Forex: Positive U.S. Data to Fuel Risk Appetite

Last updated 11/25/2009 8:59 AM ET (GMT -5) 2 Comments

Kathy Lien

Director of Currency Research, GFT

Note: 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 futures results.

The first round of U.S. economic data this morning helped to support the rally in risk currencies. The EUR/USD has finally taken out the key 1.50 level which should not be surprising for our readers since we said throughout the week that a break is imminent. We continue to believe that the U.S. dollar could fall another 5 to 7 percent (more like 4 to 6 percent at this point) over the next few months.

The big surprise this morning was the sharp decline in jobless claims. For the week of Nov 21st, 466k Americans filed for unemployment benefits, the lowest level since Sept 2008. Continuing claims also dropped to the lowest since February which signals that job losses continue to moderate. Yet there are still alot of vulnerabilities in the U.S. labor market. Earlier this month, companies like AOL, Sprint and Electronic Arts continued to dole out pink slips. If Black Friday and the holiday shopping season as a whole proves to be weak, more retailers may be forced to close stores, which could translate into even more layoffs. Part of the improvement in continuing claims is undoubtedly tied to benefits expiring. Also, for the swelling population of unemployed, finding new work remains very difficult. The takeaway is that jobless claims have improved but traders should not get overly excited by the latest numbers.

The personal income, personal spending and core PCE figures all beat expectations which is line with the stronger retail sales figures earlier this month. Durable goods dropped 0.6 percent and if you exclude orders for transportation products, they dropped by a larger 1.3 percent. Orders for defense, computer and electronic products took the biggest hit but even though the data was very weak, the negative sentiment was offset by the 1 percent upward revision to the September data. Durable goods orders can also be very volatile and therefore the market has downplayed its significance.

Comments (2)

Mike

November 25, 2009 at 11:52 AM ET

Hello,

Can you please write an article or give some good links about risk appetite, when Risk apetite occurs ,why and who are these actors ? Thanks

I'am still a EURUSD bear i think it will go down back to 1.4900 by end of the week

and the VIX index find today support at 20 level



Mike

FXDragon

November 25, 2009 at 11:55 AM ET

Hello,
You said before that "when us economy recovers, dollar will trade on fundamentals." When was the last time dollar traded on fundamentals and why was it that way?

Thank you,

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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.