EURUSD PRINTED NEW LOWS ON COMMENTS FROM BUNDESBANK. US RETAIL SALES DROPPED IN APRIL

EURUSD rose yesterday and closed at 1.3756. Negative sentiment for the Euro was fuelled from comments from the ECB Vice President Vitor Constancio who projected a prolonged period of low inflation and also hinted that the future monetary policy would act act as the main factor in determining its medium-term inflation outlook. Constancio confirmed that the ECB is monitoring the exchange rate of the single European currency.

In the session today comments from Bundesbank pushed the EURUSD lower. The German central bank stated that is open to significant ECB stimulus in June if the inflation forecast for 2016 are cut. Data from the United States revealed that the Retail Sales in the United States rose 0.1 percent in April. Market had expected a 0.5 percent rise.

Support for the EURUSD is seen at 1.3706 and resistance is seen at 1.3844.

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Bernanke Gives Traders An Early Christmas Present

Markets watched the FOMC announcement yesterday with great anticipation. Only 11% of economic analysts supported tapering at this meeting. Even though analysts including this writer did not expect to see tapering the overall market opinion yesterday and expectation was a $10 billion cut and that is exactly what Mr. Bernanke gave them. Maybe it was a Christmas present. Historically the Fed has not made any changes to its policy in December. With the changeover in leadership next month from Mr. Bernanke to Janet Yellen analysts were expecting Mr. Bernanke to leave things on hold. But never say that Mr. Bernanke did not know how to play to an audience. Instead of going out with a whimper he left with a roar. When the decision was published markets went for a wild ride, even those traders who were hoping for the tapering were surprised. The US dollar soared and then tumbled and then adjusted and corrected and for a while ended up just where it had started close to the 80.20 price. This morning the greenback is now at 80.75 and continuing to climb. The tapering was nice but it was the upward revision in 2014 GDP, and the positive comments on the accelerating jobs market and the fact that unemployment was falling faster than expected. The Fed painted a glowing picture of the US economic recovery.

The euro gave up 22 points to trade at 136.63 after soaring to the 1.38 price after the announcement. It was amazing to see market reaction on the charts after the Fed statement. The decision to taper is “ultimately positive for the dollar,”, because the Fed has become the first major central bank to begin policy normalization and has essentially endorsed the strength and stability of the U.S. economy. The dollar had initially weakened as news of the taper was offset by a dovish statement. German business sentiment picked up in December, according to a business-confidence index from the Ifo institute, paving the way for broader growth next year. The upbeat sentiment data comes a day after the ZEW sentiment survey showed German economic expectations jumped in December to their highest level since April 2006. Overnight the EU ministers agreed on a banking supervisor and policing activities for all banking in the Eurozone with the powers being turned over to the EU as opposed to individual member states.

Sterling climbed to $1.6398, paring some of its gains against the greenback after the Fed decision. Data released earlier Wednesday showed that the U.K.’s unemployment rate unexpectedly dropped to 7.4% in October, approaching the 7% threshold set by the Bank of England for when it could consider raising interest rates. The BOE currently expects the unemployment rate to fall to 7% by the third quarter of 2015.

The Japanese yen topped 104 against the greenback before the close and remained above in the Asian session. For Bank of Japan officials, the Federal Reserve’s decision to slow asset purchases is a good sign for Japanese exports as it reflects a continued U.S. economic recovery but the resulting further weakening of the yen is a double-edged sword for a resource-poor country. The Fed’s tapering method may provide a hint for the BOJ’s eventual exit from its own aggressive easing but for now, BOJ board members are mulling over options privately, pointing that before discussing the issue in public, they have to ensure the economy will overcome an expected slump in demand after the April tax hike.

To Taper Or Not To Take That Is The Question On Investors Minds – Well Mr. Bernanke ?

It is widely expected that the Fed may decide to start cutting its stimulus program this week’s meeting. Many economists believe that a string of upbeat economic data and easing fiscal restraints could prompt top Fed officials to moderate the pace of asset purchases soon. On the economic front, U.S. industrial production jumped 1.1 percent in November after a modest 0.1-percent increase in October, marking the biggest gain in a year, said the Fed in a report released on Monday.

Meanwhile, manufacturing conditions in December were flat for New York manufacturers, according to a survey released on Monday by the Federal Reserve Bank of New York. The survey showed manufacturing activity in the region rose 3.19 points to 0.98 in December from a negative reading in November. Moreover, U.S. nonfarm business sector labor productivity increased at a 3.0-percent annual rate during the third quarter, said the Labor Department.

“A series of positive economic releases from the US has once again re-ignited anticipation for an early taper to take place,” he said. The Fed’s key policymakers are to meet for two days from Tuesday to weigh whether growth is strong enough to merit cutting back its $85bil-a-month, bond-buying scheme. The so-called tapering would likely boost the greenback, making dollar-priced oil more expensive for countries using other currencies, dampening demand. The US dollar is down this morning at 80.20 giving up 4 points. There have been no clear moves by the greenback over the past week first falling to trade in the 79 level and then recovering to the mid 80 price remaining well below its expected trading range.

The euro on the other hand rebounded after better than expected manufacturing numbers in Germany and the overall eurozone helped push the euro to trade at 1.3769 adding 7 points this morning. The euro may see support in data today forecast to show German investor confidence rose to the highest level in more than four years. The ZEW Center for European Economic Research in Mannheim will probably say its index of investor and analyst expectations, which aims to predict economic developments six months in advance, climbed to 55 in December from 54.6 the previous month, according to the Bloomberg survey median. If confirmed, that would be the strongest reading since October 2009.

Across the Pacific investors seem comforted by the BoJ’s massive monthly purchases, bond-market investors have been more or less ignoring the signals of higher inflation in the pipeline — which would normally be reflected in higher yields. Stock-market investors, on the other hand, have been following the opposite line, building into their valuations and projections of equity-price performance the expectation that Japan will indeed soon be posting 2% inflation. TheJapanese yen is trading at 103 which new estimates that it could fall to the 110 level in the spring when the BoJ is expected to add more stimulus to offset the sales tax hike. Renewed signs of the BoJ’s undaunted pro-easing boas have emerged at the same time as indications that the Ministry of Finance and the BoJ are following an overt interest-rate policy through the asset-purchase program.

RBA minutes released this morning weighed on the Aussie which is trading well below the 90 price range after RBA Governor Steven’s mentioned intervention as a tool last week and said that the currency was overpriced in the current market. 

Manufacturing PMI Data In China, Germany and France Keep Currency Traders On Alert

The countdown to the Federal Reserve meeting has begun. The two day meeting is slated to begin tomorrow and conclude on Wednesday and every trader or analyst you ask seems to have a different opinion as to what to expect on Wednesday. Today most of the Asian equity indices are trading in the red despite a positive closing of the US stock markets on Friday.

From the international currency front the US dollar index is trading lower by 0.14% at 80.10 while the euro and the pound are up marginally by 0.13 % and 0.02% respectively. The euro has added 16 points to trade at 1.3758 while the pound has added 10 points at 1.6305. From the eurozone traders have the PMI and the trade balance numbers to be released. Later in the day from the US we have the Industrial production, capacity utilization, empire manufacturing and the Net tic flows numbers.  Considering the aforementioned factors it could be a volatile day for the euro dollar. French and German PMI data could upset the euro today if Germany misses the mark.

Asian markets are trading on a negative note today on the back of unexpected decline in China’s manufacturing index. Further, increasing worries over the action of QE tapering to be taken by the Federal Reserve in its meeting starting tomorrow acted as a negative factor. China’s HSBC Flash Manufacturing PMI declined by 0.3 points to the 50.5 mark in December from 50.8 levels in November after an upward revision.

The Australian dollar hovered near a three-month low on Monday ahead of what could be an eventful week with investors awaiting a key U.S. Federal Reserve meeting, while the New Zealand dollar held firm.  The Aussie went as far as 68.6 on a trade-weighted basis in New York, its lowest level in more than three years. Versus its U.S. counterpart, it was last at $0.8934, having touched $0.8909 on Friday. 
It briefly dipped to $0.8920 after HSBC’s flash report on China’s manufacturing sector showed growth slowed to a three-month low in December. The Aussie dollar is sensitive to news out of China, a key export market for Australia. 

Across the Tasman Sea, the kiwi traded at $0.8255, after recovering from a slide to $0.8198 late last week. Technical support was seen at $0.8260, the 32.8 percent retracement of its October-November sell-off. Offers suspected above $0.8300 were capping gains. 

Speculators anticipate a reading of third-quarter domestic growth due on Thursday could be supportive for the kiwi given that many economists expect it to show that the economy grew at a quarterly rate of 1.1 percent, faster than many other developed nations.  This would underpin the view that the Reserve Bank of New Zealand will raise interest rates early next year. New Zealand’s government is expected to maintain its forecast of a return to a budget surplus by 2014/15 when it announces its midyear budget update on Tuesday, while few anticipate major changes to its bond issuance programme. As a result, the currency impact was seen as limited. 

Euro Rises On Weaker Dollar Ahead of Fed Meeting

The EUR/USD posted a strong gain on Monday after a survey of purchasing managers showed manufacturing and services output in the Euro Zone region expanded at a faster pace this month than economist forecast. A lower-than-estimated U.S. Flash Manufacturing PMI report also helped to boost the Euro over the dollar.

The GBP/USD also gained ground mostly because of short-term oversold conditions and the weaker dollar. The dollar fell amid speculation the Fed will refrain from reducing monetary stimulus at this week’s two-day policy meeting on December 17 and 18. Traders are also reacting today to a lower than expected U.S. Flash Manufacturing PMI report released this morning.

Oversold conditions and a lower dollar also helped boost February Gold prices. After turning the main trend to up on the daily chart last week on a move to $1267.50, the market plunged sharply lower. Buyers stepped in on Friday, however, to temporarily stop the slide. If a secondary higher bottom does form at $1219.50 then this could serve as a sign that a bottom has been reached at $1210.10. If the Fed refrains from tapering on December 18 then look for the dollar to plunge and for gold to accelerate to the upside.

February crude oil is also receiving support from oversold technical conditions and a weaker dollar. The market made trade sideways to higher until December 18 when the latest weekly inventory figures will be released as well as the Fed monetary policy statement. Last week, the Energy Information Administration reported a 10.6 million barrel drop in supply. Many traders believe the figure was overstated and are looking for some kind of an adjustment this week.

EURUSD testing the 1.3700 level ahead of the Producer Price Index data from the United States

EURUSD dropped yesterday and closed at 1.3752. The Industrial Production in the Eurozone dropped 1.1 percent in October. The European Central Bank indicated in its December monthly report that is very keen on continuing with its accommodative monetary police for a long time, because of the downside risks for the Euro area. The market witnessed mixed data from the United States yesterday, but that didn’t stop the US dollar to gain against its European counterpart.

The Retails Sales in the US rose 0.7 percent month over month in November. The Business Inventories also recorded a 0.7 percent gain. A surprise to the market was the worse than expected Jobless Claims data which increased to 368K during the last week. Investors are now looking forward for the Producer Price Index month over month data due to be released later today.

Support for the EURUSD is seen at 1.3693 and resistance is seen at 1.3804. The HotForex Traders Board shows that 65 percent of the traders are short on the EURUSD.

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EUR/USD trading steady after the speech of the ECB President Mario Draghi

EURUSD rose yesterday and closed at 1.3737. There officials from the United States Federal Reserve supported the cut in the Fed bond-buying program at their meeting in December. The President of the Saint Louis Federal Reserve James Bullard suggested that a small taper could be appropriate at the December meeting, because of the improvements of the job market in the US.

The President of the Richmond Fed Jeffrey Lacker also highlighted the possibility of a discussion about tapering the size of the stimulus package of FED at their December meeting. The Dallas Fed President Richard Fisher warned that the cost of the 85 billion dollar asset purchase program exceeds its benefits and urged the US central bank to start tapering as soon as possible. Support for the EURUSD is seen at 1.3650 and resistance is seen at 1.3750. The HotForex Traders Board shows that 70 percent of the traders are short on the EURUSD.

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