Economic News Review

USD

Could the Dollar Continue Its Bullish Trend?

Last week gave some extraordinary opportunities for Forex traders to make profits from going long on the U.S Dollar. The two leading fronts on which the USD marked unique gains are against the EUR and the GBP.

It appears that the USD saw this bullish trend as a result of some unexpected positive news, especially regarding the housing sector. Last week, both the Existing Home Sales, and the New Home Sales, delivered better than expected figures, reflecting in 4.72M residential buildings that were sold during February, and in 337K new single-family homes that were sold during February as well. This data came as a big surprise, as analysts had quite gloomy predictions for the two reports, and therefore turned a very strong uptrend for the Dollar. In addition, as you all must remember, this entire recession began as a result of a deep crisis in the U.S home sector, and now a series of positive result from that sector has managed to elevate the USD so rapidly. Another positive data which came last week were the Durable Goods Orders indices which delivered both much better than expected figures. Whilst analysts anticipated negative growth in the total value of new purchased orders for durable goods during February, the real figures showed almost 4.0% growths.

As for the week ahead, two major events will most likely determine the Dollar's direction for the upcoming week. The first will be the Pending Home Sales which is currently expected to continue to positive line of the housing sector; however a surprising negative result could create some worries among investors regarding the U.S economy. The second major news event will of course be the Non-Farm Employment Change, expected on Friday, 12:30 GMT. as proven many times before, investors are putting a lot of faith in the credibility of this survey, and as such react immediately to its results.

Traders are advised to follow those two leading economic indicators as they are likely to set the tone for the USD trading this week.


EUR

Would the ECB Cut Interest Rates to 1.00% Later On This Week?

An extremely volatile week, which included many ups and downs, concluded with a deep drop for the EUR. The EUR/USD dropped to almost 1.32, and the EUR/JPY fell below 129.50.

The first reason for the EUR drop was the strengthening Dollar, which rose against the EUR as well. The second and even greater reason was the unwillingness of the European Central Bank (ECB) to create a rescue plan for the European Nation, which could somehow imitate the American plan. Investors are now seeing the U.S economy as a dynamic, flexible economy, in which its leaders are doing all they can in order to salvage the situation while they can. On the other hand, the European monetary system is beginning to be seen as a conservative organization, which is reluctant to react to the rapidly changing conditions of the global economy. Investors are thirsty for a European rescue plan, and if one shall arrive, it will probably signal an uptrend for the European currency.

As for this week, the ECB will announce the new Minimum Bid Rate on Thursday, and is widely expected to cut Interest Rates by 0.5% to merely 1.00%. Some might say that this move is too little, too late, as the U.S, Japan and Great Britain have all lowered their Rates below 1.00%, without succeeding in making a real change in their economies. Nevertheless, if indeed the ECB will decide to cut Interest Rates, an immediate reaction of a drop in EUR value is expected.

Forex traders are also advised to follow Jean-Claude Trichet's speech on Monday, as he may discuss the possibility of cutting Interest Rates. Such comments could have massive influence on the market.


JPY

The JPY Looks to Halt Its Bullish Momentum

Over the last trading week the JPY saw rising trends against the EUR and the GBP, and experienced mixed results vs. the USD. The JPY underwent it most remarkable bullish trend against the EUR, as the EUR/JPY dropped to the 129.40 level.

Last week the Japanese Trade Balance showed a difference of -0.04T between exported to imported goods during February. Although this is a negative figure, it was much better than the -0.29T which was expected. This indicator has an immense impact on the Japanese economy as it relies greatly on its export activity. Also last week, the Tokyo Core Consumer Price Index, which measures the change in price of goods and services, rose by 0.4% in March, also indicating that the Japanese economy is on the phase of expanding, and not contracting.

As for the week ahead, most of the impacting data will be delivered from the Euro-Zone and the U.S economy. Nevertheless, traders should follow the Tankan Indices, which are expected on Tuesday night. These surveys cover a wide range of the local manufacturers, and thus have a large impact on the Yen. Analysts forecast extremely negative figures for the indices, and such result might generate a bearish trend for the JPY.

Source: Forexyard Daily Forex analysis

Forex Charts – What Are They and How Do You Read Them?

There are two basic approaches for online forex trading, When learning to read forex charts. They are fundamental analysis and technical analysis. Fundamental analysis doesn’t rely on forex charts. It uses both political and economic factors to help determine trades. Charts here are only used as a reference. Technical analysis on the other hand will try to predict where the prices are going by analysis of historical price activity. Those who use technical analysis study the relationship between price and time.

The most traded pair of currencies is the Euro and the US dollar, so we will use them in our example. The dollar is on the right hand side of the chart and the Euro is on the left hand side. The currencies are expressed in relationship to each other in pairing. Forex charts will always display how much of the currency on the right hand side is necessary to buy a unit of the currency on the left hand side. Looking at the chart you will notice the last price displayed on a given date. This number is always highlighted. The time is recorded horizontally across the bottom of a chart and the price scale is displayed vertically along the right hand edge of the chart. The time and the price are often in all caps to help the trader remember that technical analysis is about the relationship between time and price. That is a fundamental rule of this type of relationship.

There are many ways to observe the price and time movement on a chart. These include bars, lines, point and figure, and Japanese candle sticks, the most popular method.

With the candlestick method there is a fat, red section that is the body of the candlestick. Lines protrude from the top and bottom and they are the upper and lower wicks. When you look at al the candles on a chart it is clear that bodies can be difference sizes and sometimes there is no body at all.

The same is true with wicks. Candle wicks can be of many difference sizes, or there may be no wick at all. The length of the body and the length of the wick are determined by the price range for the candle. Longer candles will have had more price movement during the time that they were open. The top of a candle wick is the highest price for that currency while the wick’s bottom is the lowest price. A candle or currency is bullish when the close of the candle is higher than the open. In English this means that there were more buyers than there were sales during the opening time period. Sometimes the candles will not have wicks. The price opened and it dropped off until it closed.

Forex charts are not a sure fire method, but they are a tool that can help a trader. Many forex traders use charts on a regular basis. Historical trends do have their place in forex trading as most traders will admit, and using the charts to track historical trends can assist a trader in making a decision today.

Often the charts are online rather than on paper. By joining a service that provides the charts via the internet a trader is able to stay very current indeed on currency activity. Charts can be checked on a minute to minute basis. For those who primarily do their trading based on historical accuracy this can be a true help.

Most forex traders however use a combination of the two approaches. They may chart historical trends, but they will also pay close attention to political, cultural and economic events within a nation. They may also use charts or other methods to check and see if a particular political event as a recent historical parallel that can be checked to determine how the currency behaved in past times. Simply following a system usually is not enough. A trader should also be a student of history and of economics. Using all the tools at your disposal will make you a better and stronger forex trader.

Economic News: Experts Analysis

From the news, here's Forexyard expert's analysis:

USD

Dollar Advances on Deepening Global Recession

The Dollar rose against most of its major currency pairs on Monday. This comes about as falling global equity markets and economic deterioration in Japan and Europe, which are more serious than the slowdown in the U.S., have boosted safe-haven demand for the U.S currency. Nevertheless, the U.S. has also released gloomy economic data. Last Friday's report showed that the U.S. unemployment rate rose to a high of 8.1% in February, as employers cut 651,000 jobs. This reveals that the U.S. has the highest unemployment rate since 1983. Analysts expected weak figures from the U.S. to lead market participants to take positions against the USD in Monday's trading. However, in many respects, much the opposite has happened.

In late afternoon trading, the USD was up 0.4% against the Yen at 98.78, and ended yesterday's session up over 90 pips at the 98.94 level. Against the EUR the Dollar fluctuated between gains and losses, finally by settling virtually unchanged at 1.2674. The Dollar's biggest gains came against Sterling, which fell to 1.3740, the lowest level since Jan. 26th. The currency cross ended yesterday's session with the GBP down nearly 300 pips against the greenback at the 1.3843 level.

Analysts predict that the Pound is likely to continue to remain vulnerable to the woes of the Britain's financial sector as investors fear more gloom, despite massive government capital injections and guarantees. Meanwhile, the USD is likely to strengthen further against the JPY, as the deepening downturn in Japan has taken the lure off the Japanese currency as a safe-haven in recent weeks. A number of analysts hold the opinion that intensified worries over grim Japanese data might take the Dollar back within sight of the key 100 Yen mark.

Looking ahead to today, there are 2 data releases that may help determine the Dollar's strength in late trading today. These are the IBD/TIPP Economic Optimism and Whole Inventories figures both at 14:00 GMT. The thing that is likely to impact the Dollar the most is U.S. Federal Reserve Chairman Ben Bernanke's speech about the state of the U.S. economy at 12:30 GMT. Forex traders are also advised to follow economic news events coming out of the Euro-Zone, Japan, and Britain, as these are likely to help determine the Dollar's main currency crosses by the end of today's trading.

EUR

Pound Crashes to a 6 Week Low vs. the U.S Currency

The Pound dropped to a record low against the Dollar yesterday, and also weakened against the EUR on growing concerns about the outlook of the British banking sector. The GBP was also hit as the Bank of England (BoE) this week will begin to implement its buying of 75 billion sterling worth of assets to boost the money supply, analysts said. The (BoE) said on March 5 that it plans to buy 75 billion pounds of gilts and corporate debt funded by new money in the next three months as it tries to bring down Interest Rates and pull the economy out of its first recession in 17 years.

The British currency fell 2% yesterday against the USD to $1.3843 from $1.4123. Against the EUR, it declined 1.8% to 0.9151 from 0.8970. It also fell 1.3% vs. the Yen to 137.03 from 1.3847. Worries amongst investors were intensified yesterday after Lloyds Banking Group; the biggest mortgage lender said over the weekend that the British government would get a stake of up to 77% in the bank after agreeing to underwrite 260 billion pounds of risky assets.

Market players expect the Sterling to weaken further, in line with medium-term monetary and fiscal realities. Therefore investors should buy the EUR against the Pound following the Bank of England's decision. As the British Pound continues to persistently sell off on each and every negative news flow from British banks, it might drop vs. the USD to as low as the 1.3650 level in the coming days.

The EUR may also make losses against the Dollar, and trade at the $1.2500 by week's end as European finance ministers resist doing more to boost their economies. This is even as the World Bank forecasts the biggest global recession since World War II. The European Central Bank (ECB) has already reduced its main refinancing Rate last week to 1.5%, and ECB President Jean-Claude Trichet stated at a press conference in Basel, Switzerland yesterday the world may be approaching a turning point, and that further measures taken by central banks and governments are likely to stimulate economic growth.

JPY

Yen Slides on Weakening Economy

The Yen fell broadly on Monday on speculation economic conditions in Japan are deteriorating due to the global recession, thus reducing the appeal of the Japanese currency. The JPY declined against most of its major currency pairs after a Cabinet Office report prediction showed that the leading index of business conditions fell to 77.4 in January from 80 in December. Japan fell into its first current account deficit in 13 years in January as the global recession crushed export demand and income from overseas investment. Making the situation worse, Japanese policy makers have been slow to respond to deteriorating economic conditions, denting investors' confidence in the country's ability to tackle the economic crisis.

The JPY dropped to 125.45 per EUR from 124.23 yesterday, and fell to 98.94 versus the Dollar from 98.02. Analysts say that the incoming data is likely to illustrate the vulnerability of the Japanese economy, and therefore the JPY is likely to remain weak, particularly as we head into end of the fiscal year. Also, the Yen is likely to weaken further since the Japanese authorities that a weak Yen is their intention. The Yen has slipped 11% since a 13 year peak against the Dollar in January as Japan's economy grapples with diving exports and its worst recession of the postwar era. Due to Japan's poor economic data, and the fact that the political situation remain uncertain, some investors predict a possibility of the JPY testing 100 level per Dollar very shortly.