Dollar Mixed as Traders Wait for Economic Data

With the Bernanke news a non-event, traders will be watching the Case-Shiller Housing Report and the Conference Board’s Consumer Confidence figure for direction. The Case-Shiller Report is expected to show a decline of 16.4%.

With the Bernanke news a non-event, traders will be watching the Case-Shiller Housing Report and the Conference Board’s Consumer Confidence figure for direction. The Case-Shiller Report is expected to show a decline of 16.4%. This number would be the smallest drop in almost a year. Despite recent negative economic reports, traders have been buying equities when negative news ends up better than expected. Traders somehow feel contractions less than forecast are bullish signs. Investors will also be watching the Conference Board’s Consumer Confidence figure. This report is expected to show that consumer confidence rose for the first time in 3 months.

The Consumer Confidence figure should be the market mover today. Recent activity by the consumer has been a major concern of equity traders recently. This was especially true of the last retail sales report. Consumers have cut back in spending because of the fear of job loss. If this trend continues then the pace of the economic recovery will be much slower than estimated. The “cash for clunkers” program encouraged consumer spending but also increased consumer debt. The Fed’s mortgage buyback program will be coming to an end in October so soon there will be little stimulus to help the consumer. Nonetheless, today’s report may show an increase in confidence, but this may have been triggered by the bullish stock market. If this number comes out worse than expected, look out below in the stock market.

Investors expect weaker than expected economic reports to be bullish for the Dollar. This is because so much emphasis is being put on the U.S. leading the world out of the current recession. Traders feel that if the U.S. economy is still faltering then the rest of the world should continue to experience weakness.

The EUR USD, GBP USD and USD CAD traders are currently focusing on the economies of their respective countries. This means that market direction will be dictated by how well each economy is doing. At this time the Euro is getting a boost from better than expected growth in France and Germany. The British Pound is feeling pressure because of the widening budget deficit and the Bank of England’s expansion of its quantitative easing program. The Canadian Dollar is finding strength from an improving economy as evidenced by better than expected retail sales.

It seems the only two markets still finding support from demand for higher yielding assets is the AUD USD and NZD USD. This could come to a screeching halt if equity markets begin to sell-off.

The Japanese Yen could also benefit if the stock market begins to weaken. Traders will once again trigger a rally because of the unwinding of the carry trade.

James A. Hyerczyk has been actively involved in the futures markets since 1982. He has worked in various capacities within the futures industry from technical analyst to commodity trading advisor. Using W. D. Gann Theory as his core methodology, Mr. Hyerczyk incorporates combinations of pattern, price and time to develop his daily, weekly and monthly analysis. His firm, J.A.H. Research and Trading publishes The Forex Pattern Price Time Report... More

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