Rsi | Forex Blog

November 30, 2010

Scared Money!

Filed under: Forex News — Tags: account, dow, forextrading, home, interest-rate, jpy, nikkei, pound, rsi, time — admin @ 3:11 pm

Another day, another worry. At least that’s what is on the mind of investors as market risk has further induced the flight to safety trade. In addition to Euro zone debt default contagion and the Korean conflict, today we get added fears of a Chinese economic slowdown as well.

The worry from China is that inflation has increased so much that China will have to raise interest rates and tighten credit conditions. Should money flows slow significantly than economic grow could stagnate which would further pressure the global economy.

Bond vigilantes have now turned their attention to the debt of the remaining PIIGS countries as yields are being pushed higher. The Euro has continued its sell-off and is now trading below 1.30 vs. USD.

However news out of the Euro zone isn’t totally negative, as German unemployment rate held steady on smaller than expected job loss figures. Euro zone CPI data came in as expected.

North of our border, Canada reported a negative monthly GDP figure, posting a .1% contraction vs. an expected .1% gain. This helped push the annualized GDP down to 1% vs. an expected 1.5%.

Overnight in Japan, the jobless rate increased slightly to 5.1% vs. an expected 5%. This helped send the Nikkei lower in addition to the Chinese slowdown fears and increased demand for Yen.

The other safe haven plays (US dollar, Swiss franc, and gold) are all higher as well.

In the forex market:

Aussie (AUD): The Aussie is lower as a potential Chinese slowdown will affect Australia greatly as China is the leading importer of Australian exports. Tomorrow’s GDP report likely will show a bit of a slowdown as higher borrowing costs and a stronger Aussie may have hurt exports.

Kiwi (NZD): The Kiwi is also lower on risk aversion and last night NZ reported that building permits declined 2% vs. an expected gain of 1.4%. A Chinese slowdown also hurts NZ.

Loonie (CAD): The Loonie is lower across the board as lower than expected GDP figures (see above) lessen the chance for a further BOC rate hike. There was some speculation that Canada would be the next to hike, but given global economic conditions, I don’t think anyone (except maybe China) will be hiking rates any time soon. (Click chart to enlarge)

Euro (EUR): The Euro is also lower across the board as the bond market is not letting up on the other countries that are potentially facing debt problems. Unless the ECB does something to thwart these bond attacks, then both Spain and Portugal could be forced into taking bailouts. The “prize” right now is Spain, but the market will settle for Portugal if Germany decides to step up. (Click chart to enlarge)

Pound (GBP): The Pound is mostly lower as well as risk in the Euro zone is dragging the Pound down. Consumer confidence figures came in lower than expected and at this point I don’t think the UK is too upset that the Pound is selling off. However, UK bank exposure to Euro zone sovereign debt could become an issue.

Dollar (USD): Congrats to the Dollar, which is getting prettier by the day. As bad as the US economy is, the Dollar’s role as a safe haven currency trumps negative data such as home prices, which show slight declines vs. expected gains. Consumer confidence figures are due out later this morning.

Yen (JPY): The Yen is showing strength today as potential problems in the Pac Rim have re-established the Yen as a safe haven. The unemployment rate ticked up slightly and the inverse correlative affects of the Nikkei selling off have increased demand for Yen.

It appears as though the era of “extend and pretend” may be coming to an end. Today marks the first meeting between the President Obama and the opposition party, who is now the majority in the House of Representatives. Differences over how to handle the economy will be a major issue going forward and we may see an end to the profligate spending that has mired the US in debt worse than the entire Euro zone combined.

Not only has the euro zone come to terms with the idea of having to “take their medicine”, but Germany appears to be force-feeding those countries facing problems.

The UK has already put in place austerity measures so Pound weakness due to Euro zone problems is a welcome relief for the BOE.

Even China may get into the act and look to halt inflation by raising rates; though I wonder how much longer the government will be able to keep the dam from bursting. There is major trouble brewing over there and eventually market forces could prevail.

What, me worry? Nah, I’ll just keep trading!

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November 11, 2010

Happy Veteran’s Day!

Filed under: Forex News — Tags: a-little-more, a-surprise-jump, australia, china, currenc, dollar, economic, forex, france, kiwi, mike conlon, rsi — admin @ 4:30 pm

Here in the US we have a government holiday today honoring veterans who have fought in previous wars to protect our freedom and way of life. So banks and the bond markets are closed today which means there is no economic news to speak of in the US.

However, the G-20 meeting is taking place right now and early reports indicate more of the same. Long talk, short action. It will be interesting to see if any specific policy is agreed to by the end of the meeting. My guess is there won’t be.

Nevertheless, the return of the Euro debt crisis has been putting additional pressure on the Euro, with the focus now turning toward Spanish and Portuguese bonds, after both Irish and Greek bonds got hammered. This in part comes from the plan put forth by Germany and now backed by France which includes “restructuring” of debt. This could potentially put bondholders on the hook for losses. I guess in today’s world of credit default swaps, losses on bonds are unheard of.

Overnight, Australia reported a surprise jump in their unemployment rate, as more people entered the workforce. They did however beat expectations in the number of jobs created.

In China, CPI figures soared showing an increase of 4.4%. It will be difficult for them to keep their currency subdued in the face of these economic figures. But somehow they will manage to do so and the world will continue to allow it to happen.

In the US, stocks are lower so the Dollar is stronger and this is encouraging a bit of risk aversion in the markets. Without any significant news to move the markets, this trend could continue throughout the day.

In the forex market:

Aussie (AUD): The unemployment rate jumped up to 5.4% vs. an expected decline to 5% as the participation rate climbed to a historic high. This eases pressure on any potential wage inflation, which could quell overall inflation and allow the RBA to pause on the next rate hike which is expected early next year. (Click chart to enlarge)

Kiwi (NZD): The kiwi is mostly higher despite the fact that home prices fell for the second month and house sales declined 36%. However, it should be noted that the Kiwifruit scare will not cause the US and Japan to ban imports, so NZ exports may hold up. A sluggish economy may cause the RBNZ to leave rates steady well into 2011, provided inflation does not pick up significantly.

Loonie (CAD): The Loonie is mixed after yesterday’s trade balance report came in worse than expected. However, oil has traded higher to an 88 handle, as the Chinese economy shows little sign of slowdown and QE2 continuing to push commodities higher.

Euro (EUR): The Euro is lower across the board as the major focus of the global marketplace has returned to the debt crisis. Both Irish and Greek bonds have been punished and now the market is turning on Spanish and Portuguese bonds. Much of this stems from bondholder fear that they may have to participate in the losses if any of these countries need to restructure their debt. (Click chart to enlarge)

Pound (GBP): The Pound is higher across the board after the most recent inflation report showed that continued inflation would be an “obstruction” to further QE, according to the BOE Governor. Inflation has persisted outside of the 2% target for some time and until it pulls backs may make it nearly impossible for the BOE to ease further.

Dollar (USD): The Dollar is stronger today as US equities are selling off after some corporate earnings disappointments. Both banks and the bond markets here in the US are closed, so there is no news driving the Dollar other than risk aversion coming from the EU.

Yen (JPY): The Yen is also mixed today gaining some strength from risk aversion and receiving some weakness from both a higher stock prices and reports that machine orders fell the most in nearly 2 years.

As the G-20 continues and leaders attempt to come to some sort of agreement, the only thing that can be certain is the near impossibility of this happening. The global economy is a series of give and takes and the sooner world leader realize this, the better. Some of these guys would rather cut off their nose to spite their face. More directly, I’m talking about China.

The Chinese economy is booming as the rest of the world struggles. It wouldn’t be so bad if they were a freely floating currency but they are not. Everyone claims that even if the Yuan was allowed to float if wouldn’t fix what ails the global economy.

I say hogwash. The Chinese are no longer an emerging economy. They have been allowed to succeed through unfair practices for so long that they now have the moral high ground when it comes to currency manipulation. If politicians can’t force change, then we as consumers need to take action.

Through all of the economic turmoil the US has been through, where is the “Buy American” sentiment? Why aren’t consumers boycotting cheap Chinese goods in favor of spending a bit more to put Americans back to work? I get the whole free trade argument and the idea that I can have cheap stuff by exploiting cheap labor abroad. But I would much rather pay a little more for goods made here in the US if it will put people back to work. Because at the end of the day that is one less person who needs public support which ultimately raises deficits which cause my taxes to go higher.

This should be a conscious choice of all. Isn’t the unemployed guy who buys cheap stuff at Wal-Mart just perpetuating his own economic degradation?
Until the Chinese join every other nation around the globe in allowing their currency to float freely, then those who continue to support this are ultimately responsible for their own economic decline.

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November 10, 2010

G-20 Games!

Filed under: Forex News — Tags: aussie, chinese-yuan, dollar, japan, mostly-stronger, rsi, time — admin @ 3:05 pm

Let the G-20 Games Begin!

Tomorrow marks the start of the latest round of G-20 meetings where global trade imbalances and currency valuations are going to dominate discussions. With somewhat coincidental timing the Chinese trade surplus came in more than expected, even though the US trade deficit came in less than expected.

In its usual pre-G20 posturing, China has allowed its Yuan to appreciate the most since 1993. (For those of you unfamiliar with the history of the Chinese Yuan, it was devalued by 50% on Jan. 1, 1994 by the government making a single decree). The idea behind Yuan appreciation is not because they are magnanimous and want to contribute to the global economy, but rather because they stand to gain more control of the IMF.

Meanwhile in the UK, the BOE took a slightly more hawkish tone as they see inflation continuing above their target range through next year and that near term CPI figures forecasts have increased.

In the EU, the markets continue to put pressure on Irish and Portuguese bond yields as the market becomes increasingly leery about their ability to service their debt.

In the US, mortgage applications rose 5.8% and initial jobless claims came in better than then the recent average of 450K.

So there is some mild risk-taking, as Yen weakness is driving markets after yesterday’s market reversal that encouraged risk aversion.

In the forex market:

Aussie (AUD): The Aussie is mostly lower this morning as consumer confidence figures declined 5.3% to their lowest levels in nearly 5 months. On a bright note, home loans came in better than expected ahead of tomorrow’s employment report where the expectation is for a gain of 20K jobs, almost half of what was gained in the previous report.

Kiwi (NZD): The Kiwi is mostly higher despite comments from the RBNZ last night that claimed that “loose” US monetary policy is driving up Kiwi value and will likely hurt exports going forward. In addition, Governor Bollard said that recent economic indicators may have been “misinterpreted”. These comments were echoed by the NZ PM who flat out said that the Kiwi was overvalued.

Loonie (CAD): The Loonie is mostly stronger on higher oil prices despite the fact that the Canadian trade deficit came in higher than expected as exports to the US fell by 3.6%.

Euro (EUR): The Euro is mixed as French CPI data came in as expected but manufacturing production figures slipped. European stocks are lower, as yields on Irish bonds have reached a new all-time high. The Euro has reached a 2-week low vs. USD. (Click chart to enlarge)

Pound (GBP): The pound is mostly higher as the BOE quarterly inflation report showed that inflation was still above targets and would likely remain there throughout 2011. This report showed a mildly hawkish tone and should recovery continue despite the austerity measure enacted, then the BOE may have to address those concerns. They are likely to take a wait and see approach to monetary policy for the first half of next year.

Dollar (USD): The Dollar is mixed this morning but showing some strength, particularly vs. Euro and Yen. While the monthly trade deficit did decrease slightly and jobless claims improve slightly, higher bond yields in the US are driving the market as there is increasing speculation that the latest round of QE may be the last.

Yen (JPY): The Yen is weaker across the board and is at a 1-month low to the Dollar as US treasury yields in short-term maturities have increased. USD/JPY is particularly sensitive to 1 and 2 year yields as this has an impact on rate differentials. In addition, Japanese consumer confidence figures have come in better than expected. (Click chart to enlarge)

So once again the G-20 meeting will take center-stage as the politics behind the economics heats up. Some topics to be discussed in addition to Chinese Yuan appreciation and trade imbalances are currency intervention and what emerging markets can do about “hot money” inflows.

Already Brazil is calling for a reduction in using the US dollar as the world reserve currency instead preferring a basket of currencies. Both the US and China have no intention of entertaining these thoughts. Can’t blame a guy for trying though.

What strikes me the most is that over the last 20 or so years, emerging market economies have grown like wild-fire, largely in part to the US Fed and the US dollar. As more money has been created, much of this “wealth” has found its way to these economies and allowed them to achieve unprecedented growth.

Now they are all complaining because the US is “hurting” their economies?

It’s a shame that these economies have such short memories, as it wasn’t that long ago that the Chinese were still riding bicycles and the Brazilians were defaulting on loans.

I’m going to watch this G-20 with interest to see if anything meaningful comes about. Until then, I expect more of 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!

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Be sure to sign up for this week’s webinar, “A day in the life of a pro forex trader”, where I will be showing readers how to prepare to do battle in the forex market. Email me your name and contact phone number at mentor@fxedu.com to sign up!

The live webinar will be given on Thursday, Nov. 11th at 8:30AM EST. The login instructions will be sent out today. Don’t miss out!

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September 7, 2010

Euro Banking Concerns!

Filed under: Forex News — Tags: a-new-15-year, aud, australia, china, economy, forex market, globe, lower, market, new zealand, nzd, oil, pound, rsi, ssi — admin @ 1:49 pm

After the long weekend here in the US, the markets have started out decidedly in risk aversion mode. On a day that is light of economic data, concerns over European debt have picked up as bond spreads have widened on both Irish and Greek debt. Questions over capital ratios for the some of the European banks are not new, yet somehow this “news” is making its way to the headlines.

In addition, German factory orders unexpectedly weakened as demand wanes amidst global turmoil.

Overnight, Australia made no changes to interest rates as expected, citing weakening global growth, particularly here in the US. In addition, new PM Gillard has been confirmed and remains committed to taxing mining profits.

The Japanese Yen is the biggest gainer as the BOJ left rates unchanged and did not make any further statements regarding Yen intervention. The Yen is now at a new 15-year high vs. the Dollar as speculation of further US quantitative easing could cause further Yen strength.

In the forex market:

Aussie (AUD): The Aussie is lower as the RBA left rates unchanged overnight at 4.5%. Risk aversion in the markets has added to weakness as construction spending declined for the third month in a row. New PM Gillard’s push for a mining tax may be seen as negative. (Click chart to enlarge)

Kiwi (NZD): The Kiwi is also lower on risk aversion after last week’s earthquake in New Zealand’s second largest city rocked the country. However, this event is now being seen as an economic positive for the country as it will create jobs to rebuild. So GDP will likely come in a tad lower, and rates will remain unchanged.

Loonie (CAD): The Loonie is mostly lower as oil is lower to 73.25 and the sentiment over the global economic slowdown is causing reduced demand for risk currencies. However, tomorrow’s interest rate decision has the market divided as a slight majority of analysts see the BOC raising rates to 1%. It will be interesting to see if the threat of a global economic slowdown is enough to keep policy unchanged.

Euro (EUR): The Euro is lower across the board as European debt concerns come back into focus. In addition, German factory orders declined 2.2% vs. an expectation of a gain of .5%. This is causing renewed fears of the “old double dip” to heat up, although I’m not certain what exactly has caused those fears to increase. Perhaps the benefit of a lower Euro is welcome news enough.

Pound (GBP): The Pound is mixed this morning, tracking higher vs. the risk currencies and Euro. This comes ahead of Thursday’s rate policy meeting where the BOE is expected to leave policy unchanged. Retail sales came in higher as back-to-school shopping helped consumer demand. It will be interesting to see how the BOE justifies higher inflation in light of dovish policy. (Click chart to enlarge)

Dollar (USD): There’s no real news for the Dollar today but tomorrow will bring the Fed release of the Beige Book economic report. I can’t imagine there is anything encouraging to report, and if there was I’m not certain anyone would believe it. Meanwhile, the President is putting forth a new economic band-aid in the form of temporary tax breaks for business, which again is likely to fall short of accomplishing much. The Dollar is getting a boost from its safe haven status.

Yen (JPY): The Yen continues to move higher vs. the Dollar and I think the Japanese are starting to realize that there isn’t anything they can do about it. Not only is US opposition to Yen intervention likely, but calls for further quantitative easing from the Fed would almost certainly cause further Yen strength. Overnight, the BOJ made no changes to monetary policy after its token injection of liquidity at the emergency meeting from Aug. 30th. (Click chart to enlarge)

As the problems in the world economy reach center stage, it is becoming more apparent that fear around the globe is likely to persist for some time. Even though there are some good economic stories around the globe, there are some equally bad ones as well.

This is as much a crisis of confidence as it is of any one factor. Sure we know about the debt problems in Europe, yet bond auctions have been going off with a hitch. Could that change in the future? Absolutely. And in fact the market may demand more in the way of interest to continue to lend to troubled nations.
But until that happens, I don’t see any more of a problem today than any other day. As China continues to divest itself of US dollars, money will continue to find its way to areas that need it.

Emerging economies are the beneficiary right now of economic weakness from the Big Boy economies, however domestic demand needs to be encouraged to balance out global trade.

Japan is one nation where this couldn’t be more appropriate, and now with a stronger Yen they will have an opportunity to pick up some of the slack. For the US can no longer be the buyer of last resort, as both government and consumer balance sheets are tapped out.

The sooner the world realizes 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!

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September 1, 2010

Hello September!

Filed under: Forex News — Tags: cad, chinese, commodity, economy, europe, market, money, nzd, pound, rsi, usd — admin @ 1:30 pm

The markets this morning are clearly relieved to be done with the month of August which was a doozy for equities and commodities. On this first day of September, risk appetite has returned to the market as US stock futures are higher on the heels of Asian and European stock market gains.

Much of the catalyst for this is due to Australian GDP figures which came in better than expected, and Chinese PMI figures which showed gains for the first time in 3 months. This shows that China still has upward growth, though it is moderating. This also bodes well for Australia, who supplies China with the raw materials it needs to sustain its growth.

In the Euro zone PMI figures showed slight gains, while in the UK, PMI figures came in worse than expected as austerity takes hold.

In the US, the ADP Employment change showed a loss of 10K jobs vs. an expectation of a gain of 15K. This caused a slight sell-off on the news announcement, but the market has quickly blown off this reading and is awaiting the US ISM manufacturing figures which are expected to show a decline from last month.

Nevertheless, the market is in classic risk-taking mode, led by the commodity currencies and marked by Yen and Dollar weakness.
In the forex market:

Aussie (AUD): Overnight, Australian GDP figures showed that the economy rose at the fastest pace in nearly 3 years, reporting growth of 1.2% vs. vs. an expectation of .9%, and YoY growth of 3.3% vs. an expectation of 2.8%. Adding to Aussie strength was the Chinese PMI report which showed a return to manufacturing growth. (Click chart to enlarge)

Kiwi (NZD): The Kiwi is following the Aussie higher as risk appetite and yield-seeking money flows provide demand. There is no major news out for the Kiwi for the rest of the week so expect it trade on risk themes.

Loonie (CAD): Crude oil is higher this morning as risk appetite is driving higher commodity and stock market prices and the Loonie is along for the ride. However, traders are paring back bets of a further rate hike as GDP figures reported yesterday came in worse than expected.

Euro (EUR): The Euro is higher this morning as PMI figures came is slightly better than expected showing that there is still some life in the EU economy. However, retail sales figures in Germany came in lower than expected but this is not enough to cause a change in sentiment this morning. In addition, Portugal had another successful debt offering, as demand hasn’t waned. (Click chart to enlarge)

Pound (GBP): The Pound is mixed this morning as is usual under risk-taking scenarios. However, PMI figures came in worse than expected, missing analyst expectations and showing a decline from last month. Austerity measures in the UK may contribute to further Pound weakness going forward. (Click chart to enlarge)

Dollar (USD): The Dollar is weaker across the board as demand for the Greenback is low due to risk taking in the market and the ADP jobs report. US ISM manufacturing figures are due out at 10AM EST and a decline is expected. The ADP figure is the first of the 3 jobs reports due out this week, with initial jobless claims out tomorrow, and the all-important Non-Farm Payrolls report due out on Friday.

Yen (JPY): The Yen is mostly lower this morning as risk appetite has encouraged yield seeking through carry trades. However, the Yen is still showing strength against the Dollar, returning very close to the 15-year high put in last week. It appears as though the market is going to test the resolve of the Japanese policy makers to see if intervention is really in the cards.

As is indicative this morning, it’s not always about the US economy. While the numbers here look pretty bleak, there are pockets of strength around the globe. Right now, the only thing keeping the Dollar afloat is risk aversion, and most of the “bad news” is from US self-inflicted wounds.

Yesterday’s Fed Minutes showed that further quantitative easing may be off the table for now, which the market views as a good thing. As other economies around the globe work to slash deficits, adding to the US deficit would be seen as negative and could have had the opposite effect.

This week is important for the US economy as it’s all about jobs. I can’t harp on this enough. And this goes hand-in-hand with US government policies. A report yesterday showed that banks have eased lending standards yet demand for new loans was weak. This is all because of the uncertainty surrounding current policy and the likely affects of more regulation, taxes, and the healthcare overhaul.

Meanwhile those that can’t find work are left out to dry, with their only hope that more government cheese will keep them afloat. If this isn’t a recipe for disaster, I don’t know what is.

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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July 20, 2010

Japanese Intervention?

Filed under: Forex News — Tags: aussie, china, currencies, europe, free, intervention, ism, nzd, overnight, pound, rate-decision, rsi — admin @ 1:36 pm

This morning, the Japanese yen is lower despite the fact that US corporate earnings are lower this morning, sending stock futures lower. Under a “normal” risk-aversion scenario, we would be seeing Yen strength, however there is some speculation in the marketplace that Japan is getting ready to intervene in its currency as recent Yen strength has been an impediment to exports and thus economic growth.

US corporate earnings are starting to show declining revenues, which is not a positive sign for economic growth. While stock investors may be mesmerized by profit beating estimates, one must consider that profit is being driven by cost-cutting and not expansion. This does not bode well for jobs growth.

The Aussie and Kiwi are higher as Chinese stocks were higher overnight. There is also speculation that China will relax tightening measures.

The Euro is mostly lower to start the US session, as is the Pound. German Producer Prices came in higher than expected, yet the ECB will maintain its asset purchase program as a “security measure”. The results of the bank stress tests are due on Friday.

Lastly, the Canadian rate decision is due out later this morning. The market is expecting a 25 bp hike to .75%, though recent global economic weakness could cause a retreat from a hawkish stance.

In the forex market:

Aussie (AUD): Minutes from the RBA board meeting showed that the Central Bank will wait for the results of the European Bank stress test as well as inflation data to determine whether or not to raise rates at the next meeting. The Aussie is higher this morning despite the risk aversion in the market this morning.

Kiwi (NZD): The Kiwi is higher as Chinese stocks were also higher overnight as there is increased chatter that the Chinese will back off the tightening measures which were intended to slow the rate of growth. If this should occur, then demand for NZ good will increase. However, the commodity currencies are giving back some gains as risk-aversion is apparent to start the US session.

Loonie (CAD): The Loonie is mixed this morning as the BOC rate decision came in with a 25 bp rate hike to .75%, as expected. However it looks like the initial reaction was somewhat negative to the news, as a potential dovish stance going forward may be weighing on investors.

Euro (EUR): The Euro is lower across the board as German PPI figures came in hotter than expected at a .6% monthly increase vs. an expectation of .2%. The results of the bank stress tests are due out on Friday so the market may be jittery despite the positive comments the ECB has been providing. I’m always a skeptic by nature, so put me in the camp that thinks this might not be as rosy as we are being led to believe.

Pound (GBP): Mortgage approvals fell last month as tighter lending standards have discouraged demand as consumer confidence plummeted last month. In addition, CBI business optimism figures came in less than expected as the UK gets ready for announced cut-backs to deal with the ballooning deficit.

Dollar (USD): The Dollar is also mixed today as it is seeing strength vs. all but the Kiwi and Aussie. US housing starts came in less than expected showing a decline of 5% vs. an expected decline of 2.7%. The Dollar is higher against the Yen as speculation of a BOJ intervention is starting to pick up.

Yen (JPY): The Yen is showing some weakness this morning as speculation is that Japanese authorities will attempt to weaken the Yen after it climbed to 7-month highs. A stronger Yen hurts Japanese exports as goods become more expensive. The Japanese have been known to intervene in the past, though they may want to proceed with caution as the market has been driving Yen close to all-time highs.

This morning is a bit of a mixed bad as we see the different pairs trading by region and not necessarily on risk themes.

There is clear weakness today in the Europe, as both the Euro and Pound are lower. The Aussie and Kiwi are higher on higher Chinese stocks and the possibility of weakening policy.

The Dollar is trading somewhat higher, as it is trading inversely to stock markets futures which are lower due to declining corporate revenues.

So at the end of the day, we are definitely in for a global economic slow-down. Results of the European banks stress tests will guide policy around the globe as systemic risk will out-weigh economic conditions in the near-term.

However going forward, some countries may be in better shape to weather any potential economic storms.

So I will continue to remain cautious until Friday and keep my trading short-term.

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July 12, 2010

US Earnings On Tap!

Filed under: Forex News — Tags: article, dollar, economy, euro, fxedu, gbp, lower, market, markets, release, rsi, trader, unemployed, week, whether-or-not — admin @ 1:23 pm

This week starts earnings season for US companies and, rightly or wrongly, will help show whether or not economic progress is occurring. We’ve witnessed the disconnect between corporate profits and the “real economy”—namely jobs—and good corporate earnings will give the unemployed hope that hiring may be soon to follow.

In the UK, GDP figures came in as expected showing slightly positive growth for the quarter, and there was an article over the weekend claiming that the UK’s proposed bank requirements would lead to a double-dip recession.

In the Euro zone, potential fears of bank solvency issues were balanced out by German economic strength measured by employment and industrial production figures. A lower Euro had helped German exports and if the banks can “pass” the stress tests without setting off a chain reaction, then the Euro could stabilize near these levels.

In Japan, the ruling party lost control of the upper house in elections, providing political uncertainty and causing the Yen to sell-off overnight. However, overall risk aversion has brought strength back to the Yen.

In the forex market:

Aussie (AUD): The Aussie is lower on risk aversion, despite the fact that home loans rose for the first time in 8 months. However, futures are showing that traders are decreasing their bets for an Aussie rise vs. the Dollar. US corporate earnings will be the major driving force this week, with better numbers encouraging risk appetite.

Kiwi (NZD): The Kiwi is also lower on risk fears despite the fact that the NZ budget deficit came in narrower than expected. Home prices came in slightly lower, but still posting gains of 5.2%. Inflation figures are due out later this week.

Loonie (CAD): Not a lot of news for the Loonie this week but expect it to be extra sensitive to US corporate earnings this week. The US is largest importer of Canadian goods and services.

Euro (EUR): The Euro is also lower as the policy makers are already calling for better capitalization of the banks before the results of the stress tests are released. It is no secret that banks would be better off with more capital; the problem is whether or not increased capital requirements will hamper growth. Germany is showing that its economy is still strong, and that may be enough to out-weigh the negativity surrounding the Euro.

Pound (GBP): The pound is lower as DGP figures showed .3% growth in the first quarter; however the current account deficit is at its widest margin since 2007. Economists are expecting better growth in the 2nd quarter, before the impact of fiscal tightening takes place. The Pound traded below 1.50 earlier but has since rebounded higher.

Dollar (USD): The Dollar is seeing some strength this morning as risk aversion is present at the start of the US session. US CPI and PPI figures are due out later this week, but all eyes will be on the US corporate earnings reports. Good earnings will provide hope that hiring may be around the corner, but at the end of the day we may still be in the “tale of 2 economies”, with companies thriving while the unemployed are crying. Bad corporate earnings could send the markets reeling, so expect volatility in the short-term.

Yen (JPY): Overnight, the ruling party lost control of the upper house of government, providing political uncertainty and the fear that Japan may have trouble attempting to tackle its deficit. The Yen was lower, but is now seeing strength on risk aversion. The Bank of Japan Monetary policy meeting is taking place this week but don’t expect them to move on rates. Japan will trade this week on risk themes.

So the market and the US government are counting on good corporate earnings to provide confidence that the economic picture may be improving. With higher profits, the likely conclusion is that companies will begin hiring again which will hopefully help lower unemployment.

However, this may not necessarily be the case. Companies are fearful of the current economic climate as potential new rules, regulations, and taxes spur hesitation. Companies will be very cautious when looking to expand and could be quite content with their present situation.

Whether or not this is the case remains to be seen as the market expects good earnings. Should the numbers be average or even bad, then that could open up a whole new can of worms.

So expect volatility this week, and be ready to profit from short-term fluctuations should the situation present itself.

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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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!

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June 11, 2010

Consumers Disappoint!

Filed under: Forex News — Tags: cad, comes, employment, euro, fear, government, morning, practice, rsi, stock, technical, time — admin @ 1:31 pm

Well so much for that. US retail sales figures disappointed this morning, coming in at a loss of 1.2% vs. an expected gain of .2%. While these numbers show that economic recovery is still fragile here in the US, much of this can be attributed to the lack of hiring by businesses. In addition, this also shows that households are saving more which may not be a bad thing, and much of the decline was in big ticket items as the economy prepares for the retraction of stimulus measures.

Across the pond, the UK reported worse than expected industrial production figures, sending the Pound lower across the board. This further adds to the fears that the UK may be facing a protracted slowdown as they attempt to control their budget deficits.

On a somewhat related note, US Treasury Secretary Geithner has turned up the heat on China. He has come out and said that the Chinese exchange-rate policy (and Yuan peg to the dollar) is preventing a balanced global recovery and causing inflation in China. Official reports showed an increase of 3.1% in consumer prices, the fastest rise in 19 months. In addition, Chinese workers are striking demanding higher wages as inflation heats up.

So this morning we are seeing some mild risk-aversion, as the Friday “unwind” occurs as traders are still hesitant to go into the weekend holding risk assets, with potential Euro landmines the primary fear driver.

In the forex market:

Aussie (AUD): The Aussie is lower this morning on risk aversion and a technical pullback after yesterday’s good economic news from the Pac Rim countries. Uncertainty over whether or not China will do anything to cool inflation has contributed to Aussie selling.

Loonie (CAD): The Loonie is lower on risk aversion, despite the fact that industrial capacity showed the largest increase on record. The Loonie has been higher lately as oil has been higher, though it is pulling back from $75 this morning. Oil will be a major factor going forward, as a potential moratorium on drilling offshore in the US is in the works due to the political backlash of the BP oil spill.

Kiwi (NZD): Despite the risk in the market, the Kiwi is higher across the board due to yesterday’s rate hike, though that could change by session end. Digestion of the economic reports show that NZ could be in for a series of rate hikes through the rest of the year as accelerating growth could push inflation much higher.

Euro (EUR): The Euro is lower also on risk themes, and the “Friday unwind” may be still be causing investors to ditch Euros over the weekend as risk fears still permeate the market. However, policy-makers in Germany raised their economic outlook for GDP higher. Still the looming threat of debt problems keeps investor cautious for now.

Pound (GBP): The pound is lower across the board as manufacturing weakened in the UK and fears that the economy may not be on sound enough footing to handle expected government fiscal belt-tightening. This comes even as a UK survey of consumer’s inflation expectations reached its highest levels in over 6 months. This may be a case of, “the consumer is not always right”.

Dollar (USD): Disappointing US retail sales figures have sent the dollar higher as risk aversion has picked up going into the weekend. However, the decrease wasn’t broad-based. The largest decreases were in building materials stores and auto sales. This comes ahead of the end of the home buyer tax credit, so it probably should have been expected. Households are saving more as the employment picture is still grim, and unless the government does something to encourage private business to start hiring, the retraction may continue.

Yen (JPY): Good gains in the Asian stock markets overnight pushed the Yen lower, though it is rebounding and has gained strength due to the unwind of carry trades as traders dump their risk assets for the weekend in favor of the safe haven the Yen provides. The Dollar and Yen are just about flat today vs. one another.

Today is an example of how bad government policy can distort economic figures and get everyone “drinking the Kool-Aid”. It should come as no surprise that retail sales are down as government stimulus measures are retracted, yet they fall for it every time.

The bottom line is jobs. Period. Not temporary census workers, not more bloated government bureaucracy, but jobs from the private sector. American consumers have finally woken up to the fact that you shouldn’t be spending money you don’t have, especially if you can’t get a job to afford stuff.

That game had gone on for way too long, and it is amazing to me to see some the debt levels people carry.

So what does the government do to help create jobs? Nothing. They hand out government cheese to keep the masses at bay and create a hostile environment for business through the threat of increased regulation and higher taxes. If you were an employer, would you be hiring?

Heck no!!!

And until hiring picks up again, expect the economy to drift downward as consumers lose faith in the recovery. And if consumers, who represent some 70% of US GDP, continue to save and not spend, then we could see a potential deflationary spiral as demand dries up.

This could lead to the dreaded “double-dip”. Not a pretty picture in my eyes. The only double-dip I want to see is in an ice cream cone!

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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June 7, 2010

Who’s Buying?

Filed under: Forex News — Tags: account, china, currency, dollar, economic, europe, forex market, gbp, market, release, retail-sales, rsi, usd, weekend, yen — admin @ 1:30 pm

The market starts out his morning in “relief mode” as there was no negative news related to the European debt crisis released over the weekend. The G-20 met over the weekend to discuss global economic challenges going forward and appear to be divided over what is the best course of action to resume growth.

The general consensus is that every region around the world is going to try to export their way to growth; however, some regions will have distinct advantages over others due to currency valuations. With different countries trying to devalue to encourage exports, the race to the bottom will leave some out in the cold. However, US Treasury Secretary Geithner said that the world shouldn’t count on the US consumer to drive growth and that individual countries need to stimulate their own demand.

This is basically the Chinese model, as their peg of their currency to the US dollar provided them with artificially low valuations which allowed them to experience exponential economic growth through exports. If China is unwilling to allow their currency to float freely in the market, then the world economic balance will be out whack with some countries unable to recover.

The same could be said of Germany, who was able to experience competitive markets due to the having the same currency valuation as other nations of the EU. Allowing the weaker EU nations to borrow excessively benefitted German exports to the region.

Now, Germany stands poised to experience even further growth of exports, as the Euro is weaker making German products cheaper to the rest of the world. As I’ve mentioned before, a weaker Euro is good for Germany. As a result of the recent sell-off in the Euro, Germany reported a growth in factory orders of 2.8% vs. an expectation of a decline of .4%.

However, the question remains: Who’s buying? If world consumer demand decreases due to a lack of credit availability and austerity measures, who is going to lead world recovery?

In the forex market:

Aussie (AUD): The Aussie is trading higher this morning after opening lower from Friday’s close due to some risk fears abating. So the Aussie is still lower. European debt fears and G-20 differences of opinion are contributing to risk sentiment.

Loonie (CAD): The Loonie is higher this morning on oil price recovery to 71.5, but is weighed by overall risk in the market, particularly Euro-related.

Kiwi (NZD): The Kiwi is trading similarly to the Aussie.

Euro (EUR): The Euro is trading higher off of lows of just below 1.19 in the overnight session. A lower Euro lower is just what the Euro zone economy needs, as evidenced by the increased factory orders number in Germany. However, the ongoing debt-crisis is the elephant in the room and further problems will only drive the Euro lower, faster.

Pound (GBP): The Pound is higher despite new UK Prime Minister Cameron’s comments that the UK deficit situation is worse than feared. This will mean severe budget cuts and the potential for higher taxes, however the thing that must be remembered about the UK: at least they’re not in the EU!

Dollar (USD): The Dollar is lower as risk fears are lessening to start the week. In the familiar pattern I’ve mentioned time and time again, the Dollar starts the session higher then gradually loses value throughout the US trading session as the potential for market-moving news out of the EU lessens as their trading day comes to a close. US retail sales figures are due out on Friday on a week that is pretty devoid of economic news.

Yen (JPY): It’s official, former finance minister Kan is the new Japanese Prime Minister, and his weak yen policies are intended to stimulate economic growth and help the Japanese stocks. Nevertheless, the Yen traded at an 8-year higher vs. the Euro as risk aversion spurred demand. Japanese trade balance figures are due out tomorrow followed by GDP figures on Wednesday.

Every day the markets can make it through without a landmine going off in Europe is positive. Global recovery is still a long way away and you can now see how global cooperation is going to be needed going forward.

The markets of the past have created great imbalances, and those who benefitted in the past are reluctant to change for the future.

I expect the markets to continue to chug along, with the Euro continuing to decline in value over the course of time. This decline can and will be accelerated by any problems related to the debt crisis. Whether or not this crisis will be managed effectively remains to be seen.

So there is still considerable risk in the market, and don’t lose sight of that even if we see some decent economic reports from around the globe.

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, China, comments, course, crisis, currenc, currency, currency market, currency trading, dollar, economic, economy, EUR, Euro, Europe, fear, forex, forex market, free, fx, fxedu, gbp, Geithner, Il, Japan, Kiwi, live, loonie, lower, Mike Conlon, news, nzd, oil, pound, practice, practice account, rate, release, retail sales, RSI, sentiment, ssi, stock, stocks, time, trade, Treasury, USD, Yen

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