Press review - page 241

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2014-10-28 12:30 GMT (or 13:30 MQ MT5 time) | [USD - Durable Goods Orders]

if actual > forecast (or actual data) = good for currency (for USD in our case)

[USD - Durable Goods Orders] = Change in the total value of new purchase orders placed with manufacturers for durable goods. t's a leading indicator of production - rising purchase orders signal that manufacturers will increase activity as they work to fill the orders;

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U.S. Durable Goods Orders Show Unexpected Decrease In September

New orders for U.S. manufactured durable goods unexpectedly showed a notable decrease in the month of September, according to a report released by the Commerce Department on Tuesday, with orders extending the steep drop seen in August.

The report said durable goods orders fell by 1.3 percent in September after plunging by 18.3 percent in August. The continued decrease came as a surprise to economists, who had expected orders to increase by about 0.5 percent.

Excluding orders for transportation equipment, durable goods orders fell by a more modest 0.2 percent in September compared to a 0.7 percent increase in the previous month. Economists had also expected ex-transportation orders to climb by 0.5 percent.

 

Forex technical trading (VIDEO): Keeping the EURUSD buyers in control (October 28th, 2014).

The EURUSD has been able to move higher in trading on Monday after finding support above a low from November 2012, the 100 hour MA and the 38.2% of the move down from last week.|
Traders will be eyeing these levels in the new trading day, to see if what was broken can remain broken – keeping the buyers in control.



 

Video: EURUSD, GBPUSD and USDJPY Trade Potential on FOMC

  • While the upcoming Fed decision is top billing, there is a lot of event risk moving forward
  • Relative monetary policy and general 'risk trends' remain a key delineation of fundamental trading
  • EURUSD, USDJPY and GBPUSD offer decisive trade opportunity for different outcomes and themes

If the FOMC decision significantly alters the Dollar's position in the monetary policy ranks, what pair is best positioned for the change? What trades are primed for a significant 'risk' response to the central bank's actions? The upcoming monetary policy decision holds significant sway over both immediate volatility levels as well as big-picture fundamental trends. Against a backdrop of surprisingly low volatility readings, a tremendous rebound in equities and a stubborn US Dollar position; there are heavy biases and plenty of opportunity. These different facets position GBPUSD as a favored relative yield setup, USDJPY as a key 'risk' trade and EURUSD a balance of both worlds. We look discuss these pairs, the FOMC rate decision and other event risk ahead in today's Trading Video.


 

Forum on trading, automated trading systems and testing trading strategies

ForexTuition, 2014.10.29 08:52

The EUR/USD pair had a volatile session during the day on Tuesday, but truthfully I believe that this market is waiting to see went the Federal Reserve does as far as an interest rate decision today. I recognize that the Federal Reserve more than likely will keep rates exactly where they are, but will really get the market moving is the statement. If there is hints of the Federal Reserve tightening of monetary policies or at least some type of hawkish behavior, that will be very good for the US dollar, and send this pair much lower. On the other hand, if they make it abundantly clear that the market should and anticipate any type of hawkish stance from the Federal Reserve anytime soon, then this pair could go higher.

Looking at the chart though, I cannot help but notice that the 1.28 level is the beginning of significant bearish pressure, pain all the way to the 1.30 handle. I have been suggesting this for some time, and there is nothing on this chart that even remotely suggests that it’s about the change. I believe ultimately some type of resistant candle in this vicinity will be an excellent selling opportunity as we break the bottom of what looks like a bearish flag, and the perhaps head down to the 1.25 level during the next several days.


 
2014-10-29 18:00 GMT (or 19:00 MQ MT5 time) | [USD - Federal Funds Rate]

if actual > forecast (or actual data) = good for currency (for USD in our case)

[USD - Federal Funds Rate] = Interest rate at which depository institutions lend balances held at the Federal Reserve to other depository institutions overnight. Short term interest rates are the paramount factor in currency valuation - traders look at most other indicators merely to predict how rates will change in the future.

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Federal Reserve calls end to QE3 - Full Text of the Fed’s Statement

The US Federal Reserve has announced the formal conclusion of its latest bond-buying program, commonly referred to as QE3, while reaffirming plans to hold interest rates at current levels for a "considerable time".

The US central bank said it would make a final $US15 billion taper to its quantitative easing program from next month, concluding a 10-month process that has seen it gradually reduce its bond buying from $US85 billion.

The widely expected move came at the end of a two-day meeting of the Fed’s policy-setting Federal Open Market Committee (FOMC), with market eyes now shifting to the central bank’s view on the US economy and outlook for rate hikes.

“The committee judges that there has been a substantial improvement in the outlook for the labour market since the inception of its current asset purchase program,” the Fed’s statement read.

“Moreover, the committee continues to see sufficient underlying strength in the broader economy to support ongoing progress toward maximum employment in a context of price stability.

“Accordingly, the committee decided to conclude its asset purchase program this month.”

“The committee anticipates, based on its current assessment, that it likely will be appropriate to maintain the 0 to 0.25 per cent target range for the federal funds rate for a considerable time following the end of its asset purchase program this month,” the Fed advised.

“However, if incoming information indicates faster progress toward the committee's employment and inflation objectives than the committee now expects, then increases in the target range for the federal funds rate are likely to occur sooner than currently anticipated. 

“Conversely, if progress proves slower than expected, then increases in the target range are likely to occur later than currently anticipated.”

The Janet Yellen-led central bank noted that the US economy had expanded at a "moderate" pace since its last meeting in mid-September, while the underutilisation of labour resources was "gradually diminsihing" and long-term inflation expectations remained "stable".

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Here is the full text of the Federal Reserve’s policy statement.

 

EUR/USD Technical Analysis: Short Trade Making Progress (based on dailyfx article)

  • EUR/USD Technical Strategy: Short at 1.2710
  • Support: 1.2500, 1.2316, 1.2140
  • Resistance:1.2759, 1.2852, 1.3070



The Euro looks to be resuming its down trend resumption following the completion of a Flag chart formation. Near-term support is in the 1.2500-34 area, marked by the October 3 low and the 23.6% Fibonacci expansion, with a daily close below that exposing the 38.2% level at 1.2316. Alternatively, a reversal above trend line resistance at 1.2759 opens the door for a test of the 23.6% Fib retracement at 1.2852.

 
2014-10-30 12:30 GMT (or 13:30 MQ MT5 time) | [USD - GDP]

if actual > forecast (or actual data) = good for currency (for USD in our case)

[USD - GDP] = Annualized change in the inflation-adjusted value of all goods and services produced by the economy. It's the broadest measure of economic activity and the primary gauge of the economy's health.

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EUR/USD Technical Analysis: Bounce Hinted Above 1.25 Mark (based on dailyfx article)

  • EUR/USD Technical Strategy: Short at 1.2710
  • Support: 1.2500, 1.2316, 1.2140
  • Resistance:1.2746, 1.2852, 1.3070


The Euro appears to be returning to the down trend against the US Dollar after completing a Flag continuation pattern last week. A daily close below support in the 1.2500-34 area marked by the October 3 low and the 23.6% Fibonacci expansion exposes the 38.2% level at 1.2316. A Hammer candle hints a near-term bounce may be in the cards however. A turn above trend line resistance at 1.2746 clears the way for a challenge of the 23.6% Fib retracement at 1.2852.

 
Forex Weekly Outlook November 3-7

US ISM Manufacturing PMI, rate decision in Australia, the UK and the Eurozone, Employment figures from New Zealand, Australia, Canada as well as important jobs data from the US with the all-important NFP report. These are the major market movers planned for this week. Check out these events on our weekly outlook.
Last week, The Federal Reserve ended its QE3 program with a vote of confidence in the US economic recovery. The ongoing improvement in the labor market, the economic expansion and the satisfactory inflation rate has made the decision to end the bond-buying program as almost foregone. Furthermore the advance GDP data released a day later showed the economy grew 3.5% in Q3 slightly better than forecasted, suggesting the US economy is marching forward. Will this trend continue in Q4?

  1. US ISM Manufacturing PMI: Monday, 14:00. The Manufacturing PMI declined to 56.6 in September after posting 59 points in August. The reading reached the lowest level since June and analysts expected a higher figure of 58.6.The New Orders Index fell short by 6.7 from the 66.7 release in August, still indicating growth in new orders. The Production Index reached 64.6, rising 0.1 above the August reading. The Employment Index expanded for the 15th consecutive month, registering 54.6, declining 3.5 points below the August reading. Overall the general trend remained positive. Another mild drop to 56.5 is expected this time.
  2. Australian rate decision: Tuesday, 2:30. The Reserve Bank of Australia kept the cash rate unchanged at 2.5%, in line with market forecast, but warned against weakening in the housing sector driven by the overpriced housing market. Global growth continued in a moderate pace, despite a recent slowdown in China’s growth. The Bank also cautioned against the strength of the Australian dollar, offering less assistance than would normally be expected in achieving balanced growth in the economy. However the general trend pointed to moderate growth in the coming quarters. No change in rates is anticipated.
  3. US Trade Balance: Tuesday, 12:30. The U.S. trade balance narrowed unexpectedly in August to $40.1 billion, reaching its smallest level in seven months. Economists expected a higher deficit of $41 billion. Exports rose by 0.2% to $198.5 billion in August, and imports gained 0.1% to $238.6 billion. Petroleum imports were weak but imports of capital goods soared to their highest on record. The U.S. trade balance is expected to reach $40.1 billion this time.
  4. NZ employment data: Tuesday, 20:45. Unemployment in New Zealand declined to its lowest level in more than five years, reaching 5.6% in the second quarter from 5.9% in the first three months of 2014. The reading was better than the 5.8% forecasted by analysts, however the participation rate declined to 68.9% from 69.3% in the first quarter. Nevertheless, the job market continues to grow rising 0.4% in the second quarter after expanding 0.9% in the previous quarter. The figures suggest that New Zealand’s job market is no longer a key concern for the country. New Zealand job market is expected to increase by 0.6% while the unemployment rate is expected to narrow again to 5.5%
  5. BOJ Governor Haruhiko Kuroda: Wednesday, 1:30. BOJ Governor Haruhiko Kuroda will speak in Tokyo. Japan’s inflation reached to its lowest pace in half a year, drifting further away from the Central Bank’s 2% target. Kuroda may give further explanations on the reasons behind the new stimulus measures issued at the end of October, earlier than expected.
  6. US ADP Non-Farm Employment Change: Wednesday, 12:15. U.S. Private-sector employers increased hiring in September, adding 213,000 jobs, according to ADP payrolls processor. The 11,000 climb was better than the 207,000 rise predicted by economists. 88,000 jobs were created from small businesses, 48,000 jobs were created from medium sized businesses and 77,000 jobs were created from large businesses. The slowdown in August proved to be temporary after the NFP release posted strong gains. Us private sector is expected to add 214,000 jobs in October.
  7. US ISM Non-Manufacturing PMI: Wednesday. 14:00. Non-manufacturing Purchasing Managers Index declined to 58.6 in September, following 59.6 registered in August. The reading was broadly in line with market forecast, indicating that he service sector is advancing more rapidly than the manufacturing sector. Respondents commented that business activity cooled mildly in the past few months after posting strong growth, but they remain positive about the general trend of the economy. Non-Manufacturing PMI is predicted to reach 58.2 this time.
  8. Australian employment data: Thursday, 23:30. Australia’s Unemployment rate increased mildly in September amid an unexpected decline in. Australian job market contracted 29,700 jobs mainly in part-time work, lifting unemployment to 6.1% from 6.0% in August. The slowdown in employment coincides with the sharp drop in mining investment. The Reserve Bank of Australia faces a tough challenge whether to raise interest rates from a record low of 2.5% to help reduce rising house prices. However, such a move may increase interest rates could undermine growth and cause unemployment to rise. Australian job market is expected to gain 10,300 positions while the unemployment rate is expected to remain unchanged at 6.1%.
  9. UK rate decision: Thursday, 11:00. The Bank of England nine-member Monetary Policy Committee voted to maintain rates at 0.5%, despite rising calls for a rate hike. The BOE’s next move will be strongly dependent on the Eurozone central bank call. The current slowdown in Europe postposes all rate hike plans. Economists expect soft demand from Europe will keep the central bank on hold until 2015. Rates are expected to remain at 0.5% this time.
  10. Eurozone rate decision: Thursday, 11:45. The European Central Bank kept its benchmark interest rate at 0.05% at its October meeting, following a 10 bps cut in the previous month. Furthermore, the Bank Policymakers decided to reveal their plan to buy asset-backed securities and covered bonds. These new moves are intended to stimulate financing bodies to expand loans to all sectors of the economy. The ECB also decided to increase its monetary policy accommodation to spur growth.
  11. US Unemployment claims: Thursday, 12:30. The number of new claims for unemployment benefits declined again last week, reaffirming the growth trend in the US job market. The 1,000 decline from the previous week was better than forecasted and the four-week moving average, fell again to 287,750, the lowest level since February 2006. Analysts have noted that claims have rarely remained low for such a long period. If the pace of firings will remain low, and hiring will continue, wage is expected to grow in the fourth quarter. The number of new jobless claims is expected to reach 285,000 this week.
  12. Canadian employment data: Friday, 12:30. Canadian private sector surged in September amid a job gain of 74,000 positions, the majority in full-time employment. The unexpected increase pushed the unemployment rate down two 6.8% from 7.0%, the lowest level in nearly six years. Economists expected a job addition of 18,700 with an unchanged unemployment rate. The rebound in full time positions indicates a positive trend in the Canadian job market. Canadian private labor market is expected to increase by 400 positions while the unemployment rate is predicted to remain at 6.8%.
  13. US Non-Farm Employment Change and Unemployment rate: Friday, 12:30. U.S. employers increased hiring in September with a job gain of 248,000, pushing the jobless rate to a six-year low of 5.9%. The strong figures suggest the US economy is advancing with a steady job growth and fewer layoffs. Economists expected a smaller gain of 216,000 and no changes in the unemployment rate. The employment was broad based but the participation rate dropped to 62.7, the lowest level since 1978 and weak wage growth is another concern the Fed has to address. US job market is expected to gain 229,000 in October with no change in the unemployment rate.
 

GBPUSD Fundamentals (based on dailyfx article)

Fundamental Forecast for Pound: Neutral
  • Sterling finishes sharply lower versus US Dollar and targets fresh lows
  • Bank of England Rate Decision threatens volatility on surprises, but watch US Dollar on NFPs



The British pound finished the week notably lower versus the resurgent US Dollar, but a busy week of economic event risk ahead suggests the GBP/USD may see big moves and could very well stage a reversal.

Watch for any surprises out of an upcoming Bank of England Rate Decision and/or the highly-anticipated US Nonfarm Payrolls report to drive the lion’s share of Sterling/Dollar moves in the week ahead. Traders are clearly preparing for big volatility across the major FX pairs as 1-week volatility prices have hit their highest since the Scottish Referendum vote in September.

We do not expect the Sterling will see the same level of turmoil on a simple BoE rate announcement. Yet we need only look to the past week’s Bank of Japan interest rate decision to see the effects of a truly surprising central bank meeting. Analysts widely expect that the Monetary Policy Committee will leave interest rates unchanged and therefore produce no post-decision statement. To that end we’ll watch earlier-week PMI figures to gauge sentiment ahead of next week’s Bank of England Quarterly Inflation Report.

Beyond UK event risk it remains important to watch how the US Dollar and British Pound start the new month. Through September it seemed as though the US Currency was unstoppable as it hit fresh peaks against almost all major counterparts. Yet the month of October brought considerable consolidation. Late volatility suggests that November could produce a material change in market conditions. And indeed historical seasonality studies have shown that major currencies are more likely to see important reversals at the beginning and end of a given calendar period. Let’s watch and see how the Sterling starts to gauge whether a more significant breakdown is likely.

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