Greenback Bull Traders never give up, do they?

A lack of substantial economic data and an abundance of geopolitical turmoil sent the Euro lower during the Asian session and into the early European session. The escalation of tensions in the Middle East between Lebanon and Israel drove up the price of crude oil over $78 a barrel, creating especially choppy conditions for the European currency. Italian CPI data fell in line with expectations at 0.1% in June while the annual rate remained at 2.3%. New car registrations declined 4.1% in June from May’s 9.6% increase, as rises in gasoline prices kept drivers away from the road. Euro-zone data on the agenda for next week includes CPI, industrial production, trade balance, and the ZEW economic survey, which is sure to give some insight into how the European Central Bank will act when they meet on August 3rd. As of 8:38 GMT, the EUR/USD trades at 1.2667, down from Thursday’s New York close of 1.2688. The decline is looking rather tired on the hourly chart as evidenced by bullish divergence among oscillators and price. Still, the possibility does remain that EUR/USD slips a bit lower to test the 61.8% fibonacci retracement of 1.2481-1.2859 at 1.2625. Additional support would be at the 78.6% fibonacci line at 1.2562. If the reversal scenario plays out, then resistance is at a resisting trendline near 1.2700 with a break higher exposing yesterday’s high at 1.2730. Also, this next leg up would be a 3rd wave rally – which is often fast and furious. An impulsive move higher could stall at the confluence of the 61.8% fibo of 1.2859-1.2647 / 7/12 high at 1.2777/79.

For the dollar, consumers continued to curtail their spending last month as rising gasoline prices dampened purchases of other goods, a fresh indication of a cooling economy. The cutback unexpectedly pushed retail sales to -0.1% after edging up by the same amount in May and Retail Sales Excluding gasoline sales, June retail sales was reported with a -0.2%. Escalating violence in the Middle East, with Israel widening its offensive in Lebanon on Friday, carried oil to a new high of more than $78 a barrel in European markets amid concerns over possible supply disruptions. Concerns from a survey from the University Of Michigan Consumer Confidence eased to 83.0 in July versus 84.9 in the previous month. Economists' consensus were 85.0. This is a fact that we know high gasoline prices and interest rates are causing consumers to restrict their spending for the 'rainy' days to come...

For some of my readers, you might've been noticed that I've been quite negative on USD... in fact quite a lot. I have my reasons why and I'm going to state it now today and I apologize for the skip in updating my blog yesterday.

Here are my reasons,

Firstly, according to the fundamentals collected through this months, it's so certain that the economic growth in the US is definately slowing. Despite that, interest rates has not failed to pause even it was expecting back in April when Fed Reserve Chairman Ben Bernanke speaks. 3 months passed and no pause is sighted. So as the current view of it, the US economy is starting to bleed, how bad it would be will left to be seen in future as I've mentioned before, an interest rate hike doesn't take effect immediately on the next month after the hike, but mostly results will only be seen after 6 months and furthermore, we're judging the inflationary data based on previous month's performance... I'm seeing the Fed to definately overshoot if the interest rates reached 5.50% in July. As another reason of why I see things differently from the market last Friday as Non-Farm Payroll reports were much much lower below the consensus and Average hourly earnings was higher than expected, I have my own analysis for that. NFP fell, unemployment increases... which indirectly means small/medium sized company are not hiring more staff to minimize expenses, so with the limited staff in the workplace and more work to be done (e.g. 1 man has to do 2 person's job, get the idea?) and the employer would gladly increase your salary/earnings by a minimal percentage as an encouragement or motivation just to make you do more work... just that simple. As for the retail sales today, I've made my analysis the previous day but failed to paste it here but here it goes... Companies refuse to employ and those who're still employed (they lucky ones...) had their earning's increased, good news for the economy and the dollar? Think again. If I am the lucky employee that happens to be still employed, and got my earnings increased, I would definately NOT increase my spending expenditure and probably cut them more than usual. Why? I see unemployment rising, high interest rates and probably higher weeks ahead, times are hard and I would definately want to save more money for tougher times ahead. How could the retail sales not dropped as people refuse to spend more? And just for information, retails sales contribute to 2/3 of consumer spending in the country. So how good could it be for the US economy then...

If you have your own analysis, I would be more than happy to hear from you and it would be great to exchange ideas as I'm still a newbie in this world. You could contact me at gohrayson@yahoo.com through email or Yahoo Messenger.

I've not made a single new trade for the whole week for my live account and I'm still hedging using USD/CHF and EUR/USD. I tried to break some rules today by placing a trade for gold at $666.00. Unfortunately, it was there and I ran out of margin to place a new trade. What a luck... My demo account has been more than terrible as I've went in the EUR/USD at the wrong price and scalping the market needs incredible precision in price marking. That one mistake caused me $100 grand. I'm looking forward to make a significant recovery on my demo account next week as more Euro data will be released that will influence the ECB on interest rate hike on August 8th.

Gold rose to a six-week high as investors bought the metal as a haven and a hedge against inflation, after escalating violence in the Middle East pushed crude oil to a record. Gold has jumped 8.4 percent this month, after falling in May and June, as bombings in India and North Korea's missile tests led to increased demand for the precious metal. Gold and Treasuries rallied and global equity markets declined as investors sought safety for their money. Israel's air force struck targets in Lebanon for a third day. I'm expecting gold to linger around 660 zone for a while in Monday before it takes another big leg up. I see the precious metal getting stronger everyday and makes me regretting that I should've taken the XAU/USD trade at 630 level back then and I had sufficient margin to make that trade then. Hopes I would be in a better position next week.

US Trade Deficit Widened... USD Positive?

The much anticipated US Trade Balance which printed slightly better then expected at $63.8b vs. $64.9b, gave a sleepy market a quick jolt. The deviation from expectations was caused by a record amount of exports from US companies which offset imported higher energy costs. Traders were quick to view this figure as USD positive, buying the greenback against the majors across the board. Within this volatile figure, USD bulls see demand abroad offsetting slowing economic growth at home. However, in the end we still have a US burdened with a massive twin deficit which today’s -$63.8 shortfall just increased. Eventually the US and speculators will have to come it terms with this structural imbalance. How the heck traders interpret this as a dollar positive? Seems that traders have run out of reasons to support the greenback, with even higher deficit but better than consensus they are interpreting as positive USD. Can't wait till TIC data is release... then hopefully by then traders will see again that LOW TIC (Foreign Investment) again be interpreted as bullish USD. The the market will move purely based on bias, not interest rates or growth issue any longer.

I've not taken any trades for my live or demo account without much movements today and I wasn't in front of my pc to keep things up to date for me so I forbid myself to make any new trades.

However, for gold prices I've recently made a new analysis and this time I'm pretty confident on it. For the past few days (including last week), USD has been pretty strong with expectations from higher interest rates and political instabilities. Risk-averse traders naturally opted for the 'strongest' currency in the world, the greenback. Major crosses against the greenback dropped, particularly EUR/USD. But when the North Korea, political instability occurred, gold prices took immediate reaction before the greenback, although the price later returned to the lower state of the day as investors are shifting their funds to the greenback in case of war between Korea and the US. It was then risked-out that the possibility of war which then AGAIN the funds were moved back into gold, supporting the price. Therefore, the gold prices has regain strength and probably from the hardcore-gold investors that previously pushed XAU/USD to $726.00 level. I've read the hourly priced movements and noticed that XAU/USD has a supporting strength against the greenback for the past few times during economic data releases and today with US Trade Balance which was interpreted as USD positive. It hardly budge the dollar and it still maintained a positive value for the commodities.

From the current situation is analysed, US can't afford even 1 single worst than expected infaltionary data that could possibly diminish the expectations from inflation-traders. For every single bad USD data is released, XAU/USD (Gold) will gain to higher grounds possibly reaching the year-high at $725. Which will then I believe another profit taking session will be done and gold retracement back to 690-700 range. EUR/USD will certainly benefit from the poor USD data but the power to sustain the prices if fairly weak compared to NZD/USD and AUD/USD due to the country's strong gold production supporting the economy. It's been under my observation too that NZD/USD was influenced by the strong dollar quite a lot last week, but the retracement back up is extremely swift and I'm amazed for the first time the correlation between gold and New Zealand Dollar.

Gold would be the perfect investment for the time being for risk-takers. But do trade with caution and buy at preferably good prices between $630-$640 range is still acceptable.

No-Action Tuesday.... *yawn*

Prices have been in range trading the whole day without much of movements within 1.2700 and 1.2700 and 1.2760 for EUR/USD. For USD/CHF, it's just exactly a mirror image of EUR/USD which I've been using to hedge all my trades all this while. Japan Consumer Confidence fell to 47.2 from 49.8 in May as the benchmark Nikkei 225 Stock Average sank to a seven-month low and rising fuel prices eroded spending power. A reading below 50 means pessimists outnumber optimists. A median of six economists surveyed by Bloomberg News was for confidence to drop to 49.1. Meanwhile German WPI (Wholesale Price Index) advanced at their strongest pace in 5-1/2 years in June, as the cost of metals, fuels and tobacco rose and French Trade Balance deficit has narrowed to -1.8 billion euros, from a revised -2.0 billion in April. Basically all of this don't really mean a thing now for the market as these are not the main concentration for the traders. Without USD data today, I couldn't expect much and just sitting in front of the pc monitoring the price movements. While I forgot to mention for the past few days, XAU/USD or gold has remained firm throughout the USD 'retaliation' against the Euro. XAU/USD has done very well to maintain the price at 630 level and I could see it could possibly hit the sky if USD shows weak data. NZD/USD and AUD/USD has shown quite some strength against the dollar since the country's economy ( Australia is the second largest gold producer on Earth and New Zealand's economy is tightly correlated with Australia's). The main focus will be US Trade Balance due tomorrow, Retail Sales and Michigan Confidence for the month of June, due this Friday. I'm hoping for the best for the coming days ahead and hopefully if I'm not wrong, Euro will be back on the bullish side. Not expecting USD to comeback yet, at least not now. I'm prepared to take a high leverage trade for my live account at 1.2780 trying out my high leverage system. My demo account meanwhile is still stuck with 1.2810 EUR/USD trade. Hoping I could close it with a slight profit or minor loss. I'm paying a heck of $440 bucks a day just for interest rates. These leeches are sucking me dry!

USD tries to get back on track... Consolidation period maybe?

With the thin data on the calendar today, not much of action is seen throughout the market for EUR/USD and USD/CHF during the Asian Session and the early London session. I guess it's the left over mixed feeling over traders on whether they should persue for the bull USD or bull EUR. They made their decision, and the greenback bulls won.

The German Trade Balance and the French Industrial Production for the month of May came out positive and supportive to the 12-nation currency as German trade Balance reported a higher surplus of 12.9B vs. 11.2B the previous month. Consensus was 11.5B. Industrial production in France, Europe's third-biggest economy, rose the most in six months in May as exports gained and lower unemployment helped fuel domestic spending. Factories, utilities and mines raised production by 2.0 percent from April, when it fell 1.4 percent, Paris-based national statistics office, Insee, said today. Economists expected a gain of 1.3 percent, according to the median of 28 estimates in a Bloomberg News survey.

All of these don't really matter as investors and traders are not back into expectations of another 25 bps hike from the Fed this coming August. Inventories at U.S. wholesalers grew a stronger-than-expected 0.8 percent in May as higher stocks of petroleum and professional equipment offset leaner automotive inventories, a government report showed today earlier.

I'm not ruling out the possibility or another hike from the Federal Reserve but chances are unlike. Few of the aspects that we should consider now and keep our attention on will be the CPI, core CPI, GDP, Trade Balance, and Employment status for the country for further inflation signals. Technically for the current view, EUR/USD is still well supported at 1.2700 and a breach below that would be further drop in Euro. We'll be seeing more gain in the USD as traders is being bullish on USD now with intereal rates in talk. One way to kill those day-dreamers would be weaker economic data report in the US signalling slower growth as the Fed is finally giving consideration on this issue. Range trading is a high probability for this week with plenty of Euro data and hopefully positive ones are able to withstand the bullish USD until we see some weakness. I took profit on my EUR/USD 1.2770 trade with only 5 pips profit earlier since I saw the drop would be aggresive. No point holding a negative trade since I could take it once again if Euro comes back up.

For my demo, I was trapped once again buying at 1.2810 with 8.9 million units. I'll not consider taking any losses for the pair at the moment as this week we'll see plenty of Euro data and possibly being supportive enough to push the 12-nation currency back up. It's been quite a hectic day considering the thin data release on Monday.

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Existing Trades
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Long EUR/USD @ 1.2820

Long EUR/USD @ 1.2960

Long USD/CHF @ 1.2480

Long USD/CHF @ 1.2501

Long USD/CHF @ 1.2520