Forex - Fed's Evans suggests a Price Level Target

From Chicago Fed President Charles Evans: Monetary Policy in a Low-Inflation Environment: Developing a State-Contingent Price-Level Target
I think there are special circumstances when price-level targeting would be a helpful complement to our current and prospective strategies in the U.S. ... There are quite a number of academic studies of liquidity trap crises that find either price-level targeting or temporary above-average inflation to be nearly optimal policies; and yet, central bankers and the public generally loathe the idea that even a temporarily higher inflation rate could be beneficial or be consistent with price stability over the longer term.
In my opinion, much more policy accommodation is appropriate today. In a speech two weeks ago, I stated that I believe the U.S. economy is best described as being in a bona fide liquidity trap.
...
In this setting, even a moderate expansion without a double dip will not lead to appropriate labor market improvement. Accordingly, highly plausible projections are 1 percent for core Personal Consumption Expenditure Price Index (PCE) inflation at the end of 2012 and 8 percent for the unemployment rate. For me, the Fed’s dual mandate misses are too large to shrug off, and there is currently no policy conflict between improving employment and inflation outcomes.
[CR Note: the currect FOMC forecast is for the unemployment rate to be in the 7.1% to 7.5% range in 2012, so clearly Evans is even more pessimistic]
...
If the Federal Reserve decided to increase the degree of policy accommodation today, two avenues could be: 1) additional large-scale asset purchases, and 2) a communication that policy rates will remain at zero for longer than “an extended period.”

A third and complementary policy tool would be to announce that, given the current liquidity trap conditions, monetary policy would seek to target a path for the price level. Simply stated, a price-level target is a path for the price level that the central bank should strive to hit within a reasonable period of time. For example, if the slope of the price path, which I will refer to as P*, is 2 percent and inflation has been underrunning the path for some time, monetary policy would strive to catch up to the path: Inflation would be higher than 2 percent for a time until the path was reattained. I refer to this as a state-contingent policy because the price-level targeting regime is only intended for the duration of the liquidity trap episode.Evans suggests committing to low rates until the price level target is achieved. That way investor know that rates will stay low even with an increase in inflation. Once the price level is achieved, the Fed will move back to a 2% inflation target.

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U.S. stock market looks for firmer view of economic recovery

NEW YORK (MarketWatch) -- The U.S. stock market's tepid two-week advance could pick up steam or falter altogether in coming weeks, depending on what a sizeable flow of economic reports has to say about the state of the recovery.
"Everybody is waiting to see the next couple of weeks of numbers so we can have a better idea of what is going on in the economy," said Hugh Johnson, chairman and chief investment officer at Hugh Johnson Advisors.
"The numbers are a touch more encouraging, and next week we'll start to see some numbers that tell us very clearly how things went in August," said Johnson.
The less-dark view was illustrated on Wall Street, where the major stock indexes on Friday eked out a second consecutive week of gains, supported by reports that U.S. wholesale inventories rose the most in two years and that Japan's growth slowed less than forecast, brightening prospects for the global recovery.
Up 1% for the week, the Dow Jones Industrial Average /quotes/comstock/10w!i:dji/delayed (DJIA 10,463, +47.53, +0.46%) added 47.53 points, or 0.5%, to end at 10,462.77, with the blue-chip index ending back in the black for the year for the first time in the holiday-shortened week.
The S&P 500 Index /quotes/comstock/21z!i1:in\x (SPX 1,110, +5.37, +0.49%) added 5.37 points, or 0.5%, to 1,109.55, leaving it up 0.5% for the week, while the Nasdaq Composite /quotes/comstock/10y!i:comp (COMP 2,242, +6.28, +0.28%) added 6.28 points, or 0.3%, to 2,242.48, a rise of 0.4% from the week-ago close.
As equities climbed Treasurys fell, pushing the 10-year yield /quotes/comstock/31*!ust10y (UST10Y 2.80, 0.00, 0.00%) to a one-month high. Read Bond Report.
Crude-oil futures for October delivery climbed 3% to $76.45 a barrel, the highest finish in a month, as Chinese trade numbers pointed to a rise in crude imports and a pipeline between Canada and the U.S. was closed due to a leak. See Futures Movers.
Gold dropped for the commodity's first weekly decline in more than a month, with the contract for December delivery down 0.4% to $1,246.50 an ounce. Read Metals Stocks.

It's the economy, stupid

Economic reports in coming days will include figures on retail sales for August, and gauge of manufacturing activity in the New York region during September. The latter part of the week brings the government's count of initial claims for unemployment benefits, with the most recent count falling, including the four-week average.
"If the numbers come in with enough consistency to increase confidence then volume will pick up. What is lacking is confidence, and I don't think you build it on the back of one number," said Johnson.
A large portion of the summer had Wall Street veering from one dismal economic report to another, a scenario underscored by the worst August for stocks in nine years.
Yet September, historically the worst month of the year for equities, has so far had stocks on the mend as reports on the labor market, manufacturing and business activity came in better than expected, lifting sentiment a bit.
And, with November elections approaching, the economy and politics are in play, with President Barack Obama on Friday maintaining the U.S. economy is coming out of the worst recession in decades, while acknowledging the progress has been slow and conceding many Americans may fault him when they vote in November. Read about who filled vacancy on Obama's economic team.
"He's quite right that the economy is in an expansion, and he's quite right that he wishes it were expanding more rapidly," said Johnson.
And, while the peak earnings' weeks are done, a few companies are scheduled to report results in the next few weeks, with six slated to announce quarterly results in the days ahead.
On Monday, Discover Financial Services /quotes/comstock/13*!dfs/quotes/nls/dfs (DFS 15.90, +0.19, +1.21%) reports, followed by Pall Corp. /quotes/comstock/13*!pll/quotes/nls/pll (PLL 37.55, +0.10, +0.27%) , Best Buy Inc. /quotes/comstock/13*!bby/quotes/nls/bby (BBY 33.88, +0.32, +0.95%) and grocer The Kroger Co. /quotes/comstock/13*!kr/quotes/nls/kr (KR 21.25, +0.24, +1.14%) on Tuesday.
Global shipper FedEx Corp. /quotes/comstock/13*!fdx (FDX 84.16, -0.12, -0.14%) and business software titan Oracle Corp. /quotes/comstock/15*!orcl/quotes/nls/orcl (ORCL 25.05, +0.72, +2.96%) are on tap for Thursday. Oracle, which recently hired ousted Hewlett-Packard /quotes/comstock/13*!hpq/quotes/nls/hpq (HPQ 38.28, -0.54, -1.39%) executive Mark Hurd, is expected to report sharp gains in profit and sales. Read what analysts expect from Oracle.
Through Thursday, blended share-weighted earnings for the S&P 500 for 2010's second quarter stood at $200.3 billion, above the prior week's $199.8 billion, according to research compiled by Thomson Reuters analyst Christine Short.
Of the 496 companies in the S&P 500 that have reported earnings for the quarter, 75% have posted earnings that topped analyst expectations.

Swiss Franc Touches Record High, Nears Parity

In the year-to-date, the Swiss Franc has risen 3% against the Dollar, 15% against the Euro, and more than 5% on a trade-weighted basis. It recently touched a record low against the Euro, and is closing in on parity with the USD. Since the beginning of the summer, the Franc has rallied by an unbelievable 15% against the Greenback. I don’t think I’m alone in scratching my head in bewilderment wondering, What could possibly be behind the Franc’s rise?

By this point, everyone is familiar with the safe-haven phenomenon. Basically, concerns of a double-dip recession have ignited a flare-up in risk aversion and spurred investors to shift capital into locales and investment vehicles that are perceived as less risky. Switzerland and by extension the Swiss Franc, have both benefited from this phenomenon: “Anxious investors searching for a haven from fears about the health of Europe’s banks, which knocked equities and sent peripheral eurozone government bond spreads higher, dumped the single currency. The Swiss franc benefited.” Enough said.

At the same time, the Dollar and Japanese Yen are also considered safe-haven currencies, and as you can see from the chart below, the three have hardly traded in lockstep. In other words, there must be something distinguishing the Franc. Economists point to a strong economy: “Gross domestic product rose 0.9 percent from the first quarter, when it increased 1 percent. ‘The underlying economics of Switzerland are very, very healthy. Concerns about deflation have subsided.’ ” The consensus is that the Swiss economy will expand by close to 2% on the year. However, this is hardly impressive, especially compared to other industrialized countries. In addition, Swiss interest rates remain low, which means the opportunity cost of holding the Franc is high. There must be something else going on.

 In fact, it looks like the Swiss Franc’s rise is kind of self-fulfilling. For most of 2009, the Swiss National Bank (SNB) spent nearly $200 Billion to artificially hold down the value of the Franc. During this period, the Franc remained stable against the Euro and depreciated against the Dollar and Yen. Having finally broken through the “line in the sand” of €1.50, however, the Franc is now appreciating rapidly. Why? Because the SNB no longer has any credibility. It lost $15 Billion (due to the Euro depreciation) trying to defend the Franc, and in hindsight, the mission was a complete waste of time. As a result, a fresh round of intervention is out of the question. The currency markets have also dismissed the possibility of new intervention, and it seems they are punishing the SNB (via the Franc) for even trying.
According to analysts, the markets have also come to see the Franc as a reincarnation of the Deutschmark, due to its “strong economy, massive foreign reserves, traditional haven status and close links with the German economy.” Those that fear a Eurozone collapse and/or want to make exclusive bets on Germany are now using the Franc as a proxy. I don’t personally understand the logic behind this strategy, but where perception is reality, it’s more important to understand that other investors see the connection rather than seeing the connection for oneself.
Going forward, there is mixed sentiment surrounding the Franc. One analyst warned clients, “I would be cautious about chasing it too far in the short term. There’s still a huge number of headwinds out there.” According to another analyst, “We expect the franc to remain strong throughout the decade.” Personally, I’m inclined to side with the former point of view. From a fundamental standpoint, there isn’t a whole lot to keep the Franc moving up and its recent surge is probably running on fumes. At the very least, I would expect a correction in the near-term.

Euro Falls Heavily

U.S. Dollar Trading (USD) mild risk aversion and heavy EUR/USD selling helped the Dollar gain against most pairs. In US stocks, DJIA -107points closing at 10340, S&P -12 points closing at 1091 and NASDAQ -24 points closing at 2208. Looking ahead, July Consumer Credit is forecast to fall -3.8bn vs. -1.3bn previously.

The Euro (EUR) came under pressure for most of the day with the market focused on a WSJ article that questioned the European Banking Stress tests and also the German Banking Association reported that German Banks would need 100bnin more capital if new global banking rules get passed. EUR/USD traded with a low of 1.2675 and a high of 1.2821 before closing at 1.2690. Looking ahead, German Trade Balance forecast at 12.9bn vs. 12.3 bn.

The Japanese Yen (JPY) USD/JPY slipped below Y84 on heavy crosses led by the EUR/JPY but the moves were not drastic and support was found at Y83.50. The BOJ held at 0.1% but given it was the second meeting in two weeks the market was not expecting fireworks. Overall the USDJPY traded with a low of 83.50 and a high of 84.28 before closing the day around 83.75 in the New York session. UPDATE July Machine Orders at 8.8%.

The Sterling (GBP) was weaker against the greenback but made good gains against the souring Euro. Cable Found support at 1.5300 and bounced in the US session. Overall the GBP/USD traded with a low of 1.5294 and a high of 1.5427 before closing the day at 1.5360 in the New York session. Looking ahead, July Industrial Output is forecast at 0.3% vs. -0.5% previously m/m.

The Australian Dollar (AUD) was pushed lower on neutral comments from the RBA after they held at 4.5% and news emerged that Labor would be forming a new government along with its proposed mining tax. Overall the AUD/USD traded with a low of 0.9090 and a high of 0.9181 before closing the US session at 0.9120.

Oil & Gold (XAU) gold surged in the US to test $1260 on global financial concerns.Overall trading with a low of USD$1244 and high of USD $1260 before ending the New York session at USD$1256 an ounce. Oil held up well in a risk averse environment. WTI Oil Closed -$0.30 at $73.80 a barrel.

Euro – 1.2685

Initial support at 1.2588 (Aug 24 low) followed by 1.2434 (61.8% retrace of 1.1877-1.3334). Initial resistance is now located at 1.2933 (Aug 12 low) followed by 1.3000 (Big figure Resistance)

Yen – 83.70

Initial support is located at 83.52 (Sept 7 low) followed by 81.85 (May 1995 low). Initial resistance is now at 85.23 (Sept 3 high) followed by 86.36 (Aug 13 high).

Pound – 1.5365

Initial support at 1.5125 (July 21 low) followed by 1.4906 (0.618 of 1.4231 - 1.5999). Initial resistance is now at 1.5492 (Sept 1 high) followed by 1.5713 (Aug 12 high).

Australian Dollar – 0.9115

Initial support at 0.9055 (Sept 2 low) followed by the 0.8771 (Aug 25 low). Initial resistance is now at 0.9222 (Aug 6 high) followed by 0.9389 (Apr 12 high).

Gold – 1256

Initial support at 1232 (Aug 31 low) followed by 1210 (Aug 24 low). Initial resistance is now at 1265 (June 21 high) followed by 1300 (round number).

Oil – 73.70

NFP Shows Solid Private Job Growth, Yen Tumbles, Commodity Currencies Soar

The Japanese yen is sharply lower in early US session after release of better than expected non-farm payroll report from US. Commodity currencies also soar broadly on risk appetite. European majors are relatively steady and Swiss Franc is indeed dropping sharply following yen. The headline non-farm payroll number showed -54k contraction only comparing to expectation of -105k. Prior month's number was also revised up to -54k. More importantly, private sector job market showed 67k expansion versus expectation of around 40k while prior month's data was also revised up to an impressive 107k. Unemployment rate climbed from 9.5% to 9.6% as expected and is ignored by the markets. Markets will now face another test of ISM services later in US morning.
Release earlier today, UK PMI services dropped more than expected to 51.3 in August and sent sterling lower against Euro. Eurozone services PMI was revised mildly up to 55.9 in AUgust. retail sales grew 0.1% mom , 1.1% yoy in July. Swiss CPI was flat mom, rose 0.3% yoy in August.
CAD/JPY follows risk appetite in US session and jumps sharply. Consolidation above 78.52 is still in progress and more upside should be seen to 82 and above. But after all, we'd still expect upside to be limited by 83.48 resistance and bring resumption of the whole fall from 94.46.

Swiss Franc are Heading to Parity with Dollar on Swiss GDP

The Swiss franc is heading to the parity with the US dollar as the pace of Switzerland’s economic growth was faster than the economists estimated. The currency also gained against the euro.
The Swiss gross domestic product grew by 0.9 percent in the second quarter of this year, following the 1.0 percent advance in the previous quarter. The median estimate was the 0.8 percent growth. Now, as the threat of the deflation considered being gone and the Swiss National Bank is unlikely to intervene, the talks emerge about the possible franc’s parity with the dollar.
USD/CHF dropped from 1.0156 to 1.0115 today as of 11:26 GMT. EUR/CHF declined from 1.3008 to 1.2980.

Pound Falls to New Lows as BoE Expects Recession

The Great Britain pound fell to its
one-month low against the USD and to the 3-month low against the yen, following the comments of the country’s monetary officials and the global bearish trend for the riskier assets.
According to the interview given to The Times by Martin Weale (a member of the Monetary Policy Committee of the Bank of England), the risk of the continuation of the recession is quite strong and there are chances that the 4-quarter growth value may turn out negative in the UK. Today’s figures from the macroeconomic reports from over the world also indicate a slowdown in the recovery.
The analysts believe that the risk-aversion was already high enough for the pound to suffer a major drawdown, while the dovish commentaries by the Bank’s officials are just pulling it even farther down. The speculators will now have an additional stimulus to bet on a further depreciation of the sterling. Meanwhile, the stock market participants retreat from equities to the appreciating bonds.
GBP/USD fell from 1.5501 to 1.5472 as of 16:05 GMT today after hitting as low as 1.5372 earlier. GBP/JPY went down from 131.93 to 130.31, touching 128.79 during early trading session — the lowest level for the currency pair since May 25. EUR/GBP increased from 0.8159 to 0.8193.

AUD/USD Outlook – August 23-27

The upcoming week consists of three market moving events in Australia, as well as political echoes after the elections ended in a hung parliament. Here’s an outlook for these events and an updated technical analysis for AUD/USD.

AUD/USD chart with support and resistance lines marked.
 

The meeting minutes and RBA governor Glenn Stevens in particular, hinted that there’s still lots of time for more rate hikes. This, together with the echoes from Ben Bernanke’s statement, hurt the Aussie. Now, the elections and other events will rock the currency. Let’s start:

1. Construction Work Done: Published on Wednesday at 1:30 GMT. This housing sector indicator has been doing better than other ones, rising, posting neat growth rates. After the last quarter saw a weaker than expected growth rate of 1.9%, there’s hope for a better growth rate this time – 3.1%.
2. CB Leading Index: Published on Thursday at 1:00 GMT. The Conference Board builds this indicator from 7 economic indicators . Most of these indicators have already been released, yet the publication still moves the currency. Three months of rises in this index will probably be followed by a fourth one, at a rate of about 0.3%.
3. Private Capital Expenditure: Published on Thursday at 1:30 GMT. This quarterly indicator always rocks the Aussie, as it’s a good gauge for the whole economy. After a superb Q4, expenditure dropped in Q1 by 0.2%, disappointing the Aussie. A recovery is expected this time, with a 2.4% rise

AUD/USD Technical Analysis

The Aussie started the week with a ounce off the 0.8870 level mentioned in last week’s outlook. It later struggled with the 0.90 line, managed to cross it, but couldn’t breach the 0.9080 line. The fall was strong and almost ended in losing 0.8870, but the pair finally closed at 0.8938.
AUD/USD now ranges between 0.8870, which served as a clear line in both directions, and the round number of 0.90, which provides minor resistance.
Above, 0.9080 proved itself once more in the past week, and is now a major line of resistance. Higher, 0.9135 supported the pair when it was trading higher, and recently worked as resistance.
Above, 0.9220 capped the Australian dollar at the beginning of the month and also supported it in April – it’s a strong resistance line. The veteran 0.9327 line is still far in the distance.
Looking down below 0.8870, the next line of support is at 0.8710, which was a swing low in May and also provided support later on. It’s followed by 0.8567, which worked as support in May and as a resistance line back in 2009.
Even lower, 0.8316 was a double bottom in July, and provides major resistance. Lower, the year-to-date low of 0.8066 is the ultimate support line.
 

Forex: GBP/USD Has broken channel support - Commerzbank Forex: GBP/USD Has broken channel support - Commerzbank

Pound's rejection from 1.5700 yesterday has triggered a 200 pips decline to 1.5500 session low, breaking below the uptrend channel support line, at 1.5610, at test support area at 1.5526/02, says Karen Jones, technical analyst at Commerzbank.

If the pair extends below 1.5502, Karen Jones points out to 1.5304/1.5274 area as next downside target: "A fall through the 200 day moving average at 1.5502 will confirm our view of a top having been formed with the 38.2%/50% Fibonacci cluster at 1.5304/1.5274 and then the 55 day moving average at 1.5201 being targeted."

Resistance levels lie at 1.5709 and then n¡between 1.5750 and 1.5820, says Jones: "Resistance above 1.5709 is found between 1.5750 and 1.5820, the August 5th low. We remain bearish whilst below 1.60."

Russian Ruble Rise with Oil Prices

The Russian rose today after crude oil, the main source of the nation’s revenue, gained and as the exporters converted their foreign currency earnings into the Russian currency.
The Russian exporters exchanged their foreign currency earnings for the ruble to pay the taxes this week. The crude oil prices advanced 0.7 percent to $75.95 per barrel in New York. The oil prices gained as the concerns for the global economy eased somewhat, but the fears may return, pushing the prices down to $60 per barrel.
USD/RUB trade at 30.541 today as of 11:02 GMT after falling as low as 30.452.

The dollar started the new week with losses during the Asian session

EUR/USD (1.2793)
European & US sessions forecast levels: 1.2525/1.3335
Trend Sessions: European: Neutral
US: Neutral/Downward
Market Focus: 8:30 AM NY Fed - Empire Manufacture, 9:00 AM Net Long-Term TIC Flows.
Daily Strategy: The dollar starts the new week mixed. The temporary loss during the Asian session is based on technical correction. It is also wait for the key Net Long-Term TIC Flows data today. The dollar may continue rises against the euro during the U.S. session today. As overall is expecting mix trading today.

Euro Traders will Turn to Financial Troubles with the Bull Spell Broken

- The German economy expands at its fastest pace on record in the second quarter

- Spain’s Prime Minister hints at relaxing austerity, Slovakia breaks the unity in stabilizing the region

- EURUSD posts a remarkable reversal; but is this correction destined to develop into a trend?

With the US dollar advancing for five consecutive days, the euro would naturally tumble for five consecutive sessions. For EURUSD, this decline was the worst performance the market has seen since mid-May. As the most liquid pair in the currency market, this benchmark is also a bellwether for the rest of the euro crosses. This is an unfortunate connection for the shared currency; because the substantial move of the past week has speculative and technical connotations as a long-overdue correction after a persistent and slow two-month advance. However, the sharp reversal has its fundamental bearings as well; and this underlying sway over investor positioning is what will truly define the euro’s progress going forward.

For the euro, there are two primary fundamental concerns going forward: whether the economy will expand faster than its peers (and fast enough to forgo additional fiscal troubles) and the threat of another financial crisis. As for speculation surrounding interest rate potential, the ECB has more or less written off any possibility of a hike for the foreseeable future; so don’t expect the Euro Zone CPI numbers to do much for price action. Between the two dominant themes, financial uncertain holds the greatest potential for the future. Officials didn’t fix their problems after Greece raced towards default and the market closed to sovereign bond auctions in the region. They merely offered a temporary patch that was whole-heartedly dependent on investor optimism. It is this precarious position that is exposed through developments that show a lack of progress with curbing deficits and surviving austerity. Of great concern last week (but generating only minimal attention) was the hint made by Spanish Prime Minister Zapatero that he may ease austerity efforts to support growth and Slovakia’s vote not to send bailout funds to Greece. There was already considerable doubt that the region could balance fiscal responsibility with reasonable growth before. Should unity break down in the effort to restore confidence in the entire European economic and monetary union, the currency will surely suffer.

With risk in mind, we cannot predict what will catalyze fear or confidence as there are few scheduled indicators that have this level of influence and no specific meetings to set rest our expectations upon. That being said, it will be important to keep a constant vigilance on underlying risk appetite trends market wide. Should the need to unwind risky positions wash over the markets once again, the euro will very likely be at the top of the list due to its fundamental troubles. A more specific concern to keep track of is the European governments’ ability to access the debt market. Spain, Ireland, Portugal and Hungary will all attempt to raise funds next week. Consistently high yields and low demand will eventually capsize confidence.

Looking at the economic docket, there is little reason to believe that we will see even a short-term trend develop from any of the scheduled listings. However, the ZEW sentiment surveys for Germany and the Eurozone should be noted. As a confidence reading for investors, this data will be important for gauging the market for sovereign and regional bank bond auctions before they actually take place

Asian markets return to gains; Euro and Pound consolidate losses

Most Asian markets are going through moderate advances on Friday, with investors focusing on Japanese authorities and the possibility of an intervention to curb Yen strength, which is weighing Japanese exports. In FX markets Euro and Pound consolidate at lower levels.

Except Japanese Nikkei Index, which has dropped 0.3%, with Toyota Motor Corp. and Honda Motor Co. leading losses, the rest of the stock markets have traded on bid tone. South Korean Kospi Index advanced 1.1% and Australian S&P/ASX Index rose 0.7%.

Shares of Japanese car manufacturers have driven the Nikkei Index lower, as Yen strength weighs the demand for Japanese products overseas. Toyota Motor lost 0.7% while Honda Motor lost 1.6% together with other strong exporters, such as Cannon, which lost 0.8% and Tokyo Electron, 1.4% down.

Euro and Pound consolidating losses

EUR/USD decline from 1.3335 high last Friday extended below 1.300 on Wednesday's sell off to bottom at 1.2770 low on Thursday, which offered support to consolidate between 1.2820 and 1.2875 during Asian session.

GBP/USD was rejected at 1.6000 high on Monday, and the pair retreated continuously during the current week, to hit a fresh 3-week low at 1.5565 on Thursday, and consolidate between 1.5600 and 1.5650 during Friday's Asian session.

USD/JPY decline from 88.10 high on Jul 28 extended to a 15-year low at 85.70 on Wednesday, to pick up on Thursday, reaching levels right above 86.00, to reach resistance level at 86.15/25, under pressure at the moment of writing

EURGBP: Bear Pressure Remains On Course

EURGBP- Risk of further downside weakness continues to be seen despite the cross’s current bid tone. This is coming on the back of its Wednesday losses. On a violation of the 0.8202 level, further declines will shape up towards the 0.8100 level, its psycho level and possibly lower. Its daily RSI is bearish and pointing lower supporting this view. To reverse this view, a climb back above the 0.8315 level must occur with a firm hold above there triggering g further strength towards its July 22’10 high at 0.8464 with a clearance of there targeting the 0.8530/31 levels. On further strength, its May 21’10 high at 0.8772 will be targeted. All in all, having continued to weaken, threats of additional losses are likely.

Dollar slides vs yen as Fed tries to stabilize US

NEW YORK — The dollar tumbled to a 15-year low Wednesday versus the Japanese yen, which many traders have taken as a safer bet after the Federal Reserve said it expected a weaker U.S. recovery and took steps to support the economy.
The dollar rose against most other currencies around the world, however, with investors still seeking access to one of the world's most accessible places to park funds, short-term U.S. Treasurys, as economic reports and forecasts Wednesday from the U.S. to Asia to the U.K. suggested a slowdown in the world recovery.
Yields on U.S. government debt tumbled as investors poured into Treasurys, which they consider super-safe purchases.
It's the dollar's biggest one-day jump against a basket of six major currencies, which include the euro, British pound, yen, Swiss franc, Canadian dollar and Swedish krona, since December 2008, according to data from Thomson Reuters. The index rose nearly 1.9 percent.
"This is just huge risk aversion," said Joseph Trevisani, chief market analyst at FX Solutions.
The Fed on Tuesday said it would take money from maturing mortgage-backed bonds and place it in Treasurys as it cut its assessment of the economy's prospects. The central bank hopes to pull long-term interest rates modestly lower, making borrowing easier and stimulating economic activity.
The Fed signaled it has stepped away from "normalizing" the emergency measures put in place during the financial crisis, as it had been doing earlier this year.
"This decision to reinvest the proceeds of previous stimulus is probably the least (the Fed) could have done, but it also leaves the door open for them to go further if necessary," said Michael Hewson of CMC Markets in London.
The Fed's action underscores the weaker growth in the U.S. this summer, which has helped take the luster off the U.S. dollar as the world's first choice for a safe haven asset and helping propel the yen.
"What are they concerned about, where are we really headed?" Trevisani asked. The Fed's plan to buy Treasurys was a manifestation of its worries that was spooking investors, he said.
The dollar tumbled to as low as 84.75 yen Wednesday, the lowest point since July 1995.
That weaker dollar could help U.S. companies compete with Japanese companies, and raises the possibility that the Japanese government will step in to make its currency weaker. A stronger yen has made goods from Japanese exporters more expensive overseas. Currency converted back to yen from the dollar also hurts the bottom line.
Japan hasn't intervened in the currency market since March 2004.
In late morning trading in New York Wednesday, the dollar recovered a bit to 85.11 yen compared to 85.27 yen late Tuesday.
The dollar was markedly stronger versus other currencies across the world apart from the yen as bad signs for the worldwide recovery came rolling in.
The Bank of England lowered its forecast for economic growth this year, while China said its industrial growth slowed in July and inflation jumped. Japan's machinery orders, a gauge of future business investment, grew much less than economists had expected in June.
The U.S. said its trade deficit widened to $49.9 billion in June, the highest level in 20 months because imports surged while exports fell 1.3 percent, in part because of a strengthening dollar earlier this year. Manufacturers have helped lead the U.S. recovery from the recession, and a slowdown in their sales abroad likely hurt economic growth in the second quarter.
But a wider trade deficit isn't likely to continue if the dollar's turn lower lasts, said Michael Woolfolk, currency strategist at Bank of New York Mellon. A weaker currency helps makes exports cheaper overseas.
The euro fell below $1.30 for the first time this month. In late morning trading, it was worth $1.2901 from $1.3196 late Tuesday, while the British pound receded to $1.5654 from $1.5747. The dollar rose to 1.0571 Swiss francs from 1.0487 francs and gained to 1.0452 Canadian dollars from 1.0318 Canadian dollars.

Outlook for Euro Improves But Still Remains Pessimistic

The euro endured hard times this year as the financial crisis in the European Union made us question the very existence of the currency. Therefore, the rally it showed this summer was rather unexpected. The experts expected the rally to end soon, perhaps even this month. Does the outlook changed? Not much, though it became somewhat more bullish.
The bears point out that the countries such as Greece, Spain and Portugal can drag the EU economy to the bottom, causing the European shared currency to collapse. The good example of such viewpoint is the words of editor of the Gartman Letter:

The euro has had a spectacular bounce. Were all of the problems that were attendant and discussed and so obvious in February, March and April of this year, have they been alleviated? Not even slightly. The major trend for the euro is still toward disintegration.

The bulls say that the European economy more stable than perceived. Jean-Claude Trichet, the President of the European Central Bank, tries very hard to support such point of view, stating that “the available data for the third quarter are better than expected” and ”the market is functioning a little bit better”. The growth of the services and manufacturing industries in Europe and the strong Germany’s economy can be considered evidences of the improving economic situation in the EU. The IMF is planning to provide the next part (€9 billion) of the promised €750 billion bailout as Greece is performing measures to reduce the budget according to the agreement.
Despite all the good signs, and even as the US is becoming next major reason for the concerns, the sentiment among the economists still remains pessimistic for the euro. The rally may end any time and the speculations persist about the possible parity with the US dollar or even the disintegration of the 16-nation currency. The forecast were revised upward but the euro still expected to decline versus the greenback to 1.22 by the end of this year.
If you want to comment on the euro’s recent action or have any questions regarding this currency, please, feel free to reply below.

USD Slips, Traders Eye Jobs

The dollar fell further against the majors in Thursday trading, sliding most against the Swiss franc and Japanese yen by about 0.6%. The Dow Jones and S&P 500 were marginally lower on the session while the Nasdaq fell by almost 0.5%. Crude oil slide by 0.5% to just above the $82-per barrel mark while spot gold was little changed on the session, holding steady around the $1,195-mark.

The North American economic calendar was light for the day, consisting of Canada’s June building permits and the US initial jobless claims reading. Building permits in Canada improved by well over consensus estimates, printing at 6.5% in June versus an upwardly revised 8.2% decline in May. Weekly jobless claims in the US missed estimates for a slight improvement, instead increasing to 479k from an upwardly revised 460k in the previous week.

Rounding out this week’s dataflow will be the key jobs reports from the US and Canada. At 7:00 AM will be Canada’s July labor report, with consensus estimates looking for the unemployment rate to remain unchanged at 7.9%. The net change in employment is seen adding 12.5k jobs in July compared with the 93.2k surge in June. The Loonie rallied sharply following the June labor data, rallying by 1.25% versus the greenback following the release.

Greenback gives the euro a tiny spanking; Japanese yen pushes the dollar down before yielding

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Dollar gains against the euro – Some positive reports from the euro-zone, including the continuing improvement in German employment figures, were not enough to withstand pro-U.S. dollar sentiment as forex trading progressed on Aug. 4. Forex traders noted that earlier this week Federal Reserve Chairman Ben Bernanke opined that the economy has stabilized and that there are signs of an expansion. A monthly private-sector job report hinted that the next monthly Labor Department job report will bring some good news. The euro hit a three-month high against the greenback on Aug. 3, hitting 1.3261. Gains could be reversed by a gloomy U.S. jobs report from DOL due out on Aug. 6. At press time (1:20 p.m. in New York), the euro was trading at 1.3137 USD.
Yen flirts with new gains versus the dollar – The U.S. dollar has rebounded against the Japanese yen and at press time (1:20 p.m. in New York) was trading at 86.1999. Earlier today, there were concerns that the greenback could come close to the eight-month low of 85.32 JPY. Forex analysts attribute the rebound, in part, to a positive report regarding private-sector job creation in July. ADP Employer Services said 42,000 jobs were created. However, some employment analysts have suggested the monthly report has a history of getting it wrong. The Labor Department will release its July jobs figure on Aug. 6. Meanwhile, on the other side of the Pacific, there was no indication that the Japanese government is dusting off its intervention contingency plans. “Our fundamental stance is that foreign exchange rates are something that should basically be set by the market,” Foreign Minister Yoshihiko Noda was quoted as telling a legislative panel.

Dollar Up On Firm Tokyo Shares; US Jobs Data Eyed

The dollar rose against the yen in Asia Friday as stronger-than-expected Tokyo stock prices strengthened investors' risk-appetite, lowering demand for the safe-haven Japanese currency.
But the greenback could fall sharply to a fresh 8-month low against the yen if U.S. jobs data due later in the global day come in weaker than expected, traders said.
Short-term-focused investors took their cue to sell the yen from the Nikkei Stock Average, which rebounded after opening 1.0% lower to briefly enter positive territory, said Shinkin Central Bank's senior dealer Shinichi Hayashi. At 0555GMT, the Nikkei was down 14.82 points at 9636.20.
Also pushing the yen down were large selling orders by Japanese semi-public financial firms, dealers said.
Still, the greenback is unlikely to push higher for now as market participants wait for U.S. non-farm payrolls data at 1230GMT, dealers said.
There's "a big risk" that the report will show the number of jobs in the world's largest economy decreased at a much faster pace than expected, said Kenichi Nishii, a senior dealer at Bank of Tokyo-Mitsubishi UFJ.
A Dow Jones poll of economists forecasts the data for July will log a 60,000 decline in jobs from the previous month, when 125,000 jobs were lost.
If the data indeed miss the market consensus, the dollar is likely to fall below Y85.00 for the first time in eight months, Nishii said. The U.S. currency was at Y86.03 at 0450GMT, higher than Y85.74 in New York Thursday.
Meanwhile, the euro was higher against the dollar and yen due to the knock-on effect of a gain in the Australian dollar, which was fueled by a somewhat hawkish statement from the Reserve Bank of Australia, dealers said. The European and Australian currencies are closely correlated with each other due to their sensitivity to risk-taking appetite among investors.
Earlier in the day, the Australian central bank signaled the direction for interest rates over time likely remains higher, with the nation's inflation expected to exceed the top end of the RBA's desired 2%-3% target band.
As of 0450GMT, the euro was at $1.3188 and Y113.48 from $1.3186 and Y113.16 in New York overnight. The Australian dollar was at Y78.75 from Y78.34 before the statement release.
The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 80.798 from 80.766.

Euro Pares Losses Ahead of ECB- Dollar Retreats

Market sentiment improved overnight with US equity bourses higher across the board on better than expected employment and ISM non-manufacturing data. July ADP employment posted a gain of 42k, beating estimates for a reading of 30k, while ISM printed at 54.3, up from 53.8 a month prior. The news eased nervous investors after a flurry of disappointing data on Tuesday triggered a sell-off in equities, with the dollar index slumping to its lowest level in nearly four months. The Dow, the S&P, and the Nasdaq were higher by 0.4%, 0.6%, and 0.9% respectively. Asia Pacific markets were mostly firmer with the Nikkei 225 gaining more than 1.7% on better than expected earnings reports and positive data out of the US. The S&P/ASX 200 index was also higher by 0.5% after Australia posted its highest trade surplus on record on Wednesday. Treasury yields came off record lows, while the yen retreated from an eight-month high against the greenback on improving risk appetite. Investors remain cautious however, ahead of tomorrow's jobs report out of the US.

Commodities were generally lower with crude oil creeping back below $82 per barrel. Gold continues to hover just below $1200 per ounce, after reaching as high as $1203 yesterday in New York. The dollar index relinquished gains to trade at 80.66, with support seen just below at 80.60. The swissy and the loonie were the best performers against the greenback, both advancing nearly .6% on the session.

Techniques to Succeed in Home Forex Trading

Forex trading has become a lot easier recently especially with the proliferation of online brokers and the decreasing costs of broadband. Aside from these, there are other ways by which you can succeed better in home Forex trading. Here are seven techniques that you should learn.

• Always monitor your books. Some people do not even keep them! Since we have established that trading is a business, you must monitor the profits, losses, and expenses that you have. Your profits are taxable and you have to prepare in case you need to be audited.

• Consider your Forex trading as you would your other businesses. Trading is a kind of business, and it is a big one. If you simply regard it as a hobby then you will not take it as seriously as you should. You will miss out on the huge rewards that you can gain.

• Since you are doing this from home, you need an Internet connection that works great. This is a very obvious factor but some people still make this mistake. The Internet is your bridge to the world of trading and you cannot afford for it to mess up just when the trends are rising.

• Always look out for the prize. Your goal in Forex trading is to earn money. Some people consider trading as a form of gambling, but that is not true. The trades should not be gambles. You have to do some research and deflect the risk if you can. If you know about the countries you trade with, you will be less exposed to risk.

• Understand the fact that you will have some losses, just like any other business. There will be highs and lows. There are days where you will earn money and there are days when you will lose some. Do not give up after just one bad day. Everybody goes through this. Get up, learn from the errors, and try again tomorrow.

• See what the pro traders are doing. They are professionals for a reason. They do not simply throw money wherever they can and cross their fingers for luck. Read a lot and you might be shocked to know just what you have to do to be a professional Forex trader.

• Finally, learn to enjoy trading. This should not be an obsession and you should only do it at a certain period. Set aside time to do other things.

Trading can be very lucrative and rewarding just as long as you are knowledgeable about what to do.

Where do you get your Forex data?

 The systems of compilation for Forex data vary a great deal. There are as many different types of collation as you can reasonably imagine, and some of these methods have been proven over time to be, if not foolproof, then at least incredibly informative. Access to the right data is important in ensuring as high a possibility of success in your trading as you possibly can. This kind of data is freely available, but what information you can glean from it is inevitably limited as it will be full of figures that carry varying levels of relevancy. Raw data is useful only in so far as you can be bothered wading through the masses of information to find only the best predictors.
The data that will be truly useful to a trader is the information produced in a quickly readable form using only the data that is absolutely relevant. This comes in the form of charts and graphs, and this kind of data is available in up-to-date form from any good broker. There are historic Forex charts freely available on the Internet, and these can be used in order to help you understand market patterns. Once you sign up with a broker you will have more recent information, which is absolutely essential for forming a strategy. Your broker will also (usually) give you the chance to have a “practice account” which tests your reading of the data so that any mistakes you make are relatively harmless. In this way you can learn to read the data proactively and safely.

Recommended Forex Brokers

The bad thing about all brokers is that they can’t make you trade better in Forex. The best thing that they can do for a trader is to offer him enough freedom, tools and support to bring his trading strategy to life. Here is the list of those brokers that try not to interfere with the ways that a trader chooses:
InstaForex — a some sort of competition to the next broker (FXOpen), this broker offers so many bonus and contest promotions to its traders that this alone is enough to make some traders join. But there are more advantages:

• Trade with MetaTrader platform
• Leverage your trades up to 1:1000
• Deposit and withdraw funds via WebMoney, Moneybookers and other ways
• Earn interest on deposit
• Low minimum account size

FXOpen — some people say that they have too many traders to be efficient but, in my opinion, the amount of traders using this broker proves its quality. After all, it has a nice set of features:

• Contests among traders
• Bonus programs
• Alternative payment methods: WebMoney, LibertyReserve, CashU, E-Bullion and other payment options
• 2 pips spread on EUR/USD

AvaFX — original Forex broker with almost 4-year history of satisfied customers. Except traditional Forex trading provides also CFD, gold and oil trading:

• 1:200 leverage
• Custom trading platform
• Trade oil, gold and other commodities
• WebMoney, PayPal and many other ways to fund your account
• MetaTrader platform for Forex and commodities trading

Forex4you — relatively new Forex broker that tries its best to keep up with the competition and offers extra-high quality level of service. See for yourself:

• More than 50 trading instruments
• Free news feeds from leading news agencies
• Cent trading (if you feel cheap)
• MetaTrader platform
• Up to 12.5% yearly interest on trade balance

All the above-listed recommended Forex brokers have a good repuation among the news traders and will provide you an enjoyable currency trading experience, while the starting conditions make the joining process very simple and easy.

Yen Rises on Growing Concerns for US Economy

The Japanese yen went up to the highest level since November 2009 against the US dollar and advanced versus all other most traded currencies after the economic reports suggested that the US economy would require additional stimulus measures, spurring the risk aversion sentiment.
The pending home sales in the US unexpectedly dropped 2.6 percent in June, while the economist expected growth by 0.5 percent. The factory orders declined by 1.2 percent, significantly more than the analysts predicted. The forecast promised increase of the personal income and the personal spending. They proved to be wrong, as the indicators were almost unchanged. The Standard & Poor’s 500 Index dropped 0.3 percent
The focus of concerns turned nowadays from Europe to the US, where fears of the double-dip recession plague the traders. In this kind of environment the yen thrives in its role of the safe currency.
USD/JPY rose from 86.50 to 85.81 today as of 19:21 GMT. EUR/JPY traded near 113.52, while GBP/JPY traded at about 136.82.

FOREX NEWS

The dollar extended overnight losses in the New York session, shedding nearly 1.3% versus the British pound and sliding by almost 1% against the Australian dollar. Improved risk-appetite was the key driver in the markets at the start of the week, with the sharp rally in the European and US equity bourses. London’s FTSE 100 rallied by 2.65%, the Dow Jones index closed higher by 2% and the S&P 500 advanced by 2.2%. Crude oil surged by 3.24% to trade at its highest level since May 14th, trading to $81.77-per barrel.

The catalyst to the initial gains was strong earnings reports from HSBC and BNP Paribas as well as soft manufacturing data from China. The weaker manufacturing PMI in July for China tempers market expectations for further policy tightening from the government to tap the brakes on an overheating economy. Also propping markets higher was a stronger than expected US July manufacturing ISM report, which beat calls for a decline to 54.0, instead printing at 55.5 from 56.2 from June.

Economic reports will be the key driver in the currency markets this week, with the data culminating in the closely watched labor report on Friday. The Tuesday session will see June personal income, personal spending, the June PCE index, factory orders and pending home sales. The June personal income and personal spending are seen lower, drifting to 0.2% and 0.1%, respectively. The pending home sales report in June is estimated to sharply reverse the record plunge from May, which printed at -30.0%, instead increasing by 3.7%

Some of Forex Glossarys

ADX (Average Directional Index) — standard technical indicator that measures the strength of a trend.
Ask (Offer) — price of the offer, the price you buy for.
Aussie — a Forex slang name for the Australian dollar.
Bank Rate — the percentage rate at which central bank of a country lends money to the country's commercial banks.
Bid — price of the demand, the price you sell for.
Broker — the market participating body which serves as the middleman between retail traders and larger commercial institutions.
Cable — a Forex traders slang word GBP/USD currency pair.
Carry Trade — in Forex, holding a position with a positive overnight interest return in hope of gaining profits, without closing the position, just for the central banks interest rates difference.
CCI (Commodity Channel Index) — a cyclical technical indicator that is often used to detect overbought/oversold states of the market.
CFD — a Contract for Difference — special trading instrument that allows financial speculation on stocks, commodities and other instruments without actually buying.
Commission — broker commissions for operation handling.
CPI — consumer price index the statistical measure of inflation based upon changes of prices of a specified set of goods.
EA (Expert Advisor) — an automated script which is used by the trading platform software to manage positions and orders automatically without (or with little) manual control.
ECN Broker — a type of Forex brokerage firm that provide its clients direct access to other Forex market participants. ECN brokers don't discourage scalping, don't trade against the client, don't charge spread (low spread is defined by current market prices) but charge commissions for every order.
ECB (European Central Bank) — the main regulatory body of the European Union financial system.
Fed (Federal Reserve) — the main regulatory body of the United States of America financial system, which division — FOMC (Federal Open Market Committee) — regulates, among other things, federal interest rates.
Fibonacci Retracements — the levels with a high probability of trend break or bounce, calculated as the 23.6%, 32.8%, 50% and 61.8% of the trend range.
Flat (Square) — neutral state when all your positions are closed.
Fundamental Analysis — the analysis based only on news, economic indicators and global events.
Gap — a difference between the previous period's close price and the next period's open price. In Forex usually only occurs during weekends — between the Friday's close and the Monday's open price.
GDP (Gross Domestic Product) — is a measure of the national income and output for the country's economy; it's one of the most important Forex indicators.
GTC (Good Till Canceled) — order to buy or sell of a currency with a fixed price or worse. The order is alive (good) until execution or cancellation.

Forex Books for Beginners

Here you will find the Forex e-books that provide the basic information on Forex trading. You can learn basic concepts of the Forex market, the technical and fundamental analysis. While all these e-books are recommended for every new Forex trader, they won't be very useful to the very experienced traders.
Almost all Forex e-books are in .pdf format. You'll need Adobe Acrobat Reader to open these e-books. Some of the e-books (those that are in parts) are zipped.
If you are the copyright owner of any of these e-books and don't want me to share them, please, contact me and I will gladly remove them.
Candlesticks For Support And Resistance — The basics of trading with candlesticks charts by John H. Forman.
Online Trading Courses — Course #1 lesson #1 by Jake Bernstein.
Commodity Futures Trading for Beginners — by Bruce Babcock.
Hidden Divergence — by Barbara Star, Ph.D.
Peaks and Troughs — by Martin J. Pring.
Reverse Divergences And Momentum — by Martin J. Pring.
Strategy:10 — Low-risk, high-return forex trading by W. R. Booker & Co.
The NYSE Tick Index And Candlesticks — by Tim Ord.
Trend Determination — A quick, accurate and effective methodology by John Hayden.
The Original Turtle Trading Rules — by OrignalTurtles.org.
Introduction to Forex — by 1st Forex Trading Academy. This trading course intends to provide to all of the students analytical tools on the trading system and methodologies. In this respect, the purpose of the course is to provide an overview of the many strategies that are being used in Forex market and to discuss the steps and tools that are needed in order to use these strategies successfully.
The Six Forces of Forex — by Scott Owens. A small e-book covering the basic and the main problems of Forex trading.
Study Book for Successful Foreign Exchange Dealing — by Royal Forex.
Forex. On-Line Manual for Successful Trading — an introduction into every aspect of the Forex trading including detailed descriptions of the technical and fundamental analysis techniques, by unknown author.
18 Trading Champions Share Their Keys to Top Trading Profits — as the name suggests, the book shares the secrets of the 18 prominent traders with the Forex beginners, by FWN.
The Way to Trade Forex — a 1st chapter of the book that will show you not only Forex basics but also some unusual techniques and strategies that can work for the newbie traders, by Jay Lakhani.
The Truth About Fibonacci Trading — the basic facts and information about Fibonacci levels and their application to the Forex trading, by Bill Poulos.
Quick Guide to Forex Trading — a 2008 edition of the Forex guide for the beginners and private traders issued by Easy-Forex.
Chart Patterns and Technical Indicators — an explanation of the most popular chart patterns and some technical indicators, by unknown author.

Profiting From Day Trading Forex Currency

You should learn many things ahead when using the Forex market for the first time. There are many people who become interested in day trading Forex currency since it is one way to invest without having to use a broker to do so. In the day trading of Forex currency, each person has their own account that they can manage and buy and sell currency on the market. It seems like it would be a simple system at the outset, but there are different terms that need to be understood to properly analyze the market and make buying and selling decisions. There are some people who offer systems that have supposedly made them a lot of money on the Forex market, day trading currency, but these are usually scams that do not make money for the consumer.

Euro appears to have weathered the E.U. bank stress test storm; White House estimates budget deficits well above $1 trillion level

Forex traders overcome negative feelings about stress test – The E.U. stress test results have failed to dampen forex traders’ enthusiasm for the euro. At press time (July 26 at 2:20 p.m. in New York), the euro was trading in the neighborhood of 1.30 USD, up approximately 0.72%. Trading sentiment has apparently been influenced by a close look at the latest monthly report on U.S. new housing starts. The Commerce Department reported on July 26 that although annual sales of new homes jumped by 24% in June compared to the previous month, there is no cause for fireworks. The seasonally adjusted June sales figure of 330,000 homes must be seen in relation to the revised figure for May, which was lowered to an annual rate of 267,000. That was the historic low point since recordkeeping began 47 years ago. This did not escape the attention of the forex market.
Continuing U.S. budget deficits seem to be unavoidable – The Obama administration on July 23 released its Mid-Term Review, a revised outlook for the federal budget for both FY 2010 and FY 2011. The newest figures suggest the U.S. economy may, in fact, not escape a double-dip recession, according to some forex traders. The administration is projecting a deficit of $1.47 trillion or 10% of GDP in FY 2010, which ends on Sept. 30. The deficit for FY 2011 is now estimated at $1.42 trillion, which amounts to 9.2% of GDP. Forex market observers believe this admission by the White House is another factor contributing to the July 26 decline of the U.S. dollar versus the euro

Retail Sales

Retail Sales are a measure of the total receipts of retail stores. Monthly percentage changes reflect the rate of change of such sales and are widely followed as an indicator of consumer spending.
Retails Sales are a major indicator of consumer spending because they account for nearly one-half of total consumer spending and approximately one-third of aggregate economic activity.
Often, Retail Sales are followed less auto sales because these are generally much more volatile than the rest of the Retail Sales and can therefore obscure the more important underlying trend.
Retail Sales are measured in nominal terms and therefore include the effects of inflation. Rising Retail Sales are often associated with a strong economy and therefore an expectation of higher short-term interest rates that are often supportive to a currency at least in the short term.

Housing Starts

Housing Starts are a measure of the number of residential units on which construction is begun each month and the level of housing starts is widely followed as an indicator of residential construction activity.
The indicator is followed to assess the commitment of builders to new construction activity. High construction activity is usually associated with increased economic activity and confidence, and is therefore considered a harbinger of higher short-term interest rates that can be supportive of the involved currency at least in the short term.

Producer Price Index

The Producer Price Index (PPI) is a measure of the average level of prices of a fixed basket of goods received in primary markets by producers. The monthly PPI reports are widely followed as an indication of commodity inflation.
The PPI is considered important because it accounts for price changes throughout the manufacturing sector.
The PPI is often followed but excludes the food and energy components as these items are normally much more volatile than the rest of the PPI and can therefore obscure the more important underlying trend.
Studying the PPI allows consideration of inflationary pressures that may be accumulating or receding, but have not yet filtered through to the finished goods prices.
A rising PPI is normally expected to lead to higher consumer price inflation and thereby to potentially higher short-term interest rates. Higher rates will often have a short term positive impact on a currency, although significant inflationary pressure will often lead to an undermining of the confidence in the currency involved.

Payroll Employment

Payroll employment is a measure of the number of people being paid as employees by non-farm business establishments and units of government. Monthly changes in payroll employment reflect the net number of new jobs created or lost during the month and changes are widely followed as an important indicator of economic activity.

Payroll employment is one of the primary monthly indicators of aggregate economic activity because it encompasses every major sector of the economy. It is also useful to examine trends in job creation in several industry categories because the aggregate data can mask significant deviations in underlying industry trends.
Large increases in payroll employment are seen as signs of strong economic activity that could eventually lead to higher interest rates that are supportive of the currency at least in the short term. If, however, inflationary pressures are seen as building, this may undermine the longer term confidence in the currency.

Durable Goods Orders

Durable Goods Orders are a measure of the new orders placed with domestic manufacturers for immediate and future delivery of factory hard goods. Monthly percent changes reflect the rate of change of such orders.
Levels of, and changes in, durable goods order are widely followed as an indicator of factory sector momentum.

Durable Goods Orders are a major indicator of manufacturing sector trends because most industrial production is done to order. Often, the indicator is followed but excludes Defence and Transportation orders because these are generally much more volatile than the rest of the orders and can obscure the more important underlying trend.
Durable Goods Orders are measured in nominal terms and therefore include the effects of inflation. Therefore the Durable Goods Orders should be compared to the trend growth rate in PPI to arrive at the real, inflation-adjusted Durable Goods Orders.
Rising Durable Goods Orders are normally associated with stronger economic activity and can therefore lead to higher short-term interest rates that are often supportive to a currency at least in the short term.

Trade Balance

The trade balance is a measure of the difference between imports and exports of tangible goods and services. The level of the trade balance and changes in exports and imports are widely followed by foreign exchange markets.
The trade balance is a major indicator of foreign exchange trends. Seen in isolation, measures of imports and exports are important indicators of overall economic activity in the economy.
It is often of interest to examine the trend growth rates for exports and imports separately. Trends in export activities reflect the competitive position of the country in question, but also the strength of economic activity abroad. Trends in import activity reflect the strength of domestic economic activity.

Typically, a nation that runs a substantial trade balance deficit has a weak currency due to the continued commercial selling of the currency. This can, however, be offset by financial investment flows for extended periods of time.

Gross Domestic Product

The Gross Domestic Product (GDP) is the broadest measure of aggregate economic activity available. Reported quarterly, GDP growth is widely followed as the primary indicator of the strength of economic activity.
GDP represents the total value of a country's production during the period and consists of the purchases of domestically produced goods and services by individuals, businesses, foreigners and the government.
As GDP reports are often subject to substantial quarter-to-quarter volatility and revisions, it is preferable to follow the indicator on a year-to-year basis. It can be valuable to follow the trend rate of growth in each of the major categories of GDP to determine the strengths and weaknesses in the economy.
A high GDP figure is often associated with the expectations of higher interest rates, which is frequently positive, at least in the short term, for the currency involved, unless expectations of increased inflation pressure is concurrently undermining confidence in the currency.

Consumer Price Index

The Consumer Price Index (CPI) is a measure of the average level of prices of a fixed basket of goods and services purchased by consumers. The monthly reported changes in CPI are widely followed as an inflation indicator.
The CPI is a primary inflation indicator because consumer spending accounts for nearly two-thirds of economic activity. Often, the CPI is followed but excludes the price of food and energy as these items are generally much more volatile than the rest of the CPI and can obscure the more important underlying trend.
Rising consumer price inflation is normally associated with the expectation of higher short term interest rates and may therefore be supportive for a currency in the short term. Nevertheless, a longer term inflation problem will eventually undermine confidence in the currency and weakness will follow.