Forex Market Commentary
EUR/USD closed high on friday but this was more to do with overall Dollar weakness than anything about the Euro land to cheer about.
The New York Fed's Empire State general business conditions index rose to 3.09 in May from -1.19 in April, which had been the first negative read for the index since December. That doesn't not translate to any firm reason to jump into USDX long positions at all. Industrial production for April fell 0.3 percent, while economists expected a 0.1 percent jump. So a slew of negative sentiment has restrained the Dollar from further gains. But the bonds markets again pint the way to higher yields. In fact, the 30-year auction on US Treasuries on Thursday was so muted that yields actually crept up resulting in a yield of 3.044 percent, the highest since November last year. But Friday, 30 year paper held off to close 2.9296 % for the weekend, and that has confirmed many traders suspicions after all that the 6 year bond rally has really lost all reason to continue and that equities maybe in for a tumble too which would weigh in on the Dollar since foreigners need to buy Dollar to invest in US Bonds and equities.
So where are we going with the USD so far?
Thus in summary -
1. Sluggish US economic data
2. Slow down in growth in demand for US Equities
3. Slow down in demand for US bonds - Treasury and corporate.
4. Commodity price increases like Oil usually comes in an inverse relationship to USD.
all affect the demand and value of USD.
Set this against major trading pairs like EUR, GBP and Yen and then we have a scenario of -
1. higher growth on US economy vs slower growth in a basket of select major currency pairs, and that leads to yield differentials across the board lower than the USD which then becomes the supporting rationale for USD purchases.
2. US inflationary pressure set against Fed target range of 2% which creates the higher likelihood of a 25 basis points rate increase at some point this year if the 2% inflation mark is met.
and thus we have a picture of pushing and opposing forces where at the moment no predominant scenario is likely to gain momentum to push the USD into positive or negative trading areas viz a viz the narrow trading ranges of the USD vs major currency pairs the last 2 months.
A great way for traders to take position in a narrow sideways trading channel is using currency options calls and puts to decide the breakout and the next new trend and direction in USD value.
See here - http://forexeducationperspective.blogspot.com/2015/05/currency-options-trading-when-markets.html
Also turn to this very curious article today on Bloomberg on German debt -
http://www.bloomberg.com/news/articles/2015-05-15/strategist-asset-classes-around-the-world-have-been-infected-with-a-highly-contagious-disease
Please note that technical data should only be used as a guide but be aware that it is the fundamental data which becomes the trigger that pushes prices into equilibrium of demand and supply.
The New York Fed's Empire State general business conditions index rose to 3.09 in May from -1.19 in April, which had been the first negative read for the index since December. That doesn't not translate to any firm reason to jump into USDX long positions at all. Industrial production for April fell 0.3 percent, while economists expected a 0.1 percent jump. So a slew of negative sentiment has restrained the Dollar from further gains. But the bonds markets again pint the way to higher yields. In fact, the 30-year auction on US Treasuries on Thursday was so muted that yields actually crept up resulting in a yield of 3.044 percent, the highest since November last year. But Friday, 30 year paper held off to close 2.9296 % for the weekend, and that has confirmed many traders suspicions after all that the 6 year bond rally has really lost all reason to continue and that equities maybe in for a tumble too which would weigh in on the Dollar since foreigners need to buy Dollar to invest in US Bonds and equities.
So where are we going with the USD so far?
Thus in summary -
1. Sluggish US economic data
2. Slow down in growth in demand for US Equities
3. Slow down in demand for US bonds - Treasury and corporate.
4. Commodity price increases like Oil usually comes in an inverse relationship to USD.
all affect the demand and value of USD.
Set this against major trading pairs like EUR, GBP and Yen and then we have a scenario of -
1. higher growth on US economy vs slower growth in a basket of select major currency pairs, and that leads to yield differentials across the board lower than the USD which then becomes the supporting rationale for USD purchases.
2. US inflationary pressure set against Fed target range of 2% which creates the higher likelihood of a 25 basis points rate increase at some point this year if the 2% inflation mark is met.
and thus we have a picture of pushing and opposing forces where at the moment no predominant scenario is likely to gain momentum to push the USD into positive or negative trading areas viz a viz the narrow trading ranges of the USD vs major currency pairs the last 2 months.
A great way for traders to take position in a narrow sideways trading channel is using currency options calls and puts to decide the breakout and the next new trend and direction in USD value.
See here - http://forexeducationperspective.blogspot.com/2015/05/currency-options-trading-when-markets.html
Also turn to this very curious article today on Bloomberg on German debt -
http://www.bloomberg.com/news/articles/2015-05-15/strategist-asset-classes-around-the-world-have-been-infected-with-a-highly-contagious-disease
Please note that technical data should only be used as a guide but be aware that it is the fundamental data which becomes the trigger that pushes prices into equilibrium of demand and supply.
Always look to support and resistance band lines as the key to understanding in the long and short term where prices are converging. Professional technical traders use 50 day and 200 day medium and slow moving averages as fundamental cornerstones for interpreting the direction of price action.
USDX
US Dollar
93.444 +0.056 +0.07%
93.444 +0.056 +0.07%
Support 92.828 Resistance 94.158
Forward 1 year - 94.458. Flat line.
Forward 1 year - 94.458. Flat line.
EUR
1.140295 +0.000495 +0.04%
Support 1.12873 Resistance 1.15133
Forward 1 year - 1.14860. Flat line.
Crude Oil
60.73 -0.11 -0.18%
Support 58.55 Resistance 61.51
Forward 1 year - 63.99. Low growth positive line.
Forward 1 year - 63.99. Low growth positive line.
Gold
1218.960 -2.545 -0.21%
Support 1,205.8 Resistance 1,237.4
Forward 1 year - 1,230.9 Low growth line.
Pieter Bergli - DeLoren Trust Holdings
A non-profit commitment to provide education on the properties of currency markets
Forex market commentaries and media reports for free
Disclaimer - U.S. Government Required Disclaimer - Commodity Futures Trading Commission
Futures and Options trading involves risks of losses. No representation is being made that any reader and account will or is likely to achieve profits or losses similar to those that are being discussed on this blog http://forexeducationperspective.blogspot.com/. The past performance of any trading system or methodology discussed is not necessarily indicative of future results.
CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.
All trades, patterns, charts, systems, etc., discussed in this blog http://forexeducationperspective.blogspot.com/ are for educative and illustrative purposes only and not to be construed as specific advisory recommendations for actual trades. Disclaimer - http://forexeducationperspective.blogspot.com/ bears no responsibility for the trading actions of its readers
Pieter Bergli - DeLoren Trust Holdings
A non-profit commitment to provide education on the properties of currency markets
Forex market commentaries and media reports for free
Disclaimer - U.S. Government Required Disclaimer - Commodity Futures Trading Commission
Futures and Options trading involves risks of losses. No representation is being made that any reader and account will or is likely to achieve profits or losses similar to those that are being discussed on this blog http://forexeducationperspective.blogspot.com/. The past performance of any trading system or methodology discussed is not necessarily indicative of future results.
CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.
All trades, patterns, charts, systems, etc., discussed in this blog http://forexeducationperspective.blogspot.com/ are for educative and illustrative purposes only and not to be construed as specific advisory recommendations for actual trades. Disclaimer - http://forexeducationperspective.blogspot.com/ bears no responsibility for the trading actions of its readers
