Forex Blog by Greg Secker

Yesterday – notes Greg Secker – we saw further falls on the FTSE and closed down 60 points at 4,121 with resistance at 4,200 not allowing the index to rally. There is now clear air down to 4,000, and we may see a fall back to the lows around 3,700. The Dow opened the day with another bearish break through support at 8,140 and dropped precisely to the major 8,000 support level. The index held firmly at this level and proceeded to rally 300 points from lows before closing the session with a gain of just 12 points. The index rallied sharply the last few times it has tested 8,000 and today’s reaction lies within this framework. If the Dow holds above 8,000, we could see another quick test of 8,500 or higher. Today in the foreign exchange news we are expecting the US monthly core CPI at 13:30. This is the change in price of goods and services purchased by consumers excluding food and energy. If the actual figure is greater than the forecast then this is good for the currency. Food and energy prices account for about a quarter of CPI but tend to be volatile and distort the underlying trend. Then at 14:55 we see the University of Michigan Consumer Sentiment report is due for release. Analysts are expecting a slight fall from 60.1 to 59.2. This report is a composite index based on surveyed consumers and is released on a monthly basis in the middle of the month. There are 2 versions of this data – preliminary and revised. The preliminary release is the earliest and tends to have most effect. Have a good days trading to finish off the week.

Yesterday – notes Greg Secker – the FTSE 100 fell 218 points amid heavy and persistent selling and closed at 4,180. The index found no support at the 4,340 and 4,200 levels during the fall. This single move has doubled the distance that the index needs to rally in order to break the double bottom. There is only minor support at 4,000 so we could easily see a return to the lows of around 3,700. The Dow opened the day with highly bearish selling pressure during the morning as the index broke through key support at 8,370. The index dropped to the next support level of 8,140 and ended the day near the lows of the session with a loss of 248 points. If the 8,140 support level gives way, we could see a quick test of 8,000 before a decision has to be made on whether the Dow will test 7,500 again. There is a lot of “clear air” beneath 8,140, which means 7,500 could be tested without too much resistance. Early this morning at half past midnight (GMT) we saw the Australian unemployment rate rise slightly from 4.4% to 4.5%. This was forecast. This afternoon at 12:45 GMT we will see the European Central Bank release their monthly Interest Rate decision. The current rate is 2.5% and the forecast is for a 0.5% cut down to 2.0%. If the actual result is greater than the forecast then this is good for the currency. The rate shift is often priced into the markets so it tends to be overshadowed by the ECB Press Conference held at 13:30. We care about this data because interest rates are very important in currency valuation. Also at 13:30 the US monthly PPI is announced. This is the change in the price of finished goods and services sold by producers. The forecast is -2.0% and if the actual result is greater than the forecast then this is good for the currency. Also at 13:30 the US Unemployment claims are due for release. This is the number of individuals who have filed for unemployment during the past week.  Tomorrow we see US CPI and the University of Michigan Sentiment Report released. This report is a measure of confidence and therefore a leading indicator.

The FTSE 100 closed down 27 points yesterday at 4,399 and in the process formed a low test bar down to 4,321. A large amount of intra-day volatility could be seen as the index looked directionless during the morning and in the approaches to the US open in the early afternoon. More negative news about the general economy was released yesterday, and plans to guarantee up to £20bn of loans to small businesses was also announced to assist small businesses in these difficult financial times. The Dow opened the day with early weakness and proceeded to drop below 8,400 as the index tested major support for the first time since the end of December. The index held at support and rose quietly from the day’s lows and ended the day with a loss of just 25 points. The Dow has now been trading within a range spanning from 8,370 to 9,000 for the last six weeks. This support level has held in solid fashion throughout this period of time and could continue to do so. The NASDAQ and S&P each tested new lows, but held their ground and consolidated sideways to the close. Look for more range movement until a breakout occurs. Wall Street has lost some of the enthusiasm that powered its late 2008 rally. The Dow Jones industrials have taken the biggest hit, falling for five straight days as investors questioned whether they got ahead of themselves when they bet in December that the economy and corporate profits were about to recover. Today sees US Retail Sales (Month on Month) figures released at 13:30. The US is a consumer driven market and this is the broadest look at this vital monthly figure. Last month this was -1.6% and the forecast for this month is -1.3%. If the actual figure is greater than the forecast this is good for the currency. At 15:30 the US Crude Oil Inventories are released. This is the change in the number of barrels of crude oil held in inventory by commercial companies in the last week. The forecast is 2.1m and there is sometimes no effect on the USD as there are both inflationary and growth implications. Good Trading.

FTSE closed down 22 points yesterday at 4,426. We are watching with a great deal of interest to see if the index finds support at 4,420 and rallies for the rest of the week. Last night business leaders painted a bleak picture of the economy, with a survey from the Chambers of Commerce suggesting a “frightening deterioration” towards the end of 2008 because the results of a survey they had undertaken has been “awful”. We await figures on the growth of the economy in the last Quarter on 23 January do determine if we have had six months of negative growth. The Dow opened yesterday with another round of early weakness and proceeded to trade slowly lower the rest of the day. The index closed the day with a loss of 125 points and is now approaching support at 8,370. Look to see if the index tests 8,370 today as the market may need to “feel” out this level before another break or bounce is seen. In the short term, the Dow has formed a steep upper trend line across the highs of the latest decline. Watch 8,550 for early signs of strength from current lows. The NASDAQ and S&P each dropped throughout the day, extending their bearish decline to four days. Watch for possible support tomorrow. So far this year, the Dow is down 3.5%. Stocks are still up sharply from late November but investors are quick to look for even subtle shifts in the market after the terrible run for stocks throughout last year. Today on the currencies the US and Canadian Trade Balance is due out at 13.30 so watch for possible movement on both currency pairs. The forecast for US Trade Balance is – $51.4Bn and Canadian Trade Balance is $3.2Bn. If the actual is greater than the forecast then this is good for the currency. The Chairman of the US Federal Reserve is here in London today and is due to give a speech at 12.00 noon titled “Crisis and the Policy Response” at the School of Economics and Political Science. As head of the central bank which controls short term interest rates, he has more influence over the value of the USD than any other person so we scrutinize his public engagements as they can be used to drop subtle clues regarding future monetary policy.

On Friday the FTSE 100 closed down 64 points at 4,448 and may be entering a range between 4,423 and 4,660. We are watching this with a great deal of interest because the resistance level is the break of the double bottom and the support level in near the 50ema. When the UKX is in between the 50ema and 200ema the markets are in an area of indecision. The Dow opened the day with early selling pressure as the index quickly dropped to the 8,600 level and eventually closed at a loss of 143 points. The Dow continues to wind up within a large triangle pattern and is now testing the lower boundary of the range at 8,600. Triangles are very powerful patterns that can sometimes spark a big breakout move. However, the geometry of this pattern is not conducive to such a breakout at this time. That’s because the index is trading too close to the apex of the pattern which means any breakout could be just a way to redefine the pattern’s boundaries until the real breakout occurs. A jump in unemployment (Non-Farm Payroll) sent stocks sharply lower on Friday as global investors feared that the US won’t deviate from their tightened budgets. The Labour Department’s much-anticipated report showed employers cut 524,000 jobs in December. But the unemployment rate jumped to a 16-year high of 7.2 percent — more than the 7 percent economists predicted — from 6.8 percent in November. Today we have no major news releases on the GBP, EUR or USD currencies. We have the Business Outlook Survey in Canada released at 15:30 and Business Confidence in New Zealand released at 21:00. Overall this coming week will relatively quiet for news releases. Good trading.

The FTSE 100 closed down just 2 points yesterday on an interesting day of announcements. The Interest Rate is now at 1.5%, the lowest level in the Banks 315 year history. The double bottom is still unconfirmed as the price action falls away from the 4,650 level. Today will be interesting with Non-Farm Payroll. The Dow opened the day very quietly and traded sideways throughout the session. The index eventually closed the day within a very tight consolidation with a loss of 27 points and remains well below the major 9,000 level. The Dow is now approaching a clear lower trend line at 8,600 which has paced the overall advance from the lows at 7,500. If the 8,600 level is crossed we could easily see another drop back towards support at 8,370. Should the Dow remain above 8,600, look for more range-type movement between 8,600 and 9,100 until major direction is decided out of this range. Wall Street was down for much of the session after a profit warning from retailer Wal-Mart intensified fears that consumers are even worse off than thought. Their reluctance to spend could make it harder for the US to recover from the recession. Here the Manufacturing Production and PPI are due for release at 9.30 this morning. Manufacturing Production is the total inflation-adjusted value of manufacturing output. The PPI is the change in price of goods and raw materials purchased by manufacturers. If the actual result is greater than the forecast for both sets of figures then this is good for the currency. At 12.00 noon today unemployment change, housing starts, building permits in Canada are to be released. Then at 13.30 its Non-Farm Payroll. The forecast is a loss of 520,000 jobs. 

FTSE 100 closed down 131 points yesterday at 4,507. In an interesting news release the Government has denied reports that it’s considering printing more money as a tactic to tackle the credit crunch. Treasury sources said that while the move has not been ruled out, it is not currently on the agenda. The Bank of England is widely expected to cut rates today by 0.5%. They are currently 2%. If this cut is announced it would mean rates are at their lowest point in the Bank’s 315-year history because ever since 1694, when the Bank was founded, its main interest rate has never fallen below 2%. The Dow had a weak day yesterday falling well below the major level of 9,000 level. The index dropped steadily throughout most of the day and eventually closed the session with a loss of 245 points. Today’s decline could lead the index back toward prior support at 8,370, especially if 8,700 doesn’t form support. Interestingly the Dow bottomed out precisely at the 50% Fibonacci Retracement level of 8,725 before rallying 50 points into the Close. If the Dow remains above this level it’s possible that we could see another test of the 9,000 level again very soon. This fall yesterday may well have been triggered by the warning from Intel about poor business conditions and more evidence of rising unemployment. This news upended some investors’ hopes for a speedy economic recovery this year and sent the major stock indexes down more than 2.5%. Intel’s second warning since November, as well as bleak outlooks from aluminum producer Alcoa and media industry bellwether Time Warner, underscored the breadth of the economy’s slowdown. The ADP National Employment Report said private sector jobs fell by a greater-than-expected 693,000 in December. This has made investors nervous ahead of tomorrow’s Non-Farm Payroll. Today we are expecting an interesting day on the Markets because the Bank of England Monetary Policy Committee are announcing the Interest Rate decision at 12:00 noon. Then at 13:30 the US unemployment claims are due. This figure is significant because it’s one of the first major news releases, however it is considered by many as a lagging indicator.

Yesterday – notes Greg Secker – the FTSE 100 continued to pushed forward and set a high of 4,675, before falling slightly to close at 4,638. These times between the 50 ema and 200 ema are always interesting, and we watch with anticipation to see if we can break up through the 200 ema or fall back down under the 50 ema and this would see the double bottom either confirmed or not. The Dow traded mostly sideways throughout the day and continues to remain around the critical 9,000 level. The index eventually closed the day with a gain of 62 points, but may be gearing up for a much bigger move ahead. Watch for possible breaks of 8,900 or 9,100. If the index can finally break above 9,000 and rally, there is ‘clear air’ above. Likewise a break to the downside would also present an easy drop back toward the 8,600 level, or possibly lower. Mixed data on the service sector, factory orders and pending home sales yesterday added to the mix. While investors expected the readings would show further deterioration, they were hoping the pace of the declines would slow. The market is eager to see signs that the U.S. recession may end later this year rather than dragging on into 2010. Todays news releases we have ADP Non-Farm Payroll figures out at 13:15 GMT an indication of the main figure out on Friday. Also the oil price may be affected when the crude inventories are released at 15:30. 

 

The FTSE closed yesterday down 22 points at 4,579 as volume returns to its normal levels after the Christmas break. A break of 4,660 could see the confirmation of the double bottom, but yesterday saw the run of 4 up days end so it’ll be interesting to see what happens today especially with the Bank of England Interest Rate announcement due out at lunchtime on Thursday. Yesterday – notes Greg Secker – the Dow pulls back 75 points to 8,953.The Dow rallied sharply late last week and tested the major 9,000 level for the first time in several weeks and continues to hold just beneath this level. The index has repeatedly tested 9,000 since early November and if it cannot rise above the 9,050 level look for another possible drop back toward near-term support at around 8,370. Yesterday – notes Greg Secker – the US President-elect Barack Obama described the US economy as “very sick” and said the situation is worsening, and this may well affect the markets. He also said he expected that the latest US unemployment figures, due out later this week, would be sobering. Investors and businesses are still contending with fears about everything from the state of corporate earnings to consumers’ willingness to spend during a recession. Today is a heavy news day in the Forex markets: HPI was released at 07:00 GMT and was – 2.5%, and PMI is due out at 09:30. Over the Pond, at 15:00 Non-Manufacturing PMI and Pending Home Sales are due for release and this could affect the USD. At 19:00 the minutes from the last FOMC meeting are released and if they are more bullish than expected then this may be good for the USD. For those of you trading into the evening today on the NZD may like to know that the New Zealand Trade Balance is due for release at 21:45. Good Trading.