Forex Trading

Surprising the market yesterday was the release of the German ZEW Economic Sentiment report which showed confidence throughout the Euro-Zone's largest economy had plunged throughout the previous month, highlighting that economic fundamentals have finally hit home the fact that recovery is not yet around the corner. This report, since identifying what was already known, had a muted impact on the value of the EUR as investors had likely already priced in the bad news from previous economic reports. Today's economic figures will likely have a much stronger effect on the market now that confidence reports more closely resemble the market itself.



USD - USD Bullish on Goldman Sachs Earnings; Mixed from Retail Sales

The US Dollar completed yesterday's trading session with mixed results versus the major currencies as U.S. data on retail sales and producer prices beat expectations, boosting hopes that the economy is on a slow path to recovery. By yesterday's close, the USD had fallen against the GBP, pushing the oft-traded currency pair to 163.25. The greenback did see some bullishness as well as it gained 50 pips against the JPY and closed at 93.56.

Investment bank Goldman Sachs reported strong profits yesterday, but economic signals from the United States and Europe dimmed optimism that a global recovery may be on the horizon. In addition, U.S. retailers beat expectations with a 0.6% sales rise in June, boosted by a big jump in auto sales. But excluding both autos and gasoline, sales were down 0.2 % in a fourth consecutive monthly decline. The slight rise in risk appetite also boosted higher-yielding currencies at the expense of both the Yen and USD, which tend to see their biggest gains when investors grow anxious and buy them as safe havens.

USD trading will be interesting today as important economic data is expected to be released. From 12:30 GMT a series of economic indicators will begin to be released, starting with Core CPI figures, the Empire State Manufacturing Index, Industrial Production and Crude Oil Inventories. Surprisingly, almost all of these releases are expected to be higher than their previous figures, meaning the USD could show bullishness today. Traders are also advised to follow FOMC Meeting Minutes at 18:00 GMT. This meeting is very important as it is very likely to impact the Dollar's volatility. Traders are advised to watch closely, as this is likely to set the pace of the Dollar going into the rest of this week's trading.

EUR - EUR Pressured by German Economic Sentiment Figures

The EUR finished yesterday's trading session with mixed results versus the major currencies. The 16-nation currency extended gains versus the Japanese yen on Tuesday, to trade above $130.75 amid a broad sell-off in the yen. The EUR experienced similar behavior against the CHF as the pair rose from 151.40 to 152.10 by days end. The EUR did see bearishness as well as it lost around 60 pips against the GPB and closed at 0.8560.

Data showed German investors have turned more pessimistic than expected in July for the first time in nine months, a signal analysts say means the nation's economy will not start growing until next year at least. Euro-Zone industrial production data also disappointed, growing only slightly in May after a bad release in April and remaining 17% lower than it was a year earlier.

Optimism about the German economy has grown in recent weeks, with data pointing to stabilization in the manufacturing sector and government officials saying gross domestic product (GDP) could be flat or slightly higher in the April-June period, breaking a string of four straight quarters of contraction. But the Mannheim-based ZEW economic think tank's monthly index of economic sentiment fell yesterday to 39.5 from 44.8 in June, the first drop since October 2008, signifying that expectations for a speedy recovery have begun to fall.

JPY - Yen Losing Ground on All Fronts

The JPY saw a bearish trading session yesterday, losing ground against most of its currency crosses. The JPY fell sharply against the Sterling Pound, pushing the oft-traded currency pair to 152.50. The Japanese yen experience similar behavior against the EUR and closed at 130.55.

The Japanese market should have a heavy effect on the JPY versus its major currency counterparts, as the Overnight Call Rate will be announced today. The rate is expected to remain unchanged, but traders should pay close attention to the BoJ Press Conference that will follow to look for expectations of Japan's economic future. A bullish statement from the BoJ could lead some traders to believe that it is forecasting a rosier financial climate in Japan.

Crude Oil - Crude Oil Inventories to be Released Today

Crude Oil prices rose slightly yesterday in seesaw trading as concerns about consumer demand tempered an earlier rally on optimism reflected in a global equities rally. Oil prices have fallen by about $14 a barrel, or 19%, since June 30th after poor employment data from the U.S. and Europe raised doubts that the global economy was poised for a strong recovery this year.

Today, the release of crude oil inventory data is likely to help determine the market's next direction for the black gold. Moreover, a release of a string of positive economic figures from the U.S could help its bullishness. Therefore, traders are advised now to make some profits as the price of Crude Oil is set to remain volatile in the short-medium term.

Article Source - European Economic Sentiment Plunges, EUR Flattens