Forextrading | Forex Blog

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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June 3, 2011

It’s Ugly Out There!

Filed under: Forex News — Tags: a-few-countries, account, currency, employment, forextrading, interest, jpg, market, mike conlon, nzd, practice, service, ssi — admin @ 7:19 am

Pay Day?This morning, the all-important Non-Farm Payrolls report will be released at 8:30AM EST which will show the state of the employment situation here in the US. As a result of Wednesday’s dismal ADP employment change figures, analysts have revised their initial projections lower so it is highly uncertain how the market will react to the release.

What we do know however is this: that the US and the global economy is slowing and that there are still major risks to stability. The debt crisis in the Euro zone, the unstable situation in the Arab countries, and Japan still dealing with the nuclear crisis as a result of the natural disaster all have the potential to add fuel to the fire.

In the Euro zone, they are preparing for the reaction to the news that a second bailout for Greece is near completion with potential ramifications from both an economic and political standpoint.

PMI service data for the Euro zone came in slightly better than expected, and Merkel’s comments yesterday that the economy in the EU is healthy but for a few countries with excessive debt may be spot on.

But the big news this morning is the NFP, where forecasts have been revised to as low as an addition of 100K jobs, with the new median being somewhere around 165K. The unemployment rate is expected to remain steady at 8.9%.

Both stocks and commodities are lower to start the day, and it is so hard to say what will happen on a day like today as expectations are all over the board, so volatility could be extreme of non-existent.

In the forex market:

Aussie (AUD): The Aussie is mostly lower ahead of the NFP as risk aversion going into the weekend is a safe bet. The Performance of Service Index came in lower than last month’s reading, posting a figure of 49.9 vs. last month’s 51.5.

Kiwi (NZD): The Kiwi is lower across the board as building permits figures missed expectations, showing a decline of 1.6% vs. an expectation of a gain of .5%. This in addition to making recent highs and today’s risk aversion make the Kiwi a likely candidate for profit-taking.

Loonie (CAD): The Loonie is mostly lower as oil prices have retreated to under $100 ahead of this morning’s NFP report. The Loonie will be extremely sensitive to this release as what’s good (or bad) for the US affects Canada greatly.

Euro (EUR): The Euro is mixed but somewhat flat against USD as the market is unsure whether the anti-Dollar properties of the Euro make it a decent alternative to the Dollar despite the risk in the market. Euro zone PMI Composite and Services figures came in better than expected lead by Germany, and the news that another Greek bailout is forthcoming may allay market fears. (Click chart to enlarge)

Pound (GBP): The Pound is lower across the board as PMI services figures came in lower than expected posting a reading of 53.8 vs. an expected 54.2. While not a huge miss, rate hike expectations for the UK are at their lowest levels in nearly 6 months despite the inflation in the UK economy. (Click chart to enlarge)

Swissie (CHF): The Swissie has been on tear of late as the preferred safe-haven currency of choice, making new all-time highs vs. a range of currencies including USD. This makes it a likely candidate for reversal should risk abate in the market, and that could start with NFP today and the Greek bailout around the corner.

Dollar (USD): The Dollar is gaining some strength from risk aversion this morning ahead of NFP, but it has been losing its luster as a safe-haven as the economic data has been weak of late prompting the market to believe that QE3 may be an option.

Yen (JPY): The Yen is stronger across the board on risk aversion despite the notion that Prime Minister Kan’s plan could result in a lame-duck government which may delay the recovery.

Wow! Simply wow! The Non-Farm Payrolls report just came in a showed a dismal gain of 54K with the unemployment rate coming in at 9.1%. This is an absolutely horrible number and a sign that US economy is still very weak.

With uncertainty running rampant and the government doing absolutely nothing to fix our problems, this is a huge no-confidence vote by business who will not hire and add to their cost structure in the face of rising deficits, increased regulation, higher taxes, and unknown health care costs. Bad government policy and the focus on the wrong things is what has gotten us to this point, and it may be time for a nuclear enema in Washington DC.

The markets are obviously selling-off as a result, with the Dollar unbelievably strengthening despite the fact that QE3 may be a real possibility. So it looks like the only “pay day” is for the stooges in Washington, who take home a large check for doing relatively little.

Remember, you can take action against bad policy here in the US—invest abroad. One of the best ways to do this is through the forex market, where not only can you get off this sinking ship of the US dollar, but get paid interest to do so!

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 1, 2011

Manufactured Economies?

Filed under: Forex News — Tags: cad, currenc, currency trading, dow, forextrading, jpy, market, markets — admin @ 7:07 am

When I think of something manufactured, I think of something made up. So it is no surprise that when I think about the global economy, it seems like manufacturing should be a more important component. Today we have received a slew of manufacturing reports from around the globe and they all have one thing is common: that they all show declines.

This exemplifies the “soft patch” that the global economy seems to be going through, though we must wonder if this situation is temporary or a sign of things to come.

PMI data from China, the Euro zone, the UK, and later this morning the all show that growth is slowing. Yet inflationary pressure due to a weak US dollar still has commodities prices near highs. With massive debt owed around the globe, it appears as though we are getting ready for global stagflation.

In Australia, GDP figures came in slightly lower than expected as a result of the flooding and this was a relief to the markets as the fear was that it was going to be much worse.

Today starts the first of three employment reports here in the US, with the ADP employment change figures today, initial jobless claims tomorrow, and lastly Non-Farm Payrolls on Friday.

So there is some risk aversion in the markets to start the day, led by lower stocks and commodities prices.

In the forex market:

Aussie (AUD): The Aussie is mostly higher despite the risk aversion as GDP figures came in showing a quarterly decline of 1.2%, just missing the expectation of 1.1%. This was seen as a positive by the market, which feared that it could be worse than expected. (Click chart to enlarge)

Kiwi (NZD): The Kiwi is mixed this morning as lower Chinese PMI figures highlight a slowing Chinese economy, and this affects the Kiwi as the Chinese import a lot from NZ.

Loonie (CAD): The Loonie is somewhat mixed today after yesterday’s BOC rate policy decision reported that they will “eventually” raise interest rates. This sent the Loonie higher yesterday and now the question is “when” and not “if”. (Click chart to enlarge)

Euro (EUR): The Euro is mixed today as slightly lower than expected PMI figures and the focus on the Greek debt crisis leave the market befuddled.

Pound (GBP): The Pound is lower across the board after the biggest miss in PMI data, reporting a figure of 52.1 vs. an expected 54.1. In addition, mortgage approvals were lower to 45.2K vs. an expected 47K showing signs of economic weakness.

Swissie (CHF): The Franc is higher across the board receiving the dual benefit of risk aversion and better than expected retail sales figures.

Dollar (USD): The Dollar is mostly lower as the ADP jobs report came in much worse than expected this morning posting a gain of 38K vs. an expected 175K. This will likely reduce the expectation of Friday’s NFP and despite the risk aversion in the markets, money flows are moving elsewhere.

Yen (JPY): The Yen is mostly higher on risk themes as the Japanese Prime Minister Kan faces a no-confidence vote over his handling of the crisis taking place in Japan. Political uncertainty is not good as Kan was seen as moving toward fiscal responsibility.

Wow, just a dismal employment change number here in the US has the markets spooked about what Friday’s NFP might be. With many areas of the economy weakening, the possibility of QE3 may be back on the table.

With the theater taking place in Washington DC over raising the debt ceiling, the inability of politicians to get us back on the path to financial responsibility will cause this situation to stagnate further.

Should Bernanke continue with the misguided belief that further Fed easing be required, then we will most certainly be on our way to stagflation. Let’s face it, there is a time to spend and a time to save and with economic uncertainty where it is, saving is the right way to go regardless of whether or not the Fed makes it an unappealing proposition.

There is still great risk in the marketplace, whether it’s from a global slowdown or the Euro debt crisis. Do not be fooled into making irresponsible decisions just because that is what the government wants you to do!

Put your money with the financially responsible regions around the globe as they are the ones mostly likely to experience growth. A very simple way 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!

Tags: account, AUD, Aussie, blog, cad, course, currenc, currency, currency trading, dollar, dow, 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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May 16, 2011

International Intrigue!

Filed under: Forex News — Tags: euro, forextrading, france, gbp, international, minutes, president — admin @ 7:26 am

Over the weekend, the Head of the International Monetary Fund (IMF), Dominique Strauss- Kahn was arrested in NYC on sexual assault charges. This is setting up to have the potential for a great spy thriller novel and/or movie. While the presumption of innocence is part of our legal system, talk of set-ups and political gamesmanship are running rampant.It was assumed that he would run to become the President of France, and there is also talk of who will succeed him at the IMF. BRIC nations are looking for a more prominent role at the IMF, so there are many who stand to benefit if Strauss-Kahn is publicly disgraced and out of the picture.

On the data front, Asian markets were down overnight, lifting the Yen and putting pressure on the commodity currencies. Oil is trading lower and stocks are set to open lower though off of earlier lows, with gold trading flat.

CPI data from the Euro zone showed a slight increase in the core number, and trade balance figures showed a better than expected trade surplus.

In the UK, home prices came in higher than expected, but the big news this week will be tomorrow’s CPI data and Wednesday’s minutes form the rate policy meeting. This will show if the BOE is changing its stance with regard to inflation, though the recent sell-off in commodities will not be factored in to either report.

There are a lot of meetings this week, with a two-day meeting of finance ministers in the EU, and the FOMC meeting on Wednesday. The Bank of Canada chief will be speaking twice this week, the minutes from the RBA rate policy meeting will come out tomorrow as well, and the Bank of Japan rate decision will round out the week.

In the forex market:

Aussie (AUD): The Aussie is lower to start the day as its positive correlation to the MSCI Pac Rim index has taken it lower after it sold off overnight. The minutes from the RBA rate policy meeting will be out tomorrow so it will give us a better idea if further rates hikes are even a possibility at some point. Home loans also fell more than expected.

Kiwi (NZD): The Kiwi is lower across the board on lower stock and commodities prices despite the performance of services index coming in with a reading of 52.6, up from last month’s 51.1. While anything over 50 signifies expansion, the Kiwi may be subject to risk themes more so than the Aussie as it has the lower interest rate.

Loonie (CAD): The Loonie is mostly lower on lower oil prices and BOC head Carney is due to speak later today. Friday will bring CPI and retail sales data and will show whether or not Canada may be any closer to raising interest rates.

Euro (EUR): The EU meeting of finance ministers that has started today has been derailed by the news of the arrest of DSK. This meeting was intended to discuss how to deal with the bailouts of Greece, Portugal, and Ireland. So there is a lot of uncertainty surrounding the Euro right now and this distraction may actually buy the Euro zone some time. ECB ministers are due to speak this week, with Trichet speaking on Thursday.

Pound (GBP): The Pound started the morning lower but has flipped to positive after home prices came in better than expected. Tomorrow’s CPI data will not include the recent sell-off in commodities, but Wednesday’s minutes from the rate policy meeting will also be based on last month as well. Any shift in sentiment at the BOE could mean they are closer to raising rates. (Click chart to enlarge)

Dollar (USD): The Dollar started the morning higher but as giving back gains as risk appetite appears to be gaining traction. The FOMC meeting on Wednesday and various Fed speak will likely confound the markets, but home sales on Thursday may be more prescient.

Yen (JPY): The Yen is also giving back earlier gains as the market moves from risk aversion to risk taking this morning. Japanese GDP figures are due out on Wednesday and are expected to show continued declines, making Friday’s interest rate decision largely irrelevant. (Click chart to enlarge)

So the market’s attention was slightly diverted this morning on this international incident that will likely be a topic of conversation for some time. But don’t be fooled into ignoring what is going on from a fundamental perspective.

The EU debt crisis is still very much in focus, and the minutes from the BOE rate policy meeting and CPI data from the UK and Canada could be fundamental drivers. While there is not a ton of economic data from the US, various Fed speak this week will likely seem contradictory, rendering it mostly useless.

So remember to ignore what they say, and watch what they do!

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, dow, EUR, Euro, forex, forextrading, free, fx, fxedu, gbp, Il, jpy, market, Mike Conlon, nzd, practice, ssi, time, trade, USD, Yen

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May 12, 2011

Sell In May And…

Filed under: Forex News — Tags: aussie, course, currency, currency trading, employment, forex, forextrading, jpy, nzd, trade — admin @ 7:08 am

The old Wall St. adage, “sell in May and go away” may be in play! Sorry folks, had to do it. But seriously, with the end of QE2 coming, weaker economic data, and commodities beginning to sell off, markets are noticeably weaker across the board.

There are a number of converging factors going into today’s market action. First, let’s examine the commodities trade. There are 4 factors driving commodities right now: 1. The end of QE2 which has reduced hot money speculation; 2) China increasing bank reserve requirements to try to slow inflation; 3) the CME raising margin requirements thereby making it more prohibitive to hold positions and/or trade; and 4) weakening economic fundamentals.

This all adds up to the perfect storm in commodities so prices are lower, which is a good thing. However, if this also takes stocks lower then it could have an initial negative effect on the economy.

In addition, industrial production figures in both the Euro zone and the UK came in worse than expected, showing signs that those economies may be weakening as well. Add in the risk from the Euro debt crisis and you have the perfect recipe for lower prices.

What this also does is help reduce interest rate hike speculation abroad, as a continued decline in commodities prices should reduce inflation expectations and allow Central banks to not have to raise rates.

Oil is back to $95 and gold has retreated to the $1480 level, with all global stock markets lower. US retail sales and initial jobless claims are due out later this morning, though these number may come in worse than expected in light of the recent commodity inflation.

In the forex market:

Aussie (AUD): The Aussie is lower across the board as their employment report showed a loss of 22K job vs. an expectation of a gain of 17K. The unemployment rate held steady at 4.9% though, which is exceptional in today’s global economy. (Click chart to enlarge)

Kiwi (NZD): The Kiwi is lower as stocks and commodities are lower reducing the risk for yield and increasing the demand for safe-havens.

Loonie (CAD): The Loonie is lower as its correlation to oil prices is highlighted this morning. In a risk-off environment, demand for the Loonie is light.

Euro (EUR): The Euro is lower across the board as the Dollar is strong on risk aversion. The major risk in the market right now is emanating from the EU, as the debt crisis in Greece is back in focus and not solution appears to be forthcoming. Industrial production figures came in worse than expected. (Click chart to enlarge)

Pound (GBP): The Pound is lower as industrial and manufacturing production came in worse than expected, re-enforcing the declining growth story and providing cover for the BOE loose monetary policy despite the inflation report from yesterday.

Dollar (USD): The Dollar is higher across the board as risk aversion has dominated the early market action. Advance retail sales figures came in slightly worse than expected, showing a gin of .5% vs. an expectation of .6%, though stripping out autos and gasoline sales the gain was .2% vs. an expectation of .5%, confirming that higher gasoline prices have hurt the consumer. Initial jobless claims came in at 434K, slightly higher than expected and PPI data was also higher showing a monthly gain of .8% vs. an expectation of .6%.

Yen (JPY): The Yen is mostly higher on risk-aversion as the un-wind of carry trades is increasing demand for Yen.

As we can see, it is apparent that the global economy is slowing down. The question is whether we are going to have a soft landing, or a crash landing thanks to “Bubble Ben” and QE2.

While the “sell in May” adage has taken on a new meaning from what was originally intended, we can see it is becoming harder and harder to support the growth story in light of all of the current news in the marketplace.

So this actually could be a time when the “go away” portion of the adage may apply, as there may not be a market catalyst to induce buying as the market sits around and waits for the aftermath of the end of QE2.

That’s not to say that markets won’t be volatile because they certainly can be, but rather that sentiment is changing from one of optimism to pessimism as the global economy trudges forward. This could potentially put the idea of QE3 back on the table, depending upon what happens in the near-term.

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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May 10, 2011

Euro Danger!

Filed under: Forex News — Tags: a-great-deal, australia, commodities, course, fire, forextrading, free, greece, jpy, mike conlon, practice, prices-as-there, ssi, trade — admin @ 7:27 am

Where there’s smoke, there is fire and it is no different for the Greece and the Euro zone. The stories that are being floated insinuate everything from Greece leaving the Euro zone, restructuring debt, or receiving further bailouts. At this point it is difficult to determine what is actually going to happen, but one thing is clear: Greece is in need of help.

Yesterday S&P poured gasoline on the fire and downgraded Greece’s credit rating again, and the current rates Greece would have to pay to re-finance are not feasible in the market. So there is heightened structural risk for the single currency.

In the UK, retail sales figures came in better than expected, but the market is looking ahead to tomorrow’s GDP estimate, which is likely to set the bar low so that the BOE can act surprised when it comes in “better than expected”.

China’s trade balance figures came in better than expected with better exports and worse imports. If they cared to have a stronger Yuan as I mentioned yesterday, perhaps they would be willing to buy more of other people’s stuff. Chinese CPI data is due out tomorrow and there is an expectation that they will raise rates again to try to slow growth.

Oil prices are lower to start the day, as the CME raised margin requirements for oil, but stocks and other commodities are trading higher.

In the forex market:

Aussie (AUD): The Aussie is mixed despite better than expected trade balance figures as the potential for a Chinese slowdown could affect Australia greatly.

Kiwi (NZD): The Kiwi is mostly lower after the IMF came out and said that the Kiwi was over-valued by roughly 20%. Thanks guys! (Click chart to enlarge)

Loonie (CAD): The Loonie is mostly higher today despite lower oil prices as the soundness of the Canadian economy is has been highlighted today after last week’s elections which the market perceives as adding to fiscal responsibility.

Euro (EUR): With all that is going on with Greece, it’s easy to lose sight of the fundamental data that still exists. Tomorrow will bring CPI data and Friday will be the GDP report. The Swiss franc is lower today as CPI data came in less than expected.

Pound (GBP): The Pound is mostly lower as the market is expecting tomorrow’s GDP estimates to be reduced, despite today’s better than expected retail sales figures which showed a gain of 5.2% vs. an expectation of 2.5%. How much longer the UK can deny better than expected data is anyone’s guess. (Click chart to enlarge)

Dollar (USD): The Dollar is showing some strength today despite higher stocks and commodities (except oil) prices as there is still some risk from the Euro zone pushing the safe-haven play.

Yen (JPY): The Yen is lower across the board as the Nikkei was higher on better than expected stock earnings which out-weighed Euro debt concerns.

While there is certainly a great deal of risk in the marketplace emanating from Greece and the Euro zone, the market doesn’t seem to be overly concerned about it. While everyone expects some sort of resolution to be forthcoming, the way in which it is handled could have a major impact.

As I mentioned above, there are many different competing financial interests that could be affected by different outcomes, and the ECB should have come up with a credible plan for Greece (and the others) long ago, as no one expected these problems to just disappear.

But without them we would have little to talk about so the outcome will be important going forward. But I don’t expect Greece to leave the Euro zone, nor do I expect to see a major restructuring of debt. What is most likely is that Germany will reluctantly agree to further aid, and the IMF will get Greece more favorable terms.

However until this occurs, it is wise to be cautious.

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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May 4, 2011

Rough Patch Ahead?

Filed under: Forex News — Tags: currenc, currency, forex, forextrading, loonie, market, marketplace, nzd, time — admin @ 7:21 am

The data is starting to get a bit weaker and the market looks as though it is preparing for an economic “rough patch” that may be just around the corner. While we all know that QE2 will officially be coming to an end shortly, how long that lasts is anyone’s guess.

The first indicator of unemployment here in the US came out this morning, with the ADP jobs report showing gains that were les than expected. This comes ahead of tomorrow’s initial jobless which are expected in the low 400K range (which is higher than we had hoped when we reached the 300k range) and then Friday’s all-important Non Farm Payrolls report.

Overnight, the Central Bank of China issued hawkish statements that combating inflation was their number one concern, so the fear of a Chinese slowdown sent the MSCI Pac Rim stock index lower, taking commodities and commodity currencies lower as well.

Yet the Euro and the Pound are holding up well, as tomorrow’s rate policy decisions are expected to produce no change, yet the ECB policy statement could be hawkish. Retail sales figures in the Euro zone came in lower than expected, and home prices declined in the UK.

This all adds up to a global slowdown, which means that the market is convinced that Bernanke will attempt to come back to the rescue and put the training wheels back on the economy through further easing at the first sign of trouble.

In the forex market:

Aussie (AUD): The Aussie started the morning lower but has flipped to higher as the weak Dollar play is back in action.

Kiwi (NZD): The Kiwi is lower across the board as it is very much influenced by what goes on in the Chinese economy. Unemployment figures due out later tonight could put a positive spin on the NZ economy.

Loonie (CAD): The Loonie is mostly lower as oil prices have pulled back to a $110 handle and the dual problem of being so in bed with the US economy has further contributed to weakness. Nevertheless the weakening Dollar has just pushed the Loonie back toward .95 vs. USD. (Click chart to enlarge)

Euro (EUR): Greek debt restructuring. Declining retail sales figures (-1.7% vs. an expected no change). Portuguese and Irish debt costs ballooning. These might seem like major problems to any other currency that is not considered the “anti-Dollar”. The ECB rate decision will keep rates unchanged, but the statement could surprise. (Click chart to enlarge)

Pound (GBP): The Pound is also higher despite home prices that fell more than expected and the notion that the BOE will not change rate policy at tomorrow’s decision. Unlike the ECB, the BOE will not issue a policy statement.

Dollar (USD): The Dollar’s short-lived bounce from risk aversion has reversed and now we are looking at weakness as there is no confidence that a declining US economy will be allowed to function without the intervention of Bernanke and the Fed. The ADP employment change showed a gain of 179K jobs vs. an expectation of 195K.

Yen (JPY): The Yen is weaker as Japanese markets are closed today.

Well it looks like this is going to be a case of bad news is good news for stocks and commodities heading into the end of QE2. The worse the data gets, the higher the expectation that Bernanke will continue some sort of monetary easing.

Whispers of “QE2.5″ are making the rounds, and the artificial conditions that created thanks to this easy money policy are delaying the problem and not fixing it. While these delay tactics might be appropriate if we trying in earnest to get our fiscal act together, the politics of Washington are preventing certainty in the marketplace.

Questions about taxes, regulation, and government spending have not assuaged businesses, and the prevailing notion is that things are getting worse and not better.

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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April 28, 2011

Dollar Pains Mean Gains!

Filed under: Forex News — Tags: account, aud, board, currency, dollar, dovish, dow, euro, forextrading, japan, trade, yen — admin @ 12:56 pm

Yesterday’s FOMC meeting and ensuing press conference was essentially more of the same, though the new theater surrounding the announcement seemed to do more to distract from the policy statement than anything.

As expected, the Fed left rates unchanged and committed to leaving rates low for an “extended” period. So the markets took this as a cue that weak-Dollar policy was here to stay for a while and sold the Dollar mercilessly, sending it to 3-year lows. This also helped push stocks, commodities, and anti-Dollar currencies higher.

This was the obvious driver of markets yesterday, and many other news events got lost in the shuffle. One such event was the RBNZ rate policy meeting in New Zealand. While there was no surprise that rates were left unchanged at 2.5%, the dovish accompanying statement left the markets a bit unprepared as there was an expectation that higher inflation might induce a rate hike sooner than later.

The Bank of Japan also held their rate policy meeting overnight, and even though the economic fallout from the natural disaster was worse than expected, the BOJ did not move to become more accommodative as the market had been expected. This has had a strengthening effect of the Yen, despite some of the risk taking in the market.

Lastly, consumer confidence figures in the UK came in at 2-year lows, despite all of the excitement surrounding the Royal Wedding tomorrow.

Later this morning, US GDP figures could have a volatile effect on the markets as it is unclear whether a better-than-expected number will push the Dollar higher or lower.

So the markets are a bit of a mixed bag this morning, trading cautiously with stocks and oil slightly lower to start the morning, and precious metals trading higher.

In the forex market:

Aussie (AUD): The Aussie is mostly higher and continues to make new all-time highs vs. USD, eclipsing 109. Weak-dollar risk appetite is the primary driver. (Click chart to enlarge)

Kiwi (NZD): Despite the risk appetite in the market, the Kiwi is lower across the board as the dovish comments that came with the RBNZ rate decision took the markets by surprise. While inflation has been increasing in New Zealand, growth concerns due to the earthquake may cause the RBNZ to maintain rates for some time.

Loonie (CAD): The Loonie is mostly lower as oil prices have pulled back a bit ahead of tomorrow’s GDP report. There is concern that a slowing US economy will spill over to the Canadian economy which draws a large portion of its economic activity from the US.

Euro (EUR): The Euro is mostly higher on the anti-Dollar trade despite German unemployment rate which came in slightly higher than expected, though overall number were down. A warning out of Portugal that its credit conditions may be deteriorating has had no weakening effect. (Click chart to enlarge)

Pound (GBP): The Pound is mixed as rate-hike expectations have improved though consumer confidence figures came in at 2-year lows as inflation is weighing on UK citizens and the lack of government spending has given cause for concern.

Dollar (USD): The Dollar is mostly lower after the FOMC yesterday, and advance GDP figures came in lower than expected at 1.8% vs. an expectation of 2%. This is causing further Dollar-weakness as the market is reading that lower than expected GDP means continued easy-money conditions. Initial jobless claims also came in higher than expected adding to the weakening economic scenario.

Yen (JPY): The Yen is stronger across the board as the BOJ did not ease monetary policy further despite the fact that the fallout from the natural disaster has weakened economic conditions more than expected.

The markets are speaking loud and clear that the biggest risk in the market today is holding US dollars. Economic conditions here are so precarious that it is unclear how things are going to get better. Unemployment is still high, GDP is still shrinking, commodity inflation is hurting the average family, and our government debt is growing.

Doesn’t sound like any of the policies that we have been pursuing are working, and I don’t see a solution on the horizon. Meanwhile, we have the Dollar at 3-year lows, commodities and foreign currencies flying higher and there has to be a “breaking point” for when all of these factors become negative for the global economy.

Right now the markets are trading on momentum, and we could see super-spikes in various markets as we break out to new highs. To think that Bernanke and the Fed will be able to control these factors is naïve and we could be in for a lot more pain.

No pain, no gain!

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!

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April 20, 2011

Markets Defy Gravity!

Filed under: Forex News — Tags: a-boost-higher-, a-good-story, economy, forextrading, japanese, market, marketplace, mike conlon, start-the-day, yen — admin @ 12:20 pm

Just days after the S&P change in outlook on the US debt situation, the market has blown off these concerns and is trading higher as US stock earnings have been coming in better than expected.The market is decidedly in risk-taking mode, with stocks and commodities higher and the Dollar and Yen weaker. Oil is trading back to just under $110, and gold has eclipsed $1500. It should also be noted that silver is trading at a 30-year high, as inflation expectations are running wild.

So what happened to the risk in the marketplace? I guess it’s a case of, “never ruin a good story for the want of a few facts”!

Overnight, the minutes from the BOE rate policy meeting showed no change, so it appears as though opinions have not wavered despite recent inflation indications.

In Japan, exports have decreased more than expected causing trade balance figures to come in worse than expected. While much of this will blamed on the natural disasters that have occurred, let’s not dismiss the impact of higher Yen values as well.

So risk-taking is the theme to start the day, with US existing home sales figures due out later this morning unlikely to derail sentiment.

In the forex market:

Aussie (AUD): The Aussie is higher across the board as both import and export prices came in higher than expected, as did the West Pac Leading Index. The MSCI Pac Rim Index was also higher, providing the extra boost higher.

Kiwi (NZD): Even though rate hike expectations have dampened, the Kiwi is along for the ride today as strength form Asia is the tide that is lifting all ships. Consumer confidence figures are due out later tonight.

Loonie (CAD): The Loonie is also higher, benefiting from yesterday’s higher than expected CPI data and higher oil prices. While Canada may be the next major region to hike rates, their close ties to an uncertain US economy could be cause for concern.

Euro (EUR): The Euro is living up to its billing as the “anti-Dollar” this morning, with Dollar weakness pushing all markets higher. While German PPI figures came in lower than expected, the stories are starting to creep up that the ECB may have been pre-mature with rate hikes. Stay tuned. (Click chart to enlarge)

Pound (GBP): The Pound is mixed as the BOE minutes revealed that policy-makers have been viewing the recent data in the UK as negative, so they are unlikely to raise rates. However, maybe they should take a look in the mirror as the inflation that they have turned a blind eye to could be the cause and the effect of loose monetary policy.

Dollar (USD): Terrible Timmy Geithner got out there yesterday and exclaimed that the S&P change in outlook is largely irrelevant and the markets believe him. Dollar weakness on risk appetite is prevalent to start the day, and existing home sales figures are unlikely to have a material effect.

Yen (JPY): The Yen is weaker across the board as risk appetite is encouraging Yen-funded carry trades in addition to the fact that Japanese exports came in much lower than expected. There is still a lot of work to be done to help re-build the Japanese economy, and recent Yen strength isn’t helpful to that cause. (Click chart to enlarge)

Will these gains continue into the long holiday weekend, or will risk aversion due to the extended lay-off begin to rear its head? Dollar weakness has driven many currencies to recent year highs, and even though the end of QE2 is supposedly coming soon, the markets seem to be very upbeat about near-term prospects.

However, there is still risk out there and just because the market or governments choose to ignore it, doesn’t mean you should too. So I am going to proceed with cautious optimism, and I would recommend the same to you!

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!

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Tags: account, AUD, Aussie, blog, cad, course, currenc, currencies, currency, currency trading, dollar, economy, EUR, Euro, forex, forextrading, free, fx, fxedu, gbp, Il, jpy, market, Mike Conlon, nzd, practice, ssi, time, trade, Yen

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April 19, 2011

S&P Warns US!

Filed under: Forex News — Tags: account, aussie, australia, currency, currency trading, euro, floated-the-end, forex, forextrading, fxedu, market, time — admin @ 11:33 am

That’s us, as well as US meaning the United States. Get your act together!

Yesterday, S&P put out a warning for a possible downgrade of US debt if politicians can’t get together and solves our debt problems. This highlights the growing frustration with those in Washington who would rather have more people “like them” on Facebook than actually deal with what ails us.

Adding fuel to yesterday’s already occurring risk-aversion, the S&P change of outlook may put pressure on politicians to do their job. It must be noted, however, that this was not a downgrade, but rather a change of outlook. While an actual debt downgrade would be catastrophic for the markets, it was interesting to see the early trading action as initially the Dollar was sold off on the announcement as this is clearly bad for the Dollar, only to reverse and cause the Dollar to strengthen further as the market realized that the flight to safety was the only way to go as that situation would be bad for everyone!

So in a sense, the Dollar strengthened because of weakness in the um, well, Dollar. Well that was yesterday, what about today?

Overnight, Asian markets were lower following the decline in the US, and oil continues to sell-off though gold is slightly higher, coming within a few dollars of an all-time nominal high of $1500. US stocks are flat to slightly lower, so it looks like there is some mild risk aversion to start the day.

In Australia, the minutes of the RBA rate policy meeting were released and they confirmed their current interest rate and said they would “look through” higher inflation because of declining growth. So essentially they are saying we know there is inflation but we are going to ignore it until GDP improves.

In Canada, CPI data will be released shortly which is expected to show inflation at 2.8%. Expectations for a rate hike in Canada are high, as they have been on hold for a bit.

In the forex market:

Aussie (AUD): The Aussie is lower as Asian stocks were down overnight in addition to RBA rate policy meeting minutes that basically said they will not be hiking rates any further. Let’s wait and see how those inflation figures come in before rushing to judgment, shall we? (Click chart to enlarge)

Kiwi (NZD): The Kiwi is also lower continuing yesterday’s slide as less than expected CPI data killed any chance of a rate hike at the next meeting.

Loonie (CAD): Canadian CPI data came in much hotter than expected, with the YoY figure showing inflation at 3.3% vs. the expectation of 2.8%, with the monthly figure rising 1.1% vs. an expectation of an increase of .6%. This increases the chance of a rate hike at the next meeting big-time. (Click chart to enlarge)

Euro (EUR): The Euro is mostly higher as slightly better than expected PMI data came in this morning, and the market is backing away from the Greek restructuring story in light of the gasoline provided by S&P yesterday. Expectations for another rate hike are gaining traction.

Pound (GBP): The Pound is also higher with no news on the docket bur a day ahead of the release of the BOE rate policy meeting minutes which could show that concerns over inflation are beginning to increase. Or not.

Dollar (USD): The Dollar is somewhat weaker in snap-back selling after yesterday’s rally higher. Housing starts and building permits figures are due out later this morning, and stories are now being floated the end to QE2 may not actually be an end but an extension through some technical mumbo-jumbo.

Yen (JPY): The Yen is mixed ahead of tonight’s trade balance figures, and overnight Japan came out and offered support for the US Treasury market in the face of the S&P change in outlook. This move is an attempt to help restore confidence in the US, so that the Yen won’t continue to strengthen as the market weighs in on which currency (Yen or Dollar) is the better safe-haven.

Will today be a reversal day and risk appetite return to the market, or has yesterday’s price action scared traders that the jig may be up?

Oil price declines continue and the debate over where to put money for the highest combination of safety and return is open for debate. The Dollar is clearly not a desirable destination, but some may have no choice.

We are so awash in US dollars right now thanks to the Fed, that money is essentially making its way everywhere as yield-seekers try to stay ahead of the curve.

How far these new bubbles can expand is anyone’s guess, but when the inevitable pop comes, look out!

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, EUR, Euro, forex, forextrading, free, fx, fxedu, gbp, Il, interest, jpy, market, Mike Conlon, nzd, practice, ssi, time, trade, USD, Yen

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