Forex analysis: some alarming data

The vacation is over and we are about to enter a critical point in the life of this economic downturn. While all the players involved, from Central Bank figures to generic politicians spin the recovery story, alarming data keeps coming out that seeks to undermine this thought. 

The notion that all the data is bad is wrong, there are some signs of life though, particularly in Australia and parts of the EU, however it leaves us not with a sense of an imminent recovery, rather a feeling of a protracted one.  It seems from the news reports of this past weekend’s G20 meeting that the Central Bankers themselves have toned down their enthusiasm. Jean-Claude Trichet, the ECB President gave cautious words last week, highlighting the fact that in the towers of the powerful, uncertainty is prevalent.

The US itself is having a severe credibility issue. While their in-house economic analysts predict recovering unemployment and sales figures, the actual data is far off from their estimates.  Last week we saw what was expected to be a decline in unemployment result in an increase that has brought the US to near 10% levels – 9.6% to be exact – a 26 year high.  So we need to ask now what is really going on.  And I fear, as my skeptical self has for months, that the answer is elusive, no one really knows.

 By all accounts, the Australian Dollar is by far the best performer of recent weeks in the Forex trading market– and this comes at the expense of the US Dollar which hit a year low against the Aussie yesterday.  Unemployment is looking to taper down a bit as a browse through the classified ads of major Australian news outlets shows a marked increase in job postings – we will find out the real deal on Thursday. 

The Bank Of England is the one to watch later this week too, as they meet and will undoubtedly find reason to spoil any party that Sterling buyers were planning – my bet is that they will not wind down their quantitive easing policies and could, in fact, increase them.

The issue at hand that Forex traders need to look at moving forward is the commercial real estate business.  While the housing issue seems to have bottomed out and is slowly inching higher, the commercial market is more depressed now than at any point in recent recorded history.  Many of the loans used by developers and agents to build and buy property to rent them out will be coming due in the coming months, and just a walk down SOHO in London or SOHO in New York City for that matter will tell you just how that will turn out.  With many malls hosting empty stores and many retail giants paring down their operations in many locations, the prospects for the health of the commercial real estate market are grim.

We are about to enter the holiday season, traditionally a buy-fest for consumers – yet confidence around the globe is low and with double digit unemployment, many people will choose to pay their rent or electricity or grocery bills before buying the latest Barbie Doll for Christmas.  We are a long way from recovery – even if the leaders of the world choose their words carefully to give the impression otherwise.  Don’t be fooled and read for yourselves.  The Forex market will not be kind to those that tow the party line – if you want to succeed in this online Forex space, trading the majors needs to be done with caution.

As gold edged near the ,000 per ounce mark, the Australian Dollar quietly gained across the board on Monday, touching a one year high against the US Dollar.  The strength of the Aussie was helped by the announcement of a .6% rise in the Down Under economy, the largest gain in the developed world.  Also, the job situation was given a boost as advertisements for jobs in newspapers and interent postings rose for the first time in 16 months. 

The official unemployment data is expected this Thursday and analysts are now revising their estimates downward.  It is the official government position that the unemployment rate, now sitting at 5.8% will rise to as much as 8.5% by next year however there are now calls for the government to restate that number as it appears the market is improving ahead of estimates. 

The US and Canadian markets were closed for Labor day holiday observances so trading was very light on Monday.  

The Bank of England will meet on Thursday and it is expected that they will keep interest rates at .5%.  However it is of interest to traders whether or not the BOE will expand or contract its credit easing measures.

The Reserve Bank of New Zealand and the Bank of Canada meet on Thursday too and are also expected are expected to keep rates unchanged.