ForexNewsNow Daily Market Outlook for February 10th, 2011

NEW YORK (Forex News Now) – Daily Market Overview – The U.S. Dollar turned in a mixed performance on Wednesday, as reported in the daily forex news. The Greenback rose against the Australian, Canadian and New Zealand Dollars, while falling against the Euro and Sterling and ending the session unchanged against the Japanese Yen.

The U.S. Dollar initially lost ground on Wednesday after Fed Chairman Ben Bernanke made comments before the House Budget Committee to the effect that although the U.S. Unemployment Rate had dropped, it will still take several years for hiring to return to normal. Bernanke also stated that, “inflation is expected to persist below the levels that Federal Reserve policymakers have judged to be consistent” with their mandate. In addition, the Fed chairman defended the $600B QE II program to buy back government debt, a program that has drawn considerable criticism for potentially igniting inflation.

In other news, the Australian Dollar was negatively affected by the employment report that came out of Australia yesterday. Despite initially appearing favorable, this key report for the Aussie disappointed the market due to most of the increase in jobs coming from part time employment while full time jobs fell.

February 9^th Important Economic Developments:

1. Fed Chair Bernanke’s Testimony – Chairman Ben Bernanke testified in Washington D.C. before the House of Representatives’ Budget Committee on the topics of monetary and fiscal policy and the U.S. economic outlook. This testimony began with Bernanke reading a prepared statement, the text of which now appears on the Fed’s website. In his comments, Bernanke expressed concerns over the weak U.S. employment picture and the continued risk of deflation. He also defended the Fed’s QE II asset purchase program.
2. Australian Employment Report – The Australian Employment Change showed an increase of 24K in December versus an expected increase of 18.4K. Nevertheless, while the release appeared favorable initially, the increase was primarily in part time employment, which increased by 32K, while 8K full time jobs were actually lost. Also, the previous month’s considerably lower 2.3K result was revised downward to 1.8K. Furthermore, the Australian Unemployment Rate stayed steady at 5%, in line with analysts’ expectations. Intraday analysis shows that AUD/USD was trading at 1.0150 just before this report’s release and has thus far fallen over a big figure to 1.0031 in reaction to the news.
3. U.K. Trade Balance – The U.K. Trade Deficit widened significantly last month to -£9.2B compared to the expected -£8.6B. Nevertheless, the previous month’s result of -£8.7B was revised slightly higher to -£8.5B. Cable rose initially from the 1.6066 level to peak at 1.6099 on this result, but then came off as far as 1.6031 in the volatile post-release trading period.
4. Japanese Core Machinery Orders – This important leading indicator for the Japanese Yen let down a market that was expecting a rise of +5.2% by coming out at only +1.7%. Nevertheless, this was still an improvement over the previous month’s fall of -3.0% that remained unrevised. USD/JPY was trading at 82.33 immediately before the number, but the Yen subsequently weakened to its present 82.75 level on the market’s disappointment over the result.
5. U.S. Crude Oil Inventories – The level of U.S. oil inventories held by commercial enterprises fell again to 1.9 million barrels last week compared with higher expectations for 2.2 million and its former 2.6 million barrel level. Due to the importance of oil exports for the Canadian economy, the Canadian dollar initially firmed versus the Greenback on this news, although the Loonie gave back its gains later on in the day.

February 10^th Forex Events for Traders to Watch

1. ECB Monthly Bulletin – An important release for fundamental EUR/USD analysis, this report gives insight as to how the ECB’s Governing Board came to make their previous rate decision. The release includes a detailed analysis of the central bank’s outlook for future economic conditions in the Eurozone that ultimately affect currency market trading in EUR/USD.
2. U.K. Official Bank Rate and Asset Purchase Facility – The BOE will release its benchmark Official Cash Rate and Asset Purchase Facility later today that are expected to remain at 0.50% and £200B respectively. This month’s decision could surprise the market in light of recent U.K. inflation numbers and last month’s addition to Andrew Sentance’s dissenting vote to raise the OCR as MPC member Martin Weale joined him for the first time.
3. U.K. Manufacturing Production – This important economic number tends to affect the GBP/USD rate considerably upon its release since it represents an important leading indicator of the U.K.’s economic health. Manufacturing Production for January is currently expected to increase by +0.5% versus last month’s +0.6% result.
4. U.S. Initial Jobless Claims – An important indicator of U.S. employment health, Initial Jobless Claims measures the people who filed for unemployment during the previous week. This week’s number is expected to drop to 411K from 415K seen the previous week. A higher number usually adversely affects the U.S. Dollar.
5. The Price of Gold and Crude Oil – The price of gold has traded in a tight range between $1,355 and $1,365 for the past 36 hours, so a breakout in either direction could have a considerable effect on exchange rates involving the commodity currencies, and especially the Aussie. Crude oil has also dropped to $86 per barrel and a reversal to the upside may adversely affect the U.S. Dollar to the benefit of the Loonie. Purchasing a forex binary call option on the Canadian Dollar/put on the U.S. Dollar could be a limited risk means of profiting from such a reversal. For more information on how to use forex binary options to capitalize on expectations and predictions surrounding economic events, click here.