec 8 2008, 10:15 GMT

ECB and BOE Have Spoken!

Thu, Dec 4 2008, 15:55 GMT
by Lena Manousarides

FXstreet.com Independent Analyst Team

The interest rate decisions by BOE and ECB came and gone, with traders left feeling more confused than before. BOE has cut rates as expected 100bps and ECB surprised markets by cutting 75bps rather than just 50 which was forecasted.

Trichet said in his press conference in front of journalists, that the decision was taken after a thorough look of the latest economic deteriorating conditions and Bank acted as needed to bring back price stability amongst European Nations. He also said that the economic outlook looks dismal for the coming months but didn’t comment as to what the bank will do in the next monetary policy meeting.

GBP/USD was trading heavily early in the morning and the pair broke important support level of 1.4550 which was the lowest level seen back in October and made new multi year lows at 1,4460. However, after the news of the rate cut passed, it was proved once again a “buy the rumor sell the fact” move as pound retraced higher. For now, levels to watch will be 1.4730 on the upside ahead of 1.4780 and on the downside if 1.4460 gives way then pound may be heading towards 1.43.

EUR/USD was following in the same footsteps of the pound and although was making new lows in the morning below 1.26, the move was quickly retraced after Trichet finished his speech. The range of 1.25-1.28 is still intact and only one clear break of those levels can give the pair some awaited direction.

Don’t forget that traders are still in a wait and see mode, as tomorrow we have the mother of all news, nonfarm payrolls. The very fact that the country is in recession and the employment sector suffers from so many negative consecutive months makes everyone wary and cautious and if we get another really negative number below -250.000 stocks might suffer another risk aversion sell off.

As we have noticed recently, the nonfarm payroll data are proving to be almost a non event for the currencies and that is mainly due to the risk aversion and the need of traders to remain aside of the market at the time of release. Tomorrow we expect maybe the same to happen again and even though the number can be potentially bad for the dollar, traders may once again support the greenback due to the falling stocks. One thing is for sure, whatever happens tomorrow it will probably set the tone for next week and keep traders alert for the next big event…

Published on  Thu, Dec 4 2008, 15:55 GMT

Another Day Another Dollar Rise!

Wed, Dec 3 2008, 09:59 GMT
by Lena Manousarides

FXstreet.com Independent Analyst Team

The markets have spoken: risk aversion is still the name of the game and that was obvious since the beginning of the week. The dollar strengthens once again against the euro and the other major counterparts in correlation with the stock’s performance the last few days. DOW JONES gained slightly yesterday after the big fall of 700 points that we witnessed on Monday, amid worries for the global economic future.

The news that automaker FORD was getting help from the FED and a loan worth many billions, gave some kind of relief in traders already negative mood, however the latest statistic data confirmed what we all knew but afraid to admit: that US is in recession! Analysts predict that the latest recession might be a severe one and therefore Bernanke and co might have to lower rates once again and adopt Japans zero rates policy. This Friday we will see just how bad things are once again in the employment sector, as we have the nonfarm payroll data. The forecasts give another nasty number of more than -200.000 jobs and that will add to the already dismal economic outlook.

EUR/USD is trading within range of 1.25-1.28 once again and although yesterday we saw a brief try of 1.2550, the latter level worked as a good support and the pair gained more than 150 points. However the short term rally found resistance at 1.2750 and down we went again! Until we see a clear break of either 1.2830 or 1.2530 the range remains intact and traders may want to wait until tomorrow’s important ECB rate decision. Euro is waiting patiently for Trichet and his pals to set the tone for the coming days and a really dovish statement may “help” the single currency to continue its recent slide.

Today the economic calendar has a few important releases, starting with PMI services from UK which printed another negative number and moving on to the ADP report out of the US later today which will give us the first taste of how the payroll number will be on Friday. The ADP report although is not the most reliable of all in terms of the actual number, however it may set the tone for traders until the real thing on Friday. Also later today we have ISM Non Manufacturing and another really low number is expected.

We are in the middle of the week today and things in the global markets continue to look all doom and gloom. It will be interesting to see if US futures rise today or if yesterday’s gains were a one off thing for this week and if further downside may come from now until Friday. Don’t forget that tomorrow we have the ECB and BOE rate decisions and both will be crucial for the direction of the pound and the euro.

Potentially, both currencies may continue to slide in the coming days, as dollar is still the currency that traders prefer and a combination of heavy rate cuts by the two banks and continuing risk aversion could make dollar the “only” currency to buy for now…

Published on  Wed, Dec 3 2008, 09:59 GMT

Crunch Time for the Dollar This Week!

Mon, Dec 1 2008, 09:33 GMT
by Lena Manousarides

FXstreet.com Independent Analyst Team

What a week this one might turn out to be what with economic calendar being full of important economic events and markets being cautious of any decisions regarding the global economic situation! Where should we start? From the speeches by the “dynamic duo” Bernanke and Paulson today, regarding the FED latest policies, which traders will monitor closely for any signs of further cuts in the coming weeks? Or ECB and BOE rate decisions later in the week which may determine the short term direction of the euro and the pound? And to top it all, don’t forget the “icing on the cake” the nonfarm payroll data which might give us another nasty taste of how bad the economy performs in the US…

EUR/USD is still trading within ranges of 1.2550-1.3050 and last week’s trading action was not strong enough to take out these levels with the pair reaching 1.3050 only to drop once again below 1.27. Traders are not eager to commit one way or another especially knowing that this week might be a key to euro and dollar fate! A clear break of 1.2630 might open way on the downside towards 1.2560.

Today the economic calendar has a few releases worth watching, with UK Halifax HPI index and Manufacturing PMI which both may show more evidence on how grim economic conditions are and Euro zone Retails sales and PMI which unless they come out very different to forecasts may not really provide any action. Later on we have ISM Manufacturing out of the US which is forecasted to print another low number.

We know that there are many economic data to choose from this week and some are more important than others, but the question still remains how will they affect the dollar? Well, the answer lies as to how the future markets will react on them and if there is further gains on DOW JONES and the rest of the markets, then dollar may weaken! The only way this scenario is not likely to work is if ECB lowers their rates by far more than it is anticipated and Trichet is really dovish signaling many more cuts to come! Then in that case, euro may fall heavily and that could give dollar bulls the upper hand again.

Let’s not forget that we saw the dollar strengthening immensely over the last few months with or without bad economic data and that was purely the fact that risk aversion was taking control and traders were looking the dollar in a new light as the safe haven currency. This may continue to happen over the next weeks and only a clear change in negative sentiment can alter that. So far this does not look likely, as the traders fear and uncertainty can be felt daily all across the globe.

EUR/GBP is another pair which ended last week on interesting note, after it failed to break 0.85 once again and dropped aggressively down towards 0.82. The daily and weekly close last week suggests that there may be further room for a deeper correction and next level to watch may be 0.8180 ahead of 0.8130. However, with both ECB and BOE rate decisions pending this week the volatility may be high and depending on what the banks do the pair can potentially retrace all recent losses.

Let’s see how today the markets react today with US traders all back from their Thanksgiving holidays and the rest of the markets ready for an interesting trading week! Don’t forget that markets gained for the last few days and although this is good news, this week’s economic events could easily wipe out all the profits in no time… Time and market sentiment will tell!

Published on  Mon, Dec 1 2008, 09:33 GMT

Dollar Strong No Matter What!

Fri, Nov 28 2008, 14:53 GMT
by Lena Manousarides

FXstreet.com Independent Analyst Team

Another week is finishing with markets trading still on positive territory as NIKEI was up more than 100 points and European session seems to want to go this way also. With US markets close for Thanksgiving Day yesterday, the action was very limited and although thin trading conditions usually spark big moves that was certainly not the case yesterday!

EUR/USD is trading lower today after the pair was not able to take out 1.2950 yesterday. A clear break of 1.28 indicated that the downside is still alive and the move could continue down to 1.27 and even lower. Next level to watch is 1.2680 ahead of 1.2630.

Today the economic calendar had releases out of UK and Europe and all the data were negative with Euro zone CPI printing very low numbers and unemployment getting higher for the month. The sentiment in Europe fell again and therefore the European single currency lost ground once again against its other counterparts. The data out of UK were not better either with CBI sales coming out much worse than expected and the pound getting the worse of it so far.

GBP/USD is trading lower again and 1.55 so far seems to work as a resistance. The correction from 1.47 to 1.55 is done and dusted and the pair looks open for further losses. Let’s not forget that investor’s confidence when it comes to the pound is very low and getting even lower with new economic data who only emphasize what we already know: that the country is suffering a severe economic crisis and looks like it will for the time being.

It will be interesting to see how DOW JONES will open today and if the positive sentiment we saw in the beginning of the week continues for another day. The risk aversion is back in the markets and the uncertainty for the future is real. Investors are taking each day as it comes and are far from ready to commit either way until they receive some kind of proof that a better tomorrow is on its way.

Aside from that, oil is trading down today again following dollar’s strength and the higher crude inventory data the other day didn’t seem to spark an oil rally so far. Until we see a change in sentiment for a weaker dollar, oil is likely to continue to trade lower in the coming days. The fear of the global crisis is what seems to drive the markets these days and oil is certainly not an exception to this!

Let’s see how the week will end and if the gains we saw printed in the beginning of the week will be completely turned around at New York closing. It is crucial to note that today it’s the last trading day of the month and therefore we may see adjustments in trader’s positions and squaring up the gains for the month.

Published on  Fri, Nov 28 2008, 14:53 GMT

It is That Simple: Dollar is Up as Long as Investor's Sentiment is Down…

Wed, Nov 26 2008, 14:40 GMT
by Lena Manousarides

FXstreet.com Independent Analyst Team

The day starts with markets falling across the board and the fact that more negative news hit the wires regarding the global economic future does not help trader’s confidence! DOW JONES didn’t manage to build up on the three days rally and so it fell yesterday together with Asian and European markets today. The market “domino” is so clear. Its starts with US futures, continue in Asia and ends in Europe with dollar appreciating as a result.

EUR/USD is trading lower again and the fact that we saw a euro rally for two days does not by any means alter the downside scenario for the pair, as risk aversion comes back to hunt it! The pair stopped the upside move at good resistance level of 1.3060 and from then on it fell more than 100 points all the way down to 1.29. For now as long as 1.29 holds we might see some further upside however with Thanksgiving Day just around the corner all bets are off! A clear break of 1.2830 will alter the upside scenario for now and make dollar bulls the ones in control.

Today the economic data out of UK were dismal for the pound, as the GDP numbers contracted for yet another month and made recession now a sure thing. The pound managed to correct since Monday towards 1.55 as we mentioned but the negative data do not let sterling run wild. As long as 1.54 holds we may see further downside for the pound however once again tomorrow’s thin trading conditions can be rather unpredictable.

The market participants were waiting anxiously for the durable orders out of the US and when the news hit the wires that they fell almost double than anticipated, the fear and uncertainty returned. No matter how much traders want and need to believe that the economic crisis will come to an end, bad news like that do not help and make every positive market sentiment fade away. Next we have consumer confidence out of the US and also new home sales which traders will monitor closely.

News that China lowered their interest rates once again for the most since 1997 has left traders shocked and frustrated, and the speculations of worsening economic conditions globally are getting now even bigger. The announcement of China couple of weeks ago about a stimulus plan of $586B in order to help the deteriorating global economy, gave some relief in investors, however since then the country’s growth has slowed down according to the latest numbers and the extreme easing in rates shows that there is desperation and uncertainty.

The bottom line is this: we all want to see the positive sentiment returning in the markets and we are all for normal trading conditions without economic worries and panic , however it is clear that we are not there yet and there is a long way till we reach that point. If we think about it logically, it is not very difficult to predict the markets next move. As long as bad data surrounding us and instability rules the way to go looks more likely to be on the downside.

So therefore, until we see signs that the risk aversion is no longer a threat, we may as well go with the flow. One look in the US, Japan and European future market can tell you where the dollar is heading next. So far the markets are telling us that dollar may be here to stay…

Published on  Wed, Nov 26 2008, 14:40 GMT

Dollar Weak Again! Is This The Start of Something Bigger?

Tue, Nov 25 2008, 15:18 GMT
by Lena Manousarides

FXstreet.com Independent Analyst Team

Another day, another hit for the dollar, with EUR/USD finally breaking 1.30 after two days of solid gains and opting higher in a move driven mainly by rise in stocks all across the board.

EUR/USD finally left the 1.20 something mark and now is trading back above 1.30 with 1.3080 daily high at the time of writing. If the pair takes out the latter level then we may see further gains towards 1.3150-1.32 in the coming days or even sooner.

GBP/USD is on the rise as well today, after breaking important 1.5150 and taking out stops only to print another 200 points. So far daily high is printed at 1.54 and the pair seems to have more upside coming. Next level to watch is 1.5480 ahead of 1.55.

The new found euro and pound rise has to do mainly with dollar weakening due to investor’s confidence being restored in last three days. It all started on Friday with news that Obama is tackling the economic problems by appointing his team right away, and it continued all Monday and today after it became known that Citigroup is being “saved “ by FED coming to the rescue with cash injections and loan guarantees. However, what this is really all about is the traders need to start believing a better future could be coming, when it comes to the crisis, and the very fact that the new US government has already stated that they have plans to unfreeze the credit markets.

DOW JONES gained yesterday for a second consecutive day more than 900 points all together and NIKEI followed in a positive territory as well. The market sentiment seems to be getting more positive lately and that is why the dollar gets sold off again, as investors don’t see the need to buy it as a safe haven currency any longer. However, be aware that the minute risk aversion comes back and investors lose their faith once again, the dollar may start to appreciate again. There are no clear reasons why the euro should go too much higher against the buck, what with its own economy suffering and the prospect for further rate cuts by ECB always present. Nevertheless, it is nice to see the long awaited correction unfolding in the euro and the pound and let’s see how long it will last.

Today the economic calendar had some news out of Europe, with GDP coming negative once again and UK data printing slightly better numbers. Yesterday’s Parliamentary hearing from Darling, did good to the pound as he outlined new plans for fighting recession and also cutting VAT in order to put money back into the consumers’ pockets. Today, King reassured that the BOE will do everything in their power to fight back the crisis and make the UK economy healthy again. We also had GDP out of US which came out weaker but didn’t really provide any reaction from traders.

We need to be aware the market rally we are experiencing could very well be short lived, due to the constant worries of the global crisis and the risk aversion which seems to hit when least expected. Don’t forget, times have changed since the summer and markets have become very unpredictable and therefore strong bullish signals in the charts can be reversed in no time!

All traders want these days is to be able to pick the lowest level and make their buy! However, the boy who cried wolf taught us one thing: after many failed rally attempts, when the real thing starts, no one will trust it until it’s too late.

Published on  Tue, Nov 25 2008, 15:18 GMT

Dollar Seems to be the Victim of Positive Market Sentiment!

Mon, Nov 24 2008, 15:17 GMT
by Lena Manousarides

FXstreet.com Independent Analyst Team

A new week has started, with Japanese market closed for national holiday and European markets trading positively after news hit the wires during the weekend, that FED has stepped up to help the troubled Citigroup with further cash injections and loan guarantees. The sentiment was already positive on Friday night New York close, after Obama revealed that Timothy Geithner will take over from Treasury Paulson in the coming days. The markets seemed to like that option and the hopes of a better economic tomorrow resurfaced again, sending DOW JONES up more than 400 points before closing.

Today we had news from Euro zone, with German IFO printing yet another lower number and euro continuing to trade below 1.26 after the news. The fact that all economic data out of Europe lately disappoint, gives another reason for speculators to predict that ECB will cut rates in December’s meeting. Today the only other important release is coming out of US and it is the existing home sales which are expected again negative for the economy.

EUR/USD is trading higher today, after it broke important resistance level of 1.2720 and moved even higher at 1.2820. The pair so far didn’t manage to break the latter level; however a clear break of 1.2830-50 will open room for more gains towards 1.29. The move came today on the back of higher stocks and oil and as long as 1.27 holds, we might be up for more gains in the coming days.

This week will be very crucial for dollar direction as apart from the economic data we also have the Thanksgiving Day and like every year, that day we see big breakouts in EUR/USD and so this year doesn’t look like it will be exception. The fact that stocks have started to gain shows that dollar might be in for further losses during this week and maybe Thanksgiving Day is the day that it will happen! Don’t forget that in the previous years, that holiday in the US gave the opportunity for the pair to break important psychological levels like 1.30 back in 2006 and 1.50 back in 2007. So let’s see until Thursday how traders will interpret all the economic events and how they will weigh the outcome of the economic data.

The fact that risk aversion is still a threat makes all the upside scenarios less optimistic, however with the new rescue plan that FED presented to Citigroup, investors feel some kind of relief that the worse might be avoided. In December usually we see dollar weakness and with traders squaring up their gains of all those months of dollar strength we could easily see further upside in EUR/USD towards 1.35.

However, let’s wait and see what happens in the Euro zone area before we rush to buy the euro as dismal economic data could spark a new wave of rate cuts by ECB and further negative sentiment in Euro zone…

Published on  Mon, Nov 24 2008, 15:17 GMT

Dollar Bulls Are Still in Control But for How Long?

Fri, Nov 21 2008, 13:40 GMT
by Lena Manousarides

FXstreet.com Independent Analyst Team

Another week is finishing today, with Asian markets gaining overnight and European session trading mixed after earlier rumors that Citigroup is up for sale. The bank lost heavily this week with the stock price falling to 15 year low. Investors have lost their confidence in the bank and they already have priced in the worse which would be a bank failure and bankruptcy. However, after yesterday’s losses it was made known today the board of directors are meeting later to discuss options for the banks future. Analysts predict that the bank may be open for a sale however until we hear something official, all scenarios are possible. If a satisfactory decision occurs, then we might see some relief rallies in the stock markets later on.

EUR/USD is trading still within tight ranges, however the pair’s earlier sell off was not enough to take out 1.24 and therefore the dollar was sold aggressively against the euro. At the time of writing the pair hovers at 1.26 and a clear break of 1.2660 will open way for 1.2730. The pair’s direction may be determined according to how DOW JONES will trade and if stocks trade positively after 2 bad days, we might see further gains for the euro. At this point the only thing that stops the pair breaking 1.28 is risk aversion and if we see change in sentiment then more gains will be printed next week, towards 1.30.

Today the economic calendar does not have any important releases out of US and all the ones out of Europe earlier showed the Eurozone’s economy is still struggling. There is a speech by Trichet soon and traders may monitor his words for any hints as to what will happen in the next monetary meeting. Most investors have already priced in another cut at the next meeting, however some comments by ECB members today showed that Trichet may not want to over cut rates just yet.

The yen also weakened during Asian session and continue to trade on the downside during the day. There is some risk appetite resurfacing all across the board and it has to do mainly with speculations that Citigroup’s decision today might be positive for market sentiment. It will be interesting to see how DOW JONES opens and if today which is the last day of the week we see a rally from recent multi year lows.

Don’t forget that next week we have the Thanksgiving holiday in the US and it is a fact that almost every year something major happens on that day. History shows that due to low liquidity and thin trading conditions the moves are usually exaggerated and the dollar is victim of the holiday by loosing heavily against the euro. If that happens this year, stops might get hit on the upside and before we know it we may see the long awaited correction!

However, it will be crucial to hear how today’s meeting with Citigroup goes and if the results favor a market rally. After all, sooner or later the market bulls will have another go to the upside and we’ll see how long it will last before risk aversion kicks in…

Published on  Fri, Nov 21 2008, 13:40 GMT

Markets Falling, Dollar is Rising: Bears and Dollar In it Together?

Thu, Nov 20 2008, 14:16 GMT
by Lena Manousarides

FXstreet.com Independent Analyst Team

What a day turned out to be yesterday, with markets taking a slump in New York and DOW JONES ending the day 400 points lower printing new multi year lows. Asian markets continued in the same manner and the same thing happened in European session. It is clear that traders continue to worry about the worsening global economic conditions and at the end whatever happens, risk aversion always wins!

EUR/USD made an impressive turn too yesterday, after it hit intra day high at 1.2820. The move did not find any followers and therefore it dropped all the way below 1.25. The latest range of 1.25-1.28 is still in play and although the pair dropped briefly below 1.25, the move found temporary break at 1.2470. If the later level gives way today, next level to watch is 1.2360.

Today the economic calendar does not have any important releases, and apart from retail sales we saw earlier out of UK, which again fell for yet another month, the only other data are the jobless claims and Philadelphia Fed out later. Traders are not focusing so much at the data lately, however the more negative news we get about the economy the bigger chances to have another sell off in the global markets.

The surprise event however came from the Swiss National bank, when it announced this morning a sudden rate cut of 100 points in order to stabilize things in the economy and meet their inflationary targets. The move was not expected at all today, however traders know that in desperate times we need desperate measures. The Swiss franc fell across the board, with USD/CHF making new multi years above 1.22 and EUR/CHF appreciating more than 200 points in the aftermath of the news.

All market participants are now wondering what next, as many now speculate that other central banks may follow SNB and cut rates before the scheduled monetary policy meeting. Already traders have priced in further cuts from both ECB and BOE and some say that FED might be forced to cut even further in order to “save” the economy from collapsing further.

With news daily hitting the wires of further bank losses and corporate earnings , traders hopes for a better and healthier market environment start to fade and the only way to go for now is either to remain a spectator or join in the fall. It does look like things are likely to continue in the same manner and for now whatever efforts we see for an upside rally; the bear market is very much a reality. For now, traders should stop trying to find a bottom and just admit that the economic situation is too unstable that any upside moves are turning out to be simple corrections before the downtrend resumes again. And the more the markets fall the more the dollar rise along with investors insecurity for the economic outlook!

For sure, at some point the bull market will resurface again, maybe next year if things stabilize a bit, however for now it looks like the bears will win, more out of necessity rather than technical or fundamental factors…

Published on  Thu, Nov 20 2008, 14:16 GMT

Lower Consumer Prices Mean Lower Dollar?

Wed, Nov 19 2008, 14:18 GMT
by Lena Manousarides

FXstreet.com Independent Analyst Team

As the week unfolds, we see further market losses, and further negative sentiment to continue being the number one moving factor for traders across the globe. Asian markets continue to trade lower and European markets although are trading relatively steady, still they print losses.

Yesterday, Bernanke and Paulson’s testimony did not manage to provide something new for investors as many predicted and now traders are waiting for further economic data in order to make their next move. It does seem like market participants are waiting patiently for the next “explosion”, reminding us of the days before the last market collapse.

Today’s economic calendar has a few releases which traders may follow, with the BOE minutes the most important event for the pound, and the US CPI number that traders are expecting, in order to see how the inflation pressures are affecting the US economy. The BOE minutes showed the bank was contemplating an even deeper cut in the last meeting showing clearly the next move may be other 50-100 points cut. Markets have already priced that in, however there is always the element of surprise and if the bank decides to cut even more then the pound will continue to fall all across the board.

The GBP/USD still trades below 1.51, seemingly rejecting the 1.49 support level and bouncing back nicely. This move is likely to be corrective before falling further and only a clear break of 1.52-1.5250 can alter the downside scenario for now.

The EUR/USD is still trading within the range of 1.25-1.28 and looks like it is stalling before something bigger happens in the coming days. If the negative sentiment continues and the markets continue to fall, the dollar will appreciate further and therefore the pair will continue to trade lower. The next important support level is 1.2330 ahead of 1.2360.

US consumer prices fell the most in 61 years today, showing economic conditions continue to deteriorate faster than firstly anticipated. Analysts predict that the FED will welcome this news with further easing of interest rates in the coming weeks and the dollar could be met with further buying amid more concerns about the economic future. The price of oil has shrunk in the last months which may continue thanks to the precarious economic state.

The dollar may continue to rise in the coming days, however traders are wary of an imminent dollar sell off as we are moving towards the end of the year. In an interview some days ago, the new president of the US, Barack Obama, said the government does not really care about the trade deficit at this moment in time and the only priority is and will continue to be, the current economic crisis and how to fight it successfully. If we analyze that statement, we may find the dollar will start to weaken later on as a bigger deficit means a lower dollar.

However, investors are not thinking that far ahead and the only thing in their minds is getting away from other currencies as the dangers of other currencies deteriorating and even stop existing are greater than that of the US dollar. We know the US is likely to fall into recession and their economic data is disappointing to say the least, however the US is still considered a superpower and the dollar is unlikely to disappear no matter how bad things get.

Published on  Wed, Nov 19 2008, 14:18 GMT

Dollar Is Looking for Direction! Can Bernanke and Paulson Help?

Tue, Nov 18 2008, 15:08 GMT
by Lena Manousarides

FXstreet.com Independent Analyst Team

Another day, another drop in the markets, with DOW JONES finishing yesterday down, more than 300 points and NIKEI following in the same direction. Traders are bracing themselves for today’s “interrogation” process of the dynamic duo Bernanke and Paulson which are giving a testimony in front of the Congress.

Today we had some important economic releases out of UK with CPI coming out much lower than expected and also Retail Price Index printing a bad number which shows exactly the level of damage that UK economy is suffering from. All bets are on now for more rate cuts by BOE in the next monetary policy meeting. The pound although was showing resilience to further losses, continued to trade on the downside and as long as 1.5070 stays untouched we may see further weakness in the coming days.

EUR/USD continues to trade between 1.25-1.28 and the pair seems to be moving without direction just waiting for the next big event to hit the news. As long as 1.2830 stays untouched, there is great possibility that the pair will move lower again in the coming days. Risk aversion continues to give dollar strength and that is likely to continue till we see signs of stabilization.

The data out of US showed PPI printing lower numbers and also TIC data coming out stronger not really surprising as in the last months many investors bought US assets due mainly to risk aversion. The event of the day that markets are waiting though is the testimony from Bernanke and Paulson regarding the bailout plan. The Congress will ask them what they are planning to do with the plan and how they will implement it in order to fight the current economic collapse. Traders don’t really expect to hear something different than what is already been said, however it will be interesting to see them trying to answer the difficult questions from the government as to how the problem will get fixed and what the bank is planning to do.

All we hear these days is how the global economy is moving closer to recession and how the level of damage is too much for the banks to handle. Market participants know that they are in for a tough ride in the coming months and the fact that FED has done nothing to solve problems so far is giving traders the jitters more than ever! It has been implied by FED and other central banks that interest rates will go even lower in the coming weeks in order to ease inflationary pressures, but what about when inflation starts to rise again? When will that leave us? Unemployment figures are rising dangerously in US and Europe, GDP numbers are getting trashed and inflation is easing. The Dollar is getting bought all across the board due to risk aversion and markets continue to fall on a daily basis.

However one would wonder, until when will traders continue to buy the buck? At times when the real fundamentals do not reflex the currency at all, it makes one think that one day investors might wake up and realize that their perspective dollars are not worth a lot. Then is where the real problems start as everyone will try to get rid of their dollars and buy back the other currencies and therefore more problems will eventually arise. The world leaders are trying their best to avoid panic in the markets but until we see reasons not to panic, investors will try their best to get rid of risky assets and therefore market collapse will be far from over.

Let’s see how the markets will react today and if the wise words of Bernanke and Paulson convince the market participants…

Published on  Tue, Nov 18 2008, 15:08 GMT

Dollar Could Show Signs of Weakness in the Coming Weeks!

Mon, Nov 17 2008, 10:54 GMT
by Lena Manousarides

FXstreet.com Independent Analyst Team

Another week has started with G20 not providing any more insight to the markets and therefore risk aversion coming back in the first hours of market opening. EUR/USD opened lower last night and continued to slide in early Asian session. However, after European opening, we saw a great comeback of the euro and the pound, with traders squaring up gains and getting ready for another “wild ride” this week.

EUR/USD is trading within a bigger range between 1.25-1.28 and only a clear break can lead us either to 1.2350 or 1.30. The pair found good support at 1.25 and therefore corrected quite aggressively towards 1.27. Next level to watch will be 1.2750 ahead of 1.28 which could find strong offers. On the downside, if 1.25 gives way then 1.2430 ahead of 1.2380 comes back to play.

At the moment is clear that traders do not want to commit in something bigger and they wait therefore for any signs as to what the direction will be. Markets have already priced in the negative data in US and Europe and they already know that the situation is bad, so right now they are at a point to either wait patiently until the crisis blows over and start buying heavily or to continue with the selling.

Today the economic calendar is almost empty with couple of releases out of US which are not expected to make any noise. The markets are getting ready for Bernanke s testimony later this week along with the Bank of England’s minutes. After the last meeting, this may give us more insight as to what went on and why the Bank decided to cut rates so heavily. The economic situation in England is getting worse by the day and the unemployment figures showed that by 2010 the number of unemployed people will reach proximately 3.000.000. This fact in combination with slow growth and deteriorating economic conditions is making BOE even more determined to “fight” recession by any means even if that means taking the interest rates down to zero!

GBP/USD is making a good start this morning after London opening, with the pair moving up more than 300 points and finding resistance at 1.4970. The pair found support at 1.4640 and bounced back from there in a sudden move which shows that traders might take their profits before continuing lower. However, markets wait the minutes from BOE before they commit either way or also the inflationary data which are out in the coming days. If CPI and PPI are both lower than the bank really won’t think twice about cutting even more next time in order to bring some kind of stability.

The bottom line is this: Market participants, investors, traders, you and me know very well that the world is at risk of recession in the coming months. We know that as from today, Japan is in recession after GDP contracted for second consecutive month. We also know that UK and Germany are in recession and US very likely too. So, we know there is probably worse to come but we also know that the crisis will at some point start to ease and traders will want to jump the chance to buy back aggressively and be on board when “the train leaves for Northville”!

History shows that December is always a month of dollar weakness and therefore this time the weakness could very well be exaggerated and more traders could sell the buck to lock up their gains of all those months. Maybe December is the month that traders need in order to start a temporary correction and take euro and pound higher! Let’s put it another way, risk aversion will always be here… But so will the prospect of a better economic tomorrow…

Published on  Mon, Nov 17 2008, 10:54 GMT

Dollar at Crucial Point: To Buy or Not To Buy?

Fri, Nov 14 2008, 09:32 GMT
by Lena Manousarides

FXstreet.com Independent Analyst Team

What a rally we saw in DOW JONES late last night, with the session closing up more than 500 points. Traders were selling heavily at the beginning of the session amid worries for the global recession, however in the last hour we saw a great comeback and aggressive gains were being made. Asian stocks were positive too and the same is happening now with the European markets.

Is this it? Are markets now all of a sudden more positive? Is global recession not a threat anymore? Are we ready to buy in a bear market? Well, all of those questions are natural to be asked and the answers lie in how the markets will react at the close of the week. Let’s not forget that when the trend is down and all we have seen this week are losses, it is quite natural to expect corrections and maybe aggressive ones too. There were reasons for DOW JONES reaction and that maybe was the fact that it nearly approached a double bottom which technically is a very good support and therefore it bounced back, before maybe trying even lower in the coming days. Also, traders didn’t want to miss the chance to buy stocks at such cheap prices for a quick buck. Whatever caused the sudden positive sentiment we see now; there are many reasons why it should just be that: a simple correction. The data every day suggest that more countries will follow in Germany's UK’s and US’s steps and we might not be able to avoid a global recession in the coming months.

EUR/USD gave up all its gains just before New York closing and from lows at 1.2380 it bounced impressively towards 1.29. The move was purely a follow up from rise in oil and DOW JONES and it was contained at 1.2850. So far today the pair is moving within 1.27-1.28 range and traders are waiting for today’s busy economic calendar before they commit which way to go. Next levels to watch are 1.2670 on the downside and 1.2880 ahead of 1.2930 for the upside.

Today the calendar has some important releases out of US and Europe, with Euro zone CPI numbers coming soon and also US retail sales and consumer confidence. Both data out of US will be monitored closely by all market participants and if data show really bad numbers then we might see renewed decline in DOW JONES and therefore maybe dollar strength due to risk aversion. At past times, when we had bad data out of US it would be natural to see dollar weakening heavily across the board, however this does not seem to happen anymore and dollar is moving according to risk aversion.

The main event of the day though is the Frankfurt conference of Central Bankers were both Trichet and Bernanke will give their testimonies regarding their monetary policy and how it is affected by the financial crisis. Their words can be eventually very moving for all markets as any reference on future decisions regarding rates will be crucial for euro and dollar direction. We know that the situation is not good and we know that all central banks and governments are working together as they say to fix things; however we don’t know how low they are prepared to go in the interest rates to accomplish that. Traders are waiting their statements before they decide any further moves. Any hint from both regarding rates and markets will go crazy!

The fact that we have G20 this weekend makes everyone nervous and traders may not want to leave open positions during the weekend as the danger of huge gaps is always there. The outcome of G20 will set the tone for next week and if markets interpret it as positive, then we might see continuation of the positive sentiment we saw yesterday and today…

Published on  Fri, Nov 14 2008, 09:32 GMT

Euro and Pound Struggle to Gain Which Could Mean More Weakness Ahead!

Thu, Nov 13 2008, 14:19 GMT
by Lena Manousarides

FXstreet.com Independent Analyst Team

Its official! German economy entered recession. The latest GDP numbers out of Germany showed that the economy contracted for the second consecutive month and therefore the country now faces the wrath of the global financial crisis. Euro was down after the news all across the board and especially against the pound which it printed new life time high at 0.8455.

EUR/USD was trading around 1.2460 at the time of GDP data and the pair made a break of 1.24 briefly to find support at 1.2380. From then on euro corrected towards 1.2550 after the move was whipsawed in a matter of minutes. The pair is trading still heavily and the question is not if there will be further downside, but when! Next level to watch is 1.2330-50 and if that level gives way then 1.22 might be next target. Let’s not forget that 1.2330 is at the moment the lowest level seen for many years and traders might try to keep the double bottom intact. However with dollars recent rally and the prospect of further gains due to risk aversion, EUR/USD could easily fall to 2005 lows at 1.18-1.20.

Today’s calendar is quite empty apart from the GDP numbers from Germany we had in the morning and the trade balance numbers we had form the US, which didn’t really catch traders attention and it was a non event altogether. The numbers showed that trade deficit narrowed further last month at -56.5B and that is not a surprise as stronger dollar means smaller deficit. Dollar looks unchanged after the data and it will be interesting to see New York open and how the currencies will behave in relation to DOW JONES. Oil is trading on the downside too, and today it was trading below $55 per barrel which also fuels further dollar strength.

Markets continue their free fall with NIKEI dropping more than 400 points overnight and European markets still trading negatively too. It looks like DOW JONES will continue in the same manner and the latest proofs that Germany , UK and US are facing recession gives traders more worry that more countries will follow. The fact that US Congress is talking about the bailout plan once again and is thinking of ways to add or alter a few parameters means that the government is quite nervous about the crisis and does not really believe that the rescue plan will be enough to fix the long term problems in the US economy.

Nevertheless, when traders smell the fear in Government or FED statements, they panic and continue to liquidate their assets which cause further collapse in the markets.

Yen and Dollar continue to be the flavor of the month in November and this might continue to be so, until at least the end of the year. It will be very interesting to see how markets will react to the year end and where January will find EUR/USD and GBP/USD. Let’s not forget that same time last year the euro was climbing new tops every day and it was on its way to 1.70 according to many economists and specialists. Well, forget all that and all Euros past glory as it will be a miracle for now even if we see 1.40 anytime soon. Until we see signs of stabilization in European economies and signals that ECB is done with easing rates, then euro might spend the last months of the year trapped between 1.20-1.30…

Published on  Thu, Nov 13 2008, 14:19 GMT

Pound Signals Further Losses Ahead…

Wed, Nov 12 2008, 12:55 GMT
by Lena Manousarides

FXstreet.com Independent Analyst Team

The pound has fallen to new records against the euro and new multi year lows against the dollar after BOE’s inflation report stated that not only the country has fallen to recession in the last quarter but the inflation seems to be easing rapidly. King said in a testimony that the bank will do everything in its power to fight the economic recession and inflation and if that means taking the rates down to zero, then so be it…

GBP/USD broke important support levels and double bottom at 1.5270 and in a quick move it printed 1.5190 before it corrected back towards 1.53 again. The pound is trading very heavily at the moment and it seems weak. Next level to watch is 1.50. If the dollar continues to gain in the coming days then we it may be unavoidable for the sterling to deteriorate even below 1.50.

Today the calendar is almost empty from important economic reports out of US and the only news we had was the inflation report of BOE and speech by King. The report showed that UK economy will continue to shrink next year as well and the level of damage is too big to fix just yet. Analysts now have started to expect further rate cuts form the bank and some even suggest that in the next meeting we may see another 150 pbs.

Traders are preparing themselves for the next two days which we have plenty of economic data out of US and Europe and on Friday a conference in which both Trichet and Bernanke will speak about the financial crisis. All those events could only fuel more dollar buying as lately the risk aversion gives dollar great powers!

EUR/USD is trading on the downside once again and during the morning we saw further fall towards 1.24. The pair could find resistance at 1.2680 and therefore could continue to fall from those levels. Next support level to watch is 1.2360 ahead of 1.24.

EUR/GBP is making new history and the fact that the pair broke 0.8190 which was the previous all time high, opens the way for further gains towards 0.85 in the coming weeks. Let’s not forget that the pair’s trading patterns has changed in the last year and although we saw at least 50-80 pips daily range before, now the pair seem to be making 150-200 pips a day! Many traders and analysts are talking about parity in the pair and if UK economic conditions continue to deteriorate we may see euro gaining further against the pound and parity maybe not a far fetched dream.

At times that the global recession is nearing and the financial crisis is continuing to weigh on all markets, the best way to go is to follow the wave and at any corrections up to continue to sell. There is no point whatsoever for traders to try and find a turning point as it looks like there is no end to the collapse just yet. All the positive market sentiment we saw in the beginning of the week seemed to fade away and as I have mentioned before, traders may need to brace themselves for the worse maybe yet to come…

Published on  Wed, Nov 12 2008, 12:55 GMT

US Markets Are Closed But Dollar Looks Open For More Gains…

Tue, Nov 11 2008, 11:35 GMT
by Lena Manousarides

FXstreet.com Independent Analyst Team

The positive market sentiment seemed to fade away and the gains we saw printed yesterday were almost gone by this morning. Asian stocks dropped and the same happened to the European markets today. The risk aversion came back once again, after banks and companies declared losses and trader’s fear and uncertainty for the economic future resurfaced.

EUR/USD is trading on the downside once again and the slightly better than expected ZEW numbers we had this morning didn’t seem to give euro another push. Euro seems to be weak and some statements from ECB members as well as Trichet regarding further easing in December may be influencing the single currency for now. The bank said that they worry about deflation in the Euro area and therefore cutting rates might be the only way to go.

Today’s calendar is empty apart from the economic data we had out of Europe and let’s not forget that US markets are closed due to Veterans Day. The activity is already contained and traders are taking it easy today as the prospect of a closed US market does not seem lucrative for meaningful positions. However, the thin conditions might allow extreme moves as we have seen in the past and especially in such a fragile environment that anything is possible!

The fact that oil continue to drop towards $60 per barrel shows that the global recession worries are always in traders’ minds and markets are far from ready to start gaining at this point. One thing is for sure that until we see some kind of stabilization in global markets, the dollar will be the currency of choice for traders and although US economic data are really disappointing and economic conditions are deteriorating the greenback may continue to rise.

Let’s see how the rest of the day will go and how traders will react in the absence of US markets later today. The best way for traders might be to stay aside on a day that thin liquidity might be the theme and therefore markets can be unpredictable…

Published on  Tue, Nov 11 2008, 11:35 GMT

Week Starts With Markets Gaining Across the Board…

Mon, Nov 10 2008, 14:45 GMT
by Lena Manousarides

FXstreet.com Independent Analyst Team

The week is starting with currencies moving in tight ranges after a very volatile week last week with. What with US elections, ECB and BOE rate decisions being the main events and also NFP which really disappointed markets after it printed -240.000.

EUR/USD is trading within 1.28-29 range so far and only a break of 1.2930 might push pair towards 1.30 again. On the downside, the level to watch is 1.2780 and if that level gives way then the pair might gave another go at 1.25 in the coming days.

Today the economic calendar had PPI out of UK which printed a really lower number and gave sterling more pressure as traders now are pricing in further cuts by the Bank of England. The fact that BOE cut rates by 150 pbs last week didn’t seem to help market sentiment and the pound and until we see some better economic data out of UK, the sentiment will remain negative. We don’t have anything else major data wise today and so traders might take it easy today amid tomorrows US National holiday which banks and markets will remain closed.

In the coming days we have quite a lot economic releases out of Europe and US and it will be interesting to see how the markets will react on the data. Asian markets were trading on a positive territory after NIKEI gained more than 400 points and European markets followed in the same tone. DOW JONES is expected to gain too today as traders seem more positive after the announcement by China regarding a new plan to help with the recent crisis. The outcome of the G20 last weekend showed all nations commitment to try and fight the global recession and the Finance Ministers will be announcing ways to do it in the coming weeks. However, there is still a lot of work to be done and it will be interesting to see how the US will try and tangle the problems with the new president taking g over.

A slow start for currencies today, with EUR/USD, GBP/USD, USD/JPY trading in very tight ranges- something we are not really used to in the last few weeks and the reason is that market participants are still trying to make sense of what happened last week and also the fact that traders are getting ready for tomorrows holiday. Let’s not forget though that at holiday times with lack of liquidity, wild moves can happen so the best way to go is to remain aside until all markets are operating normally…

Published on  Mon, Nov 10 2008, 14:45 GMT

Bad Payroll Data May Drive Dollar Higher…

Fri, Nov 7 2008, 13:20 GMT
by Lena Manousarides

FXstreet.com Independent Analyst Team

With interest rate decisions now behind us, traders are focusing their attention in today’s data which may determine the market outlook for now. After yesterdays 50 pbs cut from ECB and a hefty 150pbs from BOE and also Trichet’s implication that there is more easing to come, markets continued their fall with DOW JONES down almost 400 points and NIKEI the same.

Today the main event investors are anticipating is the payroll data and the forecast is for a negative number of -200.000. The fact it’s the 10th consecutive negative month makes everyone wary that the country will officially enter recession. Analysts from Bloomberg are giving a wide range as to what the number will be and the best scenario is -85.000 with the worst case scenario being -300.000! Whatever the outcome it is very possible we will see dollar strength in the aftermath as risk aversion may hit the markets once again.

Under normal conditions one would say that a very negative number could mean dollar weakness. However, we learned the hard way that fundamentals are not as black and white anymore and although US data is always printing bad numbers, the dollar is getting stronger by the minute. The power of fear is what makes the dollar strong and that could continue until we see some signs of stabilization in the economic crisis. It will also be crucial to watch the unemployment number together with the NFP, which is expected to be very high.

The EUR/USD is hovering around 1.28 at the time of writing and traders do not wish to commit one way or another until they see the data. Don’t forget that even after the number; whatever the outcome we won’t know what the market is feeling until well over an hour afterwards. The reaction is expected to be volatile and the whipsaws big once again. It will be best for traders to try and avoid trading the news at times of uncertainty and risk aversion as anything is possible.

Also today we have the new home sales and the number once again is expected to be negative. This will only fuel further sell off in DOW JONES and will give the dollar more reasons to be bid across the board as a safe haven. Watch out for Obama’s speech later on in Chicago where he will meet economic officials and speak about the outlook after his election. The markets will hear what he says and will act accordingly.

So today we shall see if the dollar will continue its recent strength and if DOW JONES dives once again following the European and Asian markets, then we expect the dollar to appreciate and EUR/USD to make another try for 1.25. If the later level gives way then 1.23 comes back in the game. From that level it’s either make or break time as it can work as a good support and double bottom or it can break and give us new lows for the pair.

One thing is for sure that whatever happens in the next two hours traders will weigh the data and the recent crisis and they will follow the market sentiment whichever way it goes…

Published on  Fri, Nov 7 2008, 13:20 GMT

Rate Decisions Might Determine Euro and Pound Direction…

Thu, Nov 6 2008, 12:13 GMT
by Lena Manousarides

FXstreet.com Independent Analyst Team

Today is the big day for markets around the world, as traders await interest rates decisions by Bank of England and European Central Bank. The general feeling is that both banks will cut rates by as much as 50 pbs, however there are some rumors going around that want the banks to cut more than that. Some even suggest 100 points.

EUR/USD is trading within the 1.28-1.29 range ahead of the decision and traders await Trichets press conference for further idea of what the bank decided and why. It will be crucial for markets to hear Trichet and what he has to say about the financial crisis in Europe and form his words we will make sense as to what the next move will be. Many analysts predict that the bank will cut even further in the coming months in order to stabilize the economic situation and give further liquidity into the banking sector.

GBP/USD is trading in a range too, and more than 3 times it has rejected 1.60. Traders are waiting for the BOE decision and there is chatter that the bank will be forced to cut more than 50 points today due to the deteriorating economic conditions. The last speech by Governor King showed that UK is very close to recession and the fact that the last GDP numbers were negative for two consecutive months proves just that! The pair is in a wait and see mode and if the decision shows a cut more than 50 points, it is possible to see further downside.

Let’s not forget that this morning we had economic data out of both Euro zone and UK and both printed really disappointing numbers, with Halifax house prices out of UK printing -2.2% and factory orders from Europe -8%!. The data suggest that rate cuts is the only way to go for now for both banks and let’s wait to see what happens. Apart from the two rate decisions we do not have anything major out of US, so therefore traders will act only according to what the decisions will be.

Both Asian and European markets plummeted this morning and DOW JONES is looking to open negatively too. The fact that US elections came and gone now give more reason for traders to worry about the economic future and how the new government will cope with the latest crisis. Is has been said in the media that the American people and in some respect the markets are waiting Obama like a “messiah who will save” the country from falling, however it is only a matter of time that everyone will realize that the damage cannot be restored that easily and only a miracle can make this go away.

The last speeches that we heard form Trichet showed that the bank is not worrying so much about inflation as the inflationary pressures have eased and now the main goal is the slowing growth, as the latest economic data show. It will be crucial to listen the exact words that Mr. Trichet will use in terms of the current situation and his tone will tell us if the bank has more cuts in store.

Let’s wait and see what the first rate decision by BOE will be and after that how ECB will react to the latest economic developments and don’t forget that whatever today’s outcome, traders know that the week is far from over, as NFP is tomorrow and that can be the icing of the cake for dollars direction…

Published on  Thu, Nov 6 2008, 12:13 GMT

Markets Await their Fate After US Elections…

Thu, Nov 6 2008, 10:54 GMT
by Lena Manousarides

FXstreet.com Independent Analyst Team

America has spoken: Barak Obama won the elections in a historic win as he became the first African American President in the history of American politics. Markets welcomed the result with relief and Asian markets gained more than 400 points after the formal announcement. The same thing happened to the greenback which gained all across the board and EUR/USD revered its previous gains towards 1.31 and slumped once more towards 1.27!

Today the economic calendar has enough releases to keep us busy and traders are waiting with anticipation the ADP number which will give us some kind of idea what the payroll data will give us later in the week. The report is not accurate at the best of times; however there is always a reaction after the release. Analysts predict that nonfarm payrolls will be very disappointing this month and markets are bracing for the bad news to unfold. European markets are already down today and it will be interesting to watch the New York open. Also we have the ISM Non Manufacturing release today and the number is expected to dip once again. The latest data out of the US shows that its economy is heading towards recession and the final proof will come this Friday with the NFP.

EUR/USD dropped once again towards 1.27, after yesterday’s gains, which took the pair above 1.30. The market rejected 1.30 once again and after the election result the dollar appreciated once again. At the moment the pair is moving within a tight range from 1.28 to 1.29 and traders are waiting for the data in order to commit which way to go. If the ADP shows a negative number this could spark a selloff in DOW JONES and oil and therefore may increase the dollar’s strength due to risk aversion.

All the economic data out of UK and Euro zone disappointed today, after the numbers showed that the financial crisis starting to affect the real economy and therefore analysts predict that the situation is likely to get worse in the coming months. The sterling is moving again without clear direction; however traders sell the pound in every chance they get.

GBP/USD was trading heavily yesterday following the Euro’s strength, printing 1.61 - a daily high. However the move was not enough for further gains, as economic conditions in England are poor and traders are reminded the country is far from recovering its recent meltdown. Tomorrow is a crucial day for the pound, as BOE decides the interest rates and all things point to another hefty rate cut.

The sentiment is mixed at the moment as many feel that the outcome of the elections was positive in a way, as markets await Obama to solve all the problems in the economic sector. The reason we saw a rally in DOW JONES was due to investors hope that the new government could mean a fresh start and maybe a better economic future. However, this can have a boomerang effect as markets could slowly realize that the crisis will not be resolved easily and the damage might just be too severe to repair…

Published on  Thu, Nov 6 2008, 10:54 GMT

US Elections: Will the Dollar Be the Winner?

Tue, Nov 4 2008, 13:18 GMT
by Lena Manousarides

FXstreet.com Independent Analyst Team

The big day of the US elections is finally here. The dollar rose during the Early European after EUR/USD plummeted down to 1.2530; however the pair reversed its move and at the time of writing was hovering close to 1.28. It is very obvious that traders do not know which way to go and uncertainty is the theme for now.

The risk appetite came back in the markets this morning, after NIKEI gained more than 500 points and European markets are trading positive too. It all looks like that DOW JONES will follow in the same path; however let’s wait to see what happens after New York open.

Today the economic calendar is almost empty, with Construction PMI out of UK this morning, which printed a really negative number and also PPI out of Europe which also gave a lower than previous month result, giving more fuel that ECB will cut rates by more than 25 points on Thursday. Later on we have factory orders out of US and the presidential elections which will keep us occupied till the verdict becomes clear.

EUR/USD found a temporary support at 1.2530 and from then on gained almost 300 points. Next level to watch will be 1.2850-80 which holds good resistance , however if that level gives way we might see further gains towards 1.2950 once again. The bigger range for now is 1.25-1.30 and only a clear break of those levels will lead to 1.23 or 1.32 respectively.

Market participants have a lot to look forward to this week with ECB and BOE rate decision and NFP out of US the most crucial events. However let’s not underestimate the US elections as the result could very well lead to either a dollar rally or a complete dollar slump! In the previous elections the statistics showed that the greenback rose against its other counterparts as traders were trying to make sense of what the new president means for the economy. A lot of media polls are leaning towards the democrats party as the winner, and that can mean that the dollar could eventually appreciate in the coming months as it was widely known that Bush administration wasn’t a fan of the greenback at best of times.

The recent slide in the consumer confidence led many to think that there will be a lot of work till the lost confidence comes back in the American people and therefore until we see some signs of recovery in the economic data, we can say that another market collapse could very well be in the cards. The key to that will be the nonfarm payroll data this Friday and the forecasts are giving us a really bad number of -200.000 jobs. This will mean that the country is in recession and the first job of the new political party after they get elected is to try and fight further economic deterioration.

So, let’s wait and see what the day brings and how the markets will interpret the US elections result and the question that everyone is asking is if the dollar will continue its recent rally or put a temporary break until further events unfold…

Published on  Tue, Nov 4 2008, 13:18 GMT

This Week Will Either Make or Break Dollars Recent Rally!

Mon, Nov 3 2008, 12:00 GMT
by Lena Manousarides

FXstreet.com Independent Analyst Team

What a big week we have ahead of us, what with important economic data out of US and Europe and also the long awaited rate decisions by ECB and BOE which are expected to shake things up for the currencies.

Let’s not forget that tomorrow is the big day for US as the next president will be chosen and that can really affect the market outlook by far more than traders expect. The latest financial woes are still fresh in traders’ minds and therefore all eyes will be on the next President in order to determine how they will deal with the US and global crisis. There were several speculations that the dollar strength these weeks had to do with the elections and when the elections are over, the dollar will weaken once again to reflex the fundamentals. This is just a speculation though and we shall see what happens tomorrow and how traders will welcome the election results. There is a lot of talk amongst traders that republicans favor a weak dollar and especially the Bush administration was all for that. However with a new person in power from either party, markets are not aware of their agenda and so until they are sure of their strategy, markets will be very unpredictable.

Today the economic calendar has some important releases later on, with ISM Manufacturing out of US which again is expected to print a really negative number. We don’t expect any surprises on the upside from the data as the latest numbers suggest US economy is heading for recession. In the morning we had PMI out of Euro zone which was worse than previous month and also PMI out of UK which came better than expected but failed to move the pound. Traders await Kings Testimony later today, which along with Alistair Darling they will testify in front of the parliament for the state of the economy and the financial crisis. The sterling will fall further if their tone is dovish and that might signal a bigger rate cut later this week.

EUR/USD hovers between 1.28 and 1.29 and traders are not very keen on committing either way in the pair just yet, as they have a long week ahead of them. The pair needs to take out 1.2930-50 before we can say that there is further gains towards 1.30.As long as 1.27 holds we can see further gains for the pair, however if the latter level gives way then next target may be 1.2630 or even 1.2580.

The Japanese yen is still on the defensive since early European session and the fact that today Japan was closed due to bank holiday combined with gains in the rest of Asian markets made investors sell the yen.

It will be interesting to see where this week will lead currencies and if tomorrow’s election outlook put a dent in dollars recent rally. Whatever happens tomorrow one thing is for sure: dollar has plenty of reasons to get weak in the coming days, as NFP is expected at the end of the week to print -200.000 jobs! That alone is a big deal for economic conditions as it will be now the 10th month that payroll data is negative which will formalize the fact that US was, is and will be in recession…

Published on  Mon, Nov 3 2008, 12:00 GMT

EUR/USD Rejects 1.30 Again! More Dollar Strength Expected?

Mon, Nov 3 2008, 08:24 GMT
by Lena Manousarides

FXstreet.com Independent Analyst Team

Another week is coming to its end, with markets still unsure of what the global economic future will bring. NIKEI fell more than 400 points overnight after Bank of Japan dropped its interest rates by 0.30 more than traders anticipated and the reason they went to that extreme move was fear of the economic meltdown hitting Japanese Banks in the coming weeks. Yen seems to be unchanged from the move and USD/JPY still hovers around 0.98. Let’s not forget that this time last week we had a yen appreciation against all currencies and due to risk aversion the Japanese currency made record moves against its other counterparts.

EUR/USD dropped again after it hit 1.3295 during yesterday’s session. The pair didn’t manage to break important resistance at 1.33 and therefore it dived again today. Let’s not forget that at times of uncertainty and fear, traders are not convinced easily that things got better and even with European markets and DOW JONES appreciating, the sentiment remains negative. Next level to watch will be 1.26 ahead of 1.2560.

Today the economic calendar has a few releases from Europe, with German retail sales which dropped again unexpectedly pushing euro to new daily lows below 1.27. The economic data out of Europe continue to disappoint and until we see some kind of positive numbers, the euro won’t have the chance to get bid. Also later today we have releases out of US, with consumer spending and income together with consumer confidence. The fact that the latest data form GDP showed economy contracting combined with a record low consumer confidence spark new fears of US recession and the move by FED to cut rates shows that the Bank fears the worse is yet to come.

US elections are very close and the closer they get the more wary traders get as the outcome of who wins will be crucial for dollars direction in the coming months. Also later today we have a speech by FEDs Bernanke at a financial symposium in Boston regarding the latest financial meltdown and traders will monitor closely his words for further hints as to what the bank will do to fight recession. Analysts predict that FED will be forced to cut rates once again and drop the rate below 1% for the first time in the history. This move one could say could bring more panic than relief as desperate times need desperate measures!

So far Europe and markets are mixed and it will be interesting to see how DOW JONES will react after the New York opening. One thing is for sure these days, stocks and currencies go up only for a little while and traders should try not to get attached to the upside as the risk of another meltdown in the global markets is still great.

Two things for the rest of the day to watch are US data and Bernanke’s speech and also the New York closing later on, as today is the end of the week and also the month and therefore traders might be adjusting their trades accordingly…

Published on  Mon, Nov 3 2008, 08:24 GMT

Crucial FED Decision for Dollar Direction…

Wed, Oct 29 2008, 12:54 GMT
by Lena Manousarides

FXstreet.com Independent Analyst Team

Yesterday was the first positive day for all global markets, after last Friday’s nonstop collapse. DOW JONES and NIKEI printed heavy gains and the same is happening this morning with European markets. The sentiment though is far from positive yet and traders are still waiting the point which everything will continue falling again!

EUR/USD broke 1.28 and printed a new high for now at 1.2850. The move was strong enough and as long as 1.25 doesn’t give way, there is more scope for 1.2980 or even 1.30. However, in order for this to happen we need to have a risk aversion free environment.

Today we have the durable goods orders from US which is expected a bit better than last month; however with the current economic conditions in US and the record low consumer sentiment, it’s possible that the number will be bad once again. The most important event of the day is FOMC meeting later on today and traders are waiting patiently to hear what Bernanke and co have to say for themselves in regards to the current financial crisis and the inflationary pressures. The forecasts are showing that FED will cut rates by 50 points today and maybe more in the next meeting. Some analysts are even predicting the current financial crisis may force FED to take stricter measures and cut by 75 or even 100 points. That scenario is extreme, but in extreme times we need extreme measures. My feeling is the Bank will maybe cut rates by another 25 or 50 points today, so they can have room to cut again if needed in the next few weeks.

Oil is still trading on the defensive, however for now it seems that $60 per barrel is still intact. The next potential sell off though could easily take out $60 per barrel and have oil drop even further towards $50 per barrel. It will all depend on the global worries and fears from investors and if we get another “black” trading day then anything is possible.

The question now that arises after yesterday’s gains in euro and DOW JONES, is if this move continues today or even till the end of the week. Everything in the charts so far shows that EUR/USD has further room for gains and yesterday’s closing candle is the first positive for a long time. The fact that traders anticipate FED to cut rates might give further weakness in the dollar and therefore to help the euro appreciate more. As we said before though, times like the ones we experience now are far from normal and something that we took for granted before might just not work anymore.

So, it is imperative to see what happens tonight after the FED decision and also listen to Bernanke’s statement for hawkish signs because that can cause the dollar to regain its losses in an instant. Let’s not forget that next week we have the ECB decision and traders are already pricing in another cut from the Bank.

Whatever happens today, one thing is for sure: things will get interesting right about FED decision time and it will be crucial for markets direction to see today’s New York closing.

Published on  Wed, Oct 29 2008, 12:54 GMT

What Will Another Rate Cut Mean for the Dollar?

Tue, Oct 28 2008, 11:26 GMT
by Lena Manousarides

FXstreet.com Independent Analyst Team

Another week has started and the markets seem unsure of what the next day will bring… Yesterday was the first day of some gains for DOW JONES and NIKEI and also for the euro which rose against the greenback as the risk aversion took a small break for now.

EUR/USD printed a new low during yesterday’s European session, breaking important support at 1.24 and dropping all the way down to 1.2330. However after the New York open, we saw some heavy bids on the European currency and therefore the pair moved towards 1, 26 once again.

Today’s calendar has a few releases to keep us interested, with CBI realized sales from UK which is expected low once again and also Consumer Confidence out of US which will be interesting to see what it comes out this time, what with the latest economic developments and also the US elections just around the corner. There is a lot of speculation that the US election outcome will create a volatile environment for the dollar and depending on which party will get in power, the dollar will act accordingly. According to many economists, the Democratic Party favors a strong dollar in contrast with Republicans who “love to hate” the greenback. Whatever the outcome one thing is for sure: we shall see great moves and traders more confused as to what the party in power will implement in order to make economy strong again.

All market participants will get ready for tomorrows FOMC meeting and all eyes and ears will be upon Bernanke and the members of FED, which are expected to cut interest rates by at least 50 bps. It will be very interesting to see how the dollar will react to all this and especially DOW JONES and if traders take the news as good news

The market sentiment is still negative and one would say that markets are in a wait and see mode, just waiting for the next “accident” to happen. No matter how many injections that Central Banks or Governments do in the financial systems are not enough to give investors their lost confidence back and in order for that to happen we have to see big changes in the economic fundamentals.

Many analysts and economists are saying that we are entering a period of global recession and that can easily last over the next 10 years. It is amazing to think that part of the problem started with the subprime mortgage in US a year ago but seemed to spillover Europe and Asia as well. Central banks are on a mission now to cut their borrowing rates and markets already are pricing in further rate cuts by BOE and ECB in the next monetary policy meetings. Trichet himself said yesterday and today in an interview that the Bank is ready to cut rates once again as the inflationary pressures eased. Let’s not forget that ECB has more room to cut rates than US and therefore we shall see if the rates ease down towards 2%.

Let’s see what today brings and how traders will position themselves for tomorrow’s events. The normal thing for dollar to do at times of interest rate cuts is to fall, however at present times were nothing is normal anymore, anything is possible…

Published on  Tue, Oct 28 2008, 11:26 GMT

It is True What They Say: "Trend Should Always Be Your Friend"…

Fri, Oct 24 2008, 09:00 GMT
by Lena Manousarides

FXstreet.com Independent Analyst Team

The free fall continues for markets across the globe, with DOW JONES dropping more than 500 points yesterday and NIKEI also on a downtrend. The fear and uncertainty for the global economic future is what drives the moves these days. After the disappointing earnings we had from Banks and global corporations, traders are not sure if and when the world will head to recession and the fact the UKs officials said that the country is getting closer to recession makes everyone nervous.

England’s Prime Minister Gordon Brown told the parliament that he agrees with BOEs Governor King that UK is likely to enter recession soon together with US, France, Germany and Japan, due to the latest global crisis. His words were welcomed with renewed fears from traders regarding UKs economic fate and therefore we saw GBP/USD breaking 1.62 briefly.

EUR/USD is trading within 1.27-1.29 range since yesterday and only a break of 1.2980-1.30 can give the pair more room to breathe. However, on the downside If 1.27 gives way, then 1.25 comes as a possible target. It’s better to trust the old saying: “The trend is your friend” and go short any upticks on the pair. Until we see signs of stabilization and reversal signals, it’s better to go with the flow and sell at every chance given.

Many European officials have stated these days that they are happy with euro levels at the moment, and if we go back a few months we will remember several announcements by ECBs members that said 1.25-1.30 is a “fair” currency level for the European currency. That means that we might see the pair staying within these levels for now unless we have new risk aversion wave and more dollar strength therefore.

Today’s economic calendar is almost empty from important announcements, apart from UK retail sales which are expected worse than previous month, however traders now are aware that UK data will be grim for the coming days and therefore unless the number is very bad we may not see any big movement. Also we have US jobless claims later today and a FED member speaking in a conference regarding the state of the economy.

Today we also have the Bank of Canada monetary policy report and it will be interesting to see the ins and outs of what went on after the bank cut the rates by 25pbs, only a few days back. USD/CAD is on the way to 1.27 and only there it might come to a good resistance, however whatever correction the pair does it is still a good idea to go long, especially with oil deteriorating.

Let’s see what today brings, and how the futures and stocks will react later today after the New York open. After two days of big losses in the markets we might see some correction, however if the sentiment remains negative then get ready for another “wild ride”…

Published on  Fri, Oct 24 2008, 09:00 GMT