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Market Review:
New Month- New Sentiment
In the daily market review with TheLFB trade team, Dan Cook, Snr Market Analyst at IG Markets, looks at the impact of positive economics on three major pairs. Catch Dan, and TheLFB trade team on ForexTV Live.
EUR/USD – The Euro has started off February by reclaiming some of the ground lost to the US Dollar over the last several weeks. There was some positive news out of Europe when it was reported the Final Manufacturing PMI for the Euro area came in slightly better than expected at 52.4. This report however, typically has a pretty small effect on the market and so far it appears that this most recent move may just be a simple correction of previous losses.
As of this writing the Euro has only taken back about 50% of the value lost to the Dollar on Friday alone and much of the impetus for this move appears to be the technical double bottom put in near the 1.3850 level. Later this week, the European Central Bank will be releasing their monetary policy report which will include any changes to the Minimum Bid Rate. Well before then, it should become clear whether the price action we are seeing today is the first shift toward Euro bias in February, or whether this was just a simple correction in the overall down trend we saw in January.
GBP/USD – Sterling seemed to ignore what overall were pretty positive fundamentals in the UK today and slid against the Dollar during the first half of the London trading session. Net Lending to Individuals remained unchanged at 1.2 Billion Pounds and British Mortgage Approvals slipped by 1K, but the dominant report, UK Manufacturing PMI surged to a reading of 56.7 from a revised previous reading of 54.6. Perhaps it just took traders a little while to digest this news and determine that this data should be Pound positive though, as the last few hours have seen Sterling rally to reclaim 61.8% of the ground lost since trading resumed in February.
This recent bounce came as the GBP/USD came within 20 pips of the low mark of 1.5833put in on December 30, 2009 and it may just be that this is the “line in the sand” that Sterling Bulls do not want to see crossed. The Bank of England later this week will also release their rate and monetary policy decision which could provide some bumpy trading as the week moves forward.
AUD/USD – The Aussie and US Dollars have had a volatile start to the trading week and month. After a gap down of about 40 from weekend close to open, the Aussie shot up on a very positive AIG Manufacturing Index figure that improved to an expansionary reading of 51.0 and an MI Inflation gauge that showed 0.8% growth. Mixed fundamentals stalled the early rally however, with a positive Australian Home Price Index of 5.2% offset by a -4.6% reading in the HIA New Homes Sales data and a contraction of 8.1% in the Australia and New Zealand Banking Groups Job Advertisements report.
Also not helping the Aussie was a Chinese Manufacturing PMI reading that slipped to 55.8 from 56.6. Once again though, technicals came into play and after a double bottom near 0.8790 the AUD has rallied lately and seems to be gaining momentum as energy and metals commodities gain across the board. All in all though, there has been a great deal of price fluctuation so far, only to remain within a few pips of last Friday’s close.