Foreign Currency Exchange Fundamental Analysis – May 7, 2014

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Foreign Currency Exchange Fundamental Analysis - May 7, 2014

In today’s foreign currency exchange fundamental analysis, risk sentiment mostly dominated price action with the dollar recovering some of its latest losses. Recall that the Greenback gave up ground to most of its major counterparts right when the London session opened yesterday and risk appetite picked up.

US data came in line with expectations as the trade balance showed a 40.4 billion USD deficit, smaller than the previous 41.9 billion USD shortfall. US preliminary non-farm productivity and labor costs data are up for release today but the bigger mover could be Fed Chairperson Yellen’s speech in Congress. Bear in mind that there was no press conference following the relatively hawkish FOMC statement last week and that this could be the chance to hear more remarks from the Fed head.

The euro continued to climb to the dollar and the yen in recent foreign currency exchange trading sessions, as data from the euro zone reflected a bit of stability. Spanish unemployment change and services PMI showed strong results, along with a better than expected euro zone retail sales reading. Italian services PMI merely came in line with expectations. Euro zone data, namely German factory orders and French industrial production, both came in below expectations today. This sets the tone for a downbeat ECB statement tomorrow and might lead to early pricing in before the event.

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The pound jumped to new highs against the dollar when the UK services PMI printed stronger than expected results . The index jumped from 57.6 to 58.7, outpacing the consensus at 57.9. There are no major reports lined up from the UK today but the positive sentiment could keep the pound supported ahead of the BOE rate statement tomorrow.

The comdolls raked in the gains when risk appetite improved in recent foreign currency exchange trading sessions, pushing NZD/USD past the .8700 mark and USD/CAD to test its previous lows. Data from Canada was actually weaker than expected, as the Ivey PMI and trade balance both missed expectations. New Zealand’s quarterly jobs report was mixed, as the employment change reading ticked up by a stronger than expected 0.6% but the jobless rate held steady at 6.0%. Australia’s retail sales was weaker than expected with a mere 0.1% uptick. Canadian building permits are up for release later on.

The franc advanced to the dollar after a brief period of USD/CHF consolidation, as market sentiment improved in recent trading. Swiss employment level data and foreign currency reserves are up for release today, which might spark a bit of franc weakness if the data comes up short of expectations.

The Japanese yen fell victim to risk appetite in recent foreign currency exchange trading but managed to advance against the US dollar. There were no reports released from Japan yesterday since it was still a banking holiday in the country but traders are ready to return to their trading desks today. The BOJ monetary policy meeting minutes were released and revealed a relatively optimistic outlook for the Japanese economy, despite the sales tax hike.

To contact the reporter of the story: James Brennan at james@forexminute.com

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Samuel Rae is an active retail trader across a variety of assets, including currencies, stocks and commodities and the author of Diary of a Currency Trader (Harriman House). His personal strategy focuses primarily on classical technical charting patterns with a fundamentally supportive bias, combined with a strict, risk management-driven approach to entries and exits. He is an Economics graduate from Manchester University, UK.