The Forex Daily Digest - June 11, 2009

The dollar found some strength yesterday, as U.S. stocks encouraged safe-haven flows into the greenback, helping to counterbalance foreign-exchange concerns over reports that Russia would cut its holding of U.S. Treasuries. Japan revised its January through March Gross Domestic Product number to a 3.8% decline, up from 4% drop.

The CAD destabilized a bit after stocks fell and the USD found some momentum accompanied by rising yields on 10-year Treasury notes and analyst conjecture that a rally in higher- yielding assets may end. Canada recorded a trade deficit of C$179 million ($163 million) during April. Economists forecast a surplus of C$1 billion. Meantime, the USD improved against the euro after a $19 billion auction of 10-year Treasuries.
Confidence in the world economy increased for a third consecutive month as U.S. payroll losses hit the brakes a bit and worldwide production improved, adding to signs the worst of the crisis is over, a Bloomberg survey of users on six continents showed.

The Bloomberg Professional Global Confidence Index increased to 43.57 in June from 38.72 in May, reaching the highest level since the survey began in November 2007. A reading below 50 means pessimists still outnumber optimists. The report said that the U.S. dollar may weaken in the next six months against the world’s most active currencies, with the index falling to 31.6 from 47.9 in May.

The markets took some solace in the U.S economic numbers reported on Wednesday. Traders examined the US deficit data. The April trade deficit was slightly higher than expectations, moving up to $29.16 billion, from an upwardly revised $28.5 billion from March. US exports slid to its lowest level in 3-years, falling by $2.2 billion to $121.1 billion, while imports fell by $2.2 billion to $150.3 billion. And the Fed’s Beige Book showed economic conditions in the 12 Fed districts either remained weak or worsened through May. The report reported that five districts acknowledged the downward trend beginning to show signs of moderating while some districts said there are promising signs that job losses may also be moderating.

Thursday is always the heaviest economic reporting day. Look for Initial Jobless Claims, the May’s Retail Sales figures, as well as the April Business Inventory numbers.

The JPY experienced losses against major currencies and higher-yielding assets as the global downturn appears to be easing a little, improving investor’s confidence to take riskier positions. The yen has suffered a number of session losses since the global recession gave its first signs of ending a few months ago. The JPY has been considered by traders as a safe haven for times of uncertainty and crisis, and the Yen lost most of the gains it posted during the worst moments of the crisis, in the final quarter of 2008.

The pound posted the fourth day of losses in a row against the USD as a severe political crisis gets even worse in Great Britain, where Prime Minister Gordon Brown’s Labor party is losing influence. And the dollar gained against the major currencies as speculation persists that the U. S. Government will raise its interest rates by the end of the year.

Optimism over a possible improvement in the global economic situation is definitely affecting the Forex market but some analysts believe it’s just too soon to call this recession history. But while Forex analysts and traders around the world continue to sift through the news, you can obtain daily pips by trading the current volatility.

Happy Trading –

James Dicks