EUR/USD Fluctuations Continue

EUR/USD retraced back to 1.4200 level today after some very disappointing housing data came out in U.S. Overall situation continues to remain uncertain with the EUR/USD ranging between 1.4050 and 1.4250. It now formed a clear plateau pattern on the daily chart marking some major break in the Euro vs. Dollar struggle.

Housing report for September showed a further downfall in this economics sector with the decrease in both housing starts and building permits numbers exceeding pessimistic market forecasts. There were 1,191k housing starts (against 1,285k expected) and 1,226k new building permits (against 1,300k expected) this September.

Contrary to real estate sector bad news September CPI report showed a better than expected value - 0.3% against 0.2% expected, and that's from the -0.1% in August.

Crude oil inventories report for the October 8-12 week showed a major increase in commercial oil inventories - 1.8 million barrels, which can easily compensate for the previous decrease by 1.67 million barrels.

Dollar Takes More Beating

Today U.S. dollar continued its way down the Forex market to historical bottoms of its rate against Euro currency. With EUR/USD hitting its new historical maximum at 1.4309, there is a little doubt now that dollar will stop euro reaching and breaking 1.4500 level. This is mainly caused by bad U.S. data coming out last weeks, which might mean another Fed rate cut by the end of the month.

First strike on dollar bulls was delivered today by the initial jobless claims report for the past week with 29k increase from the previous week - to 337k. Then the leading indicators by the Conference Board Inc. came out showing a 0.3% growth, which appeared as expected. But it is a very weak indicator that doesn't mean a lot to Forex traders usually.

Second strike was Philladelphia Fed Business Outlook Survey showed a very strong decrease in the diffusion index of current activity from 10.9 in September to 6.8 in October, whereas even pessimistic market analysts were expecting to see 7.0 value.

To sum it up - it is a bad time to be long on dollar, but good to be long on EUR/USD.

bad-fundamentals-good-for-usd

While dollar continued to rebound its weak positions today after EUR/USD failing to break 1.4180 resistance, fundamental stats from United States again came out below expectations. And again this caused a dollar rally against the Euro currency. ISM report on business activity for September 2007 showed a decrease by 1% - from 55.8% to 54.8% - well below the pessimistic expectation of 55.0%. After this report dollar went high to its weekly minimum at 1.4130 and now continues to gain strength.

One fundamental news that helped dollar and wasn't negative is the increase of the commercial crude oil inventories by 1.2 million barrels last week. This is logical, since when commodity prices are decreasing, currency gain value. As to the reaction on ISM services index - bad fundamental data now scare stock market investors away, thus making them to cash out into dollars (giving it more demand).