December 11, 2011

Trading Week Outlook: Dec. 12 – Dec. 16

Filed under: Forex News — Tags: bank, consumer, consumer-price, currencies, european, forex, jpy, research, top stories — admin @ 8:05 am

Dec. 10, 2011 (Allthingsforex.com) – In the aftermath of the ECB rate cut and yet another EU Summit attempt to save the euro, in the week ahead all eyes will turn to the FOMC monetary policy meeting in search for the missing piece of the QE3 puzzle.

In preparation for the new trading week, here is the outlook for the Top 10 spotlight economic events that will move the markets around the globe.

1. GBP- U.K. CPI- Consumer Price Index, the main measure of inflation preferred by the Bank of England, Tues., Dec. 13, 4:30 am, ET.

Rising by 5.2% y/y in September, U.K. inflationary pressures have begun to subside to 5.0% y/y in October, and are expected to continue lower to 4.8% y/y in November. The pullback in inflation is in line with the Bank of England’s forecast and would be welcomed by policy makers set to continue the bank’s accommodative monetary policy, while keeping the door open to more quantitative easing if the economy weakens further.

2. EUR- Euro-zone ZEW Economic Sentiment Index, a leading indicator of economic conditions and business expectations, Tues., Dec. 13, 5:00 am, ET.

Serving as a reminder of the deteriorating economic conditions in the Euro-zone, the ZEW economic sentiment index is forecast to register another drop with a reading -60.3 in December, compared with -59.1 in November.

3. USD- U.S. Retail Sales, an important gauge of consumer spending measuring the total receipts at retail establishments, Tues., Dec. 13, 8:30 am, ET.

Consumer spending is a major part of the U.S. economy and retail sales could demonstrate resilience with a second consecutive monthly increase by 0.6% m/m in November from 0.5% m/m in October.

4. USD- U.S. FOMC- Federal Open Market Committee Interest Rate Announcement, Tues., Dec. 13, 2:15 pm, ET.

At the press conference following the last FOMC meeting, the Fed Chairman made it clear that all options are “on the table”, including a “third round of securities purchases, extending the period of record- low interest rates or being more specific about when rates would rise”. Although the Fed could keep the door open to QE3, the recent resilience of the U.S. economic data, which rules out a double dip, makes an announcement of another round of quantitative easing less likely to come at the December 13 meeting. As far as the record low rates, the Fed has already made a commitment to keep the status quo at least until 2013. For the time being, expect a continuation of the Fed’s accommodative monetary policy with QE3 ready to be deployed in case future economic conditions and the EU debt crisis take a turn for the worse. The USD might be able to attract some bids if the Fed puts QE3 on the back burner.

5. GBP- U.K. Jobless Claims and Unemployment Rate, the main gauges of employment trends and labor market conditions, Wed., Dec. 14, 4:30 am, ET.

Following the anticipated pullback in inflation, the U.K. employment report has the potential to become another risk event for the pound. Forecasts point to an increase in the amount of jobless claims by up to 17,000 in October from 5,300 in September, while the unemployment rate stays unchanged at 8.3%.

6. JPY- Japan Tankan Index, Bank of Japan’s quarterly survey of large and small manufacturing and services companies, which serves as the main indicator of economic conditions in Japan, Wed., Dec. 14, 6:50 pm, ET.

The Japanese economic activity slowed significantly in Q2 2011 as a result of the devastating earthquake and tsunami but recovered in the third quarter, however the Bank of Japan’s benchmark survey is expected to underline some weaknesses with a manufacturing sector index reading of -2 from 2 in Q2 and a flat services sector reading of 1, same as the second quarter.

7. CHF- Swiss National Bank Interest Rate Announcement, Thurs., Dec. 15, 3:30 am, ET.

With deflationary pressures mounting, the strong franc hurting exporters and the economy, and the euro incapable of appreciating beyond its recent range versus the franc, it would not be a surprise to see the Swiss National Bank forced into additional action to curb the strength of its currency. The “mystery” surrounding the next step of the SNB has managed to keep the euro above the minimum exchange rate target of 1.20 against the franc. However, it may be only a mater of time before the Swiss National Bank gives in to political pressure for much bolder measures, including raising the EUR/CHF exchange rate floor from 1.20 to 1.30.

8. EUR- Euro-zone HICP- Harmonized Index of Consumer Prices, the main measure of inflation, Thurs., Dec. 15, 5:00 am, ET.

Despite of the stubbornly high inflation, fighting it has not been the current focus of the European Central Bank and the latest rate cuts were a testament to the bank’s new priority- stimulating economic growth in an effort to avoid a double dip. Although inflationary pressures in the Euro-zone are expected to remain unchanged at 3.0% y/y in November, same as the 3.0% y/y reading in October, expect the European Central Bank to continue to “look the other way”.

9. USD- U.S. Jobless Claims, an important gauge of employment trends and labor market conditions, Thurs., Dec. 15, 8:30 am, ET.

Throughout 2011, this weekly column has regularly mentioned 375,000 as the number to watch as a leading indicator of consistent improvement in the U.S. job market and future decline in the unemployment rate. Consensus forecast are pointing to a move higher to 389K, but with last week’s drop to 381,000, the jobless claims have registered a nine-month low and are approaching the 375K mark.

10. USD- U.S. CPI- Consumer Price Index, the main measure of inflation, Fri., Dec. 16, 8:30 am, ET.

Inflation would probably remain a non-issue for the Fed with forecasts expecting a flat 2.1% y/y reading in the November Core CPI, which excludes volatile food and energy costs.

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December 5, 2011

Forex Market Outlook 12/5/11

Filed under: Forex News — Tags: a-fiscal-union, aussie, australia, china, decision, euro, forex, fundamental, invest, japan, loonie, number, oil, solve-it-faster, yen — admin @ 7:42 am

This week like many others in recent history is going to be all about the Euro. I’m sure you are all surprised by this; as the Euro zone has been relatively quiet of late. Ha, just kidding. Obviously the Euro zone debt crisis has been the major topic in financial markets and the impediment to market advancement.

Last Friday’s Non-Farm Payrolls report here in the US left something to be desired despite the great headline number showing a .4% decline to 8.6% unemployment from 9%. The problem is that the number of added jobs came in as expected, and the number was largely a reflection of discouraged workers leaving the workforce. While it wasn’t a bad number, it wasn’t all too great either so the markets sold off accordingly ahead of the weekend’s potential for a risk event to occur.

However this morning we are back to risk taking mode with a renewed hope that this week will be the week that EU leaders get it all figured out. Friday’s EU Leaders meeting in Brussels is expected to produce words that show progress toward finding a solution. Note that I didn’t say, “find a solution” as we are likely to get more of the same. But leaders now have to do more to assuage market fears and to slow bond vigilante attacks on the PIIGS countries as higher bond yields will hurt the process and there is no way EU leaders can solve it faster than yields becoming unsustainable.

The market would love to hear that they have found a way to have more of a fiscal union, or to at least a way to provide for better oversight. Also, Germany backing away from an outright refusal to consider Euro bonds could also help in the process. The ECB rate policy meeting on Thursday could produce a 25bp rate reduction, as Draghi has been quick on the trigger and may try to halt a potential recession before one even gets started.

Thursday will also bring the UK rate policy decision and it will be interesting to see if they do anything at this point after increasing the asset purchases last time. The BOE has been ultra-accommodative despite the inflation, and the economic data still continues to produce decent results in comparison to the rest of the world.

There are also interest rate decisions for the commodity bloc, with Australia, New Zealand and Canada expected to make no change to policy.

Global stocks are higher to start the morning, as is oil which has just reached $102. Surprisingly gold is not following suit, which could mean that oil premium is a result of the geo-political climate in the Middle East.

There is also manufacturing and GDP data due out for various countries (check the economic calendar), but by and large the biggest driver of markets this week will be the news out of Europe and if we get any unexpected rate changes from Central banks.

The markets definitely want to go higher from here and the Euro debt crisis is the only thing really holding us back. Friday’s EU meeting will be important as to how we close the week, as will various economic data due out of China including manufacturing, retail sales, and CPI.

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November 30, 2011

Forex Market Outlook 11/30/11

Filed under: Forex News — Tags: account, bank, fear, forex, fundamental, fxedu, inflation-with, interest, lower, merely-provides, nzd, oil, trade — admin @ 6:59 am

Wow what a morning! I was about to tell you about all of the mundane things that have happened so far overnight and what to expect later today—and then the markets got hit with the unexpected.

Central banks around the globe including the: Fed, BOE, ECB, BOC, and the BOJ, essentially made a formal, coordinated intervention in the currency markets by reducing existing swap lines by 50 basis points. This move is intended to free up liquidity to help prevent the Euro and global debt crisis form becoming a liquidity crisis (shortage of cash) to help countries service their debt.

This means that more cash is available and immediately the US dollar (as the world’s reserve currency) weakened, to the tune of 200 pips vs. Euro, 200 pips vs. Aussie, 120 pips vs. Pound. This is an incredible move and I’m sorry for those of you that were short risk in this market—especially if you don’t use protective stops!

Yesterday’s target of 1.0250 from the chart of the day on AUD/USD was easily met and in fact left money on the table. But 250 pips in a day is very welcome!

Yesterday’s EU Finance Ministers meeting produced little except that they are trying to drag the IMF into a larger role to cover the EFSF and they have agreed to back Euro zone bonds at 30%, essentially meaning that if default occurs investors would lose “only” 70% of their investment. Gee, thanks! Meanwhile yields continue to rise in the periphery countries, though the German 1-year note now has a negative yield!

Things are moving along in Germany, as their unemployment rate ticked slight lower than expected to 6.9%, though overall unemployment in the Euro zone is at 10.3%, slightly higher than expected.

The other big news of the morning was that China had reduced their lending reserve requirements for the first time in 3 years, essentially making lending easier for the banks. This should act as a catalyst for global demand, and the markets moved higher on the news. Of course this action was trumped by dramatic move we saw later in the morning.

Both stocks and global equities are up big-time on this news, with oil leading the charge at around 101.50. Take a look at my video from earlier this morning prior to the news, it will show you the dramatic difference.

Here in the US, the ADP employment change came in much better than expected, showing that 206K jobs were added vs. an expected 130K. Some may try to extrapolate this figure to a gain in NFP on Friday, but the two are uncorrelated.

Later this morning we will get pending home sales figures which are expected to show a slight gain. Housing figures have been weak very recently and this lagging indicator will likely be irrelevant after the moves we’ve seen already today. And later today we will also get the release of the Fed beige book survey though we have recently heard that QE3 may be on the table, today’s action may put that on hold for a while. Until the money dries up again, that is.

Canada will be reporting GDP figures later this morning which are expected to show a monthly gain of .3%, pushing the YoY to 2,7% from last month’s reading of 2.4%.

I cannot begin to describe the dramatic nature of this coordinated move from earlier this morning. Part of the “problem” with all of this market transparency is that big players can usually get in front of the proposed action and sometimes negate the intended effects. So they have to spring the news when no one expects it.

That’s not to say that I always agree with actions that intervene with free markets, however when global problems are perhaps much bigger than people know, preventing economic Armageddon is appreciated. I don’t claim to know the extent of the problems in Europe or what the potential of a failure might be except to say that it would be bad.

This morning’s action essentially buys more time for those that are in trouble to get their houses in order and fix the problems that ail them. For today’s action solves the pending global liquidity problem, but it does not solve the solvency and debt problems.

The Euro zone and banks with exposure to the Euro debt need to use this opportunity to come up with real solutions otherwise we have just kicked the can down the road a little more. Expect inflation to pick up in a major way in at least commodities prices, with the outcome uncertain.

Volatility is still very high, so be careful with your trading. Always use stop losses, and expect the unexpected!

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November 26, 2011

Trading Week Outlook: Nov. 28 – Dec. 2

Filed under: Forex News — Tags: a-crucial-part, a-reading-above, disappointing, employment, forex, fundamental outlook, main, number, research, unemployment — admin @ 9:29 am

Nov. 25, 2011 (Allthingsforex.com) – The week ahead will mark the beginning of the final month of the year with a series of important U.S. economic data culminating with the Non-Farm Payrolls and Employment Situation report, as traders continue to ponder the impact of the EU debt crisis, the state of the U.S. economy and the odds of a QE3 announcement at the Fed’s December 13 meeting.

In preparation for the new trading week, here is the outlook for the Top 10 spotlight economic events that will move the markets around the globe.

1. USD- U.S. New Home Sales, an important gauge of housing market conditions measuring the number of newly constructed homes with a committed sale during the previous month, Mon., Nov. 28, 10:00 am, ET.

In light of the better-than-expected existing home sales report, sales of new homes in the U.S. could follow suit with a small increase to 315K in October from 313K in September.

2. USD- U.S. Consumer Confidence Index of consumers’ outlook on present and future economic conditions, Tues., Nov. 29, 10:00 am, ET.

The confidence of U.S. consumers is forecast to recover from the disappointing drop to 39.8 in September as the index rises to 43.0 in October.

3. EUR- Euro-zone HICP- Harmonized Index of Consumer Prices, the main measure of inflation, Wed., Nov. 30, 5:00 am, ET.

Inflationary pressures in the Euro-zone are expected to remain unchanged at 3.0% y/y in November, same as the 3.0% y/y reading in October, but the European Central Bank might just look the other way as rising borrowing costs and fears of a double dip have placed concerns about the stubbornly high inflation on the back burner for the time being.

4. USD- U.S. ADP-Automatic Data Processing Employment Report, a measure of jobs lost or added to the private sector of the economy, also serving as a leading indicator of the monthly non-farm payrolls, Wed., Nov. 30, 8:15 am, ET.

After adding 110K new jobs in October, the U.S. private sector payrolls are forecast to continue the trend with another 130K jobs in November. An upbeat ADP report could offer a nice prelude to Friday’s non-farm payrolls.

5. CAD- Canada GDP- Gross Domestic Product, the main measure of economic activity and growth, Wed., Nov. 30, 8:30 am, ET.

The Canadian economy is forecast to return to growth by up to 0.4% q/q in the third quarter of 2011 after shrinking unexpectedly by 0.1% q/q in the second quarter. The data should be in line with recent forecasts expecting that the Canadian economy may slow down but would be able to avoid a recession, as growth picks up from 2.1% y/y in 2011 to 2.4% in 2012 and above 3.0% y/y in 2013.

6. USD- U.S. Pending Home Sales, a leading indicator of housing market activity measuring the amount of homes under contract to be sold, Wed., Nov. 30, 10:00 am, ET.

An optimistic sequence of housing market data could continue with the U.S. pending home sales index which is forecast to rise by 1.4% m/m in November after the disappointing drop by 4.6% m/m in October.

7. CHF- Swiss GDP- Gross Domestic Product, the main measure of economic activity and growth, Thurs., Dec. 1, 1:45 am, ET.

Growing at 0.3% q/q pace in the first quarter, the Swiss economic growth in the second quarter was revised lower at 0.4% q/q from the preliminary estimate of 0.6% q/q, and it is expected to slow again to 0.2% q/q in Q3 2011. The lower GDP reading should serve as an indicator of the negative impact of the strong franc on the Swiss economy, which coupled with the rising threat of deflation could prompt the Swiss National Bank into additional action to weaken its currency.

8. USD- U.S. ISM Manufacturing Index, a leading indicator of industrial activity, where a reading above or below 50 is the dividing line between economic expansion and contraction, Thurs., Dec. 1, 10:00 am, ET.

While purchasing managers indexes in other major economies have been declining into contraction territory, the U.S. manufacturing and services indexes have managed to sustain above the 50 boom/bust line. The U.S. manufacturing sector is forecast to show resilience for another month with an ISM manufacturing index reading of 51.5 in November from 50.8 in October.

9. CAD- Canada Employment Situation and Unemployment Rate, the main gauge of employment trends and labor market conditions, Fri., Dec. 2, 7:00 am, ET.

Following the dismal October report when the Canadian labor market lost 54,000 jobs, the economy is expected to add up to 17,000 new jobs in November. The unemployment rate is forecast to stay at the same 7.3% level in November.

10. USD- U.S. Non-Farm Payrolls and Employment Situation Report, one of the most important indicators of economic health, measuring the number of new jobs created or lost in the world’s largest economy, Fri., Dec. 2, 8:30 am, ET.

The upbeat economic data throughout October was followed by some reports with negative undertones throughout November, raising QE3 odds. With more FOMC policy makers warming up to the idea of additional asset purchases ahead of the Fed’s meeting on December 13, the Non-Farm Payrolls report will be a crucial part of the QE3 puzzle. The consensus forecasts are pointing to another cautiously optimistic for the U.S. labor market report with the economy adding up to 117,000 jobs in November, compared with 80,000 in October, while the unemployment rate remains unchanged at 9.0%.

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November 25, 2011

Forex Market Outlook 11/25/11

Filed under: Forex News — Tags: a-quick-recap, currency market, currency-pairs, economic, euro, europe, forex, market, not-surprising, oil, practice, time, usd, with-the-short, yen — admin @ 6:56 am

I hope everyone here in the US had a great Thanksgiving yesterday, though the same can’t be said for the markets. We are still in risk aversion mode as the Euro debt crisis continues to plague the global economy so the US dollar has been the favored investment vehicle of choice.

Today is a shortened session here in the US with the stock market open for a half-day session. There is likely to be little action for stocks so the correlative effects of market movements will be minimal. However, it must be noted that with decreased volume there is sometimes increased volatility.

While there is no news due out for the US session, a quick recap of this morning’s news shows that confidence figures in the Euro zone came in worse than expected. While this is not surprising, yesterday’s reports of German GDP and confidence figures were positive. GDP in Germany was 2.5% YoY, as expected. IFO confidence figures all cam e in better than expected which shows that Germany is still moving along, despite the bond auction disaster from earlier this week,

In the UK, GDP figures also came in as expected, showing .5% growth which is not a great figure. It is for this reason that the BOE has been ultra-accommodative despite the high inflation they are experiencing.

Also in the Euro zone, Portugal had their credit rating reduced to junk status, and they have been all but an afterthought as the markets have focused on the Spanish banks and Italy’s government debt.

The picture continues to worsen in the Euro zone and the push for a Euro bond is picking up traction, for those who still want to see the Euro succeed. As this situation drags out, the global economy will continue to suffer and a solution will not be forthcoming overnight.

But we are seeing a bit of a morning bounce here as perhaps some of the selling was overblown. Risk still remains at heightened levels so I’m going to continue with the short-term trading themes until more clarity emerges.

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November 21, 2011

Forex Market Outlook 11/21/11

Filed under: Forex News — Tags: a-call-for, account, bank, both-the-euro, chart of the day, course, currency-pairs, forex, forex trading, interest, kiwi, ratings, realization, rsi, sentiment — admin @ 6:59 am

Markets are selling off this morning as the realization that the debt “super-committee” was nothing more than a “super-sham” intended to set the stage for the unbearably ugly political battle we are about to see unfold over the course of the next year. While the most optimistic of us had high hopes that they might be able to rise to the occasion and come up with solutions, the most pessimistic are saying, “told you so” this morning.

However all is not lost now that the abject failure of this doomed idea has materialized, as there will be automatic deficit reductions of $1.2 trillion. The problem is that it these automatic cuts will not be made responsibly as it will hurt those who can afford it the least and will weaken our national defense in the process. Thanks a lot.

Apparently Spain is a more reasonable place and they have elected a new conservative government who immediately are getting a baptism of fire but are saying all of the right things to start. It is obvious that major reforms are needed in Spain and they appear committed to deficit reduction but this may be a losing proposition if the ECB does not do something about the rising yields in the region.

This is setting up an inter-Euro battle as the markets are calling for a TARP-like solution where the ECB becomes a buyer of last resort and keeps the bond vigilantes from driving yields higher. As borrowing costs go up it makes it harder for countries to service debt whether they undertake massive austerity or not. Both Germany and the ECB itself are dead-set against this type of solution which may be the only way the Euro in its current form can survive.

Meanwhile there is some economic data due out this week and most if it is shoved forward to the next two days as the US markets are closed on Thursday for the Thanksgiving holiday. The economic data is weakening around the globe and now China is getting into the act saying that we are facing a prolonged global recession ahead.

To give a quick run-down of what’s happened earlier today and then what to expect later this week will probably be the most effective way to highlight this week’s action. The big news from earlier this morning was that Japanese exports came in lower than expected and UK home prices fell more than expected. These figures fall in line with the stalling global growth story so it will be important to see how Central banks respond.

The release of the BOE rate policy meeting will be out on Wednesday so we will see how committed they are to further monetary easing even after they increased their asset purchase program at the last meeting despite CPI readings in the 5% range. The Bank of Japan could also be close to intervening again in its currency as recent strength has it back to levels close to highs from which earlier interventions were enacted.

Existing home sales in the US are due out later this morning and expected to have declined, and there are a bunch of ECB leaders speaking today as well.

Tomorrow will bring the release of the FOMC meeting minutes, as well as US personal consumption figures and US GDP estimates. Canadian retail sales figures and EU consumer confidence round out the day.

Wednesday is packed with the aforementioned Central bank minutes releases, as well as Euro zone PMI and industrial orders figures. US data releases include: durable goods orders, personal income and spending, initial jobless claims, and U Michigan consumer confidence figures. Essentially these figures that are usually spread out along the week have been moved up for the holiday.

On Thursday, German GDP figures highlight the docket, with very little to be released on Friday.

Frankly I am a little surprised at the market reaction to the “super-failure” (as I am calling it) as I can’t believe that anyone thought this would work in the first place. The concern is that the ratings agencies will downgrade the US yet again but we saw what happened the last time we got a downgrade—that yields in the US went LOWER as a result as the flight to safety trade kicked in.

I suppose the EU dragging its feet could also be an issue but the landslide election in Spain gives me hope that they people of Europe are starting to come around to the reality that things need to change. Once they accept it and move on, they may be able to recover.

In other words, just another week in the forex market!

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November 13, 2011

Trading Week Outlook: Nov. 14 – Nov. 18

Filed under: Forex News — Tags: a-narrow-range, aud, consumer-price, currencies, forex, health, japan, marketplace, markets, sales, september, trades, usd — admin @ 10:42 am

Nov. 12, 2011 (Allthingsforex.com) – In case the market decides to pay attention not only to headlines from Italy and Greece but also to economic data, the week ahead will offer plenty of insights on inflation and economic conditions in some of the world’s largest economies.

In preparation for the new trading week, here is the outlook for the Top 10 spotlight economic events that will move the markets around the globe.

1. JPY- Japan GDP- Gross Domestic Product, the main measure of economic activity and growth, Sun., Nov. 13, 6:50 pm, ET.

After registering its third recession in a decade and contracting by 0.9% q/q in Q1 and 0.5% q/q in Q2, the preliminary GDP estimate for the third quarter of 2011 is forecast to show the Japanese economy returning to growth by up to 1.5% q/q in Q3 2011. More upbeat GDP report and safe-haven flows should keep the yen supported in spite of the desire of the Japanese authorities to see their currency weaken.

2. GBP- U.K. CPI- Consumer Price Index, the main measure of inflation preferred by the Bank of England, Tues., Nov. 15, 4:30 am, ET.

The September spike in inflationary pressures to 5.2% y/y could be followed by a slight pullback to 5.1% y/y in October. Stubbornly high inflation, however, has not prevented the Bank of England from continuing its accommodative monetary policy and doing more quantitative easing.

3. EUR- Euro-zone GDP- Gross Domestic Product, the main measure of economic activity and growth, Tues., Nov. 15, 5:00 am, ET.

More signs of deteriorating conditions in the Euro-zone’s economy might come from the third quarter GDP estimate with forecasts pointing to only 0.2% q/q growth- same as the 0.2% q/q reading in Q2 2011. The GDP report will be released at the same time as the German ZEW economic sentiment index which is also expected to be weak with the index dropping to -52.1 in October from -48.3 in October.

4. USD- U.S. Retail Sales, an important gauge of consumer spending measuring the total receipts at retail establishments, Tues., Nov. 15, 8:30 am, ET.

A lot is riding on this report as consumer spending is a major part of the U.S. economy, but retail sales might not demonstrate a lot of strength with a smaller increase by 0.2% m/m in October from 1.1% in September. However, the slowdown could be temporary as sales at retail establishments would likely see a boost in the upcoming months due to the holiday shopping season.

5. JPY- Bank of Japan Interest Rate Announcement, Wed., Nov. 16, around 12:00 am, ET.

With the U.S. dollar slowly but surely erasing a big chunk of its post-intervention gains against the yen, it would be interesting to find out if the Bank of Japan is ready to stand against the tide of persistent yen strength. This is provided that they haven’t intervened by the time the meeting takes place, as another intervention remains a likely event.

6. GBP- U.K. Jobless Claims and Unemployment Rate, the main gauges of employment trends and labor market conditions, Wed., Nov. 16, 4:30 am, ET.

The U.K. employment data followed an hour later by the Bank of England inflation report could become a couple of back-to-back risk events for the pound. Forecasts point to an increase in the amount of jobless claims by up to 20,000 in October from 17,500 in September, while the unemployment rate inches higher to 8.2% from a previous reading of 8.1%.

7. EUR- Euro-zone HICP- Harmonized Index of Consumer Prices, the main measure of inflation, Wed., Nov. 16, 5:00 am, ET.

The European Central Bank’s preferred inflation gauge is forecast to stay unchanged at 3.0% y/y in October- same as the 3.0% y/y reading in September, but month-over-month the index is expected to pull back with a smaller 0.3% m/m increase in October from 0.8% in the previous month. Shifting monetary policy from maintaining price stability to pro-growth on the threat of a double dip in the economy could spell further ECB rate cuts.

8. GBP- Bank of England Inflation Report, the bank’s official assessment and outlook on inflation, Wed., Nov. 16, 5:30 am, ET.

As the latest PPI report showed inflationary pressures coming off their recent highs, if the Bank of England offers a dovish outlook on inflation, there will be no urgency for the bank to start tightening monetary policy anytime soon. Lower inflation expectations and risk aversion could lead to some unwinding of long GBP positions.

9. USD- U.S. CPI- Consumer Price Index, the main measure of inflation, Wed., Nov. 16, 8:30 am, ET.

Consumer prices in the United States could remain a non-issue for the Fed with forecasts expecting a flat 0% m/m reading in October from 0.3% m/m in September. Only a significant drop in unemployment and consistent improvement in the U.S. job and housing markets could change the Fed’s mind and its promise to keep rates “exceptionally low”. Until then, QE3 would not be completely out of the picture.

10. USD- U.S. Housing Starts, a leading indicator of housing market activity measuring construction of new residential properties, Thurs., Nov. 17, 8:30 am, ET.

Losing momentum after the jump to 658K in September, the U.S. housing starts are forecast to decline to 610K in October, while the building permits flatten in the 600K range.

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November 11, 2011

Forex Market Outlook 11/11/11

Filed under: Forex News — Tags: currency, economic, forex, gold, live, michigan, practice account, rate-decision, results, trend, written-about, yen — admin @ 7:09 am

Today is “11-11-11” and folks have been waiting a while for this as sometimes the wackiness that ensues on days like today will leave you scratching your head. But today is also Veteran’s Day here in the US, so it is a bank holiday which means that we could see reduced volumes in the currency markets.

However, the rest of the world is not sleeping so we must turn our attention to what is taking place around the globe. Today is an extremely light day of news, so focus still remains on Italy and the Euro debt crisis. Global stocks are higher to start the morning.

In Italy, the upper House (Senate) has agreed to the austerity measures put forth so we are now awaiting for approval from the lower House. Should this go smoothly, then Berlusconi could step down by the end of next week. Part of the problem though is that nothing ever goes smoothly. Right now the leading candidate to replace him is Monti, who is scene as a “technocrat” and seemingly capable of handling financial matters.

In Greece, the new unity government is being voted on with Papademos as the interim leader. While there won’t be a pop quiz on these names later, it should be important to note that there is a serious shift toward leaders with financial backgrounds assuming power in these countries. This is intended to instill confidence that some of these European countries can get back to fiscal sanity.

On the news front, China has increased lending to support its economy which is reflected by some risk appetite in the marketplace. Between Chinese growth and potential European stability measures, markets are looking to take back some of Wednesday’s losses. Italy’s austerity is a good start.

In the UK, PPI data came in lower across the board which could mean that they are finally seeing some relief form inflation. CPI data has remained elevated for some time and the BOE mantra that it would come down eventually because of austerity measures may finally be coming true. However, the recent tone at the BOE has been dovish so do rule out further QE if the economic data worsens.

Speaking of worsening economic data, there are more and more calls out there that Europe is going to slip into recession so there are increased calls for the ECB to step up in the debt crisis. The ECB so far has been refusing to be a buyer of last resort for Euro debt so that has given the market the ability to drive yields higher, as we saw the other day in Italy when their 10-year bond yield rose to over 7%. It is now back in the 6.5% range but shows that the ECB is unwilling and perhaps unable to provide better support.

Here in the US, stocks and commodities are set to open higher and today is a bank holiday so there should be lower volume in the currency markets. U of Michigan consumer confidence figures are due out later this morning but I doubt they will have a material impact. My guess is that today will be an “inside day” with little movement either way, though end-of-the-day risk aversion could crop up as fears about Europe come back into focus.

And lastly from the rumor mill, there has been some chatter that Japan had been secretly intervening in its currency vs. USD, as reflected by the price action we saw above 78. Since this has been noted, the Yen has started to appreciate a bit. Whether this is true or not is anyone’s guess but it makes for good conversation.

So at this point I am still erring on the side of caution and am looking to keep my trading to the short-term unless we see a major move which I doubt will happen on a light volume day.

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November 5, 2011

Trading Week Outlook: Nov. 7 – Nov. 11

Filed under: Forex News — Tags: asset, australia, chinese, england, eur, forex, greece, main, market, switzerland, university, usd — admin @ 11:26 am

Nov. 5, 2011 (Allthingsforex.com) – Although much lighter on pivotal economic data, the trading week ahead will not be any less intriguing as headlines from the Euro-zone debt crisis continue to dictate the market’s direction and traders prepare for the next act of the Greek drama, while keeping an eye on the political situation in Italy.

In preparation for the new trading week, here is the outlook for the Top 10 spotlight economic events that will move the markets around the globe.

1. CHF- Swiss CPI- Consumer Price Index, the main measure of inflation preferred by the Swiss National Bank, Mon., Nov. 7, 3:15 am, ET.

The Swiss inflation gauge is forecast to increase by 0.3% m/m in October, same as the 0.3% m/m reading in September, while the yearly CPI measure remains near zero, at 0.5% y/y. With the euro breaking lower towards its recently established “floor” against the Swiss franc, the Swiss National Bank might need to refresh the market’s memory of its promise to do whatever it takes to defend the EUR/CHF 1.20 exchange rate level. Moreover, the SNB could even be prompted to raise the floor up to 1.30, especially if the “massively overvalued” franc and the risk of deflation continue to loom over the economy.

2. EUR- Euro-zone Retail Sales, an important gauge of consumer spending measuring the total receipts at retail establishments, Mon., Nov. 7, 5:00 am, ET.

In case the market decides to start paying attention to economic data rather than the headlines from Greece and other EU debt-ridden nations, the weakness in the Euro-zone economy is expected to continue with retail sales forecast to decline for another month by 0.2% m/m from the 0.3% m/m drop in the previous month.

3. GBP- U.K. Industrial Production, the main gauge of industrial activity measuring the output of factories, mines and utilities, Tues., Nov. 8, 4:30 am, ET.

With the Manufacturing PMI dipping below 50 into contraction territory, the U.K. industrial production is forecast to register an anemic increase by 0.1% m/m in September, compared with 0.2% m/m in August.

4. CNY- China CPI- Consumer Price Index, the main measure of inflation, Tues., Nov. 8, 10:00 pm, ET.

Inflationary pressures in China are forecast to stage a larger decline to 5.4% y/y from 6.1% y/y in the previous month. Lower inflation could ease some of the concerns that the Chinese central bank may have lost its grip on inflation and could reduce the odds of more rate hikes by the PBOC. A decision by the Chinese central bank to refrain from raising the benchmark rate further could give the Chinese and the Australian economies a boost, and could lend support to the Australian dollar.

5. NZD- Reserve Bank of New Zealand Financial Stability Report on economic conditions, inflation and future monetary policy, Wed., Nov. 9, 4:00 pm, ET.

At its latest monetary policy meeting, the Reserve Bank of New Zealand surprised the markets with its hawkish stance on inflation and the potential for rate hikes in the near future. The bank would probably echo the same sentiment in its financial stability report, which could help the New Zealand dollar attract some bids.

6. AUD- Australia Employment Situation and Unemployment Rate, the main gauge of employment trends and labor market conditions, Wed., Nov. 9, 8:30 pm, ET.

The Australian labor market is expected to cool off with slower job creation of up to 10,000 new jobs added in October, compared with the 20,400 jobs in September, while the unemployment rate rises to 5.3% from 5.2% in the previous month. If coupled with more risk aversion, a weak jobs report could become a significant risk event for the Aussie dollar.

7. GBP- Bank of England Interest Rate Announcement, Thurs., Nov. 10, 7:00 am, ET.

When it comes to the Bank of England’s future monetary policy, the unknown is not whether the bank will change the benchmark rate from its record low 0.5% level, but rather if there will be an expansion or a reduction in the bank’s quantitative easing operations. Policy makers recently decided to expand the Asset Purchase Program beyond the 200 billon-pounds ceiling by another 75 billion pounds, however the latest minutes report stated that “depending on developments in the euro area and financial markets, the size of the stimulus could be adjusted in either direction”. Although it still may be a bit of a long shot, if EU leaders succeed to put out the fire from the debt crisis and the U.K. economy strengthens, the size of the Asset Purchase Program could be reduced, and it would not be surprising to see the GBP benefiting from such scenario.

8. USD- U.S. Jobless Claims, an important gauge of employment trends and labor market conditions, Thurs., Nov. 10, 8:30 am, ET.

Breaching below the 400K mark to 397K, first-time applications for unemployment benefits are forecast to inch higher to 402K, still above 375K- the number estimated by economists to signal significant decline in unemployment.

9. GBP- U.K. PPI- Producer Price Index, the main measure of wholesale inflation and a leading indicator of consumer price inflation, Fri., Nov. 11, 4:30 am, ET.

Despite of the recent rise in the CPI to 5.2% y/y, producer prices in the U.K. are expected to register a slight pullback with the core PPI forecast to reach 3.7% y/y in October from 3.8% y/y in September.

10. USD- U.S. Consumer Sentiment, the University of Michigan’s monthly survey of 500 households on their financial conditions and outlook of the economy, Fri., Nov. 11, 9:55 am, ET.

The preliminary consumer sentiment index estimate for November is forecast to bring another month of improvement with a reading of 61.1, compared with 60.9 in October. Should the upcoming U.S. economic reports manage to keep up with the October trend, more optimistic undertones in the U.S. economic data throughout the month of November would help rule out concerns of a double dip and could reduce QE3 odds ahead of the Fed’s next meeting on December 13.

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October 17, 2011

Forex Market Outlook 10/17/11

Filed under: Forex News — Tags: account, currency-pairs, fear, forex, japan, market-looks, time, whether-or-not — admin @ 7:32 am

Over the weekend, G-20 leaders re-iterated their desire that EU leaders pick up the pace and come up with the solution to the Euro debt crisis, essentially giving them a week to finalize the plan. This provided the market with some optimism to start out the day, but that optimism was short-lived as Merkel’s reps sought to lower expectations.

The message was that essentially the “dream” of solving the crisis in the next week was not likely, essentially dousing risk appetite lower. While European leaders believe that they have identified 5 areas that need to be addressed, as always, the devil is in the details.

One of the biggest points of contention is what level of losses will private investors voluntarily accept and whether or not those losses would trigger contagion to the other areas of the Euro zone. The previously agreed upon 21% loss is seen by leaders to be insufficient, so obviously banks are balking at higher figures. If banks are forced to take a larger “haircut”, then logically it makes sense that they will likely need to retain more capital.

News on the docket this week will be highlighted by inflation figures in the US, UK, and EU as well as the release of the minutes from the rate policy meetings at the BOE and RBA respectively. While inflation is seemingly not a problem at this point, it could increase significantly if the cloud of worry is removed from the markets on the potential Euro debt deal.

Tomorrow will bring economic data from China which could have a major affect on both the Aussie and Kiwi. GDP figures will show China’s growth rate and any perceived slowdown could be compounded if the currency manipulation bill here in the US gets more traction. Right now it appears to be DOA, but it’s sometimes hard to gauge what self-serving politicians might do. Regardless of whether the bill passes, the conversation has been turned up with the volume getting louder from both sides.

There is also going to be a bit of Fedspeak this week with the theme likely directed toward the Euro zone and their troubles. Markets here look poised to rally if EU leaders can come up with a decent plan. US corporate earnings have been acceptable so far given the overall economic environment, but so much more needs to be done.

If the risk trade can return in any meaningful way, then we could see higher prices across the board for both stocks and commodities. This is where it gets interesting though, as I could envision a scenario where stocks trade higher but commodities trade lower on overall reduced global growth. How this will all play out is anyone’s guess but I think the markets will react more forcefully to good economic data and less to negative data.

The Pound is likely to see some gains if money flows continue to move from Europe to other areas around Europe (including the Swissie) and tomorrow’s CPI report could put the BOE in an awkward position if inflation continues to rise after they increased the size of their QE program by 75 billion. The minutes released from the rate policy meeting could show what they might do next.

Other than that, it’s really just about risk this week emanating from the Euro zone and whether or not the market believes a solution may be forthcoming. Of course this is all predicated on the belief that there is a solution possible that would not kill the markets and cause further contagion.

This might be the problem that haunts EU leaders and the markets should be careful what they wish for!

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