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October 16, 2011

Trading Week Outlook: Oct. 17 – Oct. 21

Filed under: Forex News — Tags: a-leading-indicator, bank, climate, consumer-price, currencies, eur, euro, european, forex, gbp, main, outlook — admin @ 8:05 am

Oct. 15, 2011 (Allthingsforex.com) – Although it would be interesting to see what a couple of forward-looking sentiment indexes from the Euro-zone and the U.S. housing, industrial activity and inflation reports might have to add to the current global economic backdrop, the trading week ahead will be all about Sunday’s EU Summit as traders anxiously await to find out more details on the promised by European leaders new plans to put out the fire from the EU sovereign debt crisis.

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. Industrial Production, the main gauge of industrial activity measuring the output of factories, mines and utilities, Mon., Oct. 17, 9:15 am, ET.

Despite of the unexpected increase in the ISM Manufacturing PMI, the U.S. industrial production could lose some momentum in September with a reading of 0.1% m/m, down from 0.2% m/m in August.

2. CNY- China GDP- Gross Domestic Product, the main measure of economic activity and growth, Mon., Oct. 17, 10:00 pm, ET.

As a result of the global slump, the world’s second-largest economy China is expected to slow, although not dramatically, to 9.2% q/y from 9.5% q/y in Q2 2011.

3. GBP- U.K. CPI- Consumer Price Index, the main measure of inflation preferred by the Bank of England, Tues., Oct. 18, 4:30 am, ET.

Inflationary pressures in the U.K. are forecast to stay stubbornly high and even spike up to 4.9% y/y in September, compared with 4.5% y/y in August. Even though it might be a long shot, the GBP could attract some bids on expectations that, in light of rising inflation, the Bank of England could decide to limit the size of the recently-announced additional asset purchases.

4. EUR- Euro-zone ZEW Economic Sentiment Index, a leading indicator of economic conditions and business expectations, Tues., Oct. 18, 5:00 am, ET.

The ZEW institute’s survey is expected to deliver another indicator of the deteriorating economic conditions in the Euro-zone with the economic sentiment index forecast to register a larger -45.0 decline in October, compared with -43.3 in August.

5. GBP- Bank of England Monetary Policy Committee Meeting Minutes, a comprehensive report of the central bank’s meeting that could provide an outlook on the economy, interest rates and future monetary policy, Wed., Oct. 19, 4:30 am, ET.

The minutes should serve as a reminder of the fears of contagion from the EU debt crisis and the threat of a double dip for the U.K. economy which were the main reasons behind the Bank of England’s decision to offer more quantitative easing and to expand the bank’s Asset Purchase Program by another 75 billion pounds. In other words, heightened event risk for the GBP…

6. USD- U.S. U.S. Housing Starts, a leading indicator of housing market activity measuring construction of new residential properties, and U.S. CPI- Consumer Price Index, the main measure of inflation, Wed., Oct. 19, 8:30 am, ET.

While the U.S. housing starts are forecast to increase up to 590K in September from 571K in August, the building permits are expected to decline to 610K in September from 630K in the previous month.

Still not large enough of an increase to cause the Fed to reconsider its promise to keep rates “exceptionally low through 2013”, the core consumer price index, which excludes food and energy costs, is expected to rise to 2.1% y/y in September from 2.0% y/y in August.

7. GBP- U.K. Retail Sales, an important gauge of consumer spending measuring sales at retail establishments, Thurs., Oct. 20, 4:30 am, ET.

The U.K. consumer spending is forecast to increase by 0.1% m/m in September, compared with the 0.2% m/m drop in August.

8. USD- U.S. Existing Home Sales, the main gauge of the condition of the U.S. housing market measuring the number of closed sales of previously constructed homes, condominiums and co-ops, Thurs., Oct. 20, 10:00 am, ET.

After rising to 5.03M in August, the sales of existing homes in the U.S. are forecast to slow to 4.91M in September, confirming the lack of significant improvement in the U.S. housing market.

9. EUR- Germany IFO Institute Business Climate and Expectations Index, a leading indicator of economic conditions and business expectations in the Euro-zone’s largest economy, Fri., Oct. 21, 4:00 am, ET.

In the aftermath of the anticipated drop in the ZEW economic sentiment index, the German IFO index is forecast to follow suit with a reading of 106.5 in October from 107.5 in the previous month.

10. EUR- EU Summit of leaders of the 27 countries in the European Union, Sun., Oct. 23, all day.

Without a doubt, the main event of the trading week, the EU Summit is when the markets around the world expect to see the promised “comprehensive strategy on the euro-area sovereign debt crisis”. The summit was postponed because EU leaders needed more time to finalize their new plans on how to prevent further contagion, recapitalize banks, and conclude discussions on the next bailout installment for Greece. “Better late than never” optimism that EU leaders have finally realized the seriousness of the situation after about 18 months since the beginning of the crisis, has helped investor sentiment and risk appetite, with the euro registering its biggest rally since March, 2009. A lot is riding on this summit and if the EU leaders deliver anything short of spectacular, disappointment and risk aversion could quickly set back in, renewing the pressure on the single currency.

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October 14, 2011

Forex Market Outlook 10/14/11

Filed under: Forex News — Tags: a-meeting-next, aussie, economic, eur, euro, forex, japan, looks-as-though, practice account, time, top stories, usd — admin @ 7:07 am

It looks as though the European rescue plan is starting to take shape as a meeting of G-20 leaders is likely to produce a framework for the resolution. It is then likely that whatever emerges will be discussed at a meeting next week of European leaders and if that is agreed to, then we could have the final resolution by early November as promised by Merkel and Sarkozy.

Some of the points of emphasis will be: what is the haircut in Greek bonds, that is, what percentage of private sector losses will be required. This is important because this may lead to further bank losses that have high exposure to sovereign debt. This leads to the second point, that the ECB needs to help re-capitalize the banks so that they can weather the potential losses. There is also talk that the IMF will step in to provide capital, and the IMF in turn will receive capital infusion from emerging markets countries like China and Brazil.

So in reality, this is really more of a global collaborative effort as it doesn’t look like Europe has the juice to go it alone, and world leaders understand the threat that this poses to global economic health.

This comes as the ratings agency S&P looks to hasten the process by downgrading Spain’s debt for the third time in three years. In addition, there was a no-confidence vote that took place in Italy, which PM Berlusconi survived.

Despite all of this uncertainty and hopefulness, the markets are in risk-taking mode to start the morning, lead by last night’s better than expected earnings report from Google. This has driven stocks higher, and the correlative effects of Dollar weakness have been taking place.

However, the market has turned around a bit on the release of the US advance retail sales figures which were actually a lot better than expected, so this could be a case of markets not looking to be long risk ahead of the weekend. The figure reported showed a gain of 1.1% vs. an expected .7%, which is definitely a plus for the economy.

So why have the markets sold off on that report? Perhaps because it dampens the possibility of further Fed easing as the economic picture improves, or maybe it’s a case of “buy the rumor, sell the news”.

Other news from earlier today was that China’s CPI data came in as expected by slightly lower than last month, posting a reading of 6.1%. If inflation begins to cool in China, then it could be a sign that the economy is slowing. Or it cold also mean that they are ready to ramp up lending again. The potential impact of the currency bill passed in the Senate here in the US to try to force China to re-value their Yuan is unknown at this time, as is the Chinese response to it.

CPI data in Europe also came in as expected at 3%, though the ECB doesn’t have room to move even if they wanted to go higher. The obvious focus there is on the debt crisis.

The only thing else to watch this morning is the U of Michigan Confidence figure which comes out later, though I don’t think it will be a game-changer. With the “Occupy Wall St.” movement and gridlock in government, it is hard to imagine anyone is confident right now.

However, it is times like these when it is usually best to dip your toe in the water. Being a contrarian in the marketplace is a difficult but often times rewarding position to take. If everyone is selling, someone has to be buying, right?

Just some food for thought.

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October 4, 2011

Forex Market Outlook 10/4/11

Filed under: Forex News — Tags: account, commodity, currency, euro, forex, markets, rate-decision, top stories — admin @ 6:56 am

Yesterday’s continuation sell-off from last week was a slight deviation from the activity we were expecting as the usual dose of weekend risk aversion and the re-establishment of risk positions to start the week did not take place. In fact, just the opposite occurred as the selling accelerated throughout the US trading session.

Part of the reason for this was news out of the Euro zone from the EU Finance Ministers’ meeting regarding what it will take for Greece to receive the next tranche of bailout money. One of the impediments had been Finland’s insistence upon some sort of collateral agreement to receive their participation and some sort of deal was reached. But there was also talk that the private sector participation may need to increase. Known as a “haircut”, essentially this would mean that the private sector would have to agree to accept greater losses on the debt than had previously been agreed upon at the July meeting. While no definite level has been mentioned, should the haircut increase significantly banks with heavy exposure to European debt could experience big-time losses.

Thus there has been selling in bank stocks and the overall stock market indices which has dragged the Euro even lower and ignited further safe haven risk aversion via the US dollar and gold buying. PPI figures in the Euro zone came in slightly higher than expected so Thursday’s ECB rate decision could produce no change but serve as a platform for Trichet to speak on the debt crisis.

Overnight, the RBA rate decision in Australia produced no change as expected but they did leave the door open to rate reductions if the economy begins to slow significantly or if employment starts to fall. Causing dual stress on the Aussie is the fears of a Chinese slowdown which is evidenced by their lower PMI numbers. On top of this, the US Senate is proposing legislation to combat China’s unfair trade practices of undervaluing their currency which could ignite a trade war between the world’s top two economies. While I believe that something needs to be done about the Chinese currency peg, the timing of this may be disastrous. The Aussie is trading at 1-year lows.

Meanwhile the flight to safety has strengthened the Japanese yen to 10-years highs vs. the Euro and Pound and intervention is unlikely unless the Yen strengthens above 76 vs. USD.

Speaking of the Pound, UK GDP figures are due out tomorrow and bets are increasing that the BOE may increase their bond buying to combat a declining economy. While the numbers have been weakening, I’m not sure they are weak enough to warrant further easing at this point. We shall find out on Thursday.

With major risk aversion causing massive selling, thankfully we have Bernanke to the rescue today—not! He is set to speak to the Joint Economic Committee on the state of the economy and I’m sure he’s going to say, “all is well” or words to that effect, and he may even go so far as to hint at further monetary easing. The problem he has and hasn’t understood from the start of this crisis is that cheap money is not the end all be all but that consumer confidence in our economy and policymakers is tantamount. Confidence is near an all-time low and the psyche of the American consumer—and frankly their ability to consume with declining wages and high unemployment—further adds to the downward economic spiral.

Friday’s employment report is a crapshoot at this point as there is no telling what the number of new jobs added will be. Estimates are for 50K jobs to be added though it is unclear if that will be an acceptable figure to the markets even if it is reached.

We are entering very dangerous economic territory here and the recent history has shown that we may be heading straight for the type of market activity we saw after the US financial collapse in mid-2008. With the Euro debt crisis on the brink of disaster, demand for US dollars to increase bank liquidity further contributes to risk aversion and the correlative effects of taking all other markets lower. Demand for Treasuries and Dollars has been high for the past few weeks and despite “Operation Twist” this may continue for some time.

There is no magic bullet at this point that can immediately fix the problems, but solutions at this point are more welcome than non-action. Everyday that passes without resolution hastens the speed at which the problems accelerate. We feel eerily close to that point, so continue to avoid risk until some clarity emerges.

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September 27, 2011

Forex Market Outlook 9/27/11

Filed under: Forex News — Tags: account, currency market, europe, forex, forex trading, live, market, sentiment, time, usd — admin @ 6:41 am

Yesterday’s market rally has continued this morning after news broke yesterday that indeed EU leaders were making significant progress toward coming up with a solution to the debt crisis.

The current plan being floated is one that resembles the US TARP program (Troubled Asset Relief Program) whereby the ECB creates a special purpose vehicle (SPV) that will buy distressed bonds and sovereign debt from banks and issue debt which can be used to access liquidity from the ECB. The general idea is that the bad bonds will sit on the ECB’s balance sheet allowing European banks to continue operations.

While these plans have been floated before, this one seems to be a bit more credible as more details emerge. International pressure on EU leaders to do something (and do it quickly!) was confirmed by Treasury Secretary Geithner, who has hit the TV circuit over the last few days.

As a result of this news, risk assets are back in favor with Dollar and the other safe havens declining. This week is fairly light on news so this morning’s better than expected German consumer confidence figures had little impact.

It is likely that the US home price figures and consumer confidence figures due out later this morning will have a similar effect. While they are expected to have declined, the markets are more concerned with re-capturing some of last week’s losses than with minor data points that show what we already know—that the US economy and thus the global economy has slowed.

One of the “bright spots” about the Euro debt crisis is that it is receiving much of the blame for what ails the global economy. The prevailing notion is that if this situation can just be rectified, then the global economy can resume growth again.

While this situation has been a major source of risk in the marketplace, it must be noted that it is not the sole cause of the global economic slowdown. This “sideshow” may buy time for politicians here in the US to figure out how to work with one another again and institute some pro-growth policies that can get our economy moving again.

We are stuck in a vicious cycle of high unemployment, which reduces consumer confidence and thus demand, which then in turn causes businesses to reduce output which means that they will cut spending if profits fall significantly. The easiest way for them to cut spending is to cut their workforce, which further perpetuates the cycle.

But things aren’t as bad as they seem, as corporate balance sheets have never been healthier and hiring could resume if businesses could become more confident that we have the right policies to grow the economy.

Unfortunately, right now we do not. Washington DC is broken and the fact the markets have been laser-focused on the Euro debt crisis of late has let these guys off of the hook.

If a credible resolution be reached by Euro zone leaders, then we need business to come back here in the US. It all starts with government getting gout of the way and allowing the “American Pie” to increase in scope and size. We shouldn’t be trying to re-allocate a shrinking pie in the name of “fairness” or whatever else they are calling it.

Until we can shelve the ideology in favor of pragmatism, we will continue to stagnate. So it all starts with the Euro zone, for if they can’t get their act together, then what we do here in the US becomes a moot point.

But for now the markets want to believe that the EU will get it together, which I suppose is better than the alternative. While we are not out of the woods just yet, signs point to better days ahead.

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August 16, 2011

Market Outlook 8/16/11

Filed under: Forex News — Tags: carry trade, china, commodities, course, forex, forex market, level, top stories, unemployment — admin @ 6:36 am

This morning all eyes and ears are on Europe as a meeting between the leaders of France and Germany is taking place where they are expected to produce further measures to help deal with the Euro debt crisis.

The major topic is going to be the expansion of the EFSF and guidelines for debt reduction in the countries plagued by excessive indebtedness as a percentage of GDP. But the market perhaps is looking for something more as calls for a Euro-bond that includes and is backed by all countries would help raise capital to help fund those that are in trouble. This idea seems to be gaining traction in the markets, though it is unclear if the leaders are willing to consider it at this point. Overall, Euro zone debt as percentage of GDP overall is very low so this is economically feasible, though could be political anathema.

One of the reasons is that GDP reports this morning show that German GDP grew less than expected, showing a gain of 2.8% vs. an expectation of 3.2%. Overall Euro zone GDP increased 1.7%, slightly lower than the 1.8% expectation. This has prompted a bit of risk aversion in the markets, with stock indices lower and gold trading higher.

In the UK, CPI data came in hotter than expected, showing inflation of 4.4% vs. an expectation of 4.3%. This comes a day ahead of tomorrow’s release of the rate policy meeting minutes, which some are expecting to show a bias toward easing and not tightening. It must be noted that this meeting took place before the riots, so while the BOE may be hoping that stubborn inflation subsides as economic growth contracts, the idea that further QE may be necessary could show up in this report.

In Australia, the release of the RBA rate policy meeting minutes has not deterred the market from believing that the next move on interest rates will be to lower at the next meeting in October.

The Swiss franc and Japanese yen are both higher this morning on risk aversion, and the market is speculating what further action these safe havens can taken to attempt to weaken their currencies. Both Central banks essentially have little control over the value of their respective currencies despite low interest rates and risk aversion has not quelled enough to change recent trends.

In the US, both housing starts and building permits figures are due out though the bar has been set so low that both figures are largely inconsequential at this point. The economic activity gained through these areas is probably offset by the notion that greater supply could be further detrimental to an already floundering housing market.

Even though the ranges have tightened from last week’s excessive volatility, triple digit moves on the Dow are still taking place. Today the major event will be the press conference after the Franco-Prussian meeting today on the Euro debt crisis and what they have resolved, if anything, to do. So there could be some mid-day volatility after the European markets have closed.

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August 9, 2011

Forex Outlook 8/9/11

Filed under: Forex News — Tags: bank, currency, currency market, dow, forex, gold, london, point, pound — admin @ 8:07 am

The markets appear to be “stabilizing” for the time being after yesterday’s massive sell-off, the 6^th largest down move for stocks in the history of the markets. Oil has pulled back as well, though gold is sky-rocketing to new daily highs, reaching just under $1780.

There is obvious fear in the marketplace, and what started out as debt concerns both here in the US has become global economic growth concerns. So right now, the market is unsure who poses the bigger the risk, the US or the Euro zone. This is reflected in the currency values, as EUR/USD has been trading a range with no clear direction.

This is in stark contrast to the commodity currencies, which have sold-off greatly lead by the Aussie which is down close to 10% for the week! On the flip side, the safe havens have received these money flows, with the Swiss franc making new all-time highs vs. Euro and USD. The Japanese yen is also strengthening despite the attempt to weaken the currency through intervention last week.

The British pound is also trading a range as their economic data weakens and also dealing with the “protests” taking place in London right now. I’m not sure that the media is giving this the proper attention it deserves, but looting and rioting are taking place as a single incident has ignited the anger over austerity measures.

One of the last bastions of growth in the global economy has been China, and overnight their CPI data came in higher than expected showing inflation of 6.5% which means that they may make further efforts to slow down their economy. Talk of the global “double-dip” is starting to heat up, as it appears that the soft patch we were dismissing the data as may become a harsh reality.

So it’s the Fed or nothing today, as all eyes are on the FOMC meeting taking place today. What, if anything, can the Fed do at this point? Bernanke will clearly attempt to calm fears in the market but at this point it may be difficult to provide the magic pill that everyone so desires. Instead, the medicine we may be forced to take is a much tougher pill to swallow.

The global banking system while not in great shape is clearly better than in 2008, though European bank exposure to sovereign debt and US bank exposure to a still-declining housing market may make it difficult to bring confidence back. Money pours into US Treasuries, as it is not certain where to go.

So how do we get out of this mess? It all comes back to economic growth. Without it we are doomed and those who think the government can pick up the slack are delusional. Without job creation form private business, demand will continue to weaken.

So while stocks may be higher to start the morning, do not be fooled into believing a bottom is in. This saga is far from over, and thankfully politicians are on vacation for the rest of the month so I don’t have to listen to the blame game take place.

Be cautious and judicious in your trading and use strict risk management principles. Volatility can be your friend, though it can also be your greatest enemy!

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June 24, 2011

Market Rollercoaster!

Filed under: Forex News — Tags: commodities, correlations, forex, fxedu, interest, live, marketplace, money, reduce-the-size, stock, trades — admin @ 7:30 am

Wow, what a wild ride yesterday was in the global market place! We had a bit of everything: gloom and doom, government manipulation, weakening economic data, crisis resolution, fear, anger, and hope. Where else can you get this type of excitement?Here’s a quick recap of what happened over the past few days: Dollar was strengthening after the FOMC said that QE2 would end, taking down global stocks and commodities. The EIA then said that the US would release 30 million barrels of oil from our strategic reserve, driving oil prices lower and sending correlated markets such as stocks lower. Later in the day it was announced that Greece had accepted a 5-year austerity plan and will be receiving money form the EU and IMF as part of a new bailout (though the actual vote is next week), so the markets rebounded only to finish slightly lower.

Frankly, I am outraged by the oil thing but not surprised. While yes I am in favor of lower oil (gasoline) prices, I am not in favor of achieving them by weakening our emergency reserves. What happens if a situation arises where we need that oil? It’s like raiding your emergency savings account to go on vacation. Politics at its worse.

Meanwhile in the Euro zone, it looks like the Greece austerity deal will go through next week, despite the protestations of nearly 75% of Greek citizens polled.

Here in the US, durable goods orders came in better than expected, posting a gain of 1.9% vs. an expectation of 1.5%, which is a welcome better-than-expected data point.

So the markets are starting the day in mild risk taking mode with stocks set to open higher, though oil prices are lower.

In the forex market:

Aussie (AUD): The Aussie is higher across the board after Asian stocks were higher overnight on risk taking after yesterday’s comeback in US stocks.

Kiwi (NZD): The Kiwi is strengthening as risk trades are being re-established after the Greek debt crisis announcement.

Loonie (CAD): The Loonie is mixed as risk appetite and lower oil prices fight to see which aspect will dominate trading today.

Euro (EUR): The Euro is off of its previous highs and has pulled back some as they are not out of the woods yet. While yesterday’s news of the agreement is extremely positive, the vote hasn’t actually taken place yet. German IFO expectations figures came in better than expected. (Click chart to enlarge)

Pound (GBP): The Pound is mostly lower as rate expectations for the UK have been lowered and there is considerable concern about the exposure that UK banks have to the Euro zone.

Swissie (CHF): The franc is stronger across the board today despite the mild risk taking in the markets to start the day. The safe haven aspects of the Swissie may still be desirable until after the Greek austerity plan is officially voted on and accepted. (Click chart to enlarge)

Dollar (USD): The Dollar is weakening on slight risk appetite after US durable goods orders came in better than expected. It will be interesting to see if the Dollar will continue to weaken without the aid of the Fed, or if it can co-exist in higher stock market environment if the correlations break down.

Yen (JPY): The Yen is showing some surprising strength despite the higher Asian stock market returns overnight. While there is still risk in the marketplace that appears to be coming from the EU and UK specifically, cautious buying persists.

Wild market action indeed! Whether you agree with what is going on in the marketplace or not is of no consequence. What is important is that you have a plan to protect yourself from unexpected events that can cause major volatility.

If summer volume decreases, then volatility could definitely pick up. This is exciting for forex traders because volatility equals potential. There are still many different global events that will carry trading well into the next few months, and there is still great risk and opportunity.

However, this doesn’t change this mess that is known as the US economy. It appears as though election cycle politics are in full-effect so it is doubtful that anything meaningful will get done. The debate over the US debt ceiling may come into play as ideology gets left behind in favor of pragmatism, but don’t expect wholesale changes overnight.

The business climate is still an abomination, with the new healthcare bill, regulations, potential for tax increases, and a reluctance to reduce the size of government and debt all factoring in to keep businesses from hiring. The fact that there is actually debate over the fact that the current path we are on is disastrous is both scary and sad.

So invest your money in countries on the right path, and stay away form those destined for doom. The best way I know of to do this is through the forex market!

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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June 23, 2011

Fed Falters!

Filed under: Forex News — Tags: a-much-bigger, a-real-concern, equation, euro, forex, loonie, lower-on-risk, markets, price, removal — admin @ 7:14 am

The big news of the last two days was yesterday’s FOMC where Fed Chairman Bernanke confirmed the end of QE2. I also felt bad for him as he looked like a child who just was informed that there is no Santa Claus as he lowered the Fed’s growth and GDP forecasts, all but admitting that these extraordinary measures haven’t worked.

In a way, I feel bad for him as he is getting NO help on the fiscal side of the equation, and trying to keep the economy afloat with monetary policy alone won’t work. Cue the debate over the debt ceiling, which is due to expire in early August which could put pressure on politicians to finally take action, as doubtful as it may seem. Bernanke will likely be quiet for the rest of the summer, but if things start to deteriorate rapidly, then we could hear rumblings of further easing.

So yesterday markets reversed and risk was taken off of the table, with Dollar strength pushing stocks and commodities lower which has continued into this morning.

In the Euro zone PMI figures came in worse than expected, though this is a minor inconvenience when considering that the vote on austerity in Greece needs to take place. There are certain conditions Greece must adhere to, including the sale of state-owned assets to satisfy their creditors, namely the ECB and the IMF. As I have mentioned before, this is not a done deal.

In addition, ECB honcho Trichet’s comments about the debt crisis are not helping matters.

Stocks and commodities are lower to start the day and later this morning we will get initial jobless claims which are expected to show another 415K newly unemployed, and new home sales which are expected to have declined by 4%. It’s not a pretty picture out there folks and until the fiscal side of the equation begins to repair itself through debt reduction and not expansion, we will continue to sink toward the abyss.

In the forex market:

Aussie (AUD): The Aussie is mostly lower on risk aversion but it hasn’t been as badly sold-off as the Euro as the benefit of the interest rate differential makes it somewhat prohibitive to short as it is still attractive.

Kiwi (NZD): The Kiwi is also lower on risk aversion thought the prospect of being the next major economy to raise interest rates leaves it somewhat desirable to those still seeking yield.

Loonie (CAD): Curiously, the Loonie is mixed to slightly higher despite oil prices that have sold off more than 3 handles. With US GDP figures revised lower, Canada’s economy is bound to be affected so I’m a little surprised that the Loonie is not much lower. (Click chart to enlarge)

Euro (EUR): The anti-Dollar properties of the Euro are dragging it lower in addition to the continued drama of the debt crisis and the possibility of Greece not accepting the austerity measure imposed upon it despite the confidence vote. This could bring about major contagion which as Trichet noted yesterday, could be a major risk event. (Click chart to enlarge)

Pound (GBP): The Pound is selling off as well on Dollar strength though mortgage loan applications have gone up signaling that inflation is a real concern in the UK.

Swissie (CHF): The Swissie is mostly higher on risk themes and earlier trade balance figures came in much better than expected. Even though exports declined, imports declined by an even greater margin allowing a much bigger surplus. This could however also show that the Swiss economy is shrinking rapidly, which would be negative in the long run.

Dollar (USD): The Dollar is stronger across the board as the artificial condition known as QE2 is ending. Initial jobless claims came in worse than expected, though within general expectations. Risk in the markets is causing Dollar strength, not the sentiment that US economy is doing well.

Yen (JPY): The Yen is mostly stronger though not as much as we might think under risk aversion scenarios, as the Dollar is favored.

It’s starting to look ugly out there again, and the removal of Fed easing may bring about a major slowdown. Oil prices are moving much lower, in a sign that indeed Dollar strength affects the price of oil which in turn influences inflation.

Market sell-offs are accelerating, and it appears as though the removal of the Fed crutch before the patient can walk has caused a bigger problem. While under normal circumstances the summer might be a slow time for market activity, I think this time it will be different.

There are many potentially hazardous situations that need to be navigated and I am afraid that politicians are asleep at the wheel. Temporary measures produce temporary results. This is akin to bandaging a wound, but not stitching it up first. Of course there is going to be continued bleeding when you take it off, as the problem hasn’t been fixed!

So beware of the risk in the marketplace, as this could carry on for some time. Protect yourself and your assets through the forex market!

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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June 10, 2011

Summer Soft Patch?

Filed under: Forex News — Tags: account, aud, australia, cad, chinese, forex, government, jpy, markets, nzd, ssi — admin @ 7:10 am

Or something worse? The talking heads would like you to believe that the weak economic data we are seeing is only transitory and in fact the good times are just around the corner. I’m having a hard time rectifying this sentiment, as it seems like the “good times” are what has been transitory led by the temporary “free money” condition of QE2. Since that time, nothing has changed on the fiscal side of the ledger so I’m not surprised that the delay tactics by the Fed are not working.

The problem with all of these emergency and stop-gap measures is that everyone knows they are fleeting, so this does not change consumer sentiment or behavior. Temporary solutions provide temporary relief, and the complete lack of confidence in politicians to solve our problems is alarming.

But it’s not just here in the US where these issue occur, though we are the worst of the bunch. The ECB had to take the other tack, pressing the individual countries to solve the debt crisis and stating that the ECB would not be expanding its aid to Greece.

In the UK, the data has also gotten worse, with industrial and manufacturing production figures coming in way worse than expected, which may actually vindicate the BOE’s easy money policy. But therein lies the problem—people have caught on to the fact the economies are not healthy because monetary policy is so cheap so they act defensively which causes economic stagnation.

Would the reverse actually occur if Central banks stated raising rates? If you want to fool the people into believe things are well, shouldn’t they be doing the opposite of what they have been doing?

Things aren’t horrible everywhere, though, as China increased its imports by 28.4% showing signs that they may be pushing an agenda led by domestic demand. This will ultimately be a positive for New Zealand and Australia, and possible Japan when they get back on track.

In Canada, the unemployment rate shrank to 7.4% as more jobs were added to the economy, though the participation rate came in slightly lower. So all of this adds up to risk aversion in the markets, with declines in both stocks and commodities.

In the forex market:

Aussie (AUD): The Aussie is lower across the board on risk aversion as well as the fact that recent weaker economic data has shifted the focus more toward the Kiwi and Loonie.

Kiwi (NZD): The Kiwi is actually mostly higher despite the risk aversion as the increase in Chinese imports helps New Zealand’s economy. A fresh all-time high was made earlier vs. USD.

Loonie (CAD): The Loonie is mixed today as lower oil prices and a sputtering US economy put pressure on the currency, yet better than expected employment figures show that the economy is moving forward. Canada added 22.3K jobs vs. an expected 20K jobs gain, and the unemployment rate shrank to 7.4% from an expected and previous 7.6%. (Click chart to enlarge)

Euro (EUR): The ECB has re-assumed the role of parent and not enabler with regard to the member countries and the debt crisis. The message is loud and clear that the inaction over the past year to find a resolution will no longer be tolerated. German CPI data came in as expected and growth projections for the economy were also expanded.

Pound (GBP): The Pound is lower across the board after industrial production figures showed a decline of 1.7% vs. an expected no-change, and manufacturing production figures showed a decline of 1.5% vs. an expected decline of .1%. This is indicative of the weakening economic conditions in the UK. (Click chart to enlarge)

Swissie (CHF): The Swissie is mixed as it’s safe haven properties are causing demand, but less so than the Dollar and Yen as the economic problems in the Euro zone could have a carry-over effect.

Dollar (USD): The Dollar is showing some strength on risk aversion heading into the weekend on the usual “take risk off ahead of the weekend” play. No news out of the US is good news.

Yen (JPY): The Yen is stronger across the board on risk aversion as carry trades are abandoned, at least for the weekend carry. Rumblings of some type of monetary intervention keep making the rounds, and perhaps the market is willing to probe these suspicions by buying Yen.

So is it just a soft patch, or something worse? I have not seen any evidence that would lead me to believe it is the former, as long-term outlooks are still being held back by misguided government policy. So far nothing has changed.

QE2 was intended to buy the government time to make strides toward getting its fiscal house in order, but seemingly they have done nothing. Now that summer season is upon us, these guys in Washington can’t wait to get out of Dodge and retire to whatever golf course they can to avoid the scrutiny of the general public who elected them and are struggling to make ends meet.

Pretty soon election season will be upon us so that means its time to hit the campaign trail which will further delay any type of action. Meanwhile, the economy stagnates and the malaise and lack of confidence grow.

Not quite the recipe for growth, now is it? The beauty of the forex market is that you don’t have to stand idly by and take it! You can invest your hard earned money in the currencies of countries that are committed to solutions and not just kicking the can down the road.

Isn’t time you came to see what the forex market 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, blog, cad, course, currenc, currency, currency trading, dollar, dow, economy, EUR, Euro, forex, forextrading, free, fx, fxedu, gbp, Il, jpy, market, Mike Conlon, nzd, practice, ssi, time, trade, USD, Yen

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June 6, 2011

Now What?

Filed under: Forex News — Tags: account, cad, course, currencies, currency, currency trading, economy, euro, forex, forextrading, market, party, practice, usd — admin @ 7:20 am

After Friday’s dismal jobs report, it may be lucky that there is relatively little economic data due out from the US as all signs point to a weaker economy. Nevertheless the “Fed Heads” will be out in full force this week, attempting to obfuscate the situation to the best of their limited abilities with various speaking engagements on the state of the US economy.

Around the globe, this week will bring many rate policy decisions with no one expected to change policy this time around. Australia kicks off the party tomorrow, followed by New Zealand on Wednesday afternoon, and then the Euro zone and UK on Thursday. It should be noted that the UK rate policy decision which will be the only one that does not have an accompanying statement.

Japanese GDP is also due out this week and while it is expected to come in negative as a result of the effects of the natural disaster, recent Yen strength could prompt the BOJ to attempt to further ease monetary conditions to jump-start the economy.

Stocks and commodities are lower to start the morning, though I could see this turning around as there relatively little to derail sentiment and now that the bad news about the US and global economy has been digested, what’s left to do?

This week’s market action may be an important harbinger of things to come if Dollar weakness and risk appetite return to the market because this may mean the continuation of QE2 well into the second half of the year.

In the forex market:

Aussie (AUD): The two big pieces of news that highlight the Australian economy this week are tomorrow’s rate policy decision (and accompanying statement) and Thursday’s employment report. While no change is expected this time, expectations are increasing for a rate hike at the next meeting. (Click chart to enlarge)

Kiwi (NZD): The Kiwi is mostly higher on yield-seeking ahead of Wednesday’s rate policy decision. While no change is expected, don’t forget that the most recent rate reduction was in direct response to the earthquakes and as the economy recovers, a return to a more “normalized” level may be appropriate.

Loonie (CAD): With oil below $100 and Canada’s largest trading partner (the US) looking extremely weak, the Loonie has been selling off as of late. The big news for Canada this week will be Friday’s employment report.

Euro (EUR): An election over the weekend ousted the Portuguese PM Socrates which could potentially affect bailout discussions among the Euro countries needing assistance. While the Greek situation is still lingering, signs point to a resolution sooner than later. Euro zone PPI data came in slightly higher than expected, and Thursday’s rate policy decision should produce no change despite inflationary pressures. It is interesting to note that CPI data is due out on Friday AFTER the rate decision. (Click chart to enlarge)

Pound (GBP): The UK rate decision on Thursday is expected to produce no change and is likely to be less of a factor than the other announcements as the market will have to wait for the release of the BOE meeting minutes to get a better understanding of the decision as there is no accompanying statement.

Swissie (CHF): Want to know why the Swiss franc is one of the most sought after safe-haven currencies? Wednesday’s unemployment rate figures should give you a clue as it is expected to come in at 3%. By contrast, the US unemployment rate is more than 3x that figure.

Dollar (USD): I think Friday’s NFP really summed up the situation here in the US succinctly—stagnation. With little economic data due out this week, Fed speak will rule the week with the usual contradictions.

Yen (JPY): All eyes will be on the release of Japanese GDP figures which could be a catalyst for BOJ action if they come in worse than expected. While it is no surprise that the Japanese economy has been weak as a result of the natural disasters, a strengthening Yen is not desirable at this point.

When governments enact temporary solutions and don’t actually fix the long-term problems, it should be no surprise to anyone that growth and recovery is temporary as well. In today’s instant information gratification society of social media, government tactics intended to shift sentiment and fool people into taking action no longer work.

So where does that leave us now? Well, the majority of the gains that have been realized so far in the stocks and commodities markets have taken place without the individual investor on board. With continued Dollar weakness, people have to find a place to invest and the negative returns of owning Dollars no longer out-weigh the risks that are present in the market.

This summer may be a slow one as investors weigh risk sentiment, but I expect the strong to continue to be strong and the weak to continue to weaken.

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, blog, cad, course, currenc, currencies, currency, currency trading, dollar, economy, EUR, Euro, forex, forextrading, free, fx, fxedu, gbp, Il, interest, jpy, market, Mike Conlon, nzd, practice, ssi, time, USD, Yen

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