Forex Trading TV Video Blog

As we begin the last week of January, investors will look to recoup from last week’s volatility. Last week saw a host of important economic data, which would have contributed considerable volatility to the market on its own; however unexpected news was the main focus for traders. Firstly came Fed Chairman Ben Bernanke’s unprecedented and unexpected rate cut of 75bp last Tuesday, this news took the downward slide in the dollar and Dow and reversed the trend. Secondly, was the news regarding fraudulent activity at French firm Societe Generale, which suffered a detrimental case of employee trading fraud upwards of 7 billion Dollars. The market responded in turn showing turbulent movement to end the weeks trading.

This week should continue to produce volatile conditions as a plethora of significant data is to be released. Non-Farm payrolls, GDP, core durable goods, ISM and manufacturing numbers are all on tap. There is also continued speculation that Wednesday’s scheduled interest rate statement will see another 50bp rate drop, in another effort to ease the falling US economy.

Today’s calendar from the US will see New Home Sales released at 15:00 GMT. As the housing market has been one of the main catalysts in American financial woes, it is no surprise that New Home Sales is expected to fall yet again. Forecast’s have the number dropping from 647K to 640K, its lowest mark in over 12 years.

As the US government slowly initiates their new stimulus plan, expect the dollar to continue to disappoint against its major counterparts, before Wednesday’s expected rate cut.

The USD continued to take a hit yesterday as the unexpected rate cut by the Fed led to a big gain for commodity currencies. The U.S. dollar hit the 1.47 level against the EUR and last traded at 1.4760. An improvement in investors’ appetite for risk pushed the USD down vs. the high-yielding currencies such as the GBP and CAD.

Yesterday, the greenback fell against the EUR as strong German business confidence data and tough inflation comments by the ECB official dashed hopes for the next interest rate cut in the Euro zone. The USD is also pressured by the widening interest rate disadvantage after the recent “emergency” interstate rate cut. Expectations for rate cuts at the next weeks’ FOMC meeting are diminishing noticeably. The contracts are now estimating less than a 75% chance of a cut of 50bp next week. As a result, the dollar has rebounded against the JPY and given back some of its risk aversion related gains against all of the other major currencies. As for the fundamental data, yesterday, there was little reaction to a report showing that the pace of Existing Home Sales in the U.S. fell by 2.2% in December. That confirmed market perceptions that the housing market turmoil, which is threatening to push the economy into a recession, is far from over.

Also, yesterday’s economic indicator released by the Labor Department reflected a slowdown in the rate of unemployment, but didn’t help to move the market mainly because of weak Existing Home Sales figure. The U.S. House Prices also fell 1.8% which was the 1st annual decline on record.

Today, there is no economic data expected to be released from the U.S. markets. It is most likely that the prices will vary within the range of the current price corridor.