Daily FX Trading Updates: 25 EU Banks Fail Stress Tests – Oct 27, 2014

Daily FX Trading Updates: 25 EU Banks Fail Stress Tests - Oct 27, 2014

The US dollar gave back some of its recent FX trading gains on Friday as data from the US economy came in weaker than expected. New home sales came in at 467K, short of the 473K consensus, while the previous month’s reading was downgraded to 466K. Pending home sales data is due today and a 1.1% rebound is eyed to follow the previous month’s 1.0% decline. Weaker than expected figures might cause another round of dollar selling.

The euro made a bit of a recovery on Friday, as traders booked FX trading profits ahead of the release of the euro zone banking stress test results. As it turned out, 25 out of 123 banks failed the test, mostly in Italy. This indicates that some banks have a few months to come up with the necessary funds to cover their shortfall or else run the risk of failing if a recession takes hold. German GfK consumer climate ticked up from 8.4 to 8.5 instead of falling to 8.1, providing a bit of hope for the consumer sector in euro zone’s largest economy. German Ifo business climate is due today and a dip from 104.7 to 104.6 is expected.

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The pound also made a strong bounce at the end of the FX trading week, as the preliminary UK GDP reading came in line with expectations of 0.7% growth. To top it off, the previos quarter’s reading was upgraded to show a 0.9% expansion. UK CBI realized sales is due today and it might show a drop from 31 to 29, which might be taken negatively by the pound.

The franc recovered to the dollar last week, despite the lack of top-tier data from Switzerland. There are still no reports due from the country today, leaving traders to focus mostly on euro zone data and its potential effect on the Swiss economy and SNB monetary policy. Risk sentiment might also be a key mover for the franc pairs today.

The yen lost FX trading ground on Friday, as BOJ Governor Kuroda admitted that there might be need for more easing should the economy fail to meet its inflation target. He pointed out that falling energy and commodity prices might drag overall price levels back below 1%, farther away from their 2% goal. There are no reports due from Japan today, which suggests that this shift in BOJ stance might keep pushing the yen lower.

The comdolls were unable to take much advantage of dollar weakness on Friday, as AUDUSD consolidated while NZDUSD gave up more ground. There were no reports released from these economies then and there are no major ones on tap for today, indicating that risk sentiment might be the big mover for these currencies.

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.