Practice Account | Forex Blog

November 15, 2011

Forex Market Outlook 11/15/11

Filed under: Forex News — Tags: aud, decision, economy, europe, gbp, mike conlon, practice account, rate-decision, sentiment, trader — admin @ 6:31 am

Well it looks like its bond yields in Europe that have the markets in a tizzy yet again this morning, with the Italian 10-year note back up above 7%, and a short-term note auction in Spain did not go off as planned as they sold less than the 3.5 billion euros they had hoped, at an interest rate of over 5% vs. 3.6% just last month.

This is troubling indeed as the cost to borrow in Europe is starting to rise again and this comes AFTER the supposed rescue package that was put in place begrudgingly last month. Part of the problem is that the plan appears to be woefully insufficient and it looks like the market wants to test European resolve. The only way that this is going to come to a close is if the ECB agrees to be the “buyer of last resort” for these bonds and that appears highly unlikely.

With new governments transitioning in Greece in Italy, it was a advantageous time for bond vigilantes to flex their muscles.

However, the actually data coming out of Europe is not horrible, with German GDP figures coming in slightly higher than expected and French GDP as expected. However, the German ZEW economic surveys came in a 3-year lows showing investor and business angst in the wake of current conditions.

In the UK, CPI data came in lower than expected but still at elevated levels of 5% vs. an expected 5.1%. Tomorrow’s inflation report from the BOE will show the mindset of the Central bank who appears to be fine with short-term inflation in attempts to grow the economy. The retail price index also came in slightly lower than expected.

In Australia, the release of the RBA rate policy meeting minutes showed that global risk emanating from the Euro debt crisis was the primary driver of the last interest rate cut, and that they are maintaining a mild dovish bias going forward. The “mild easing” was justified in order to keep the Australian economy fluid.

Later this morning here in the US we will get the Advance Retail Sales figures which are expected to show a gain of .3%, which is lower than last months 1.1% but already “baked into the cake”. This is an awfully low bar considering the “recovery” we have been hearing about so I would like to see this number exceed by a decent margin. To truly have economic recovery here in the US, the consumer has to return as they represent some 70% of the economy so it starts with Advance Retail Sales figures.

Also out this morning is PPI data which will likely be ignored by Bernanke and the Fed as they are hell-bent on keeping an easy money policy to help support the floundering economy. Empire manufacturing figures round out the morning but likely will have little impact.

So this morning’s risk aversion and sell-off could be countered by a better-than-expected Advance Retail Sales figure that could reverse market sentiment. However, should the number come in worse than expected, look out below!

Markets are still very jittery and the Euro debt crisis could continue to worsen if there is no credible belief that the individual countries can get their act together with austerity with help from the ECB to keep borrowing costs low.

Until both of these things happen, the Euro zone is still at risk of imploding as the market demands more and more from the beleaguered region. It would help if the US could also get its house in order, though this unfortunately seems like a pipe-dream as well.

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November 11, 2011

Forex Market Outlook 11/11/11

Filed under: Forex News — Tags: currency, economic, forex, gold, live, michigan, practice account, rate-decision, results, trend, written-about, yen — admin @ 7:09 am

Today is “11-11-11” and folks have been waiting a while for this as sometimes the wackiness that ensues on days like today will leave you scratching your head. But today is also Veteran’s Day here in the US, so it is a bank holiday which means that we could see reduced volumes in the currency markets.

However, the rest of the world is not sleeping so we must turn our attention to what is taking place around the globe. Today is an extremely light day of news, so focus still remains on Italy and the Euro debt crisis. Global stocks are higher to start the morning.

In Italy, the upper House (Senate) has agreed to the austerity measures put forth so we are now awaiting for approval from the lower House. Should this go smoothly, then Berlusconi could step down by the end of next week. Part of the problem though is that nothing ever goes smoothly. Right now the leading candidate to replace him is Monti, who is scene as a “technocrat” and seemingly capable of handling financial matters.

In Greece, the new unity government is being voted on with Papademos as the interim leader. While there won’t be a pop quiz on these names later, it should be important to note that there is a serious shift toward leaders with financial backgrounds assuming power in these countries. This is intended to instill confidence that some of these European countries can get back to fiscal sanity.

On the news front, China has increased lending to support its economy which is reflected by some risk appetite in the marketplace. Between Chinese growth and potential European stability measures, markets are looking to take back some of Wednesday’s losses. Italy’s austerity is a good start.

In the UK, PPI data came in lower across the board which could mean that they are finally seeing some relief form inflation. CPI data has remained elevated for some time and the BOE mantra that it would come down eventually because of austerity measures may finally be coming true. However, the recent tone at the BOE has been dovish so do rule out further QE if the economic data worsens.

Speaking of worsening economic data, there are more and more calls out there that Europe is going to slip into recession so there are increased calls for the ECB to step up in the debt crisis. The ECB so far has been refusing to be a buyer of last resort for Euro debt so that has given the market the ability to drive yields higher, as we saw the other day in Italy when their 10-year bond yield rose to over 7%. It is now back in the 6.5% range but shows that the ECB is unwilling and perhaps unable to provide better support.

Here in the US, stocks and commodities are set to open higher and today is a bank holiday so there should be lower volume in the currency markets. U of Michigan consumer confidence figures are due out later this morning but I doubt they will have a material impact. My guess is that today will be an “inside day” with little movement either way, though end-of-the-day risk aversion could crop up as fears about Europe come back into focus.

And lastly from the rumor mill, there has been some chatter that Japan had been secretly intervening in its currency vs. USD, as reflected by the price action we saw above 78. Since this has been noted, the Yen has started to appreciate a bit. Whether this is true or not is anyone’s guess but it makes for good conversation.

So at this point I am still erring on the side of caution and am looking to keep my trading to the short-term unless we see a major move which I doubt will happen on a light volume day.

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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 25, 2011

Forex Market Outlook 10/25/11

Filed under: Forex News — Tags: a-recipe-for, answer, australia, china, invest, marketplace, new zealand, practice account, rsi, starts-the-game, the-market — admin @ 5:36 am

Well it looks like the market is unaware that there is major risk potential in the marketplace as stocks and commodities took off yesterday and it was “game on” for risk appetite. As a result, the Euro as well as the commodity bloc currencies moved higher despite the Euro debt decision due out tomorrow.

Does the market know something that we don’t? As often is the case, the answer is simply “no”. What the market does know is that it wants to take on risk and wants to buy stocks (especially large fund managers who have posted less than stellar returns) as corporate earnings have been largely better than expected. Throw in higher Chinese PMI data that showed that they aren’t slowing entirely and you have a recipe for gains.

But should the market be paying more attention to the risk? I think the answer is a resounding “yes”. For the devil is in the details, as they say, and what we may hear from the EU tomorrow could be detrimental to market stability. For example, how big of a voluntary haircut will Greek bond holders have to bear? 50? 60? At what point does it no longer become voluntary and trigger a technical default which in turn triggers Credit Default Swaps and then starts the game of musical chairs that is inevitably going to leave someone exposed and with massive losses?

How large does the EFSF have to be to handle these problems and prevent contagion? How will they get it there? Leverage? Partial guarantees?

The point I am trying to make here is that there are MANY questions that need to be answered and I’m not certain that there is a “right” answer. It is more likely that we are at acceptable and unacceptable viewpoints and how the market reacts will be telling. But don’t forget, the market has been rallying in a big way heading into this news. Its not like it is unaware of the issues. Yet people are buying like its just another day. And by and large it is, and I believe the hope is that the cloud of uncertainty we have been dealing with will be lifted.

What is exactly is going to happen tomorrow is anyone’s guess, but the contrarian in me tells me that when everyone is bullish, I should be bearish. We are reaching certain price levels on many currency pairs that will likely induce volatility heading into tomorrow’s announcement that is showing to be released at 10EST, though not confirmed.

If I had to guess what is going to happen (and I hate to do that because I am a trader and not a prognosticator), I think the markets will spike higher on the news, and then start a sell-off as the news trickles out. This will likely represent a pullback on what has become a “ V-bottom” reversal into an up trend for most of the pairs. However, I am going to trade what I see and not what I think will happen and I advise you to do the same.

In other news, last night New Zealand reported CPI data that was lower than expected, showing 4.6% inflation vs. the expected 4.9% which may mean that the RBNZ will be on hold for tomorrow’s rate policy meeting.

Later this morning, the Bank of Canada will issue its rate decision and are not expected to change rates, which could mean a bounce off of parity vs. USD.

In the US, home prices and consumer confidence figures are likely to have little impact, and recent rumors being floated that there could be “QE3” in the works may have been the catalyst for the market’s recent rise.

While the Fed has a dual mandate to contain inflation and promote job growth, they may feel compelled to act if nothing comes out of the Super-committee in Washington that is charged with reducing our deficit.

However for now, I am waiting on tomorrow and will not be taking any positions into the release of the “resolution”. There are just too many uncertainties at this point.

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October 24, 2011

Forex Market Outlook 10/24/11

Filed under: Forex News — Tags: bank, cad, currency-pairs, economic, economy, europe, interest, marketplace, new zealand, news, practice account, trades, usd — admin @ 7:06 am

It is often said that the waiting is the hardest part, and that is exactly where we are in the global market dynamic with the Euro debt crisis continuing to linger. This past weekend’s Summit has come and gone without producing anything more than the continued conjecture that has been plaguing the markets. Supposedly this Wednesday will be the day that produces the final resolution, though I am skeptical that this will be the end.

There are short, medium, and long-term issues that need to be worked out and to think that this will all be solved by Wednesday is silly at this point. This is after all, the 13^th emergency summit in the last two months! The immediate problem is Greece and their sovereign debt issues and so far the answer seems to be asking private bondholders to take up to 60% losses on their holdings and not calling it a default. This then causes the intermediate term problem of bank losses and now requires re-capitalization. The EFSF right now remains at 440 Billion euros and is seemingly far too small to handle all of the potential problems. There has been no credible talk of how to increase that fund.

Finally, this brings us to the long-term issues of how to stop the contagion of this crisis spreading to the other debt-ridden countries, most notably Spain and Italy. The moral hazard created by potentially retiring Greek debt without a re-structuring opens the door for other nations to seek the same terms. Meanwhile, credit ratings will continue to fall (now France is looking at a downgrade) which will in turn increase the cost to service debt. The ECB has not gone to the printing press just yet, as its mandate of maintaining low inflation is still tantamount and German remembrance of the Weimar Republic and its hyperinflation is something they never want the chance to repeat.

So Wednesday will be the day of reckoning, and so far the markets have been moving to the upside despite the risk that still persists. Perhaps the market just wants to hear that there is a plan, regardless of the details. My feeling though is that Wednesday will disappoint and that the markets have been in “buy the rumor” mode so we may see “sell the news” on Wednesday. Stay tuned.

In addition, PMI figures in Europe came in worse than expected across the board showing signs of an economic slowdown, though New Orders figures were higher. This reversed some risk appetite the market had been experiencing in the Asian session, as Chinese PMI figures showed the fastest manufacturing growth in nearly 4 months which was also better than expected. Japanese exports also improved and came in better than expected.

This week is also marked by interest rate decisions in Canada, New Zealand, and Japan. While none are expected to change policy, the Japan rate decision could get interesting as the Yen has been strengthening vs. US and is now at the 76 level which many believe may be the level where the BOJ will intervene. While they most likely won’t act before Wednesday’s Euro debt summit, the rate decision the following day could produce fireworks if the deem the global situation to be stable.

Meanwhile, US stock earnings continue to come in better than expected and it seems as though markets want to go higher if this pesky Euro debt crisis would just go away. My guess is that even though markets have been moving higher, Wednesday’s announcement may prove disappointing which could cause some short-term selling which in my opinion may be a long-term buying opportunity.

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October 14, 2011

Forex Market Outlook 10/14/11

Filed under: Forex News — Tags: a-meeting-next, aussie, economic, eur, euro, forex, japan, looks-as-though, practice account, time, top stories, usd — admin @ 7:07 am

It looks as though the European rescue plan is starting to take shape as a meeting of G-20 leaders is likely to produce a framework for the resolution. It is then likely that whatever emerges will be discussed at a meeting next week of European leaders and if that is agreed to, then we could have the final resolution by early November as promised by Merkel and Sarkozy.

Some of the points of emphasis will be: what is the haircut in Greek bonds, that is, what percentage of private sector losses will be required. This is important because this may lead to further bank losses that have high exposure to sovereign debt. This leads to the second point, that the ECB needs to help re-capitalize the banks so that they can weather the potential losses. There is also talk that the IMF will step in to provide capital, and the IMF in turn will receive capital infusion from emerging markets countries like China and Brazil.

So in reality, this is really more of a global collaborative effort as it doesn’t look like Europe has the juice to go it alone, and world leaders understand the threat that this poses to global economic health.

This comes as the ratings agency S&P looks to hasten the process by downgrading Spain’s debt for the third time in three years. In addition, there was a no-confidence vote that took place in Italy, which PM Berlusconi survived.

Despite all of this uncertainty and hopefulness, the markets are in risk-taking mode to start the morning, lead by last night’s better than expected earnings report from Google. This has driven stocks higher, and the correlative effects of Dollar weakness have been taking place.

However, the market has turned around a bit on the release of the US advance retail sales figures which were actually a lot better than expected, so this could be a case of markets not looking to be long risk ahead of the weekend. The figure reported showed a gain of 1.1% vs. an expected .7%, which is definitely a plus for the economy.

So why have the markets sold off on that report? Perhaps because it dampens the possibility of further Fed easing as the economic picture improves, or maybe it’s a case of “buy the rumor, sell the news”.

Other news from earlier today was that China’s CPI data came in as expected by slightly lower than last month, posting a reading of 6.1%. If inflation begins to cool in China, then it could be a sign that the economy is slowing. Or it cold also mean that they are ready to ramp up lending again. The potential impact of the currency bill passed in the Senate here in the US to try to force China to re-value their Yuan is unknown at this time, as is the Chinese response to it.

CPI data in Europe also came in as expected at 3%, though the ECB doesn’t have room to move even if they wanted to go higher. The obvious focus there is on the debt crisis.

The only thing else to watch this morning is the U of Michigan Confidence figure which comes out later, though I don’t think it will be a game-changer. With the “Occupy Wall St.” movement and gridlock in government, it is hard to imagine anyone is confident right now.

However, it is times like these when it is usually best to dip your toe in the water. Being a contrarian in the marketplace is a difficult but often times rewarding position to take. If everyone is selling, someone has to be buying, right?

Just some food for thought.

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October 5, 2011

Forex Market Outlook 10/05/11

Filed under: Forex News — Tags: account, avoid-the-topic, currency-pairs, gbp, interest-rate, interest-rates-, invest, mike conlon, number, practice account, trend — admin @ 7:06 am

Was yesterday’s intense rally just a pause in the selling or does this mark a reversal of trend? This is the million dollar question and one that the markets are weighing very carefully. The catalyst for yesterday’s move higher was none other than Fed Chairman Bernanke who stated in his speech to the Joint Economic Committee that further monetary stimulus could be forthcoming.

This gave the markets an immediate shot in the arm and they rallied on those words as the thought of more free Fed money is too good to ignore. Many thought, including myself, that given the politics of further easing he might avoid the topic, but with the recent selling taking place something had to be done. So I applaud him for his courage, though political pressure seems to be waning against complete opposition to further monetary stimulus.

This was enough to push markets higher including the Euro, which had maintained strength until this morning after Moody’s downgraded Italy by three notches and warned that further downgrades of other countries could occur. Couple this with weaker PMI services figures from the Euro zone and declining retail sales figures (-1% vs. an expected -.7%) and the economic picture doesn’t look much better than it did two days ago.

Yet for some reason the markets believe that EU leaders are making serious strides toward a debt crisis resolution this time, all but admitting that they haven’t taken this crisis seriously enough to this point. One positive note was a vote of confidence in Portugal as investors passed on an opportunity to receive early payouts from a bond issue, electing to wait it out.

In the UK, GDP figures came in slightly worse than expected, showing a gain of .1% for the quarter vs. an expectation of .2%, bring the YoY figure down to .6% from the expected .7%. While this does indeed show a declining economic picture, it is unclear if this is enough to cause the BOE to increase asset purchases at tomorrow’s rate decision.

The EU rate decision also tomorrow, though, is another story. The ECB has been reluctant to step up in the wake of the debt crisis and it will be interesting to see what if anything they announce tomorrow. They could use this platform not to change rate policy per se, but rather announce plans for how they plan to combat the debt issue. The difference between the two rate decisions is that the BOE does not issue a statement with their decision, and the ECB does.

Rounding out the news from around the globe, Australian retail sales figures came in better than expected, showing a gain of .6% vs. an expectation of .2%. This has helped push the Aussie higher in conjunction with the Dollar weakness we saw yesterday and the follow-through this morning.

The ADP jobs report came out here in the US this morning and showed an increase of private sector jobs of 91K, vs. an expectation of 75K. While this number bears no significant correlation to Friday’s Non-Farm Payrolls report, it should be noted that although Friday’s NFP is expected to show a gain of around 60K, the number of private sector jobs expected to be added is closer to 100K.

While the markets started the morning in risk-taking mode, it appears as though we are giving back some earlier gains as both stocks and risk assets are selling off a bit. While still in positive territory, it will be interesting to see if this rally can be sustained or if it was just a one-day wonder.

So today may be what we call an “inside day”, where we make neither new highs or lows as we wait for the rate decisions of tomorrow to guide sentiment. And of course any news out of the Euro zone will be dissected, though the usual “no news is good news” mantra may not hold water in this situation. Clarity form the Euro zone is needed, and not obscurity.

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September 29, 2011

Forex Market Outlook 9/29/11

Filed under: Forex News — Tags: australia, commodities, currency market, expectation, fundamental, improved-on-the, practice account, push-the-german, trend — admin @ 7:19 am

This morning, all eyes were on Germany which voted to expand the scope of the EFSF, laying the groundwork for the Greek bailout to continue and effectively buying more time for EU leaders to figure out a plan to resolve the crisis.

This has been dragging on the global economy for some time now and has discouraged investment and capital formation from taking place. And while this vote is not the end all be all and just one vote in series of others that need to take place, leaders are hopeful that the EFSF can be ratified by mid-October.

So to turn our focus away from the debt crisis for a moment, there was actually some economic data that came out today that surprisingly shows a bit of economic resilience. In Germany, unemployment figures fell by 26K vs. the expectation of a decline of 8K which helped push the German unemployment rate down to 6.9% from last month’s 7%. And while five different measures of Euro zone confidence all came in worse than expected, it must be noted that things typically need to get better before business and consumers start believing.

Here in the US initial jobless claims came in better than expected, with 390K newly unemployed vs. the expected 420K. While not a dramatic turn-around, at least it halts the declining figures we have seen of late.

US GDP Annualized figures came in slightly better than expected showing a gain of 1.3% vs. the expectation of 1.2%. The GDP price index also came in a higher than expected, showing a gain of 2.5% vs. 2.4% which means that inflation is steady to rising slightly. Personal consumption figures also came in better than expected, posting a gain of .7% vs. .4%. This perhaps might be the most positive reading, as the US economy needs the consumer to come back in order for it to flourish. Though this could also be a function of the “back to school” phenomenon.

Later this morning we will get pending home sales which if improved, could round out a pretty positive morning for the US economy in light of recent events. August home sales were expected to have declined 2.1%.

In the UK, mortgage approvals came in better than expected with 52.4K approvals vs. the expected 49.7K. This is either a result of improved sentiment or the fear of inflation but either way it is producing positive economic activity. The UK sometimes gets lost in the shuffle when we look at the problems in the Euro zone.

The markets are rallying this morning as risk appetite has improved on the German vote as well as the better than expected economic data. But the markets are still pretty range-bound at the moment, so we are seeing cases of “buy the rumor, sell the news”. The Euro was actually higher earlier this morning before the vote as the anticipation of it passing held more promise than the actual vote itself.

Even with this vote passed, the problems are far from over and the market can turn quickly if it loses confidence in the EU resolve to save the union. The global economy has not recovered just yet, even though there is some decent economic data. In fact, estimates are calling for a slowdown in China, who reports PMI figures tomorrow.

So don’t be fooled into believing that everything is peachy-keen just yet, as the global economy still has a long way to go.

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September 19, 2011

Forex Market Outlook 9/19/11

Filed under: Forex News — Tags: a-little-more, a-move-lower, carry trade, china, commodities, finance, killed-the-only, nzd, practice, practice account, usd, will — admin @ 7:04 am

The more things change, the more they stay the same in the Euro zone. This weekend produced further non-action on the part of EU Finance ministers and ECB officials, and the markets are voicing their displeasure by selling off this morning.

This morning, there is further question over whether or not Greece will receive its next tranche of bailout funding and a conference call that was supposed to take place today has been postponed for unknown reasons. This situation has been horribly mismanaged by European banking and finance officials and it remains to be seen if Greece can avoid default.

But with every passing day, the public anger increases and the will to resolve becomes weaker so if this can’t be resolved shortly it may not ever be. This comes ahead of the vote to ratify the new EFSF agreement that was made back in July, though this may change the dynamic of that agreement if Greece defaults. Now there is talk of a possibility of Greece defaulting AND remaining in the Euro zone, though I think that is highly unlikely.

Today is a day devoid of economic data, not that it matters much anyway when the overwhelming theme of the markets is the Euro debt crisis. So it will be difficult to turn the markets around unless we get some sort of comments from the Fed. Later this morning, President Obama will be speaking about the US debt problem, though that speech is more likely to set the stage for the 2012 election that offer any credible solutions to our problems.

On Wednesday, the FOMC meeting is expected to produce some further “help”, if you can call it that, to the markets in the form of “Operation Twist” whereby the Fed buys longer term Treasuries as opposed to the shorter term in an attempt to dive interest rates even lower.

Part of the problem is that what is going on here in the US is not because interest rates are too high, but rather because the economic climate is so bad that the uncertainty is causing business to shy away from the free money. The only place it really goes is to Wall St., who then use it to finance speculating activities that are likely to induce inflation, if they have any impact at all.

And inflation is something that Bernanke would love to see at this point, as it would mean a pick-up in demand. But demand won’t pick up unless people get back to work and unemployment comes down, though that seems unlikely with the current tax, regulation, and healthcare regime.

By demonizing the job creators, the government has effectively killed the only hope they have of seeing an economic turn-around in the US. This morning at the President’s speech we will see how serious they are about fixing the economy. Or will it be more about political preservation?

The news this week is likely to be secondary to Euro debt crisis, but we will get the minutes from both the RBA and BOE rate policy meetings. The BOE minutes are a little more significant as they do no issue a statement when they issue their policy decision. Recent events have left them more dovish than hawkish, though it may not matter much if the problems in the Euro zone get worse.

So the markets are in risk aversion mode this morning, with Dollar and Yen strength and stocks and commodities lower. With Euro trading at 1.3650 vs. USD we could see another move lower to 1.35 in short order. This will have the ancillary effects of pulling both the Aussie and the Loonie closer to parity with USD, though those areas of psychological support may present buying opportunities.

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September 14, 2011

Forex Market Outlook 9/14/11

Filed under: Forex News — Tags: beneficiary, currency market, dow, invest, morning, practice account, rate-decision, the-marketplace, trades, trend — admin @ 8:36 am

This morning the markets appear to be in risk taking mode as hopes that the European debt crisis can be contain are outweighing fears of further contagion. This has markets moving higher, led by stocks and the Euro and with gold selling off.

While this does not by any means imply that the problems are over, the markets are re-calibrating themselves in anticipation of a potential solution in Europe, though the Euro is giving back earlier gains. It is quite possible that today will be the type of day that flips back and forth between risk appetite and aversion. A conference call later this morning between EU countries has the markets high on anticipation.

In the UK, the jobless claims figures came in better than expected with fewer newly unemployed. 20K lost jobs vs. the expectation of 35K and the weekly earnings were slightly higher.

The Aussie and Kiwi are also trading lower and giving back earlier gains despite the fact that consumer confidence figures came in much better than last month. However, housing starts in Australia declined 4.7% on interest rate outlooks so the potential for a declining economic picture is on investor’s minds.

The Kiwi, on the other hand, appears to be the beneficiary of a strengthening economy and we will learn more from the Central bank later today when the RBNZ has it’s rate policy meeting. Rates are expected to remain steady at 2.5%.

Here in the US, economic stagnation persists as advanced retail sales figures came in worse than expected showing no change vs. an expected gain of .2%. This is concerning because we are in the middle of the “back to school” season which usually means more spending so overall spending may be a whole lot worse.

The economic picture here in the US is slowly deteriorating the “jobs bill” that the President has proposed is more of political posturing than a serious or credible bill to get people back to work. Apparently the American people are going to have to suffer for the rest of this President’s term as he appears to be unwilling to compromise from the ideology that got him elected but largely has failed.

So there is still major risk in the marketplace, though it might not be reflected at this stage of the morning. Recent trends have the US dollar strengthening as money is moving away from the Euro and needs to find a home.

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