U.S. Dollar Holds Onto Gains Despite Data

Last updated 11/19/2009 10:28 AM ET (GMT -5) 0 Comments - Add your comment

Forex Trading involves high risks, with the potential for substantial losses and is not suitable for all persons. Past performance is not necessarily indicative of future results.

Kathy Lien

Director of Currency Research, GFT

Risk aversion is the theme of the day with stocks down more than 100 points and the dollar up against nearly all of the major currencies. It has been a busy morning with a flurry of economic data and Treasury Secretary Geithner speaking on the hill. Jobless claims were virtually unchanged at 505k but continuing claims rose to 5.611M. The labor market is still the primary sore point of the U.S. economy and based upon the latest reports, it hasn't improved significantly. Many traders may be focusing on the 500k mark in claims and ready to celebrate when weekly claims fall below those levels. However as we pointed out last week, we are pretty much there and even though a break below 500k will feel significant to some traders, it will not make the growing population of unemployed Americans feel any better.

Meanwhile despite a drop in the Empire State Manufacturing survey earlier this month, the Philadelphia Fed survey rose from 11.5 to 16.7. The details of the report indicate that improvements were seen in 6 out of 9 underlying components. This suggests that the slowdown in the manufacturing sector recovery may not be as widespread as previously thought. Finally, leading indicators grew for the seventh consecutive month. However the 0.3 percent rise was right in line with expectations but weaker than the 1.0 percent growth seen last month. According to the Conference Board, the positive contributors – beginning with the largest positive contributor – were the interest rate spread, average weekly initial claims for unemployment insurance (inverted), stock prices, average weekly manufacturing hours, real money supply and manufacturers’ new orders for consumer goods and materials. The negative contributors – beginning with the largest negative contributor – were index of consumer expectations, building permits, index of supplier deliveries (vendor performance), and manufacturers’ new orders for nondefense capital goods.

The mixed economic reports only had a marginal impact on the U.S. dollar and so far Treasury Secretary Geithner is primarily talking about financial reform. He did mention that the U.S. economy is in recovery mode and growth should improve over the next few quarters. Watch out for any comments on the dollar. However what triggered the meltdown today came from China and fears over the real estate bubble. Therefore a turnaround in the markets is unlikely. The biggest mover was the NZD/USD which was hit by Labour opposition that has withdrawn its support for an inflation targeting and its impact on the NZD and exports.

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About The Author

Kathy Lien began her FX trading career 10 years ago at J.P. Morgan Chase. After graduating New York University’s Leonard Stern School of Business at the age of 18, Kathy joined the bank's interbank FX trading desk and eventually moved to the cross markets proprietary trading desk. In the interbank market, her ability to create solid fundamental and technical analysis from the myriad of information on the market helped her trade forex spot and options. Her experience eventually led her to be chief strategist at Daily FX where she worked until she joined GFT in 2008.

With her knowledge of forex, as well as her experience trading other products, such as interest rate derivates, bonds, equities, and futures, Lien has built a reputation as an international currency analyst. She is frequently quoted on CNBC, Bloomberg, Fox Business and Reuters. Lien has also written for publications like Active Trader, Futures, and SFO magazine. She is the author of the newly updated Day Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Boris Schlossberg.

To buy Kathy’s newly updated Day Trading and Swing Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, click here.