Carry Trade | Forex Blog

August 5, 2011

Forex Outlook 8/5/11

Filed under: Forex News — Tags: account, aud, australia, carry trade, china, commodity, currency, default-on-its, gbp, gold, practice account, rate-decision, sentiment, trend — admin @ 7:23 am

Well it looks like we dodged a bullet this morning with the US Non-Farm Payrolls report that showed jobs growth of 118K vs. an expectation of 85K. The unemployment rate ticked lower to 9.1% even though all of the recent data was pointing to a lower number.

Those of you who read my commentary know that when things appear to be at the worst, that is usually when you get an upside surprise! Check out today’s Forex In Four video (at the 6-minute mark) where I explain how this works and why I went on record expected 125K jobs prior to the release.

So why are we dodging bullets, this far into the “recovery”? Well the markets have been down 8 out of the last 9 days, with the crescendo hopefully taking place yesterday with the Dow down some 500 points. This is a direct result of a slowing global economy, and the debt crisis still taking place in the Euro zone.

Yesterday after the ECB rate policy decision, they decide to do an about-face and go from a previously hawkish to dovish stance as both Spain and Italy are under attack by the bond market as yields continue to move higher which will eventually move to unsustainable levels and will require a bailout if something isn’t done to prevent this. This sent the markets into a mini death-spiral.

And this is also emblematic of the ECB’s lack of attention to this problem over the last year. As yields were being driven higher on the “3 little pigs”, the ECB did nothing until the problems got out of hand. Now that Spain and Italy are in the cross-hairs, it may be too late to act and will assuredly cost more to deal with now as opposed to being preemptive. It is very telling that laissez-faire comes from the French.

So the markets are clearly relieved today though it will be interesting to see if this is enough to stem the tide of the Euro zone debt crisis, or if the market is looking for QE3 from the Fed. Regardless, it may be tough for investors to take risk assets over the weekend, despite the massive selling we’ve seen of late.

The volatility in this markets sets up perfectly for short-term trading, and that’s what I will continue to do!

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August 4, 2011

Forex Outlook 8/4/11

Filed under: Forex News — Tags: a-bond-auction, aud, carry trade, forex market, forex trading, form, italy, live, spain, trend — admin @ 6:56 am

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August 1, 2011

Forex Outlook 8/1/11

Filed under: Forex News — Tags: carry trade, commodities, currency-pairs, forex trading, from-the-rba, fundamental, fxedu, nzd, picture, practice, practice account, stock, unemployment, week — admin @ 6:53 am

I’m back from vacation this week and boy did I pick a good time to get away! Well not really, but it was nice anyway. The insanity that is taking place in Washington DC looks like it may be coming to an end, but let’s remember that while a deal has been reached, it has not been voted through just yet.

There still is some safe-haven rotation going today with Yen and Swiss franc strength, yet gold is pulling back from all-time nominal highs. A “relief rally” is underway in the equity markets with global stocks and oil higher, but after last week’s carnage this was to be expected.

Despite the general sigh of relief in the markets, this does not feel like classic risk appetite has returned to the markets, but rather US dollar weakness, perhaps on the notion that QE3 may be around the corner. Last week’s dismal GDP report and the potential for this week’s Non-Farm Payrolls report to get worse may bring the Fed back into the picture.

This week will also bring rate policy decisions from the RBA in Australia tomorrow, and the ECB, BOE, and BOJ on Thursday. While no change is expected, the BOE will be the only Central bank not issuing an accompanying statement. Inflation expectations have risen, but look to these banks to try their best to avoid looking hawkish. BOJ intervention hopefuls are waiting for action, but it may not be forthcoming.

Volatility still abounds in the markets, and this debt ceiling agreement is not a done-deal just yet.

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July 22, 2011

Hooray For Europe!

Filed under: Forex News — Tags: aussie, carry trade, china, crisis, dow, interest-rates-, ireland, live, morning, stock — admin @ 7:26 am

Yesterday’s market reaction to the news out of the EU could not have been a more perfect scenario for those searching for a ray of hope that the global economy might actually be able to move forward. News out of Brussels was that indeed a solution to the Euro debt crisis had been agreed upon, going a lot further than most had thought possible.

While the markets are still trying to judge the merits of the resolution, the EU took some bold steps to try to stem the crisis. Some of the highlights: Greece gets a larger bailout—but needs to enact major austerity to receive it; Greece gets AAA-rated terms for borrowing from the ECB and EFSF, as does Portugal and Ireland if needed; the ECB will buy bonds and essentially be a “bidder of last resort”, all but daring speculators to try to drive yields higher on Spain, Italy, or others (think ‘don’t fight the Fed’). These are extraordinary measures that will give the debt-burdened countries a chance at redemption. However, the question remains as to whether or not the austerity required is too draconian, and the likelihood that it can be accomplished. One other thing to note however is that the EFSF was not expanded so the size of the emergency facility remains at 440 billion euros, which hopefully is enough to manage future liquidity issues.

While this serves the markets purposes for now, it appears likely that the EU economy is going to shrink in size as austerity is enacted throughout the region. One early sign is that German IFO confidence figures have come in lower than expected, though Euro zone industrial orders picked up for the month.

The rally that took place yesterday has followed through to this morning, with stocks in Asia and Europe up overnight, as are commodities. Next up is the US debt ceiling debate, and the politics surrounding it has gotten so nasty that it’s almost become comical. A deal will definitely get done and the only question is at whose expense.

In the forex market:

Aussie (AUD): The Aussie is mostly higher, easily clearing the resistance identified yesterday at 1.08 vs. USD. Export and import prices have risen, which could give rise to inflation down under.

Kiwi (NZD): The Kiwi is has rocketed higher to 86.75, just south of my target of .87 from earlier this weak. Inflation expectations are rising, which means that so are interest rate hike expectations as well.

Loonie (CAD): The only other fundamental data out his morning has come from Canada, which reported lower than expected CPI data that has sent the Loonie lower, despite oil trading up to $100. Core CPI came in at 1.3% vs. an expectation of 1.9%, and the headline figure came in at 3.1% vs. an expected 3.6%. This may buy the BOC time to allow the economy to continue with lower rates as prices seemingly are under control. Better than expected retail sales figures showed a gain of .5% vs. an expected .3%, which shows economic improvement. (Click chart to enlarge)

Euro (EUR): The Euro has pulled back some to under 1.44 vs. USD as markets are set to open slightly lower here in the US. While the market seemed pleased with the initial resolution form yesterday, as more is learned about the deal, the less enamored the markets may become. (Click chart to enlarge)

Pound (GBP): The Pound is also pulling back after yesterday’s rally and with no news on the docket may be a victim of having traveled too far, too fast.

Swissie (CHF): The SNB has been thankful of late that risk is abating in the global economy as the franc becomes less desirable when safe-havens are out of favor.

Dollar (USD): I’ve read some analyses that claim that yesterday’s massive moves were more a function of Dollar weakness than Euro strength. The markets are looking for any indication that the global economy is stabilizing, as the appetite for risk is increasing as cheap money floods the globe. We need a compromise on the debt ceiling debate to really instill confidence.

Yen (JPY): The Yen is picking up some strength as risk appetites are turning to risk aversion as the morning moves forward. Nevertheless it was lower yesterday as carry trades were re-established.

As I said yesterday, “buy the rumor, sell the news”. While the Euro debt crisis resolution may be better news than expected, the devil is always in the details. As the markets start the comprehend all that needs to be done, opinions over the deal may change.

While we are seeing a pull-back in the early action here in the US, this could be more of a function of jittery markets still being fearful heading into the weekend. The debt ceiling debate rages on here in the US and should it seem less likely that a deal can be reached, then the markets may react quickly.

So now it is up to the US, and hopefully we can cast the politics aside for the better of all and not just a specific political base.

To learn more about how you can take advantage of world events through the currency market, be sure to check out our currency trading courses!

To follow these events live with a free, real-time practice account, click here! Don’t miss out on the world’s fastest growing market!

Tags: account, AUD, Aussie, Australia, bank, cad, canada, carry trade, China, commodities, commodity, course, currencies, currency, currency market, currency pairs, currency trading, decision, dollar, dow, economic, economy, EUR, Euro, Europe, fear, forex, forex market, forex trading, fundamental, fx, fxedu, gbp, gold, interest, interest rate, interest rates, invest, Japan, jpy, Kiwi, live, loonie, lower, market, Mike Conlon, new zealand, news, nzd, oil, pound, practice, practice account, rate decision, RSI, sentiment, stock, time, trade, trader, trades, trend, unemployment, USD, Yen

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July 20, 2011

Get It Done!

Filed under: Forex News — Tags: account, australia, carry trade, decision, europe, fundamental, new zealand, pound, practice, release, trend, week, whether-or-not — admin @ 6:52 am

Markets Call For Debt Deals Now!There is major optimism that tomorrow’s meeting of EU Finance Ministers in Brussels is going to produce a sensible solution to the debt crisis in Europe which means that the politics of doing the unpopular have been cast aside. This could come in the form of the bond buying from the emergency lending facility, which would essentially be quantitative easing to help keep individual countries’ yields low and then allow them to buy back later.

This situation practically mirrors what is going on here in the US with the debt ceiling debate, as the markets will take any solution at this point. While I personally don’t believe it’s a good idea to raise taxes in this economic climate, fixing loopholes is not the same thing. If unemployment gets worse as a result, then let the leaders bear the blame.

But we have been down this road before, where the markets anticipate a deal because they are weary and because it makes perfect sense; and then the politicians defy logic. By the end of this week we should have more clarity, and the risk appetite in the market is reflecting that sentiment.

In the UK, the release of the BOE rate policy meeting minutes confirmed there was no change of stance, though some have noted that there may be lesser resolve for additional bond purchases.

In the US, existing home sales are due out later this morning and yesterdays housing starts numbers surprised to the upside, showing that the housing market may not be dead just yet.

So this all adds up to risk taking this morning, with stocks and oil higher, and gold giving back prices gains as it sheds some of its safe haven status.

In the forex market:

Aussie (AUD): The Aussie is mostly higher on risk themes despite an index of leading indicators number that came in slightly negative, showing a decline of .1%. More pressing was the release of the RBA minutes, which showed that Central bank might not move on rates for some time.

Kiwi (NZD): The Kiwi is also mostly higher ahead of tomorrow’s release of consumer confidence figures. One item that has escaped attention is that the Chinese Yuan has appreciated the most in nearly 17 years (though still less than the weekly swings in Euro), which could be good for NZ exports.

Loonie (CAD): The Loonie continues to approach 2011 highs vs. USD after yesterday’s hawkish statement from the BOC at the rate decision. Today’s release of the monetary policy report may confirm that if not for global instability, rates might be higher. Oil back to $99 is also pushing Loonie.

Euro (EUR): It’s make-or-break time for the Euro this week as the entire globe is looking for a resolution to the debt crisis. The major impediment so far has been German political opposition, but as world opinion moves against them, they may be forced to bite the bullet. While no one expects the solution to emerge tomorrow from the meeting in Brussels, the market is optimistic that significant steps will be taken. (Click chart to enlarge)

Pound (GBP): The Pound is bouncing off of earlier lows as the indeed the BOE confirmed that they are willing to turn a blind eye to inflation (some say up to CPI gains of 5%!) in order to ride out the government austerity. Tomorrow’s retail sales figures will show whether or not the consumer in the UK is active, or if they are heading straight for stagflation. (Click chart to enlarge)

Swissie (CHF): The Swissie has been the most-favored safe haven currency of late so naturally it is giving back some of those gains as risk appetite has increased due to increased market optimism. Tomorrow’s trade balance figures will show whether or not a stronger currency has damaged the trade balance significantly.

Dollar (USD): The market is hoping that yesterday’s news on housing starts carries over to existing home sales figures due out later this morning. However, if the data begins to improve too much, then the market may assume that QE3 is off of the table which may cause some Dollar strength. What is more likely though is that good news will be received well by the stock market, which has been reporting great corporate earnings.

Yen (JPY): The Yen is mostly lower as safe haven demand has lessened. If the global economy can get past these two major debt hurdles, then it could be game on again for significant carry trades.

Markets are a forward-looking and discounting mechanism so gains we are seeing now are in anticipation of these debt problems getting fixed. This in and of itself does not mean that deals have been reached, however.

The politics surrounding all of these deals has been the major impediment so far, so the markets are saying just get it done. Uncertainty at this point is worse than bad policy and while the devil is in the details, the markets will decide later whether or not they approve. Let’s face it, I have very little confidence that any of these deals will be perfect, so just let the chips fall where they may.

If the markets do not see significant progress or agreements in principle to resolve these issues, then we could see this week’s gains vanish. For that is the problem with rising expectations; the letdowns hurt that much more!

To learn more about how you can take advantage of world events through the currency market, be sure to check out our currency trading courses!

To follow these events live with a free, real-time practice account, click here! Don’t miss out on the world’s fastest growing market!

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November 24, 2010

Happy Thanksgiving!

Filed under: Forex News — Tags: a-lot-worse-, board, carry trade, economic, fear, forex, irish, jpy, market, pound, ssi — admin @ 3:37 pm

Happy Thanksgiving!

On the eve of Thanksgiving it is important to look back and to reflect on our blessings. As I will be out for the holiday tomorrow, it is important to know that while the US markets are closed, the forex market will continue to trade. This reduction in volume could cause volatility, especially if the risk themes that have dominated the market of late persist.

Though that does not appear to be the case this morning, as positive economic data has rallied the markets after yesterday’s sell-off. In addition, the Irish austerity plan will be out this morning that will show how they intend to cut spending to handle their debt issues.

The “good” news on the economic data front was that only 409K people lost jobs last month, beating expectations and creeping toward a number in the 300s. However at this pace it may be a LONG time before we see meaningful improvement. But I guess this is something to be thankful for.

Something to not be thankful for is for new homes sales, which came in way lower than expected, posting a decline of 8.1% vs. an expected gain of 1.6%.

This all adds up to a risk-taking scenario with stocks and commodities rebounding from yesterday, as more economic clarity calms fears.

In the forex market:

Aussie (AUD): The Aussie is higher across the board economic fear subsists and risk appetite returns to the market. (Click chart to enlarge)

Kiwi (NZD): The Kiwi is also higher which is good news, however the fate of the NZ miners appears to not be as miraculous as that of the Chileans. This is the worst mining tragedy in NZ in nearly 100 years.

Loonie (CAD): The Loonie is higher as well as risk has subsided and oil prices have rebounded. Encouraging economic data from the US also bodes well for Canada.

Euro (EUR): The Euro has traded back from just under 1.33 vs. USD and is now positive on the morning. German IFO sentiment figures came in better than expected, though industrial orders in the region missed expectations. The big news is that the Irish austerity plan will be unveiled today which is necessary for them to receive the economic bailout. (Click chart to enlarge)

Pound (GBP): The Pound is mixed as GDP figures came in as expected posting a quarterly gain of .8% which pushed the YoY figure to 2.8% growth.

Dollar (USD): The Dollar is weaker as risk appetite has increased ahead of Thanksgiving. Better than expected initial jobless claims trumped a weaker than expected durable goods orders number, which showed a decline of 3.3% vs. an expected gain of .1%. The new home sales figures were not as positive but the market doesn’t care as it takes a break from risk-aversion.

Yen (JPY): The Yen is lower across the board as yield seeking returns and carry trades are re-established after recent un-winds.

There is a lot to be thankful for in the markets today and it sometimes is too easy to be negative in light of recent events. So today I am content to sit back and enjoy, as things could be a lot worse.

Happy Thanksgiving to all!

And watch out for the volatility!

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May 5, 2010

Sell in May, Go Away!

Filed under: Forex News — Tags: carry trade, economy, forex market, gold, japan, jpy, life, markets, pound, rsi, stocks, trades — admin @ 7:16 am

“Sell in May, Go Away” is an old Wall St. adage that seems to be proving why it has become a popular investing strategy over the course of time. I can’t think of a time when it has been more prescient; in light of the market sell-offs taking place. Yesterday, world stock markets sold off big time, as did commodities prompting the flight to safety trade and the safe haven dash for the US dollar.

There is a lot of risk and fear in the markets right now, as the Euro zone debt crisis is not inspiring confidence. Notice that this crisis is no longer just about Greece, as contagion appears to be ready to complicate matters in the EU.

In addition, China’s intentional slowing of its economy may be a major drag on world demand, which is not good for growth world-wide. This is having a negative impact on commodity prices, which is generally a positive for businesses and consumers alike, but it is taking down the commodity currencies in the process and causing the unwinding of carry trades as investor rush for the door.

On a positive note, the UK elections will be over tomorrow and that may take one risk element out of the equation.

World stock markets are lower again this morning, as are US stock futures and commodities heading into the market open. At this point there is very little that can be done to change the market mood from risk-aversion, and this could be the sell-off that many doomsday economists have been predicting.
So today is an obvious risk aversion day.

In the forex market:

Aussie (AUD): The Aussie has gotten clobbered over the past few days and is rapid approaching .90 vs. USD. Despite good economic prospects at the moment, a reduction in Chinese demand would hurt the Australian economy the most. Despite the doom and gloom, building approvals came in much higher than expected, showing signs that the Australian economy may be more resilient than the market expects. A government pledge to tax mining companies at 40% isn’t seen as positive for business, however. This is one of Australia’s most profitable sectors.

Loonie (CAD): The loonie is lower as expected as well. The Loonie’s high correlation to oil prices has helped drag it lower, as oil has fallen from above 86 to start the week to 81.5 today. No news out of Canada until this Friday’s employment reports, which if not improved, could give the BOC reason to delay their expected rate hike.

Kiwi (NZD): The Kiwi is also lower, as China is New Zealand second largest market for exports. Tomorrow’s employment reports will show whether or not the economy is improving despite the risk-aversion in the markets.

Euro (EUR): I have never in my life seen a bigger mis-management of a crisis than what is taking place in the EU. Sovereign debt is obviously a major problem world-wide, and the inability of individual countries to debase their currency to help themselves is reflective of MAJOR structural problems with the Euro. When a unified government reacts to a crisis swiftly and with confidence, speculators back off as it is usually a fruitless endeavor to try to bet against a government. When a government fails to inspire confidence, the market smells blood in the water which then makes it much harder to deal with the original problem in the first place. This all comes before the German meeting to decide on the Greek bailout which could send the Euro over a cliff if this thing is not dealt with properly and with confidence. Much, much more to come. The Euro is at 1.28 and change and falling like a rock.

Pound (GBP): The Pound is actually showing some life and is positive against all but USD and Yen as risk themes are too much to overcome. The most recent polls suggest that the Conservative Party will be the victor in tomorrow’s elections and that they will be able to put together a coalition government which will avoid the dreaded “hung Parliament”. The Conservative Party has vowed to reduce the deficit more than the other two parties, and this could be a sign of the new paradigm taking place world-wide. Reckless spending has to be reigned in, and I hope that our idiots in Washington DC take note if indeed the Conservatives win.

Dollar (USD): The Dollar is higher on the flight to safety trade, and pending home sales were higher yesterday showing signs that the economy is recovering. What is Europe’s loss may be the US’s gain, as the Dollar is known as the “anti-dollar”.

Yen (JPY): Japan is still closed for the Golden Week holiday, but that hasn’t stopped Yen appreciation as carry trades are being unwound at breakneck speed. They could be in for a very rude awaking when their stock market reopens, especially if the EU doesn’t combat its debt crisis in a meaningful way.
Wow. All I can say is wow. Right now, the confluence of events taking place in the world is adding up to the perfect storm. There is virtually no leadership in politics anymore, and this couldn’t be more true than what’s happening in Europe.

I would not be surprised at all to see a break-up of the Euro going forward. The structural flaws are too many, and populist revolts are preventing politicians from showing some spine. Riots in Greece are typical and not unexpected, and already the streets are being filled with tear gas.

It’s ugly out there. Very ugly. I’m not certain what the EU can do now to prevent a death spiral. The inability to act may have damaged the Euro irreparably.
If you are still in stocks, I’d advise you to use serious risk management, including protective stops.

And if you’re not in the forex market yet, I implore you to get involved. Buying the Dollar could hedge your other investments against potential catastrophic losses.

To learn more about how you can take advantage of world events through the currency market, be sure to check out our currency trading courses!

To follow these events live with a free, real-time practice account, click here! Don’t miss out on the world’s fastest growing market!

Tags: account, AUD, Aussie, Australia, cad, canada, carr, carry trade, commodities, commodity, course, currenc, currencies, currency, currency market, currency trading, dollar, dow, economic, economy, EUR, Euro, Europe, forex, forex market, free, fx, fxedu, gbp, gold, Il, invest, investor, Japan, jpy, Kiwi, live, loonie, lot, lower, market, meeting, Mike Conlon, new zealand, news, nzd, oil, pound, practice, practice account, rate, RSI, ssi, stock, stocks, time, trade, trades, USD, Yen

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April 30, 2010

Not Good Enough!

Filed under: Forex News — Tags: aud, backpedalling, carry trade, consumer, data, forex market, july, june, kiwi, market, morning-as-the, pound, practice account, time — admin @ 8:02 am

US GDP figures came in this morning showing an advance of 3.2% annualized, just missing analyst expectations of 3.3%. While there is mild disappointment on the miss, GDP growth of any amount should be seen as positive at this juncture in time. Much of the advance in GDP growth came as a result of personal consumption numbers which were higher than expected, showing that a consumer-led recovery may be underway.

In other news, Canadian GDP figures came in as expected but the market is still concerned that the change in language used by the BOC in this week’s interest rate policy meeting could stall future rate hikes.

In an opposite turn of change of language, the New Zealand central bank Governor left himself “wriggle room”—I always say wiggle but whatever—as the market is increasing its bet that we’ll see a rate hike earlier than the July meeting as was previously forecast.

Meanwhile, deflation is still prevalent in Japan even though household spending and wages are up.

And lastly, Greece austerity measures are predictably causing unrest but it looks like bailout measures will soon be in place. The markets are in risk-taking mode this morning going into the weekend as the next round of news expected out of the EU is thought to be positive as the negative is already “priced in”.

In the forex market:

Aussie (AUD): The Aussie is higher this morning on increased risk-appetite as signs are pointing to a resolution for Greece. A survey of Australia’s trade businesses shows that there is an expectation for a rise in the Aussie dollar going into year end.

Loonie (CAD): The Loonie is lower this morning as the market is paring back expectations of a rate hike based on the backpedalling language that came from the BOC over the last few days. Canadian GDP figures came in as expected so there is some hesitation to push gains in the Loonie despite the risk appetite.

Kiwi (NZD): On the other hand, the RBNZ changed its language to leave “wriggle room” for a potential rate hike at the June meeting as opposed to the expectation of July. This is all incumbent of course on actually having the economic data to support a hike.

Euro (EUR): The Euro is higher this morning as the market is expecting a resolution to the Greek debt crisis to come in soon. Greece has agreed in principle on an austerity package that will satisfy lenders (Germany) and allow a bailout to take place. For those worried about contagion, Spain just officially announced unemployment rates in excess of 20%! Even if the Greece problem gets resolved, there are others lurking in the shadows. Don’t get too excited about the Euro’s prospects just yet.

Pound (GBP): Consumer confidence fell to a 3-month low in the UK heading into next week’s elections, as signs of a slower return to growth is all but expected.

Dollar (USD): The Dollar is lower on risk taking as GDP figures came in slightly less-than-expected but signs that consumer spending is improving is seen as positive. However, Bernanke all but said at the FOMC meeting that the Fed won’t move on rates until they see signs of employment gains, and we’re not quite there yet.

Yen (JPY): In the overnight session, reports have showed that economic recovery is not strong enough yet to fend off deflation, and the Bank of Japan has pledged to help banks lend in order to encourage spending. Consumer prices have fallen for 13 straight months. However, the good news is that spending and wages have increased so there is hope that it will help stimulate the economy. So expect a weaker Yen as BOJ monetary policy and risk-taking could bring about a further increase in carry trades.

So there is some light at the end of the tunnel as good economic figures are starting to pop around the globe. However, the amount of global debt in the marketplace is looming as there are MANY countries that have out of control debt.

So while Greece makes the headlines because they were first, the other PIIGS countries could be next to line up for a bailout. Not to mention the debt levels of the UK and the US. And Japan’s debt as a percentage of GDP is so large that it‘s no longer become a factor.

So you can see the obvious conflict between trying to grow economies and scale back debt to sustainable levels. How this is going to play out is anyone’s guess.

To learn more about how you can take advantage of world events through the currency market, be sure to check out our currency trading courses!

To follow these events live with a free, real-time practice account, click here! Don’t miss out on the world’s fastest growing market!

Tags: account, AUD, Aussie, Australia, bank, Bernanke, cad, carr, carry trade, central bank, course, crisis, currenc, currency, currency market, currency trading, data, dollar, dow, economic, economy, EUR, Euro, fed, forex, forex market, free, fx, fxedu, gbp, Il, interest, interest rate, Japan, jpy, Kiwi, live, loonie, lower, market, meeting, mie, Mike Conlon, new zealand, news, nzd, piigs, pound, practice, practice account, ssi, time, trade, trades, unemployment, USD, Yen

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April 21, 2010

“Loonie” for Canada!

Filed under: Forex News — Tags: a-will-continue, aud, carry trade, commodities, currency, free, governor, market, money, ssi — admin @ 7:46 am

On the heels of yesterday’s interest rate policy meeting, the Loonie is seeing continued strength as the BOC set the stage for future rate hikes. The economy has been strong and while unemployment is a bit high, inflation fears are beginning to heat up as typically inflation will rise faster in Canada than in the US. This is taking place despite the risk aversion in the market this morning.

There is slight risk aversion in the forex market as the IMF/EU/ECB meetings with Greece are taking place. While this whole situation has become a comedy of errors, let’s hope it doesn’t end in Greek tragedy. Nevertheless, this drama will continue to play out until the final act. The Euro is lower this morning as a result.

More positive news came from the UK, as jobless claims fell more than expected, showing signs that the UK economy may be on the road to recovery. Minutes from the BOE policy meeting showed unanimous consent to keep rates steady, though as mentioned yesterday, there is some concern that inflation is starting to show up outside of accepted target rates.

Meanwhile, the US is picking up support in its quest to see a strong Chinese Yuan on a day which is devoid of major market moving news for the US.

In the forex market:

Aussie (AUD): The Aussie is slightly lower this morning on risk themes however if is near 6-month highs. In general the global economic news has been strong as of late, but risk coming from the Euro zone and the issue of Chinese Yuan re-valuation is weighing on investors. In addition, an index of leading economic indicators came in at 18-month highs, demonstrating further signs of Australian economic strength.

Loonie (CAD): The Loonie is stronger again this morning, trading at .997 vs. USD. Yesterday’s interest rate policy meeting has set the stage for future rate hikes in a straightforward manner, prompting some analysts to wonder why they didn’t just raise rates yesterday. Barring any further major risk-events, I expect the Loonie to trade at or below parity with USD.

Kiwi (NZD): The Kiwi is slightly lower on risk aversion and signs of a muted economic recovery. Tomorrow will bring consumer confidence figures which may give insight into near-term economic growth.

Euro (EUR): Debt talks begin today between Greece and the IMF/EU/ECB with how to handle the potential bailout. Credit-Default swaps are at a record high, showing signs that the market believes a default is imminent. It doesn’t help that the Greek finance minister is saying that Greece could activate the aid package before the talks are even over. Signs of contagion in the region are also picking up, with Portugal as the most likely to come under fire. Equities markets are lower in Europe today.

Pound (GBP): The Pound is higher this morning as jobless claims fell more than expected, showing further signs of economic recovery. In addition, the MPC minutes showed unanimous support for the no rate hike, yet the threat of higher-than-targeted inflation figures could cause the BOE to act. Retail sales figures are due out tomorrow, followed by GDP figures on Friday.

Dollar (USD): The Dollar is marginally higher this morning on risk themes, despite the slew of “good” corporate earnings reports. I suppose that companies that have trimmed the fat by firing workers should be reporting good earnings, but that’s a conversation for another day. In addition, big bank earnings once again beat expectations—today it’s Morgan Stanley—as the free money the Fed supplies these banks conveniently makes its way to trading desks on Wall St. and not Mom-and-Pop on Main St. The stock market futures are slightly higher, as are commodities.

Yen (JPY): The Yen is slightly lower as the mild risk-aversion to start the morning is not enough to cause the un-wind of carry trades. The Bank of Japan Deputy Governor was out saying that he sees “light at the end of the deflation tunnel”, and is expected to continue with accommodative monetary policy.

Today is a day marked by individual currency strength. Both Canada and the UK are strong, while the Euro zone is weak. Today can be classified as neither risk-taking nor risk-aversion. On days like today, use the individual currency fundamentals to guide your trading and keep an eye open for any changes to risk themes.

Without any major news to affect the forex market, take clues from both US stock market and both oil and gold. While the usual correlations may not be as strong as on other days, the disconnects can sometimes provide excellent trading opportunities.

To learn more about how you can take advantage of world events through the currency market, be sure to check out our currency trading courses!

To follow these events live with a free, real-time practice account, click here! Don’t miss out on the world’s fastest growing market!

Tags: account, AUD, Aussie, Australia, bank, cad, canada, carry trade, commodities, course, currenc, currency, currency market, currency trading, demo, dollar, economic, economy, EUR, Euro, Europe, fed, forex, forex market, free, fundamental, fx, fxedu, gbp, Il, index, interest, interest rate, invest, investor, Japan, jpy, Kiwi, live, loonie, lower, market, Mike Conlon, money, news, nzd, oil, pound, practice, practice account, ssi, stock, time, trade, trades, unemployment, USD, Yen

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April 20, 2010

A Traders Paradise!

Filed under: Forex News — Tags: carry trade, currenc, dow, financial, forex, free, gold, interest-rate, ira, loonie, new zealand, oil, pound, trader — admin @ 7:20 am

Yes, I am speaking about the forex market! For starters, yesterday’s rebound from the fear in the market was nothing short of remarkable. Apparently the SEC voted “along party lines” to formally charge Goldman Sachs with fraud. Two thoughts on this: 1) it is beyond me why a supposedly independent watchdog agency would have “party lines” to begin with, and 2) the case against Goldman must not be that strong which means this amounts to nothing more than political pressure to get the financial reform bill passed. Time will tell.

Regardless, the markets have rebounded from that news and are pushing higher this morning, as risk-taking is in the air. And that’s what I mean by “traders paradise”. One day it looks like we are going to fall off a cliff with all of the doom and gloom, and the next we are high-fiving over how great things seem to be. All you have to do is be on the right side of sentiment and keep your trades shorter-term in nature, and you can ring that cash register day in and day out.

A couple of pieces of news to consider today: 1) CPI came in less than expected in New Zealand last night, 2) Consumer prices came in higher than expected in the UK, 3) the Canadian interest rate decision is due out today, and 4) Goldman Sachs has thumbed its nose at the government and reported blowout earnings.

What this means for the forex market:

Aussie (AUD): The Aussie is higher on improved market sentiment and the minutes from its central bank’s policy meeting were released overnight, showing that the RBA was concerned that a mining boom might stoke inflation. Should inflation figures come in higher the next time around, expect the RBA to remain hawkish. Concern over Chinese demand is a factor to consider, but I believe that the RBA will act on what is and not on what might be.

Loonie (CAD): The Loonie is higher this morning as oil prices have rebounded and the Bank of Canada is meeting on interest rates today. Speculation in the market is that they will use this opportunity to foreshadow a rate hike in June if they increase their forecasts for inflation and economic growth. There is virtually no chance they will change rates today, though stranger things have happened.

Kiwi (NZD): The Kiwi is slightly lower this morning as consumer prices came in lower than expected, showing a rise of 2% vs. an expectation of 2.3%. Recovery in NZ has been more tepid than expected, and this may allow the central bank to keep rates at a record low 2.5% for a longer period of time. The central bank will be holding its interest rate policy meeting next week.

Euro (EUR): Wow, horrible news isn’t dominating the headlines in Europe! In fact, there is actually some encouraging news, as German Investor Confidence levels came in higher than forecast to seven- month highs. This comes in contrast to the fear over the economic impact of Greece and the volcano and shows that the economy in Germany is still very strong despite all of the structural problems of the Euro.

Pound (GBP): The Pound is higher this morning as inflation in the UK surged 3.4%, higher than expectations of 3%. The BOE rate policy meeting minutes are due out tomorrow and are expected to be dovish, though this figure comes in outside of the BOE mandate to keep the inflation target rate within 1% of its target. What this means is that should this pattern continue, we could start to see rate hikes despite the uncertainty over the May 6th elections.

Dollar (USD): US corporate earnings are higher this morning, prompting the futures to trade higher and the Dollar to trade lower as risk appetite is back to the marketplace. Goldman Sachs reported earnings much higher than analyst expectations, practically laughing at the government and the SEC. There’s no real news for the Dollar until Thursday, when PPI and initial jobless claims are reported.

Yen (JPY): The Yen is lower across the board as risk-taking is back in play. Carry traders sell yen and buy higher yielding currencies when risk appetite is high. In addition, the Japanese Finance Minister says that the BOJ should shoot to have an inflation target of “1 or 2%.” Now I’m not sure that this is even possible from a monetary standpoint, as Japanese interest rates are at .1%. Sure they increase bond buying and quantitative easing, but right now they are in a deflationary spiral and adding to the deficit is a fool’s folly. Perhaps the government should impose a “non-consumption tax” to discourage savings and get the domestic economy moving by encouraging consumption. Good Luck with that.

As you can see, one day it’s doom and gloom and the next day it is pizza and ice cream for everyone! That is why the forex market is the ultimate trader’s paradise. There is literally trillions of dollars flowing through this market on a daily basis, and savvy investors are taking advantage of these moves to reap financial gains.

The basic risk-on, risk off theme is one of the most basic plays in financial markets. Traders with a marginal sense of timing but with superior money management skills are raking it in.

Isn’t it time you see what the excitement is all about?

To learn more about how you can take advantage of world events through the currency market, be sure to check out our currency trading courses!

To follow these events live with a free, real-time practice account, click here! Don’t miss out on the world’s fastest growing market!

Tags: account, AUD, Aussie, bank, BOE, cad, canada, carr, carry trade, central bank, course, currenc, currencies, currency, currency market, currency trading, decision, dollar, dow, economic, economy, EUR, Euro, Europe, financial, forex, forex market, free, fx, fxedu, gbp, gold, Il, interest, interest rate, interest rates, invest, investor, IRA, Japan, jpy, Kiwi, live, loonie, lower, market, meeting, Mike Conlon, minutes, money, new zealand, news, nzd, oil, pound, practice, practice account, rate decision, release, sentiment, short, ssi, time, trade, trader, trades, USD, Yen

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