Here’s What Changes the Euro’s Bullish Bias
Mark Whistler is the founder of www.WallStreetRockStar.com and is the author of multiple books on trading. Mark’s newest book, The Swing Trader’s Bible – co-authored with CNBC/Fox News regular guest Matt McCall – will be on shelves in late summer, 2008. In addition, Mark also writes regularly for TraderDaily.com and Investopedia.com.
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1. Euro Slips Despite News
The News:
Overnight, the euro lost ground, falling about 100-PIPs after briefly trading above 1.5800.
The Breakdown:
Just after 2:00 AM EST, the euro suddenly fell through the floor on the heels of the German GDP and consumer confidence reports.
Within the GDP report, growth was inline with expectations at 1.5% quarter over quarter and 2.6%, year over year. The numbers were actually reasonably positive, when considering other dismal economic numbers for the Euro Area of late. However, German ZEW economic sentiment and IFO business climate indices for May both showed most participants are very downbeat about growth in the near-term.
Just after GDP and the ZEW reports came out, the euro ripped downward, clearing out most momentum players in the early morning hours.
Then, on Tuesday morning, the ECB’s Weber publicly announced that the central bank would most likely not be cutting rates anytime soon. Add on gloomy U.S. housing data and most would think both of the aforementioned are a formula for the euro to gain ground.
But the euro didn’t uptick on Tuesday morning and actually… continued to fall.
The Bottom Line:
When a currency begins trading opposite the news, it means someone, somewhere knows something that the market doesn’t. Regardless, the euro has completely bucked two sets of positive news this morning… indicating that the euro’s bullish days could be numbered.
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2. U.S. Housing Weakness Remains
The News:
New Home Sales in the U.S. edged up 3.3% in April, but are 42% below this time one year ago.
The Breakdown:
Within the report, the Northeast, Midwest and West regions all showed slight improvement during the month, while the South witnessed new home sales decline.
What’s more, median home prices actually increased 1.5% nationally for the month – despite the negative year over year numbers.
Finally, March sales were revised downward 3.3%, which was certainly not positive for overall housing.
The Bottom Line:
Though housing markets may still have some downside left, the U.S. could be starting to enter bottoming territory.
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3. Manufacturing showing Signs of Life
The News:
The Federal Reserve’s Fifth District showed manufacturing weakened in May; however, the report did have some positive highlights.
The Breakdown:
The overall composite index declined -3 in May, with shipments and new orders both declining month over month. However, backlog of orders only posted a single digit decline (-5), versus the previous seven months of negative double-digit growth. What’s more, the Six Months Shipment Outlook held steady at 15, which was positive for the overall report.
The Bottom Line:
While manufacturing remains weak, the overall theme from today’s report was that of producers expecting business conditions to improve in the months to come. Overall, the report shows U.S. manufacturing could begin to see some signs of expansion in the months to come.