Daily Market Analysis by FXNET - page 6

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Basics of Forex Economic Indicators

Indicators are used throughout the whole process of Forex trading, there are many indicators which can be made useful for many things and in many ways. With experience traders learn to utilize indicators and combine them to find what they need. Here are some basics about Forex economic indicators, which are very important for certain, markets.

Indicators help traders understand the economic situation of a relevant country, and the impact it will have on currencies. Governments and financial institutions will release official economic data from time to time to inform the public of the changes in a country’s economy. These releases have an impact on traders, and should be on a trader’s watch list. Those releases can either increase market activity or decrease it, either way analysts will be providing information about these indicators, and traders should take them into consideration.

News releases are scheduled and therefore these indicators have a schedule too, meaning traders can expect this coming change, and track them. Some trading software will automatically update the information, and all media will cover it. Traders can get their information through Forex alerts or on dealers’ websites. These economic indicators represent underlying economic data such as the country’s GDP, Employment statistics, and other important information. Each indicator is important and can affect the country.

Once the indicators are out and received they can be analysed. Some economic indicators are important in relation to some countries but not to others. For example economic indicators dealing with inflation data such as CPI are important for the U.S since it is a key driver in the Forex market. Obviously the bigger the market the more affect it has on other currencies which means the closer it should be watched. Analysing the released indicators, can be done in many ways – depending on the preferred method – and traders can make the most of each opportunity generated by the release of an economic indicator.

 

Asian Session – Soft Australian employment data hurt aussie

The Australian dollar was the worst performer during the Asian session after being hurt by soft Australian employment data.

According to a labour force survey for January, the domestic economy showed a surprise 3,700 drop in the number of employed Australians, which came on top of a slight downward revision in December's figures. The unemployment rate rose to the highest level since July 2003, at 6%.

The aussie tumbled over 100 pips against the US dollar in reaction to the disappointing data today.

AUDUSD fell to 0.8926 from 0.9030, reversing Wednesday’s gains made after strong China trade data.

In other currencies, the euro, pound and yen gained against the US dollar. There is caution with trading the greenback today ahead of a report today that forecast to show U.S. retail sales stalled.

The euro gained for the first time in three days against the dollar before an ECB monthly report later today.

EURUSD opened in Asia at 1.3592 and rose to 1.3615, regaining some losses from the sharp tumble yesterday following ECB policy makers comments on negative interest rates.

GBPUSD climbed to a high of 1.6622, the highest since January 28. The pound was lifted by BOE governor Mark Carney’s comments that the UK’s economic recovery was gaining momentum. Markets factored in a rate increase earlier in 2015, sooner than previously thought.

USDJPY slid to a low of 101.98 from 102.51. US retail sales will be a key risk for the dollar. A relatively flat outcome for sales will provide little rationale to buy the currency.

 

Asian Session – Yen weakens after Bank of Japan policy announcement

The yen tumbled against major counterparts after the announcement from the Bank of Japan that it left its monetary policy and economic assessment unchanged. The Bank also extended and doubled two loan programs.

USDJPY and the JPY crosses rallied with the Nikkei following the BOJ policy announcement. From just below 102.00, USDJPY surged up to 102.73. EURJPY rallied from 139.50 to 140.50, GBPJPY from 170.17 to 171.35.

EURUSD opened in Asia at 1.3705, Trading was extremely quiet over the past 24 hours with the pair hovering around 1.3700. During the Asian session the pair traded a 1.3695-1.3717 range.

Looking ahead, the euro will be in focus as the German ZEW investor sentiment data will be released in the European session today.

GBPUSD edged higher from 1.6710 to 1.6736 in Asia following the downside retracement to 1.6694 overnight. EURGBP consolidated between 0.8193-97 in Asia after the bounce last night.

Key risk for the sterling today will be UK inflation data.

AUDUSD opened in Asia and held between 0.9030-42 ahead of the Reserve Bank of Australia minutes then rose to a fresh one-month peak of $0.9081. The minutes had nothing new to say but alt of the move in AUD was based on positioning.

 

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Asian Session – Dollar struggles after weak US consumer confidence data

Weak US data dampened sentiment keeping the dollar heavy against the yen. US Consumer confidence in February fell to 78.1 versus 80 forecast and 79.4 previous. Meanwhile there were comments from the Fed policy maker Tarullo who said that monetary is possible tool to deal with broad sustained systemic risk and that it is possible that interest rates will remain historically low for some time after Fed starts to raise them.

USDJPY opened the Asian session at 102.24 after trading with a heavy tone through the US session due to weak US consumer confidence and a drop in the 10-yr Treasury yield to 2.70%. The pair eased to 102.13 in early Asia.

The Australian dollar was in focus today as there was domestic data on the construction sector. Fourth-quarter total construction fell 1.0% on the quarter while engineering construction was down 0.5%. Also weighing on the aussie lately was the weaker Chinese yuan.

AUDUSD opened the Asian session at $0.9018 and traded a moderate 0.8969-0.9021 range.

EURUSD barely moved yet again in Asia and could only manage a $1.3739/1.3748 range for the entire morning session.

GBPUSD traded a 1.6669-85 range in Asia. Yesterday the pound rose above $1.6720 after comments by the BOE's McCafferty that the UK could raise interest rates in Q2 2015.

Revised GDP for the UK will be released in the European session today and US new home sales in the US session.

 

Asian Session – Yen lifted by upbeat Japanese data

The yen performed well in today’s Asian session after a series of upbeat data released from Japan. Most figures came in on or better than expectations, which reduced the expectations in the market that the Bank of Japan might be taking action for further policy easing.

USDJPY opened the Asian session at 102.12 and traded to 102.20 before falling after the Japan data to 101.76. Yesterday the dollar got a bit of a boost after Fed Chair Yellen’s testimony.

EURUSD opened the Asian session at 1.3709 after a recovery in EURJPY and a broadly weaker USDJPY. EURUSD could only manage a 1.3703/15 range.

The main event during the European session will be Euro zone inflation data and the outcome will likely shape the European Central Bank expectations ahead of next week’s meeting.

GBPUSD traded a 1.6677-95 range as did USDCHF which traded a 0.8877-08889 range during the Asia n session.

AUDUSD opened today at 0.8965 and traded a moderate 0.8944-90 range in Asia with dips to 0.8955 in early trades but it wasn't long before the 0.8990 level was tested. China data this weekend will be a key risk to the aussie.

 

Asian Session – Aussie gains after data shows Australian economy picks up pace

Risk trades were back after the Ukraine crisis de-escalated and this was particularly evident after the S&P 500 rallied 1.5% to a record highon Tuesday.

During Wednesday’s Asian session, the main data releases were from Australian, with fourth quarter GDP numbers coming in stronger-than-forecast.

In other news, China provided its strongest signal yet that it will shift toward balanced and clean economic growth, promising to reduce the pace of investment to the lowest in a decade and wage a "war on pollution".

Most major currencies traded a range during today’s Asian session, consolidating moves from the previous day. The unwinding safe haven trades led to a weaker yen and Swiss franc.

USDJPY opened the Asian session at 102.21 after the yen was sold across the board due to outflows from safe have currencies as the Ukraine crisis eased. The pair traded a 102.11/29 range throughout the Asian session.

EURJPY did little and traded a 140.25/57 range.

EURUSD opened the Asian session at 1.3742 but barely moved during the Asian session , edging down about 15 pips to 1.3727. Focus is on Euro zone services PMI data later today. The main key risk for the euro will be the European Central Bank meeting on Thursday. There are mixed views on whether the ECB will take action and cut rates.

GBPUSD traded sideways in Asia between 1.6656-73. UK BRC shop prices inflation data released early today had little impact. The UK services PMI data due later today will be more important while Thursday’s Bank of England policy meeting will also be a key risk for the pound.

USDCHF traded a 0.8868-08877 range, remaining calm after fears of the Ukraine crisis subsided and there was less demand for the safe haven Swissie.

AUDUSD opened on Wednesday at 0.8952 and the pair spiked up to 0.8995 after the better-than-expected Q4 GDP numbers. The pair then fell back down to 0.8935.

Looking ahead, Eurozone services PMI data will be released in the European session today.

 

Asian Session – Australian dollar rallies after strong retail sales and trade data

The Australian dollar was the best performer today after Australian retail sales beat expectations by more than double the forecast, while the nation’s trade balance posted a strong surplus. The upbeat data lessened the possibility of a rate cut by the Reserve Bank of Australia and helped sentiment for the AUD.

Australian retail sales jumped by 1.2% m/m versus a consensus of 0.5% while the trade surplus widened to A$1.433 billion versus a previous A$591 million and above the A$270 million forecasted.

AUDUSD rallied to a high above 0.9030 while AUSDJPY rose to a high above 92.60 yen.

In other news overnight there was soft US data. The private payrolls processor ADP showed a tepid increase of 139,000 jobs in February, while jobs growth in January was revised down sharply to 127,000 from 175,000. The ISM non-manufacturing PMI fell to a 4-year low last month.

However the dollar remained buoyant as Fed policy maker Williams said yesterday that he expects the first rate hike to be in mid 2015. This gave a boost to the dollar.

USDJPY rose to a high above 102.75 in Asia today, up from the session open of 102.30 and up 1.2% since Monday.

EURUSD traded at $1.3728, little-changed in Asia but off 2-month high of $1.38255 hit on Friday. A key risk for the euro will be today’s European Central Bank meeting. Interest rates are expected to remain the same at 0.25% but many expect the central bank to end its SMP sterilization program, which means an end to bond buying that was draining liquidity. By ending this program, the increase in liquidity in the financial system of the Euro zone will weaken the euro.

GBPUSD was flat trading a 20-pip range above $1.6706. The Bank of England policy announcement will be in focus today.It is expected to be a non-event as the rate is predicted to remain at 0.50%.

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Asian Session – Yen gains on safe haven demand after dismal China trade data

Risk aversion took hold on Monday after a shockingly weak Chinese trade balance report sent a shiver through the markets on the weekend. The world’s second largest economy posted a $23 billion monthly deficit in February compared to a $14 billion surplus expected. This comes after a nearly $32 billion surplus in January.

Meanwhile other disappointing news hurt market sentiment as well after Japan's current account deficit hit a record 1.5tn yen in January.

Due to increased safe haven demand, the yen benefited during Monday’s Asian session.

USDJPY opened on Monday with a gap lower on risk aversion following worse than expected China trade data. The pair dipped from 103.11 to 102.96. On Friday the dollar surged to a high of 103.75 on the back of stronger-than-forecast US jobs numbers.

EURUSD is proving to be resilient despite the growing tensions in the Ukraine crisis. The pair moved off post-NFP lows of 1.3851 hit on Friday and opened the Asian session on Monday at 1.3870 to reach a session high of1.3891.

GBPUSD traded a 1.6720-45 range during the Asian session, down from Friday’s high of 1.6784.

USDCHF traded a 0.8759-0.8780 range. Swiss retail sales data will be in focus today.

AUDUSD opened the Asian session at 0.9045, gapping down from Friday’s New York close of 0.9069 and slid to 0.9022. The aussie is being weighed down by the poor China trade numbers. China is a major trading partner for Australia.

 

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