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November 28, 2011

Beginning of the dollar pain trade?

Filed under: OANDA News — Tags: a-deeper-treaty, cad, chf, eurogroup, free, gbp, german, italy-however, stability-union, usd — admin @ 4:11 am

The USD is opening this weeks account a good deal weaker. Asian and Euro-bourses have rebounded from their biggest selloff in nearly two-months amid speculation policy makers are intensifying their efforts to contain “the” debt crisis.

For most of the weekend throughout Europe, the free press was reporting positive EUR actions. Yesterday, Germany’s finance minister suggested that the Euro-zone could rapidly implement changes to the Lisbon Treaty, allowing for significantly greater EC fiscal oversight of Euro area member countries. In theory, this would create a “Stability Union” before a deeper treaty change in the future. Elsewhere, in Italy, La Stampa, suggested that that the IMF would provide a €600b financing facility for Italy (this could only ever be EUR positive). Other news sources have since cited unnamed officials as saying that the report is not credible and that there are no discussions within the G7 of a large IMF package for Italy. However, that being said the story has nonetheless alerted the market to the possibility that some assistance might come from the IMF’s mission to Rome this week and the Eurogroup meeting.

The German newspapers have not been left out in the cold. They reported that the German government and five other EZ members, with triple “A” credit ratings, are considering issuing bonds. Part of the money raised would be used to provide financial assistance, under strict conditions, for Italy and Spain. Finally, the EFSF issued a new issuance strategy that would have it increase precautionary funding. The above reasons, remedies and excuses, have allowed the market to apply risk again, despite another rating agency, Moody’s warning that Euro area sovereign ratings are increasingly under threat. They noted that risk of multiple defaults by Euro area countries is “no longer negligible”.

There has been interest to sell EUR’s into this relief rally thus far, however, stop losses still lurk tight above 1.34+ that could fuel further short term gains. Bigger picture, confidence in the debt-embattled single currency remains “paper thin’ and many in Europe will already be eyeing tomorrows EUR+8b BTP (Italian) auction for euro-demand clues. The future of the Euro-zone remains hanging in the balance. The market cannot be fooled by month-end window dressing affecting the FX market over the remaining few session for November. The right-hand-side remains most vulnerable to the pain trade.

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October 12, 2011

Forex Market Outlook 10/12/11

Filed under: Forex News — Tags: currency trading, currency-pairs, fear, free, fundamental, japan, lower, markets, new zealand, practice, rsi, stock, vote — admin @ 7:21 am

This morning has started with risk appetite driving markets higher, with Dollar and Yen weakness acting as either a by-product or catalyst of the move. Regardless of who or what is leading the charge, a sense of calm is starting to return to the markets and they looked poised for a 4^th quarter rally into the end of the year.

Positive sentiment surrounding the resolution of the debt crisis has not been derailed by Slovakia delaying their vote on the EFSF expansion agreed to in principle on July 21^st as the market believes that the Franco-Prussian solution which Sarkozy and Merkel have promised is coming in early November will like supercede that package. The “Troika” has already agreed to Greece receiving the next tranche of money despite the uncertainty surrounding the vote of whether Greece has done enough to receive it, with the hope that whatever is offered in early November is enough to wipe the whole slate clean.

So the pressure is on to come up with a resolution that not only deals with the problem but is also something that is agreeable to all of the Euro zone members as well as the markets in general. Call me skeptical but I’m not certain if such a solution exists. Today a plan to re-capitalize European banks will be proffered which is a step in the right direction.

Meanwhile in the UK, policy-maker Posen has claimed that the BOE is prepared to ease further and the unemployment rate has ticked higher to 8.1% from 7.9% and an 8% expectation, yet the Pound is trading higher and hit our last week’s target of 1.57 vs. USD and then some. GDP estimates came in better than expected for September calling for .5% for last month vs. .2% for the previous month. Also to note is that even though the official unemployment rate rose, the number of new jobless claims came in lower than expected at 17.5K vs. an expected 24K.

Both the Aussie and the Kiwi are tracking higher with the former trading back above parity vs. USD. Related home sales and price figures show that there is moderate growth, and Australian consumer confidence figures came in better than expected. Australian employment figures are due out tomorrow.

Also adding to the risk trade is the machine orders figures that were reported by Japan that came in much better than expected, showing a monthly gain of 11% vs. an expected 3.9%. This has helped rally the Nikkei and caused some Yen selling and tonight’s release of the BOJ meeting minutes may show how close they are to intervening in the currency which could provide for additional risk taking.

Speaking of meeting minutes, the release of the September FOMC will be out later today and will definitely show how close Bernanke and Co. are to QE3. While he floated the idea at the JEC briefing earlier this month, it may have been in response to tanking markets and not any serious policy discussion. If on the other hand they are close to QE3, then this could push markets higher on the free-money trade.

US corporate earnings season is upon us and was kicked off by worse than expected numbers out of Alcoa, yet the S&P 500 has rallied to above 1200. The bar has been set so low for many of these companies that the beats should be more than the misses.

Also to note is that the Senate did not pass Obama’s “jobs bill” which was a more of political statement than a credible plan. This means that more money is not added to the deficit and taxes are not raised in the near-term, and we are likely to have to wait for the deficit reduction committee to take action before anything gets done.

Yet the mood surrounding the markets appears to be positive and I think we will definitely see that 4^th quarter rally that investors desire. Business can only sit on the sidelines for so long and if they start to believe that there may be a change in Washington DC in the next election cycle to more pro-business policies, then they may start to invest.

While I don’t think this will solve our unemployment problem in the near-term, if we can get the needle moving in the right direction then that could instill some confidence which is ultimately what this economy is sorely lacking.

So keep an eye out for the Fed release later today as it has the ability to create volatility as the market dissects the Feds intentions. Any hint at the “free money” trade could send markets even higher!

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October 5, 2011

Bernanke Boosts Global Markets!

Filed under: Forex News — Tags: activity, chairman, chart of the day, free, government, market, markets, more-prevalent, other-reasoning, president, reasoning, some-the-gains, testimony, the-markets — admin @ 8:05 am

In his testimony to the Join Economic Committee yesterday, Fed Chairman Bernanke did not rule out further monetary easing if the economic situation worsened here in the US and around the globe so the markets took that as a sign that the free money trade may be back on.

This caused a tremendous move in the markets right out of the gate and Dollar weakness, though some the gains were given back until the last hour of the stock market yesterday. Then, another wave of buying took over and lifted teh risk tide into the close. Market pundits are calling this activity suspicious, but I offer another reasoning.

The Plunge Protection Team (PPT) is part of trader’s folklore that says that the government powers that be actually intervene in the markets from time to time to prevent excessive selling. Also called the President’s working group on financial markets, it is designed to instill confidence in the markets and change sentiment.

This used to be more prevalent years ago, but I would not be surprised to see it return given the market action we have seen of late. So absent any other reasoning, I’m going to go with this. Chalk another one up to Bernanke and friends!

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September 14, 2011

Cracks Appear in Merkel’s Coalition as Debt Crisis Worsens

Filed under: OANDA News — Tags: a-wedge-between, deficit-target, eur, european-union, free, german, greek, likelihood, market pulse, time — admin @ 1:56 pm

Fears that Greece is heading towards an inevitable default have increased significantly in the past two weeks. And now it appears that as the likelihood of a default increases, the fate of Greece has driven a wedge between the two main parties in Germany’s coalition government headed by Chancellor Angela Merkel.

On Tuesday, comments made by German Vice Chancellor Philip Roesler who heads the Free Democratic Party painted Merkel into a corner. Merkel, whose Christian Democratic Party leads the government only through the support of the FDP, was forced into damage control when Roesler brought up the possibility of Greece defaulting and being forced out of the Eurozone.

“To stabilize the euro, there can no longer be any taboos,” Roesler wrote in an article for the German Newspaper Die Welt. “That includes, if necessary, an orderly bankruptcy of Greece if the necessary instruments are available.”

Merkel immediately went on the offensive to reassure markets already in panic following Monday’s deep sell-off. Merkel pledged that she personally, and the government as a collective, are in agreement that “everything must be done to keep the euro area together”.

Merkel went on to suggest that the loss of Greece would lead to a “domino effect” that would soon engulf other debt-ridden countries within the region.

Greece Expected to Miss Deficit Target

One of the main conditions Greece agreed to in exchange for emergency funding was to reduce its 2011 deficit by 7.6 percent. Progress on this objective is currently being reviewed by representatives of the “troika” comprised of the European Union, the International Monetary Fund, and the European Central Bank. The preliminary results of this audit are not encouraging.

The latest evaluation is that Greece will fail to meet its deficit reduction target. According to the auditors, this failure is due partly to a lack of effort on the part of the government, but also because the Greek economy contracted more than had been anticipated. The weaker growth resulted in lower revenues leaving a wider-than-expected budget shortfall.

The big question now of course is will the government’s apparent failure to meet its deficit goal affect the next financial aid payment of 8 billion euros (US$10.9 billion)?

At this time, most analysts believe Greece will still receive the next tranche as scheduled but it will surely come with a stronger warning that Greece must take its deficit reduction goals more seriously.

In addition to the deficit shortcomings, Greek officials will also be taken to task over their lackluster efforts to privatize a series of government-owned agencies. Again, in exchange for emergency funding from its Eurozone neighbors, Athens was expected to sell a series of government-owned agencies and use the money to reduce the operational deficit.

The scheme is expected to raise 1.7 billion euros (US$2.3 billion) by the end of the month, and another 5 billion euros (US$6.8 billion) prior to the new year. Publically, the government claims it is optimistic that it will meet these targets but the troika remains unconvinced.

It is commendable that Merkel acted so quickly to defuse the comments of her Vice Chancellor but in the end, this may prove to be little more than window-dressing. Greece is clearly not on track to contain its deficit and the likelihood of a default – no matter what Merkel says – is higher today than it was just two weeks ago.

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June 15, 2011

Quick Turnaround!

Filed under: Forex News — Tags: cad, chinese, dow, eur, fire, free, marketplace, risk, ssi, unemployment — admin @ 6:29 am

Well that was short-lived. All of the relief from yesterday’s Chinese economic reports can basically be thrown out of the window as leaders in the Euro zone can’t seem to get there act together. In what has been become a spectacle that would make Sophocles proud, the Greek debt crisis has appeared on all stages: first starting as a drama, then becoming a tragedy, then a comedy, then back to drama, now approaching tragedy again!

Yesterday’s emergency meeting of leader failed to produce anything and the major outcome that was reported was “bickering”. EU leaders need to come up with a solution by the end of the month in order for Greece to secure an IMF payment which could be withheld if no action is taken. Germany is still insisting on measures that would constitute a default, and no resolution appears close.

It is patently clear that Germany is the obstacle in this process and while bailouts aren’t my cup of tea, if they want to save the Euro then they need to compromise. Germany stands the most to lose in this entire ordeal, so in my opinion they are negotiating from a position of weakness and not strength. Stay tuned for this one!

In the UK jobless claims came in three times higher than expected and wage growth has slowed though the unemployment rate has remained steady at 7.7%.

US CPI data is due out later this morning and is expected to vindicate Bernanke as fuel costs have come down. Yesterday’s regalia of Bernanke and the Fed may have stolen the headlines from the re-opening of “Spiderman” on Broadway as the best staged event of the day!

So the markets have started the day in risk aversion mode, with stocks and commodities lower around the globe. Lost in yesterday’s excitement over tame Chinese CPI is the fact that raised bank reserve requirements in an attempt to slow their economy.

In the forex market:

Aussie (AUD): The Aussie is higher to start the morning despite the risk aversion in the marketplace. Yield-seekers see a positive economy and the RBA honcho’s conflicting comments that inflation was more likely than not could foreshadow a possible rate hike. New dwelling starts rose 3.1% vs. an expectation of a decline of .8%. (Click chart to enlarge)

Kiwi (NZD): The Kiwi is lower across the board despite a much better reading of consumer confidence from last month. Considering that they were dealing with an earthquake last month, this was to be expected. Risk aversion and money flows are putting pressure on the Kiwi.

Loonie (CAD): The Loonie is mixed despite lower oil prices to start the morning. The fate of the Loonie lies somewhat with the US CPI data and what the market response to the release may be.

Euro (EUR): The Euro has given back all of yesterday’s gains and then some. While Euro zone industrial production figures came in better than expected, the problems with the Greek debt crisis are weighing heavily on risk in the markets. (Click chart to enlarge)

Pound (GBP): The Pound is mostly lower after jobless claims came in showing an increase of 19.6K vs. an expectation of 6.5K. While the UK economy is definitely slowing, how the avoid stagflation is anyone’s guess.

Swissie (CHF): The Swissie is mixed as its safe-haven properties are counter-balanced by the sentiment that the SNB will not raise interest rates due to recent franc strength. Declining import prices reflect Swissie strength.

Dollar (USD): The Dollar is higher across the board as risk aversion ahead of this morning’s CPI data release and specific Euro weakness are driving demand. Should inflation come in less than expected, pressure for higher rates would abate.

Yen (JPY): The Yen is surprisingly mixed this morning as well, as risk aversion has increased demand, yet not enough to unwind carry trades. With the risk coming from Europe, it appears as though money flows are driving price action. The Nikkei was actually higher last night, the only major market index to post gains.

As you can tell by now, sentiment in the marketplace can shift on a dime and there is still major risk around the globe. Some days the positives are emphasized (like yesterday), while others the negatives shine through.

The problems in Europe are too great and the Greek situation may be a microcosm of what is really taking place. Germany is playing with fire in this situation and ultimately they might end of getting burned before they drag everyone else into the fire.

While the rest of the globe has a “wait and see” attitude at this point, European leaders essentially have 2 weeks to get this figured out. So while the only fireworks expected this summer should occur on July 4th, there may be other “independence” celebrations taking place.

Of course this bound to bring about a lot of pain as well, and certain market volatility. So don’t take time away this summer, as the action may be too great to miss!

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 27, 2011

Turning A Negative Into A Positive!

Filed under: Forex News — Tags: aud, course, currencies, currency trading, free, japan, jpy, memorial, usd, yen — admin @ 7:27 am

That’s what looks to be occurring in Japan, which for the first time in nearly 25 months is showing signs of inflation. Japan has been mired in economic stagnation for the last 20 years, other wise known as the “Lost Decade” which is ironic considering it is actually closer to 2 decades.

We are all aware of the earthquake, tsunami, and nuclear crisis that devastated Japan a few short months ago, and it is the disruptions of supply that has caused prices to rise. While the aftermath of the natural disaster is a negative thing, the economic growth that could come out of the re-building efforts could be a net positive. However, Fitch lowered Japan’s credit outlook.While silver linings may exist in Japan, this is clearly not the case in the US, as yesterday the GDP revision, personal consumption, and initial jobless claims figures all missed their mark. So we are seeing Dollar weakness in the marketplace, but don’t mistake this for risk appetite. Right now the fundamentals are starting to come back more into focus, as risk themes become more muddled.

One such beneficiary of risk themes has been the Suisse franc, which is now looking like the best safe-haven currency out there. It is hitting all-time highs vs. the Euro, the Dollar, and the Pound and the IMF just called for Switzerland to raise interest rates—which will make it more desirable if the Suisse do comply.

Later this morning, the US will report personal income and spending numbers, though it seems doubtful that these will impress the markets. Stocks are flat to slightly higher, with commodities stronger as next week is shortened due to the Memorial Day holiday here in the US. This means that banks are closed on Monday, which will reduce volume but not volatility.

In the forex market:

Aussie (AUD): The Aussie is mostly higher as yield-seeking is taking place on Dollar weakness. While there is still considerable risk in the market, the markets are becoming less enamored with the US dollar as a safe haven.

Kiwi (NZD): Another up day for the Kiwi on rumors that China has been buying in order to diversify it’s considerable currency reserves. It is at a 3-year high. (Click chart to enlarge)

Loonie (CAD): The Loonie is losing its luster as it is being sold because of Canada’s close ties to the US. As economic conditions decline here in the US, Canada will decline as well as the US is by far the largest importer of Canadian goods and services.

Euro (EUR): The Euro is mostly higher as the “anti-Dollar” is benefiting from US economic malaise despite the problems in the Euro zone with the periphery countries debt problems. Euro zone economic confidence figures came in lower than expected.

Pound (GBP): The Pound is mixed as market concern over weak economic recovery in the UK is near the forefront. However, home prices rose for the month more slightly more than expected showing that there is still price stability and inflationary pressures in the economy.

Swissy (CHF): The Swissy is making new all-time highs vs. EUR, GBP, and USD after the IMF called for a rate hike in Switzerland. The Swissy has been receiving a major bid from its safe-haven status as a better performing economy than both the US and Japan. (Click chart to enlarge)

Dollar (USD): The Dollar is weaker across the board after the second day of weak economic data. Personal income figures came in as expected at .4%, but personal spending was slightly lower than expected at .4% vs. the expectation of .5%. Monday is a bank holiday in the US.

Yen (JPY): The Yen is mixed after Japanese CPI data ended 25 months of deflation after posting a .6% gain. Retail sales however fell 4.8%, though that was better than expected. The Fitch downgrade of Japan’s credit is a largely non-issue, and perhaps this will set the stage for some economic growth in Japan going forward.

The major theme of the last two days in US dollar weakness as negative economic data paints a picture of an economy in trouble. It is amazing that this makes the Dollar less desirable than the Euro, which is mired in its own problems with the debt problems of its periphery members.

Nevertheless, because Monday is a bank holiday here in the US, we could see some squaring of books this weekend though I don’t think the usual risk-off play of buying Dollars will happen.

Currencies like the Swissy and gold by proxy are taking away some of the Dollar’s attributes as the major safe-haven currency, which could be a problem if the US economy continues to sink.

With the problems that ail the US economy and no apparent solutions coming from US policy-makers, it could be a long summer for USD!

Enjoy the long weekend folks, I’ll be back on Tuesday!

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

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May 25, 2011

The Saga Continues!

Filed under: Forex News — Tags: account, bank, cad, course, currency, forex, free, government, japan, practice, risk, trade, yen — admin @ 7:02 am

Overnight, the Euro was lower and tested support vs. USD at 1.40 after a rumor was floated that Greece was going to have a “snap election” which would essentially allow the public to weigh in on the austerity measures. This rumor has since been denied, but it is obvious to see how this could have a negative effect on the Euro as it is highly unlikely Greek voters are supportive of these measures. As a friend of mine likes to say, ” 100% of the people enjoy a free lunch!”

With little other news emanating from the Euro zone, our attention has turned to the UK and the release of its GDP figures which came in as expected. While personal consumption was lower, exports were higher making up for the lack of domestic demand.

In Japan, trade deficit figures rose the fastest in nearly 2-years though this was expected as the supply-chain disruptions that occurred as a result of the natural disasters there have hurt exports. However, the BOJ is apparently ready to boost lending to help in the rebuilding effort, mostly likely in coordination with further government spending.

US durable goods orders are due out later this morning and are expected to show a decline of some 2% and the home price index is also expected to show declining prices. With economic expectations this low, the worst might already be factored in.

Stocks are slightly lower to start the morning as is oil, though gold is trading higher.

In the forex market:

Aussie (AUD): The Aussie is lower across the board as mild risk aversion and a lower than last month leading indicators index have reduced demand.

Kiwi (NZD): The Kiwi is mostly higher despite the risk aversion as it is still catching a bid from yesterday’s inflation expectation report.

Loonie (CAD): The Loonie continues to move lower as oil retreats and the market expectation is that slowing growth will keep the Bank of Canada from raising rates any time soon. (Click chart to enlarge)

Euro (EUR): The Euro was lower but has since bounced higher after the rumor of the snap election was squashed by Greece. Allowing the fate of Greek austerity to be determined by the populace would be disastrous.

Pound (GBP): The Pound is mostly higher after GDP figures came in as expected showing .5% quarterly growth and 1.8% YoY. Private consumption figures came in lower at -.6% vs. an expected gain of .1%, but this was largely offset by exports which were up 3.7% vs. an expected 2.1%.

Dollar (USD): The Dollar is showing strength this morning after durables goods orders came in worse than expected, showing a decline of 3.6% vs. the expected decline of 2.5%. This may invoke further risk aversion as the trading day moves forward, but the house price index due out later this morning could surprise.

Yen (JPY): The Yen is mostly weaker as trade balance figures showed a deficit, though not as bad as had been expected. It is widely assumed that the Bank of Japan will take further action to help the economy re-build, though they may wait to coordinate with the government on further spending. (Click chart to enlarge)

So far this week, not much has changed. The risk in the marketplace is still looming, there is nothing positive coming out of the Euro zone regarding the debt crisis, and the economic data continues to point to a slowing global economy.

It is always times like this that put me on heightened alert as I hate to wait. The uncertainty of the situations and the fact that the various currency pairs are trading at critical levels means that sentiment may be about to shift as we breach these support and resistance levels.

For now, it looks as though the markets will trade around these levels until the next significant piece of news can establish a market direction. What that news will be is anyone’s guess, and it may not be something as obvious as what we know about today. While the Euro debt crisis is likely to drag on for some time, it will be interesting to see if the summer trading season brings opportunity or disinterest.

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, economy, 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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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 5, 2011

Decisions, Decisions!

Filed under: Forex News — Tags: aud, aussie, australia, cad, dollar, forex, free, mike conlon, nzd, retail, usd — admin @ 7:11 am

This morning, I am talking about the rate policy decisions that have taken place in both the UK and the Euro zone. While both decisions produced no change which was expected, weakening economic data may allow both Central banks to remain accommodative for some time.

Prior to the rate announcement this morning, UK PMI data came in worse than expected showing that manufacturing may be faltering and providing the BOE with the ammunition it needs to justify current rate policy despite the inflation.

In the Euro zone, factory orders in Germany were also lower displaying a chink in the armor of the EU’s strongest economy.

There has been some relief in the commodity space as oil has retreated to a $106 handle, gold is just above $1500, and silver is back to a $30 handle, having tested $50 just last week.

The drop in commodity prices is affecting the commodity currencies negatively as would be expected, though Australia has the added pressure of much worse than expected retail sales figures.

The employment report from New Zealand last night was mostly positive, though the Kiwi is suffering from the “throwing the baby out with the bathwater” syndrome.

Later this morning we will get the initial jobless claims here in the US which comes ahead of tomorrow’s Non-Farm Payrolls report. Yesterday’s ADP report was largely seen as negative and helped take markets lower.

In the forex market:

Aussie (AUD): The Aussie is lower across the board as lower commodity prices plus lower retail sales figures make it the biggest loser this morning. Retail sales declined .5% vs. an expected gain of .5%. Building approvals came in better than expected, but the retail sales figures obviously dominate the headlines.

Kiwi (NZD): The Kiwi is mostly lower as despite better than expected employment figures that came in last night. The unemployment rate fell to 6.6% from an expected 6.7%, and the quarterly employment change was up 1.4% vs. an expected .6% on a higher than expected participation rate. So these numbers are pretty good.

Loonie (CAD): The Loonie is lower on lower oil and commodities prices as the risk trade picks up steam. Tomorrow is the Canadian employment report.

Euro (EUR): The Euro is now trading much lower but not for the reasons one would think. While the ECB left rates unchanged and the policy statement is perceived as dovish, it was actually the US initial jobless claims taking it lower (see below). Worse than expected German factory orders put a negative spin on the Euro. (Click chart to enlarge)

Pound (GBP): The Pound is mixed but is surprising resilient in the face of this morning’s news. While they maintained current policy, UK PMI figures came in worse than expected, showing a reading of 54.3 vs. an expectation of 56. This somewhat justifies current policy, so the market is not punishing.

Dollar (USD): Wow, here comes QE3! Initial jobless claims came in MUCH worse than expected, showing 474K newly unemployed vs. an expectation of 415K. This is clearly moving in the wrong direction and is a further indictment that Fed policy is not working. So expect them to double-down with even further easing! Moronic.

Yen (JPY): The Yen is strengthening on risk-aversion as commodities and stocks are lower to start the day. The Yen is trading at its strongest levels since the natural disaster. (Click chart to enlarge)

Man, this could get ugly today. Stock and commodities are trading lower and it looks as though everyone is rushing to the exits. Initial jobless claims here in the US are moving in the wrong direction, and we are closer to seeing a 500K print than we are a 300K.

This is significant because it is further evidence that the US Fed monetary policy is not working. So what would a prudent person do when something isn’t working? They would probably stop doing it and look for a better way.

Is this what I expect the Fed to do? Absolutely not! I expect QE3 to be forthcoming and for these guys to just keep doubling-down until we can hyper-inflate our way out of this economic quagmire. Of course this won’t work either and the consequences of such actions will prove to be disastrous.

What Bernanke and the “text book”-only crowd haven’t figured out is that economics today is more about how people feel and not what the playbook says to do. So while we are probably facing much bigger problems from asset-price deflation, scaring the pants off of the global public with higher commodity prices has the opposite effect of what they are trying to accomplish!

This could get scary, folks! Of course look for tomorrow’s NFP report to bail out the Fed just one more time. But if it doesn’t, then lookout below!

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

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April 25, 2011

Fed Watching!

Filed under: Forex News — Tags: aussie, bernanke, course, dow, eur, euro, free, gbp, markets, nzd, ssi, thursday, yen — admin @ 1:01 pm

The week ahead! This morning European markets are closed for the Easter holiday just as the US markets were closed on Friday. With nothing major occurring over the weekend the markets look poised to resume last week’s trend: Dollar weakness.

This week will also be interesting in that it will be the first of Fed Chairman Bernanke’s quarterly reports, where he is going to try to sway public opinion to accepting his view of the marketplace. This may be extremely difficult to do with gold trading firmly above $1500, silver just short of $50, oil above $112, and gasoline approaching $5 in some parts of the country.

Meanwhile, US stock earnings reports are due out this week and they have been largely positive so far so that could help buoy the markets higher. US GDP figures are due out on Thursday and the market has already lowered expectations.

There are various GDP and CPI reports due this week and also some rate decisions. However, the big news will be Bernanke on Wednesday, as the market isn’t sure what to expect at this point.

So today is a lighter volume day, with only US New Home Sales figures to potentially affect currencies.

In the forex market:

Aussie (AUD): The Aussie is somewhat lower this morning despite higher commodity prices. CPI data is due out on Wednesday, which could put rate hikes back in play despite RBA officials’ attempt to jawbone the Aussie lower.

Kiwi (NZD): The Kiwi is also lower as Asian stocks were lower overnight. The RBNZ rate policy meeting is on Wednesday and while they are expected to leave rates unchanged at 2.5%, they could telegraph future hikes as inflation is has been creeping higher. (Click chart to enlarge)

Loonie (CAD): The Loonie is mostly higher catching its bid from higher oil prices ahead of Friday’s GDP report.

Euro (EUR): European markets are closed but nevertheless the Euro is higher as the market is invoking its anti-Dollar properties. CPI data is due out on Wednesday from Germany, followed by the German unemployment report on Thursday. At this point, as Germany goes, so does the Euro. (Click chart to enlarge)

Pound (GBP): The Pound is mostly lower ahead of Wednesday’s GDP report which is expected to contract a bit as the effects of government austerity are realized. However, the UK economy has been fairly resilient despite this, and the BOE may need to get its act together quickly.

Dollar (USD): Another day, another weak Dollar! US new home sales are due out later this morning, but the big news this week is going to be the Bernanke circus. Like much of what has gone on lately, this is bound to be a major let-down. GDP figures on Thursday and consumer confidence figures round out the week.

Yen (JPY): The Yen is mostly weaker as a slew of economic data is due out on Wednesday, followed by Thursday’s rate decision. The take-away here is that the BOJ is expected to remain accommodative and would love for the Yen to weaken, but it may not be possible thanks to the Dollar.

Without the benefit of European trading, today’s action may be on lighter volume. While the Dollar has been strengthening a bit, it is still weaker and the questions surrounding Wednesday are bound to leave traders guessing.

One of the major issues right now is inflation and the effect that it will have on the global economy. As we near the end of QE2, how the markets react in the coming weeks will tell the story.

So I’m going to keep my trading to the short-term, and will expect volatility on Wednesday as the market hangs on every word spoken!

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!