U.S. Building Permits Data to Drive USD Trading Today

The forex market is set to go very volatile on the release of Building Permits data from the U.S. In turn, this is likely to be crucial in determining the Dollar's strength, as this week's trading comes to a close. If the results equal to or higher than the forecasted 0.52 million, then the USD may record a bullish trading session today. On the other hand, if the data is worse than forecast, then the Dollar could possibly fall against its major currency pairs. Traders are also advised to follow Crude Oil prices today, as sudden movements in this commodity may have a strong impact on the USD.



USD - Dollar Drops on Poor Economic Data

Yesterday the Dollar depreciated against all its main currencies crosses. The greenback's biggest drop was against the EUR, as the EUR/USD pair rose above the 1.4150 level. The Dollar also dropped against the Pound and the Yen as well.

The Treasury International Capital (TIC) published the Long-Term Purchases report yesterday. This report measures the difference in value between foreign long-term securities purchased by US citizens and U.S long-term securities purchased by foreigners during May. The figures showed a negative balance of $19.8 billion. The data also showed that China's holding of U.S treasury securities topped $800 billion. The gigantic debt has raised concerns that it might have the potential to erode the value of the Dollar in the long term.

Also yesterday, the Philadelphia Manufacturing Index, which is used to measure the business conditions in the Federal Reserve district, was published. The report showed a -7.5 mark, which means that the factory activity in the district has contracted for the 10th consecutive month in July. This contributed to the Dollar's downfall as well.

As for today, very important housing data are scheduled from the U.S. At 12:30 GMT, both the Building Permits and Housing Starts indicators will be published. The two are leading gauge of the housing sector in the U.S, and has the potential to severely impact the market. According to current forecasts, the housing sector has shown relatively positive figures in June. If the actual result will be similar or even higher than forecasts, the USD might be able to correct yesterday's slide. Traders are advised to follow the publications, and take advantage of their impact on the market.

EUR - EUR Hits 2 Week High against the Dollar

The EUR continued its bullish trend against the Dollar yesterday, and the EUR/USD is currently trading near the 1.4130 level. The EUR rose against the Pound as well and declined slightly against the JPY.

The EUR climbed against the Dollar as poor data was released from the U.S economy and Crude Oil's prices rose, which further weakened the Dollar. This drove the European currency to a 2 week high against the USD.

The positive data from the Euro-Zone leading nations also supported the EUR yesterday. The French Consumer Price Index rose 0.1% in June, showing that fears from deflation are very unlikely, resulting in a temporary relief for the crisis-hit economy. The Italian Trade Balance, which measures the difference in value between imported and exported goods and services during May, rose by 1.19 billion EUR. This has a crucial impact on the Italian economy, which relies greatly on its exporting activity.

Looking ahead to today, the only significant data from the Euro-Zone will be the European Trade Balance. Analysts forecast a 1.2B result, which means that the exporting activity in the Euro-Zone was larger by 1.2 billion EUR from importing during May. If the actual result will be similar to forecasts, it will be the first positive result in 13 months. In turn, this may have a positive effect on the EUR.

JPY - JPY Records Mixed Results against the Majors

The Yen underwent an extremely volatile session against the major currencies yesterday. Although the Yen did not see a sharp depreciation yesterday, it is about to mark the biggest weekly loss against the EUR in two months, following an extremely bearish week. The most significant publication from the Japanese economy was the Tertiary Industry Activity report. The report failed to reach expectations for a 0.3% rise, as the actual result showed that the value of services purchased has dropped by 0.1% in May.

As for now, current expectations are assuming that the Yen may fall against the EUR on speculations an advance in stocks will increase demand for higher yielding assets. The JPY is known as a currency which rises in times of global financial crisis, and it seems that the rising stocks could be a leading sign for the financial improvement which has the potential to significantly weaken the Yen.

Crude Oil - Crude Oil Completes Bullish Week

Crude Oil continued to hold its yesterday, and a barrel of Oil is currently traded for $62.70. Crude Oil is currently heading for its first bullish week in more than a month.
Crude rose as a result of two leading factors. One, the bearishness of the USD supported the price of Oil. Crude Oil's prices are valued in Dollars, and thus any depreciation in the USD's value has the potential to further push-up Oil prices. Higher global equity markets also restored optimism that an economic recovery is impending.

An improvement in economic conditions is set to increase demand for Crude Oil, which will of course hike Crude Oil prices. This week might be acknowledged as the first strong sign that investors have regained their faith in Crude Oil as a long-term investment. Traders are now advised to follow the news from the strongest economies and especially from the U.S in order to predict Oil's direction for the coming weeks. It seems that as long as the news will show that the world is pulling out of recession, Crude Oil prices are likely to rise.

Article Source - U.S. Building Permits Data to Drive USD Trading Today

Crude Rises the Most in 3 Weeks

Crude Oil prices remain steady at above $61 a barrel on Thursday, after gaining 3.4% in the previous session. Oil's gains on Wednesday came after the Energy Information Administration (EIA) showed a bigger-than-forecast drop in Crude supplies last week. And along with a weak U.S. dollar, which traded near a month low against major currencies, this supported the rally in Oil prices. Investors will be keenly watching the weekly U.S. jobless claims data due to be released later on Thursday, for a clue of a possible rebound of the world's largest economy.



USD - USD Plummets as Stock Markets Rally

The Dollar dropped against most of its major currency counterparts yesterday as a rally in global stock markets diminished demand for the safety of the U.S currency. The Dollar traded at $1.4108 per EUR after sliding 1% yesterday and reaching a day's low of $1.4135, the weakest level since July 2nd. However the USD was up against the Yen trading at 94.36 from 93.39 late Tuesday.

Better than expected results from the New York Manufacturing Index and as expected results from the Consumer Price Index (CPI) which were released Wednesday put further pressure on the Dollar. However the major mover in the market Wednesday were the equity markets, with U.S stocks rallying sharply following the release of better than expected 2nd quarter earnings from Intel.

It is likely that earnings results will continue to dominate market movements in the following days as the earnings from J.P. Morgan Chase, Citigroup and Bank of America are due later this week. Traders should also follow the release of the Unemployment Claims, TIC Long Term Purchases and the Philly Fed Manufacturing Index to be released today at 12:30 GMT, 13:00 GMT and 14:00 GMT respectively as these results may either strengthen or reverse the current bearish sentiment on the Dollar.

EUR - EUR Gains on Renewed Market Optimism

Benefiting from the return of risk appetite and gains in equities the EUR traded at $1.4112 versus the USD, up from $1.3935 late Tuesday. The EUR was also up against the Yen trading at 133.12 up from 130.14 yesterday. The British pound jumped to $1.6425 against the USD from $1.6270 Tuesday.

The EUR was little changed after a report showed Annual Consumer Price Inflation in the Euro-Zone fell 0.1% in June, marking negative inflation in the region for the first time since its creation. The British Pound rose 0.6% versus the Dollar following gains in financial sector stocks. The Pound was little affected by the overall pessimistic economic data released Wednesday from the U.K. The data showed the number of people claiming jobless benefits in June rose at its slowest pace in more than a year; however the overall unemployment rate rose to its highest level since January 1997.

With no major news due to be released today from Europe, traders should follow the data to be released from the U.S as these will have great affect on any USD currency crosses. Furthermore, traders should follow closely the continuing release of the corporate earning reports as they will continue to be the driving force behind the movement in equity markets and consequently the demand for riskier currencies such as the EUR and GBP.

JPY - The Yen Slides as Investors Move to Riskier Assets

The Yen slid against the EUR, trading at 133.01 per EUR after declining as much as 2.1% in its largest intraday loss since May. The Yen was also down 0.8% against the USD trading at $94.25. The drop followed a report that showed U.S. industrial production for June fell less than forecasted and Intel Corp.'s second quarter earnings were higher than estimated.

The JPY experienced a phenomenal rally these past two weeks as investors retuned to the safety of the Japanese currency following the release of poor U.S employment data. However, this rally was snapped Monday with a better than expected start to the 2nd quarter earnings season. The positive earnings reports from Goldman Sachs and Intel rekindled risk appetite among investors diminishing demand for the safe haven Yen and in turn pushing them to riskier, higher yielding currencies. With stock markets continuing to rally it is likely the JPY will extend its losses during today's trading as well.

OIL - Oil Prices Rise as U.S stockpiles Fall

Crude Oil continues to climb as stock markets rally and U.S Crude Oil Inventories showed a larger than expected decline. Crude oil for August delivery rose as much as 47 cents or 0.8% to $62.01 a barrel Wednesday. The weak Dollar and huge rally in the stock market following the release of Intel's forecast sales helped boost Oil prices. Crude inventories fell by 2.81 million barrels vs. the expected 2.1million and refineries are operating at 87.9%, the highest since August. However demand is still weak and so it is unlikely Oil prices will reach $70 a barrel again in the short term and it is likely to remain in the $60-$65 range.

Article Source - Crude Rises the Most in 3 Weeks

New Zealand Dollar Tumbles as Fitch Downgrades Credit Outlook to a 'Negative' (Euro Open)

The New Zealand Dollar fell sharply late into the overnight session as credit rating agency Fitch downgraded the smaller antipode’s long-term credit rating to “negative” and warned the country could fall into a “low growth trap”. A slew of earnings reports from top companies including Carrefour and SAP are likely to guide price action in the coming session.

Key Overnight Developments

• NZD Tumbles as Fitch Downgrades Credit Outlook to ‘Negative’
• New Zealand Consumer Prices Fall to Lowest in Nearly 2 Years
• NZ Manufacturing Continues to Stabilize as New Orders Gain
• Japanese Service Demand Unexpectedly Drops on Job Losses

Critical Levels



The Euro fell in overnight trading, losing as much as -0.3% to the US dollar. The British Pound followed suit, shedding -0.4% against the greenback to test as low as 1.6379.

Asia Session Highlights



New Zealand’s Consumer Price Index declined less than economists expected in the second quarter, with the annual inflation rate falling to 1.9%, the lowest since the three months ending September 2007. Forecasts were pointing to a 1.8% result ahead of the release. Transportation and transport supply costs led the drop, -6.6% and -9.5% from a year before. Lower fuel prices and cheaper airfares were likely behind the drop-off: gasoline prices fell 17% from a year before while the average cost of air travel tumbled 21% in the same period as companies slashed prices to entice consumers amid the global recession. The Reserve Bank of New Zealand has said that they expect inflation to fall below the 1-3% target range this year but return to desirable levels by early 2010. RBNZ Governor Alan Bollard added this week that New Zealand is likely to recover faster than its main trading partners from the current downturn, boosting expectations that the central bank will begin raising interest rates sooner rather than later. Indeed, overnight index swaps now show the market is pricing in 79 basis points in tightening over the next 12 months, second only to the Federal Reserve that is seen hiking rates by 82bps over the same time frame.

Separately, the Business NZ Performance of Manufacturing measure rose to 46.2 in June from 43.1 in the previous month. The result suggests the sector continues to shrink, albeit at the slowest pace in 9 months. New Orders led the metric higher, expanding for the first time since April 2008. In annual percentage terms, new orders and output saw positive growth for the first time in at least 7 months. Manufacturing figures have been stabilizing in most industrial countries in recent months as producers adjust inventories to current demand levels; it remains to be seen if this process will translate into a sustainable recovery going forward.

Japan’s Tertiary Index surprised to the downside, showing service demand shrank -0.1% in May versus expectations for a 0.4% gain. It seems job losses are starting to catch up with the world’s second largest economy even as the effects of the government’s massive 25 trillion yen fiscal package continue to be digested. Consumption is likely to remain lackluster as the unemployment rate continues to climb, weighing on overall economic growth and holding back recovery from the worst Japanese recession since World War II. Yesterday, the Bank of Japan slashed its GDP growth forecast for the 2009 fiscal year and said consumer demand “remains generally weak.”

The New Zealand Dollar tumbled 50 pips in a mere 15 minutes late into Asian trading as Fitch cut its long-term credit outlook for the smaller antipodean nation to “negative” from “stable”. The ratings agency expressed concern over New Zealand’s medium-term growth outlook given its “persistently large current account deficit and rising foreign indebtedness”. Fitch warned that the government may need to implement a “stronger fiscal adjustment” after Prime Minister John Key cancelled tax cut plans on fears of the ballooning public deficit. Fitch Asia Pacific Director Ai Ling Ngiam said New Zealand could “fall into a low growth trap”, an allusion to Japan’s infamous “lost decade” of stagnant economic performance. Fitch added that the volatility of the New Zealand Dollar complicates the necessary adjustments, with the currency “more responsive to global financial conditions than to domestic economic fundamentals.”

Euro Session: What to Expect



The economic calendar looks tame in European hours, with the July edition of Switzerland’s ZEW Survey of analyst sentiment the only notably item on the docket. The metric rebounded sharply in June, registering the first positive reading in close to three years. The forward-looking bias of the survey’s respondents tends to see it lead actual trend changes in the exchange rate, however, so a meaningful near-term impact is unlikely barring a wild deviation from recent figures once the data crosses the wires.

On balance, forex price action is likely to fall in with risk trends once again as earnings season continues, with notable reports due from: Carrefour SA, Europe’s largest retailer; Novartis AG, Europe’s second-largest pharmaceutical firm; Accor SA, Europe’s top hotel company; and SAP AG, the world’s biggest computer services provider.

Written by Ilya Spivak, Currency Analyst
Article Source - New Zealand Dollar Tumbles as Fitch Downgrades Credit Outlook to a 'Negative' (Euro Open)

Dollar and Yen lose safe haven appeal, but not for the same reasons

As the Dollar and Yen lose their luster for now, partly due to positive news and partly due to political uncertainty (in Japan primarily, but to some extent the US), I want to take this opportunity to rant.

I have been involved in the markets for the better part of 15 years. I started my career as a stock broker and find myself now a staunch advocate of the Forex.

I have weathered turbulence in the markets, former Fed Chairman Alan Greenspan’s “irrational exuberance” speech (which ironically sent the markets on the biggest rally in 50 years), the internet bubble burst and now the “biggest recession since the great depression.”

I lived through 8 US presidents, saw two of the greatest leaders – economically speaking – in Reagan and Clinton and saw miserable failures like Carter and the senior Bush.

But, in my life I have never witnessed such irresponsibility and lack of basic understanding of free market thought, as I have with the current president, Barack Obama.

Carter was a failure, not because he held such liberal policies as many would have you believe, he failed because he was weak, in domestic and international relations he was viewed as timid and non-confrontational.

Perhaps, had he been more assertive he would have succeeded in reforming the system to his liking – and I would be blaming him for killing capitalism. And, as much as people compare the two – Obama is not a Jimmy Carter.

We need to look at the core of the man - Carter was weak, Obama is strong. Carter had the support of the US Congress, but was not able to achieve, because he sought bi-partisanship which he did not get.

Obama does not care about what the other side thinks, as long as his side is on board it is fine. But Obama has another tool at his disposal that enables him to push his agenda through, without the help of the Congress, the Czar.

In the US, cabinet members need to go through a vigorous vetting and approval process by both branches of Congress. A Czar is not a cabinet member. First introduced by Ronald Reagan to head up the war on drugs, a Czar has broad powers to do – and answers only to the president.

Reagan created this role because he did not believe the drug war would go on for so long and therefore adding a cabinet post, a move that takes a constitutional amendment, would not be necessary.

Obama however has gone beyond this level, appointing 33 Czars, each with an average salary of $250,000 and annual budget for office and staff of over 10 million. This is the single largest expansion of governmental agencies ever – and the fun part is this is not part of the government as the Czars answer only to the president.

It is shocking – and it is why Obama is not like Carter – he has the power to achieve what he wants, whether congress says yes or no to the idea, he has a back door to his goals if he needs it.

I am not sure if the American public should be more upset at the wasteful 340 million plus that this group is costing them, or the fact that Obama has given powers to a group of people that subvert the system of checks and balances that has made America unique and safe from tyranny.

Congress gave Reagan the approval for this post for logical reasons - quick and decisive action was needed, and waiting for congress to approve each mission was pointless.

Obama has exploited this rule and it will be to the detriment of the US populace. Take for example the idea that his health czar is proposing – taxing the rich 5% to pay for health coverage for everyone else, or his employment czar, extending benefits to the unemployed by and relaxing the rules so that they do not need to be seeking employment while getting the benefits (their rationale for this: “it is a hard job market you know – it might demoralize the unemployed to have to keep searching for a job in this tight market”).

And just how do they pay for this unlimited benefit? You guessed it, taxing the rich. This makes no sense. Why penalize those who work and reward those that don’t? all you do is make the productive less ambitious to be productive and you make the non-productive dependant on a system that is willing to care for them indefinitely – so in turn there is less productivity by default.

In my opinion, you don’t need a stimulus that will give people money to do nothing; you need a stimulus that will spark production – as that is what will save the economy over the long haul.

For Forex traders and Forex Online enthusiasts what does this mean? It means the US is moving in the direction of China and Russia and Venezuela, in which there is a central government that controls all things. So what does this mean for the Dollar? Only time can tell, but it does not look too good.

Dollar retreats again on good corporate news, Euro reverses after German data

USD

The Dollar slid on Tuesday in very up and down trading against most currencies, after US Investment Bank, Goldman Sachs, reported better than expected earnings and US retail sales surpassed expectations.

This raised hopes for an economic recovery and continued the risk appetite rally that began on Monday. Retail sales rose by .6% after it was expected that a rise of .2% would prevail.

Goldman Sachs, which is one of the most prestigious institutions on Wall Street, was the recipient of nearly 20 Billion Dollars of federal money in December, after posting their worst losses on record. They have since paid back the federal money and still managed to squeak out a profit in the second quarter.

At 10:00PM GMT, the US Dollar was down .35% to the British Pound to 1.6274, down 1.03% to the Canadian Dollar to 1.1385, down .63% to the Australian Dollar to .788 and down .32% to the New Zealand Dollar to .6342. The Dollar did rise .7% to the Swiss Franc to 1.0911.

EUR

In a switch from Monday’s Forex trading session, the euro fell on Tuesday as a result of less than spectacular data out of Germany.

The German think-tank, ZEW, came out with their first drop in consumer sentiment in nine months. Monday the Euro responded well to comments from the European Central Bank President, Jean-Claude Trichet, who eluded to a recovery later this year.

At 11:50PM GMT, the Euro was down .8% to the US Dollar to 1.3936, up .1% to the Yen to 130.17, down .65% to the British Pound to .8556, down 1.55 to the Canadian Dollar to 1.5834, and down 1.1% to the Australian Dollar to 1.7647. The Euro did rise against the Franc to 1.5205.

Pound Slides against Euro, Dollar as Pressure on Prime Minister Rises

The pound posted the fourth day of losses in a row against the U.S. dollar as a serious political crisis deepens in Great Britain, where Prime Minister Gordon Brown’s Labour party is losing influence significantly.

Negative factors weighing on the pound are coming from virtually everywhere on the political sphere in the United Kingdom and the European Union, making the pound to reverse an uptrend started by signs of economic recovery. Prime Minister Gordon Brown is suffering sequential calls to resign, as his party had the weakest results in the European Parliament elections, reaching just 15.3 percent of voters, a drop of 7 percent from 2004. David Blanchflower, former Bank of England policy maker, affirmed that the central bank may continue its intentions of buying assets with newly created money, in order to rescue the shrinking British economy, adding pessimism to the pound outlook.

As long as Gordon Brown resists to resign, the pound will continue its bearish trend, according to currency strategists. The United Kingdom is in its worst economic moment since the end of the Second World War, and Gordon Brown is considered unable to rescue Great Britain from the current negative scenario. The pound is likely to continue weak, and as long as Brown remains in power, it’s rather improbable that the pound will recover versus the main currencies.

EUR/GBP rose slightly to 0.8738 from a previous price of 0.8743. GBP/USD traded at 1.5868 from 1.5972

Dollar Climbs on Interest Rates Raise Speculations

The dollar gained versus the main currencies as speculations that the U. S. Government will raise its interest rates by the end of the year, consequently causing a bearish day in equities markets around the world.

High-yield currencies like the South African rand had a negative day against the dollar as the Fed fund futures showed a 40 percent possibility of interest rates raise for the second semester, a high jump from the previous 13 percent chance from a week ago. The yen was the only main currency that did not have a negative day versus the dollar, as domestic favorable news like the falling number of bankruptcies improved confidence among merchants and Japanese investors, making the greenback to end a rally that brought the yen to a one-month low. The U. S. currency also posted sharp gains against the Great Britain pound, as the government crisis in the U.K. deepens, and the future of Prime Minister Gordon Brown is uncertain.

There is a wave of optimism favoring the greenback, according to economists. Several factors indicate for a stronger dollar to come for the following weeks, not only a sequence of positive reports and speculations is raising the traders’ confidence to buy assets in dollars, a consistent sentiment among specialists that the dollar has been excessively sold over the past two months may help the dollar to enter a significant uptrend.

EUR/USD traded at 1.3900 from a previous price of 1.3969. GBP/USD traded at 1.5800 from 1.5981.