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jazzz · 08-26-2008, 07:04 AM

GBP/USD – 2 year high for the dollar in sight of Britain's frail economy

Data on the UK's gross domestic product has revealed no changes in the second quarter at 0.2% quarterly growth, its lowest in 16 years. This rose investors' expectations that the Bank of England would cut interest rates. This as well as weak data from the European region gave support to the dollar.

Despite the weakening of global economies and the resulting boost of the dollar, traders remained skeptic about the continued rise of the dollar due to the frail U.S. financial system. Traders will be closely monitoring U.S. housing data to be released this week, as well as new developments about the future of Lehman Brothers investment bank and mortgage giants Fannie Mae and Freddie Mac.

I believe that market focus for the near future will be on the sterling and oil prices – two key elements in keeping the dollar stable. Oil prices fell the steepest fall in 4 years on Friday to below $115, thus increasing the dollar's gains. Moreover, Investors will act carefully at this week's housing data, which might limit the dollar's gains, yet they have no reason to sell the dollar for now.

The sterling fell to $1.8415, its lowest rate since 2006. This slide brought about unexpected short positions in the sterling, perhaps making it possible for the currency to recover.

Regards

jazzz · 12-05-2008, 11:29 AM

Hi there,

Here are today;s forex update.

Unstable Forex Market... Hoping for some corrections soon

Market Speculation

Today is central bank day for Europe, with the ECB, BOE and Riksbank all on tap for rate decisions. The Riksbank brought their meeting forward by two weeks in order to chop rates at today's meeting, and for good reason: our models show that Sweden is one of the most rapidly decelerating economies in the developed world right now. Its exports are plummeting and its banking system is under siege from ill advised loans to especially Baltic countries. Baseline expectations are looking for a 100-bp cut to the rate.

Speculation is mounting that the BOE will chop by 150 basis points rather than the 100 bps baseline consensus. The ECB baseline is moving to 75, but if the ECB can surprise, then today would be the day to do it, considering the rapidly mounting horrors taking place in the economy. As a side note, it seems more than a touch silly to fret about the size of the cuts here. All major central banks are moving towards zero to 0.50% by mid next year anyway...

The setup for the US job report on Friday looks increasingly bleak, and we have a hard time understanding the apparent attempts to find optimism on equity markets, despite the old-fashioned wisdom that stocks like to climb a wall of worry. Yesterday's Non-manufacturing ISM was a record low for the 11 year history of the survey and far worse than expected. The news headlines are showing layoffs from every corner and the ADP number out yesterday was far worse than expected. Employment is a lagging indicator, but increasing unemployment also dangerously reinforces the power of the negative cycle, especially now that central banks efforts are geared toward damage control from deleveraging, as the game of economic stimulus by interest rate manipulation was over a long time ago. The employment fall out in the services sector after a weak Christmas shopping will yet another problem for the incoming Obama administration to tackle in the new year.

Upset China Economy

The US' Paulson is in China over the next couple of days for talks. PBOC chief Zhou was out trying to tell the world that US overconsumption was to blame for the crisis, but this is an absurd statement, as US overconsumption was simply a product of the global imbalances that were developing for years and were to a great degree enabled by China's suppression of its currency and buying of US treasuries which kept US interest rates artificially low. The trajectory of the Yuan in the short term will be very interesting for the USD: will the Chinese attempt to maintain a steady course or will they look to keep their currency weaker in the coming time frame to boost exports now that commodity pricing pressures have eased so sharply?

Get latest update at: Finexo Innovative Trading-Online Forex Trading, Currency Trading, Managed Account, Forex, Forex Demo, Economic Calendar.

Regards

jazzz · 12-16-2008, 11:35 AM

Finexo Currency Analysis and Updates

Still bearish USD

The monetary policy statement from the Fed will be key to watch today for signs that the Fed is planning on launching new, unprecedented measures like quantitative easing and even the extension of credit directly to corporations and consumers. It is clear from current credit spreads that hardly any credit is available on the open market as banks are hoarding reserves to protect their balance sheets. This is guaranteeing that the weakest corporations will default and an unprecedented squeeze on consumers that the Fed chairman no doubt fears would send the US economy staggering into what some have called stag-deflation (highly dangerous for growth as debts become more and more onerous in a deflationary, highly indebted economy). Bernanke has already forewarned the potential for the Fed to monetize debt with the purchase of US treasuries and has even brought up the idea of the Fed issuing its own debt. But how much sway does Mr. Bernanke hold over the FOMC? There are dissident voices... A mushy statement resulting from lack of unity in the FOMC could result in a USD rally if the USD has been selling off over fears of Fed/Treasury balance sheet profligacy - there are signs this is the case, but the disappearing yield in the US has been no bit player either. By the same token, a more clear voice showing intent to move rapidly toward alternative monetary measures would then supposedly be more USD bearish.

There are virtually no signs out there that risk conditions are improving, and we are a bit surprised to see equities trading as high as they have recently. Most risk spreads are getting worse and worse and it feels like something must give soon. Still, it is very difficult to gauge the market's potential for movement as we are reaching the calendar year-end and all of the lousy liquidity and unpredictable action that it entails. Remember the 2004-2005 transition: EURUSD rallied strongly to record highs on the final two days of the year, only to collapse starting on the very first trading day of the year such that it was trading over 800 pips lower by the end of the month of January. We're not saying that we expect a repeat, just that the transition to a new year could provide an important pivot point across markets - especially as we have seen a year of historical market moves.

CAD Review

CAD is looking weak again versus the broader market as the crude oil rally petered out quickly at the $50/barrel level and fell sharply from there all the way below $45 again - this is an especially bearish signal from crude considering the normally slavish reaction to a weaker USD from the energy market (it is also a USD booster generally we might add). If oil tumbles further, we would expect CAD to remain weak. EURCAD is shooting out the lights, but USDCAD needs to work its way back above 1.2500 to help prove that the lows are in for now.

jazzz · 12-23-2008, 11:35 AM

Here are some updates and recommendations i read on a site. I hope it is useful to all the traders.

Daily FX Market Analysis
The EURUSD correction continued apace on Friday after EUR had clearly overreached itself on a broad basis. The correction lower in EURUSD cut almost 900 pips from the high on last Wednesday - the most remarkable move since, well, since a few days previously when the EUR rallied over 2000 pips from the lows just two weeks ago. This is truly remarkable stuff, and the reasons are twofold: First, Bernanke's declaration of war on deflation at the last FOMC meeting and promise of alternative and hyper-expansionary monetary policy, a subject we covered extensively last week; and second, the extremely thin holiday trading, where any existing market bias gets squeezed mercilessly into capitulation once a move develops. The bias in the market has probably been largely eliminated after the merciless rally and the subsequent huge drop from the top, so we may start the New Year with a clean slate.

President Bush's team extended emergency financing to the auto industry from the TARP package, even if it was with some heavy strings attached, including the need to do a radical restructuring to cut costs in a very tight timeframe. The move boosted CAD due to Canada's extensive export exposure to the US auto industry. Is this a good opportunity to buy USDCAD again on the reaction? Technically, it doesn't look very promising for the shortest term after reversing so strongly from Fridays' impressive highs, but if the pair is able to work its way back above 1.2300 again, the prospects for a rally would appear much brighter. Canada announced its own C$4 billion bailout package for Canadian subsidiaries of US automakers.

New stories abound on the planned Obama stimulus package, with the consensus figure of $800+ billion dollars being thrown around - that's around 5-6% of US GDP. The FT reports that Obama has raised the jobs target to 3 million jobs from 2.5 million jobs. Considering the rate at which Americans are losing their jobs in recent months, that seemingly aggressive target would only roll back about 5 weeks of job losses - and it is 4 weeks to Obama's inauguration and will take months and months for the style of stimulus package Obama is discussing to take hold in the job market. That means by the time any stimulus plan is getting traction, the US economy could have lost another 5 million jobs or more. The economy has to work through so much excess hedonism from the credit bubble that it will take a very long time indeed for the US to dig itself out of this mess.

Equity markets may hold the key to the next move in currencies. We've been locked in a range in the major US indices for some time now and we wonder how long the strain of optimism can hold up. Either way, equities are due for some directional resolution very soon, and our bias is for the downside, which could support the USD (confirming the "appropriateness" of Bernanke approach - also, EUR vs. USD rate spreads continue to plummet after ECB moves late last week) and the JPY. The greatest loser should be the EUR eventually. As we have outlined, the Euro economy will be devastated and deflation will reign supreme if the ECB continues to refuse to join the competitive devaluation theme. Also, the instability in Greece and suspected skeletons in European banks' closets are another.

This week offers a few data points of interest even as the Christmas holidays are soon upon us. For the US, we have the final Michigan confidence number and New and Existing Home Sales numbers tomorrow. On Wednesday, we have Durable Goods Orders and Weekly Jobless Claims, as well as Personal Consumption data and the PCE inflation measure for November and weekly jobless claims. Japan sees a raft of data releases on Friday, including inflation, Retail Trade and Household Spending numbers for November.

Beware the lack of liquidity in this market!

jazzz · 03-13-2009, 12:22 PM

President Obama signed PORK!

The problem with the world is not that there is an economic crisis, it is that the politicians who are “trying” to deal with it are just making things worse. When US President Obama was candidate Obama, he promised the US people that he would eliminate excess spending, known to all as Pork. Well, after three enormous bailout bills filled with this Pork passed through the US congress, President Obama signed them – saying things arrogantly like “it’s a stimulus bill, what do think we do in a stimulus bill, spend” to justify the frivolous dollars that were spent. Yet yesterday was the clearest sign that this young, charming, good-looking man has no experience as CEO and limited experience in politics. Prior to signing a new 410 Billion Dollar spending bill filled with 8500+ frivolous spending items (pork), he lectured the press about how earmarks (pork) are bad and how it was shameful that congress needed to continue this policy of adding items to a budget that have no place in a budget in times of a crisis the magnitude of which the world is facing.

He then went into a closed room and signed the bill – with no cameras present.

Forex traders took it out on the dollar yesterday as people are starting to worry about where all this money is coming from. The US printing presses are on overdrive trying to make enough money to meet the demands of this Presidency which is already responsible for close to three trillion dollars of spending – more than the GDP of most major countries – and he is not even past his first 100 days.

Sure, all this spending might help the economy in the short term – how can an infusion of so much money not start an economy. But he is sealing the fate of the global economy for the next ten years as interest rates will soar and taxes will be raised in an attempt to pay for all this. Forex brokers have it right, sell the dollar because inflation will kick in and then the devaluation will begin. Get out while you can – before the carnage on Forex street really begins.

Look for Online Forex traders and blogs to begin trying to find a new favorite. Perhaps the Australian Dollar as I have been touting for months. It has done quite well – the yields are high and the potential for growth is great. Keep watching the Aussie – and don’t say I did not tell you so.

jazzz · 06-08-2009, 11:11 AM

Volatile Trading in the Euro after ECB leaves rates Unchanged but Foresees Deeper Recession
EUR

The Euro rose on Thursday during a volatile session following the European Central Bank's decision to leave the core interest rate unchanged at a record low of 1.0 percent. Despite the ECB's announcement that they expect a much deeper recession in the European Union than previously predicted, ECB president Jean-Claude Trichet did not move on a more aggressive interest rate cut. The ECB also restated their intentions to purchase an additional 60 billion Euros in government and secured corporate bonds.

At 11:30PM GMT, the Euro was up .855 to the Japanese Yen, up 1% to the British Pound at .8755, up .2% to the US Dollar to 1.4176 and up .2% to the Swiss Franc to 1.5161. The Euro fell and .15% to the Australian Dollar to 1.7654.

CAD

The Canadian was down broadly in early Thursday trading after the Bank of Canada kept their core interest rates unchanged as expected, however they acknowledged that there was concern about the recent rise in the Canadian currency and how it would affect the overall economy. The Canadian dollar rebounded late in the session after no comments came from the Central Bank that they were looking at a quantitative easing plan such as buying government debt by printing money, leading traders to believe that the CCB does not feel a need for further stimulus measures.

At 11:40PM GMT, the Canadian Dollar was up 1.3% to the US Dollar to 1.0964, up 1.1% to the Euro to 1.5553, up 2.1% to the British Pound to 1.7748 and up just over 1% to the Australian Dollar to .8803

Source: * Finexo | Forex Online