Rate | Forex Blog

September 17, 2010

East Vs. West!

Filed under: Forex News — Tags: a-soft-landing, correlations, course, currency trading, dollar, economic, euro, forextrading, jpy, lot, nzd, rate, trade, trader, usd — admin @ 2:02 pm

This morning, both the US and the Euro zone reported less than expected CPI and PPI data respectively, showing that while inflation is positive is still underwhelming the market. It is apparent that all of the accommodative monetary policy around the globe is not causing runaway price increases, and may be setting up for a soft landing.

Meanwhile, the war of words continues between China and the US, with the former making veiled threats about US dollar instability affecting the US recovery and at the same time justifying their stance for currency stability. Now the congress critters are joining the act, loathe missing out on an opportunity to get in front of the camera.

Japan is also catching heat from their intervention, and frankly I don’t think they care what anyone else thinks at this point. Everyone is out for themselves and global cooperation is a farce. So it is now being confirmed that the intervention is “unsterilized”, which was different from the last unsuccessful attempt in 2004, as the Japanese are just simply printing money.

Wait until Big Ben tries to counteract this move with further quantitative easing of his own. I wonder if his “QE2” will end up more like the titanic, sinking the US economy.

The morning started with markets higher, though it appears to be giving back earlier gains. In addition, today is “triple witching” which can bring volatility.

In the forex market:

Aussie (AUD): The Aussie is higher on risk taking on a day that is devoid of news Down Under.

Kiwi (NZD): The Kiwi is also higher on risk taking, as gains in Asian stocks boosted demand for carry trades. This comes even after the RBNZ left rates changed the other day.

Loonie (CAD): The Loonie is mostly lower despite some risk appetite as oil prices are lower and US CPI data came in less than expected showing that Canada’s largest trading partners’ economy is slowing, in contrast to the Aussie and Kiwi. (Click chart to enlarge)

Euro (EUR): The Euro is lower this morning as German PPI figures came in lower than expected, and chatter about the Irish banking system is picking up thereby putting the debt issue to the forefront. While this is not enough to encourage risk aversion, it should be noted that construction outputs were also lower foreshadowing an economic slowdown.

Pound (GBP): The Pound is mixed this morning, trading lower against risk currencies and pulling back from earlier gains. Next week, the minutes from the rate policy meeting will be released which will show if there are any other dissenters beside the lone board member calling for rate hikes. (Click chart to enlarge)

Dollar (USD): The Dollar is lower this morning, as CPI data came in less than expected but still showing slight gains of .3%. The Michigan Consumer confidence data is due out just before 10 AM EST so it will serve as a gauge of sentiment.

Yen (JPY): The Yen is weaker against all but the Loonie and Dollar, as today’s currency action is highlighted by geography. Today the East a beast and the West ain’t the best! Intervention seems to still be in the minds of traders who while tempted to test the resolve of Japan, haven’t done so yet.

This is all setting up like a bad Rocky movie, with an East vs. West flavor to the currency market. With no major news to move the markets, there’s lots of chatter coming from both sides of the Pacific.

Today is triple witching for the markets, which means that we get options, index futures, and index futures options expiring so there could be some wackiness in the US equity market which could then move currencies if the correlations hold up.

My guess is that correlations are starting to break down with Yen intervention being the major anomaly. In addition, gold is at all-time highs around 1280–without inflation!

Now is a time to be cautious in the markets, as uncertainty abounds!

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, bank, blog, cad, canada, carr, carry trade, China, course, currenc, currencies, currency, currency market, currency trading, data, dollar, dow, economic, economy, EUR, Euro, forex, forex market, forextrading, free, fx, fxedu, gbp, Il, index, Japan, jpy, Kiwi, live, loonie, lot, lower, meeting, Mike Conlon, money, news, nzd, oil, pound, practice, practice account, rate, RSI, ssi, stock, stocks, time, trade, trader, trades, USD, Yen

Comments (0)

August 6, 2010

Bye-Bye Dollar!

Filed under: Forex News — Tags: a-building-and, dow, economy, jobs, jpg, kiwi, market, markets, north, north-america, nzd, rate, ssi, treasury, unemployment — admin @ 3:15 pm

This morning’s much anticipated Non Farm Payrolls report disappointed the market which sent the US dollar careening lower. While the unemployment rate held steady at 9.5%, this is probably more of a function of discouraged workers leaving the workforce. For the month of July, the US economy lost 131K jobs, nearly twice the expectation of a 65K loss.

In addition, the revisions to last month’s data came in nearly twice as bad as reported in what is becoming a familiar pattern. But the US isn’t the only country with bad employment figures today.

In Canada, the unemployment rate rose .1% to 8% as the Canadian economy lost 9.3K jobs, which is the first loss in 2010.

This report sent equity index futures and commodities lower, as well as the US dollar. Under a “normal” risk-aversion scenario, one might expect Dollar strength. However, there may be a “silver lining” in this jobs report, as the creation of private sector jobs came in higher.

So what started out as risk aversion, may be flipping around to risk appetite due to Dollar weakness.

In the forex market:

Aussie (AUD): The Aussie is actually higher after the initial downturn due to risk aversion, but now Dollar weakness is driving the market. (click chart to enlarge)

Kiwi (NZD): The Kiwi is taking back some of yesterday’s losses after their bad employment figures. Money that flowed from the Kiwi to the Loonie is slowly making its way back. (click chart to enlarge)

Loonie (CAD): The Loonie is the biggest loser this morning as they lost jobs last month for the first time all year. As seen in the above chart, the Loonie benefited yesterday from Kiwi weakness, but is now giving it all back as the situation looks weaker in North America. Adding to Loonie weakness is lower oil prices, though it is rebounding as I write.

Euro (EUR): The Euro started the morning session somewhat weaker but quickly grabbed a bid on the NFP report and is now higher. German industrial production figures came in lower than expected, but that news quickly took a back seat to Dollar weakness.

Pound (GBP): The pound is trading much like the Euro this morning after the UK reported their own weaker industrial production figures.

Dollar (USD): If it weren’t for the Loonie, the Dollar would be the worst performer this morning. Keep in mind that as the US economy weakens, so will the Canadian economy as the US is the largest importer of Canadian goods and services. NFP data was disappointing, but the silver lining I mentioned above could provide hope.

Yen (JPY): The Yen is the strongest pair today as risk aversion and Dollar weakness is driving the markets. USD/JPY is approaching the 85 “line in the sand” level—the place most think will encourage intervention.

As you can tell, the jobs reports in the US and around the globe are important drivers of economic growth and the picture is beginning to look more bleak as uncertainty over government decisions has induced hesitancy.

Until we adopt pro-business policies here in the US, it’s going to get worse. Just as the Treasury Secretary “predicted” the other day. This is akin to jumping off a building and stating, “this might hurt”.

However, there is still some good economic news around the globe, and in the end, the fiscally responsible will be rewarded. If the US doesn’t want to be the recipient of it, so be it.

Thankfully, the forex market allows me to move money quickly to those regions that deserve it!

Tags: AUD, Aussie, blog, cad, dollar, dow, economic, economy, EUR, Euro, forex, forex market, forextrading, gbp, Il, jpy, Kiwi, loonie, lower, news, nzd, oil, pair, pound, rate, ssi, time, USD, Yen

Comments (0)

July 27, 2010

Market Surfing!

Filed under: Forex News — Tags: a-great-ride, australia, cad, consumer, course, currenc, data, dollar, ecb, free, money, rate, trader — admin @ 1:30 pm

Now may be the time to “ride the wave” in the markets as the major news of the summer, the Euro bank stress tests, were received positively by the market. Yesterday I commented on the credibility of those tests, and reminded readers to follow the market rather than impose their own view.

So far this morning the market is in risk-taking mode, as CPI data will begin to be released tomorrow in the Euro zone and Australia. Higher readings may show that policy adjustments may need to take place, especially in Australia.

Adding to Euro strength is the news from the Basel committee on Banking Supervision who announced they would be seeking new measures to shore up the global banking system.

In the UK, a CBI report showed that household spending increased at its fastest pace in nearly 3 years, lending support to the view that economic recovery is taking place.

This morning, US consumer confidence figures and home prices are due out, and yesterday’s housing sales figures were bad historically, yet the market reacted favorably because they were higher than expected. The market also seemed to overlook the revised figures from last month, which showed a much lower figure.

In the forex market:

Aussie (AUD): The Aussie is higher as risk appetite has increased due to a positive economic outlook in the markets. CPI data is due out tomorrow and should those figures come in higher than expected, the market may expect a further rate hike at the next RBA rate policy meeting.

Kiwi (NZD): The Kiwi is also higher on risk themes going into the RBNZ rate policy meeting tomorrow night. The expectation is for a rate hike of 25bp to 3%, but pay attention to the policy statement as the Kiwi is closing in on 2010 highs.

Loonie (CAD): The Loonie is also higher as oil has surged to 79.50 in addition to general risk appetite. There is no real news on the docket until Friday, when Canada reports GDP figures.

Euro (EUR): The Euro is also mostly higher, trading largely as expected according to our risk ladder. Consumer confidence figures and import prices were higher in Germany, showing continued strength in the Euro zone’s largest economy. This shows a renewed outlook for growth but don’t expect tomorrow’s CPI data to affect monetary policy just yet, as the ECB cannot start raising rates until after the sovereign debt issues of the countries in trouble are rectified.

Pound (GBP): The Pound is higher across the board as CBI reported sales data showed that household spending increased at the fastest pace in nearly 3 years. This CBI gauge showed a reading of 33 vs. an expectation of 3. So it beat handily and the market has responded accordingly as economic growth prospects have advanced.

Dollar (USD): The Dollar is lower as a “normal” risk-appetite scenario is taking place this morning. The home price index came in showing a slight increase which is a good sign in that prices aren’t still falling. However, with the end of the homebuyer tax credit, this may not be the case going forward and as always, the economic prospects here in the US will come down to jobs growth.

Yen (JPY): The Yen is lower across the board as risk appetite has increased the demand for carry trades. Recent Yen strength vs. the Dollar has heightened the awareness of possible intervention, but the BOJ appears (for now) to let the market dictate prices. Japanese employment and CPI data are due out on Thursday night.

So if the market tells you it wants to go up, you should listen. Many times traders (myself included) try to interpret market news and data and then make predictions of what they think should happen. A better way to approach the markets is to follow trends that you see on the charts, and then act accordingly. Try to find low-risk entry points based on technical support and resistance, and then hop on and enjoy the ride.

The news we have been receiving as of late has largely been positive and has emboldened risk appetite. While there are bound to be hiccups along the way; use them to your advantage by buying pullbacks or selling rallies.

The global economy is still fragile, but every passing day that does not bring bad news should be viewed as a positive for risk appetite. Money has to flow somewhere, and if you can catch it just right, you may be in for a great ride!

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, carr, carry trade, charts, course, currenc, currency, currency market, currency trading, data, dollar, dow, ECB, economic, economy, EUR, Euro, forex, forex market, free, fx, fxedu, gbp, home, Il, index, Japan, jpy, Kiwi, live, lower, meeting, Mike Conlon, money, news, nzd, oil, pound, practice, practice account, rate, release, ssi, technical, time, trade, trader, trades, trend, USD, Yen

Comments (0)

July 23, 2010

Canada’s June Inflation Rate at 1%

Filed under: OANDA News — Tags: forex round up, growth-declined, positive-growth, previous, previous-month-, rate, second, several-cases, statistics, the-second, the-year, week — admin @ 1:10 pm

According to Statistics Canada, Canada’s national inflation rate was 1.0 per cent in June. All provinces recorded positive growth, but in several cases, the rate of growth declined from the previous month, reinforcing Bank of Canada Governor Mark Carney’s statements earlier in the week where he predicted Canada’s rate of growth would slow in the second half of the year.

Source: The Canadian Press

Comments (0)

June 30, 2010

Less Money Needed!

Filed under: Forex News — Tags: a-reversal-for, account, currenc, currency, currency market, europe, live, loonie, mie, rate, recession, rsi, stock — admin @ 1:40 pm

There was encouraging news overnight as the ECB said it would lend banks less than analysts had predicted, showing signs that the European banking system may not be in as weak a state as the market thinks. In addition, German unemployment changed less than expected and the unemployment rate remained steady showing signs of economic stability. Euro zone CPI figures fell back to 1.4%, slightly better than analyst expectations.

In the UK, consumer confidence figures fell to 6-month lows as residents prepare for budget cuts, and BOE policy-maker Adam Posen said that UK recovery is tentative and could risk sliding back into recession. Look for continued loose monetary policy unless inflation figures really heat up.

In the US, the ADP employment change came in less than expected and could serve as a harbinger of Friday’s Non-Farm Payrolls report.

In Australia, bank lending and house price gains showed that the economy has been resilient in the face of rate hikes but whether that trend continues remains to be seen.

Canadian GDP figures came in flat, showing neither growth nor contraction but missing analyst expectations of a .2% gain.

So today is a bit of a mixed bag, with earlier risk-taking on the European bank news giving back some gains. Stocks are mixed to slightly lower with commodities relatively flat. Today is the last day of the second quarter, so we could see some window dressing which could mean volatility in stocks.

In the forex market:

Aussie (AUD): The Aussie is giving back some gains after bank lending and home price figures showed how strong the Australian economy has held up despite the RBA’s rate hikes to cool the economy. While the trading day started off in risk-taking mode, the Aussie may decline if we flip to risk aversion.

Kiwi (NZD): The Kiwi is lower this morning as the RBNZ said in its annual Statement of Intent that it will continue to remove economic stimulus as the NZ economy recovers. Part of this statement has been construed as backing away from tighter monetary policy, citing global economic conditions.

Loonie (CAD): A bit of a reversal for the Loonie this morning as well, as risk-taking waned and GDP figures came in lower than expected. GDP stalled after gaining for 7 straight months as retail sales declined as the government removed temporary tax relief measures.

Euro (EUR): The Euro is higher across the board this morning as the ECB said it will lend less to banks to cover their debt payments than the market was expecting. This shows that the financial health of European banks may not be as bad as expected and that they are largely able to meet debt obligations. There has been major fear about the sovereign debt exposure of these banks, and this announcement took that fear down a notch.

Pound (GBP): The Pound is lower this morning as comments from the BOE said that recovery is tentative and consumer confidence figures fell to 6-month lows as budget concerns weighed heavily. However, house price figures rose to 2-year highs in a sign that the property market may be stabilizing.

Dollar (USD): The Dollar is mixed as the ADP employment change showed a gain of 13K vs. an expectation of 60K jobs gained. Friday’s Non-Farm Payrolls report will really show how far along we are in the employment picture and economic health, but this worse-than-expected figure may be foreshadowing.

Yen (JPY): The Yen is showing some strength against all but the Euro as risk aversion appears to winning the morning battle. Yen started the trading lower as Asian stocks continued to sell-off, but then reversed on the Euro bank news, only to reverse again on the ADP jobs report.

Yesterday’s sell-off may have been an over-reaction to negative sentiment in the market but the important thing to remember is that global economies are still fragile. As various governments remove stimulus, economies will now be forced to stand on their own.

In the US, it’s all about jobs, jobs, jobs. As long as people are unemployed and unable or unwilling to spend, economic recovery is going to be fragile. Part of the problem is that we don’t have policies in place that encourage private sector growth, as looming tax hikes to support out of control spending weigh heavily on private business.

So this most recent scare is all about confidence. It is obvious that people don’t have confidence in their government’s ability to improve conditions. It doesn’t matter what the policy is, there is NO confidence right now.

However, there are pockets of economic strength around the globe and those who are employed are experiencing a MUCH different economy than those who aren’t. Some are beginning to say that this is the “new normal”; where we will have economic growth AND high unemployment. I beg to differ.

I understand that emergency stimulus measures were necessary to prevent us from going over the cliff but enough is enough. The sooner the government removes the training wheels from the economy, the sooner citizens will learn how to ride again. Because at this point, the US government is holding us back, and not letting us move forward. Friday’s NFP will either confirm or deny this assertion, and the market will respond accordingly.

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, BOE, cad, comments, commodities, course, currenc, currency, currency market, currency trading, dollar, dow, ECB, economic, economy, EUR, Euro, Europe, fear, financial, forex, forex market, free, fx, fxedu, gbp, home, Il, jpy, Kiwi, live, loonie, lower, mie, Mike Conlon, news, nfp, nzd, payrolls, pound, practice, practice account, rate, recession, retail sales, RSI, sentiment, ssi, stock, stocks, time, trend, unemployment, USD, Yen

Comments (0)

June 17, 2010

Carney Says Rate Increases Not “Preordained”

Filed under: OANDA News — Tags: a-sure-bet-, after-reaching, boost-from, british, from-the-monthly, pound, rate, recently-raised, toronto — admin @ 1:08 pm

Bank of Canada Governor Mark Carney said yesterday that just because the Bank recently raised interest rates by a quarter point, that does not mean that further rate hikes are “preordained”. Citing the Euro debt crisis and lingering weakness in the US economy, Carney stated that while Canada will likely lead the G8 nations in growth for the remainder of the year, this alone does not mean further rate increases are a sure bet.

“Arguably Carney left no clear direction yesterday,” Firas Askari, head currency trader in Toronto at Bank of Montreal, Canada’s fourth-largest lender, said in an e-mail. “The Canadian dollar is weaker against the crosses as there appears to be big U.S. dollar bids around the C$1.0210 to C$1.0220 area.”

The Canadian currency traded at C$1.0244 per U.S. dollar at 7:52 a.m. in Toronto, compared with C$1.0243 yesterday. It has strengthened to C$1.0225 three times in the last four days, the highest level since May 14. One Canadian dollar buys 97.70 U.S. cents.

Source: Bloomberg

Comments (0)

US Jobless Claims Increase by 12,000

Filed under: OANDA News — Tags: a-sure-bet-, british, colorado, lend-further, michael-englund, number, pound, rate, recently-raised, report, unemployment, usd — admin @ 12:57 pm

The US Labor Department announced that the number of new claims for jobless benefits unexpectedly rose by 12,000 last week to a total of 472,000 new claims. These latest results lend further credence to fears that employment gains will be slow in coming to the US market, and this is likely to continue to mute consumer spending which accounts for roughly 70 percent of the US economy.

“We need faster growth in employment, and we’re not at that point yet,” Michael Englund, chief economist at Action Economics LLC in Boulder, Colorado, said before the report. “Whether we have adequate economic growth to bring down the unemployment rate significantly remains to be seen.”

Source: Bloomberg

Comments (0)

May 12, 2010

Not Dead Yet!

Filed under: Forex News — Tags: account, aud, aussie, course, fxedu, home, loonie, rate, trade — admin @ 1:25 pm

So we know all about the debt crisis in the Euro zone and the bailout agreement that was put forth, leaving some in the market to wonder whether or not it was “enough” and to question the structural feasibility of the Euro.

The major question is whether or not the PIIGS countries (particularly Greece) will accept austerity measures to try to get their budget deficits in order. Earlier today, Spain announced new spending cuts designed to show their commitment to austerity. This is a good first step, and Spain will probably have to access the bailout funds. But as I mentioned yesterday, if confidence returns to the EU then borrowing costs will be lower allowing the PIIGS to refinance their debt at lower levels. If they can accept some austerity measures, there is no reason why the Euro can’t survive.

In addition, European GDP figures came in higher than expected showing an expansion of .2%, in a sign that there is still some life in the EU.

Across the channel in the UK, a deal between the Conservatives and Lib Dems has forged a coalition government that has agreed in principle to reduce the UK budget deficit. While this news was deemed positive by the Bank of England, Governor King stressed caution that risks to UK growth have increased.

So there’s some mild risk-taking in the market this morning.

In the forex market:

Aussie (AUD): The Aussie is higher on mild risk taking and gold prices have soared to $1240, which is beneficial to the Australian economy, especially in light of a proposed “windfall profits tax” on mining companies. Employment figures are due out tomorrow.

Loonie (CAD): The Loonie is higher for the fourth straight day as investors are increasing bets that there will be a rate hike in June. The growth story in Canada is still intact and the only thing keeping the Loonie lower is the risk Euro-related risk in the market.

Kiwi (NZD): The Kiwi is slightly higher on risk appetite in the market. Home sales and retail sales figures are due out in the next day or so, which should give a clue on inflation in NZ. This could affect potential rate hikes that the market is expecting mid-year.

Euro (EUR): The Euro has a bid this morning and is higher, as Spain’s spending cuts and EU GDP figures show that there is still life in the region, despite what all of the “doom and gloomers” may have you believe. It’s kind of funny that now that everyone is coming out of the woodwork to talk about the Euro is finished, I’m actually positive on it as a viable currency! Must be my contrarian nature. But that’s not to say I’m positive on its growth prospects (I’m not), but merely that a lower Euro is going to be good in the long run.

Pound (GBP): The Pound is lower this morning as the BOE has jawboned it lower. Governor King came out and said that there are still risks to economic growth, but seemed to be talking out of both sides of his mouth as he also applauded the new government’s plans to reduce the deficit. So while he mentioned that quantitative easing may need to be increased, I don’t think it’s likely. Don’t forget that a lower Pound is better for UK exports, so watch what they do and not what they say.

Dollar (USD): The Dollar is lower as risk appetite is increasing in the market, and though the trade balance numbers came in slightly worse than expected, it is not enough to derail the US economic growth story. Initial jobless claims are due out tomorrow, and Friday we get retail sales figures.

Yen (JPY): The Yen is lower on risk-taking and carry trades. CAD/YEN is the biggest gainer showing signs that market is betting that Canada is the next to raise rates.

As my wife likes to say, “When the party is over, it’s time to go home.” The sooner the Greeks realize this, the better off they will be. Look, everyone in the world would love to retire with full pensions at the age of 52, it just isn’t possible. No one is saying that these guys have to go back to manual labor. Get a fishing boat, take tourists out. With a declining Euro, the PIIGS countries will actually benefit.

Sure there’s going to be anger right now, and we haven’t seen the last of the rioting. But pretty soon the crowd starts to thin out, as the intelligent ones realize they can secure jobs for themselves while the other idiots are out rioting! Before you know it, there’s only 2 guys out there banging the drum, and everyone else has reluctantly gone back to work.

So the punch bowl has been removed. There will be other parties in Greece. The sooner they realize this, the better.

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, BOE, cad, canada, carr, carry trade, course, crisis, currenc, currency, currency market, currency trading, dollar, economic, economy, EUR, Euro, Europe, forex, forex market, free, fx, fxedu, gbp, gold, home, Il, invest, investor, jpy, Kiwi, life, live, loonie, lower, Mike Conlon, news, nzd, piigs, pound, practice, practice account, rate, retail sales, ssi, time, trade, trades, USD, Yen

Comments (0)

May 10, 2010

EU Pledges 750 Bn Euros to Stabilize Currency

Filed under: OANDA News — Tags: avoid-the-debt, european, forex round up, liberal, majority-win, monetary-fund, package, rate, rate-on-greek — admin @ 12:56 pm

Markets in Europe and Asia turned sharply positive Monday on news that the EU finance ministers had reached a deal that would set aside 750bn euros (US$975bn; £650bn) to ensure other European countries can avoid the debt crisis now crippling Greece. The International Monetary Fund will also contribute to the package.

The euro quickly climbed above $1.30 after falling to a 14-month low last week. Japan’s Nikkei 225 index was up 1.3% and Hong Kong’s Hang Seng index rose 0.8%, while London’s FTSE 100 share index was trading up 255.5 points at 5,314 by mid-day.

More importantly however, may be the drop in the rate on Greek debt. In a strong showing of support for the deal, the rate on two-year Greek bonds fell immediately, from 18.1% to 4.9%.

Source: BBC News

Comments (0)

May 7, 2010

A Recipe for Disaster!

Filed under: Forex News — Tags: bank, currency, currency trading, dollar, forex, from-the-euro, greek, market, morning, nfp, rate, time — admin @ 7:33 am

With concerns over the Euro and the Greek debt crisis, yesterday’s market action became the “perfect storm” as there was a systematic breakdown in trading technology which sent the markets reeling. The Dow Jones Industrial Average dropped nearly 800 points in less than 10 minutes.

There were major moves in the currency market as well, as investors fled risky assets in favor of US bonds and the dollar. This helped contribute to what looked like a death spiral, as problems with trading technology caused some stocks to trade at erroneous levels, dragging the indexes lower and causing automated trading systems to take action which also exacerbated the problem.

There is still major risk in the marketplace; primarily coming from the Euro zone which some believe is fighting for survival. This morning, the German Parliament approved the Greek bailout, but the ECB still has a long way to go to figure out how to deal with contagion to the rest of the EU. Now the concern has turned to Spain, which may require a bailout as well as borrowing costs have increased dramatically thereby making it harder to service their debt. Unless a comprehensive plan is proposed, we could see continued problems for the Euro. The G-7 is having an emergency conference call to discuss a solution.

In addition, the UK elections took place and the result is the dreaded “hung Parliament”. However, Moody’s did not use this event to downgrade the UK credit rating, and the possibility exists that the government will be able to work together despite the political differences.

On what would normally be the biggest news of the day, the US Non-Farm Payrolls (NFP) report came out this morning and showed a gain of 290K jobs, which was better than expected. However, the unemployment rate ticked higher to 9.9%, showing signs that recovery is fragile.

In Canada, employment grew by 108K and the unemployment rate ticked down to 8.1% showing signs that recovery may be stronger than here in the US.

Lastly, the Yen is lower as the Bank of Japan pumped nearly 22 billion dollars of liquidity into its financial system in response to the Euro crisis.

In the forex market:

Aussie (AUD): The Aussie is higher this morning on yen weakness and is receiving support from a technical bounce as yesterday’s carnage sent the Aussie much lower. Right now there is a ton of risk in the market so at this point I’m not certain I would be looking to establish long trades here.

Loonie (CAD): The Loonie is the big winner today as better than expected employment numbers came in showing signs of economic recovery.

Kiwi (NZD): The Kiwi is trading on risk themes exclusively and getting a technical bounce similar to the Aussie. This is not to be confused with risk appetite, as this is more likely due to yen weakness and short-covering.

Euro (EUR): The Euro has bounced back from yesterday’s carnage as there is hope that the EU can come to some sort of a resolution on how to deal with the sovereign debt problems of its members. Today the first step was taken as German Parliament approved the Greek bailout, but now the larger looming issue of how to reduce borrowing costs for other nations experiencing similar problems is center-stage. They’re not out of the woods yet.

Pound (GBP): Fears of political gridlock due to the “hung Parliament” in the UK has sent the Pound lower, though the UK did manage to maintain its AAA credit rating from Moody’s. However, there is hope that what we are seeing from the EU will serve as a warning of what can happen in the UK if Parliament doesn’t work together.

Dollar (USD): The Dollar is mixed this morning as the NFP report came in better than expected but unemployment ticked higher. The Dollar is giving back some of yesterday’s gains from the flight to safety trade, but there is still major risk in the market.

Yen (JPY): The Yen is much lower this morning as the Bank of Japan added liquidity to the market to the tune of nearly 22 billion dollars. The Yen had major gains yesterday as carry trades we un-wound at break-neck speeds and demand for yen was high prompting this move from the BOJ.

In all my years of trading the markets, I have never quite seen anything like what took place yesterday. When technology fails, it can set off a chain reaction that affects every market. Due to the correlations between market instruments, a breakdown in one area can cause action in others and that’s exactly what took place.

Combine this with the uncertainty due to the risk coming from the Euro zone and you have the perfect recipe for disaster. With such extreme volatility in the markets, a lot of money can be made or lost very quickly. When situations like this arise, I advise to stay on the sidelines or only use risk capital that you are prepared to lose.

Until normalcy can return to the marketplace and confidence is restored, expect major volatility. Trade extremely cautiously if at all.

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, bank, cad, canada, carr, carry trade, course, crisis, currenc, currency, currency market, currency trading, dollar, dow, ECB, economic, EUR, Euro, fear, financial, forex, forex market, free, fx, fxedu, gbp, Il, index, invest, investor, IRA, Japan, jpy, Kiwi, live, loonie, lot, lower, market, Mike Conlon, minutes, money, news, nfp, nzd, payrolls, pound, practice, practice account, rate, short, ssi, stock, stocks, technical, time, trade, trades, unemployment, USD, warning, Yen

Comments (0)

« Newer Posts — Older Posts »