December 5, 2011

Forex Market Outlook 12/5/11

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

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

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

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

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

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

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

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

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

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

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December 2, 2011

Forex Market Outlook 12/2/11

Filed under: Forex News — Tags: aussie, australia, bank, chf, currency trading, fundamental, interest-rate, oil, overall-economy, swiss-national, time, top stories, words, yen — admin @ 6:29 am

It’s that time of the month again—jobs Friday and so far the markets have high expectations that the NFP report is going to come in better than expected. 130K jobs are expected to have been added to the economy and the unemployment rate is expected to have remained steady at 9%.

So markets are up higher in anticipation of this release as there is hope that we are turning a corner as an economy. The problem I usually have is that when markets get ahead of themselves early on, there is usually some type of disappointment. But I don’t want to think the worst as it would be a welcome relief to see more jobs added. So I think this could be one time when the market has it right.

Also contributing to higher stock and commodities markets this morning is news out of the Euro zone that despite Merkel’s reluctance to issue a Euro bond, she left the door open by saying that a fiscal union would need to occur first. So in other words, as slight as the possibility is, there is a chance.

PPI data in the EU came in slightly lower than expected so this adds to the belief that the ECB may lower interest rates yet again. New ECB honcho Draghi wasted no time cutting rates upon taking over the Central bank so if inflation stays muted, then that could be the next move.

But inflation does not appear to be muted, with oil prices back to $101.50 and gold back to the $1750 area as a sign that inflationary fears are becoming more real.

The British pound is also higher this morning, most on risk-taking but also because PMI construction data came in better than expected, posting a reading of 52.3 vs. an expected 52.

A lot has been happening in Switzerland lately and I have been largely ignoring them as I hate active central banks like the SNB. This morning, retail sales figures came in worse than expected showing a decline of .2% vs. an expected no change. This falls in line with yesterday’s GDP report which missed by a wide margin showing 1.3% YoY vs. an expected 1.8%.

But that’s not all. Yesterday afternoon a rumor was floated that the SNB could move to negative interest rates. Essentially, they would be charging you to keep money in francs vs. paying interest as way to try to weaken the franc and encourage economic activity. Take a look at today’s chart of the day and you’ll see why I don’t like the currencies run by active central banks!

On the employment front, data released in Canada surprised and halted its rise toward parity temporarily as the Canadian economy lost 18.6K jobs vs. an expectation that they would add 20K. The unemployment rate ticked higher to 7.4% from 7.3% and the Loonie weakened as a result. However, a good NFP number here could reverse that move as it would be game on for risk appetite.

While the market has great anticipation of the NFP release and is expecting a good number, we must not lose sight of the risk that still exists in the marketplace. Geo-political risk is heightening in places like Iran and Egypt, and of course we are not even close to a resolution in the Euro zone.

Yet the markets seem like they want to move higher and maintain this “Santa Claus Rally” into the end of the year so that money managers can close out with gains on the books. Because otherwise it’s been a tough year.

I honestly have no clue as to where this NFP number might be as I am so conflicted this AM so I won’t hazard a guess. Part of me says that the number will disappoint because expectations (and market behavior) are so high, but the other part tells me that things have been getting better despite the political environment here in the US.

Either way I always trade this number the same way: by waiting for the release and then entering a position based on the market reaction to the results. Positioning one’s self ahead of this number is just a guessing game and could have disastrous results as the volatility is usually extreme.

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November 30, 2011

Forex Market Outlook 11/30/11

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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November 17, 2011

Forex Market Outlook 11/17/11

Filed under: Forex News — Tags: aud, currency, data, economy, euro, fundamental, housing, interest-rate, kiwi, pound, usd — admin @ 6:59 am

All eyes continue to focus on Europe and the rising yield situation as it unfolds and pushes the cost to finance debt to record levels. Italy and Spain have seen record yields as of late, and now the attention is starting to turn toward France, the EU’s second largest economy. Spain also downgraded their GDP outlook.

This has prompted a bit of a battle between France and Germany with the former wanting a much greater participation from the ECB in this whole debt debacle. The idea is that the ECB would become the “buyer of last resort” which theoretically should stabilize the market and allow yields to come down. This action would be similar to the “bazooka” that the US Fed claimed to be ready to use, essentially scaring off the potential bond vigilantes.

However the EU situation is different and because they have let it drag on for so long the credibility of such an action would be in question. And this is where the ECB in general runs into problems. Even if they said that they would be the buyer of last resort, the market would most assuredly test that resolve and it is likely that a worse situation would unfold even if they did follow through with it. To say that this is not a good situation is an understatement.

Italy and Greece though look prepared to institute the austerity measures they must undertake, as Papademus in Greece has received initial support. In Italy, PM Monti has also declared himself the Finance Minister, thereby eliminating a potential conflict. So its Monti or bust!

On the data front, the most important numbers have come from the UK. Consumer confidence figures came in way lower than expected with a reading of 36 vs. and expectation of 43 which itself was lower than last month’s 46. But yet the retail sales figures came in gangbusters showing a gain of .9% vs. an expectation of a decline of .2%.

Perhaps this disconnect can be explained by the fears that are instilled by the government despite the decent economic data that is released. The government keeps harping on how bad the economy is to justify their easy money position and explain 5% inflation, but I think the economic data tells a different story. Right now, the UK is doing exactly what should be done around the globe by reducing government spending. The inevitable dip in GDP due to that action should be welcomed and not feared. Are you listening, Bernanke?

Here in the US, the data was largely positive with initial jobless claims coming in at 388K vs. the expected 395K. Building permits also rose 10.9% vs. an expected 2.4% with the expected 603K exceeded by the reported 653K. Housing starts also came in better than expected, with 628K reported vs. the 610 K expected. Later this morning the Philly Fed Index will be released and there will be some Fedspeak from one of the Fed minions.

So the number here in the US while not great are improving, and it will be interesting to see if Bernanke can justify further Fed monetary easing with the improving data. Obviously the risk in the EU could cause a liquidity dry-up so he may have to resort to that line of reasoning.

Nevertheless the markets are in slight risk-aversion mode, having improved some since the data releases earlier this morning. Yesterday’s move higher in oil to $103 is being explained as the un-wind of crack-spread trades, although I find the timing of the move curious with yesterday’s release of CPI data.

With oil prices above $100 it will be much harder for Bernanke to mask the true inflation we see in the economy unless housing prices continue to tank further. My general feeling is that the only thing holding back the markets right now is the Euro debt crisis and we would be seeing some massive inflation (in everything but housing) if they truly solved the problem.

But for now nothing appears to be close to light at the end of the tunnel so I prefer to keep my trades to the short-term and take advantage of the volatility, rather than trying to avoid it.

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November 8, 2011

Forex Market Outlook 11/8/11

Filed under: Forex News — Tags: a-fairly-tight, aud, currencies, fundamental, kiwi, range, top stories, trade, trader — admin @ 6:38 am

Today is one of those days where there is seemingly nothing happening, with little economic data released but one major event holding the market’s attention. The budget acceptance vote in Italy is now being viewed as a proxy for Berlusconi’s power in Italy and the potential for political theatrics at this vote could bring about a no confidence vote for the Premier.

Essentially what is taking place today is the Italian Parliament is voting on whether to accept the budget for 2010 (last year) and while it is expected to pass, some members may abstain from the vote in an attempt to show their displeasure with Berlusconi. If this occurs and the abstention is great, then there will be pressure for a no confidence vote which could lead to his resignation. This is the ideal scenario for the market, as they would prefer to see a technocrat in office who can navigate the economy and bring Italy back to fiscal health.

However, Italian politics is such that this could be a drawn out process. It must be noted that Berlusconi has a media empire and controls several newspapers, so he has a much louder voice than most. It will be interesting to see what comes about, but recent rises in Italian bond yields may make it more expensive for the government to service its debt if the political uncertainty continues.

Things are going a lot nicer in Greece, where PM Papandreou has reportedly said his goodbyes as they are close to forming a unity government intended to enact the measures laid in the debt crisis deal. Speaking of that deal, it is expected to be operational by next month, provided these governments can get their houses in order though timelines have known be extended in Europe.

On the data front, the Aussie was lower overnight as the Australian trade surplus came in lower than expected, though it is rebounding on risk appetite this morning. Stocks and commodities are higher to start the day, though in general the currency markets have been trading in a tight range.

The British pound has also been moving higher as it benefits form money flows leaving the Euro. Both industrial and manufacturing production figures in the UK came in as or slightly better than expected which is acceptable at this point given the state of their economy. Later this morning, an unofficial GDP estimate will be released.

As soon as the Swiss franc starts to weaken on its own (see yesterday’s chart of the day), the market takes notice and starts to buy it again! Consumer confidence figures came in worse than expected but the big news was a statement from the SNB that claimed that they would manipulate the currency for competitive advantages in exporting goods and services. The market has taken this to mean that there will be no further intervention, after yesterday’s calls to move the peg to the Euro up to 1.25 from 1.20.

In the US not much is happening today, with some Fedspeak due out later today. This will likely produce little in the way of market reaction as it is insignificant in the grand scheme of things.

Meanwhile the debt debate here in the US continues forward and the media is grasping at the slightest indication of any news. It is times like these when the markets can become jittery, as unexpected releases could produce market movement.

Right now the currency market is trading a fairly tight range, so I prefer to keep my trades to the near-term and attempt of buy ahead of support and sell ahead of resistance, essentially trading the range. The risk at this point to putting on longer-term positions at these levels is too great, so until some clarity emerges I will stick to the shorter-term.

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November 2, 2011

Forex Market Outlook 11/2/11

Filed under: Forex News — Tags: carry trade, china, commodities, currency-pairs, dow, fundamental, nzd, pound, world — admin @ 7:12 am

How does one get invited to that ultra-ritzy resort town of Cannes, France? Apparently by upsetting G-20 leaders as you potentially re-neg on a deal that may be the most important economic event of the past year. Yet that’s where Greek PM Papandreou will be as he has been “summoned” to the G-20 meeting to explain what the heck is going on in Greece.

For the record, Greece is not part of the G-20 so his presence is unwelcome to say the least. Both European and G-20 leaders have been blind-sided by the referendum vote in Greece and it has the potential to derail all of the wheeling and dealing that has taken place over the last month as the Euro debt resolution was announced. Picture this—say you owe a lot of money and your creditor agrees to reduce the amount you owe by 50%. What to you do? You take it of course and say ‘thank you’. What you don’t do is say let me get back to you.

Yet that’s exactly what Greece has done, which is essentially a slap in the face to Euro zone leaders and by proxy, the rest of the world. If Greece does not back away from this action or mitigate its impact, then the rest of the world may suffer. Don’t be surprised if this referendum turns into an “opinion poll” which has little consequence. Yet this may go down as one of the biggest idiotic blunders in the history of geo-politics.

Despite this SNAFU, the markets are up-beat to start the day as anticipation of today’s FOMC meeting may give markets hope that there is more free money on the horizon. It is unlikely to produce any change to policy, as the last change dubbed “Operation Twist” hasn’t had enough time to work. But, Bernanke may officially open the door for QE3 if he deems the economic environment to be worsening. So far, the Fed has been way behind the curve and their economic forecasts and estimates have largely missed the mark. This can be problematic when you consider that they use these estimates to make policy.

In the meantime, economic data is trickling in and is mixed. In Germany, PMI manufacturing figures came in better than expected, but the unemployment rate ticked higher to 7% from an expected 6.9%. Italian PMI figures were a lot worse than expected.

Tomorrow the ECB is having its first rate policy meeting with their new chief Draghi at the helm. Will this produce a change of policy? Market expectations are that there will be no change, but if they fear a weakening they could be prompted to cut rates. This is one of those times that a rate cut might make sense, so I’m a bit surprised more people aren’t talking about it. A rate reduction in Australia just took place, so we could begin to see the start of some ratcheting down.

But the most important data to round out the rest of the week is on unemployment figures, with New Zealand reporting later tonight and Canada reporting on Friday. Today marks the first day of the US employment reports with Friday’s Non-Farm Payrolls report being the most important of the bunch.

This morning, the Challenger jobs cuts figures came in better than expected, as did the ADP employment change figures. The ADP report shows private payrolls changes and today’s report of 110K net new jobs was better than the expected 100K.

However, one cannot make a direct correlation between today’s ADP number and Friday’s NFP. Friday’s figure is the official government report and takes into account both government and private payrolls. So it will be interesting to see what that figure is, as it is one of the most significant economic barometers we have. Expectations are for a gain of 95K with unemployment rate to remain stubbornly high at 9.1%.

For now, the markets are content to drift higher and hope for some Fed love later today and are also hopeful that the G-20 summons for the Greek PM will remove the uncertainty surrounding the deal. Should Bernanke fail to produce or should the G-20 fail to change Greece’s intended course of action, then we could slip back into risk aversion mode in a heartbeat.

As a result of these uncertain prospects, I am content to keep the trading to short-term and am not looking for the home-run trade.

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October 31, 2011

Forex Market Outlook 10/31/11

Filed under: Forex News — Tags: china, chinese, currencies, currency, euro, forex market, fundamental, government, interest-rates-, japanese, point, trend, yen — admin @ 7:04 am

This Halloween is turning out to be more trick than treat as the market digests the events of the past week, particularly the Euro debt resolution. This week is starting out in risk aversion mode with US dollar strength and stock market and commodities weakness.

One of the “tricks” from over the weekend was the unilateral currency intervention by the Ministry of Finance in Japan, who took action to weaken the Yen citing excessive speculation and one-sided moves that don’t reflect the underlying economic fundamentals. This has caused the Yen to fall some 4% vs. USD and is the third intervention this year undertaken by the Japanese. It must be noted, however, that this intervention was taken by the government itself and not the Bank of Japan.

So this week has started out with a bang in what is going to be a heavy week for economic data around the globe. A G-20 meeting, Central bank decisions, GDP figures, and employment numbers all can move markets so this week is likely to see some volatility which is great for the shorter-term traders. Let’s start with the highlights region by region from around the globe and discuss the potential data moving events taking place this week.

In Australia, tomorrow’s RBA rate policy decision will be significant if they lower rates by 25bp as some are expecting, though the overall consensus is still for no change. This means that the statement will likely be dovish as inflation concerns are less important than the global growth story. This announcement will be preceded by Chinese PMI manufacturing figures which may be more impactful as it gives a gauge of Chinese growth which ultimately is a proxy for the Australian economy.

In New Zealand, building permits plunged by some 17% although gains of 2% were expected and Wednesday’s unemployment rate is expected to improve to 6.4%.

In the Euro zone, there are still many questions to be answered with regard to the details of the resolution and now it looks like banks want to use accounting gimmicks to re-capitalize rather than raise private funding. CPI data came in slightly higher than expected, showing inflation at 3% vs. the 2.9% expectation. This is unlikely to impact Thursday’s rate decision, though the ECB may attempt to come off hawkish to prove they are sticking with their mandate. German retail sales figures came in lower than expected and their unemployment figures are due out on Wednesday.

The Pound is lower as home price figures came in lower than expected and tomorrow’s GDP figures are expected to showing slow growth, though it must be noted that the decline in government spending may be responsible. Various PMI figures are spread out along the week so these may be better barometers of the health of UK business and industry.

In Canada, GDP figures came in better than expected this morning, showing a YoY figure of 2.4% vs. the expectation of 2.2% with the quarterly figure higher by .1%. Raw materials and producer prices were also higher so there may be signs that inflation is starting to pick up. Friday’s employment report is expected to show 15K jobs added and the unemployment rate to remain steady at 7.1%.

And finally here in the US, this Friday’s NFP is expected to show a gain of 95K jobs and the unemployment rate to remain steady at 9.1%, though those estimates can change in the ensuing days. Wednesday’s FOMC meeting may be significant if Bernanke hints at further monetary easing or QE3. While corporate earnings have been good, unemployment has been stubbornly high and the Fed chief just can’t help himself and see the need to tinker with policy as if it makes a difference. At this point he is likely pushing on a string and money can’t get much cheaper—its up to fiscal policy now to determine the fate of the economy and whether or not confidence will be instilled.

The deficit super-committee is charged with finding an answer and at this point the prospects don’t look good. Add in a G-20 meeting this week which may show how much IMF involvement (read US taxpayer) is included in the Euro debt deal and we will see some volatility.

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October 28, 2011

Forex Market Outlook 10/28/11

Filed under: Forex News — Tags: a-released-here, commodities, currency-pairs, economic, europe, forex market, fundamental, ireland, monetary, oil, practice account, top stories, trades, while-the-boj, yen — admin @ 7:05 am

Yesterday’s meteoric ride higher in risk assets is emblematic of the overall state of the global economy in that it is government and not business that is holding us back. With the “resolution” of the Euro debt crisis having been established, let’s not forget that the debt problem is not going to go away, but rather now they have a coherent plan to deal with it. That is, until something happens.

Part of the problem with the plan laid out yesterday is that it did not address the debt problems in the other four periphery countries and while Greece may live to see another day, the people of Italy, Ireland, Portugal, and Spain may take issue that they did not receive debt forgiveness. So this situation is far from over, and it will be interesting to see what happens when the it comes time to actually follow through on these plans if necessary.

So the major risk appetite from yesterday has abated some today as we some profit-taking in the markets ahead of the weekend. Risk assets are slightly lower to start the morning, but not enough to show a reversal of sentiment. Moves like yesterday’s are rarely one-day phenomena so it seems likely that barring some extremely bad news, markets particularly US stocks should move higher. The Dow climbed above 12000 and corporate earnings have continued to impress.

This rise in stocks yesterday was both accompanied and caused by US dollar selling, as the Dollar experienced a broad-based sell-off and commodities were higher as well. Economic data has been slightly better of late, but it will be interesting to see if this is sustainable with the potential inflation on the horizon.

There was no significant news out of Europe this morning, but overnight in Japan the jobless rate came in much better than expected, posting a 4.1% figure vs. an expectation of 4.5%. Household spending also decreased by less than expected, and CPI data showed continued deflation. Industrial production figures however were worse than expected.

So the story in Japan is one of an improving economic picture despite the recent Yen strength which is at an all-time high vs. USD.

Economic data released here in the US missed expectations slightly with Personal Income showing a .1% gain vs. the expected .3%, though personal spending increased .6% as was expected. Later this morning the U of Michigan consumer confidence figure will be released and is unlikely to bet expectations.

Today is setting up to be an inside day which is not surprising given yesterday’s massive move. Essentially this means that we won’t be making new highs or new lows. These types of pauses are generally necessary as it gives the markets time to fully digest the impact of the change in sentiment and determine if the move is warranted.

In this case I think it is, not because the economic fundamentals looks so good, but because there really is no place else to go. With bonds paying little interest, the value of the Dollar declining, and global growth uncertain, stocks are a pretty good place to be. The rationale behind it is that companies can maneuver more quickly than governments and can maintain earnings but cutting spending if need be. With valuations fairly low historically, dividend yields are higher making stocks an attractive bet.

But what’s even a better bet are the commodity currencies in my opinion as dividends are paid quarterly in stocks; in currencies interest is paid daily. So you don’t have to try to pick individual winners like in stocks or get locked up for months waiting for dividends. You can get in and out in a moments notice and get your interest daily.

In addition, if the Dollar continues to weaken with the threats of QE3 on the horizon, then other currencies are going to look more attractive. That’s what makes the currency market the market of choice for these uncertain times!

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October 21, 2011

Forex Market Outlook 10/21/11

Filed under: Forex News — Tags: a-new-all-time, currency market, decision, eur, forex trading, fundamental, live, markets-on-edge, trade, unemployment — admin @ 7:16 am

The market has been range-bound headed into the weekend, but man, those ranges are pretty big! I was surprised as I thought we’d see the ranges tighten up but that hasn’t been the case. Yesterday, the markets made huge moves as various news trickled out regarding the Euro debt crisis.

It is times like these when I tend to be more cautious, as it is difficult to know when news may hit or what its impact may be. Yesterday, the markets were selling off as risk aversion picked up throughout the early US session, only to completely reverse after “news” came out that the size of the rescue plan is going to be in the magnitude of $1.3 Trillion, with a “T”. That is encouraging news for the market, as in this case more is better.

But, later that day, news came out that indeed EU leaders needed more time to unveil the plan and that this weekend’s Debt Summit would not produce the resolution but rather next Wednesday will be the day that it is revealed. While this was initially seen as further stall tactics, the market is willing to give them a few extra days. They are likely close to a deal, and just need the weekend to sell it to the other members.

Though this creates another set of problems, as any dissension in the ranks could put the markets on edge. It should be no surprise though that they moved the decision, falling back more in line with what Merkozy originally proposed and not the G-20 timeline.

There’s not a ton of economic data out this morning, with German IFO survey figures coming in better than expected and the UK posting better than expected public finances on lower borrowing.

The big news of the morning came from Canada, where CPI data came in slightly hotter than expected. Core CPI came in at 2.2% vs. an expected 2%, with the headline figure at 3.2% vs. 3.1%. The Loonie has strengthened as a result, also being buoyed higher by early risk appetite in the markets.

There is no further news on the docket for today, but there could be more “news” leaked out of the Euro debt debate so there could be volatility. Not to mention general risk aversion heading into the weekend.

**This just in: USD/JPY tanking here and making a new all-time low at 75.82! Japanese intervention talk is bound to pick up now as that 76 level was seen as the “line in the sand”. This could also be the function of USD weakness if they are more involved in the bailouts of Europe. Stay tuned to this development!

So the markets are definitely behaving crazily here, so it is always good to remember to use a hard stop and take shorter term trades. There’s no telling what may happen today or over the weekend, so I’m going to step aside and not try to be a hero over the weekend. The potential risks do not outweigh the possible rewards.

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October 20, 2011

Forex Market Outlook 10/20/11

Filed under: Forex News — Tags: because-the-boe, cad, economic, fundamental, loonie, new zealand, nzd, sentiment, trend, uncertainty — admin @ 7:01 am

This morning all eyes are on Athens where the Greek rioters are protesting against further austerity measures which are to be voted to ensure that Greece is taking the steps necessary to continue the bailout discussion. The Troika will be reporting the economic state of affairs in Greece but so far the sentiment has been that that was Greece has done is insufficient to date.

Yet there is some positive news coming regarding the EFSF, though at this stage they are just rumors and not confirmed. Supposedly, the EFSF will be able to buy bonds on the secondary market provided there are no bank solvency issues. What this means is that they can be a “constant bid” to attempt to keep rates lower and then they can re-package and flip them or hold to maturity or whatever. However, the size of the fund is still in question and whether or not they will leverage that remains to be seen.

Producer prices in Germany came in slightly higher than expected, and the German government GDP forecast showed a growth rate of 1%, much lower than the 2.9% they have experienced.

In other news that just hit the wire, in Libya Momar Gaddafi is being reported dead.

Earlier in the UK, retail sales figures came in much better than expected, showing a monthly gain of .7% vs. an expectation of .2%. This could be a function of higher price expectations because the BOE is seen as being inflationary. But I must say, so far the BOE has been wrong in many of their economic assessments and should inflation persist, the UK economy could come to a grinding halt.

Here in the US, Initial jobless claims came in at the usual 400K, and later this morning we will get existing home sales figures, the leading indicators, and the Philly Fed. Throw in a little Fed speak and there is just enough to inspire some volatility.

We are very range-bound at these levels as the Euro debt crisis continues to maintain a stranglehold on these markets and the anxiety increases with every TV report of another Greek rioter lobbing a Molotov cocktail.

Yet US stock earnings have been coming in positively despite the economic climate as corporations are lean and mean and sitting on mountains of cash, yet the market uncertainty thanks to the political gamesmanship in Washington is keeping them from hiring. While lack of demand is always cited as the “cause”, it is actually the effect of bad policy and not the other way around.

The super-committee that is charged with deficit reduction here in the US is likely going to be ineffective so it will be more of the same. However, these problems seem minor compared to what is taking place in Europe and this weekends meeting may produce progress toward resolution, or it may not.

Meanwhile, my short gold trade triggered yesterday as the Bear Flag pattern completed, with an initial price target of $1500, and then $1440.

Tomorrow could be a risk aversion kind of day, so today we may see some cautious risk taking, though today is likely to be an “inside day” producing neither new recent highs or lows.

At this point the rumor mill is in high gear so there could be mid-day volatility based upon unconfirmed reports. This market is more conducive toward short-term trading at this point, as the uncertainty is still high and risk at a premium.

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