Practice Account | Forex Blog

August 5, 2011

Forex Outlook 8/5/11

Filed under: Forex News — Tags: account, aud, australia, carry trade, china, commodity, currency, default-on-its, gbp, gold, practice account, rate-decision, sentiment, trend — admin @ 7:23 am

Well it looks like we dodged a bullet this morning with the US Non-Farm Payrolls report that showed jobs growth of 118K vs. an expectation of 85K. The unemployment rate ticked lower to 9.1% even though all of the recent data was pointing to a lower number.

Those of you who read my commentary know that when things appear to be at the worst, that is usually when you get an upside surprise! Check out today’s Forex In Four video (at the 6-minute mark) where I explain how this works and why I went on record expected 125K jobs prior to the release.

So why are we dodging bullets, this far into the “recovery”? Well the markets have been down 8 out of the last 9 days, with the crescendo hopefully taking place yesterday with the Dow down some 500 points. This is a direct result of a slowing global economy, and the debt crisis still taking place in the Euro zone.

Yesterday after the ECB rate policy decision, they decide to do an about-face and go from a previously hawkish to dovish stance as both Spain and Italy are under attack by the bond market as yields continue to move higher which will eventually move to unsustainable levels and will require a bailout if something isn’t done to prevent this. This sent the markets into a mini death-spiral.

And this is also emblematic of the ECB’s lack of attention to this problem over the last year. As yields were being driven higher on the “3 little pigs”, the ECB did nothing until the problems got out of hand. Now that Spain and Italy are in the cross-hairs, it may be too late to act and will assuredly cost more to deal with now as opposed to being preemptive. It is very telling that laissez-faire comes from the French.

So the markets are clearly relieved today though it will be interesting to see if this is enough to stem the tide of the Euro zone debt crisis, or if the market is looking for QE3 from the Fed. Regardless, it may be tough for investors to take risk assets over the weekend, despite the massive selling we’ve seen of late.

The volatility in this markets sets up perfectly for short-term trading, and that’s what I will continue to do!

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August 1, 2011

Forex Outlook 8/1/11

Filed under: Forex News — Tags: carry trade, commodities, currency-pairs, forex trading, from-the-rba, fundamental, fxedu, nzd, picture, practice, practice account, stock, unemployment, week — admin @ 6:53 am

I’m back from vacation this week and boy did I pick a good time to get away! Well not really, but it was nice anyway. The insanity that is taking place in Washington DC looks like it may be coming to an end, but let’s remember that while a deal has been reached, it has not been voted through just yet.

There still is some safe-haven rotation going today with Yen and Swiss franc strength, yet gold is pulling back from all-time nominal highs. A “relief rally” is underway in the equity markets with global stocks and oil higher, but after last week’s carnage this was to be expected.

Despite the general sigh of relief in the markets, this does not feel like classic risk appetite has returned to the markets, but rather US dollar weakness, perhaps on the notion that QE3 may be around the corner. Last week’s dismal GDP report and the potential for this week’s Non-Farm Payrolls report to get worse may bring the Fed back into the picture.

This week will also bring rate policy decisions from the RBA in Australia tomorrow, and the ECB, BOE, and BOJ on Thursday. While no change is expected, the BOE will be the only Central bank not issuing an accompanying statement. Inflation expectations have risen, but look to these banks to try their best to avoid looking hawkish. BOJ intervention hopefuls are waiting for action, but it may not be forthcoming.

Volatility still abounds in the markets, and this debt ceiling agreement is not a done-deal just yet.

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July 21, 2011

All Eyes On Europe!

Filed under: Forex News — Tags: cad, china, commodity, course, europe, fear, fxedu, greece, live, lower, new zealand, practice account, sentiment — admin @ 7:36 am

Today’s meeting of Euro zone Finance Ministers, bankers, and power brokers is intended to produce a solution to the debt crisis that plagues not only Europe but the global economy as well. While the immediate problem is Greece, the larger and more pressing problem is how do they prevent contagion to Spain and Italy.

While there are many different proposals floating about, the bottom line is that the politically expedient needs to be cast aside in favor of a solution. Apparently France and Germany have come to an agreement in principle, with the details to be released later today. Bear in mind that even if they do come out with a resolution (which is unlikely to be complete by today), the market may not like the terms.

Here in the US, the news yesterday that we may be close to a debt ceiling deal has taken an about-face and there is so much confusion and obfuscation surrounding these talks that it is fruitless to try to forecast when or if a deal may be forthcoming.

Overnight in the UK, consumer confidence and retail sales figures came in better than expected, though lower expectations mean that it is easier to clear the hurdle. Nevertheless, this is an encouraging sign for the UK as the government austerity kicks in.

Euro zone and Chinese PMI figures came in weaker than expected, showing signs that the global economy is starting to slow. Yet the market is rebounding and has flipped from risk-aversion to risk-taking mode as optimism over the Euro debt deal is starting to increase.

In the forex market:

Aussie (AUD): The Aussie has bounced off its lows of the morning after the market took lower than expected Chinese PMI figures as a sign that Australia’s exports may decrease as demand in China slows. However, risk sentiment has picked up so the Aussie is nearing resistance at 1.08 vs. USD. (Click chart to enlarge)

Kiwi (NZD): The Kiwi reached an all-time high vs. USD at .86 as hopes of a rate hike in lieu of an expanding economy have the markets enamored with the growth story.

Loonie (CAD): The Loonie is mostly higher as risk appetite has increased and oil prices have rebounded to just below $99. Tomorrow is the release of both CPI and retail sales data which may show further economic strength which could lead to increased rate hike bets.

Euro (EUR): While PMI figures were down, the Euro is up and trading above 1.43 vs. USD as the market is hopeful that a solution for the debt crisis is coming. I wonder if this will be a case of “buy the rumor, sell the news” for the Euro today. (Click chart to enlarge)

Pound (GBP): The Pound is also higher as consumer confidence figures came in better than expected, though lower than last month’s reading, posting a 51 vs. 49. In addition, retail sales figures came in better than expected, rising .2% vs. an expectation of no change.

Swissie (CHF): The Swissie is mostly lower as demand for safe-haven asset has decreased with the risk-taking in the market. Declining trade balance figures show the effects of a stronger franc on the economy.

Dollar (USD): The Dollar is weaker across the board as risk appetite has increased due to the dual-action of the potential Euro debt resolution and the fact that the economic data here, namely initial jobless claims, continues to be weak. This means that the market could be expecting QE3 from Bernanke and the Fed.

Yen (JPY): The Yen is weaker vs. all but the Dollar and this relationship needs to be watched closely it could be a catalyst for BOJ currency intervention. Trade balance figures came in better than expected which means that Japanese exports are improving as the recovery from the natural disaster takes effect.

So the markets will continue to wait for the news out of the Euro zone meeting in Brussels today and there could be major volatility surrounding the release of their statement as the market weighs on every word.

While the markets have been flying so far this morning, I am going to exercise caution as I’m just not as positive as others. Buy the rumor, sell the news has always been a trading mantra I’ve adhered to, so it will be interesting to say what is going to happen later today.

But for now I’m content to take profits, and looking to re-establish positions as the news is released.

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, Australia, bank, cad, canada, carry trade, China, commodities, commodity, course, currencies, currency, currency market, currency pairs, currency trading, decision, dollar, dow, economic, economy, EUR, Euro, Europe, fear, forex, forex market, forex trading, fundamental, fx, fxedu, gbp, gold, interest, interest rate, interest rates, invest, Japan, jpy, Kiwi, live, loonie, lower, market, Mike Conlon, new zealand, news, nzd, oil, pound, practice, practice account, rate decision, RSI, sentiment, stock, time, trade, trader, trades, trend, unemployment, USD, Yen

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June 8, 2011

Bubble Ben Bungles!

Filed under: Forex News — Tags: economic, interest, markets, politicians, practice, practice account, risk-aversion, yen — admin @ 7:31 am

Yikes! I guess I was mistaken in my assessment that Fed Chairman Bernanke wouldn’t say anything “dumb” at yesterday’s speech. It wasn’t so much what he said but how he said it. While Bernanke is known as an academic and a reluctant public figure, his mumbling, stumbling, and bumbling through the Q & A session did not inspire confidence in the least.

While we all know that the US and the global economy are weakening, we need real leadership to guide us through these troubling times. Unfortunately, Bernanke is out on an island by himself, and he is getting no help from the politicians in Washington DC. Trying to solve our nations economic woes with monetary policy alone will not work. Period. Until we get our fiscal house in order, we will always be teetering on the edge of the cliff. Where is the leadership?In the Euro zone, German Industrial production figures came in lower than expected, and another ratings agency stated that indeed a rollover of Greek bonds would constitute a default. Let’s not forget that a default will trigger a massive event, led by credit default swaps (CDS) which were termed “financial weapons of mass destruction” and greatly contributed to the economic collapse of 2008. GDP figures came in as expected.

The Fed’s Beige Book report is due out later today but will tell us what we already know, that the economy is weakening. The powers that be are attempting to pass this off as a “soft patch” so that their summer vacations can go interrupted.

Later today we will get New Zealand’s interest rate decision, which is expected to produce no change. Tonight will bring Japan’s GDP figures, and as the Yen strengthens the talk of Bank of Japan monetary intervention increases.

Tomorrow is the rate decision in both the Euro zone and the UK.

So the markets are trading lower this morning on risk-aversion, as the outlook continues to worsen.

In the forex market:

Aussie (AUD): The Aussie is trading lower on risk aversion ahead of tomorrow’s employment report, holding support currently just above 1.06 vs. USD. (Click chart to enlarge)

Kiwi (NZD): The Kiwi is lower on risk aversion as well and this afternoon’s RBNZ rate decision is unlikely to produce a change in policy or a hawkish statement. A weaker Kiwi will be desirable in the event of a global slowdown.

Loonie (CAD): The Loonie is mostly lower on lower oil prices and risk aversion despite the fact that housing starts came in better than expected, posting gains 183.6K vs. an expected 182K. While these are not world-beating numbers, anything positive is welcome at this point.

Euro (EUR): The Euro is mixed to lower as GDP figures came in expected showing moderate growth of 2.5%, though German industrial production figures came in lower than expected. The potential resolutions to the Greek debt crisis are being met with scrutiny, and not all members of the Euro zone are on the same page. (Click chart to enlarge)

Pound (GBP): The Pound is mostly lower ahead of tomorrow’s rate policy decision as Moody’s suggested that the UK’s current credit rating may be in jeopardy. No change is expected for tomorrow’s release.

Swissie (CHF): The Swissie is strong today as dual effect of risk-aversion and an unemployment report showed a rate of 2.9% unemployment are increasing demand.

Dollar (USD): The Dollar is stronger on the safe haven demand despite the weakening economic picture here in the US. If we don’t start to tackle the fiscal side of the equation, we may be in big trouble.

Yen (JPY): The Yen is the strongest today on risk aversion as carry trades are un-wound and tonight’s GDP release is expected to show negative growth. While this is no surprise after the natural disasters that hit them, it appears as though the calls for BOJ intervention may not be worrisome to the markets.

Poor Bubble Ben. The guy is getting no help from Washington DC and is the unfortunate whipping boy for all that ails us. Nevertheless he is doing all he can given the circumstances.

While I give him a lot of heat for the decisions he makes, he is merely reacting to the lack of leadership in government today. I think yesterday’s Q & A session was very telling, and he may not be getting a lot of sleep at night these days.

There are tougher times ahead for us, the longer we continue to extend and pretend is only going to make it worse.

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

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

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

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February 7, 2011

Super Bowl Hangover?

Filed under: Forex News — Tags: a-monthly-gain, a-respite-from, a-show-signs, aussie, course, currency market, economic, euro, fxedu, gbp, practice account — admin @ 12:46 pm

I guess that’s what the markets are counting on as there is very little economic data due out this morning. While the timing is purely coincidental, a respite from news gives the market time to re-evaluate current levels and look ahead to more important data due out later in the week.With that in mind, let’s take a look back at Friday’s NFP report.

While I take no pleasure in being correct that the number would come in worse that expected, I was a little bit shocked at off and un-reliable those numbers appeared to be. How can the number of jobs created miss by a wide margin and the unemployment rate improve .4%? “Official” unemployment was reported at 9%, which some have deemed mathematically impossible. As I have said in previous blog articles, you can’t have the BLS (Bureau of Labor Statistics) without the BS!

The only significant news to speak of this morning is that German Factory Orders came in worse than expected, showing a monthly decline of 3.4% vs. an expectation of a decline of 1.5%, bringing the YoY figures lower to 19.7% from an expectation of an increase of 21.3%. This has prompted further selling in the Euro, which may have topped out at 1.385 from early last week. The market is starting to come around to the idea that without a comprehensive plan to handle the debt crisis, it will be difficult for the ECB to raise interest rates despite the growing inflation the Euro zone is experiencing.Returning to the situation in Egypt, while there is no sign that a resolution is near, order is starting to return to daily life while negotiations take place. Stay tuned for this one, and keep a close eye on oil prices.

In the forex market:

Aussie (AUD): The Aussie is mostly lower as retail sales figures came in lower than expected, showing a monthly gain of .2% vs. an expectation of a .5% gain. Thursday morning is the Australian employment report which is the economic data highlight of the week.

Kiwi (NZD): The Kiwi is trading slightly higher and receiving the bulk of commodity currency in-flows as negative data from its antipodean neighbor Australia show signs of a slowdown. (Click chart to enlarge)

Loonie (CAD): The Loonie is mixed this morning ahead of a building permits number that is due out and expected to show a slight increase of 2% vs. a decline seen last month. With oil prices slightly higher due to event risk in Egypt, volatility will likely come from abroad.

Euro (EUR): The Euro is lower across the board after last week’s summit in Brussels failed to produce any meaningful solutions to the debt crisis. While this was not entirely unexpected, recent hawkish rhetoric from the ECB may be falling on deaf ears until a debt plan is established. (Click chart to enlarge)

Pound (GBP): Euro losses are the Pound’s gain as money flows from the common currency as potential losses seem likely. The big news this week comes on Thursday, as the BOE will give its rate decision. Recent signs of inflation have the market suspecting that a hike may be near, though such action appears unlikely this time.

Dollar (USD): The Dollar is strengthening this morning as the Euro weakens despite no news on tap for today. This week is relatively light of news, so we’re going to get some “Fedspeak” to fill the data voids.

Yen (JPY): The Yen is mostly lower as despite some recent encouraging economic data and the Nikkei was higher overnight. The Yen may be losing some its panache as a safe-haven currency after the credit downgrade by S&P two weeks ago.

On days that are light on news and data points, market correlations sometimes come back into play as one dominant theme can drive the marketplace. This morning that theme is Euro weakness, however that could change when the US market opens.

So often times we can see some mean reversion plays as the market moves throughout the day. By being able to figure out what is actually moving the markets, traders can then look for opportunities in other instruments that may follow suit.

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, article, AUD, Aussie, Australia, blog, BOE, cad, commodity, course, crisis, currenc, currency, currency market, currency trading, data, decision, dollar, dow, ECB, economic, EUR, Euro, eurusd, fed, forex, forex market, forextrading, free, fx, fxedu, gbp, idea, Il, interest, interest rate, interest rates, jpy, Kiwi, life, live, loonie, lower, market, Mike Conlon, money, news, nfp, nzd, oil, pound, practice, practice account, rate decision, retail sales, RSI, ssi, time, tip, trade, trader, unemployment, USD, Yen

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December 23, 2010

Merry Christmas?

Filed under: Forex News — Tags: australia, cad, christmas, currenc, euro, forex market, fxedu, jpy, mike conlon, news, practice, practice account, stocks, yen — admin @ 2:47 pm

Heading into tomorrow’s shortened session due to the Christmas holiday, worse than expected economic data is getting a reprieve. US economic data is mixed, and I think we are seeing a case of “it could be worse” type sentiment.

Overnight, New Zealand reported a GDP contraction of .2% vs. an expectation of a gain of .1%, bringing the YoY figure down to 1.5% from an expected 1.8%. The market had clearly set itself up for a “miss” but was mildly relieved when the number was not as bad as expected, as evidenced by a higher-trading Kiwi.

In Canada, a monthly reading of GDP showed a gain of .2%, which was slightly lower than the expected .3%, which working in tandem with mixed US economic data is helping the Loonie gain strength.

In the UK, a BOE policy-maker came out and stated that he thought the UK could see a GDP contraction at some point next year and, you guessed it, the pound is trading higher!

Lastly, US economic data showed that we lost another 420K jobs, but those who have jobs have seen their incomes rise .3% which was slightly better than expectations, while slightly spending less than expected (.4% vs. an expected .5%). Personal consumption data came in lower than expected, as did Durable Goods Orders.

Yet the markets are trading somewhat flat, except for gold which is off 1%.

In the forex market:

Aussie (AUD): The Aussie is mostly higher but for Japanese yen strength. The Australian economy is rocking and even though it is a “risk” currency, it is also seemingly a good place to hide out over the holiday weekend.

Kiwi (NZD): The Kiwi is higher across the board after showing an economic contraction last quarter. This apparently was expected by those in the know and recent selling has been reversed in a case of “sell the rumor, buy the news”.

Loonie (CAD): The Loonie is mostly lower as GDP figures showed slowing growth, continuing the theme from yesterday. Nevertheless, there are no major issues specific to Canada that would make the Loonie any less attractive. Yes the global economy is starting to slow. The Loonie is likely range-bound to finish the year. (Click chart to enlarge)

Euro (EUR): The Euro is lower as the debt crisis is back to the forefront as there is little other news to hide it. The Irish government just took control of Ireland’s largest lender and there is some speculation that there may be increased competition among the worst debt-ridden Euro zone nations to get their debt funded.

Pound (GBP): The Pound is mixed despite comments that the UK could see a GDP contraction next year. Recent debilitating weather in the UK is likely to be blamed if retail sales come in worse than expected for the month.

Dollar (USD): The Dollar would be lower were it not for Euro weakness. Economic data is not encouraging, nor does it send holder’s of it fleeing. This is all becoming part of the “new normal”, where weekly job losses of 420K are not only expected but also of minimal importance.

Yen (JPY): The yen is strengthening for the second day in a row as Asian stocks were lower overnight, and a continuation of bond selling from yesterday is driving yields. However, volume was very light so this could be an aberration as earlier this morning, USD/JPY traded down to the 38.2% retracement level I identified yesterday. (Click chart to enlarge)

Holiday volume is light today yet there are some moves taking place. Perhaps participants are in the “holiday spirit” and are not punishing those currencies with worse than expected economic data.

It also looks like there are some year-end ranges being established, as those who need to dress their windows have likely done so already. This is the time of year when I struggle to find fundamental reasons as to why things are occurring and it really takes a lot less to move markets.

Next week is also a holiday-shortened week, so it will be interesting to see if it mirrors this week’s market action. Merry Christmas to all who celebrate the holiday!

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, Australia, blog, BOE, cad, canada, comments, course, crisis, currenc, currencies, currency, currency market, currency trading, data, dollar, dow, economic, economy, EUR, Euro, forex, forex market, forextrading, free, fundamental, fx, fxedu, gbp, gold, Il, interest, Japan, jpy, Kiwi, live, loonie, lot, lower, market, Mike Conlon, new zealand, news, nzd, pound, practice, practice account, rate, retail sales, sentiment, ssi, stock, stocks, time, trade, USD, Yen

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December 1, 2010

Markets Rebound, For Now!

Filed under: Forex News — Tags: aud, australia, cad, dollar, dow, forextrading, invest, japan, practice account, spain, usd — admin @ 3:03 pm

The markets are taking a much-needed break from selling on the strength of manufacturing figures from around the globe. Led by Chinese growth in PMI figures which came in at a 7-month high, the market has shrugged off recent Euro debt crisis concerns.

There were also good numbers from the UK and various regions in the Euro zone, showing signs of economic life. US ISM Manufacturing figures are due out later this morning. However, one day of decent data does not a trend make. The looming debt crisis in the euro zone is still the major detriment to global economic health.

Overnight in Australia, GDP figures came in lower than expected but perhaps are indicative of the intended effects of the RBA rate hikes, that is, to keep inflation in check and to keep the Australian economy from over-heating.

So today is a risk-on day, however the overall risk themes in the market have not abated to the point where they can be discounted—yet.

In the forex market:

Aussie (AUD): The Aussie is higher despite reporting lower than expected GDP figures as global risk appetite has increased. GDP grew at .2% vs. an expected .4% for the 3rd quarter, pushing the YoY figure down to 2.7% vs. an expectation of 3.4%. (Click chart to enlarge)

Kiwi (NZD): The Kiwi is higher on risk appetite and the Chinese economic expansion data, which is a positive for NZ exports. However, the Korean conflict has not gone away so there still are some tensions in the Pac Rim.

Loonie (CAD): The Loonie is the best performer this morning as demand for commodity currencies has increased despite yesterday’s disappointing GDP report. Oil is back up to 85 and change, and Canada’s geography insulates it from the Korean conflict, unlike the Aussie and Kiwi.

Euro (EUR): The Euro is catching a break today from selling due to the debt crisis. German retail sales figures came in close to double the expectation for last month, though overall PMI figures were slightly lower for the Euro zone. (Click chart to enlarge)

Pound (GBP): The Pound is mixed this morning as is expected under a “normal” risk-taking scenario. While manufacturing growth rose at the fastest pace in nearly 16 years, home prices have fallen to a 9-month low. PMI figures came in at 58, vs. an expected reading of 54.7.

Dollar (USD): The Dollar is weaker across the board as some of the recent safe-haven plays are being un-wound. Better than expected ADP employment data has contributed to risk appetite, two days ahead of Friday’s NFP report.

Yen (JPY): The Yen is lower against all as investors are dipping their toes back in the risk pool. There’s no significant news out of Japan for the rest of the week so expect the Yen to continue to move on risk themes.

This schizophrenic market has longer-term investors shaking their heads but for short-term traders this is nirvana. One day the world is seemingly going to end, and the next day everything is champagne and roses.

But that’s how markets work. They sometimes have a short-term amnesia which can confuse and distort the overall picture. Let’s not forget that tensions are still high in Korea, or that Portugal and Spain are a few hundred basis points away from being forced into taking a bailout.

While better than expected data is good news, it may not be enough to change overall sentiment or the economic problems that plague us. But I am not here to be “Debbie Downer” today, as I am content to party on with market. However, I am hanging near the exit and am out at the first sign that the party may be over.

I’d suggest you do the same.

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, Australia, blog, cad, canada, commodity, course, crisis, currenc, currencies, currency, currency market, currency trading, data, dollar, dow, economic, economy, EUR, Euro, eurusd, forex, forex market, forextrading, free, fx, fxedu, gbp, home, Il, invest, investor, ISM, Japan, jpy, Kiwi, life, live, loonie, lower, market, Mike Conlon, news, nfp, nzd, oil, pound, practice, practice account, rate, retail sales, sentiment, short, ssi, time, trade, trader, trend, USD, Yen

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November 22, 2010

Who’s Up Next?

Filed under: Forex News — Tags: aud, australia, bank, dow, economic, forextrading, oil, practice account, spain — admin @ 2:50 pm

As was expected, Ireland requested a rescue of its banks to the tune of $130 billion, with various downgrades likely to follow. The initial reaction was Euro-positive, but as I mentioned last week the result is likely to be negative, as the market turns its attention to both Portugal and Spain.

While the exact details of the Irish deal are unclear at this time, there is going to be a re-structuring of the banking system at the very minimum. The Euro should continue to be volatile as markets punish the bonds of Portugal and Spain. The EU needs to come up with a viable solution to promote stability in the region or we could just see this story played over and over again until the EU emergency fund has been completely tapped.

Portuguese debt is among the highest in the world and Spain is the 4th largest economy in the Euro zone so further attacks on these countries’ bonds could exacerbate the problem much worse than what we saw from Ireland. Expect more volatility in the market as further details of the Irish bailout are released.

There’s not a lot of economic data due out today in this shortened holiday week here in the US. Markets are mixed this morning with stocks and commodities lower and specific weakness in both the Pound and the Euro.

In the forex market:

Aussie (AUD): The Aussie is surprisingly higher as the market appears to be leaning toward risk aversion this morning. This week is a light week for economic data from Australia, so perhaps they are benefiting from Euro and Pound money flows this morning.

Kiwi (NZD): The Kiwi is lower across the board as S&P downgraded NZ’s credit-rating outlook to negative, citing a reduced outlook for global demand. (Click chart to enlarge)

Loonie (CAD): The Loonie is mixed as oil is slightly lower this morning but like the Aussie may be catching a bid as investors seek places to stash their dough. Tomorrow is a busy day of data in Canada, as retail sales and CPI data are on the docket.

Euro (EUR): The Euro is lower despite the news of the bailout for Ireland, as now the question of contagion becomes the bigger issue. While there is some data due out for the region this week, the more pressing concern is structural in nature, as the Euro hopes to avoid the type of declines that we saw earlier this year. (Click chart to enlarge)

Pound (GBP): The Pound is also lower as the UK’s close ties to the Irish banking center and the threat of contagion is weighing on the currency and stocks alike. Wednesday is the UK GDP report which will provide further insight into the health of the UK economy as austerity measures begin to take place.

Dollar (USD): The Dollar is mostly higher as would be normal in a risk aversion scenario. This is a holiday week her in the US with Thanksgiving on Thursday, so most of this week’s data will be released tomorrow and Wednesday. Tomorrow is GDP and personal consumption data along with existing home sales, with Wednesday bring durable goods orders, initial jobless claims, and the U Michigan confidence survey.

Yen (JPY): The Yen is mostly higher though in recent times it has not behaved like we would expect from a “safe-haven” currency. Thursday is CPI data so we will get a better idea of how bad deflation is in Japan.

As the market begins to learn more about the details of the Irish bailout, the focus will now turn to both Portugal and Spain as they are the two most vulnerable countries in the Euro zone. Unless the EU comes up with some type of plan to keep bond yields from rising (perhaps a short ban?), we are likely to see these two flirt with disaster.

While Portugal is in much worse shape than Spain, the latter is a much larger economy so market participants may feel emboldened to strike at the bigger prize. The Spanish economy is still mired in a major housing bubble and has rampant unemployment. If the ratings agencies decide to take aim at either country, it could get the ball rolling downhill.

With the Thanksgiving holiday here in the US likely to slow the markets down toward the end of the week, we could see some added volatility. I seem to recall last year there was some news (can’t remember what) over the Thanksgiving holiday that induced risk aversion, so be cautious heading in toward the end of the weekend.

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

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

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September 21, 2010

Housing Surprise!

Filed under: Forex News — Tags: a-trend-make-, currenc, eur, fomc, forex market, housing, japan, monetary, money, need, practice account, rate — admin @ 1:49 pm

This morning, US Housing starts increased 10.5% vs. an expectation of a .7% increase, handily beating estimates and posting the largest gains in nearly 4 months. While this is a good start to the morning and further encouraging risk appetite, one data point does not a trend make.

This comes ahead of the FOMC meeting today at 2:15 EST where the Fed will have to decide what, if anything needs to be done via monetary policy to promote the economic recovery.

Across the pond in the Euro zone, Ireland and Spain had successful bond auctions that have allayed market fears and helped markets and the Euro move higher. As I mentioned yesterday, the new “game” seems to be to promote fear surrounding up-coming debt offerings, thereby causing yields to rise in an attempt to increase borrowing costs and thus returns to investors. For all of the “fear” surrounding Ireland’s bond auction, it’s shocking that the offering was over-subscribed by a magnitude of five times!

In the UK, the budget deficit soared higher than expected, putting pressure on the Pound and showing the need for increased spending cuts.

Lastly, diplomatic tensions between China and Japan have caused some Yen strength and the concern that the FOMC may ease monetary policy further has contributed.

In the forex market:

Aussie (AUD): The Aussie is mostly higher as minutes from the RBA rate policy meeting showed that they are committed to raising rates if the economy keeps expanding at its current pace or faster. This has pushed the Aussie to 2-year highs vs. USD.

Kiwi (NZD): The Kiwi is mostly lower this morning ahead of tomorrow evening’s release of GDP figures which are expected to be lower due to the earthquake, thereby giving the RBNZ reason to pause on rate hikes going forward.

Loonie (CAD): The Loonie is lower this morning as CPI data showed that prices increased 1.7% vs. an expectation of 1.9%, as reduced energy costs suggest that inflation may be muted and easing pressure on the BOC to continue with rate hikes going forward.

Euro (EUR): The Euro is higher across the board as successful bond auctions showed market confidence that both Spain and Ireland may not need any bailout money and that they are taking the steps necessary to deal with their budget woes, despite the nonsense going on in Greece.

Pound (GBP): The Pound is lower as net borrowing costs came in higher than expected, posting the largest August deficit since 1993. This clearly demonstrates the need for less borrowing and reduced spending to get the UK fiscal house in order.

Dollar (USD): The Dollar is mostly weaker this morning as mild risk appetite has picked up due to better than expected housing start numbers. The Dollar could continue to weaken if the FOMC meeting brings further monetary easing, but my guess at this point is that Bernanke maintains the “extended period” language and does nothing.

Yen (JPY): The yen is showing strength this morning despite the mild risk taking as diplomatic tensions with China are causing uncertainty. In addition, the fear that the FOMC meeting will bring further monetary easing in response to Yen intervention may cause a showdown between Central banks; one that the Japanese can’t win.

So all eyes and ears are waiting for the FOMC meeting later today which always brings volatility to the market as traders position themselves ahead of the report. Recent economic data has not been negative enough to warrant a Fed move at this time; however Yen intervention and continued Chinese currency manipulation could pose a threat to a US economic recovery.

It is becoming clearer that the market believes that road to recovery is through reducing deficits by decreasing spending, despite the fact that it is not popular. Politicians both here and abroad need to realize this sooner than later or risk permanently losing market confidence which will cause a continued economic decline mired by high unemployment, economic stagnation, falling prices, and raging deficits.

Not a pretty picture if you ask me! So watch for the volatility heading into FOMC today, and trade cautiously!

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

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

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August 26, 2010

Risk Appetite Returns- For Now!

Filed under: Forex News — Tags: a-classic-risk, aud, cad, course, currenc, expectation, kiwi, market, morning-on-risk, practice account, ssi, summer, time — admin @ 1:38 pm

This morning global stock markets are higher, rebounding from 7-week lows. This has encouraged a bit of risk taking, but the question remains: how long will it last?

US weekly initial jobless claims came in at 473K, besting analyst expectations of 485K and better than last week’s reading of 504K. While one week does not make a trend, the fact that this figure was not worse than expected is seen as positive.

In the UK, CBI reported sales figures came in at 35, handily beating the expectation of 18 and showing signs that the UK is economy is still on solid ground.

In the Euro zone, Ireland issued short term debt at rates lower than their last offering, shrugging off the S&P debt downgrade from 2 days ago and bolstering the view that the market has not given up hope of recovery. The offering was over-subscribed, showing high demand for the debt issuance.

So this morning we are seeing some risk appetite return to the market, with commodities and stocks higher on a day that is light on news.

In the forex market:

Aussie (AUD): The Aussie is higher this morning on risk appetite despite the fact that private investment declined 4% vs. an expected gain of 2.3%. The elections appear to be dead-locked at this time, which many are viewing as a positive for stocks, especially the miner who may avoid the mining tax as a result. (Click chart to enlarge)

Kiwi (NZD): The Kiwi is the biggest gainer this morning as oversold conditions due to the inflation report may have been overblown. The Kiwi has sold off the most in recent trading.

Loonie (CAD): The Loonie is also higher due to risk taking as oil prices have rebounded to 73.50. In addition, if US jobless claims continue to improve, then a more positive outlook for the US economy would be positive for the Loonie.

Euro (EUR): The Euro is also higher has Irish debt costs actually were lower despite S&P’s best efforts to push them higher. In addition, loan growth in the EU is picking up at the fastest pace in nearly a year in a sign that both households and business may be feeling more confident.

Pound (GBP): The Pound is also higher on the back of the CBI sales figures and going into tomorrow’s GDP report. The UK economy appears to be rebounding, yet sentiment surrounding the UK austerity measures has left the market confused about economic prospects going forward. (Click chart to enlarge)

Dollar (USD): The Dollar is weaker this morning against all but the Yen in a classic risk taking scenario. Stock futures are higher as initial jobless claims figures came in better than expected. There is a slew of data out for the US tomorrow, and provided the data doesn’t come in way worse than the already lowered expectations, should continue to bring about some risk appetite.

Yen (JPY): The Yen is lower across the board and rebounding some after the intervention talk has begun to heat up. Today’s risk taking and higher Nikkei has provided relief for the safe haven of the Yen. CPI data is due out tomorrow and expected to show continued deflation, which shouldn’t have much of an impact on the market one way or another. (Click chart to enlarge)

Today is a welcome respite from the selling that has occurred earlier this week. With very little market moving news out today, risk appetite has increased. However, we’re not out of the woods yet. As the market becomes accustomed to slower growth, we’re going to experience these swings between risk taking and risk aversion.

Today feels like a slow day, as perhaps traders are finally going to take some time away to enjoy what’s left of the summer. So “no news is good news” and that appears to be the theme for the day.

Just remember to be cautious, as one day does not a trend make.

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, commodities, course, currenc, currency, currency market, currency trading, data, dollar, dow, economic, economy, EUR, Euro, forex, forex market, forextrading, free, fx, fxedu, gbp, Il, intervention, invest, jpy, Kiwi, live, loonie, lower, market, Mike Conlon, news, nzd, oil, pound, practice, practice account, rate, RSI, sales, sentiment, short, ssi, stock, stocks, time, trade, trader, trend, USD, Yen

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