Direction or trend is simply the general direction of price movements - upward, downward, or flat.
Wednesday, January 5, 2011
ADP Non-Farm Payrolls on Tap for Today
ADP Non-Farm Payrolls on Tap for Today
January 5th, 2011 Posted in Analyst Picks
Dan Eduard
Name: Dan
Traders eager for markets to return to their pre-holiday volatility levels should pay particular attention to today’s US ADP Non-Farm Payrolls figure, set to be released at 13:15 GMT. Economic indicators out of the US have been relatively strong over the last few weeks, and have led to an increase in investor confidence in the global economic recovery. As such riskier currencies, like the euro and UK pound have made fairly significant gains against the safe-haven USD and JPY.
The ADP figure precedes US government employment data by two days, and as such, is considered a solid predictor of the official statistic. Analysts are predicting today’s indicator to come in at around 101K, which, if true, would signal the third consecutive month that employment rose in the US. While the number is not significant enough to state that the US employment sector is fully over the economic crisis, it is a clear indication that it is going in the right direction.
The euro is likely to maintain its recent bullish trend should the employment figure come in at or above its predicted level. Currently the EUR/USD is trading just belowthe 1.3300 level. A solid ADP figure could send the pair well above yesterday’s high of 1.3430, and it may even approach the 1.3500 resistance line.
Turning to the rest of the week, traders will obviously want to pay attention to Friday’s Non-Farm Payrolls for the official US government employment figure. In addition, the latest US Unemployment Rate will be announced. Early forecasts are saying that the unemployment rate will likely drop from 9.8% to 9.7%. If true, the markets are likely to see heavy fluctuations as a result.
AUD/JPY Poised for Serious Bullish Movement
AUD/JPY Poised for Serious Bullish Movement
January 5th, 2011 Posted in Technical Analysis Dan Eduard
After tumbling close to 100 pips in yesterday’s trading session, the AUD/JPY appears to be on the verge of an upward correction. Currently trading just above the 82.00 level, technical indicators are currently showing that a bullish move is likely to occur in the next 24-hours.
We will be looking at the daily chart for the AUD/JPY, provided by ForexYard. The technical indicators being examined are the Bollinger Bands, Williams Percent Range and Relative Strength Index.
1. As seen in our chart, the Bollinger Bands have begun to widen, which is typically seen as a sign of an upcoming reversal. Furthermore, the price ticks are well below the lower band, indicating that the reversal is likely to be upward.
2. The Williams Percent Range is currently right around the -90 level. Usually, anything below -80 is a sign that the instrument is in oversold territory. This appears to be the case at the moment, and is another sign that a bullish move is on the horizon.
3. The Relative Strength Index is currently well below the lower support line, indicating that a reversal may occur in the near future. Now may be a great time for forex traders to go long in their positions at a great entry price.
Technicals Show Potential Pullback in Gold Prices
Technicals Show Potential Pullback in Gold Prices
January 4th, 2011 Posted in Oil and Precious Metals, Technical Analysis Russell Glaser
Name: RussellSpot gold prices continue to climb but price stalled at a previous all-time high and the commodity looks to head lower.
Following a failed breach of the resistance level at $1423 the price of spot gold as moved lower.
Technicals on the daily chart point to a potential fall in the price of spot gold. Declining Momentum (7) will shortly provide a sell signal by dipping below the 100 level. Falling stochastics on the daily chart also support a decline in the price.
Support for the pair is found at the mid-December low at $1361 followed by the rising short term trend line off of the October and November lows.
Resistance is located at mid-December high at $1408, followed by the previous high at $1423, and finally at the all-time high at $1431.
Decline in the U.S. dollar with a lower risk in the market
Tuesday, 4 Jan 2011
U.S. dollar decline during trading on Monday versus both the euro and Swiss franc after the record rise in the beginning of the day only, and comes after U.S. economic data that led to the tendency of traders to the market trend towards riskier currencies and markets high-risk as well, and in general He has directed the euro to levels close to 1.3360 against the U.S. dollar during trading yesterday, the greenback saw the same negative performance against the Swiss franc and closed at 1.5485 levels.On the other hand have been statements from the United States of America on the ISM Manufacturing report has recorded an increase to the levels of 57 during the last month, and comes against the expectations that she was referring to the possibility of recording 57.1 and, in general terms, this indicates that the growth rates in the industrial sector recorded rates positive during the months of the current, which means that economic recovery can be maintained in a positive way during the coming period, on the other hand it may have issued statements also on the rates of expenditure on the construction sector has registered an increase for the third month in a row, which means high rates of growth of America at the moment .
On the other hand, those American economic reports had led to higher yields on American Treasury bills, but this is not the rise in revenues enough to let the dealers expect the sustainability of speculators in the market to do to buy the U.S. dollar, but it was more affected in the market yesterday were the crude oil prices and U.S. stocks.
On the other hand, it is expected to release data today from the United States of America on factory orders and the U.S. in at 15:00 GMT, is expected that the dealers have a strong view of these data in the case of the results better than expected it will be U.S. dollar expected to continue to rise.
USD Graphic Rewind: Dollar Index Climbs on Hopes for US Economy
http://www.dailyfx.com/forex/fundamental/article/usd_graphic_rewind/2011/01/05/USD_Graphic_Rewind.html
The dollar index succumbed to some early selling pressure in European trade and threatened to reverse Monday’s gains and resume its recent downtrend. However, after solid factory data in the US and a optimistic view from the Fed the dollar managed to shake off these early losses to close higher on the day. The buck also got a boost from softer global equities as they paused after a surging start to 2011 and commodities sold off, with both gold and oil racking up significant losses. The dollar has maintained this bid tone over-night as Asian equities had be soft as commodity-related stocks weigh on broader sentiment.
The outlook for the buck this year remains very positive with the US economy set to continue recovering coupled with the potential of a paring down of QE2 the buck should be set to climb off its own improving fundamentals. This says nothing of the gains it should register against the likes of the yen and euro whose own fundamentals look very shaky and are likely to weigh on the respective currencies against the buck.
Written by Jonathan Granby, DailyFX Research Team
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DailyFX provides forex news on the economic reports and political events that influence the currency market.
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Euro Holding True to Form; Latest Topside Failure Anticipated
http://www.dailyfx.com/forex/fundamental/daily_briefing/daily_pieces/opening_comment/2011/01/05/Euro_Holding_True_to_Form.html
We were not at all surprised to see the sell-off in the Euro on Tuesday, following an early surge above 1.3400. Technically, we have been talking of the expected formation of a medium-term lower top by 1.3500, with any rallies above 1.3400 to be very well capped. The latest sharp pullback reaffirms our outlook and once again puts the pressure back on the downside with the market eying a retest and break of the critical lows by 1.2970 over the coming sessions.
Fundamentally, the initial Euro selling was triggered by some bearish comments from the PBOC president on the outlook for the Chinese economy, while DIW’s negative views over the prospects for a healthy German economy were also seen weighing. Meanwhile, economic data out of the US has continued to show impressive recovery, with the most recent releases coming in the form of solid ISM manufacturing and factory orders. The resurgence in the US economy has also now been reflected in the latest FOMC Minutes from December with the Fed outlining that it is expecting growth to pick up. As we have already talked about in previous commentary, Fed monetary policy can only really go in one direction from here, and as the central bank becomes less accommodative, the USD Dollar should find additional support.
Another interesting point of note is that the latest IMF COFER (Currency Composition of Foreign Exchange Reserves) data which shows the aggregate of FX reserves for 106 countries shows an impressive increase in the amount of USD reserves, while at the same time also showing that central banks have been moving away from the Euro. While data like this should be taken with a grain of salt, as there are a number of factors that need to be considered, we definitely would give it some recognition in terms of the general negative sentiment shift in the Euro.
Moving on, as we glance at developments in the other major currencies we see that USD/JPY has been recovering, but still needs to establish back above the Ichimoku cloud top to officially secure the latest bounce; Cable continues to consolidate but ultimately remains well offered on rallies and looks like it wants to break lower towards 1.5295; USD/CHF has finally accepted a fresh record low for now by 0.9300, and could be in the process of carving out a major base; The Australian Dollar has been showing some relative weakness and AUD/USD is now threatening further retreat well below parity; and USD/CAD has once again rejected the notion of being comfortable below parity, with the market mounting and impressive recovery and once again looking to extend gains back towards 1.0200 initially over the coming days.
Looking ahead, German (58.3 expected) and Eurozone services PMIs (55.0 expected) are due at 8:55GMT and 9:00GMT respectively, followed by UK construction PMI (51.0 expected) and official reserves at 9:30GMT. Eurozone industrial new orders (1.5% expected) and PPI (0.3% expected) cap things off for the European session at 10:00GMT. US equity futures and oil prices are tracking lower, while gold recovers a bit and trades with a mildly bid tone.
Written by Joel Kruger, Technical Currency Strategist
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Forex: Dollar Climbs a Second Day as a Natural Reversal Effort Offsets Disappointing FOMC Minutes
http://www.dailyfx.com/forex/fundamental/daily_briefing/session_briefing/daily_fundamentals/2011/01/05/Forex_Dollar_Climbs_a_Second_Day_as_a_Natural_Reversal.html
- Dollar Climbs a Second Day as a Natural Reversal Effort Offsets Disappointing FOMC Minutes
- Euro Puts in for an Uneven Performance as Traders Doubt Data, ECB Financing Progress
- British Pound Surges on the First Action London Session with Help from Manufacturing
- Japanese Yen Starting to Feel the Fundamental Pressure as Kan Hints at Higher Taxes
- Australian Dollar Progresses a Stumble into a Possible Reversal While Risk Seems Steady
- Canadian Dollar Moves Right Back to Parity against the Greenback without Conviction
Dollar Climbs a Second Day as a Natural Reversal Effort Offsets Disappointing FOMC Minutes
Tuesday was a highly unusual trading day for not only the US dollar but for the capital markets in general. Falling back on the normal fundamental drivers, it would seem that the backdrop activity should have been relatively steady. Instead, various assets and currency pairs were exceptionally volatile; and more interestingly, there was a remarkable divergence in the performance of markets that usually trade hand-in-hand. Looking first at our benchmark for investor sentiment, the S&P 500 spent the New York session retracing the sharp rally that opened the New Year. Under normal circumstances, this would denote a general move towards risk aversion. However, the conviction in this reversal was tepid at best considering the benchmark index would not trade below Monday’s low. Yet, if we expand our horizons, we note that oil and AUDUSD tumble through the day. Such a performance from two favored speculative assets would suggest a concerted effort at unwinding risky positioning. Yet, looking closer, we also note that the Japanese yen collapsed through the early morning – typifying a build in carry interest.
Such a mixed day could lead one to believe that fundamentals had descended into chaos. However, this confusion can be alleviated by untangling the performance of the various assets. The first thing to establish is that trading conditions are still abnormal. Liquidity has certainly improved since the end of December; but many long-term investors as well as short-term speculators are keeping to the sidelines until there is a clear and consistent vote on market direction through the coming month, quarter and year. With that in mind, we note that divergences can develop and volatility is still very high. More importantly, the larger fundamental trends (like underlying risk appetite) have not reengaged. That said, we look back to our benchmark for speculative interest – the S&P 500. The index was lower on the day; but it did not make the necessary effort to break the long-term bull trend. That would contribute to the tentative boost to the greenback against fundamentally troubled currencies like the euro and Japanese yen. That said, there was also a notable push from key counter-currencies like the yen and Australian dollar. The former was shaken by the mention of a tax hikes that could dampen the economic recovery while the latter is still suffering from the destructive effects of the nation’s worst flood in recent memory along with a marked drop in key data. So, after untangling this complicated scenario; what should we take away from the day’s developments? Market conditions are still distorted, the influences of government stimulus versus austerity will continue to press and trends are still flimsy. Therefore, cautious and skepticism are warranted on the dollar’s nascent advance.
While, as traders, our primary concern is fundamental trends impacting the market now; we should also keep an eye on developments that alter the long-term course of the currency market. That said, the market’s general projection for the dollar over the next six months via the $600 billion stimulus program seems to be accurately priced in. The minutes from the FOMC’s last monetary policy decision noted directly that though there were improvements in the economy, they were “not sufficient” to warrant a change in the asset-purchasing program. A change in the program before its maturity is highly unlikely barring an extreme change in the outlook; so don’t expect this to have a marked impact on the dollar besides the constant weight of regular Treasury purchases. Looking ahead to tomorrow, we will get in the NFPs spirit with the ADP report release.
Related:Discuss the Dollar in the DailyFX Forum, John’s Analyst Picks: EURUSD Moves Towards its First Target, Missed out on GBPJPY
Euro Puts in for an Uneven Performance as Traders Doubt Data, ECB Financing Progress
It was difficult to get an accurate read on the euro Tuesday. The currency slipped against the US dollar and British pound but rallied against the Swiss franc. That in itself is a contradiction to accepted risk appetite correlations. Once again, this can be partially attributed to the unusual market conditions we are still facing as well as the data and news for the day. On the docket, we note that German unemployment rose for the first time since June of 2009 (though it doesn’t really alter the larger trend) while the initial Euro Zone CPI reading hit an October 2008 high (though the ECB is likely to take more interest in the later-released core data). On the headlines, the ECB announced it had successfully sterilized its cumulative government bond purchases through last week; but skepticism certainly remains surrounding European financials.
British Pound Surges on the First Action London Session with Help from Manufacturing
With London back online, sterling traders had a round of notable event risk to take stock of. The near eight-month high in mortgage approvals was worth a footnote; but it was the manufacturing activity PMI reading that really struck a chord with pound bulls. The strongest reading in 16 years suggests that – like the US – the United Kingdom may fall back on a factory-led recovery to sustain it.
Japanese Yen Starting to Feel the Fundamental Pressure as Kan Hints at Higher Taxes
It is a rare occasion when Japanese fundamentals actually alter the course of the yen; but the currency certainly felt the aftershocks of an announcement by Finance Minister Kan. The policy maker said it was inevitable that the government must debate the current course of consumption tax and social security to rein in its deficits. Will an economic slump finally remind the market that the future looks dim for Japan?
Australian Dollar Progresses a Stumble into a Possible Reversal While Risk Seems Steady
The Australian dollar was one of the more active currencies for the day – fundamentally rather than technically. The disastrous effects of the nation’s flood have forced many companies to break contracts and create a very real concern for growth. Yet, where this may be temporary, the fourth consecutive drop in factory activity presents a more engrained trouble with high interest rates and a high currency.
Canadian Dollar Moves Right Back to Parity against the Greenback without Conviction
When there isn’t a clear foundation of fundamental support for a currency (be it growth, interest rates, speculative conviction or any other overwhelming driver), trends are quickly snuffed out. That seems to be the case for USDCAD; which has quickly retraced from its bearish break below the closely-watched parity level. This is already a difficult pair on which to establish trends and a lack of risk trend is further complicating.
**For a full list of upcoming event risk and past releases, go to www.dailyfx.com/calendar
ECONOMIC DATA
Next 24 Hours
| Currency | GMT | Release | Survey | Previous | Comments |
| JPY | 23:50 | Monetary Base (YoY) (DEC) | 7.6% | Not translating into inflation | |
| AUD | 1:00 | HIA New Home Sales (MoM) (NOV) | 6.1% | Fell 0.2% in Nov after surging in Oct | |
| CNY | 2:30 | HSBC Services PMI (DEC) | 53.1 | Manufacturing is more important | |
| JPY | 5:00 | Vehicle Sales (YoY) (DEC) | -30.7% | Down as subsidies have expired | |
| EUR | 8:45 | Italian Purchasing Manager Index Services (DEC) | 53.5 | 54.5 | Service sector is expanding in Europe, but the recovery continues to be led by manufacturing |
| EUR | 8:50 | French Purchasing Manager Index Services (DEC F) | 54.1 | 54.1 | |
| EUR | 8:55 | German Purchasing Manager Index Services (DEC F) | 58.3 | 58.3 | |
| EUR | 9:00 | Euro-Zone Purchasing Manager Index Composite (DEC F) | 55 | 55 | |
| EUR | 9:00 | Euro-Zone Purchasing Manager Index Services (DEC F) | 53.7 | 53.7 | |
| GBP | 9:30 | UK PMI Construction (DEC) | 51 | 51.8 | Weak housing keeps activity muted |
| GBP | 9:30 | Official Reserves (Changes) (DEC) | -$728M | ||
| EUR | 10:00 | Euro-Zone Industrial New Orders (YoY) (OCT) | 18.4% | 13.5% | Recovering from last year's 15% year-over-year decline in October |
| EUR | 10:00 | Euro-Zone Industrial New Orders s.a. (MoM) (OCT) | 1.5% | -3.8% | |
| EUR | 10:00 | Euro-Zone Producer Price Index (MoM) (NOV) | 0.3% | 0.4% | CPI is considered more important from a monetary policy standpoint |
| EUR | 10:00 | Euro-Zone Producer Price Index (YoY) (NOV) | 4.4% | 4.4% | |
| USD | 12:00 | MBA Mortgage Applications (DEC 31) | -18.6% | Plunging as long-term rates rise | |
| USD | 12:30 | Challenger Job Cuts (YoY) (DEC) | ADP not a consistent indicator of government nonfarm payrolls report | ||
| USD | 13:30 | ADP Employment Change (DEC) | 100K | 93K | |
| CAD | 13:30 | Industrial Product Price (MoM) (NOV) | 0.3% | 0.5% | Prices are creeping higher on commodity inflation |
| CAD | 13:30 | Raw Materials Price Index (MoM) (NOV) | 2.0% | 1.7% | |
| USD | 15:00 | ISM Non-Manufacturing Composite (DEC) | 55.6 | 55 | Would be highest since April 2006 |
| USD | 15:30 | DOE U.S. Crude Oil Inventories (DEC 31) | -1258K | Inventories have been plunging on elevated demand and year-end tax considerations | |
| USD | 15:30 | DOE U.S. Gasoline Inventory (DEC 31) | -2316K | ||
| USD | 15:30 | DOE U.S. Distillate Inventory (DEC 31) | +243K | ||
| Currency | GMT | Upcoming Events & Speeches | |||
| USD | 18:00 | Hoenig Speaks at The Central Exchange in Kansas City |
SUPPORT AND RESISTANCE LEVELS
CLASSIC SUPPORT AND RESISTANCE - 18:00 GMT
| Currency | EUR/USD | GBP/USD | USD/JPY | USD/CHF | USD/CAD | AUD/USD | NZD/USD | EUR/JPY | GBP/JPY |
| Resist 2 | 1.3840 | 1.6420 | 89.00 | 1.0000 | 1.0922 | 1.0600 | 0.8230 | 127.60 | 146.05 |
| Resist 1 | 1.3700 | 1.5910 | 86.00 | 0.9735 | 1.0750 | 1.0200 | 0.8000 | 120.00 | 140.00 |
| Spot | 1.3301 | 1.5584 | 82.04 | 0.9494 | 0.9991 | 1.0052 | 0.7672 | 109.12 | 127.84 |
| Support 1 | 1.3000 | 1.5312 | 80.00 | 0.9300 | 0.9950 | 0.9600 | 0.6850 | 103.80 | 125.00 |
| Support 2 | 1.2925 | 1.5186 | 75.00 | 0.9000 | 0.9700 | 0.9375 | 0.6585 | 100.00 | 119.00 |
CLASSIC SUPPORT AND RESISTANCE –EMERGING MARKETS 18:00 GMTSCANDIES CURRENCIES 18:00 GMT
| Currency | USD/MXN | USD/TRY | USD/ZAR | USD/HKD | USD/SGD | Currency | USD/SEK | USD/DKK | USD/NOK | |
| Resist 2 | 14.4500 | 1.6755 | 7.1750 | 7.8165 | 1.4945 | Resist 2 | 7.7500 | 5.7800 | 6.2750 | |
| Resist 1 | 13.8500 | 1.5931 | 6.7650 | 7.8075 | 1.4655 | Resist 1 | 7.5800 | 5.6625 | 6.1150 | |
| Spot | 12.2430 | 1.5419 | 6.6780 | 7.7694 | 1.2880 | Spot | 6.7233 | 5.6029 | 5.8644 | |
| Support 1 | 12.0500 | 1.4724 | 6.4000 | 7.7490 | 1.2750 | Support 1 | 6.4500 | 5.2625 | 5.7030 | |
| Support 2 | 11.7200 | 1.3475 | 5.9200 | 7.7450 | 1.2500 | Support 2 | 6.1250 | 5.1000 | 5.5200 |
INTRA-DAY PIVOT POINTS 18:00 GMT
| Currency | EUR/USD | GBP/USD | USD/JPY | USD/CHF | USD/CAD | AUD/USD | NZD/USD | EUR/JPY | GBP/JPY |
| Resist 2 | 1.3483 | 1.5753 | 82.65 | 0.9636 | 1.0098 | 1.0227 | 0.7786 | 110.94 | 129.85 |
| Resist 1 | 1.3392 | 1.5668 | 82.34 | 0.9565 | 1.0044 | 1.0139 | 0.7729 | 110.03 | 128.85 |
| Pivot | 1.3342 | 1.5562 | 81.98 | 0.9446 | 0.9981 | 1.0084 | 0.7685 | 109.33 | 127.60 |
| Support 1 | 1.3251 | 1.5477 | 81.67 | 0.9375 | 0.9927 | 0.9996 | 0.7628 | 108.42 | 126.60 |
| Support 2 | 1.3201 | 1.5371 | 81.31 | 0.9256 | 0.9864 | 0.9941 | 0.7584 | 107.72 | 125.35 |
INTRA-DAY PROBABILITY BANDS 18:00 GMT
\
| Currency | EUR/USD | GBP/USD | USD/JPY | USD/CHF | USD/CAD | AUD/USD | NZD/USD | EUR/JPY | GBP/JPY |
| Resist. 3 | 1.3492 | 1.5762 | 83.01 | 0.9615 | 1.0100 | 1.0200 | 0.7788 | 110.77 | 129.65 |
| Resist. 2 | 1.3444 | 1.5718 | 82.77 | 0.9584 | 1.0073 | 1.0163 | 0.7759 | 110.36 | 129.20 |
| Resist. 1 | 1.3397 | 1.5673 | 82.52 | 0.9554 | 1.0046 | 1.0126 | 0.7730 | 109.95 | 128.75 |
| Spot | 1.3301 | 1.5584 | 82.04 | 0.9494 | 0.9991 | 1.0052 | 0.7672 | 109.12 | 127.84 |
| Support 1 | 1.3205 | 1.5495 | 81.56 | 0.9434 | 0.9936 | 0.9978 | 0.7614 | 108.29 | 126.93 |
| Support 2 | 1.3158 | 1.5450 | 81.31 | 0.9404 | 0.9909 | 0.9941 | 0.7585 | 107.88 | 126.48 |
| Support 3 | 1.3110 | 1.5406 | 81.07 | 0.9373 | 0.9882 | 0.9904 | 0.7556 | 107.47 | 126.03 |
v
Written by: John Kicklighter, Currency Strategist for DailyFX.com
To receive John’s reports via email or to submit Questions or Comments about an article; email jkicklighter@dailyfx.com
DailyFX provides forex news on the economic reports and political events that influence the currency market.
Learn currency trading with a free practice account and charts from FXCM.
Learn currency trading with a free practice account and charts from FXCM.
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