Forex Trading Strategy: U.S. Economic Data
U.S. economic data provides clues for dollar in currency trading
Part of a good forex trading strategy is checking economic data for clues as to where a currency is headed in forex trading. U.S. economic data today is trending toward dollar softness, and it is important to figure that into your forex trading strategy. Forbes reports on the U.S. economic data due out today:
Later on in the day, investor focus will be on a raft of data from the US, where inflation, housing starts and industrial output figures are all due.
CPI inflation is seen at 0.7 pct, with the core figure at 0.2 pct.


Forex Forecast: Will Euro Drop Versus Yen on FX Market?
Some currency anaylsts predict a euro correction in currency trading
The forex forecast for EUR/JPY may see it moving lower as a sharp correction triggers a drop in the euro in forex trading on the currency market. Bloomberg reports on the a likely EUR/JPY correction on the FX market:
The euro may see a ``sharp correction lower'' against the yen in coming days, according to charts that some traders use to predict price movements, said analysts at Citigroup Inc., the biggest U.S. bank.
Europe's single currency ``should be closer to 157.50- 158.00'' versus the yen, wrote New York-based Tom Fitzpatrick and London-based John Noyce in a research note dated yesterday.

Yen Weakness Worse than Dollar Softness in Currency Trading
Japanese yen up slightly in forex trading, but not enough
Even though the Japanese yen rose slightly against the U.S. dollar in currency trading on the FX market earlier today, it is not expected to maintain its gains. Yen weakness is considered worse than dollar softness in forex trading, reports Reuters:
But market participants said any respite for the low-yielding yen would be fleeting as investors dump the currency for higher-yielding currencies and assets as part of trading strategies such as the carry trade.
"The yen remains weak," said Tomoko Fujii, a senior economist and strategist at Bank of America in Tokyo.
"The G7 was a non-event, and thus far we've seen nothing to stop the move" to sell yen, she added.


British Pound News: Sterling Breaks $2 in Forex Trading
U.K. pound up in currency trading, supported by inflation
Yesterday, MarketWatch reported the following as the currency market slowed for the day in London:
"We have a string of events which could well propel sterling to break the $2 level. Today's move above $1.9900 was kick-started with the higher-than-expected production inflation figures," noted Martin Slaney at GFT Global Markets.Today, that prediction was realized as the U.K. pound broke the $2 level against the U.S. dollar for the first time in 15 years in currency trading on the FX market. Forbes reports on this British pound news in forex trading:
The prospect of higher borrowing costs in the UK is strengthening the pound against the dollar, as speculation grows of a cut in US interest rates, and against the yen, where rates seem set to remain at 0.5 pct for the time being.


GFT Market Recap: London Session
The UK data was at the forefront in today’s session as market participants were watching for accelerating inflation out of the UK numbers. When the UK’s CPI and RPI were released it showed exactly that has the CPI came in higher than expected at 3.1% v’s 2.8% (y-y) as did the RPI which came in at 4.8% v’s 4.6%. The GBP rallied sharply and the GBP/USD reached highs above the psychological level of 2.0000 and traded up to 2.0033. The USD also lost a little ground against the JPY today and stayed in rather tight ranges against the EUR and CHF.
RANGES

10:00pm-6:00am EST

Low
High
EUR/USD
1.3526
1.3549
GBP/USD
1.9902
2.0033
USD/JPY
119.10
119.69
USD/CHF
1.2111
1.2133



European Mid Morning Update 17th April 2007
Market awaits the key U.K. and U.S. CPI numbers
Some minor releases seen so far in Europe with Swiss February Real Retails Sales declining to +4.5% YoY but above the forecast of +4.0% YoY and provide solid signs of strength with unemployment at very low levels, inflation almost flat and industry looking buoyant. It should keep the SNB on track for a further rate hike but whether this will cause any strength in the Franc itself is unlikely with the market even favoring the Euro on an interest rate basis with prompted the SNB to comment that the level of the Franc does not reflect fundamentals.
The Italian February Trade Deficit narrowed to EUR-1.8bn and better than the EUR-1.95bn forecast. This is less than half of the February number last year and displays an improving balance with strong exports and imports under control. Q1 GDP should be quite good.
The following economic releases are due later today:
FebruaryEuro-zone Trade Balance EUR -5.0bn
Euro-zone Trade Balance s.a. EUR 0.6bn
March U.K. CPI (MoM) +0.3%
U.K. CPI (YoY) +2.8%
U.K. CPI Core (YoY) +1.8%
U.K. RPI (MoM) +0.5%
U.K. RPI (YoY) +4.6%
U.S. CPI (MoM) +0.6%
U.S. CPI (YoY) +2.8%
U.S. CPI (Excl food & energy)(MoM) +0.2%
U.S. CPI (Excl food & energy) (YoY) +2.6%
U.S. Housing Starts 1500K
U.S. Building Permits 1515K
U.S. Industrial Production +0.2%
U.S. Capacity Utilization 82.0%
AprilGerman ZEW Survey – Economic Sentiment 10.0German ZEW Survey – Current Conditions 69.0Euro-zone ZEW Survey – Economic Sentiment 8.0
The U.K. CPI may well provide the most action for the European morning with PPI showing a growing firmness in output prices which threatens high street prices. Forecasts are focusing on a +0.3% MoM rate that should bring the annual rate just short of the 3% upper band. In spite of the strong Pound which should make imports cheaper U.K. inflation has remained high and higher energy prices threaten to test the critical 3.0% upper target range which will only exacerbate the pressure on the BOE to hike rates. This in turn suggests further upward pressure on the Pound. However, watch the 1.9956-59 area that may well contain the upside on this first attempt. However the psychological 2.0000 level beckons and should be tested over the coming week.
Elsewhere the two other releases of note are the German and Euro-zone ZEW survey which are expected to show continued strength and the U.S. CPI numbers. This latter release could also have an impact with the market fearing high inflation accompanying the slowdown in the economy. We have Fed officials watching this closely and while an annualized rate of above the 2.8% forecast is clearly bad for the economy the threat of a hike in rates could generate a temporary recovery in the Dollar.
Note important support and resistance areas:
USDJPY EURUSD USDCHF GBPUSD
Res: 120.34-53 1.3640-66 1.2234-80 2.0016-45
Res: 119.86-07 1.3590-16 1.2150-88 1.9956-59
Spt: 119.00-10 1.3510-20 1.2029-75 1.9862-76
Spt: 118.10-40 1.3440-50 1.1969-97 1.9741-80


European Morning Update 17th April 2007
Quiet range trading seen in the Asian session
The Aussie remained within a tight 0.8312-30 range this morning unmoved by the NAB Business conditions index for Q1 which remained unchanged from the prior 17. Notable was a rise in employment conditions and rising CAPEX plans which point to confidence in expanding capacity. The report is positive and reflects expectations of continued growth but with the big restraint being full employment and therefore a shortage of skilled labor. Overall this is neutral for the Aussie which needs to overcome recent highs if the uptrend is to continue. However a downward correction looks more likely at this point.
One of the key factors for the Japanese economy to solidify the base for the recovery to continue is consumer confidence and this took a further knock in March with the index edging lower by 1.4 to 47.2 and below forecasts of 47.8. One reason for the drop has been suggested to be the fact that the survey was conducted in person rather than over the phone. That aside, the Japanese are naturally conservative by nature and generating a reading reflecting strong confidence is always going to be a tough thing. That aside, with the market more Yen bearish the result will add to the desire to buy Dollars on dips – with the 119.00-10 area the first test of key support.
The following economic releases are due later today:
FebruarySwiss Adjusted Real Retail Sales (YoY) +4.0%
Italian Trade Balance (Total) EUR -1.95bn
Italian Trade Balance (EU) EUR 500mn
Euro-zone Trade Balance EUR -5.0bn
Euro-zone Trade Balance s.a. EUR 0.6bn
March U.K. CPI (MoM) +0.3%
U.K. CPI (YoY) +2.8%
U.K. CPI Core (YoY) +1.8%
U.K. RPI (MoM) +0.5%
U.K. RPI (YoY) +4.6%
U.S. CPI (MoM) +0.6%
U.S. CPI (YoY) +2.8%
U.S. CPI (Excl food & energy) (MoM) +0.2%
U.S. CPI (Excl food & energy) (YoY) +2.6%
U.S. Housing Starts 1500K
U.S. Building Permits 1515K
U.S. Industrial Production +0.2%
U.S. Capacity Utilization 82.0%
AprilGerman ZEW Survey – Economic Sentiment 10.0
German ZEW Survey – Current Conditions 69.0
Euro-zone ZEW Survey – Economic Sentiment 8.0
A much duller day than expected was seen yesterday with the Dollar failing to break below the lows seen in early Asia. The strength seen from those lows, while not particularly penetrating did break minor Dollar resistance against the Euro and this is beginning to suggest we may see a slightly larger pullback before the next round of weakness. This I can accept against the Euro but the same sort of expectation against the Swissie is going to make that more complicated and the need to tread carefully continues.
The Pound had a stronger showing than I had initially expected and there may be a little more seen today but I don’t think today’s the day we retest the 2.0000 level. It will before too long and this will be the first touch of this high level since 1992. However, all round I still maintain that the general wave structure is at a stage where a slightly larger pullback is beginning to look more and more likely but perhaps we have to wait until next week before that occurs. For now the basic Dollar direction does still appear to be lower although not directly.
As for USDJPY I have to say the short term has become a touch more complicated. I still tend to favor the overall move getting towards 120.53 but the structure looks a bit strange. Again, possibly EURJPY may well be the place to look and this appears to require a second test down towards the 161.40-44 area before we see that resume the rally which should reach 163.00-30 at least with minor risk of as much as 164.00.
The Aussie held below the 0.8357 peak and should see further losses today while USDCAD is still in the process of finding a low which it should do within the 1.1276-99 range.
Note important support and resistance areas:
USDJPY EURUSD USDCHF GBPUSD
Res: 120.34-53 1.3640-66 1.2234-80 2.0016-45
Res: 119.86-07 1.3590-16 1.2150-88 1.9956-59
Spt: 119.00-10 1.3510-20 1.2029-75 1.9862-76
Spt: 118.10-40 1.3440-50 1.1969-97 1.9741-80