Technical Analysis

This is the trade review for my Euro and Swissy trade.

The dollar made yet another push against the majors as the Trade Balance came out higher than expected today. November’s trade balance narrowed to -$58.2B from $58.8B in October which was better than the consensus of -$60.0B.

This is the trade review for my Cable and Yen trade.

The dollar made a small rally against the majors today after crude fell to $55.64/barrel. This is the lowest its been since 2005. When oil prices falls, we get cheaper gas. And when gas prices drop, it leaves more discretionary income for the consumers which theoretically means more consumer spending on other items. More consumer spending means better GDP and stronger economy.

This is the trade review for my Yen and Cable trade.

Hmm..so there isn’t much to report today since there were no major news events concerning the Dollar. However, an interesting thing to look it as the fact that the Dollar has pretty much gained back all of its losses it suffered during the Thanksgiving day fiasco. Can you say reversion to the mean?

This is the trade review for my Yen trade I posted on January 4, 2007

So the NFP Report came out much higher than expected on Friday and caused the Dollar to make a nice run against the majors. The consensus for the NFP was 100k which would’ve been a decline from the previous number of 132k. Instead, the NFP came in at 167k which is in fact, was 35k higher than last month’s number.

Since we’re starting a new year I thought I would start a public record for the “Pippin Ain’t Easy” blog. This first week was a good start as I was able to finish positive. Each week I will post a week in review so that we can keep track of our trades.

This is a recap of my trades that were posted on January 4, 2007

The ISM Non Manufacturing Index came in strong once again although it decreased slightly to 57.1 from 58.9 in November. However new orders fell almost 3 points to 54.4 and backlog orders fell 6.5 points to 48.0. This decrease may mean a slowdown in upcoming business activity but overall the numbers are still doing ok. Nothing to worry about yet!

If you like to read the headlines then you’ve probably come across something along the lines of “Dollar rallies as ISM index unexpectedly rose”. While I’m not denying the fact that the higher than expected ISM numbers caused the Dollar to surge today, I don’t know if you could say that it was the main cause.

So a happy new year to you all! Is it me or does it seem like each year just keep getting crazier and crazier? Constant fighting, increasing natural disasters, horrible accidents, and abnormally warm weather are just some of the weird things going on and you can bet that if these things continue at the rate they’re going, it will definitely have an impact on the currency market. Not to freak you out, but you wouldn’t be too far off if you said that “We have entered the twighlight zone.”

Ok so the news was positive across the board for the dollar and yet the buck doesn’t move against any of the majors. Existing Home Sales rose 0.6%, Chicago PMI came out at 52.4, and Consumer Confidence came in at 109.0. All 3 reports came out better than expected and yet the dollar still failed to make any gains. I’m not sure why that is, and I’m not really going to try and guess. The market is always right and sometimes it just doesn’t do what we would expect it to do.

So back to the currencies….The market moved in favor of the Dollar today as New Home Sales grew 3.4% to 1.047M units. The housing market has been dragging for a while now, so everyone is looking for some kind of sign that we are seeing a bottom in the real estate bust. This number gave enough fuel for the markets to push the Dollar up, especially since there weren’t any other major news reports to factor in today.

Ok maybe not but the Philly Fed Index did drop to -4.3 compared to last month’s index which was at 5.1. This was much lower than the expected 3.0 figure that was forecasted and shows that the manufacturing sector is still softening. Recall that the Empire index was relatively flat, and even though it’s usually firmer than the Philly Index, this is a wider than normal difference between the 2 reports. However, if you look at the entire picture, it actually makes sense that the manufacturing sector is decreasing.

Me and the Yen just haven’t been good friends lately. It teases me all the time and then turns its head away from me just as I think we’re about to connect with each other. Once again, the Yen had shown plenty of signs that it was going to gain against the dollar but unfortunately, with traders’ expectations for the BOJ to raise rates weakening, the Yen fell and went against my trade.

Well the technicals had been screaming for the dollar to drop and finally with the positive German IFO numbers, the market got just the catalyst they needed to sell off their dollars. The German IFO index was forecasted to come in at 107 but came out at 108.7, which was a nice jump from its previous number of 106.8. The German IFO index is similar to the US Empire Index because it surveys several countries and asks them to assess their business situations and their expectations for the next 6 months.

So what did we learn last week? We learned that inflation is flat, but at the same time we are still seeing signs of a healthy economy thanks to the American consumers. Bolstered by the business of the holidays, consumers are rampantly spending their cash on gifts for their loved ones, effectively boosting retail sales. And when consumer sales are up, expect prices to go up with it. So while CPI last week showed flat inflation, I don’t expect the next ones to be so tame.

The Dollar made yet another rally as Treasury International Capital unexpectedly rose to $82.3B in November from a revised $70.2B in September. This was way above the $65.0B consensus. This increase shows that foreigners’ investments in the US are rising which is basically good for the US since we need their investments to finance our debt. The biggest gains in foreign investments were in treasuries and equities. Their equities investments should add enough fuel to the fire for a year-end rally in the stock market. So why the sudden interest by foreigners for US securities? Well we’ve seen a narrower trade gap, narrower government debt, and high tax receipts which all make the foreigners’ eyeballs fill with $$$.