Sunday, January 9, 2011
EUR/USD Weekly Review 3 Jan – 7 Jan 11
Saturday, January 1, 2011
Year End Highs!
As we near the end of 2010, both US stocks and commodities are at 2-year highs. Part of these moves is due to economic recovery, the other part due to accommodative US monetary policy. In other words, a cheap Dollar.
But will this continue into 2011? Well at some point the scam that is the official inflation report will be unable to contain rising prices, even if housing continues to fall. Just yesterday we saw lower than expected housing prices, though this should not come as a surprise given the fragile recovery.
This means we are likely to see higher interest rates both here in the US and abroad. Countries that are counting on austerity measures to slow down demand may be deluding themselves as folks have to eat. No one is going to care that TV prices have come down if milk cost $6 a gallon and it costs $4 gallon in gas to get to the store. Rising interest rates will put further pressure on housing prices, so next year is going to be interesting from a monetary policy perspective.
In Germany, CPI data has already come in higher than expected this morning and while not at critical levels, could be a sign of things to come.
At what point will public backlash influence weak-willed politicians, or will calls for action fall on deaf ears? China is attempting to control inflation by every means policy EXCEPT monetary policy. Eventually this dam will burst and I can foresee social tensions rising.
Are we having fun yet? Today is pretty much finished with economic news, so let’s see if the risk appetite that we are seeing this morning continues throughout the day.
In the forex market:
Aussie (AUD): The Aussie is mostly higher as risk appetite has increased due to a weak USD. The Aussie looks as though it may be putting a double top vs. USD which could signal a reversal. (Click chart to enlarge)
Kiwi (NZD): The Kiwi is higher across the board as the market is anticipating NZ as the next commodity currency to raise interest rates. Because markets are forward-looking, the Kiwi is faring better then the Aussie today.
Loonie (CAD): The Loonie is taking its cues from the oil which is “lower” to 91.25. I guess market participants read my blog yesterday and saw the folly of their investment decisions. Oil inventories will likely show a build-up in supply despite the recent cold weather.
Euro (EUR): The Euro is mixed this morning as higher than expected CPI data in Germany (1.7% vs. an expected 1.5%) and Dollar weakness is offset by a stronger Pound and Yen.
Pound (GBP): The Pound is higher this morning as reports show that mortgage repayments in the UK are taking place as expected. The “wait and see” approach adopted by the BOE may result in further inflation before the effects of the austerity measures begin to kick in.
Dollar (USD): The Dollar is weaker across the board to start the day as risk appetite appears to have heightened. Yield-seeking investors who may seem confident that the lack of economic data supports an economic recovery theme may be set up for a fall.
Yen (JPY): The Yen continues to show some strength as exporting companies buy Yen to repatriate their earnings abroad, providing temporary demand. However, should the market continue to push Yen strength, then we could see the BOJ heat up the jaw-boning rhetoric again. (Click chart to enlarge)
The lack of news to close out the year has some market participants thinking that it is “game on” to take on risk. With markets near two-year highs, this may make sense to some. However, this is not the time to initiate new positions.
End of the year window-dressing plus a convenient story to push commodities higher (foul weather) may be short-lived.
Be on the lookout for my 2011 economic predictions later this week!
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!
But will this continue into 2011? Well at some point the scam that is the official inflation report will be unable to contain rising prices, even if housing continues to fall. Just yesterday we saw lower than expected housing prices, though this should not come as a surprise given the fragile recovery.
This means we are likely to see higher interest rates both here in the US and abroad. Countries that are counting on austerity measures to slow down demand may be deluding themselves as folks have to eat. No one is going to care that TV prices have come down if milk cost $6 a gallon and it costs $4 gallon in gas to get to the store. Rising interest rates will put further pressure on housing prices, so next year is going to be interesting from a monetary policy perspective.
In Germany, CPI data has already come in higher than expected this morning and while not at critical levels, could be a sign of things to come.
At what point will public backlash influence weak-willed politicians, or will calls for action fall on deaf ears? China is attempting to control inflation by every means policy EXCEPT monetary policy. Eventually this dam will burst and I can foresee social tensions rising.
Are we having fun yet? Today is pretty much finished with economic news, so let’s see if the risk appetite that we are seeing this morning continues throughout the day.
In the forex market:
Aussie (AUD): The Aussie is mostly higher as risk appetite has increased due to a weak USD. The Aussie looks as though it may be putting a double top vs. USD which could signal a reversal. (Click chart to enlarge)
Kiwi (NZD): The Kiwi is higher across the board as the market is anticipating NZ as the next commodity currency to raise interest rates. Because markets are forward-looking, the Kiwi is faring better then the Aussie today.
Loonie (CAD): The Loonie is taking its cues from the oil which is “lower” to 91.25. I guess market participants read my blog yesterday and saw the folly of their investment decisions. Oil inventories will likely show a build-up in supply despite the recent cold weather.
Euro (EUR): The Euro is mixed this morning as higher than expected CPI data in Germany (1.7% vs. an expected 1.5%) and Dollar weakness is offset by a stronger Pound and Yen.
Pound (GBP): The Pound is higher this morning as reports show that mortgage repayments in the UK are taking place as expected. The “wait and see” approach adopted by the BOE may result in further inflation before the effects of the austerity measures begin to kick in.
Dollar (USD): The Dollar is weaker across the board to start the day as risk appetite appears to have heightened. Yield-seeking investors who may seem confident that the lack of economic data supports an economic recovery theme may be set up for a fall.
Yen (JPY): The Yen continues to show some strength as exporting companies buy Yen to repatriate their earnings abroad, providing temporary demand. However, should the market continue to push Yen strength, then we could see the BOJ heat up the jaw-boning rhetoric again. (Click chart to enlarge)
The lack of news to close out the year has some market participants thinking that it is “game on” to take on risk. With markets near two-year highs, this may make sense to some. However, this is not the time to initiate new positions.
End of the year window-dressing plus a convenient story to push commodities higher (foul weather) may be short-lived.
Be on the lookout for my 2011 economic predictions later this week!
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!
Saturday, December 18, 2010
Foreign exchange specialists
ECB divided over debt
The euro has weakened further versus its major counterparts amid signs of division among European governments over how to stem the regions debt crisis. ECB Executive member Stark has today called on governments to take action to solve the sovereign debt crisis. He noted that the ECB is “not in charge of fiscal policy” and that “our mandate is not to make it easier for governments to refinance their debt”. For the euro, focus this week will be on the EU summit and whether any new mechanism to deal the sovereign debt problems is agreed upon.
The US Dollar is trading marginally higher in a relatively quiet start to the week with market participants easing into an end of year trading style. Looking ahead, tomorrows FOMC policy meeting will have investors paying close attention to what the Fed has to say. Any signs of downplaying the need for additional quantitative easing, while at the same time sounding more upbeat on the outlook for the economy, will likely open a fresh round of dollar buying.
The US Dollar is trading marginally higher in a relatively quiet start to the week with market participants easing into an end of year trading style. Looking ahead, tomorrows FOMC policy meeting will have investors paying close attention to what the Fed has to say. Any signs of downplaying the need for additional quantitative easing, while at the same time sounding more upbeat on the outlook for the economy, will likely open a fresh round of dollar buying.
Data released in Britain overnight showed that UK home sellers cut asking prices for a second month in December to the lowest level in almost a year and may reduce them by a further 5 percent in 2011. Sterling showed little reaction to the news, though it did ease back slightly versus the dollar and euro. Ahead this week, Consumer Price Index figures are due for release with the BoEclosely watching whether headline prices remain stubbornly high amid the challenging growth outlook.
All in all, a quieter week is expected in the markets.
Thursday, December 2, 2010
How to earn through forex
Modernity allowed things to become a lot easier, and this includes forex trading. It is a fact that earning profits hasn’t been deemed as easy or convenient for lots of individuals worldwide, however with the web based forex trading it is safe to say that getting rich instantly is quite possible.
Currency trading or forex trading is a multi-billion business for this reason earning money specifically in this sector is not difficult and the reason why so many people are attempting their luck by committing to this occupation.
Online businesses are sprouting out like mushroom in the internet and since forex trading has also joined in the bandwagon, more people are now able to have to be able to quickly make income using it.
Note that, trading foreign currency doesn’t have someone to be a college graduate or be amazingly brilliant. As a matter of fact, you can be just the guy next door and still make big and serious money, like the other professional traders. How is this possible, the secrets is in the software or forex robot large amounts of online traders are using nowadays.
Forex robots are the tool to help newbies and professional traders continually generate income night and day. So, regardless if you are sleeping or playing your computer game your software alternatively is making a killing online. It is for this reason why it’s much easier to trade online.
What’s more, the beauty of online forex trading is the reason that you do not have to invest massive amount capital to begin with. Plus, you can safely try first to help you learn even more about the system to guide you in the long run.
Moreover, since online forex trading or foreign exchange refers to the exchanging of the currencies worldwide. Buying low and selling high is the key to getting rich instantly.
So in order to be one of the numerous successful traders and investors, It is suggested that you just consider online forex as the next financial venture.
If you enjoyed this article on Forex Product Reviews then also please check out our ivybot for more great information.
Tuesday, November 30, 2010
Vietnam More Credit Worthy than Portugal and Spain?
You may have read that European bond spreads have widenend to record levels but how bad is that really? To put everything into perspective, investors are demanding more premium to lend to Ireland, Portugal and Spain than to emerging countries in Europe and Asia. To be more specific, these 3 European countries that have made headlines on a daily basis are now considered less credit worthy (or are assumed to be a greater risk) than Romania, Lebanon, Vietnam and Indonesia. The following table shows the current 5 year credit default swap spreads for some of the major countries. Triple A rated countries such as the U.S., Switzerland, Germany, Denmark and Sweden have swap spreads less than 50bp.
For those of you that are unfamiliar, the Credit Default Swap (or CDS) spread is the premium paid by a protection buyer to the protection seller over a length time. If a default occurs, the protection seller would have to cover the losses. The CDS spread is quoted in basis points per annum of the contract’s notional amount.
In case you are curious, the two countries that have the lowest CDS swap spreads and are therefore considered the most credit worthy are Norway and Finland.
For those of you that are unfamiliar, the Credit Default Swap (or CDS) spread is the premium paid by a protection buyer to the protection seller over a length time. If a default occurs, the protection seller would have to cover the losses. The CDS spread is quoted in basis points per annum of the contract’s notional amount.
In case you are curious, the two countries that have the lowest CDS swap spreads and are therefore considered the most credit worthy are Norway and Finland.
Top 10 Forex Blogs
So, here are my top 10 forex blogs:
- Kathy Lien - Head of currency research at Global Forex Trading (GFT). She provides interesting technical and fundamental analysis, forex signals and strategies. A significant part of posts are of her interesting TV interviews.
- FXPath: Great technical analysis by forex expert James Chen. He’s also the author of the book: Essentials of Foreign Exchange Trading.
- Currency Thoughts: Larry Greenberg, a veteran currency economist brings forex news from many places all over the world, and in-depth analysis of current events.
- Forex Blog: This forex blog is written by Andrei. Since 2006, Andrei’s excellent blogs forex news, updates on forex software (including code), technical lines and lots more.
- Forex Blog: Adam Kritzer writes technical and fundamental analysis about the forex market. He has a special interest on China’s growing role in currency markets.
- Forex Magnates: Michael Greenberg focuses on bringing up to date news about the forex industry with a very clever analysis. His blog also consists of occasional forex news, analysis, and educational resources.
- Francesc Riverola: CEO of FXStreet provides forex industry news, detailed statistics of his big forex portal and spices up his blog with other stuff as well.
- The Forex Articles: James Wooley speaks his mind regarding forex strategies, forex trading ideas and more.
- Trading U – Chicago Blog: Jay Norris writes about psychological effects of forex trading, trading patterns, technical analysis and much more.
- Winners Edge Trading: Last but not least, Casey Stubbs at Winners Edge Trading, with a special focus on one of the most popular currency pairs: EUR/USD. His great posts about trading psychology also have a big share in his content.
War = Good News for South Korea?
South Korea was in the midst of figuring out what to do with its appreciating Won when disaster struck, in the form of an unprovoked attack from North Korea. Combined with a worsening of the sovereign debt crisis in Europe, the news was enough to send the Won down 5% over the course of a couple weeks. From the standpoint of managing its currency, it looks like the (distant) prospect of war is actually a blessing in disguise.
Over the last decade, South Korea has been one of the world’s largest serial interveners in currency markets. Over the last two years alone, as evidenced by the growth in its foreign exchange reserves, it has spent more than $100 Billion defending the Won. As the so-called currency war has intensified, so, too has the Bank of Korea intensified its efforts to hold down the Won, having spent more than $20 Billion since July towards this effort.
You could say then that South Korea’s hosting of the G20 Summit on November 15 put it in a slightly awkward position. Still, it was determined to make clear that it would continue to take steps to combat the rise in the Won. According to Shin Hyun-song, the special economic advisor to President Lee Myung-bak, “This means that countries can intervene in the currency market when the market is in disorder and when there is a gap between the market rate and underlying economic fundamentals.” Of course, fundamentals is hardly an objective notion in this case.
While the G20 predictably called on participants to “move toward a market-driven exchange rate system and to refrain from competitive devaluations,” it nonetheless also guided them towards “implementing policy tools for bringing excessive external imbalances down to sustainable levels.” The underlying message is that certain countries should curtail their reliance on exports and try to achieve more balanced growth.
Naturally, South Korea’s interpretation was that while direct intervention is now taboo, taxes and other capital controls are sanctioned. Thus, it has been reported that “the Korean government has been gauging its timing to launch further measures to tighten the financial market and protect it from volatile global capital movement..bank levies on non-deposit liabilities and taxes on foreign purchases of government bonds are both possible options.”
As I said, though, the South Korea now has some breathing room. Its Won depreciated rapidly in the minutes after the shelling of Yeonpyeong island, which killed four and wounded 20, was first reported. The fact that the US government immediately pledged its support and solidarity (by sending over an aircraft carrier) is not instilling confidence. One analyst indicated, “We see a strong chance of further Korean won weakness in the days ahead as more details emerge, particularly if public opinion in South Korea puts pressure on the government there to take a stronger stance.”
Even before this episode, the EU sovereign debt crisis had spread to Ireland, and put Spain and Portugal at risk, too. As a result, the Dollar-as-safe-haven mindset re-emerged, and spurred some capital movement back to the US. In this context, the drama with North Korea only exacerbated the climate of risk aversion.
Ultimately, both the EU fiscal crisis and the tensions with North Korea will subside, which should cause the Won to resume its rise. (In fact, Korean exporters have come to view this as inevitable, and have taken advantage of the relatively favorable exchange rate to repatriate overseas earnings). At this point, you can expect the Bank of Korea to begin implementing capital controls and continue the face-off with currency markets.
Over the last decade, South Korea has been one of the world’s largest serial interveners in currency markets. Over the last two years alone, as evidenced by the growth in its foreign exchange reserves, it has spent more than $100 Billion defending the Won. As the so-called currency war has intensified, so, too has the Bank of Korea intensified its efforts to hold down the Won, having spent more than $20 Billion since July towards this effort.
You could say then that South Korea’s hosting of the G20 Summit on November 15 put it in a slightly awkward position. Still, it was determined to make clear that it would continue to take steps to combat the rise in the Won. According to Shin Hyun-song, the special economic advisor to President Lee Myung-bak, “This means that countries can intervene in the currency market when the market is in disorder and when there is a gap between the market rate and underlying economic fundamentals.” Of course, fundamentals is hardly an objective notion in this case.
While the G20 predictably called on participants to “move toward a market-driven exchange rate system and to refrain from competitive devaluations,” it nonetheless also guided them towards “implementing policy tools for bringing excessive external imbalances down to sustainable levels.” The underlying message is that certain countries should curtail their reliance on exports and try to achieve more balanced growth.
Naturally, South Korea’s interpretation was that while direct intervention is now taboo, taxes and other capital controls are sanctioned. Thus, it has been reported that “the Korean government has been gauging its timing to launch further measures to tighten the financial market and protect it from volatile global capital movement..bank levies on non-deposit liabilities and taxes on foreign purchases of government bonds are both possible options.”
As I said, though, the South Korea now has some breathing room. Its Won depreciated rapidly in the minutes after the shelling of Yeonpyeong island, which killed four and wounded 20, was first reported. The fact that the US government immediately pledged its support and solidarity (by sending over an aircraft carrier) is not instilling confidence. One analyst indicated, “We see a strong chance of further Korean won weakness in the days ahead as more details emerge, particularly if public opinion in South Korea puts pressure on the government there to take a stronger stance.”
Ultimately, both the EU fiscal crisis and the tensions with North Korea will subside, which should cause the Won to resume its rise. (In fact, Korean exporters have come to view this as inevitable, and have taken advantage of the relatively favorable exchange rate to repatriate overseas earnings). At this point, you can expect the Bank of Korea to begin implementing capital controls and continue the face-off with currency markets.
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