The U.S. Session Trader's Daily Forex Question

The U.S. session, trader's daily 09:45 EDT question; "Oh dear, do we now want to take a U.S. based trade and run the risk of a price move stranding things with no momentum, as 80% of U.S. sessions do?" The law of probability says that U.S. trade will not follow through with sustainable breaks on new positions, and with what came before the Wall Street open, we already have seen that the bullish S&P start could literally go anywhere. TheLFB equity tracking system shows that the main components that we use to gauge S&P momentum has only four out of thirty companies trading in the green. If this move is to hold, and by default the Usd is to get weaker, a huge raft of volume needs to hit that lifts all stock indices, as well as oil and gold trade. Not to say that could not happen, but it is questionable as to whether it will hit and hold before the European markets go into their close at 10:30 EDT. The fact that gold moved $10, or 1% in five minutes at the open, and the S&P managed to tag on 0.3%, leaves another question as to why oil has not moved too far, and further enforces the feeling that the Wednesday move could hold. The majors are so far from their previous session highs or lows, that actually breaking new ground and holding for a ride on the dollar is very unlikely; unless a volume tsunami hits. There is nothing at all clear-cut about the picture we have on the major pairs, and the global market Usd drivers. All are overbought in the near-term, and the major pairs are all dealing with daily chart Simple Moving Average areas that really are creating massive support and resistance areas to work through. Volume and speculative interest is very light, creating an environment that offers plenty of volatility, but also failed breaks, in the same measure. Global equity trade is flat, and commodity markets are also flat-lining after efforts to hold support this week. In all, not an easy environment to issue high probability signals.

Forex Trading: How a GDP Announcement Can Boost a Currency

The Australian GDP announcement for the second quarter of 2012 showed that the Australian economy grew much more than expected. The economy grew 1.3%, compared to official estimates of a 0.5% growth. After a month of pessimistic economic news for Australia and in the wake of further interest rate cuts, such a result came as welcome news for the nation and sparked activity in forex trading. The Australian Dollar (AUD) rallied in many of its denominated currency pairs, showing particularly strong gains against the US Dollar (USD).

The AUD has staged a recovery in forex trading ever since the unexpected half-point interest rate cut made by the RBA on May 1. The encouraging GDP figures account for the last spike seen in the graph above, showing a strengthening AUD despite the RBA cutting the rate by a further quarter-point at the start of June.
Fittingly for forex trading and currency pairs, there are always two sides to every coin. Just as the AUD strengthened on the back of the GDP announcement, the USD has almost simultaneously weakened after economic data released by the US Bureau of Labour. US non-farm payroll figures, a key economic indicator for the country released on June 1, showed growth in the employment sector that was far below national estimates.

What this has served to do is strengthen the calls for another round of quantitative easing, which in the short term would devalue the USD due to its inflationary effect. Such a move could spark further movement in forex trading against the USD, and possibly towards the Aussie.
It is important to see how a GDP announcement and other economic news can influence a currency pair. You can keep track of all the latest forex trading developments with IG Markets. They provide a dedicated forex focus, which keeps track of all the recent movement in the major currency pairs, as well as an extensive collection of analysis and frequent market updates.

The Pros and Cons of a Weak Euro

The lingering Eurozone crisis has brought with it a decline in the value of the euro vs. the U.S. dollar. With the economic situation in Europe still shaky, the European Central Bank (ECB) has initiated a strategy of quantitative easing to spur growth. At the same time, problems in Greece have not gone away, and the new Greek government is threatening to exit the euro currency. All of these things are likely to keep the euro low for some time to come, and as with most things, there will be winners and losers in the U.S. economy. (See also, Will The ECB's Quantitative Easing Sink The Euro?)

The Winners Importers of European goods. Companies that use European parts as inputs will find their supply chains becoming more affordable. Transportation companies that purchase European cars and trucks will benefit by adding to their fleet at a reduced cost. Similarly, airlines that buy their planes from Airbus or other European aircraft manufacturers will do so at better-than-usual prices. This can help boost profit margins for these firms. U.S. consumers. American consumers will find that imported consumables, such as fine wines and cheeses from France and Italy, have become more affordable. German cars, including Audi, Mercedes Benz, BMW, and Volkswagen, will all become less expensive at showrooms in the U.S. Investors in European companies that do big business in the U.S.

American investors are able to buy shares of foreign companies through ADRs which are listed on U.S. stock exchanges. European ADRs of companies that have a large presence in the U.S. may benefit by increasing sales here. Bayer, the German producer of over-the-counter drugs, reports that a 1% depreciation of the euro could increase company sales by €260 million. Airbus could see a $1 billion boost in profits for every 0.10 decline in the euro, and chemical manufacturer BASF forecasts an extra €50 million in earnings for every one cent the euro drops.