Ssi | Forex Blog

April 11, 2011

Slow Start To The Week!

Filed under: Forex News — Tags: chinese, conversation, currenc, dollar, eur, euro, forextrading, highly-doubtful, japan, market, morning, ssi, trade — admin @ 12:36 pm

This week is starting out slowly as there is little news today to warrant any excessive volatility or trend disruptions. This may be a good thing as after Friday’s major moves higher in commodities and the resulting Dollar weakness, a quick pause to re-evaluate may be exactly what this market needs.

Here’s what we do know this morning: Chinese exports came in better than expected overnight giving them a trade surplus vs. an expected trade deficit. I guess that peg to the Dollar really helped out!Over the weekend, the US government was able to come to a compromise to keep the government operating—for now. Quickly the conversation is going to switch to the debt ceiling which needs to be raised if we want to keep doubling down, or perhaps this is just another political game to be played.

Japanese machine orders fell and the aftershocks keep coming as earthquake after earthquake continues to pound the island nation. A mixed reading of industrial production figures in the Euro zone has led to some minor weakness.

Later today, two noted Fed Doves (inflation deniers) Yellen and Dudley will be speaking. The only risk here is that a deviation from their noted dovish stances could belie a shift on the FOMC. This is highly doubtful.

Meanwhile, oil has “pulled back” to $112, and gold to $1470. US stocks are set to open higher, and Europe is mixed ahead data due out later this week.

But make no mistake about it; Dollar weakness is driving global markets higher, as the Dollar index has put in a 17-month low. How much lower the Dollar can go without disrupting economies abroad remains to be seen.

In the forex market:

Aussie (AUD): The Aussie is marginally lower this morning with no news to guide it higher. Commodities have pulled back a bit so the US dollar is strengthening some, but this could just be a cat-cat bounce. Consumer confidence figures due out on Wednesday highlight the extent of the news form down under.

Kiwi (NZD): The Kiwi has been moving higher very quietly as the re-building efforts from the earthquake are starting to add to the pick-up in economic activity. The Kiwi just broke its 2011 high vs. USD. (Click chart to enlarge)

Loonie (CAD): The Loonie is pulling back a little as oil is now trading at $111.50. This comes ahead of tomorrow’s BOC rate decision where the expectation is that rates will be left unchanged at 1%.

Euro (EUR): The Euro is starting the day lower as mixed industrial production figures do little to affect the Euro one way or the other. What is affecting the Euro this morning is a wee bit of US dollar strength, as oil prices retreat. The Euro fell just short of reaching 1.45 vs. USD. (Click chart to enlarge)

Pound (GBP): The Pound is mixed this morning ahead of tomorrow’s CPI report which is expected to show inflation still a problem at 4.4%. Should inflation subside in any meaningful way, then the BOE may be afforded more time to allow fiscal policy reductions to work, rather than having to do it through monetary policy. UK jobless claims are due out on Wednesday.

Dollar (USD): The Dollar appears to be doing a little “dead-cat bounce” here, as oil prices have pulled back after the risk of being short over the weekend was navigated. Fed doves will speak today but don’t expect a change of heart with regard to policy stance.

Yen (JPY): Aftershock after aftershock keeps happening in Japan which has heightened the risk that this nuclear situation could get worse. While economic fundamentals are bound to be moribund in the short-term, the long-term prospects for growth appear grounded due to the re-building that will take place.

There are many factors contributing to the global economy that have had various push-pull effects on different markets. But the one underlying theme that continues to persist is Dollar weakness.

While economic data this week won’t be as telling here in the US, both the UK and Canada have news that could be market moving. But overall, the weak US dollar trend is still intact.

However, if you are not already short the US dollar, it may be difficult to get in here, so wait for pullbacks to get a better low-risk entry. And of course keep an eye on the news to see if any other region’s fundamentals begin to look as bad as the US.

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

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

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

Comments (0)

March 31, 2011

Celtic (Paper) Tiger?

Filed under: Forex News — Tags: crisis, currency trading, forex, fxedu, gbp, market, nzd, portugal, ssi — admin @ 12:42 pm

This morning the Euro has rocketed higher despite the fact that Ireland will release the results of its banks’ stress tests, which could show a more dire situation than previously thought. Once considered a shining light on the economic scene, Ireland has been reduced to the poster-child of the global economic bubble.

Yet the market is willing to push that aside as CPI data in the Euro zone came in slightly higher than expected, and traders are pricing in a rate hike at the next policy meeting in early April. Yet the ECB has a difficult task, as entering into a tightening cycle could prove disastrous for both Spain and Portugal who are fighting higher interest rates that are pushing them closer to a bailout.

Meanwhile here in North America, Canada will report GDP figures later this morning and in the US we will have another round of initial jobless claims data which as long as it stays in the 300s, should be seen as positive.

So this morning there is a bit of risk appetite, with commodities higher. Curiously, US stock futures are not higher so perhaps the market is waiting to see the jobless claims. There is still a lot of risk in the markets, so the slightest perception that things aren’t improving could reverse this recent up trend in a heartbeat.

In the forex market:

Aussie (AUD): The Aussie is mostly higher, reaching a new all-time high vs. USD at 1.036 earlier this morning. Retail sales figures came in slightly better than expected, though building approvals came worse than expected. A monthly gain was expected for building approvals which came in negative.

Kiwi (NZD): The Kiwi is also higher despite negative business confidence figures, though this is to be expected after the earthquake they experienced.

Loonie (CAD): The Loonie is showing strength this morning ahead of the GDP report as oil prices have eclipsed 105 again and risk appetite appears to be healthy to start the morning. (Click chart to enlarge)

Euro (EUR): The Euro is the big winner this morning despite the report expected from the Irish bank stress tests. Meanwhile, Portugal has missed its deficit target moving them one step closer to bailout, though German joblessness is the lowest it has been in nearly 20 years. Inflation though accelerated at its fastest pace in nearly 2 years, and the market is fully expecting a rate hike at the next meeting. This could push yields higher on the debt-laden countries, making it harder for them to service their debt. (Click chart to enlarge)

Pound (GBP): The Pound is mostly lower as the UK’s close ties to Ireland put them in a precarious position heading into the bank stress tests.

Dollar (USD): Dollar weakness has been the primary driver of markets of late and the “don’t fight the Fed” mentality has been in full effect. Initial jobless claims are expected to be still in the 300s, though it appears that risk appetite may be waning as the morning progresses. Tomorrow’s NFP will be a major market mover.

Yen (JPY): The Yen is flat to slightly lower, balancing its status as a safe-haven with the weakness inherent from the economic conditions due to the natural disaster.

I’ll keep harping on it—there is still a TON of risk in the markets. I don’t feel that the risk of not gaining interest in the US should out-weigh the potential for another Euro collapse. The debt-stricken countries in the EU have not been provided with relief, and no solution to this crisis has been offered.

The amount of interest these countries have to pay is unsustainable and it is only a matter of time before someone walks away from the table. Germany is still taking a hard-line approach, as internal politics show that the bailouts are unpopular.

Yet they are attempting to force change on some of these regions as pre=conditions for bailout. One such change that they want is for Ireland to raise their corporate tax rate. This is the only thing Ireland has going for them economically so this would be a disaster for their economy.

How this plays out is anyone’s guess, but being Irish myself, I can tell you that they would be more likely to tell Germany to “shove it”, rather than capitulate.

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

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

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

Comments (0)

March 10, 2011

A Dose Of Reality!

Filed under: Forex News — Tags: aud, aussie, australia, currency trading, gbp, global, initial-jobless, japan, morning, practice, ssi, time, trade — admin @ 2:33 pm

With all of the talk about inflation and I am as guilty of it as the next guy, the structural problems that face the global economy may be far more important. The problem that I have is that nobody seems to be doing anything about these structural issues, and are content to sit back and hopefully inflate away the problem. That is a pipe dream.

Yesterday, the RBNZ lowered interest rates as expected, but surprised the market with a 50 bp cut rather than the 25 bp the market was expecting citing the damage caused by the earthquake. Overnight In Australia, the employment change came in worse than expected, though the unemployment rate remained the same. In Japan, GDP declined slightly more than expected and in China trade balance figures came in much worse than expected as exports grew at only 2.4% vs. an expectation of 27.1% pushing the Chinese trade balance to a deficit of 7.3 billion vs. an expectation of a surplus of 4.9 billion. Whoa.

With so much going on, it seems almost comical that the BOE rate decision may not be the most important news of the morning as they decided to leave monetary policy unchanged despite all of the inflation gauges ticking higher.

In the Euro zone, Moody’s was at it again, this time downgrading Spanish debt on banking concerns.

And finally, US Initial Jobless claims came in worse than expected, showed 397K losses vs. an expectation of 378K.

This all adds up to risk aversion in the markets, with stocks and commodities lower and Dollar showing strength.

In the forex market:

Aussie (AUD): The Aussie is trading lower this morning after employment change figures showed that there was a loss of 10K jobs vs. an expected gain and overall risk aversion in the market has the Aussie flirting with parity against USD. (Click chart to enlarge)

Kiwi (NZD): The Kiwi is lower as yesterday the RBNZ lower interest rates .5% to 2.5% which was a greater reduction than the market had expected. However, they did maintain that there would not be any further cuts this year, so the Kiwi is rebounding some. Bear in mind that global economic conditions can obviously change making that pledge irrelevant.

Loonie (CAD): The Loonie is mixed this morning as fundamental weakness from around the globe is sending some loot Canada’s way, but lower oil prices despite Libyan bombing of oil infrastructure and overall risk aversion is weighing on the currency.

Euro (EUR): The Euro is mostly weaker as Moody’s downgraded Spanish debt and the German trade surplus came in less than expected as exports decreased 1% vs. an expectation of a gain of .7%. Dollar strength today is also weighing on the Euro.

Pound (GBP): The Pound is lower across the board as the BOE decided to leave both rates and the asset purchase program unchanged despite inflationary forces they are seeing. However on the plus side, both industrial and manufacturing production figures came in better than expected. (Click chart to enlarge)

Dollar (USD): The Dollar is catching that safe haven bid this morning despite worse than expected Initial Jobless claims figures. The US trade balance came in worse than expected, but lower oil prices likely due to China’s slowdown in the face of the Libyan unrest are driving Dollar strength.

Yen (JPY): The Yen is mixed today as the balance between safe haven currency and a fundamentally weak economy is being tested. GDP figures showed a decline of 1.3%, which was slightly worse than expected and highlight a contracting economy and not a growing one.

The global economic data pouring in doesn’t look so swell today and it is about time the markets responded accordingly! The level of risk in the market place is elevated, with Libyan unrest, inflation fears, and the European debt crisis all piling up.

Tomorrow there will be protests in Saudi Arabia which could be very disastrous should they go the way of Egypt or Libya.

Meanwhile, Central bankers will be able to use this weaker economic data to justify their monetary policy stances, and if they wait long enough perhaps they just might be proven right.

It is no secret that the global economy is structurally weak, and so far monetary policy has allowed it to go unfixed. But this will not continue forever. For when that day of reckoning does come, and it will, you want to make sure you are on the right side of that economic tidal wave!

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!

Comments (0)

March 3, 2011

The Twilight Zone!

Filed under: Forex News — Tags: a-were-higher, account, bernanke, course, economy, fxedu, gbp, jpy, morning, nzd, problem, ssi, time — admin @ 1:45 pm

North is south, right is wrong, up is down. Have you ever had the feeling that what you believe to be true really isn’t? That somehow you exist in an alternate reality and are starting to question your own sanity?Well that’s how I feel when I listen to Fed Head Bernanke give testimony to Congress. Well not exactly, but you get the idea. Yesterday’s Beige Book report told a different story than what many Americans are currently seeing regarding current economic conditions. While the economy may be improving, current monetary policy and the commitment to keep interest rates low could have dire consequences going forward.

As the world’s reserve currency, a depreciated US dollar contributes to higher commodity prices. This is an undisputable fact, yet Bernanke continues to dismiss it. Does anyone really think that oil would be at $100 if interest rates were at historical averages of 4%?

So Bernanke is guilty of willful blindness and is all but screaming at the top of his lungs that he wants to see inflation—without actually saying it.

Other regions around the globe are more sensitive to the inflation issue, such as the ECB who will be having their rate decision later this morning. Part of the problem that established nations such as the US and the Euro zone have is how to ward off inflation while maintaining and encouraging growth at the same time.

The politically expedient way is through the “extend and pretend” policies that we see here in the US; however the best way to tackle the problem is with intellectual honesty which we seem to lack.

So far this morning the market is enamored with the economic prospects and current policy, as stock futures are way higher to start the day, and oil is pulling back as Libyan turmoil is seen as improving.

In the forex market:

Aussie (AUD): The Aussie is mostly higher on risk themes despite the fact that building approvals came in much worse than expected, dropping nearly 16%. In addition, Australian exports were lower some 4%, perhaps a result of a stronger currency or Chinese slowdown.

Kiwi (NZD): The Kiwi has rebounded nicely after the MSCI Pac Rim index traded higher on the back of the US Beige Book report issued yesterday. While rate expectations for the Kiwi remain muted, the positive interest carry cannot be ignored.

Loonie (CAD): The Loonie is slightly higher on risk appetite though lower oil prices are holding it back some. The US employment reports both today and tomorrow will affect the Loonie as Canada’s economic prospects are closely tied to the US.

Euro (EUR): The Euro is mostly lower as the ECB keep rates unchanged at 1% but didn’t issue overly hawkish comments in the decision. Meanwhile, retail sales figures came in much better than expected posting a YoY gain of .7% vs. an expectation of no change. It seems likely today that the Euro will flip back to positive as risk themes continue.

Pound (GBP): The Pound is lower across the board as a home price survey showed that prices were lower for an eighth consecutive month and the PMI services index came in lower than expected, posting a reading of 52,6 vs. an expectation of 53.7. (Click chart to enlarge)

Dollar (USD): The Dollar is mixed this morning ahead of the initial jobless claims report which is expected to show some 400K of job losses. Individual weakness in the Euro and Pound are giving the Dollar some life, though it is lower against the rest. It will be interesting to see if stocks can hang on to their early gains this morning.

Yen (JPY): The Yen is mostly lower on risk-taking as stocks in Asia were higher overnight. The Dollar is putting in a near-term bottom vs. Yen. (Click chart to enlarge)

Part of what makes the currency market the most exciting market to trade is that different interpretations of events provide endless opportunities to make money.

While often I feel like I am in the “twilight zone”, being able to stand apart from the crowd will give me an opportunity to stay ahead of curve. While I don’t want to impose my own view of where I think things should be, it is much easier for me to change course should my overall view be proven correct.

I try not to listen to the media who simply regurgitate the talking points coming from the government and spin them into a positive. I don’t believe government reports that are lacking in merit (such as inflation data) and take them with a grain of salt.

But what I do is try to interpret how the market will react, and look for signs that a certain view may be supported through price action.

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!

Comments (0)

February 10, 2011

The Wait For Rates!

Filed under: Forex News — Tags: account, australia, cad, central, currenc, jpg, risk-aversion, ssi, time — admin @ 1:09 pm

This morning, all eyes are on the BOE rate policy decision where it is expected that that they will leave interest rates unchanged at .5% and will keep the $200 billion pound bond purchase program in tact. So why is this so important?

Well, the BOE’s primary objective is price stability (low inflation) but the most recent reading is showing nearly double the Central bank’s target of 2%. While the government has pledged to reduce the deficit through austerity measures, the BOE has bet that prices will fall as a result of a lack of demand. This has not been the case so far, and the bank is in a bit of a pickle.

The market is betting that there will be a reduction in accommodative monetary policy at some point this year, and right now that mostly likely means May. But the question remains whether or not a non-action today will be positive or negative for the Pound. We shall see. By the time I’m finished writing this we will see the result.

Overnight, Australia reported employment data that on the surface was better than expected, adding 24K jobs vs. an expected 17.5K. However, the majority of these gains were in part-time employment, perhaps suggesting that business confidence is waning as employers are not willing to commit to the long-term.

So we are seeing some risk aversion to start the morning, with stock indices and commodities lower. Thought curiously, Yen is not benefiting as much as would be expected.

In the forex market:

Aussie (AUD): The Aussie is lower as the deceiving employment report showed a potential lack of business confidence which added to overall risk aversion in the market. (Click chart to enlarge)

Kiwi (NZD): The Kiwi is also lower on the heels of the comments from the Finance Minister yesterday as well as risk aversion which took the MSCI Pacific stock index lower overnight.

Loonie (CAD): The Loonie is also lower on risk themes as oil prices have retreated to near 86.50. A measure of home prices is due out later this morning but is mostly a non-factor.

Euro (EUR): The Euro is lower on risk aversion and on Dollar strength despite better than expected industrial and manufacturing production figures.

Pound (GBP): The Pound is rallying higher as the BOE decision came in and they left rates and the bond purchase program unchanged, as expected. (Click chart to enlarge)

Dollar (USD): The Dollar is stronger across the board on risk themes as its safe haven is sought by investors. In yesterday’s Fedspeak, Bernanke did little to quell market fears about inflation. I actually watched some of his testimony and it is so painful to watch mostly dumb (for lack of a better description) Congress people ask the wrong questions! Give me 5 minutes with him televised!

Yen (JPY): The Yen is somewhat mixed which is surprising given the risk aversion in the markets. Under a “normal” risk aversion scenario, Yen would be stronger. Don’t be surprised to see some reversion to mean before the day is over.

So it seems as though Central bankers around the globe are content to let inflation move higher to further government agendas. Meanwhile, it is the people that suffer. They are playing a dangerous game and the belief that they will be able to control inflation once it gets out of hand reeks of hubris.

If they are so great at identifying problems and fixing them, why is it that we continue to move through these boom and bust cycles? Whether it is a stock, bond, or housing bubble makes no difference—the common factor is the same. Bad monetary policy combined with weak-willed politicians is a recipe for economic disaster.

At least in the UK that are upfront about their inflation which is in contrast to what we heard yesterday from Bernanke. He couldn’t give a straight answer to why food and energy are NOT included in his assessment of inflation, and dumb politicians let him off the hook.

I don’t feel sorry for the banks that made bad loans to people who made bad decisions about housing prices with the blessing of bad government policy. However, I am held hostage to the system, as are you. The moral hazard that is being created by Central banks with the rubber stamp of government brings us closer to lawlessness with each passing day.

So be nimble with your money—and invest in the countries that appear to be doing the right thing and selling the ones that don’t!

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

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

Tags: account, AUD, Aussie, blog, cad, course, currenc, currency, currency market, currency trading, dollar, EUR, Euro, forex, forextrading, free, fx, fxedu, gbp, Il, interest, jpy, Mike Conlon, nzd, practice, practice account, ssi, time, USD, Yen

Comments (0)

January 25, 2011

Has The Ball Started Rolling?

Filed under: Forex News — Tags: account, currenc, currency, euro, face, gbp, market, practice, ssi — admin @ 2:15 pm

A sigh of relief can be heard somewhere in the hallowed halls of the BOE, as GDP figures came in much worse than expected, showing a quarterly decline of .5% vs. an expectation of a gain of .5%, driving YoY GDP down to 1.7% growth, lower than the expected 2.6%.So why is this a good thing? Well technically it is not, but lower GDP figures give the BOE justification for its extremely accommodative monetary policy. For months they have been claiming that it was needed despite the rising inflation that was hitting the UK, and now vindication is theirs.

But what to do going forward? Now the question becomes how do they stave off a double dip recession? Will inflation return to acceptable levels? The BOE minutes from the rate policy meeting will be out tomorrow which should show a continued commitment to propping up the economy in the face of inflation. This is decidedly Pound-negative, which could help the UK return to growth through higher exports and manufacturing.

In the meantime, the government will continue to reduce spending to try to get the deficit under control so a lack of demand may bring prices back to normalized levels which has been what the BOE had hoped for in the first place.

In other inflation news, CPI data in both Australia and Canada came in lower than expected suggesting that their respective Central Banks can leave rates alone for now.

All this adds up to Dollar and Yen strength, as a bit of risk aversion has hit the market and demand for carry trades is reduced. Commodities continue to decline, as the global economic slowdown reduces demand.

In the forex market:

Aussie (AUD): The Aussie is mostly lower as CPI data came in showing inflation at 2.7% vs. the expectation of 3%, the slowest increase in nearly 2 years. This likely gives the RBA continued reason for pause on rate hikes as the potential global slowdown could reduce demand for Australian raw materials, particularly from China. (Click chart to enlarge)

Kiwi (NZD): The Kiwi is actually higher this morning ahead of tomorrow night’s rate policy decision. While it is almost certain that the RBNZ will not move on rates, there is some hope that the policy statement may allow for a potential rise down the road which is all carry traders can hope for at this point. So demand for the Kiwi today may be short-lived.

Loonie (CAD): The Loonie is also mostly lower as CPI data showed a slight decrease from the expectation, showing a rise of 2.4% vs. an expectation of 2.5%. This also suggests a pause in rate hikes, and oil prices are trading lower to 86.75 to reflect that slowdown.

Euro (EUR): Lost in the shuffle today is the Euro which is trading mixed today despite rumblings that a Spanish bond auction to come may not be as well-received as hoped. While I don’t see this rumor having legs, Euro is affected by the UK GDP report which is offset slightly by a better than expected German consumer confidence number.

Pound (GBP): Be careful what you wish for may be the mantra of UK policy-makers as GDP figures came in way worse than expected. Citing cold weather and response to austerity measures, the UK economy appears to be “under-heating”, according to one economist. With austerity measures set to kick in, it will be a challenge to encourage growth and to avoid the dreaded double-dip. (Click chart to enlarge)

Dollar (USD): The Dollar is the beneficiary of global weakness and we may get our own does of reality after consumer confidence figures are reported later this morning. Tomorrow is the FOMC meeting which should show a continued commitment to accommodative policy in the face of all of these global slowdowns.

Yen (JPY): The Yen is flexing its muscles today as safe haven demand has picked up despite the BOJ leaving rates unchanged at their rate decision meeting. Even the familiar rhetoric of the promise to pursue “powerful monetary easing” has not discouraged traders from buying Yen and reducing carry trades.

Today could end up being quite the ugly day for global markets, with stocks futures and commodities lower to start the US session.

Commitments to austerity and reductions in GDP from established economies may be the first shoe to drop. China has already started to potentially slow down the pace of their growth, and now the UK reports slowing growth BEFORE the austerity measures even start!

If there is a global contraction, then that would affect demand for commodities, which could then in turn hurt the commodity producing countries such as Australia, New Zealand, and Canada.

With the Euro debt crisis still on-going and far from resolved, a global flight to safety may make it harder for the PIIGS to finance their debt which could add water to an already dwindling economic fire.

While the other shoe has not fallen yet, it may just be a matter of time and trading with caution may be the best course of action at this point.

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!

Comments (0)

January 19, 2011

Euro Champ, Dollar Chump!

Filed under: Forex News — Tags: a-state-dinner, against, aussie, chinese, consumer, currency trading, dollar, economy, morning, practice, president, ssi, words — admin @ 3:02 pm

The Euro has been higher against the Dollar 7 of the last 8 days as the Dollar has put in an 8-week low as a result of the sluggish US economy. This morning the US reported declining housing starts which missed analyst forecasts, though there was an increase in mortgage applications and building permits.

This highlights the difference in market sentiment in that the early Dollar strength this year was more a function of concern over the Euro debt crisis and less about the perceived strength of the US economy.

In the UK, fewer people made jobless claims, though the unemployment rate remained steady and as expected at 7.9%

Overnight in Australia, consumer confidence figures came in worse than expected though that should not be a surprise to anyone as the floods that have ravaged Brisbane would cause even the most optimistic to have caution.

Tonight is the first China state dinner at the White House as President Obama attempts to repair a fractured relationship with China. Man, would love to be a fly on the wall for this one! Regardless of the outcome, expect little to change as a result. But it makes for a good headline.

US stock futures are lower to start the day, and trading in European markets is lower as well, though commodities are higher. So today is a bit of a mixed bag.

In the forex market:

Aussie (AUD): The Aussie is mixed this morning, trading higher against the N. American currencies but lower against the rest. Consumer confidence figures fell from 111 to 104.6, the lowest reading in nearly 6 months. Lower confidence can be attributed to the flooding.

Kiwi (NZD): The Kiwi is mostly higher going into tonight’s CPI data release. Prices are expected to have risen significantly, which could put the possibility of another rate hike back on the table.

Loonie (CAD): The Loonie is lower across the board as a continuation of yesterday’s dovish comments by the BOC has induced further selling. Oil prices are higher however, so it will be interesting to see if the positive correlation between the Loonie and oil holds up today, or if there is a mean reversion trade out there. (Click chart to enlarge)

Euro (EUR): The Euro is higher across the board as it is rallying on anti-Dollar sentiment. There is little economic data out to day for the Euro zone and as I mentioned yesterday little take away from the meeting of finance ministers with regard to the Euro debt crisis. (Click chart to enlarge)

Pound (GBP): The Pound is mostly weaker this morning despite the fact that jobless claims came in lower than expected for the third month in a row. This data is positive for the UK economy, though it may be under pressure after yesterday’s soaring inflation data. While under normal circumstances rising inflation would be currency-positive for the country experiencing it, the UK faces the dual challenge of a reduction in spending and higher prices which could produce the dreaded stagflation.

Dollar (USD): The Dollar is weaker against all but the Loonie as the sluggish economy here makes other currencies more attractive. Housing starts fell to 529K, lower than the expected 550K and tomorrow’s existing home sales figures may show a declining housing market. The weak Dollar is encouraging higher commodities prices though, but US stocks are still lower so there may be a possible reversal there.

Yen (JPY): The Yen is stronger against all but the Euro as Dollar weakness has encouraged safe haven money flows. A potential economic slowdown in China could help Japanese exports going forward so this may be a play on Chinese GDP figures that are due out tomorrow.

As is evidenced by today’s market, Dollar weakness is still a major driver of world markets and the correlative effects of the Dollar on commodities may be back en vogue. Existing home sales and initial jobless claims tomorrow will provide a clearer picture of the health of the US economy.

Absent any further complications in the Euro zone, then we could see some continued Dollar weakness.

Tomorrow will also bring economic data from China, as they will report their GDP figures as well as some PPI and CPI data. Should there be a material slow-down, then that could affect both the Aussie and Kiwi to the downside.

However if China keeps humming along, then it could further increase risk appetite. Stay tuned!

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!

none

Comments (0)

January 18, 2011

Coming In Hot!

Filed under: Forex News — Tags: against, check-out-our, currency trading, economy, emergency, euro, forex, market, news, practice, president, retail, ssi, whether-or-not, words — admin @ 4:05 pm

UK CPI data came in earlier this morning WAY hotter than expected, showing inflation at 3.7% vs. an expectation of 3.4%. This is now becoming a problem in the UK as inflation is nearly TWICE as much as the 2% target and markedly higher than the BOE limit of 3%, and will require yet another letter of explanation from the BOE to the Chancellor of the Exchequer.

In the very least, this will put major pressure on the BOE to change their stance on accommodative monetary policy, and the minutes from the BOE meeting will show whether or not individual voting members are starting to cave to the pressure. While a change to policy could potentially help the Pound rise, the threat of stagflation may be a greater detriment going forward. Retail prices came in as expected.

In Canada, the Bank of Canada left rates unchanged this morning as was expected and boosted their outlook for growth in 2011 and 2012. However, dovish comments about the Loonie’s role in that growth have helped send it lower.

In the EU, Euro zone and German economic sentiment came in better than expected, but the current situation survey came in less than expected yet the Euro is higher as there is a hint of confidence that progress is being made with regard to the debt crisis.

In the US, empire manufacturing figures came in higher than last month with a reading of 11.92, but missed expectations of 12.5.

Today is a positive day for world markets, with Dollar weakness driving risk appetite.

In the forex market:

Aussie (AUD): The Aussie is higher as risk appetite has increased on a renewed outlook for the Euro and the belief that rebuilding due to the damage from the flooding may encourage business activity.

Kiwi (NZD): The Kiwi is mixed today as the market weighs the balance between risk appetite and the news that home prices declined for 3rd time in 4 months, showing signs that a sluggish economy may be hampering demand.

Loonie (CAD): The Bank of Canada left rates unchanged at 1% as expected and increased their growth forecast for the economy. However, comments that interest rate hikes would be “carefully considered” we seen as dovish which has helped push the Loonie lower this morning, in addition to lower oil prices. (Click chart to enlarge)

Euro (EUR): The Euro is higher across the board even though yesterday’s meeting of finance ministers failed to produce an agreement with regard to the how to combat the debt crisis. While there is some speculation that the emergency facility (EFSF) will be expanded, nothing concrete has emerged as of yet.

Pound (GBP): The Pound is trading higher against all but the Euro, as inflation data came in much higher than expected. The minutes of the rate policy meeting are due out on Jan. 26th, so we will see if there is any further support for less accommodative policy, perhaps in the form of a removal of asset purchase plan. (Click chart to enlarge)

Dollar (USD): The Dollar is mostly lower despite a higher Empire manufacturing number though it fell just short of expectations. The market is still grappling with whether or not the Dollar should rise or fall with equity prices (which are higher this morning).

Yen (JPY): The Yen is mixed as well as individual fundamental weakness in Canada and NZ is causing an un-wind of carry trades, though it looks like those money flows are making their way to the Aussie. Euro and Pound strength cause Yen selling.

As the different fundamental data comes in around the globe, it is easy to see how hot many flows will sell weakness and buy strength. However, sometimes the perception of strength is actually weakness, and vice-versa.

Take the Pound for example. There was immediate Pound strength right out of the gate as CPI data was reported. The thought was that higher inflation will cause the BOE to act to remove accommodative monetary policy. But upon further inspection, this may actually produce a negative economic condition whereby a shrinking economy due to austerity and higher prices due to inflation create stagflation which could essentially derail the UK economic recovery.

So round and round she goes and where it stops, nobody knows. The forex market tracks worldwide money flows and money always has to “land somewhere”. Whether it is another currency or another market, investors will seek out higher yielding assets when times seem stable and promising, and will run to safe havens when times look bleak.

This is the essence of the forex market so it is important that you have a good understanding of the market fundamentals if you are to succeed.

Do you have a good understanding of the fundamentals? If not, check out our currency trading courses!

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!

none

Comments (0)

January 12, 2011

Who’s A PIIG?

Filed under: Forex News — Tags: a-relief-rally, aud, aussie, currency, forex, gbp, ssi, time — admin @ 3:04 pm

Portuguese Problem?Not from where I am standing, nor where the French or Germans are concerned either. Portugal successfully auctioned off more of its debt which was oversubscribed; and both the French and Germans praised Portugal for going above and beyond in trying to get their fiscal house in order. This is a far cry from the rumors spread over the weekend, and it appears that for now Portugal may be safe.

This has buoyed the markets higher this morning, as risk appetite has increased on this news as well as better than expected US corporate earnings. No surprise that oil is higher this morning as well (see my previous article) in that the snowy weather on the East Coast increases perceived demand.

The economic data and news out this morning is relatively benign, with no big market moving or earth shattering impact expected.

Euro zone officials will meet next week to discuss what other measures should be taken to help shore up the Euro and provide a stable environment for the debt-laden countries to meet their debt obligations as well as reduce the size of their deficits.

So today seems like a bit of a relief rally—as stocks are higher around the globe as the market is “relieved” that Portugal was successful in its offering.

In the forex market:

Aussie (AUD): The Aussie has bounced back from overnight lows just above .98 vs. USD as risk appetite has increased in the market. The flooding in Australia continues to be a problem, with some estimates claiming that it could shave 1% off of GDP. Higher than expected home loan approvals though show that there is still demand, and overall risk taking has boosted the Aussie. Tomorrow brings the Australian employment figures. (Click chart to enlarge)

Kiwi (NZD): The Kiwi is surprisingly lower this morning on no news despite the risk appetite in the market. The reason for Kiwi weakness may be that money flows from the Aussie may be reversing as recent down beat economic data was reported in NZ, and they may be on hold for a while with rate hikes.

Loonie (CAD): The Loonie is higher as oil prices have surged back to just under 92 on the back of snowy weather and the Alaskan pipeline situation. The Loonie is back to two and half year highs vs. USD. (Click chart to enlarge)

Euro (EUR): The Euro has moved higher on the successful Portuguese bond auction, though there are still stories being floated that some may want the Portuguese to take a bailout. This appears very unlikely to happen at this time.

Pound (GBP): The Pound is higher as today is setting up as a “classic 2010″ risk-taking scenario despite the fact the UK trade balance figures came in worse than expected. Tomorrow is the BOE rate policy decision.

Dollar (USD): The Dollar is lower this morning as today is a “classic 2010″ risk-taking scenario. By this I mean that we entered a condition in 2011 where both stocks and commodities AND the US dollar were rising simultaneously when there was risk appetite was increased, as opposed to the Dollar weakness we would see last year under similar circumstances. Perhaps this was a function of Euro weakness (due to debt fears) and individual, regional weakness. It will be interesting to note how the correlations shake out as the year progresses.

Yen (JPY): The Yen is lower across the board on risk appetite, despite the fact that bank lending fell for the 13th straight month. The Japanese trade surplus and trade balance fell slightly.

So what’s in store for the Dollar in 2011? We’ve obviously seen some aberration from what we would normally expect from the risk themes in the market. Does the Dollar now go up with the stocks and commodities market, or does it still go down?

Asset allocation to start the year may have been an early driver, though it is important to know that correlations in the market work great—until they don’t! What I mean is that it is easy to get in a mindset that if X happens, Y will follow. Resist the urge to be that black and white, and use that knowledge to identify potential market plays.

While I’m not certain that there will be certainty in the inter-relationships between different markets and currencies, what I do know is that there will be TONS of opportunities via increased volatility!

Are you prepared to take advantage of these forex market moves?

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

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

Tags: account, AUD, Aussie, blog, cad, course, currenc, currencies, currency, currency trading, dollar, dow, EUR, Euro, forex, forextrading, free, fx, fxedu, gbp, Il, jpy, market, nzd, practice, ssi, time, trade, USD, Yen

Comments (0)

January 7, 2011

Employment Friday!

Filed under: Forex News — Tags: a-more-friendly, account, course, currency, currency trading, euro, free, fxedu, nzd, practice, second, ssi — admin @ 3:21 pm

This morning’s trading action was not lacking for excitement as the major volatility ensued after the release of the Non Farm Payrolls report. The jobs added figure was disappointing, showing that we gained 103K jobs, vs. an expectation of a gain of 145K.

However, the unemployment rate came in better than expected, showing it decreased to 9.4% from 9.8%. Analysts were expecting the rate to come in at 9.7%. This number is very questionable as December is usually a tough month to gauge due to seasonal employment and the number of people leaving the workforce. My guess is that the latter had more to do with this figure as initial jobless claims have held fairly steady in the low 400K range, and the number of jobs added was lower.

But expect the media outlets to trumpet this number as signs of an improving employment picture, even though that might not be the case. Yet.

In Canada, the unemployment rate came in steady at 7.6% vs. an expectation of an increase of.1% to 7.7%. The net change in employment was an additional 22K jobs added, vs. an expectation of a gain of 20K. This math seems more palatable.

In the Euro zone, German retail sales figures and exports came in lower than expected, and GDP forecasts were revised slightly lower.

So this morning we have Dollar weakness, as the recently the Dollar has been trading more in-line with economic reality and not inversely on risk themes.

In the forex market:

Aussie (AUD): The Aussie is mostly higher though trading lower than the Kiwi and Loonie as Dollar weakness on the NFP report has increased demand.

Kiwi (NZD): The Kiwi is showing the biggest gains for the second day in a row as it appears as though some of the money leaving the Aussie is making its way to the Kiwi.

Loonie (CAD): The Loonie is the second best performer this morning as the employment report showed an improving and more realistic picture. More jobs than expected were added so the unemployment rate remained the same. Pretty simple concept, huh? (Click chart to enlarge)

Euro (EUR): The temporary gains the Euro made against the Dollar on the NFP released were short-lived as the fundamental picture trumped the anti-Dollar sentiment. Austerity measures around the Euro zone have decreased demand for German exports, and Germany has been the major driver of economic stability in the region. If Germany falters, look out! (Click chart to enlarge)

Pound (GBP): No news is good news for the Pound as Euro weakness is helping to divert money flows back to the Pound. While the economic problems in the UK may be as big (or bigger) than that of the EU, it is their ability to control their own currency that makes their currency more desirable.

Dollar (USD): The Dollar is lower (except for the Euro) as the NFP release was disappointing. I don’t think anyone believe the headline unemployment rate figure (down to 9.4%) as everyone knows it is more a function of temporary distortions related to the end of the year and the December holidays.

Yen (JPY): The Yen is mostly weaker though the Dollar has given back earlier gains against its safe-haven counterpart. I’m still trying to get a handle on what the actual driver of the Yen has been as early trading in it has been erratic to say the least. (Click chart to enlarge)

All is not lost in the US with regards to employment; however there is some mild disappointment that things aren’t improving at a more rapid pace. We can pretty much forget about the headline number for now as next month’s revisions and participation rate may move it back toward expected levels.

While the anticipation of a more friendly business climate has been around for some time, it does indeed take time for things to get moving. Fed Chairman Bernanke just got finished speaking and he says that economic growth should be better in 2011 than last year.

However, just because he says it, doesn’t make it so. Business has to rebound and employment has to increase to get things moving again. The challenge for the Fed for 2011 is how to stimulate growth while keeping inflation manageable.

Good luck with that, Ben!

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

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

Tags: account, AUD, Aussie, blog, cad, course, currenc, currency, currency market, currency trading, dollar, dow, EUR, Euro, forex, forextrading, free, fx, fxedu, Il, jpy, Mike Conlon, news, nzd, practice, ssi, time, USD, Yen

Comments (0)

« Newer Posts — Older Posts »