Thursday, 16 Dec 2010

Positive Manufacturing Data Fuels Mid-Day Dollar Recovery

Better than expected Philly Manufacturing data helped fuel a dollar rally that helped bring the greenback to even on the day after trading lower versus the major currencies.

The dollar shaved its losses on the day following the release of the manufacturing data from the Federal Reserve Bank of Philadelphia that showed its index rose to 24.3 in the month of December. Economists had expected a release of 14.8.

The better than expected manufacturing numbers lifted most of the major currency pairs back to even for the day. The majors were confined to tight trading ranges which characterize light volumes as the holidays approach.

The EUR/USD was trading up slightly at 1.3235 after opening the day at 1.3211. The GBP/USD was higher at 1.5633 from 1.5550. The USD/JPY was lower on the day at 84.02 from an opening day price of 83.81. Equities were higher with the S&P 500 finishing the day near its daily high at 1242.87 for a gain of 0.62%. Spot crude oil price were down at $87.87 from an opening day price of $88.39.

Gold prices slumped for the third day in a row finishing down at $1370 after opening at$1380. The losses may be due to year-end profit taking by large institutional traders. Also creating waves in the gold market were new potential position limits by the Commodities Futures Trading Commission. The US commodity regulator proposed limiting the number of futures and options contracts an investor may hold. While this won't affect most individual traders it could impact large institutional traders who hold large position in commodities.

Tomorrow traders will be looking to the second day of the EU economic summit as well as the release of the German Ifo Business Climate survey. EU leaders agreed to a permanent mechanism to help EU nations that struggle with their sovereign debt loads. We may expect more comments from the meeting which could support the euro in the short term. Support and resistance for the EUR/USD come in at the bottom of the consolidation pattern from early December at 1.3180 and 1.3500.