Forex Yellow Pages

One year after Wall Street teetered on the brink of collapse, seven out of 10 Americans lack confidence the federal government has taken safeguards to prevent another financial industry meltdown, according to a new Associated Press-GfK poll.

Even more — 80 percent — rate the condition of the economy as poor and a majority worry about their own ability to make ends meet. The pessimistic outlook sets the stage for President Barack Obama as he attempts to portray the financial sector as increasingly confident and stable and presses Congress to act on new banking regulations.

The public sentiment also poses a challenge to central elements of Obama’s governing agenda. Half of those surveyed said deficit reduction should be a national priority over increased spending on health care, education or alternative energy. Read more…

The Euro and the British Pound may gain against the US Dollar in European trading hours with equity index futures trading 0.6% higher and pointing to losses for the safety-linked greenback. Germany’s Current Account and Switzerland’s Unemployment data headline the economic calendar.

Key Overnight Developments

• Japan: Current Account Shows Continued Exports Slump, Merchant Sentiment Falls

• Australian Business Confidence Rises to Highest in Nearly Six Years, Says NAB

Critical Levels

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One of the great advantages of trading currencies is that the forex market is open 24 hours a day (from 5pm EST on Sunday until 4pm EST Friday). Economic data tends to be one of the most important catalysts for short-term movements in any market, but this is particularly true in the currency market, which responds not only to U.S. economic news, but also to news from around the world. With at least eight major currencies available for trading at most currency brokers and more than 17 derivatives of them, there is always some piece of economic data slated for release that traders can use to inform the positions they take. Generally, no less than seven pieces of data are released daily from the eight major currencies or countries that are most closely followed. So for those who choose to trade news, there are plenty of opportunities. Here we look at which economic news releases are released when, which are most relevant to forex (FX) traders, and how traders can act on this market-moving data. Read more…

The New Zealand dollar moved sharply lower against US and Australian counterparts following a highly-anticipated central bank rate decision. Reserve Bank of New Zealand Governor Alan Bollard made it fairly clear that domestic economic risks remain to the downside and did not rule out further interest rate cuts through year-end. The fact that the RBNZ remains committed to lower interest rates was less surprising than Bollard’s explicit reference to the New Zealand Dollar exchange rate.

Continued NZD rallies have limited economic recovery in the export-dependent economy, and Bollard effectively implied that lower interest rates would be necessary to support growth. Though forex traders have generally proven less sensitive to interest rate developments through the global financial crisis, it remains fairly clear that much of New Zealand Dollar demand comes from yield-seeking speculators lured by comparatively high domestic interest rates. A downgrade in yield forecasts subsequently hurts the Kiwi, and forex markets made their disappointment quite clear in sending the NZDUSD sharply lower following the RBNZ commentary. Read more…

How’s the economy, you ask? I have the proverbial good news and bad news, but in this case, they’re exactly the same: The U.S. economy appears to be hitting bottom.

First, the good news. Right now, it looks like second-quarter GDP growth will come in only slightly negative, and third-quarter growth will finally turn positive. Compared to the catastrophic decline we recently experienced — with GDP dropping at roughly a 6% annual rate in the fourth quarter of last year and the first quarter of this year — that would be a gigantic improvement.

Furthermore, there is a reasonable chance — not a certainty, mind you, but a reasonable chance — that the second half of 2009 will surprise us on the upside. (Can anyone remember what an upside surprise feels like?) Three-percent growth is eminently doable. Four percent is even possible. Surprised? How, with all our economic travails, could we possibly mount such a boom? The answer is that this seemingly high growth scenario isn’t a boom at all. Rather, it follows directly from the arithmetic of hitting bottom. Read more…

It was a tenuous week; but the dollar was able to ultimately hold its own through the close. However, just because momentum behind the earnings-driven rally in risk appetite has stalled does not mean that the world’s most liquid currency has avoided a collapse all together.

Fundamental Outlook for US Dollar: Bearish

- Fundamentals support a recovery in US and global growth, but how does risk appetite factor in?
- Bernanke sees signs of stabilization, calls focus on the deficit
- Do technicals call for a dollar collapse or recovery.

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Market sentiment is on the verge of a significant shift; and many well-established ranges are now threatening breakouts. Regardless of what currency pair or instrument you trade, risk appetite will always factor in. The best we can do is isolate and reduce this exposure. With EURGBP, there is no doubt a correlation to risk trends; but the direction and severity of this driver is somewhat dampened.

Why Would EURGBP Hold a Range?

· Levels to Watch:

-Range Top: 0.8660 (Trend, Fib, SMA, Pivot)

-Range Bottom: 0.8425 (Trend)

· Risk appetite has been on the rise through the past week; but the situation hadn’t really met a critical point until today. Many of the dollar and yen-based pairs (as well as the benchmark equity indices) have been pushed to the edge as fear that US lender CIT was nearing bankruptcy has eased and the focus is trained back on impressive earnings. For EURGBP, the impact of risk appetite is not so clear cut. However, the UK GDP data on Friday will be.

· From a technical perspective, EURGBP’s general trend from the January swing high has been bearish. The rebound from mid-June is still a correction of this larger trend until a larger retracement can shift momentum. Resistance is formidable though around 0.8650/700. A 38.2% Fib of the April to June bear wave coincides with a trend, pivot and 50-day SMA.

Suggested Strategy

· Short: Half-size entry orders will be placed at 0.8645, well enough below absolute resistance.

· Stop: An initial stop of 0.8725 will cover last week’s swing high and the general trend only. To secure profit, move the stop on the second lot to breakeven when the first target hits.

Target: The first objective equals risk (80) at 0.8565 and the second target is set to 0.8463.

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