Daily Economic Commentary: United States

Trading Discussion News and Economy
346

Holy smokes Forex Gump, what is going on with the dollar? The dollar took a hit yet again yesterday, as anti-dollar sentiment seems to be growing by the day. EUR/USD broke past and 1.3900 handle yesterday and I can’t help but ask, will we see a test of 1.4000 by the end of the week?

The dollar once again took a kick to the gut, as the ADP employment report came in much worse than expected. The report printed job losses of 39,000 last September, after it was expected that 23,000 jobs would be added! Talk about being off target!

In any case, this naturally led to more losses for the dollar, as this would provide more evidence for the Fed to introduce another round of quantitative easing later this year. Furthermore, it sets the stage for poor expectations for the non-farms payroll report coming out later this week.

But first, we have weekly unemployment claims data coming out tonight at 1:30 pm GMT. Another 454,000 people are projected to have filed for unemployment benefits in the past week. If this figure were to come in worse than expected, we may just see another round of dollar selling take place.

347

and I can’t help but ask, will we see a test of 1.4000 by the end of the week?

You mean by the end of the morning? lol

348

Whoa! Did you see how the dollar traded yesterday? The dollar turned out to be like one of those action movie heroes who gets beaten up first before finally gathering enough strength to end with a win!

To illustrate what I mean, take a look at the dollar index. After falling to its lowest level since January at 77.34, it was able to pick itself up and even end the US trading session with a small gain at 77.88.

Apparently, the better-than-expected results on the initial jobless claims was able to help the dollar find some support. It showed that application for jobless benefits only amounted to 445,000, lower than consensus and the previous week’s 456,000 figure. This gave traders reason to believe that the U.S. job market is starting to get better…

But I wouldn’t bet on that just yet. Once the complete U.S. employment report for September comes out tonight, we will see a clearer picture of the labor market. Due at 12:30 pm GMT, the report is expected to show that 1,000 net jobs were created, opposite the 54,000 decline seen the month before, and that joblessness rose to 9.7% from 9.6%.

With the Fed promising to inject more stimulus in the economy in case the situation gets worse, it looks like the upcoming employment report will determine if the Fed will engage in another round of QE sooner rather later. If you want to know more about the report, go ahead and check out Forex Gump’s blog!

349

When it rains, it pours! The bad news just keeps coming for the U.S. as they published more disappointing economic data last Friday. Worse-than-expected non-farm payrolls numbers caused wild swings in EUR/USD, but the pair continued on its way up and closed at 1.3929, up from 1.3912. Likewise, from its opening price of 82.40, USD/JPY headed south and hit a low of 81.73 before it settled at 82.08.

Analysts were hoping to see the monthly decline in non-farm payrolls improve from 57,000 to 5,000 in September. Instead, the U.S.’s NFP figures came in drastically below expectations when it revealed a decrease of 95,000 jobs in September.

The unemployment rate unexpectedly stayed flat at 9.6% even as economist had predicted a 0.1% uptick. But these levels are still considered uncomfortably high by many.

By the looks of it, it seems investors are convinced we’ll see a second round of quantitative easing in November. After all, last Friday’s non-farm payrolls data gives the Fed more reason to do so, even though the central bank has yet to confirm such action. But behind every dark cloud is a silver lining. Some say the USD has bottomed out as investors have already priced in another round of quantitative easing.

Let’s see if the USD can muster the energy to fight back this week.

On deck tomorrow is the FOMC meeting minutes, which has potential to rock the markets. Remember, investors want to know what’s on the Fed’s mind at all times so they can react according to future policy moves. Expect another dollar sell-off if we receive any dovish remarks at 6:00 pm GMT.

Wednesday picks up with Fed Chairman Bernanke’s speech at 8:10 am. Again, be sure to catch this one as Bernanke may slip and give clues about future Fed moves. Questions from the audience will likely be entertained, so who knows what will be said!

Then on Thursday, the U.S. rolls out a trio of hard-hitters, all at 12:30 pm GMT.

Expect to see prices of finished goods and services sold by producers to increase by 0.2% in September to follow up the 0.4% increase in August.

Similarly, the trade balance deficit should widen from 42.8 billion USD to 43.4 billion USD.

Also, the weekly unemployment claims figure is due and is slated to show a 445,000 claims for unemployment benefits last week.

Finally, Friday wraps up the week with September’s retail sales data. After seeing a 0.4% increase in August, don’t be surprised to see a 0.3% uptick for the month of September! The U.S. will need strong growth in consumer spending if they want to strengthen its recovery. Weaker-than-expected figures in this report may just seal the deal for QE round 2.

350

It ain’t over ‘til the fat lady sings! After days of losing against its major counterparts, the Greenback finally showed signs of life. Market players were eager to buy it up even though the U.S. was on holiday celebrating Columbus Day yesterday. Greenback bulls rallied to bring EUR/USD down to 1.3873 to seal a 113-pip slide for the day.

No high-tier reports were released yesterday, but Fed officials gave the Greenback all the support it needed with their hawkish words.

Fed President Hoenig, true to his hawkish tendencies, did his thing and said that low interest rates would do more bad than good. Recall that this is the same Hoenig that has been the lone FOMC official pushing for tighter monetary policies.

Vice Chair of the Fed’s Board of Governors Janet Yellen seems like she’s not seeing eye to eye with the doves, too. She warned that the Fed’s extremely accommodative policy may promote excessive risk-taking. That’s something you definitely wouldn’t want in such a time of economic doubt. But she isn’t all out for the hawks yet. She said the Fed should focused on cutting stimulus “when needed,” rather than on pushing for more stimulus.

With the way investors have been treating the Greenback, it’s clear to see they’ve made up their mind about further quantitative easing. But clearly, the Fed has not, judging by the different views Fed officials have on QE round 2. Luckily, we have the ever-so-important FOMC meeting minutes up ahead to shed some light on the matter. Be careful at around 6:00 pm GMT. The minutes are due for release at that time and it usually causes wild swings on the charts!

351

The dollar’s performance on the charts yesterday was as wack as The Situation’s (aka Mike Sorrentino) groove on the latest Dancing With The Stars episode. Save for the pound, it lost against all of its major counterparts. It erased the gains it made against the euro during Asian and European sessions when EUR/USD dipped to an intraday low of 1.3775 as the pair ended the day with a 43 pips higher at 1.3916. Boo!

Yesterday we saw that consumers were more optimistic about the economic conditions in October, with IBD’s seniment index printing at 46.4, higher than both the 44.5 consensus and its 45.3 reading in September. But traders seemed to have shrugged the positive vibes that might have come from the report, and focused on what the Fed had to say in its most recent monetary policy meeting. Too bad for the dollar, the minutes showed that the FOMC was more inclined to providing the economy with more stimulus. Uh oh…

Wait, before you go hatin’ on the dollar, remember that the meeting was held 3 weeks ago and recent comments from Fed officials show that the FOMC is still undecided on whether or not to pull the QE trigger. If you want more details on the FOMC stay tuned to Forex Gump’s blog later.

You may also want to listen in to Fed Reserve Chairman Ben Bernanke’s speech at 8:10 GMT today, as he may drop some hints about the bank’s decision. Along with that, we also have the import prices for September on tap. Ah, it looks like the dollar won’t get some lovin’ from the report with the market is expecting to see prices of imported goods to have declined by 0.1% during the month. Yikes!

May the pips be with y’all!

352

Who wants Greenbacks? Well, according to yesterday’s price action, no one does! The USD sold off strongly and lost against all of the other major currencies, save for the CHF. EUR/USD flirted with the 1.4000 handle as it rose to a high of 1.4003 before closing 39 pips higher for the day at 1.3956.

Talks of QE round 2 continue to haunt the Greenback. Investors are acting as though they’re already convinced we’ll see the Fed take action by November. No wonder the dollar index has fallen to a 9-month low!

Still, there are a few Fed members that believe they should wait until the economy prints more bad data before they begin further easing. They might just get what they wished for today.

At 12:30 pm GMT, the U.S. is scheduled to dump a trio of hard-hitters.

First off is the PPI report, which is slated to show a mere 0.2% uptick in September to follow up the 0.4% increase in August. Keep an eye on this one. If it prints worse-than-expected results, it may be an indication that deflationary threats are increasing, and it could prompt the Fed to act sooner.

We also have the trade balance report on deck. July posted a 42.8 billion USD deficit. But the figure to watch is 44 billion USD because this is the deficit the U.S. is expected to have racked up for the month of August.

Last but not least, we have the weekly initial claims data. Most believe the report will show that 445,000 individuals claimed unemployment benefits last week, the exact same number as the previous week.

As always, be on the lookout for a downside surprise that may hammer in another nail in the USD’s coffin. Good luck out there, folks!

353

I’m starting to wonder if the USD likes the taste of defeat. Yesterday, thanks to a couple of disappointing reports, it chalked up big losses against its major counterparts again. EUR/USD rose an awesome 115 pips and finished at 1.4072; USD/JPY slid 29 pips and closed at 81.47; and GBP/USD climbed 112 pips and ended at 1.6003.

Soft trade balance figures kept the dollar from recuperating its recent losses yesterday. The 42.6 billion USD deficit in July grew to 46.3 billion USD in August, thanks in part to a big jump in trade with China.

The U.S. has been complaining about the “artificially weak” yuan and its negative effects on U.S. trade. They say the yuan’s low value gives China an unfair advantage, making U.S. exporters less competitive in global markets. Not only that, but it tends to widen the trade deficit the U.S. has with China. Judging by the latest data, they may have a point.

The weekly initial claims report failed to provide the USD with any support, too. Unemployment claims last week were worse than the expected 445,000. The number of individuals who claimed unemployment benefits was at 462,000, up from the previous week’s 449,000. Analysts were hoping to see indications of the labor market bottoming out, but it doesn’t look like they’ll be getting them soon. Some even say we’re seeing signs that employment growth in the private sector is beginning to slow.

The only bit of good news the U.S. got yesterday was from the PPI report, which posted a respectable increase. Producer prices rose 0.4% in September, matching the previous month’s uptick and beating forecasts for a 0.1% increase. But don’t expect this to keep the Fed from pulling the QE2 trigger. At best, it will probably just make them consider toning down easing measures.

Up ahead, we have more high-tier events on deck.

First, Fed Chairman Bernanke is due to speak about “Monetary Policy Objectives and Tools in a Low-Inflation Environment” at 12:15 pm GMT. As always, it’s best to see what the man has to say because he may just let slip a few details regarding the Fed’s future policy moves.

The much-awaited retail sales report will also be available today. Will September deliver and post a 0.3% growth to follow up the previous month’s 0.4% uptick? You’ll just have to tune in at 12:30 pm GMT to find out!

Likewise, the CPI report is due at 12:30 pm GMT. August printed a 0.3% rise in prices, but anything less than the expected 0.2% uptick for September will probably cause another USD selloff. The U.S. has been battling deflationary threats, after all.

Last but not least, the preliminary University of Michigan consumer sentiment report answers the age-old question, “How are you?” Analysts believe the report will likely say that consumers are feeling a bit more optimistic. They predicted last month’s reading of 68.2 to rise to 69 in October.

There you have it! Good luck out there, and may you bag massive pips to end the week!

354

Boy did the Greenback bring sexy back last Friday! The dollar scored wins against its major counterparts save for the yen. It gained the most from the euro with 97 pips when EUR/USD closed the week at 1.3975, and the Swissy with 54 pips when USD/CHF closed at 0.9530. Boo yeah!

Some naysayers cite that it was profit-taking which fueled the dollar’s comeback and had traders shrugging off mixed economic reports and Fed Reserve Ben Bernanke’s pessimism. Let’s do a recap, shall we?

First there was the retail sales report which showed that consumer spending was up by 0.6% in September, and was double the consensus. Sales excluding volatile items such as automobiles also came in better than the expected 0.3% growth when it printed at 0.4%.

Then there was the Empire State Manufacturing report which showed that manufacturers in New York are more optimistic about the economy in October when its index tapped in at 15.73, overshooting both its 6.0 forecast and September’s 4.10 reading.

But it wasn’t all good in the hood for the dollar.

Fed Reserve Ben Bernanke signaled that the central bank will likely increase its asset purchases in November when he said that “there would be a case for further action.” Uh oh…

Among his worries were high unemployment and the risk of deflation, and latter was backed by the CPI report released on Friday which showed that prices in September only rose by a puny 0.1% and fell short of the 0.2% consensus.

Adding more bad vibes was the Preliminary University of Michigan Consumer Sentiment report which revealed that consumers are less optimistic about the economy in October with the index printing at 67.9, lower than the 68.8 consensus and the 68.2 reading in September. Dang son!

Hmmm, I wonder if the dollar will get lucky in today’s trading with the economic reports we have on tap. You may want to tune in to the Treasury International Capital report due later at 1:00 pm GMT as that would show whether or not the strong demand for U.S. dollars that we saw in July continued in August. A figure higher than its previous reading at 61.2 billion USD will probably be bullish for the currency.

Then we have the capacity utilization and industrial production indices for September at 1:15 pm GMT which are expected to come in at 74.8% and 0.2%, respectively. To end the dollar’s roster of economic hollers today is the NAHB builders survey for October which is anticipated to show that outlook for home sales improved with its index forecasted at 14.0, higher than its 13.0 reading in September.

You may want to be careful in betting your pips on the dollar though. Because if you ask me, I don’t think barely-better-than-expected figures will be enough to turn Big Ben’s frown upside down and stop talks about the Fed launching QE2. Good luck!

355

It looked like the dollar was going to continue its winning ways from last Friday, but like I always say, sentiment can change on a dime and that’s exactly what happened! After hitting an intraday low at 1.3831, EUR/USD rose back up to close above its opening price, finishing at 1.3992! Tough luck Uncle Sam!

While many traders looked to take some profits last Friday, it seems that others found yesterday’s price action as just another way to sell the dollar a better price. It’ll be interesting to see whether this continues for the rest of week, especially with the G20 block having a party during the weekend. I hope they don’t forget to send me my invitation this time. After all, every party needs a DJ right?

Anyway, back to the economic roundup…

The markets were hit with some surprising data yesterday, as the Treasury International Capital report showed that 128.7 billion USD worth of long term Treasuries were bought up. This blew past expectations of 61.2 billion USD. The report also showed that there was actually significant demand from China and Japan.

Take note though, that this data reflected August’s figures and that during that month, the dollar actually remained steady. It’ll be interesting to see if September’s figures drop like a brick, considering that the USD took a massive hit last month.

Meanwhile, both capacity utilization and industrial production came in worse than expected. Capacity utilization came in at 74.7, failing to hit the 74.8 consensus, while industrial production dipped by 0.2% in September, after it was expected to maintain growth of 0.2%. This indicates that despite the dollar’s recent weakness, it has failed to boost U.S. manufacturing significantly. Hmmm… more reason for quantitative easing eh?

Looking ahead, we’ve got some housing data coming up at 12:30 pm GMT, with housing starts and building permits data scheduled for release. The two reports show the annualized figure of permits issued and buildings that began construction in the past month, and are expected to print at 580,000 and 590,000 respectively. If these reports come in better than expected, it could provide the dollar some support to help it recoup from yesterday’s beating.

Finally, we’ve got a slew of FOMC members scheduled to drop some bombs on the markets today. Watch out for any mention of further QE, as it might just spark some volatility in the markets.

356

Shabam! And just like that, the dollar has come roaring back! After opening just below 1.4000, EUR/USD came crashing down before finally finishing at 1.3729. For those of you who only have 10 fingers, that’s a drop of more than 250 pips!

What the Huck happened?!

Well, it seems that the major market moving news yesterday was the Chinese central bank’s decision to raise interest rates by 0.25%. While China’s economy has been booming like one of Big Pippin’s Bose speakers, it seems that there are now some worries that inflation is starting to heat up. And as we all know, one way to counter rising inflation and potential asset bubbles, is to stymie growth by raising interest rates.

This appeared to spark a run of risk aversion, causing traders to run back to the dollar screaming “Mommy!”

Later on, the dollar got more support once a group of Fed officials commented on the need for more quantitative easing. It seems that not all Fed officials are on the same page, with some saying that another round of QE may not be necessary. This helped ease the notion that more asset purchases are a foregone conclusion come this November.

Lost in all this were the mixed results from the building permits and housing starts reports. While the annualized pace of building construction kept in line with August figure of 610,000 (thereby beating consensus of 590,000), building permits failed to hit targets by printing an annualized figure of just 540,000. It was expected that the annualized pace would come in at 580,000. Nevertheless, this didn’t dampen any optimism towards the dollar.

No hardcore economic data coming out today, but keep an eye out for the Beige Book coming out at 6:00 pm GMT. No, I ain’t talking about the cook book in yo Mama’s kitchen! I’m talking about the Fed’s Beige Book. This could provide more insight as to what other Fed officials think regarding monetary policy.

357

So much for a comeback, Greenback! After struttin’ its stuff on the charts during Tuesday’s trading, the dollar posted losses against its counterparts yesterday. It gave up the most to the euro with 221 pips when EUR/USD closed at 1.3950, then the Aussie with 182 pips when AUD/USD closed at .9684, and the pound as GBP/USD closed at 1.5840. Sheesh!

  As Pipcrawler mentioned in his [blog](http://http://www.babypips.com/blogs/pick-of-the-day/looking_to_jump_in_short_eurus.html), the [market’s sentiment](http://www.babypips.com/forexpedia/Sentiment_Analysis) made a U-turn in a span of one day as it seems to have already forgotten about the threat to global demand posted by the [PBOC’s rate hike](http://http://www.babypips.com/blogs/piponomics/china_gives_dollar_bears_wedgi.html). Too bad for the dollar, it also seemed like it was also forgotten in anticipation of today’s roster of economic reports from China.

Yesterday the Fed’s Beige Book report provided little support for the currency as it contained almost the same mumble jumble as last month’s report, citing that economic activity continued to rise, but at a slower pace.

  Earlier, we saw that [consumer prices](http://www.babypips.com/forexpedia/CPI) came in as expected at 3.6% for September and China’s [GDP](http://http://www.babypips.com/forexpedia/Gross_Domestic_Product_%28GDP%29) posted a 9.6% growth for the third quarter which was better than the 9.5% forecast.

On the other hand, producer prices rose higher during the month at 4.3% than the expected 4.1%, and industrial production was lower at 13.3% than the 14.1% consensus. This could be good news for the dollar as the figures may give Chinese officials more reason to keep ‘em rate hikes coming.

  Making things even better for the dollar bulls is U.S. Treasury Secretary Timothy Geithner’s comments that there’s no need for the dollar to decline any further against the euro and the yen. Word on the street is that the dollar spike during the Asian session today was caused by his remarks. 

  See if today’s roster of economic reports can get the dollar some lovah-lovah on the charts. At 12:30 pm GMT we have the [initial job claims](http://www.babypips.com/forexpedia/Initial_Jobless_Claims)report which is anticipated to show that the number of people who filed for unemployment benefits last week was lower at 454,000 than the previous week when it was at 462,000. 

  Then at 2:00 pm GMT we have the [Leading Indicators](http://http://www.babypips.com/forexpedia/Leading_Indicators) and [Philadelphia Fed Manufacturing](http://http://www.babypips.com/forexpedia/Philadelphia_Fed_Index) Indices. Conference Board’s report is expected to show that the economy grew by 0.3% in September. Hopes are also high that manufacturing activity in Philadelphia has improved this October with the forecast up at 2.0 following a -0.7 reading in September. 

  If you plan on showing the dollar some love, you may want to keep your fingers crossed for better-than-expected figures as these may be bullish for the currency. May the pips be with ya!
358

The dollar was the hot tottie of the FX hood yesterday as it managed to end the day higher against its major counterparts despite mixed economic reports and dovish comments. It hustled some muscle against the euro, taking EUR/USD down from an intraday high of 1.4051 and end the day with a 26 pip gain at 1.3924.

  Some of my buds are saying that perhaps the possibility of the [Fed](http://www.babypips.com/forexpedia/Fed)launching [QE](http://www.babypips.com/forexpedia/Quantitative_Easing)2 might have already been priced in by the market. And that could be the reason why St. Louis Fed President James Bullard’s remarks about providing the economy with further stimulus being the way to go, seemed to have been shrugged off.

  Then again, maybe the dollar bulls have U.S. Treasury Secretary Geithner to thank for their pips. As I mentioned yesterday, Geithner said that the dollar doesn’t need to tumble any further against the euro and the yen. A handful of traders might have taken this as an indication that the U.S. is okay with another [intervention](http://www.babypips.com/forexpedia/Intervention) from the [BOJ](http://www.babypips.com/forexpedia/BOJ). 

  Anyway, for yesterday’s stats, we saw that the number of [initial jobless claims](http://www.babypips.com/forexpedia/Initial_Jobless_Claims) last week was lower at 452,000 than the expected 455,000. On the other hand, Conference Board’s leading indicator for September just hit the 0.3% growth consensus, while the [Philadelphia Fed Manufacturing](http://www.babypips.com/forexpedia/Philadelphia_Fed_Index) index disappointed the 2.0 forecast when it printed at 1.0 for October.

Ah, with our economic calendar is blank for reports from the U.S. we may just see the dollar end the week on a good note as profit-taking could take place ahead of the G20 Finance Ministers meeting. That’s just a hunch though. Good luck and may the pips be with you!

359

The G20 didn’t exactly send the dollar flyin’ high like a G6 on Friday’s trading. It ended the week almost unchanged against its major counterparts save for the Swissy from which it gained 120 pips when USD/CHF closed at .9797. At the end of the day, EUR/USD was only 4 pips higher at 1.3929 while USD/JPY was up 2 pips at 81.36.

  It might have been hesitation ahead of the [G20](http://www.babypips.com/forexpedia/G20) Finance Ministers meeting and the lack of economic reports from the U.S. that got some traders just sittin’ on the sidelines. But word on the street is that the dollar may continue its downfall this week as the finance ministers pinky swore to avoid weakening their currencies. Yikes!

  With that said, you may want to take note of [Fed Reserve Chairman Ben Bernanke’s](http://http://www.babypips.com/forexpedia/Ben_Bernanke) speech at 12:30 pm GMT. Be on your toes for that as he may drop some details about the [Fed](http://www.babypips.com/forexpedia/Fed)’s move to launch [QE](http://www.babypips.com/forexpedia/Quantitative_Easing)2. According to some of my buds here in the FX hood, one reason why the dollar fell earlier today was because the U.S. didn’t show any sign of backing away from providing the economy with further stimulus. 

  Remember to also keep tabs on the [existing home sales report](http://www.babypips.com/forexpedia/Existing_Home_Sales)for September which is due later at 2:00 pm GMT. Analysts are expecting to see that sales were higher at 4.28 million USD during the month than in August which was only at 4.13 million USD.

Ah, it seems like we’re in for a lot of action on the charts today. Make sure you gauge the market’s sentiment first before you enter in your trades, aight?

Anyway, tomorrow we have more housing data on tap with the S&P Case Shiller HPI for August anticipated at 2.5% and FHFA HPI seen to print a 0.2% decline during the month.

We’ll also have Conference Board’s report on consumer confidence for October which is projected to have increased to 49.5 following its 48.5 reading in September.

360

Despite losing to its other counterparts, yesterday wasn’t all that bad for the dollar as it pulled off a wild rodeo action against the euro. The bears lassoed in EUR/USD during the New York session, taking it down from an intraday high of 1.4082 to close the day 14 pips lower at 1.3965. Yeehaw!

Word on the street is that the G20 finance ministers failed to impress the FX hood with their pinky promise that they would “avoid competitive devaluation of currencies.” The market really didn’t see that a concrete agreement was made to address the whipsaws on the currency market. And so, the Fed’s move to pull the QE trigger came under the market’s spotlight once again and caused the dollar sell-off during the Asian and European sessions.

Good thing yesterday’s line up of economic reports came in better than expected and made the currency look purtier than a new calf in springtime. Ha!

According to the National Association of Realtors, existing home sales was up at 4.53 million in September which beat both the 4.28 million consensus and the 4.12 million sales in August. This translated to the third consecutive month that the housing market showed some hustle without any aid of the government’s tax incentives.

There was also the Dallas Fed Manufacturing Survey which showed that manufacturing activity in Texas was higher in October, with its index printing at 2.6, than what the market had been bracing for. The forecast was an 8.0 decline following September’s -17.7 reading.

See if today’s economic reports will be able to sustain the dollar’s rally on the charts. At 2:00 pm GMT we have the S&P Case-Shiller Home Price Index (HPI) which is seen to show that house prices increased by 2.15% on an annual basis. Then there’s also the FHFA HPI which is anticipated to show an improvement in house prices with the forecast up at -0.2% following the 0.5% decline it tapped in July.

Along with the housing reports, we also have the Conference Board’s consumer confidence report for October on tap. Analysts are expecting consumers to have shown more swagger during the month with the index up at 49.5 from September’s 48.5 reading.

Make sure you don’t miss the reports, aight? But keep in mind that the dollar may not giddy-up as much as a wild horse would with talks of quantitative easing still dominating the market’s sentiment. Good luck y’all.

361

The dollar posted another win against the euro yesterday as EUR/USD closed 118 pips lower at 1.3852. I guess traders were diggin’ the cliché, “Once you go Buck, you never go back.” Ha! Anyway, against the yen, the dollar erased the loss it scored on Monday as USD/JPY ended 70 pips higher at 81.50. Sweet!

What caused the dollar-lovin’ yesterday? Let’s just say, it was all thanks to the swagger that American consumers showed in October.

Conference Board reported that consumer confidence was higher during the month, with the index printing at 50.2, than it was in September when the reading was a measly 48.6. This might have gotten a handful trader giddy as the forecast was only for a modest increase to 49.9.

Making things even sweeter for the dollar was the 0.4% increase in house prices in August, as reported by FHFA, which beat the 0.2% decline that the market was bracing for. Boo yeah!

Does the increase imply that the worst is over for the U.S. housing market? Err, I don’t think so.

According to the joint report by S&P and Case-Shiller, house prices in 20 metropolitan areas only increased by a puny 1.0% in August, which disappointed the 2.4% increase that analysts predicted. Yikes! Fortunately for the dollar, it seems like traders just shrugged off the disappointing figure.

Tune in to Census Bureau’s report on new home sales for September later at 2:00 pm GMT to get a better feel of how the housing market is faring. Note that the consensus is higher at 300,000 from August’s 288,000 reading.

But before that, at 12:30 pm GMT, we have the durable goods orders for September. With the forecast up at 2.0% following August’s -1.6% reading, the market is expecting that production will increase in the coming months as manufacturers work to fill the orders.

Make sure you keep tabs on those reports as they may spur the dollar on another rally and reel you in a handful of mad pips. Peace out!

362

Score another one for the scrilla! Improved sentiment on the dollar and slightly positive economic data in the U.S. energized the currency bulls enough to push the dollar higher against its major counterparts for another day this week. EUR/USD dropped by 86 pips to its closing price of 1.3767, while USD/JPY ended the day 20 pips higher at 81.70 after hitting an intraday high of 81.99.

After weeks of speculating on the size of the Fed’s quantitative easingprogram, market geeks now have reason to think twice about the number. See, word on the forex grapevine is that the Fed would launch a couple of billion dollars at a time on a measured pace, and not dump a gazillion dollars at once like the early estimates. This caused a round of profit-taking on the dollar shorts, and boosted the greenback in the pip charts.

Of course, it also helped that economic reports in the U.S. showed some promise. Sales of new homes rose by 6.6% to 307,000 in September, and marked the second monthly rise after plunging to a record-low of 282,000 in May.

Orders for durable goods also surprised the markets when it printed a 3.3% growth in September. But watch this report closely my forex peeps, as taking out the 15.7% increase in transportation orders would reveal a drop of 0.8% in the data. Also, orders for non-military capital equipment dropped by 0.6%, which might mean that business investment could slow down in the coming months.

We’ll have more information on the health of the U.S. economy today when the weekly unemployment claims report is released at 12:30 pm GMT. The data is expected to increase slightly to 455,000 from last week’s 452,000 figure, but a lower number might inspire another round of dollar buying.

Happy trading kids!

363

The dollars bears just couldn’t resist could they? After the dollar had eked out three consecutive days of gains, risk appetite took over yesterday, pushing higher yielding currencies higher against the dollar. EUR/USD rose more than 150 pips from its opening price to end at 1.3929. Meanwhile, GBP/USD soared higher to 1.5939, up more 170 pips for the day.

With risk appetite picking up yesterday, the dollar fell victim to the advances of other higher yielding currencies. Interestingly, the better than expected unemployment claims data did nothing to support the dollar. Claims came in at 434,000, beating the estimated 455,000 figure.

Will the dollar succumb to more weakness later? Hmmm… I think we’ll have to wait and see what happens once all the smoke from today’s economic data clears!

First up, we’ve got the Advanced GDP report coming in at 12:30 am GMT. Word on the street is that the U.S. economy grew by an annualized 2.0% during the third quarter. In addition, experts are predicting that the previous quarter’s growth will be revised down to just 1.7%.

The markets will be paying attention to this figure, as it could have a big say on how big or quickly the Fed will be implementing more quantitative easing measures. If the data dictates that the U.S. economy has struggled more than expected, it could prompt Fed officials to get off their butts and inject more stimulus into the economy. This in turn may lead to another dollar sell-off, so all you dollar bulls out there, be careful!

Also, keep an eye out for the Chicago PMI and revised University of Michigan Consumer Sentiment reports coming out at 1:45 pm and 1:55 pm GMT respectively. The PMI report is expected to print at 58.0, slightly lower than the previous month’s reading of 60.4, while the consumer sentiment report is projected to be revised slightly from 67.9 to 68.0.

That’s all I’ve got for the U.S. If the market spooks you too much with its fake makeup and cheap costume, it might be better for you to take an early weekend and eat some candy! Happy Halloween!

364

The dollar bears are at it again! After letting the dollar regain some of its losses early on last week, the bears sold it off quickly once it got to “too expensive” levels. Sell high as traders say!

The dollar took a major hit when its advanced GDP report missed expectations. It showed that the country only grew 2.0% during the third quarter, and not 2.1% like initially expected. If that wasn’t enough for the bears, the report also showed that second quarter’s figure was revised DOWN to 1.7% from 2.0%.

To add insult to injury, the University of Michigan’s consumer sentiment survey revealed that people became less optimistic in September. It printed a reading of 67.7, worse than consensus and lower than the previous month’s reading.

Will the bearish sentiment towards the dollar continue this week? Hah, that’s a tough call, as a huge amount of economic data will come out! Let’s take a look at what we have on our economic calendar…

Today, we’ve got the the reports on personal spending and income, as well as the ISM manufacturing PMI. While these reports are USUALLY watched, they probably will take a backseat for now as much “bigger” reports will come out in the following days.

Of course, I’m talking about the Fed’s decision on interest rates and its quantitative easing program. If the Fed goes ahead with its QE program, then the important thing to watch is the size of the program. The market is expecting a 500 billion USD program, so anything less than that could be beneficial to the Greenback. Conversely, any figure higher than that would be bearish for the Greenback.

Another big report is the U.S. non-farm payrolls. The consensus is that 60,000 jobs were created in October, opposite the 95,000 jobs lost in September. I don’t know about you, but that seems an very optimistic forecast… If the actual figure comes in below expectation, then we could see the dollar take another hit.

Be careful trading this week folks, as the amount of economic data could cause a lot of whipsaws! Sentiment can change on a dime, which means we should be flexible in our trades and not get married to one!

365

Mixed economic data from the U.S. yesterday got the pip-DJs fallin’ in love with the dollar as they push the greenback higher against its major counterparts. EUR/USD dipped to an intraday low of 1.3863 before ending the day 70 pips lower at 1.3893. Meanwhile, USD/JPY spiked to an intraday high of 81.41 in seconds during the Asian session, but ended the day only 20 pips higher at 80.51.

It seemed that the bulls got a lil’ excited over the economic data released yesterday. The ISM manufacturing PMI rose to a 5-month high at 56.9 in October when analysts only pegged the figure at 54. A boost in homebuilding also improved construction spending in September, and lifted the data by 0.5% after dropping by 0.2% in August.

But the red figures from the U.S. early in the day might have limited the scrilla’s gains.

First, we got news that personal income and spending failed to hit their targets of 0.4% and 0.2% growth respectively. Interestingly, spending still outpaced income growth, as spending was up 0.2% in September, but incomes fell by 0.1%.

A closer look will reveal that incomes fell due to the fact that for a ton of people collecting unemployment benefits, well, their time was up! No, no, the Grim Reaper wasn’t knocking on their door (although with the Halloween weekend just passing us by, I guess there were SOME who did – ha!). Rather, their 99-week allowance period from the government has come to an end.

Also released was the PCE index, which as you should know, is considered to be the Fed’s primary tool that it uses to gauge inflation. And what did the data show? No growth! Kaboom! Oh boy, I can’t wait for all those doves in the Fed to point to this figure when they scream that the U.S. needs more quantitative easing. You see, the less a threat inflation is (and the more deflation is for that matter), the more leeway the Fed has in implementing more stimulus measures.

Looking ahead, there’s none of the usual hardcore data coming out today, but we do have the U.S. mid-term elections to come out. What will them Republicans and Democrats have to say? How has perception of Mr. Obama changed during this recession? Will the Undertaker come back up from the grave for the 20th time (oops, wrong T.V. show!)?