2013-10-26

Where To Start Forex Trading For the Week Of October 27th, 2013

 

United States Dollar:  The US dollar traded almost flat after slumping to a near two-year trough versus the euro after data showed US consumer sentiment declined more than expected in October, spurring speculations the Federal Reserve will delay cutting the stimulus program.

The greenback came under pressure after economic data painted a dismal picture of US economy. Orders for US made durable goods excluding the volatile transportation sector fell 0.1 percent in September following a 0.4 percent downward revision in August, the Commerce Department said in Washington.

A rebound in demand for jetliners helped push-up total bookings for durable goods to 3.7 percent in September according to Binary options broker, Binary International.

Separately, the final reading of the University of Michigan/Thomson Reuters consumer sentiment index dropped to 73.2 in October, the lowest since December, from 77.5 in the prior month.

Economists believe this month’s 16-day partial shutdown trimmed as much as 0.6 percent from annualized fourth-quarter gross domestic product through damage to business and consumer sentiments and reduced government spending.

More analysts now believe the Fed will delay scaling back its $85 billion a month bond purchase program until its March 18-19 meeting. The changed market perception has increased the allure of carry trades where market participants buy higher-yielding assets by selling low interest-rate currencies to book a profit.

The ICE-dollar index, a gauge of the greenback’s strength against a basket of six major rivals, fell slightly to 79.181 from 79.211 late Thursday, capping its weekly decline to 0.6 percent.

The WSJ Dollar Index, a rival benchmark that uses a broader basket, rose to 71.77 from 71.70.

 

 

EURO:  The euro finished Friday’s trading session little changed after hovering near a two-year high as souring German business sentiments dented the earlier euphoria toward the 17-nation currency.

The euro had hit an intraday peak of $1.3832, its strongest level since November 2011, before giving back the day’s gain to change hands at $1.3802, little changed from its level late Thursday. The 17-member shared-currency rose about 0.9 percent against the greenback this week, making for a 2.1 percent rise month to date.

The common-currency managed to hold its ground despite an unexpected drop in Germany’s Ifo business sentiment data for the first time in six months. A stronger currency is negative for the eurozone as it is likely to undermine exports, worsening the already struggling currency bloc’s trade balance.

Today’s data follows Thursday’s sub-forecast private sector activity, suggesting recovery in the region is losing momentum.

That makes currency strategists nervous as they believe the euro’s rise above $1.40 will make businesses and European Central Bank policymakers uneasy, resulting in policy response. The current level, though high enough to potentially impact the bank’s inflation outlook, is unlikely to trigger any action beyond verbiage.

 

 

Japanese Yen:  The yen edged lower versus the dollar on Friday as weak US economic data spurred bets the Federal Reserve will push back the so-called taper, diminishing the demand for safer assets.

The Japanese currency shed 0.1 percent to close at 97.42 per US dollar after rising as high as 96.94 on Friday, tallying its weekly loss to 0.3 percent.

The Japanese unit’s weakness hit the exchange-rate sensitive equities in Tokyo, dragging the Nikkei Stock Average down 2.7 percent.

The heightened possibility of the US Fed maintaining the current pace of stimulus is likely to weigh on the dollar-yen pair going forward, said currency strategists. Consequently, the yen is likely to shoot up near the 93 handle by year end, they argued.

 

 

Pound:  The British pound rose versus the US dollar and pulled away from a near two-month low against the euro after data showed UK gross domestic product expanded at the fastest rate in three years during the third-quarter, adding to evidence recovery was gaining pace.

Sterling headed for a higher weekly close versus most of its 16 major peers after the Bank of England said yesterday it will widen access to money market operations, signaling greater liquidity for commercial banks.

The British unit traded at $1.6173 Friday, little changed from late Thursday.

Data released by the Office for National Statistics in London showed the economy grew by 0.8 percent in the September quarter, up from the 0.7 percent seen between April and June and the most since Q2, 2010.

BoE Governor Mark Carney said the central bank will widen the range of collaterals it accepts and offer money on cheaper terms for longer periods. It will also consider making liquidity tools available to a wider range of financial institutions, he said.

 

 

Canadian Dollar: The Canadian dollar extended losses to a third day versus its North American counterpart on Friday as markets braced for a more accommodative monetary stance by the Bank of Canada and crude prices posted their biggest weekly decline since June.

The loonie, as the Canadian dollar is popularly known, dropped 0.3 percent to trade at C$1.0448 as traders continued to build positions to the Bank of Canada’s move to lower expectations of an interest rate hike.

The currency fell to a seven-week low against the US dollar earlier after reports showed US durable goods order, excluding transport equipments, fell marginally in September.

That led to a mild risk-off bias and traders turned a little more cautious toward the commodity currencies, said analysts.

Bank of Canada governor Stephen Poloz indicated the bank is not in a hurry to raise interest rates anytime soon while lowering growth forecasts for the next three years.

Futures on crude oil, the country’s biggest export, rose 74 cents to $97.85 a barrel in New York on Friday, paring weekly loss at 3.2 percent.

 

Australian Dollar: The Australian dollar reversed early losses against the US dollar to finish Friday’s trading session virtually unchanged.

The Aussie, as the Australian dollar is popularly known, changed hands at 95.85 US cents, up 0.1 percent from its level late Thursday. It finished the week 1 percent lower.

The Aussie currency had dipped briefly in the morning session only to rebound later. The local currency still posted its first weekly decline this month against the greenback.

Reserve Bank deputy governor Philip Lowe said Thursday non-mining investment in Australia was at similar level seen during the 1990s recession. A weaker currency, lower interest rates and improved business sentiment could turn things around, he said.

 



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