Mike Conlon | Forex Blog

August 8, 2011

Forex Outlook 8/8/11

Filed under: Forex News — Tags: a-great-wake-up, aussie, china, default-on-its, dow, invest, live, marketplace, mike conlon, pound, printing, sentiment, top stories, trades — admin @ 6:47 am

This morning the markets are responding reasonably well after Friday’s S&P downgrade of the US. The beleaguered ratings agency, who some say was largely responsibly for the banking crisis of 2008 dropped the US from AAA to AA as they forewarned if serious deficit reduction wasn’t agreed to in the debt ceiling debate.

While stocks and oil are much lower to start the day, gold has surged to new nominal all-time highs at $1715. The currency market sees this as “much ado about nothing” as it is trading orderly and looks like just another volatile day.

Because indeed, this much ado about nothing. There is a 0% chance that the US will default on its obligations as the Fed has the ability to turn on the printing press and print money to satisfy our creditors. However, this could be a question of valuation as the Dollar would be worth far less in that situation.

And that is one of the issues that some aren’t taking into consideration, that not only is it important that we are able to repay our debts, but that we are able to do so with something of value. Currency risk and political risk are all factors that need to be considered, and I think this is a great wake-up call for those in Washington DC who wish to continue to do business as usual.

Meanwhile in the Euro zone, the ECB has agreed to step up its purchases of Italian and Spanish debt, essentially trying to keep yields low so that debt can be repaid. While there is still risk in the marketplace, the global slowdown is a far bigger risk than the US potentially defaulting.

With no other news on the docket today, all eyes will be looking toward the FOMC meeting tomorrow which is bound to address this new development. Many in the market believe that this will lead to another round of quantitative easing (QE3), though its effectiveness at this juncture is uncertain. Some argue that the temporary kick we got from Fed easing was ineffective as the markets right now are back to pre-QE2 levels.

So there is risk aversion in the markets today, with the Dollar strengthening in what some might see as a counter-intuitive move. However this could become a case of sell the rumor, buy the news as this really is nothing more than egg on the face of Washington DC politicians who are conveniently on vacation until the end of the month. Get it together people!

Comments (0)

June 3, 2011

It’s Ugly Out There!

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

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

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

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

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

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

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

In the forex market:

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

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

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

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

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

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

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

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

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

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

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

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

To learn more about how you can take advantage of world events through the currency market, be sure to check out our currency trading courses!

To follow these events live with a free, real-time practice account, click here! Don’t miss out on the world’s fastest growing market!

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, USD, Yen

Comments (0)

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!

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

Comments (0)

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!

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

Comments (0)

April 20, 2011

Markets Defy Gravity!

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

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

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

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

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

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

In the forex market:

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

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

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

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

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

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

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

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

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

To learn more about how you can take advantage of world events through the currency market, be sure to check out our currency trading courses!

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, jpy, market, Mike Conlon, nzd, practice, ssi, time, trade, Yen

Comments (0)

April 5, 2011

Fed Propaganda!

Filed under: Forex News — Tags: a-careful-eye, aussie, currency trading, loonie, mike conlon, practice, public, time, usd — admin @ 12:26 pm

Today is a day marked by spin-jobs from the US Fed as they take their show on the road and try to convince the public that current policy is helping the economy move forward. The problem is that there are often conflicting speeches, and don’t tell the true story of what has taken place.Lat night, Big Ben kicked it off and said that he is keeping a careful eye on inflation leading some to believe that rate hikes may be coming sooner than the market thinks. The problem with this view is that the metric the Fed relies on to view inflation, core CPI data, is flawed. Too much of that figure relies on housing prices, which got so inflated during the bubble that they are bound to continue to fall for some time. So we could have $150 oil, $5 gasoline, but housing prices fall 10% and there is no inflation! Doesn’t give me too much confidence.

Overnight in Australia, the RBA kept rates unchanged and hinted that no further rate hikes will be forthcoming for the rest of the year, which was no surprise. What was a surprise however was that the trade balance showed a deficit of $200 million vs. an expectation of a surplus of $1 billion. This shows that perhaps Australian exports are too expensive because of the Aussie dollar strength, and that Australians are using their new-found currency wealth to buy expensive imports.

In the UK, the Pound is higher as PMI services figures came in better than expected showing that the UK economy may be recovering from the dip in GDP it had last quarter due to austerity measures.

Markets are set to open slightly lower this morning, with both stocks and commodities pulling back.

In the forex market:

Aussie (AUD): The Aussie is lower across the board as the RBA left rates unchanged but more importantly, exports decreased again showing that the high value of the Aussie may put pressure on GDP growth. In addition, China raised interest rates 25bp in an attempt to slow inflation. (Click chart to enlarge)

Kiwi (NZD): The Kiwi is actually higher across the board, receiving the benefit of money flows from the Aussie.

Loonie (CAD): The Loonie is mostly higher despite lower oil prices to start the morning, pulling back to a $107 handle from the yesterday’s highs of $108. This is still a very high price for oil, so it hasn’t affect the Loonie too greatly this morning, which is also getting a bid from money leaving the Aussie.

Euro (EUR): The Euro is lower across the board as there is minor Dollar strength due to Bernanke’s comments last night. In addition, Portugal was downgraded again, ahead of tomorrow’s GDP report and Thursday’s rate decision. Lower retail sales figures somewhat offset higher PMI data. (Click chart to enlarge)

Pound (GBP): The Pound is higher across the board as PMI services index came in much better than expected showing sign that the UK economy may be gaining traction after last quarter’s disappointment. While the BOE is expected to keep current rate policy steady this Thursday, it could increase the chance of a hike at the following meeting.

Dollar (USD): The Fed policy-makers are out in full force trying to sell their current policy to anyone who will listen. The Dollar is fundamentally weak right now and will continue to be until QE2 ends. The release of the FOMC meeting minutes this afternoon is likely to paint a different picture than what gets said today. When it comes to the Fed, remember to disregard what they say, but watch what they do.

Yen (JPY): The Yen is mostly lower with no news on the horizon other than the report that the operators of the nuclear facilities in question have been dumping radioactive water into the ocean. Not good.

You know policy is bad when you have to get out and sell it. Especially when the minutes are being released on the same day. It’s almost like a pre-emptive media campaign designed to fool the public.

I don’t think anyone is buying it at this point. The attempt today to obfuscate policy and to essentially cover their butts is appalling and it is shameful that there is no honesty about the current situation and how bleak it looks.

In addition, we are facing a government shut-down if Congress can’t agree on budget cuts and it is unfortunate that the politicians who exist by essentially buying votes can’t stand up for fiscal responsibility.

So Dollar weakness will continue to drive world markets higher, yet it will be the average person who feels the pain of inflation. Thanks, Fed.

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!

Comments (0)

March 28, 2011

Collision Course!

Filed under: Forex News — Tags: a-will-speak, account, aussie, course, currency trading, gbp, ireland, markets, mike conlon, time, yen — admin @ 12:49 pm

Well it looks like all things negative about the global economy are about to come to a head. Converging situations of varying importance are tugging on the fortitude of the markets and seemingly it is just a matter of time before something gives.

The nuclear crisis in Japan appears to be worsening, as aftershocks the size of large earthquakes continue to rock the island nation, making it harder to control the nuclear disaster that has taken place over there and providing uncertainty to the global community.

Meanwhile in Libya, the civil war there continues and the US and allied forces have been engaged for over 10 days, though no one is quite certain what we are doing. President Obama will speak tonight to attempt to provide clarity.

In the EU, Ireland is posturing that senior bondholders share in some of the losses from the debt crisis as a way of negotiating a better deal for themselves in the EU. Should bondholders be required to take losses, that could speed up the contagion to Spain and Portugal as bond yields would certainly rise to even more unsustainable levels.

Here in the US, personal consumption and spending figures are due out later this morning, thought the markets appear to be feeling a tad risk averse despite some dollar weakness. The Dollar rose last Friday after a Fed official suggested that QE2 should end early.

Stocks are looking to open slightly higher here in the US, though commodities are lower to start the morning.

In the forex market:

Aussie (AUD): The Aussie is mostly higher, though pulling back from an overnight high of 1.03, a 29-year high! Australian bonds have been the best performers so far this year, highlighting the strength of the Aussie economy. (Click chart to enlarge)

Kiwi (NZD): The Kiwi is mostly lower ahead of tonight’s trade balance data. While the Kiwi had a nice run into the end of last week on better than expected GDP data, they have a long way to go to catch Australia.

Loonie (CAD): The Loonie is mostly higher despite oil prices that are pulling back some. GDP figures are due out on Thursday.

Euro (EUR): The Euro is mostly lower as the focus has shifted back to the debt crisis. The in-fighting that is taking place between countries is bound to create further complications and not produce solutions. German CPI data is due out tomorrow which could give interest-rate watchers some food for thought.

Pound (GBP): The Pound is mostly lower continuing its slide lower ahead of tomorrow’s GDP figures. A contraction of .6% is expected because of government austerity measures, but don’t be surprised if the UK economy is surprisingly stronger. (Click chart to enlarge)

Dollar (USD): The Dollar strengthened last week after a Fed official suggested that QE2 should end early. The market appears to be shaking off the risk premium that it maintains over the weekend due to risk events, and personal consumption data due out later this morning will show whether the consumer is starting to come back.

Yen (JPY): The Yen is lower across the board as the nuclear crisis is still unresolved and the economic and social uncertainty is tremendous. The jobless rate is due out later tonight but it will not contain the effects of the disaster so it is largely a non-factor.

The convergence of geo-political and economic events may just be too much to handle. The US Fed money-pump has sustained us thus far, but it is about to end in a few short months and it will be interesting to see what happens leading up to that point.

Will unemployment still be high? Will commodities prices derail household income? Will housing prices continue to fall? Will the EU resolve the debt crisis? Will Japan be able to contain the nuclear disaster and start the re-building effort?

All of these questions need to be answered and the uncertainty of it all may be too much for the market to bear. Once the first domino in the chain falls, then it could set off a reaction that perpetuates the next leg lower.

There is still tremendous risk in the marketplace, and should everything hit the fan at the same time, we could be in for some trouble.

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

Comments (0)

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!

Comments (0)

March 23, 2011

What Are They Thinking?

Filed under: Forex News — Tags: account, euro, japan, jpg, jpy, mike conlon, morning, practice — admin @ 1:03 pm

It seems like there is a lot of “denial” going on around the globe these days, much to the detriment of those who just want to live their lives. Decisions made by those in power have been getting worse and are starting to negatively affect the very same people they are supposed to protect.

Some “questionable” decisions of late: Bernanke’s QE2 policy, Japan’s initial response to the nuclear damage, Obama’s decision to follow the French into bombing Libya, the BOE decision to maintain interest rates in the face of inflation, the EU non-decision on how to handle the debt crisis. All of these judgments have a serious impact on both economic and societal harmony and so far have done little to improve these situations.

So it makes me wonder who is benefiting? Right now, it is seemingly government itself and not the people they represent. This brings me today’s question of the government vote in Portugal, where they are weighing the decision whether or not to accept extreme austerity measures to avoid an EU bailout. Well in today’s economic climate everyone is seemingly out for themselves, so why should Portugal be any different?

It will be interesting to see what they do, but the market has already punished them by pushing bond yields higher, as if they have already chosen. The economic events of the last two years have proved that there is no longer any morality in finance, and once moral hazard is accepted as the norm, there is no reason to behave responsibly.

Thus there is some risk aversion in the marketplace this morning, with stocks and commodities slightly lower.

In the forex market:

Aussie (AUD): The Aussie is trading pretty flat to lower to start the morning as the relative risk in the market is just slight enough to apply pressure. With no news out of Australia this week, the Aussie’s rate differentials look very attractive.

Kiwi (NZD): GDP figures are due out of NZ later this evening which will likely show a hit to GDP in the short-run as a result of the earthquake, but there is optimism that the rebuilding efforts will add to GDP next year. (Click chart to enlarge)

Loonie (CAD): The Loonie is mixed after yesterday’s dismal retail sales figures. As the US goes, so goes Canada. With oil prices retreating slightly to just under $102, the Loonie is also somewhat lower.

Euro (EUR): Were it not for the Pound, the Euro would be lower across the board. Industrial new orders came in lower than expected and the vote by the Portuguese government over whether to accept aggressive austerity measures to avoid an EU bailout. (Click chart to enlarge)

Pound (GBP): The Pound is lower across the board as the there was no change in policy-maker stance to leave rates unchanged in the face of rising inflation. The UK doesn’t have the benefit that the US does by hiding true inflation by measuring things that no on cares about, so the BOE is likely to come under fire. “Merit in waiting” was the operative phrase used to justify their position.

Dollar (USD): The Dollar is seeing some mild strength this morning on risk aversion, though new home sales due out later this morning could change that sentiment. Despite Bernanke’s flooding the market with cash, greedy banks have been hoarding and the US consumer has finally caught on to the fact that now is not a good time to buy a home. Investors have been buying like there is no tomorrow, so I think the Fed might actually be content to let them experience the inevitable loss when interest rates finally have to rise.

Yen (JPY): Almost near the end of week two for the Japanese crisis, and thankfully there is no new news about nuclear problems. They just came out with a price-tag for the recovery, which is north of $300 billion dollars. Gulp.

Policy decisions by the few that affect the many are dangerous because you never can tell what motivates an individual. Part of the problem is that the majority of these decision-makers are NOT elected officials.

Social engineering, weak political will, ideology, and the need to be liked are all hallmarks of weak leadership, and we are seeing it around the globe time and time again. It is not surprising and quite unfortunate, but by not looking out for the “little guy” some of these governments may be in for a rude awakening.

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

Comments (0)

March 16, 2011

Making Sense Of It All!

Filed under: Forex News — Tags: account, dollar, flight, forex, gbp, japanese, mike conlon, portugal, practice, pressure-on-the, reflect-the-new, remarked-on-the, time — admin @ 1:49 pm

One of the things we try to do as traders is to impose some type of order on the marketplace so that we can gain a better understanding of what is taking place. At times this seems like an impossible task as there are so many competing and contradictory events and policies that color the market on a daily basis.

And that is the challenge that the markets present. Oil prices are rising, yet we are told there is no inflation. The Japanese have had a major catastrophe and the BOJ is printing money, yet the Yen is strengthening. Market correlations sometimes also come into play, as do risk themes. However, the most important thing to look at is monetary policy of a given country. Look no further than the US Fed.

Yesterday at the FOMC meeting, Bernanke remarked on the improving economy but made no changes to monetary policy. QE2 has been flooding the world with cheap Dollars, so an over-supply of Dollars has produced weakness, despite risk themes in the market. While there are pockets of individual data that contribute to an economy, how its Central bank responds is more important. There is most decidedly heightened risk around the globe, from the nuclear aftermath in Japan to the unrest in the Arab region, particularly Bahrain. Not to mention the potential re-surfacing of the Euro debt crisis. One would think that the Dollar would be in demand as a safe-haven reserve, yet it has barely budged higher. In fact, the Dollar is at an all-time low to the Swiss franc, another safe-haven currency.

So while it used to be good enough to say, “buy the currencies of countries with strong economies and sell those of the weak”, it is also important to gauge the policy response as well. Don’t forget that currency pairs can be driven by economic weakness as well as economic strength.

In the forex market:

Aussie (AUD): The Aussie is mostly lower though higher against the Dollar and Euro as fundamental weakness in those two has trumped the flight to safety.

Kiwi (NZD): The Kiwi is also mixed despite lower than expected consumer confidence figures. This highlights the weakness in both Euro and Dollar.

Loonie (CAD): The Loonie is mostly weaker despite the rebound in oil prices as it is taking direction form weakness in the US economy. (Click chart to enlarge)

Euro (EUR): Inflation in the EU rose at the fastest past in nearly 2 years as CPI data came in a little hotter than expected. This puts additional pressure on the ECB to potentially raise rates despite the fact that yields are already rising on the sovereign debt of nations like Portugal, who were just downgraded again. (Click chart to enlarge)

Pound (GBP): The Pound is mostly lower despite the fact that the jobless claims figures unexpectedly declined the most in nearly 8 months. Jobless claims were expected to rise by 1.3K but they fell by over 10K.

Dollar (USD): The Dollar is mixed this morning as fundamental weakness from QE2 and dismal housing starts numbers is being tempered by risk aversion in the market.

Yen (JPY): The Yen still continues to strengthen despite the additional liquidity added to the market by the Bank of Japan. While the nuclear situation is still uncertain, Japanese stocks experienced a “dead-cat bounce” on short-covering; though then Yen did not reap the correlative benefits.

At the end of the day, watching Central bank actions on policy can be the most telling way to get an idea of what is taking place in ALL markets. While individual economic releases and extraordinary situations can shift sentiment, until a Central bank acts to change policy to reflect the new information, consider policy to act as pressure on a currency in either direction.

Sometimes the market likes to get ahead of itself and get in front of these changes, but as individual traders it is more important to tag along early then to try to get out in front and lead. Because as we know, policy cannot make sense for extended periods of time, and the market can remain irrational longer than you can stay solvent!

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!