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April 18, 2011

A Familiar Game!

Filed under: Forex News — Tags: a-light-week, a-raised-the, course, economy, euro, free, jpy, practice — admin @ 1:02 pm

The markets are starting the week lower as risk aversion is dominating the action in this holiday-shortened week. In what has become a familiar scene, oil is trading lower as it gets bid up on Friday’s as market participants do not want to go short over the weekend as the risk in the Arab countries is still present.

Adding to risk sentiment are the usual Euro debt crisis rumors, which propose that rate hikes are going to cause Greece and Ireland to default. While this has to be a concern for the ECB, I’m surprised that more clarity isn’t being proffered. Perhaps some Euro weakness in the face of rising rates would be just what the ECB is hoping will happen.

In an attempt to slow down inflation, China raised the reserve requirements for banks again which is intended to curb lending.

Overnight, New Zealand reported CPI data that showed that inflation increased slightly less than expected. In the UK, asking prices for homes came in higher as lack of supply and overall inflation contribute to seller confidence. I guess it doesn’t hurt that London has become the “preferred destination” of former Arab dictators so the market could remain strong for some time.

It will be interesting to see if the US market can shake off the lower start and turn it around by the end of the day. Recently, the US market has seemed immune to negative news and keeps going higher, as Bernanke’s dollar destruction leaves traders few other alternatives.

In the forex market:

Aussie (AUD): The Aussie is mostly lower on risk aversion, but is faring better than the other commodity currencies due largely to its interest rate differential. The minutes from the RBA rate policy meeting are due out tomorrow, which I expect to have a dovish tone as a result of the recent run-up.

Kiwi (NZD): The Kiwi is lower across the board as CPI data came in lower than expected, perhaps dampening hopes of a rate hike any time soon. CPI showed a quarterly increase of .8%, pushing the YoY number to 4.5%, vs. expectations of 1% and 4.6% respectively. (Click chart to enlarge)

Loonie (CAD): The Loonie is also lower as oil has pulled back a day ahead of the release of CPI data. While Canada has not been seeing the inflation that some other regions have, building permits and housing starts figures will show whether or not the economy is moving forward.

Euro (EUR): The Euro is lower against all but the Kiwi as the rumors of a Greek debt restructuring and a possible block of aid to Portugal are making the rounds. PMI data is expected to contract slightly, and PPI data is expected to increase. (Click chart to enlarge)

Pound (GBP): The Pound is mixed under what would be considered a “normal” risk aversion day despite the fact that home asking prices came in higher than expected. The BOE rate policy meeting minutes will be released on Wednesday which could show increased worry over inflation. Retail sales figures come out on Thursday.

Dollar (USD): The Dollar is mostly higher on risk aversion, and Friday markets are closed here in the US. It’s a light week for news in the US, without today bringing some Fedspeak at various locations, and the Philly Fed is due out on Thursday, which could see higher volatility as we have a long market weekend.

Yen (JPY): The Yen is higher across the board on risk aversion as Asian markets were down over night. Trade balance figures are due out on Tuesday night, and I am a little surprised to see Yen continue to strengthen considering the major economic challenges they are facing.

We’ve seen this one before, folks. The markets push both oil prices higher on Friday’s because of the risk in the marketplace and when nothing significant happens, it sells off going into Monday. This helps take markets down (which isn’t a bad thing), and then US stocks tend to rebound to start the week. Rinse and repeat.

Except there is going to be the time when this game does not work, and the selling that starts the day could bring about a “big one”. The markets have been so pumped up on Fed easy-money steroids that sooner or later the bubble is going to burst. What the exact catalyst will be is anyone’s guess but at this point these markets are climbing the “wall of worry.”

In times like these it makes sense to proceed cautiously as no one knows where or when the next risk event may come from.

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, fxedu, gbp, Il, jpy, market, Mike Conlon, nzd, practice, ssi, time, trade, USD, Yen

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March 29, 2011

They’re Buying What?

Filed under: Forex News — Tags: account, board, correlations, course, currenc, dollar, economy, forextrading, free, jpg, jpy, time, trade, yen — admin @ 1:44 pm

Just when you think you know what is going on in the marketplace, you get thrown for a loop. Apparently now the market believes that the safest place to be is in US stocks. No matter what the situation or risk in the market, stocks seem to keep climbing higher.

Last night President Obama gave his speech on why the US is involved in Libya and at the end of the day he should be afforded the same leeway as every other president who takes military action.

Oil prices are pulling back some, stocks in Europe and Asia are lower, yet US stock futures are higher to start the morning.

IN the UK, GDP figures came in slightly better than expected, posing a decline of .5% vs. an expectation of a .6% decline, with the YoY number coming in as expected at 1.5%. This isn’t too bad considering that the austerity measures are starting to kick in. Right now, the market is expecting the ECB to raise rates before the BOE does, despite the high inflation in the UK.

US home price figures are due out later this morning, s are US consumer confidence figures. It will be interesting to see whether US stocks can hang on, or if the Dollar turns around and weakens.

In the forex market:

Aussie (AUD): The Aussie is lower this morning after putting in a multi-decade high vs. USD. The Aussie had put in 6 days of gains prior to today’s pullback.

Kiwi (NZD): The Kiwi is lower against all but the Yen as overnight trade balance figures came in lower than expected. However, both imports and exports were higher, showing the potential for economic growth.

Loonie (CAD): The Loonie is higher across the board despite lower oil prices to start the day. With relatively little news out of Canada, this appears to be more of a fundamental play on the perceived strength of the Canadian economy. (Click chart to enlarge)

Euro (EUR): The Euro is mostly lower as Dollar strength is driving the forex market this morning. While there is an expectation that the ECB will raise rates at the April 9th meeting, they first have to navigate the Irish bank stress-tests.

Pound (GBP): The Pound is also some strength, higher against all but the Dollar as the GDP figure came in slightly better than expected. A call for measured rate hikes from a hawkish BOE policy-maker were countered by a statement from the BOE dove who said he would resign if inflation didn’t come back to normal levels this year.

Dollar (USD): The Dollar is stronger across the board despite higher stocks to start the day. Home price figures and consumer confidence numbers are due out later this morning.

Yen (JPY): The Yen is weaker across the board this morning as no additional news about the nuclear crisis has induced Yen buying. The Yen should be weakening after the G-7 intervention, and last night employment figures came out that showed that the economy was actually improving prior to the earthquake. (Click chart to enlarge)

Sometimes the market doesn’t behave as we would expect it to and that is something that all traders have to deal with. Correlations that we rely on sometimes break down and as the saying goes, “the correlations work great until they don’t.”

So it is important to remember to look at the technicals of each pair individually, as anything can happen. Be married to a certain view can sometimes prove dangerous.

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, nzd, practice, ssi, time, trade, USD, Yen

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March 27, 2011

Merkel Loses Power

Filed under: OANDA News — Tags: been-mobilised, big-backers, chf, combined-44-3, eclipsing-the, economic exposure, emergency-plan, eur, free, make-the-case, nuclear-crisis, sentiment-has, social, state — admin @ 7:41 pm

Chancellor Angela Merkel’s conservatives lost power in a regional stronghold on Sunday, with early poll results showing the Greens, buoyed by Japan’s nuclear crisis, surging to their first state premiership.

In Baden-Wuerttemberg state, where anti-nuclear sentiment has been mobilised by Japan’s nuclear breakdown, the Greens and Social Democrats (SPD) were set to win 47.3 percent, eclipsing the Christian Democrats who held power there for six decades.

Merkel’s CDU and their Free Democrat coalition partners, big backers of nuclear power, won a combined 44.3 percent, according to projections at 1800 GMT in the state of 11 million people.

Reuters

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March 24, 2011

Eww EU!

Filed under: Forex News — Tags: a-floor-under, course, dow, eur, euro, free, lower-as-retail, marketplace, mike conlon, prime-minister — admin @ 1:29 pm

Last night, the Portuguese Parliament rejected the austerity measures put forth in budget prompting the Prime Minister to make good on his promise to resign. This is pushing Portugal closer to having to seek a bailout, yet the Euro is trading higher this morning. Part of the issue is that interest rates are way to high for countries like Portugal to service their debt, and without the help of the EU to lower those rates, it is unsustainable.

This comes ahead of the two-day EU Summit, and apparently the market is turning a blind eye to these issues and directing its focus toward a possible ECB rate hike at the April meeting. But with re-financing costs so high for the PIIGS countries, it is unclear how raising rates is going to help this situation. Apparently the market is more hopeful than I am, though Moody’s agrees with me as they lowered ratings on Spanish banks.In the UK, retail sales figures came in worse than expected, which finally may give the BOE a ray of hope that their inaction on inflation may take care of itself. What is more likely is that the very inflation that are encouraging through loose monetary policy will likely harm GDP as people stop consuming.

World risk is still very high as an act of terrorism in Israel is heating up conflict there, not to mention the civil war taking place in Libya and the protests taking place in other Arab countries. Apparently the only folks who have noticed are those buying oil, which is now trading above $106.

Yet the Dollar is extremely weak, as QE2 has reduced the value of the Dollar as a safe-haven destination. Perhaps that is because data like the durable goods orders which posted a decline of .9% vs. an expected gain of 1.2% and the fact that another 382K people filed for unemployment last week show that the US economy is not improving.

Yet stocks push higher, as it more obvious that there really is no other place to put your money.

In the forex market:

Aussie (AUD): The Aussie is mostly higher on risk appetite and Dollar weakness with no news from Down Under to affect the currency fundamentally.

Kiwi (NZD): The Kiwi is higher across the board as last night’s GDP release came in slightly better than expected, showing a gain of .2% vs. an expectation of .1%. This is pretty impressive considering the earthquake that took place there.

Loonie (CAD): The Loonie is mostly higher taking its cues from higher oil prices, which is in high demand given the unrest in Arab countries.

Euro (EUR): The Euro is mostly higher despite Portugal’s rejection of austerity. The EU Summit today and tomorrow may address some of these issues, though I could see the Euro pull back from these levels.

Pound (GBP): The Pound is lower as retail sales figures came in worse than expected showing a decline of 1% vs. an expectation of a .6% decline. Higher prices are likely driving consumers away, so this could be the market doing what the BOE won’t. (Click chart to enlarge)

Dollar (USD): The Dollar is mostly lower as apparently the global risk in the marketplace is not enough to increase demand for the greenback. In-line initial jobless claims at 382K and worse than expected durable good numbers aren’t helping the perception of the Dollar.

Yen (JPY): The Yen is mostly weaker as the G-7 intervention has essentially put a floor under USD/JPY. While Japan is set to report CPI data tonight, this news is ancillary as the big story is the containment of the nuclear crisis. (Click chart to enlarge)

It is not my position to tell the market what it should be doing; my job as a trader is just to follow along and be ready to change course if the situation presents itself. However, my experience tells me that the markets have greatly discounted the global risk-taking place around the world.

Seemingly everyday there is a new concern, yet the markets shrug it off like its no big deal. This I believe is setting the markets up for a rude awakening and presents tremendous opportunity for those who can recognize when the tuning point comes.

So don’t get lulled into a false sense of security, as the gravity of world events could take a turn for the worse at a moments notice. Be one of the first through the exit door and not lagging behind!

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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March 7, 2011

Bernanke’s Plot!

Filed under: Forex News — Tags: a-house-today, cad, conspiracy, free, hook-if-housing, jpy, market, practice, thursday, unemployment, usd — admin @ 1:54 pm

If this is economic recovery, then I want no part of it.

Another week has begun with the US dollar weakening and everything else going higher, as the Fed’s attempts to force-feed “recovery” have accelerated the pace of inflation fears. Oil is trading at 106 and change, and gold is reaching new highs in the 1440s. Turn on the television and all you will see are reporters standing outside of gas stations, complaining about the high price of gas.

Almost every major economy is raising interest rates (except for New Zealand who will be cutting rates after having had to deal with not one but two earthquakes in the last 6 months), yet Bernanke and the Fed keep turning that blind eye. Why are they so afraid of higher, normalized interest rates?

The reason is this: housing prices. Somewhere along the way in the madness of the housing bubble, consumers became convinced that the best time to buy a home was in a low-interest rate environment. With low rates, prices move higher. So what happens when rates move higher? You guessed it, prices go lower. However, once you buy a home, the price you pay is fixed and final. Interest rates on the other hand, can be variable and consumers have the option to re-fi to get the best rate.

So what has been happening to housing prices since we’ve had this zero interest rate policy (ZIRP)? They’ve gone lower. So Bernanke decided that since he can’t have rates lower than zero, both QE1 and QE2 would help him push rates to below zero, which is where the REAL rate of interest is today. And still, housing prices have declined.

After seeing that this hasn’t worked and realizing that banks, the government, and the Fed itself are all on the hook if housing prices decline further due to the Fed having to raise interest rates, Bernanke decide to turn a blind eye to the inflation around him, and is attempting to scare people into buying homes for fear that prices are going higher through general inflation.

But only a complete lunatic would be looking to buy a house today, with the price of food and energy rising, which is essentially going to take money out of a consumer’s pocket and prevent them from spending it elsewhere. Businesses will lose revenue and have to lay people off, contributing to further unemployment.

This doesn’t sound like a recipe for success to me. The Dollar is tanking, Libyan unrest is picking up driving oil higher (though don’t think for a second that the conspiracy theorists don’t see this as a major cover-up), and people are beginning to panic. This isn’t going to end well.

In the forex market:

Aussie (AUD): The Aussie is flat to slightly lower though higher against the Dollar as risk aversion is beginning to pick up this morning.

Kiwi (NZD): The Kiwi is also mostly lower as it is expected that the RBNZ will cut interest rates at Wednesday’s meeting.

Loonie (CAD): The Loonie is mostly higher this morning as oil prices are climbing faster than I can type, trading just below $107 right now. (Click chart to enlarge)

Euro (EUR): The Euro is mixed, seeing some strength from its anti-Dollar status, but having its own issues as the idea of potential rate hikes puts the sovereign debt problems of member states in jeopardy.

Pound (GBP): The Pound is mostly lower this morning despite increased speculation that the BOE will tighten monetary policy by either reducing asset purchases or raising rates at this Thursday’s rate policy meeting. (Click chart to enlarge)

Dollar (USD): The Dollar is lower despite all of the risk in the market as Fed credibility may be in further question. Talk of tapping to the strategic oil reserve to deal with oil prices rather than raise rates is like putting a band-aid on a gunshot wound.

Yen (JPY): The Yen is higher across the board as its safe haven qualities are in demand with the risk in the market.

Bernanke is running out of time—quickly. Whether this plays into his grand plan or is merely a hiccup remains to be seen. However, the pace with which decisions need to be made is rapidly approaching and I fear that hasty decisions will lead to further bad policy.

There is no doubt that inflation is starting to pick up, it will be interesting to see how high and how much pain it needs to cause before the Fed will act. In the meantime, I’m going to keep an eye on the Dollar for if it starts to turn higher, than I know that fear is starting take hold and that something big may be about to happen.

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

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March 4, 2011

Where Rubber Meets The Road!

Filed under: Forex News — Tags: currency trading, data, dollar, free, fxedu, market, mike conlon, month, morning, prime-minister, release, trade, usd — admin @ 12:51 pm

All eyes this morning are on the US Non-Farm Payrolls (NFP) report due out at 8:30AM EST. While this is always one of the most significant economic reports that will induce market volatility, it hasn’t been this anticipated for some time.

Last month’s NFP report was an outlier, in that the 36K jobs gains reported almost came with a notion of disbelief, as if it was a mistake of some sort. Bad weather was blamed for the disconnect; but the figure showed that only 36K jobs were created, yet the unemployment rate fell from 9.4% to 9%. As I said in last month’s NFP blog article, you can’t have the BLS without the BS!

So this month we are expecting there to be gains of 196K jobs, with the unemployment rate ticking slightly higher to 9.1%. Recent data of late has been better than expected, especially when considering that the ADP employment change showed better than expected gains on Wednesday, and initial jobless claims came in lower than expected on Thursday. “Only” 368K people lost jobs last week, beating the expectation of 395K losses.

So this number should be pretty good today then, right? I’m not so sure. As I mentioned last month, when everyone gets their hopes up so high for good numbers, they usually end up disappointed. There is no other news to rely on today, so this number will be critical.

Last month I offered a guess as to what the number would be, and will my prediction was correct that it was worse than expected, I couldn’t imagine how much worse it was. This month I think we may see more of the same. So my prediction (remember this is a guess and NOT a trade recommendation) is that we will see jobs gains of 112K, better than last month but missing expectations. I think this will somehow induce US dollar strength today, as the Dollar seems very oversold to me. Regardless of what happens, there will be major volatility as the market digests the data.

Speaking of volatility, who saw the crazy move on the Euro yesterday? It happened right around 8:30 and the talking heads tried to attribute it to the initial jobless claims numbers, but basically ECB head Trichet said that he could raise rates next month, sending the Euro higher to the tune of 150 pips. This also helped risk-taking as US stocks made tremendous gains.

Stocks and commodities are higher to start the morning, but will these gains continue? Stay tuned for NFP!

In the forex market:

Aussie (AUD): The Aussie is mostly lower this morning as Prime Minister Gillard said that Aussie strength “puts burdens” on some areas of the economy. In addition, a separate report cited Australia’s housing market as being in a tremendous bubble which could pose a risk to the economy.

Kiwi (NZD): The Kiwi is also lower as the International Monetary Fund (IMF) said it will likely cut it forecast of New Zealand’s growth as a result of the two earthquakes. The rate expectations for New Zealand actually show that a reduction may be coming before another hike. The Kiwi has had a tough week. (Click char to enlarge)

Loonie (CAD): The Loonie is mixed this morning as the tug of war between higher oil prices and Canada’s economic ties to the US battle for position.

Euro (EUR): Wow, what a move for the Euro yesterday. The ECB finally did issue the hawkish comments the market was waiting for, after about 45 minutes of hemming and hawing. Was that a timed announcement with US economic data at exactly 8:30AM? Let the conspiracy chatter begin! (Click chart to enlarge)

Pound (GBP): The Pound is mostly higher as rate expectations shrug off recent home price data that has showed declines.

Dollar (USD): The Dollar is actually trading higher this morning as despite the mild risk taking in the market: This “wait and see” approach should provide trading opportunities on the release of the NFP report.

Yen (JPY): The Yen is weaker across the board as it is still trading under expected risk themes.

Put up or shut up! There are no more excuses! The US needs to see jobs growth and today’s number will be critical. There are two competing arguments for the direction of the Dollar today.

The first argument says that if the number should come in better than expected, then the Dollar should rally higher as this means that the US economy is improving and Bernanke will have to move on rates sooner to combat inflation. If the number is worse, than it justifies his position of fragile recovery and the need for a weak Dollar.

The alternate argument is that a better than expected number while good for the economy, will cause Dollar weakness as Bernanke has been blind to the inflation story and will not pre-empt QE2 under any circumstance. This comes as just about everyone else around the globe is complaining about inflation.

I’m actually in the second the camp, but think that a worse than expected number will cause Dollar strength today (the opposite of the scenario I laid out above). However, I will not be taking positions before the release, as I always prefer to let the market tell me which way to go.

So I can envision a scenario where the number comes in worse than expected (see my guess above) and initially the Dollar trades lower, but then quickly rebounds and finishes the day higher. This feels like a “crescendo moment”, with a sharp price spike and major volatility to reverse recent Dollar weakness.

At least that’s what I hope will happen, otherwise the Dollar may be falling off of a cliff! See you at 8:30!

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, forextrading, free, fx, fxedu, gbp, Il, jpy, market, Mike Conlon, news, nzd, practice, ssi, time, trade, USD, Yen

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March 2, 2011

Oil, Jobs, Inflation Oh My!

Filed under: Forex News — Tags: aud, aussie, eur, forex, free, fxedu, interest, middle-east, mike conlon, yen — admin @ 1:28 pm

There is a lot going on in world markets recently and it seems like we are reaching a tipping point of some sort. With oil hovering around $100, rising inflation data around the globe, improving (but still historically high and unacceptable) employment figures and risk fears over government deficits and unrest in certain regions around the globe, it seems like a recipe for disaster.However, all of these “minor details” cannot seem to trump incredibly loose monetary policy around the globe. Most specifically, here in the US. The US dollar is already weak when compared to the commodity currencies and the safe haven currencies, including the Japanese yen and Swiss franc. Bernanke in his testimony yesterday and most likely today will continue to beat the accommodative monetary policy drum.

The stage is being set for even further Dollar weakness if any of these better-performing economies begin to raise rates. This would increase the rate differentials and make the US dollar even less attractive than it is now.

Even though both Canada and Australia appear to be benefiting from oil prices and increased economic activity, they are doing all they can to jaw-bone their currencies lower to no avail. Australian GDP figures showed an increase of .7%, in-line with expectations.

New Zealand has actually taken it one step further, with the Prime Minister actually calling for an interest rate cut, though this may be warranted because of the earthquake.

PPI data in the Euro zone showed a pretty large increase, and the UK reported higher home prices and PMI Construction figures, despite the protestations of the BOE head honcho who made extremely dovish comments in an attempt to hold back Pound strength.

Here in the US, we will have oil supply and demand figures today, which could have an impact if levels are noticeably off due to unrest in the Arab countries. We will also get the start of some employment data from ADP, which will set the stage for Friday’s NFP.

The MSCI Pac Rim Index was noticeably lower overnight, though equity index and commodity sentiment has flipped to positive. So we have early risk-taking in currencies.

In the forex market:

Aussie (AUD): The Aussie has rebounded from overnight weakness due to lower Asian stock market prices despite reporting in-line GDP growth figures. GDP showed a gain of .7% last quarter, keeping the YoY number steady at 2.7%.

Kiwi (NZD): The Kiwi has not rebounded from overnight weakness like the Aussie as the Prime Minister is calling for an interest rate cut in the wake of the earthquake which will have a major impact on the economy. Can’t say I blame him. (Click chart to enlarge)

Loonie (CAD): The Loonie is somewhat mixed today, seeing strength from higher oil prices and money exiting the Kiwi, yet tempered due to yesterday’s BOC dovish comments.

Euro (EUR): The Euro is higher across the board as PPI data showed producer prices increased 1.5% vs. an expectation of 1% for January, pushing the YoY figure to an increase of 6.1% vs. an expectation of 5.6%. This gives more ammo to those in the hawkish camp that the ECB may need to raise rates to combat inflation, but at the same time Portugal is being led toward the bailout chopping block. (Click chart to enlarge)

Pound (GBP): The Pound is also mostly higher after PMI Construction data posted a reading of 56.5 vs. an expectation of 52.9 and home prices were up causing BOE head King to make extremely dovish comments saying that he doesn’t see the inflation yet and that he thinks he will have to continue to write letters explaining the inflation story.

Dollar (USD): The Dollar is mostly lower as risk appetite has increased this morning ahead of Bernanke’s continued testimony to Congress. The ADP employment change figures are due out later this morning which could be a harbinger of Friday’s NFP. With Bernanke firmly at helm, accommodative monetary policy and weak USD should persist.

Yen (JPY): The Yen is weaker as risk appetite returned to the market after Asian stocks followed yesterday’s US stock market sell-off. There is no other significant news due out of Japan this week.

As I mentioned yesterday, there are a lot of little things that add up to a general market sentiment about the direction of the prospects of the global economy. However, US monetary policy is the current driver of growth.

This is taking place at the expense of the US dollar, which is falling in value and would be remarkably lower if not for geo-political risk around the globe.

There are three basic events that could happen to save the US dollar from devaluing significantly further: 1) Future uprisings and contagion in the Arab countries and Middle East, 2) Further problems with the Euro debt crisis, 3) Fed reverses accommodative policy and begins to tighten.

If things continue on their current path, then I could see situations 1 & 2 taking place. This would buy Bernanke time to allow his weak Dollar policy to play out while not having to tighten. However if either of these do not occur, then the lack of tightening could actually CAUSE either situation to occur.

Either way the US Fed wields entirely too much power around the globe and its ability to wreak havoc bother here and abroad is mind-boggling.

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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March 1, 2011

Is A Little A lot?

Filed under: Forex News — Tags: a-bit-stronger, aud, australia, bernanke, board, dollar, free, globe, interest, market, middle-east, morning, sooner-or-later, yen — admin @ 1:10 pm

Today brings a bunch of different economic data points from around the globe that singularly don’t add up to much but taken collectively do indeed show one thing: that economic recovery is taking place.All of the numbers and the metrics appear to be growing; yet why does it feel like things are actually getting worse? Time heals all wounds, as they say, but I suppose that is only true if you tend to the wound as well. While I give Bernanke and the Fed a lot of heat regarding their policies, I can’t deny that they are working. But at what expense?

Bernanke will be speaking today and tomorrow, where he is expected to talk about deficit reduction as well as defend his policies. US ISM manufacturing figures will be out later this morning.

In the Euro zone, PMI and employment figures came in better than expected and CPI estimates came in as expected.

The Bank of Canada is due out later this morning with their rate policy decision and with recent Loonie strength, I can’t see a rate hike or hawkish statements forthcoming.

Overnight, the RBA left rates unchanged in Australia and gave tempered comments about further hikes as well.

So the market is in a bit of risk-taking mode, with both stocks and commodities trading higher.

In the forex market:

Aussie (AUD): The Aussie is mixed this morning as the market was disappointed with the lack of hawkish comments from the RBA who decided to hold steady on interest rates to no one’s surprise. Retail sales figures came in better than expected. GDP figures are due out tomorrow which could resume bullish sentiment. (Click chart to enlarge)

Kiwi (NZD): The Kiwi is mostly lower as the impact of the earthquake is fully realized in New Zealand. A potential slowdown in China could hamper exports going forward, though rebuilding will provide jobs to the economy.

Loonie (CAD): The Loonie is higher ahead of today’s Bank of Canada rate decision. While rates are expected to remain unchanged, I do not expect any type of hawkish comments as the Loonie is nearing all-time highs vs. USD. Yesterday’s GDP report came in much better than expected, posting a gain of 3.3% vs. an expectation of 2.9%.

Euro (EUR): The Euro is higher across the board as PMI figures showed that manufacturing was up around the region and German unemployment sank three times as fast as the expectation. In addition, CPI estimates came in as expected, though this may invoke some hawkishness from the ECB later this week. (Click chart to enlarge)

Pound (GBP): The Pound is also higher as home prices showed a gain of .3% vs. an expectation of a decline of .2%, which adds to the inflation story. UK PMI figures were also better than expected.

Dollar (USD): The Dollar is mostly weaker but gaining strength ahead of Bernanke’s testimony. The Dollar is nearing all-time lows against many of the commodity currencies and it will be interesting to see if Bernanke tries to “manage” the Dollar a bit stronger or face criticism for allowing the Dollar to falter.

Yen (JPY): The Yen is lower across the board as the flight to safety play is starting to unwind as geo-political events take a backseat to the economic growth story.

No one can deny that the global economy is in much better shape than it was 2 years ago; now the debate is over whether the short-term fixes will have long-term consequences.

I still think that the US economy faces many challenges and despite decent economic data, the problem is only getting worse. To me, Fed policy is overkill. This is encouraging bubbles around the globe and at home, whether it is currency or commodity-driven; and these bubbles will need to be popped sooner or later.

So I don’t take too much solace in the economy and while I acknowledge that things could be worse, I think they could be so much better. Adding to deficits at this point is irresponsible, as is keeping money so cheap that this behavior is to be encouraged.

Until we see some political courage, I expect that the Dollar will continue to weaken.

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February 4, 2011

Who’s Working?

Filed under: Forex News — Tags: a-barometer-for, a-certain-view, a-tight-range, aussie, crisis, currenc, currency, economy, forextrading, free, mike conlon, morning, north, overall, usd — admin @ 12:56 pm

That is the question that will be answered later this morning as today is “jobs Friday” and we eagerly await the release of the Non-Farm Payrolls report and the unemployment number. This is one of the most important data releases as it shows whether or not meaningful jobs are being created. The expectation is for a gain of 140K jobs.

The unemployment rate is also due out and this can sometimes be a deceiving number as the participation rate will sometimes affect the overall numbers. A higher participation rate usually means that workers are less discouraged and looking to get back in the workforce. Our neighbors to the north, Canada will also be reporting their unemployment rate. As goes the US, so goes Canada. At least that has been the market action of late, as part of the fate of Canada’s economy lies with US economic recovery, for better or worse.

There is no other economic data due out for the rest of the day, so expect the markets to trade off of that NFP number.

The Aussie is higher as the RBA lifted both its economic and inflation forecasts despite the recent natural disasters and previous comments form the RBA head.

And lastly, the Euro zone head honchos are meeting today in Brussels for a debt summit where the hope is that they will produce some meaningful response and solution to how to deal with the crisis. Don’t count on it.

In the forex market:

Aussie (AUD): The Aussie is higher across the board as the RBA raised its GDP outlook for 2011 to 4.25% growth from a previous forecast of 3.75% and they raised their inflation outlook with CPI set to increase 3% from a previous forecast of 2.75%. If they are correct in the new assessment, then we will see further rate hikes in Australia some time this year unless another global crisis emerges. (Click chart to enlarge)

Kiwi (NZD): The Kiwi is mostly lower getting a bit of follow-thru from the negative employment report that came out on Wednesday night. In addition, money flows are potentially returning to the Aussie after the RBA raised its outlook.

Loonie (CAD): The Canadian employment report just came out and showed a gain of 69.2K jobs vs. an expectation of 15K, handily beating the estimate. The unemployment rate remained steady at 7.8%. (Click chart to enlarge)

Euro (EUR): The Euro is slightly positive ahead of the US NFP report and has been in a tight range holding just above 1.36. While there was no meaningful data out this morning, the debt summit could produce fireworks if the sides don’t move any closer to resolution.

Pound (GBP): The Pound is somewhat mixed as a reading of house prices showed a gain of .8% for last month vs. an expectation of a decline of .3%. While on reading does not make a trend, this does contribute to the overall sentiment that inflation is rising in the UK.

Dollar (USD): All eyes will be on the NFP report where the US economy is expected to add 140K jobs. The unemployment rate is expected to tick higher to 9.5%, though that may be a function of the participation rate scenario that I mentioned above. Back in the day on the trading desk, we used to wager on the number so I will proffer my guess. My feeling is that the economic data has been too rosy of late so I think the number may disappoint. So I’m calling for a gain of 94K. Note: this is not a trading recommendation or advice, but rather a guess.

Yen (JPY): The Yen is slightly lower as Asian markets were higher overnight and it really is just puttering around waiting for the NFP number. A better than expected number will likely encourage some Yen selling and risk-taking through carry trades, and a worse than expected number could induce Yen strength as a safe haven going into the weekend with Egypt situation still unresolved.

Today’s NFP report really serves as a barometer for the economy and this is one of the reasons why it is so closely watched. While the economic data of late has been better than expected, my intuition always tells me that when expectations are high, they sometimes disappoint.

I am not trying to be Debbie downer here, its just that I think that while the economy is recovering, I don’t think it is happening as fast as people would like to believe. If I’m wrong, I’ll be more than happy to admit as much.

But realize that just because I have a certain view, doesn’t mean that I am married to it and as a trader I will perfectly happy to throw that view aside and join the trade to go the other way.

I also wanted to mention the situation in Egypt, which is still uncertain as to what the likely outcome is going to be. So we could see some selling later in the day and Dollar strength as the flight to safety trade picks up ahead of the weekend.

So be careful around the NFP number as the volatility will be intense. And trade well!

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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February 1, 2011

Game On!

Filed under: Forex News — Tags: aussie, course, currency, currency market, egypt, forex, free, gbp, jpg, middle-eastern, mike conlon, morning, picture, practice — admin @ 12:59 pm

The market is turning its attention away from the situation going on in Egypt as there is confidence that while this a political uprising and rally, there is no violence to speak of and that the government appears to be stable– for now. The uncertainty that caused last Friday’s risk aversion and subsequent sell-off is now becoming, well, more certain, as this appears to be less of a threat.

As a result, we have some risk taking in the market, with world stock indices higher and oil prices falling from recent highs. However, I don’t want to celebrate prematurely as the real threat going for forward is how other Middle Eastern nations that are similar to Egypt will react and if there will be any further uprisings which may not be as peaceful and therefore casue instability. Stay tuned.

Earlier this morning, the RBA left rates unchanged in Australia at 4.75% which was expected, and comments from the Governor while intended to be dovish may have left the door open for inflation to rise despite the flooding.

There is also strength in the Japanese yen this morning, as Dollar weakness as a prevalent theme has re-emerged and money flows shift to Japan to avoid Dollar losses.

In the Euro zone, unemployment declined slightly to 10% and PPI figures came in higher than expected showing signs that inflation may be afoot.

In the forex market:

Aussie (AUD): The Aussie is higher across the board after rates were left unchanged. House prices came in higher than expected which showed that the temporary economic lull form the flooding may have only dampened inflation temporarily. Rebuilding efforts to repair the damage from the flooding may contribute to excess demand which could alsopush prices higher. (Click chart to enlarge)

Kiwi (NZD): The Kiwi is also higher as risk appetite in the market has improved and overnight they reported that wages remained steady to slightly higher.

Loonie (CAD): The Loonie is mixed this morning as declining oil prices are adding to sentiment that the Bank of Canada wants a weaker Loonie as it has attempted to jawbone it lower as of late. A higher valued currency affects Candian exports negatively.

Euro (EUR): The Euro is lower against all but the Dollar despite higher PPI figures that came in showing a gain of 5.4% vs. an expectation of 5%. In addition, Euro zone PMI figures came in better than expected, posting a reading of 57.3 vs. an expectation of 56.9. Lower oil prices are also weighing on the Euro due to the anti-Dollar effect.

Pound (GBP): The Pound is also mixed as Nationwide House Prices declined less than expected last month and a report came out that the BOE may need to raise rates 125 basis points this year to combat inflation despite austerity measures. IN addition, PMI figures came in much better than expected, posting a reading of 62 vs. an expecation of 58. (Click chart to enlarge)

Dollar (USD): The Dollar is weaker across the board as a resumption of selling due to QE2 has occured now that there is more clarity out of Egypt. The ISM Manufacturing number is due out later this morning and will show if we are making any economic progress.

Yen (JPY): The Yen is stronger acorss the board despite the risk appetite in the market as money flows are leaving the declining Dollar and setting up camp in Japan for its safe haven properties.

It appears as though the global economy is recovering, albeit slowly. Rising prices however are an artificial measure of increased activity because it doesn’t actually add more to the bottom line, it just shows that things cost more.

The situation in Egypt is an interesting “case study” as these types of uprisings may be the new paradigm for Middle East politics which couldn’t be more varied and different. Should these uprisings start to occur with more regularity, then it will inevitable that some will end badly. Attempting to paint this picture with one broad brush is not only insufficient but dangerous. So my caution goes up when I see market reactions like today’s action.

While its true that it may be “game on” again, look for the game to be interuppted more frequently and more rapidly.

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!