Dollar down on US jobless claims

February 26, 2010 – Kathy Lien

Dollar down on US jobless claims

Initial claims for unemployment benefits in the US rose by 22,000 to a seasonally adjusted 496,000 in the week ended February 20, the US Department of Labour said. It was higher than the market consensus of 455,000.
Orders for large manufactured goods was mixed.

An increase in aircraft orders lifted durable goods orders to rise by three per cent in January, the most in six months, The US Department of Commerce said.

Excluding transportation, durable goods orders fell by 0.6 per cent, weaker than economists’ forecast.


"The Aussie dollar fell quite aggressively at the open of the New York trading session," GFT Forex director of currency research, Kathy Lien, said from New York.


"That was largely due to the risk aversion from more fears about Greece as well as weaker economic reports in the US."

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Sterling Continues to Fall in Forex Trading

February 26, 2010

Currency trading with the U.K. pound

The sterling continues to fall in forex trading. Even as the U.S. dollar weakens against the euro and the Japanese yen in currency trading, the U.K. pound continues to struggle.

With economic divergence high on everyone’s mind, the sterling can’t seem to get a break. Concerns about mounting U.K. debt remain in place, and there are also issues surrounding other aspects of weak British economic performance. Even an upwardly revised GDP can’t pull the sterling out of its funk.

One of the issues is that there might be an early election in the U.K. while the current government scrambles to capitalize on the GDP reading. Pressure remains on the sterling in forex trading, and it is difficult to see when it will ease off.

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Divergence Trade in Forex Trading

February 26, 2010

Using economic divergence as part of a currency trading strategy

One of the ways you can enhance your currency trading strategy is to consider incorporating economic divergence. This is the idea that you can benefit from the impact that different recovery paces in different countries can have on currencies on the FX market.

GFT’s Kathy Lien explains a bit about the divergence trade in FX360:

Economic divergence is one of those long term factors that can have a big impact on currencies, equities and bonds but usually take a long time to pan out. At the beginning of a recovery, the market pays particular attention to economic divergence as they try to figure out who will raise interest rates first. In the current recovery, economic divergence is even more important because not only are different countries growing at a different pace, but each part of the world is dealing with different issues.

If you are careful about it, you can find good forex trading success with a little help from economic divergence.

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London Session – February 26, 2010 6:03 AM

February 26, 2010

The ability of the DJIA to bounce off technical support, better than expected Japanese January industrial production and retail trade data and perhaps the positive reaction to the India budget allowed a little risk appetite to return this morning.  Stock markets are higher across the board and the JPY has given back some of this week’s gains.  EUR/USD is holding with a 1.3550 to 1.3610 range with EUR buyers still thin on the ground as the market sceptically awaits the next round of news surrounding EMU and in particular the Greek budget.  Despite the softening is market fears the cable has been unable to hold onto its session highs.  Full text » | Technorati | Stumble It!

Asia Session – February 26, 2010 1:40 AM

February 26, 2010

Risk currencies built upon their earlier gains from New York, ending the week limping slightly above recent lows. Despite the continued woes of Greece and the Euro Zone in general, the Euro was boosted by short covering ahead of the weekend. Rumors of a hedge fund buying the Euro were also seen as a help for the European currency. EUR/USD initially touches lows at 1.3530 and from there never looked back on its way to 1.3600 highs. AUD/USD began its climb at the 0.8800 level at lunch time in the NY session, and topped the move off near 0.8910 late in Asia trading. NZD/USD climbed from 0.6905 to 0.6955, and GBP/USD made modest gains to 1.5285 after a low near 1.5240. Full text » | Technorati | Stumble It!

New York Session – February 25, 2010 3:43 PM

February 25, 2010

The currency markets continued to keep pace with the risk trade and this elicited yet another wild NY session in terms of price action. Equities opened deep in the red as US economic data continued to print on the ugly side. The durable goods report was extremely disappointing as the core number that feeds directly into GDP (non-defense capital goods excluding aircraft) sank nearly -3% on the month. Meanwhile, initial jobless claims jumped to 496K from 474K and were well above the consensus guesstimate. The poor reports are on the heels of downright disastrous consumer confidence and new home sales numbers earlier in the week. Full text » | Technorati | Stumble It!

Euro Falls in Forex Trading

February 25, 2010

Currency trading with the euro

The euro is falling in forex trading as Europe frets about the situation in Greece. Moody’s warned that Greece faces another downgrade to its sovereign debt rating if austerity measures aren’t adopted. On the other side, the Greek government is getting a great deal of pressure from its own people to reject austerity measures.

The euro zone is concerned about member states’ exposure to Greek debt, and there are concerns that this could put a serious damper on the chances for economic recovery in the region this year. This is sending the euro lower in forex trading.

It is not surprising that high beta currencies are dropping right now in favor of the U.S. dollar, which is rising on its safe haven status. The carry trade is unwinding as well, and it appears that investors are ready to run for cover.

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Risk Aversion Sends Carry Trade Unwinding

February 25, 2010

Currency trading on the FX market

The carry trade is unwinding quite quickly today, with risk aversion sending investors hurrying toward safe havens. A great deal of concerning news is weighing on the carry trade.

For the most part, investors remain fixed on the drama playing out in Greece. Moody’s is warning that another credit downgrade could be coming for the country if austerity measures aren’t adhered to. However, the government may find it difficult to adhere, since the public is protesting vociferously.

Another issue is the fact that Britain continues to struggle. National debt is mounting, and the Bank of England acknowledges that quantitative easing may be needed again going forward.

With all of these concerns, it is little wonder that the risky carry trade is being unwound in favor of more stable positions and safe haven currencies.

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British Economy May Require More Quantitative Easing

February 25, 2010

Sterling continues to tank against the dollar in forex trading

The British economy may require more quantitative easing, according to some policymakers. While it is far from a foregone conclusion, the Bank of England is leaving the door open to further stimulus measures, according to member Posen.

GFT’s Kathy Lien reports in FX360 on the possibility of quantitative easing in Britain:

Given that one of the central bank’s mandates is to keep inflation within target, the lack of inflationary pressures confirms that from a price perspective, there is no pressure to reduce stimulus. He also said a potential output drop is a big concern and because they do not know exactly how the economy will progress, they have to leave the door open on more Quantitative Easing.

Like the U.S. economy, the British economy is not yet out of the woods. The sterling is having difficulty in forex trading as the British economy struggles, and as debt mounts. Britain doesn’t want to end up like Greece, and investors are concerned about the current state of things.

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London Session – February 25, 2010 6:15 AM

February 25, 2010

Bernanke may have delivered no major surprises yesterday but his reassurances that rates will be left on hold for an extended period allowed a little support for equity markets.  In contrast the fx market is not in the mood to extend risk.  Bernanke’s speech yesterday coincided with the release of disappointing US new home sales data which served as a reminder of the continued vulnerability of the market and drove home the point as that there is still no near-term risk of a rate hike.  European data this week have also tended to highlight the sluggish nature of its economic recovery.  Following the poor IFO survey released earlier in the week, Eurozone Feb economic confidence disappointed this morning as did French consumer confidence.  The JPY has been the major beneficiary of economic uncertainty making gains vs the USD, GBP and the EUR overnight before sellers emerged.  The USD gained significantly vs the EUR overnight on the fears of further downgrading of Greek debt, though from an low of USD1.3453 EUR/USD has managed a decent bounce in European hours back above the USD1.3500 level.  Full text » | Technorati | Stumble It!

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