Gbp/Usd: Although Monday’s bearish price action has now been totally negated, we retain our bearish outlook and will look to take advantage of the choppy market conditions to establish a fresh short trade on Tuesday. Hourly studies are now looking well overbought and the market has also exceeded its daily average true range of 200 points. There is a confluence of resistance by 1.6580 in the form of the 10/20-Day SMAs, and 78.6% fib retrace off of the recent 1.6665-1.6275 move, and as such we will look to take advantage and sell on a push into this confluence. STRATEGY: SELL @1.6580 FOR AN OPEN OBJECTIVE, STOP @1.6780. RECOMMENDATION TO BE REMOVED IF NOT TRIGGERED BY NY CLOSE (5PM ET) ON TUESDAY.
Bank of England Votes 6-3 to Expand Asset Purchases, Governor King Dissents
Written by David Song, DailyFX Currency Analyst
The Bank of England Minutes showed the MPC unanimously agreed to keep the benchmark interest at the record-low, but voted 6-3 to increase the scope of the asset purchase program by GBP 50B to GBP 175B earlier this month.
Governor Mervyn King, along with Timothy Besley and David Miles pushed for a GBP 75B expansion in an effort to support an economic recovery, with the statement going on to say that ‘all members agreed that substantial further asset purchases were needed over the next three months’ as policymakers expect inflation to remain below the 2% target until 2012. The board maintained a dovish outlook for price growth and projects inflation to slip below an annual rate of 1.0% this year, and went onto say that ‘insufficient stimulatory monetary policy’ could hamper the prospects for a sustainable recovery as the outlook for future growth remains uncertain. Meanwhile, the central bank noted that ‘the most immediate downside risks to the economy seems to have receded,’ while the rate of money growth remained surprisingly weak, and the BoE may take further steps to steer the economy out of the recession as price pressures remain subdued.
As a result, the British pound tumbled lower against its currency counterparts following dovish outlook held by the central bank, and slipped back below the 50-Day moving average (1.6464) to retrace the previous day’s advance against the U.S. dollar. However, the overnight decline looks to have stalled at an intraday low of 1.6375, with the pair holding above the weekly low (1.6275), and a rise in U.K. retail sales may push the GBP/USD higher over the next 24 hours of trading as growth prospects improve.
Written by Jamie Saettele, Senior Currency Strategist
As mentioned this morning, the EURUSD trend is bearish below 1.4330. If the pair is going to turn down, then this is a good place for that to happen. A line drawn off of the most recent 2 highs is at current price.
Rising Swiss Exports And Investor Confidence Add To Signs Recession Ending
Written by John Rivera, DailyFX Currency Analyst
• OECD Economies Improve, but Weak Recovery Is Expected – Wall Street Journal
• Small Firms Rack Up Job Losses – Wall Street Journal
• Rio Tinto profits drop in line with rivals– Financial Times
• Stocks Rise Worldwide as China Rebounds; Industrial Metals Gain – Bloomberg
• King Changes Tune as Slump Prompts ‘Activist’ Stance– Bloomberg
USDCHF – The Swiss Trade balance surplus widened to 2.35 from 1.5 billion as exports rose by 4.1% as tradimg partners Germany and France are realizing positive growth. The increasing foreign demand may help end the country’s recession which is expected to lag Europe in recovery. Meanwhile, the Swiss Zew investopr sentiment reading soared to 18.6 from 0.0, which was a three year high and reinforced the positive outlook. However, the Swiss Nationa Bank’s Discuss the topic and your trade ideas in the USD/CHF Forum.
GBPUSD – Retail spending in the U.K rose 0.4% in July, which was in-line with expectations, while the annual rate of consumption increased 3.3% from the previous year to top market forecasts for a 2.7% rise. The breakdown of the report showed demands for household goods jumped 4.5% after contracting 1.0% in June, while discretionary spending of food slipped 1.0% from the previous month, with sales of clothing and footwear slipping 0.4%. The fourth gain in the last five months bodes well for future growth as consumer demand accounts for a large portion of the country’s GDP. Discuss the topic and your trade ideas in the GBP/USD Forum.
Written by Jamie Saettele, DailyFX Senior Currency Strategist
A triangle appears to be unfolding since the low was made at 153.44. Triangles are continuation patterns so favor a break below 153.44 before a more important low forms. Short term resistance is at 156.00 and price ideally remains contained by the resistance line drawn off of the August 10th, 13th, and 20th highs.
Thursday, 20 Aug 2009 6:01 EDT at 18:01 by Jamie Saettele
Since the end of February, gold has traded in a contracting range and taken the form of a triangle. The immediate barriers are 927.60 on the downside and 974.30 on the upside. However, the critical levels are 907.60 on the downside and 993.60 on the upside. A break of either of these levels would warrant a breakout strategy. A break higher targets the all-time high set in March 2008 at 1034. A break lower could result in a test of the October 2008 low at 681. Although the break may not occur for a number of weeks, this is a chart worth keeping an eye on.
Euro Could Hit Fresh 2009 Highs If Data Signals End of Euro-Zone Recession
Written by Terri Belkas, DailyFX Currency Strategist
The euro staged an impressive rebound against the US dollar from 1.4050 last week, closing Friday just below resistance at 1.4350. The appreciation was the result of a variety of factors, including broad US dollar weakness, but also from fundamental forces.
The euro staged an impressive rebound against the US dollar from 1.4050 last week, closing Friday just below resistance at 1.4350. The appreciation was the result of a variety of factors, including broad US dollar weakness, but also from fundamental forces. Indeed, German services PMI surged to a 16-month high of 54.1 in August while French manufacturing PMI hit a 15-month high of 50.2, signaling an expansion in activity after growth had contracted for more than a year. Together, these helped push the Euro-zone composite PMI, which encompasses both manufacturing and services, up to a 14-month high of 50 from 47.0. Now, 50 is the point of neutrality for these indices, so the data suggests that business activity in the Euro-zone registered no change during August, but put into perspective with the record lows seen in the first quarter, the news is positive. The data was timely when also considering Federal Reserve Chairman Ben Bernanke’s comments from the Jackson Hole Symposium – a meeting of the world’s central bankers and finance ministers – as he said we are "beginning to emerge" from a deep global recession. Given strong PMI reports, it looks like the Euro-zone could be helping lead the way.
That said, upcoming economic reports may exacerbate this optimistic sentiment or derail it. On Wednesday, the German IFO survey of business confidence. Like the latest ZEW survey, the results are anticipated to reflect a surge in confidence, with the index estimated to creep up to a 10-month high of 89.0 in August from 87.3. On Thursday, the German GfK survey of consumer confidence is projected to rise to a more than 1-year high of 3.6 in September from 3.5 and on Friday, Euro-zone economic confidence is anticipated to increase to a 10-month high of 78.0 in August from 76.0. Overall, a steady stream of positive news could be the impetus to drive EURUSD to fresh 2009 highs. That said, such a move would also require a broad increase in risk appetite, as the US dollar is still treated as a safe haven asset.
US Dollar Carving Out Bottom Against Most Major Currencies
Written by Ilya Spivak, DailyFX Currency Analyst
Strategy: Pending Short
New Zealand Dollar positioning is largely the same as that of its Australian counterpart: the pair is showing a dramatic rising wedge confirmed by clear negative divergence on the RSI oscillator, with a bearish reversal to confirm a double top below the September 2008 swing high. We will look for a daily close below the wedge bottom (currently at 0.67) to enter short.
To reach Ilya regarding this article or subscribe to his email distribution list, please contact him at firstname.lastname@example.org
Written by Gregory McLeod, Power Course Instructor
The Euro Pound Resurrection?
After reaching a high of .9803 at the end of last year, EUR/GBP hopes of a parity party was dashed as the 8 month slide brought the pair down to its knees at the June lows of .8417. This happened to be the 61.8% Fibonacci retracement zone of the October 20th 2008 .7692 run up to the December 2008 high of .9803. Look for this pair to challenge its June 5th .8869 high in the coming days with .9005 well within reach.
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We don't have Metatrader available for spreadbet accounts yet, but I know that there are plans to offer it eventually. Key word being eventually The primary focus right now is getting CFD's released. What some of our traders do is set up the spread bet account, and then use one of our MT4 demos for the charting.
September Effect Could Push S&P 500 Lower, Japanese Yen Higher
Written by David Rodriguez, Quantitative Strategist
The “September Effect” on the S&P 500 and broader risky assets has typically led stocks lower on the month, and a continuation in said tendency would likely push the safe-haven US Dollar and Japanese Yen higher through the foreseeable future. Indeed, the month of September is historically the worst month of the year for the S&P. It is interesting to note that the US Dollar Index has likewise historically fallen in September, but a shift in market dynamics suggests that this is less likely in the month ahead.
September Effect in the US S&P 500 Index
Seasonal tendencies point to S&P 500 declines through the month of September. The S&P 500 has fallen through in said month through 11 out of the past 20 years of trading—good for over 10 points on average. Though this may not seem like much, the past 10 years have actually seen the S&P drop over 50 points on four different occasions. We can give no concrete explanation for the clear September underperformance, but it is likewise fairly clear that S&P 500 trading volume picks up substantially as traders return from summer breaks. If the past is any indication of what is to come, traders should be on the lookout for risk sentiment-linked Japanese Yen and US Dollar gains through September.
Record Low European Producer Prices Allows ECB to Remain On Hold
Written by John Rivera, Currency Analyst
• Global Economy Gains Steam– Wall Street Journal
• M&A Revival Seen in Three Deals – Wall Street Journal
• EU wary on withdrawing fiscal stimuli – Financial Times
• Wells Fargo Will Repay TARP `Shortly' Without Raising Equity, Stumpf Says – Bloomberg
• Stocks Fall for Third Day, Industrial Metals Drop; Australian Dollar Gains -Bloomberg
Gold’s rally pushed through what may be the top of a triangle. Price remains beneath highs in February and April but a rally above there puts the all time high at 1034 (March 2008) in jeopardy. Structurally, even a new high is probably just temporary. An unorthodox top in wave B of an expanded flat would pave the way for wave C to eventually drop below 681. Interestingly, the 1999-2008 rally is equal to the 1976-1980 rally in terms of price. 2008 momentum, as measured by RSI, did not reach the 1980 level. This creates a significant divergence that is typical of major turning points. Even allowing for a new high in gold, the metal appears much closer to a top than a bottom.