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September 02, 2009

Today Could Be a Much Different Day
by Brewer Futures Group

The U.S. Dollar is trading mixed overnight following a strong rise yesterday. Yesterday's much anticipated break in the equity markets triggered a risk aversion rally in the foreign currency markets encouraging investors to seek the safety of the Dollar.

Today could be a much different day as a slew of U.S. economic reports may trigger a choppy, two-sided trade. Trading may also be light and directionless as investors begin to square up positions ahead of Friday's U.S. Non-Farm Payrolls Report. Today's trade is likely to be influenced by a preliminary labor number from ADP, followed by U.S. Productivity and Factory Orders Reports. In addition to these reports traders will have to deal with crude inventories and the FOMC minutes from the August 12 meeting.

Technical factors are also likely to yield a strong influence as many of the foreign currency markets approach short-term oversold levels.

Trading could be light in the EUR USD as investors await tomorrow's European Central Bank meeting. Based on the recent series of stronger economic reports, traders are looking for the ECB to leave interest rates unchanged. The key to the report will be any commentary regarding government stimulus. Traders are waiting to see if the ECB decides to end some of its stimulus programs.

The GBP USD is trading better this morning. This move is most likely technically related as the Pound has reached a short-term oversold level. Fundamentally, there has been very little to get excited about. Yesterday's announcement that U.K. manufacturing contracted more than expected was another sign that the economy is still not ready to recover. This currency pair is likely to remain under pressure until the Bank of England announces the end of its asset-buyback program. This is not likely to occur until the economy starts to show more strength.

The Japanese Yen is likely to continue to take its direction from the stock market. The weaker the stock market gets, the more risk adverse traders will get. This will continue to encourage repatriation into safety of the lower yielding Yen.

Lower energy and equity prices continue to weaken the Canadian Dollar. Comments from Bank of Canada officials are indicating its concern over the value of the Canadian Dollar. The BoC wants to see a weaker currency in order to stimulate demand for Canadian goods.

Despite lower global equity markets this morning, the AUD USD is trading better. News that the Australian economy grew more than expected triggered a short-covering rally overnight. The report showed that Aussie GDP was up 0.6%. Traders attribute this gain to the positive influence from government stimulus that encouraged consumer spending. Traders should not that all gains are likely to be erased if the U.S. equity markets have another significant break.

In summary, look for a choppy, two-sided trade today. Light volume could trigger volatile trading in both directions as major players stand aside until Friday's U.S. Non-Farm Payrolls Report.

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DISCLAIMER: Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor. The value of currencies may fluctuate and investors may lose all or more than their original investments. Risks also include, but are not limited to, the potential for changing political and/or economic conditions that may substantially affect the price and/or liquidity of a currency. The impact of seasonal and geopolitical events is already factored into market prices. Prices in the underlying cash or physical markets do not necessarily move in tandem with futures and options prices. The leveraged nature of FX trading means that any market movement will have an equally proportional effect on your deposited funds and such may work against you as well as for you. In no event should the content of this correspondence be construed as an express or implied promise or guarantee from B.I.G. Forex, LLC and Brewer Investment Group, LLC or its subsidiaries and/or affiliates that you will profit or that losses can or will be limited in any manner whatsoever. Loss-limiting strategies such as stop loss orders may not be effective because market conditions may make it impossible to execute such orders. Likewise, strategies using combinations of positions such as "spread" or "straddle" trades may be just as risky as simple long and short positions. Past results are no indication of future performance. Information contained in this correspondence is intended for informational purposes only and was obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted.

Information provided in this correspondence is intended solely for informational purposes and is obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted.

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