Daily Economic Commentary: United States

[PipDiddy]

It didn't take long for bulls to regain control of the dollar. They put its two-day slide to an end and erased some of its recent losses as a flight to safety boosted the safe haven currency. While EUR/USD slid 52 pips to close at 1.2995, USD/JPY finished 25 pips higher and ended at 78.03. Can the dollar hold on to its gains this time around?

So far, the dollar seems to be benefitting from uncertainty in the euro zone. Even though the European Union recently drew plans to set up a 150 billion euro credit-line with the International Monetary Fund, a lot of questions remain unanswered, and in turn, this has been weighing down on investor confidence.

Considering the fact the investors are still quite focused on the European debt crisis, I would say that market conditions continue to favor the dollar. I wouldn't be surprised to see it chalk up more gains today!

Let's just hope that today's housing starts and building permits data don't disappoint. The reports, which are due at 1:30 pm GMT, could trigger a dollar rally if they show positive results. Housing starts are expected to tick up from 630,000 to 640,000 while building permits are seen to fall from 640,000 to 630,000. Since this will give the markets its first taste of significant U.S. data this week, it could have a substantial impact on the dollar, so don't miss it, homies!

[PipDiddy]

So much for a putting an end to the dollar’s losses! Thanks to better-than-expected economic data from the U.S., the high-yielding currencies gained ground against the Greenback. The dollar bears were able to push GBP/USD 156 pips up from its open price, while EUR/USD also rocketed by 83 pips to 1.3078.

The good vibes started spreading during the London session when Germany printed better-than-expected economic reports. Not only that, Spain apparently had a successful bond auctions too, selling 5.64 billion EUR worth of bonds against the target of only 4.5 billion EUR.

Still, it was the U.S. economic reports that sealed the deal for the currency bulls. The U.S. building permits printed at 680,000 in November, a 9.3% jump that represents the highest level in 19 months. In addition, housing starts clocked in at 690,000 in the same month against expectations of only a 640,000 million figure. Booyah!

Let’s see if the U.S. can follow through with its string of strong economic reports today. At 3:00 pm GMT we’ll get hold of the existing home sales report, followed by the crude oil inventories data at 3:30 pm GMT.

Keep a close eye on these reports if you’re trading the news!

[PipDiddy]

The dollar made up for its lackluster performance on Wednesday by taking back a good number of pips it had lost against its major counterparts. It stole 23 pips away from the yen while snatching 31 pips away from the euro. Let's see if it'll hold on to its gains today!

Although existing home sales data came in disappointingly, the dollar remained the king of the hill as the ECB's decision to dish out big loans to European banks boosted demand for the safe haven currency.

Existing home sales fell short of expectations last month, registering an annualized number of homes sold of just 4.42 million rather than 5.04 million. To make matters worse, October's 4.97 million figure was revised down to just 4.25 million. Ouch! We already knew the U.S. housing market was in bad condition... but apparently, it's even worse than we thought!

At 1:30 pm GMT today, we'll take a look at the latest unemployment claims data. Survey says that a total of 376,000 individuals filed for unemployment benefits last week, slightly up from the previous week's 366,000 claims.

At the same time, the U.S. final GDP report will be due. No changes are expected to be made to the previous estimate which measured GDP growth at 2.0% last quarter. That being the case, the markets may react if we see a figure other than 2.0%.

Last but not least, at 2:55 pm GMT, the revised University of Michigan consumer sentiment report will be available. My homeboys say we'll likely see an upward revision from 67.7 to 68.1.

Phew! With so many reports on tap, we could be in for another wild day! Just remember to practice smart risk management so you don't get burned, playas!

[PipDiddy]

What a comeback by Uncle Sam! What looked like a surefire loss turned out to be not-so-bad, as the greenback was able to buck its earlier losses. After hitting a high at 1.3120, EUR/USD came crashing back down to finish at 1.3050, just 3 pips higher than its opening price. Meanwhile, GBP/USD backed off the 1.5700 handle to close at 1.5677, right smack at its opening price.

So changed that allow the dollar to rally?

Apparently, we saw a mini wave of risk aversion creep back into the markets, as we received some disappointing GDP figures. The U.S. economy grew 1.8% last quarter, which was below the expected 2.0% figure. That figure, along with rumors that France may get downgraded, spooked the markets and helped the dollar rally.

In other news, initial jobless claims came in slightly better-than-anticipated, printing at 364,000. This was below the expected 376,000, and also marked a small improvement from last week’s 368,000 number.

Meanwhile, the revised University of Michigan consumer sentiment index came in at 69.9, which was a decent improvement from the initial report’s score of 67.7.

For today, we’ve actually got a slew of red flags coming up during the New York session.

At 1:30 pm GMT, both the core durable goods and core PCE price index will be released. Expectations are that core durable goods orders grew by 0.5% last month. If today’s report comes in worse-than-expected, it could spark another wave of risk aversion. As for the PCE price index, just remember that this is the Fed’s preferred measure of inflation and it is expected to show that inflation remains subdued at 0.1%. Any major deviation from this figure may elicit a strong market reaction, so be careful.

Later on at 3:00 pm GMT, new home sales figures will also be available. Word is that the annualized rate of new home sales increased from 307,000 to 314,000 in the past month. Take note that we’ve seen mixed results from the housing sector this past week, so don’t be surprised if the report comes in exceedingly better or worse than projected.

That’s it for this week folks! Let me just wish you a Merry Christmas! Hopefully you get an early Xmas present and make some pips today!

[PipDiddy]

Will the Greenback be able to party like it's 2012? It seems like it spent the last few days of 2011 losing ground to most of its major counterparts, except for the euro. EUR/USD ended the year below the 1.3000 handle while the rest of the higher-yielding currencies enjoyed the Santa Claus rally.

Although there weren't a lot of hard-hitting economic reports released towards the end of the year, we saw a pretty decent risk rally as Forex Gump predicted in his article about a possible Santa Claus rally. One reason that could explain this was that traders closed out their positions before 2011 came to a close. Another reason was that Italian bond auctions turned out slightly better than expected, as yields didn't spike up too much.

Aside from that, the U.S printed a couple of better than expected economic figures just after Christmas. Pending home sales beat expectations and showed a 7.3% increase, which was a lot higher than the estimated 1.7% gain for November. Chicago PMI came in at 62.5, surpassing the consensus at 60.4.

For today, the economic calendar is as empty as my wallet after all that holiday spending. Banks are still on a holiday, which means that we could see less trading activity for the day. Better use this time to review how the major currencies fared last year or to read up on what's in store for the markets this 2012!

[PipDiddy]

With traders still partyin’ likes its 2012, consolidation reigned over the markets as expected. EUR/USD traded within a tight range of just 50 pips, while GBP/USD trading was choppy and eventually closed at 1.5501, just 3 pips below its opening price for the day.

No surprises here, as most markets were still off on holiday and no hardcore data was released. That could all change today though, as we’ve got some really red flags on deck during today’s New York session.

First, we’ve got the ISM manufacturing PMI coming out at 3:00 pm GMT. The index is projected to print a reading of 53.3, which would mark the third consecutive month that the index has improved. If the figure comes in much better-than-expected, it could serve as a catalyst for a risk rally, so watch out!

Later on at 7:00 pm GMT, Ben Bernanke and his boy band will turn up the heat when the minutes of the latest FOMC meeting are released. The minutes will reveal what was discussed and what exactly are on the minds of Fed officials.

[PipDiddy]

Aha! It looks like currency bulls tried to put their Usher on but they just couldn’t ignore positive data and let them burn. Risk appetite caused the demise of the dollar on the charts yesterday which consequently scored losses against all of its major counterparts.

EUR/USD rallied 127 from its opening price to close the day at 1.3054. Meanwhile, USD/CHF ended the day with an 82-pip loss at .9321.

It was reported yesterday that U.S. factories grew at the fastest pace in six months in December. The ISM manufacturing index printed at 53.9 after coming in at 52.7 in November, topping the consensus which was for a more modest increase to 53.3. This, along with positive reports data from the euro zone (details in my EUR commentary), sparked risk appetite.

With that said, be sure to keep tabs on the roster of reports that we have on tap today. Only the factory orders report for November is due from the U.S. (eyed at 1.9%). However, we do have a few from the U.K. and the euro zone too which could shift market sentiment.

Also, another event that we have to look forward (about three weeks from now) is the Fed's first published interest rate forecast. Yup, you read that right. The FOMC minutes revealed that the Fed will begin publishing its forecasts. Apparently, the dudes and dudettes of the FOMC decided on the move in December but chose to keep it a secret until yesterday. Sneaky, eh?

[PipDiddy]

Guess who's back in the game! The dollar yo! It followed up its big loss on Tuesday by clawing back and snatching a few pips away from its major counterparts. It managed to steal 108 pips away from the euro while gaining 8 pips against the yen. Will concerns about the euro zone debt crisis continue lifting the dollar today?

Judging by yesterday's market action, it seems like the tides of risk sentiment may be turning in favor of the dollar again. Euro zone debt jitters resurfaced as a report from Spain indicated that the government is considering applying for a loan from the IMF and EU to restructure its banking sector. In turn, this helped fuel demand for the dollar.

Developments in Europe aside, it would be wise to also catch today's U.S. reports. Considering how the markets reacted to Tuesday's positive U.S. data, we could see a similar reaction if the ADP non-farm employment report prints an upside surprise later at 1:15 pm GMT. Forecasts have this report showing an increase of 176,000 jobs last month, down from the 206,000 increase in November. However, there are those that believe that the ADP report will confirm the economy's recent positive momentum.

Keep an eye on for this report, lads! Remember, employment has been one of the Fed's main considerations in determining monetary policy. Besides, the ADP report is often viewed as a preview to the NFP report, which is already due this Friday.

After that, at 1:30 pm GMT, we'll take a look at initial claims data. This weekly report is slated to show a total of 375,000 filings for unemployment benefits, down from the previous week's 381,000 claims.

Last but not least, the ISM non-manufacturing PMI will round up our day at 3:00 pm GMT. Look for this index to mirror Tuesday's manufacturing PMI data and show a nice improvement from 52.0 to 53.0.

[PipDiddy]

Who’s the king of the forex hills? That’s right, the Greenback is! The dollar showed the markets who’s boss yesterday after it gained sharply against its major counterparts on risk aversion and strong U.S. reports. EUR/USD plunged by as much as 119 pips, while USD/CHF shot up to close 111 pips higher than its open price. Booyah!

I could tell you about concerns in the euro zone and how the latest bond auctions gave the region’s investors more worries, but I’ll just tell you about the other factor why the dollar strengthened so much yesterday.

Why, it’s the employment-related reports, of course! The Challenger report on planned job cuts started the day on a positive note by printing at its lowest levels since June last year. Not only that, the ADP report also clocked in at 325,000 in December, which is A LOT better than the 176,000 figure that many were expecting.

Then, the initial jobless claims report also showed an improvement, dropping by 15,000 from its revised 387,000 number. The ISM services PMI disappointed expectations though, with its 52.6 reading against expectations of 53.00. Still, it was a bit better than November’s 52.0 figure, so I guess the investors didn’t feel too bad about it.

For today the NFP report and the U.S. unemployment rate are due at 1:30 pm GMT. For the newbies who just started trading forex, you should know that these reports are one of the closely watched, if not the most closely watched reports in across markets because of their significance on the world’s biggest economy.

Good luck trading the NFP, brothas!

[PipDiddy]

The safe haven Greenback continued its domination last Friday thanks to a strong employment report. The U.S. dollar index, which tracks the performance of the currency versus other major currencies, ended the week at its highest level in almost a year at 81.85.

The U.S. employment report showed that 200,000 net jobs were added in December, which was much higher than the 152,000 increase initially predicted. The unemployment rate also improved, falling to 8.5% from 8.7% the previous month.

Whether the Greenback's rally will continue this week or not will depend on how high economic reports from the U.S. will come out.

The first red flag on the economic calendar is the U.S. retail sales. It is scheduled to publish at 1:30 pm GMT on Thursday, and is expected to print a 0.3% rise. The core version of the report is also predicted to show the same increase.

The unemployment claims that will be released at the same time is also something to keep an eye out for. The consensus is a 370,000 figure. Given the strong employment figures for December, we could actually see the actual figure beat forecast.

On Friday, watch out for the Preliminary University of Michigan consumer sentiment survey. The survey tends have a strong impact on price action, so pay attention to it! The market is expecting a 70.8 reading, which is a slight improvement from the previous month's 69.9.