Consumer Diffidence

Yesterday was an ordinary day without much events. Even the Dow and S&P indices felt this big nothing and moved about 0% (yes, zero) and 0.01%, respectively.

Today the consumer confidence report is due today, and it will a good gauge for economic activity. Without confidence, there are less consumers and the future doesn't look bright, as consumers make 2/3 of the US GDP.

Tomorrow is the big day with the announcement of the new interest rate. Bernanke will have to choose between restraining inflation and raising rates and avoiding a recession and lowering (or keeping) rates. Tomorrow at 2:15pm EDT, don't miss.

The dollar got stronger yesterday, rising against most major currencies. Like always, Forex Funnel managed to extract $100 out of the market. Let's see what happens tomorrow, after the interest rate announcement.

Good luck with your trades,
Nadav

nadavs

The Week Ahead: Last Week of June

June is about to end, but economic data is just getting more and more interesting. First, tomorrow is the consumer confidence and new home sales, which will show whether the economy is going for a recession or there is still some growth.

Wednesday is the big day. Ben Bernanke will announce the Fed interest rate, and will affect many prices: oil, stocks, the dollar, and others. Watch out for those, stay out of the market if you cannot handle high volatility.

Thursday will bring the final first quarter GDP, which is the ultimate gauge for recession. On Friday we will see another measure of inflation, and if it's high, expect high volatility as well.

Have a great week,
Nadav

nadavs

Good for Forex, Good for Stocks

Yesterday's CPI figure taught us two important lessons. The first one is that good sales numbers usually come with a higher inflation. The other lesson is that every market interprets data differently. The two markets in this story are the forex market and the stock market.

First, the expected CPI was +0.5%, which is not a small increase. However, the real CPI came out to be +0.6%. Usually, such a small difference does not make such a big impact. However, due to the upcoming Fed meeting, this number is very important.

The stock market reacted with joy to the fact that the Fed is not going to raise the interest rates, as many feared. The S&P index went up by 1.5%, the Dow jumped 1.37%, and the Nasdaq surged over 2%, probably do to the Yahoo-Google agreement.

On the other hand, the dollar rose against all major currencies. The reason for this rise is the completely eliminated risk that the Fed is going to lower interest rates. Inflation is too high, so the Fed can't lower the interest rate and boost inflation. Forex Tracer managed to pull out two quick trades out of this fall in EUR/USD.

As you can see, different market interpret the same data differently. As a trader, you need to know which way to trade on different news, or not trade at all during that times. Know your market and know your pairs.

Have a great weekend,
Nadav

nadavs

Bernanke, Recession, and Inflation

Yesterday Bernanke gave a speech about the United States economy. In his speech, he mentioned several very important pieces of information for forex traders, including information about a recession and the inflation.

First, Bernanke talked about the potential recession. He said he knows that the recent job report and oil prices are very unwelcome, but the fear of recession should not be so big. The economy is starting to do better. This gave the dollar a little boost, but not as his inflation speech.

After mentioning the recession, Bernanke started talking about inflation. He said that if consumers and business owners expect inflation, they will behave in such a way that accelerates inflation, so it becomes a self-fulfilling prophecy. Then he warned that if inflation does stay at safe levels, the Fed may have to raise interest rates. This led the dollar to jump, the EUR/USD rate fell, and Forex Tracer managed to get a nice boost out of it.

Today's only interesting report in the US is the trade balance, something Bush managed to ruin. Let's see how bad it will be this time.

Good luck with your trades,
Nadav

nadavs

The Week Ahead: Second Week of June

The forex market opened yesterday with a rise of the EUR/USD to over 1.5760 (Forex Tracer managed to make another $390 off that move). Asian traders did not calm down from the disappointing job report and made the dollar dive.

Ahead of us is a week full of information with two major indicators: retail sales and the CPI. The retail sales indicator tells how much retail sales have grown over the last month, and it is a good indicator of consumer spending. High retail sales means consumers are spending more, and so expanding the economy. A negative figure tells that consumers spent less last month than two months ago. It's not that great, but as long as it doesn't continue, it's fine.

The CPI is the number everyone waits for. It stands for Consumer Price Index, and it measures the change in price of certain goods and services. This number is very important because it is a gauge for inflation. This month it's extremely important, because of May's job report. If the number is negative, it can signal about an upcoming recession. If it's near-flat, it means prices have not risen too much. If it's high, it can signal an upcoming stagflation, a combination of stagnation and inflation. Those two economic situations should cancel each other, but when they show up together, they are really hard to recover from. Beware of the bears.

Have a great week,
Nadav

nadavs