Unpredictability plagues every angle of USD
Tuesday, January 5, 2010
The problem that the US has with consistent signs of recovery came through on Monday as two separate reports showing two totally different things were released.
While the manufacturing report showed a steady increase in US production, a clearly positive sign that indicates some semblance of growth, however any bounce that the Dollar took off of this was stifled by a housing report which showed that prices have now fallen – at least in November/December – to the lowest level in years.
The continued duality of this mythical recovery is affecting Forex traders and their ability to adequately trade in any of the USD related pairs. The issue here is misinformation, not necessarily by news organizations, but by the government agencies and private parties that comprise the “independent” review boards for various sectors.
Take the employment numbers for example; ADP which is the largest payroll processor in the US comes out with a report, usually on Wednesdays, that shows the total number of people that they processed payroll for each week.
If the number rises, you know that more people are employed, if the umber drops you know some were terminated.
For the past month and a half, the ADP has come out showing an increase in layoffs, while the government report – the Non-Farm Payroll – has shown less layoffs. They both cannot be right and yet they both are representing the same data.
The difficulty in predicting which way the recovery pendulum is swinging is clearly evident here as there is no guarantee that one piece of data will be supported by another, a former given in Forex trading.
So, as we continue to build on the New Year, we must remember to proceed with caution. What you see is not necessarily what exists – in charts, in data and in rallies and downtrends.
What used to be somewhat predictable has now become impossible to peg and scouring the data will not help clarify – the market in USD is running on whims and psychological factors. As we have seen in the past with stocks, this is a dangerous pattern and we can only hope it settles down soon.
While the manufacturing report showed a steady increase in US production, a clearly positive sign that indicates some semblance of growth, however any bounce that the Dollar took off of this was stifled by a housing report which showed that prices have now fallen – at least in November/December – to the lowest level in years.
The continued duality of this mythical recovery is affecting Forex traders and their ability to adequately trade in any of the USD related pairs. The issue here is misinformation, not necessarily by news organizations, but by the government agencies and private parties that comprise the “independent” review boards for various sectors.
Take the employment numbers for example; ADP which is the largest payroll processor in the US comes out with a report, usually on Wednesdays, that shows the total number of people that they processed payroll for each week.
If the number rises, you know that more people are employed, if the umber drops you know some were terminated.
For the past month and a half, the ADP has come out showing an increase in layoffs, while the government report – the Non-Farm Payroll – has shown less layoffs. They both cannot be right and yet they both are representing the same data.
The difficulty in predicting which way the recovery pendulum is swinging is clearly evident here as there is no guarantee that one piece of data will be supported by another, a former given in Forex trading.
So, as we continue to build on the New Year, we must remember to proceed with caution. What you see is not necessarily what exists – in charts, in data and in rallies and downtrends.
What used to be somewhat predictable has now become impossible to peg and scouring the data will not help clarify – the market in USD is running on whims and psychological factors. As we have seen in the past with stocks, this is a dangerous pattern and we can only hope it settles down soon.
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