Forex Blog

March 5, 2014

President Obama Predicts Solid Year for U.S.

The U.S. economy will grow this year at its fastest pace since 2005, helping reduce the annual average unemployment rate for a fourth straight year even as market borrowing costs rise, the Obama administration predicted.

Gross domestic product will expand 3.1 percent in 2014 after rising 1.9 percent last year, the administration said in forecasts accompanying its 2015 budget plan released today in Washington. The jobless rate will average 6.9 percent this year, compared with 7.4 percent last year, and average 6.4 percent in 2015, according to estimates based on information as of mid-November.

The $3.9 trillion spending request anticipates an accelerating economy that’s boosting employment while moving up inflation to levels unlikely to concern Federal Reserve policy makers. The proposal says fixing the immigration system, investing in infrastructure, simplifying the tax code and improving job training would reduce the ranks of the unemployed even more.

Bloomberg

The post President Obama Predicts Solid Year for U.S. appeared first on MarketPulse.

ECB Should Study Japan’s History

The central bank failed to sound a deflation alert.  “At present there is no reason to expect that overall prices will drop sharply and exert deflationary pressure on the entire economy,” policy makers wrote in their monthly report, signed off by the governor.

That governor was Yasuo Matsushita and the report was published in January 1998. Within six months, Japan’s consumer prices excluding food began falling in a trend that would mark the next 15 years.

The concern now for economists from Barclays Plc to Morgan Stanley and JPMorgan Chase & Co. is that European Central Bank President Mario Draghi risks making the same mistake as the Bank of Japan — publicly playing down a deflation threat — and ultimately may have to introduce quantitative easing.

Bloomberg

The post ECB Should Study Japan’s History appeared first on MarketPulse.

January 30, 2014

Don’t Let The Unanimous Vote Fool You. Fed Remains Heavily Divided.

The voting members all supported the decision to taper an extra $10 billion a month in the last month that Federal Reserve Chairman Ben Bernanke presided. That’s the first time since June 2011 that a decision has been unanimous, with prior objections coming mostly due to hawks upset with the bond purchases in the first place, but last month due to one official fretting it was too soon to scale back.

Never mind — the January decision brought four different regional Fed presidents — two of whom are ardent hawks (Richard Fisher and Charles Plosser), one who’s a converted dove (Narayana Kocherlakota), and one centrist who will be leaving as soon as the Cleveland Fed can find a successor (Sandra Pianalto).

The bigger changes are still to come, as Janet Yellen is set to become chairwoman, Stanley Fischer and Lael Brainard are set to join the Fed’s board, with room for President Obama to finally name a vice chairman in charge of bank supervision.

This group are all on board with the decision to stop buying bonds. But the real test is when they will want to start lifting interest rates, and how they will communicate that. It’s pretty clear that the Fed’s target of waiting until the unemployment rate gets to 6.5% — even with all the asterisks and hashtags and footnotes attached — is in tatters, now that the jobless rate is at 6.7% and the Fed doesn’t see any reason to lift rates.

MarketWatch

Get OANDA’s exclusive weekly Market Pulse FX

Email Address: Preferred Format: HTMLText

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

The post Don’t Let The Unanimous Vote Fool You. Fed Remains Heavily Divided. appeared first on MarketPulse.

November 1, 2013

Obama Declares U.S. Open for Business

Declaring “we are open for business,” President Obama on Thursday announced an expansion of federal efforts to lure foreign companies to invest in the United States, including making sales pitches a formal part of every American ambassador’s portfolio.

“All of them are great ambassadors for America, and they’re building bridges and connections every day,” Mr. Obama said at a conference organized by the Commerce Department that brought together foreign businesspeople with local and state officials. “Well, I want them doing even more to help foreign companies cross those bridges and come here.”

Mr. Obama also pledged to do more business development when he travels overseas. He said the federal government did not adequately coordinate with cities and states in trying to attract foreign investment. That has left individual states in the difficult position of competing with other countries for business investment.

NY Times

The post Obama Declares U.S. Open for Business appeared first on MarketPulse.

October 15, 2013

Dollars ‘Reality’ Premium Kicking In

Filed under: OANDA News — Tags: , , , , , , , — admin @ 10:47 am

Reality TV coverage does not get any better. It’s tantalizing close, or so capital markets are being led to believe, a halt to the US fiscal standoff is within the Senates grasp. If so, they now must race the clock to sell the plan to lawmakers before U.S. borrowing authority runs out later this week – the supposed deadline. The emerging deal would stave off a potential default, end the two-week old US partial government shutdown and change the immediate deadlines in favor of three new ones over the next couple of months – alas, more “can-kicking.”

Hollywood could not write a grander finale. So far, US politicking has managed to bring global financial markets to a near standstill. The lack of urgency from investors has born little pressure on US lawmakers to hasten their decision process. President Obama and company have been tongue lashed from various G10 members and international agencies, reminding the US that inactions are pushing the global economy towards another recession. Until a decision is reached asset classes remain paralyzed by global inactivity, lack of liquidity and “cheap” position taking.

Currently, fundamental data has a limited release Stateside, luckily that is not the case out of Europe. A couple of economic reports so far this morning have had a limited, but profound affect on forex price activity, very much a rarity over the last couple of weeks. Sterling briefly pushed to new intraday highs outright (1.6011) and against the EUR (0.8473) after last month’s inflation print came in unchanged from August, +0.4%, and +2.7% on the year. The market had been pricing in a -0.1% drop in both. The pace could accelerate in the months ahead as utility prices rise and “a topped out pound makes its presence felt.” Governor Carney’s +2% level looks as theoretical as ever. UK policy makers have said that they will not consider raising the main interest rate until there is a significant fall in UK unemployment. They expect their target of +7% jobless rate to e reached sometime in 2016 – “lower rates for longer.”

Despite Spain delivering a solid Bill auction result – Spanish treasury (Tesoro) sold just above the indicated range at lower borrowing costs and higher bid-to-covers (€4.57B vs. €3.5-4.5B indicated range in 6 and 12-month Bills) – and Greece’s 13-week yield falling below +4% for first time in nearly two-years – has not been helpful for weak EUR bull positioning this morning. Germany’s October ZEW Survey delivered some mixed results, current situation came in below both expectations (29.7 vs. 31.3 expected) and a month ago reading. This has managed to push the 17-member single currency to fall to a fresh low for the week and highlights the currency’s most vulnerable side (LHS – 1.3499). Price action ahead of today’s North American open would suggest that there were some decent stops triggered on the break, which came just before the mixed-result German ZEW survey.

Technically, the USD is in fine form in Europe this morning, racking up some decent gains despite the supportive data out of the UK and mainland Europe. The dollar is up +0.5% on the day as the market moves Stateside. The EUR’s next support is 1.3480 while sterling’s is 1.5885. Against JPY, the ‘mighty’ dollar continues to have its struggles, with ¥98.70 proving a difficult level to penetrate. If the market can succeed with some conviction then ¥99.50-100 is again opened where optioned related offers are located.

US treasury yields are moving higher (10′s +4-5bps +2.72%), but not by much, as investor optimism grows over a deal to avert a US debt crisis – despite it only being a temporary one. In reality, a US environment where economic growth remains tenuous and political strife considered more of a formality, argues for more of an investor defensive stance. This should keep US bond yields relatively in check with short-term and high quality product more in demand.

After shaking off the long weekend’s cobwebs, any positive Washington developments should help keep the dollars near-term trajectory intact, even given the uncertain timing of next week’s data. However, the combination of Janet Yellen’s nomination last week (dovish), the extended delay in US data releases, and the slightly softer tone of recent Purchasing Managers Index data would suggest that investors would continue to look for a softer USD in the near term. Near term G7/dollar support levels remain big, but not impenetrable. Both liquidity and short-term positioning will be expected to play a greater role in deciding a fairer dollar price level.

Forex heatmap

Other Links:
Forget Flows Yen Bears Eye ¥100

The post Dollars ‘Reality’ Premium Kicking In appeared first on MarketPulse.

October 11, 2013

GBP/USD – Rangebound as Markets Eye US Consumer Sentiment

Filed under: OANDA News — Tags: , , , , , , , — admin @ 12:41 pm

GBP/USD is rangebound in Friday trading, as the pair trades in high-1.59 range in Friday’s European session.  In economic news, today’s highlight is UoM Consumer Sentiment. On Thursday, US jobless claims soared, while the Bank of England made no changes to the interest rate or asset purchase facility levels. In Washington, there is talk of progress over the US shutdown and debt ceiling, as high-level talks continue on Capitol Hill. There are no British releases on Friday.

Could the shutdown soon be over? There appears to be progress towards some agreement on the budget, as high-level talks continue between the Republicans and Democrats in Washington. President Obama held a 90-minute meeting with Republican leaders on Thursday, and the talks continued into the night. The Republicans are likely to make a proposal which would extend the debt ceiling until late November, but would require the Democrats to discuss the budget before that. The White House and Democrats are cool to the idea, but both sides have lowered the rhetoric, as the government shutdown drags on and the debt ceiling hits its limit next week. US Treasury Secretary Jack Lew testified before the Senate finance Committee on Thursday and warned that the political crisis was starting to take a toll on the US economy. With the public blaming both parties for the impasse, the politicians are looking for a way to end the crisis and get the government operating again.

US jobless claims soared last week, hitting a six-month high. The key indicator jumped from 308 to 374 thousand, way above the estimate of 307 thousand. However, this exceptionally high reading could be a one-time aberration, in part due to technical issues in California. In the end, this critical release hasn’t helped the markets gauge the health of the labor market. Non-Farm Payrolls, another vital employment release, is suspended while the shutdown continues, so the US employment picture remains unclear.

In the UK, the Bank of England held course in a pair of key decisions on Thursday. The BOE kept the benchmark interest rate pegged at 0.50%, and left asset purchase facility unchanged at 375 billion pounds. With the British economy picking up steam, the BOE will likely face more pressure to raise rates, although BOE Governor Mark Carney has stated repeatedly that this won’t happen before 2015.

The US dollar was broadly higher earlier in the week, as President Obama nominated Susan Yellen to replace Bernard Bernanke as chairman of the Federal Reserve. Bernanke is due to retire early next year, and Yellen, who serves as Fed vice-chairwoman, became the leading candidate after former Treasury Secretary Lawrence Summers withdrew his candidacy. Yellen is considered dovish in stance and has supported Bernanke in previous rounds of QE increases. Yellen’s nomination must be confirmed by the Senate, but this is expected to be little more than a formality, as she enjoys wide support from both sides of Congress.

QE tapering, one of the hottest topics in the markets just a few weeks ago, has quickly moved to the backburner, courtesy of the budget and debt ceiling crises which have gripped Washington. Earlier this week, the Fed released the minutes of its September policy meeting. At that meeting, the Fed surprised the markets by not reducing its bond-purchasing program, which currently runs at $85 billion/mth. The minutes stated that the decision not to begin tapering was a “close call”. This has raised speculation that we could see tapering before the end of the year. However, the Fed is reluctant to make any major moves in the midst of the political crisis the US is currently experiencing. As well, the Fed is “data dependent”, and key releases such as Non-Farm Payrolls have been suspended to the shutdown. This makes it difficult for the Fed to get an accurate picture of the true state of the economy. Bottom line? We may not see any QE moves by the Fed before the end of the year.

USD/JPY – Yen Under Pressure As Crisis Talks Intensify

The US dollar continues to put pressure the yen on Friday. The dollar has been marching upward most of this week and is trading in the mid-98 range in Friday’s European session. On Thursday, US jobless claims soared, while the Japanese Corporate Price Index posted a strong gain. Friday has a light schedule, with the major release being UoM Consumer Sentiment. There are no Japanese releases on Friday. In Washington, there is talk of progress over the US shutdown and debt ceiling, as high-level talks continue on Capitol Hill.

Could the shutdown soon be over? There appears to be progress towards some agreement on the budget, as high-level talks continue between the Republicans and Democrats in Washington. President Obama held a 90-minute meeting with Republican leaders on Thursday, and the talks continued into the night. The Republicans are likely to make a proposal which would extend the debt ceiling until late November, but would require the Democrats to discuss the budget before that. The White House and Democrats are cool to the idea, but both sides have lowered the rhetoric, as the government shutdown drags on and the debt ceiling hits its limit next week. US Treasury Secretary Jack Lew testified before the Senate finance Committee on Thursday and warned that the political crisis was starting to take a toll on the US economy. With the public blaming both parties for the impasse, the politicians are looking for a way to end the crisis and get the government operating again.

US jobless claims soared last week, hitting a six-month high. The key indicator jumped from 308 to 374 thousand, way above the estimate of 307 thousand. However, this exceptionally high reading could be a one-time aberration, in part due to technical issues in California. In the end, this critical release hasn’t helped the markets gauge the health of the labor market. Non-Farm Payrolls, another vital employment release, is suspended while the shutdown continues, so the US employment picture remains unclear.

The US dollar was broadly higher earlier in the week, as President Obama nominated Susan Yellen to replace Bernard Bernanke as chairman of the Federal Reserve. Bernanke is due to retire early next year, and Yellen, who serves as Fed vice-chairwoman, became the leading candidate after former Treasury Secretary Lawrence Summers withdrew his candidacy. Yellen is considered dovish in stance and has supported Bernanke in previous rounds of QE increases. Yellen’s nomination must be confirmed by the Senate, but this is expected to be little more than a formality, as she enjoys wide support from both sides of Congress.

QE tapering, one of the hottest topics in the markets just a few weeks ago, has quickly moved to the backburner, courtesy of the budget and debt ceiling crises which have gripped Washington. Earlier this week, the Fed released the minutes of its September policy meeting. At that meeting, the Fed surprised the markets by not reducing its bond-purchasing program, which currently runs at $85 billion/mth. The minutes stated that the decision not to begin tapering was a “close call”. This has raised speculation that we could see tapering before the end of the year. However, the Fed is reluctant to make any major moves in the midst of the political crisis the US is currently experiencing. As well, the Fed is “data dependent”, and key releases such as Non-Farm Payrolls have been suspended to the shutdown. This makes it difficult for the Fed to get an accurate picture of the true state of the economy. Bottom line? We may not see any QE moves by the Fed before the end of the year.

EUR/USD – Dollar Lower As Jobless Claims Soar

Filed under: OANDA News — Tags: , , , , , , , , , , , — admin @ 11:22 am

EUR/USD has gained ground in Friday trading. In the European session, the pair is trading in the mid-1.35 range. US Unemployment Claims looked very weak on Thursday, jumping to its highest level since April. Friday has a light schedule, with the major release being UoM Consumer Sentiment. In Germany, inflation data was mixed. Back in Washington, there is talk of progress over the US shutdown and debt ceiling, as high-level talks continue on Capitol Hill.

The shutdown continues, budget talks are deadlocked, but high-level talks are continuing between the Republicans and Democrats in Washington. President Obama held a 90-minute meeting with Republican leaders on Thursday, and the talks continued into the night. The Republicans are likely to make a proposal which would extend the debt ceiling until late November, but would require the Democrats to discuss the budget before that. The White House and Democrats are cool to the idea, but both sides have lowered the rhetoric, as the government shutdown drags on and the debt ceiling hits its limit next week. US Treasury Secretary Jack Lew testified before the Senate finance Committee on Thursday and warned that the political crisis was starting to take a toll on the US economy. With the public upset at both parties for the impasse, the politicians are looking for a way to end the crisis and get the government operating again.

Weekly jobless claims jumped last week, hitting a six-month high. The key indicator jumped from 308 thousand to 374 thousand, way above the estimate of 307 thousand. However, this exceptionally high reading could be a one-time aberration, in part due to technical issues in California. In the end, this critical release hasn’t helped the markets gauge the health of the labor market. Non-Farm Payrolls, another vital employment release, is suspended while the shutdown continues, so the employment picture remains unclear.

The US dollar was broadly higher earlier in the week, as President Obama nominated Susan Yellen to replace Bernard Bernanke as chairman of the Federal Reserve. Bernanke is due to retire early next year, and Yellen, who serves as Fed vice-chairwoman, became the leading candidate after former Treasury Secretary Lawrence Summers withdrew his candidacy. Yellen is considered dovish in stance and has supported Bernanke in previous rounds of QE increases. Yellen’s nomination must be confirmed by the Senate, but this is expected to be little more than a formality, as she enjoys wide support from both sides of Congress.

QE tapering, one of the hottest topics in the markets just a few weeks ago, has quickly moved to the backburner, courtesy of the budget and debt ceiling crises which have gripped Washington. Earlier this week, the Fed released the minutes of its September policy meeting. At that meeting, the Fed surprised the markets by not reducing its bond-purchasing program, which currently runs at $85 billion/mth. The minutes stated that the decision not to begin tapering was a “close call”. This has raised speculation that we could see tapering before the end of the year. However, the Fed is reluctant to make any major moves in the midst of the political crisis the US is currently experiencing. As well, the Fed is “data dependent”, and key releases such as Non-Farm Payrolls have been suspended to the shutdown. This makes it difficult for the Fed to get an accurate picture of the true state of the economy. Bottom line? We may not see any QE moves by the Fed before the end of the year.

Washington Negotiations Remain Incomplete And Risk Rewarding

Asian and Euro asset gains have so far not been able to match yesterday’s North American market advance closeout on speculation that US lawmakers will reach an agreement on raising the nation’s debt limit to avoid a default. Reports that the US is possibly drawing closer to a short-term resolution on the ‘ceiling’ have boosted investors risk appetite. In truth, neither political side in Washington is willing to concede ground or lose face – the only thing anyone seems assured of is that there remains a partial US government shutdown and that the US debt ceiling has not been raised.

The Republicans and the Obama administration at least describe the talks as being constructive and pledged to continue to talk to avoid a default and end the governmental shutdown. The prospect of a short-term debt limit increase would obviously bode well for risk sentiment. Should Congress come to a meaningful agreement today ahead of the long weekend, the greenback would be expected to reinforce its dominance ever so slightly against the historically low yielding currencies such as JPY, EUR and GBP. Any “risk-on” reaction would favour the USD lower against the Emerging Market currencies, especially in light of the Yellen nomination and increasingly delayed prospects for asset tapering.

However, a resolution within the next few days should not be relied upon – given that the US is not expected to run out of cash until early November there is no immediate urgency for either politicking party’s grandstanding to end. Investors should be prepared for either side to push negotiations to the upper most limits. Thus far, the risk happy currencies are steadily moving north – the 17-member EUR currency has managed to print a fresh two-day high (1.3578), but its now entering territory where several small resistance levels are beginning to appear (1.3585-10). Yen outright remains at odds with the dollar and trapped between its 50 and 100-day moving average (98.30-60). While the EUR/JPY continues to show strong upside momentum leading the currency pair to new overnight highs towards the 134 resistance level – the last line of defence protecting this past summers peak (134.95).

Sterling briefly regained a 1.60 print but managed to give that up rather quickly ever since UK August construction output printed a discouraging +4% (expecting +5.2%) on the year earlier this morning. The disappointing British construction reading is the latest piece of official data to cast doubt on UK business surveys that have indicated economic growth in Q3 – its in fact the third piece of disappointing data this week (UK factory output and trade performance also disappointed). These figures are in contrast to the private sector surveys, which portray economic growth for Q3.

Before closing up shop for the long weekend in North America a couple of economic releases either side of the 49th parallel could make the markets rather interesting. On the job front, Canada goes it alone with it’s reporting. The market is not looking at anything within striking distance of last months whopping +59.2k reading reported in August – consensus is expecting a cooler +5k print with no change in the unemployment rate at +7.1%. Investors continue to anticipate that the Bank of Canada needs to see evidence of significant improvement in the activity data in order to upgrade its outlook and drag the loonie higher outright. For now the CAD remains contained in its tight range of 1.0350-1.0450.

Perhaps more of a slam-dunk would be assuming US consumer sentiment to drop to a two-year low this morning (72) because of the US government partial shutdown. The final September report said consumers “…do not expect the President and Congress to be careless enough to allow intransigence on the federal budget and debt ceiling to shut down the government.” But look how very wrong they were!

Forex heatmap

The post Washington Negotiations Remain Incomplete And Risk Rewarding appeared first on MarketPulse.

USD/INR Technicals – Bearish Breakout On Both Short/Long Term

Rupee rebounded back yesterday, trading below the key 61.0 support an more importantly below the last Friday’s swing low – where this week’s USD/INR rally started. By trading below the 61.0, the rally has been invalidated, and short-term pressure is on the downside. When we consider that USD is actually trading mostly higher against other major currencies, it is interesting to see that Rupee manage to strengthen against the Greenback when the rest of the world actually bought USD following the postponement of a US Default by 6 weeks.

The reason for this strengthening appears to be talks between the Government and global banks to include Indian sovereign bonds into global bond indexes. If the Indian Government get what they want, foreign purchases of Indian bonds will increases significantly, potentially bringing additional $20 – 40 billion USD inflow into India annually, which will help square off the leak of foreign investments (FI) which has been the main culprit for Rupee slide in 2013. This news receive positive reaction mostly from offshore Rupee traders – a very good sign as this suggest that we could even see a temporary slowdown in outflow of foreign funds for now as these FI may just want to keep their money within India in order to purchase Rupee Bonds when they are able to do so.

Hourly Chart

USDINR_111013H1

From a technical perspective, we are not seeing anymore significant bearish push following the break of 60.9 resistance, with price trading sideways between 60.7 – 60.9 for most of the Asian session. Nonetheless, overall bias is bearish with prices testing 60.9 on a few occasions but ultimately failed. Stochastic favors a bearish push with Stoch curve facing “resistance” around the 55.0 level. Should Stoch curve indeed head lower with USD/INR breaking 60.70, we could see continuation of price heading towards the round figure 60.0.

Weekly Chart

USDINR_111013W1

Weekly Chart is extremely bearish currently, as the latest sell-off can be interpreted as the bearish rejection from Channel Top, which helps to affirm the breakout (or break in) of the Channel. However, it is unlikely that Channel Bottom will be reached on this bearish move alone as price has actually came off more than 10% and a significant pullback is overdue. Stochastic indicator lends weight to this assertion with readings close to the Oversold region, with Stoch curve likely hitting the Oversold region when price hits 59.0 – the lower end of the consolidation region back in July.

Fundamentally, nothing has change much in India’s economy outlook. Inflation continues to roar, with September Wholesale prices expected to climb close to August’s 6.10% increment due to more expensive food and oil imports. On the other hand, industrial output and the overall economic activity is expected to decline. IMF only recently slash India growth forecast to 3.8%, way lower from the previous 5.6% outlook, the steepest cut amongst all the downgrades. With a weakening economy and continued inflation, it is likely that FIs will continue to leave the country, and may even accelerate when US straighten their mess.

Seasonally, India tend to see huge Gold imports in the month of October due to their Deepavali celebrations, where gold is commonly given as gifts. Given that Gold prices has decreased significantly since September, demand for Gold may be even greater, and offset the expensive taxes and restrictions that RBI has made to limit Rupee outflow. Hence, traders should not simply assume that it’ll be a smooth bearish road for USD/INR ahead.

More Links:
GBP/USD – Relying on Support at 1.5950 Level
AUD/USD – Remains Subdued with Solid Support at 0.94
EUR/USD – Finds Solid Support at 1.35

Get OANDA’s exclusive weekly Market Pulse FX

Email Address: Preferred Format: HTMLText

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

The post USD/INR Technicals – Bearish Breakout On Both Short/Long Term appeared first on MarketPulse.

Older Posts »

Powered by Efacilitators Hosting