RBA Leaves Rates Unchanged!
By Mike Conlon | February 2, 2010
So this morning is a risk-aversion day in the currency markets, however equity futures in the US are up slightly this morning, as are gold and oil. At some point today, I expect some sort of mean reversion.
Here’s a look at the currencies:
Aussie (AUD): As mentioned, the Aussie is down this morning as the RBA left rates unchanged. There was also a comment made about sovereign debt concerns that is also weighing on the Aussie. It’s currently the biggest loser on the morning, down 1% vs. the US dollar and 1.3% vs. the Japanese yen.
Kiwi (NZD): The Kiwi is down this morning trading in sympathy with the Aussie, and there was also news that wages in New Zealand rose at their slowest pace in 9 years. This demonstrates that the labor market is weak and is a sign that rate hikes may be off the table for some time.
Loonie (CAD): The Loonie is down this morning as a result of risk-aversion, though it has been trading higher recently as oil prices have been moving higher. There’s no real market making news on the Loonie until the end of this week when they report the unemployment change on Friday, so look to oil prices to give clues about where the Loonie may go.
Euro (EUR): The Euro is up slightly this morning as it’s taking a much needed break from the pounding it’s been taking. By now you are familiar with all of the negative news from the region regarding the PIIGS countries, so today, no news is good news. The trend though is still clearly down.
Pound (GBP): The pound is lower this morning as market sentiment over the health of the UK economy is still negative. The pound tested 1.59 vs. the US dollar and is near a three-month low.
Dollar (USD): US home sales figures come out at 10AM EST and could serve as a barometer to the health of the economic recovery in the US. Coming on the heels of the biggest federal budget EVER proposed, there are increased worries that the administration’s plans, “just don’t add up” and that proposed tax hikes on businesses and the wealthy will further stall jobs growth.
Yen (JPY): The yen is higher this morning as the global risk-aversion theme is taking place. This may leave the BOJ in a conundrum as their attempts to weaken the yen to improve exports could be undermined by global risk aversion themes. Stay tuned on this one.
Overnight, Asian equity markets were up and European markets are up as well, though off their highs of the day. US stock futures are slightly higher, though I suspect that this existing home sales data at 10 may be the catalyst for a stock market reversal if they come in worse than expected.
Currently, oil is up almost a full percent to over 75, and gold is trading just higher than 1100 to 1113.
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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Global Recovery Under Way?
By Mike Conlon | February 1, 2010
All eyes are on the US ISM Manufacturing number due out this morning at 10AM EST. The market is hoping to see a rise in this number as that would indicate business activity is picking up. So far this morning, we are seeing mild risk-taking as the Euro has rebounded from 4 days of selling.
US stock market futures are up as are gold and oil.
Let’s examine how this is affecting world currencies:
Aussie (AUD): The Aussie is currently trading down this morning despite the risk-taking tone this morning as traders are gearing up for the RBA rate decision due out overnight. The market is expecting a 25 basis point hike to 4%, but this could trigger a bearish scenario. If they do raise rates, it is extremely likely that they will take another rate hike off of the table going forward. There is also a chance that they don’t raise rates this time, as news that China is paring back economic stimulus could affect the Australian economy.
Kiwi (NZD): The Kiwi is up slightly this morning benefitting from the risk trade.
Loonie (CAD): The Loonie is up this morning as oil prices recover and stabilize as well as a general risk-taking mood this morning. The market is waiting for confirmation from the ISM data so it trading in a tight range until that release. The Loonie should strengthen today if the number comes in better than expected.
Euro (EUR): The Euro is the biggest gainer this morning as it rebounds from 4 days of weakening. The market is gaining confidence that the plan to manage the debt crisis in Greece is acceptable and plausible which generally ties in to the risk-taking trade this morning. Over the last four days, the thought that Euro could serve as an alternative to the US dollar as a reserve currency was largely debunked as Central banks pulled cash out of the Euro at a record pace.
Pound (GBP): The pound is down this morning against all but the Japanese yen as housing prices slid in the UK and banks granted fewer mortgage applications last month. The Bank of England rate decision is on tap next week but traders are more interested to see if they continue with their quantitative easing program.
Dollar (USD): The US dollar is down this morning as part of the risk-taking trade. Stock market futures are up as are commodities and all eyes are on the ISM Manufacturing number. There are some figures out this morning that show that US personal incomes are up slightly, and personal spending is higher than the prior reading but missing expectations by just .1%.
Yen (JPY): The yen is down across the board this morning as the BOJ’s top economist said that Japan’s economy is far from “achieving self-sustaining growth” as their export led recovery failed to induce consumer spending. This also falls in line with ministers calls last week for a weaker yen.
As we can see the big news of the day is ISM Manufacturing number which will be viewed as a proxy for global economic recovery. The only currency that is trading “out of the ordinary” is the Aussie, as the market prepares for the rate decision.
In global markets, stocks in Asia closed generally higher and Europe is higher at the moment. US stock markets futures are higher pre-open and oil is up to 73.47, with gold slightly higher to 1088.
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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Fastest Growth since 2003!
By Mike Conlon | January 29, 2010
This morning, the US Q4 GDP figures came in at a better than expected 5.7%, the fastest growth since 2003. While this is seemingly good news for the US economy as it marks the 2nd straight quarter of growth providing further evidence that we moved forward from recession.
However, we’re not out of the woods just yet. There are still global concerns weighing heavily upon the markets, such as the Greek debt problem in the Euro Zone, as well as China’s restrictions on lending.
This morning’s currency action is rather neutral, as it can’t be described as either risk-taking or risk-aversion.
Here’s how world currencies are trading this morning:
Aussie (AUD): Gains in the Aussie have slowed down as the global slowdown, particularly in China, is expected to slow growth in Australia. This morning is a mixed bag for the Aussie, as it’s higher vs. the Japanese yen and British pound, but down vs. the US dollar and Euro.
Kiwi (NZD): The Kiwi is trading higher across the board and is showing the highest percent gain vs. the yen this morning, up 1%. They just reported a budget deficit for the first time in 9 years, as tax receipts have slowed and government spending picked up last year.
Loonie (CAD): Canadian GDP came in this morning at .4%, a smidge higher than expectations. Canada is showing slow but steady growth, which is a positive for the economy. The Loonie has been weakening against the US dollar as global risk appetite has abated and oil prices are down almost $6 this year.
Euro (EUR): The Euro is trading higher against the yen and the pound, but down against the rest this morning. Consumer prices rose 1% showing that inflation is starting to pick up in the region. Also to note is that fears over the Greek debt crisis are weakening as region considers all of its options.
Pound (GBP): The pound is down this morning against all but the yen, experiencing a technical pull back from its recent strength. Housing prices were up the most in 5 months and consumer confidence is improving. BOE policy-maker Andrew Sentance cautioned that the recovery can continue, “especially if interest rates remain low.”
Dollar (USD): The dollar is showing strength today after the GDP figures that were reported this morning. The fastest growth since 2003 is stoking thoughts that inflation may be closer than the Fed thinks.
Yen (JPY): The Japanese yen is down across the board today as the CPI index showed that deflation is still very prevalent in the Japanese economy. Finance Minister Kan called for the Bank of Japan to take a powerful approach to combat falling prices and a strengthen yen.
The stock markets closed down in Asia, but are currently higher in Europe and the US. Gold is down slightly and oil is up this morning.
So today is a bit of a mixed bag. Keep an eye on the correlations to watch for break-downs or irregularities to see if there are reversals or reversion to mean. Today seems like it will be a range-bound day going into the weekend.
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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Its All About Jobs!
By Mike Conlon | January 28, 2010
This morning, it looks like risk appetite has returned to the forex market after yesterday’s FOMC meeting has been fully digested. The only thing “unexpected” from the meeting was that the decision was not unanimous, as KC Fed Chief Thomas Hoenig dissented and raised concerns about possible inflation. While this view will most probably be discounted for “an extended period” to use Fed parlance, it is interesting to see someone break from the pack.
Also, additional problems from the Euro zone have increased downward pressure on the common currency, as Portugal has now joined the mix and is showing up on the watch lists as their fiscal budget is drawing attention from the ratings agencies. In light of these problems, the market is still in a risk-taking mood.
The other big news came from last night’s Presidential State of the Union Address, where the President issued a renewed commitment to fixing the employment problem here in the US and pledging to help put Americans back to work which overall is positive for economic growth. Whether or not the follow through occurs is another story, but for now, the markets are satisfied.
Here’s a look at the currencies:
Aussie (AUD): Benefitting in early trade from risk appetite, the Aussie traded as high as 90.45 vs. the US dollar. In addition, commodity prices are higher as well. There is much debate over whether or not another rate hike will be in order at the next policy meeting as inflation concerns abound. Watch out for a mid-morning reversal if equity markets sell-off.
Kiwi (NZD): Yesterday, the New Zealand Central Bank left interest rates unchanged at 2.5% as inflation is likely to stay in its target range. However, the bank is expected to move on rates sometime before mid-year. Also up this morning, but off of its highs.
Loonie (CAD): With oil prices holding above $74 (for now), the Loonie is showing decent gains this morning against the risk averse currencies. The Loonie is showing some strength today vs. the US dollar, as it bounced back against technical resistance at 1.065.
Euro (EUR): The Euro is down this morning after having broken support at 1.40 vs. the US dollar. While EC economic sentiment was up this morning vs. an expected decline, the news that the first of the PIIGS countries, Portugal, may be following Greece’s lead down the road to fiscal uncertainty. S&P is saying that Portugal’s current budget leaves the country economically “frail”. Remember that when trading often times support becomes resistance so keep that 1.40 level in mind.
Pound (GBP): The Pound is strong again this morning, extending yesterday’s gains. The prevailing thought is that interest rate hikes may be on the table for the foreseeable future.
US Dollar (USD): The dollar is down today against the commodity currencies as risk appetite has returned. US durable goods orders came in lower than expected, and initial jobless claims came in slightly more than expected. This lends credence to the FOMC stance that rates should remain low for “an extended period”, much to KC Fed Chief Hoenig’s chagrin.
Yen (JPY): The yen is down against all but the Euro currencies, as the bottom rung on the risk-taking ladder. The uptick in risk appetite as a result of the State of the Union Address last night has helped propel Asian stock markets higher last night and the yen lower.
In world markets, the Asian stock markets closed higher than 1.5% from the previous day but stocks in Europe are mostly lower with news out of the Euro Zone. US stock markets are down, and gold and oil are higher, to 1093 and 74.12 respectively.
What’s important to take away from all of this news is that no single instrument trades in a “bubble” and that news from around the globe can affect any market. By having and maintaining an understanding of global events, investors and traders can better position themselves.
To learn more about how these markets are ALL inter-related, be sure to check out our extremely affordable currency trading courses!
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FOMC Day Fun!
By Mike Conlon | January 27, 2010
This morning, the broader currency markets are trading in a slight range, with the Japanese yen (JPY) and the British pound (GBP) showing gains against the US dollar. There is a mild risk-aversion theme this morning as all eyes are on the US FOMC policy meeting today at 2:15 EST.
As far as news-worthy currency events go, this may be the one which has the largest impact on the market. It is almost 100% certain that the Fed will not be raising rates from .25%, however the market will be looking for clues for any change in language that may suggest a shift in policy.
The markets here in the US have been on edge recently, as political pressure and rhetoric have picked up because of what many see as a rejection of the current administration’s policies. This has caused some in Congress to pull their support for Fed Chairman Bernanke, whose term is up at the end of January.
Let’s take a look at how specific currencies are faring so far:
Aussie (AUD): Earlier today the Australian Consumer Price Index (CPI) number came in at .5% for Q4 and at 2.1% YoY, which was slightly higher than expectations. This sent the Aussie initially higher and above .90 against the US dollar, though it’s now trading below on the move to risk aversion and fears that the moratorium in Chinese lending may affect the Australian economy.
Kiwi (NZD): The Kiwi is trading down on the risk aversion theme, most notably against the Japanese yen around .5% on the morning. The Reserve Bank of New Zealand is coming out with its rate decision later today and is expected to maintain rates at 2.5%, which is a record low. This could weigh heavily on the Kiwi as the market has priced in a 50 basis point rise by mid-year.
Loonie (CAD): The Loonie is trading near a 5-week low as world markets and commodities have sold off recently and the flight to safety trade has been in effect. One of the major factors affecting the Loonie is the price of oil, which is off some $10 from recent highs.
Euro (EUR): The Euro is off slightly this morning, as it attempts to shake off the problems it’s been having related to the debt crisis in Greece. European stock indices are down today, as comments from ECB council member Weber said that the bank may take additional steps to withdraw liquidity from its banking system. With today’s FOMC decision on tap, the Euro could test 1.40 which has been an area of psychological support for some time.
Pound (GBP): Reports are out this morning that the quantitative easing measures that the Bank of England has taken may be working. Although UK GDP came in lighter than expected, it did come in positive which is a step in the right direction. BOE policy-maker Sentance warned that the bank may need to act quickly if the recovery strengthens and inflation picks up. The pound is up to 1.62 vs. the US dollar.
US Dollar (USD): The dollar is weak against the pound and the yen this morning, but otherwise is up slightly against the commodity currencies and the Euro. The market is waiting on the FOMC decision and more importantly if there is a change is language which may give hints about a change in policy. Keep an ear out for a continuation of the “extended period” language. The dollar has been gaining recently, as risk-aversion has heightened around the globe.
Yen (JPY): The Japanese yen is at a 5-week high vs. the dollar, as the Japanese yen benefits the most from the risk-aversion trade. With interest rates at .1% and not moving any time soon, the carry trade is back on with the yen as the funding currency of choice. Also to note is that Japanese exports have risen for the first time since mid-2008, a sign that economic recovery may be taking place.
In world markets, stocks are down in Asia and Europe and the MSCI world stock index is experiencing its largest losing streak in almost a year as concerns that developed economies may be preparing to scale back which affects emerging markets. In the US, the stock markets are down slightly as are gold and oil, which are trading below 1100 and 75 respectively.
Look for a reversal today if the Fed does as expected and maintains uniformity of language with its previous rate decisions. The world markets are looking for some vote of confidence that will allow risk-taking to resume again. Despite all of the political wrangling coming out of Washington, if Bernanke can project confidence that the recovery in the US in taking place, then it may signal game on again!
To learn more about how these events affect the currency markets, be sure to check out our currency trading courses!
To follow these events in a free, real-time practice account, click here!
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End of the Year Blowout Sale!
By Mike Conlon | December 28, 2009
END OF THE YEAR BLOWOUT SALE! OVER 55% OFF!
As we come to the end of 2009, now is the time to look back and reflect upon this past year and to think about making changes going forward. 2009 was a “roller coaster” of a year for investors and many were left wondering what to do when the markets were collapsing and then missed the rally back.
However, one group of investors was able to navigate the treacherous waters of 2009 with relative ease and was able to turn market panic into profits! You may be asking yourself where these investors found these opportunities…..
In the Currency Market!
MAKE YOUR #1 NEW YEAR’S RESOLUTION TO GET EDUCATED!
Did you know that the currency market is the largest financial market in the world with over $3 trillion traded every day and is 30 times larger than the daily trading volume of NYSE and NASDAQ put together?
Did you know that trading currencies has become the hottest trend amongst retail investors with more than 150,000 new accounts opened each month?
We want to help savvy investors who are looking for sound trading opportunities by offering them education, tools and resources to capitalize on this lucrative market.
We realize that many of our subscribers are novices to the currency market and that is why we are offering our subscribers from now until the end of 2009 our most complete and thorough currency trading program — ALL 3 COURSES — at over 55% off the regular price!
The FXEDU currency trading course bundle, valued at $1397, can now be yours for only $625!
That’s over 55% off the retail price!
Our courses will teach you:
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You will have over 6 months to complete the courses and will have 24-hour/day access to our instructors and course materials for one full year to continue your training throughout the year!
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No Change at BOJ!
By Mike Conlon | December 18, 2009
The Japanese Central voted to keep their interest rate at .1%, attempting to encourage economic recovery. Japan has been battling deflation for MANY years, but it has picked up recently as the most recent CPI (consumer price index) declined 2.2% in October, marking the eighth straight month of declines.
The also issued a statement that they do not “tolerate” deflation, but issued no plans as to what they actually intend to do about it. Mostly hollow words if you ask me.
So this morning we’re seeing some Yen (JPY) weakness, as its down across the board, most notable against the Canadian dollar (CAD) at -1.07%. CAD is strong due to a rebound in oil prices which is trading above 74.
Also, I’m seeing a bit of British pound (GBP) strength this AM as UK mortgage approvals rose. This means the banks are starting to lend more and hopefully that will help stabilize their housing market.
Euro is a mixed bag this AM, trading flat against USD so far. News out of Greece is that they are going to reform their notoriously lax tax policy to try to raise revenue to get their debt under control. In Germany, Business confidence reached its highest levels since July 2008.
The Swiss franc (CHF) has advanced past 1.50 Euro, as the Swiss National Bank (SNB) allowed the currency to appreciate. Back in March, the bank intervened in its currency to keep it from appreciating and undermining economic recovery.
Lastly, today is “quadruple witching“– where both futures and options positions expire. So this could lead to some volatility today… though I suspect it won’t be bad as traders have been paring back positions for the holidays and year end.
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Weekly Outlook from InnerFX
By Mike Conlon | November 24, 2009
EUR/USD
Yesterday’s rebound against the US dollar (USD) provides a clue about a potential resumption of the longer term uptrend. We’ll see if the euro will manage to hold gains above the fresh breached barrier into the 1.4950 region (which is currently under minor pressure) – formed by the falling trend line coming from 1.5045 over the previous lower highs. In case of an extended pullback below 1.4950, the 1.4850-1.4900 level will eventually limit losses in order to keep the bullish structure under development. I maintain my bullish stance on euro but I’m slightly cautious due to the repeated price action hesitation against the 1.5000-1.5060 top side. As I said earlier today: it won’t be easy to break higher, but it won’t be easy to drop lower (below 1.4800/50) either, while signs of hesitation continue to rule across the board – resulting in short-lived moves in a chop-chop manner.
- EURUSD 4hrs chart 11-23-2009
- EURUSD daily chart 11-23-2009
NZDUSD
In my previous short-term outlook, I mentioned that a pullback from .7440 would probably face solid bids around .7300, and eventually lower – around .7150. The upside remains favored for now as the pullback has faced a solid support, indeed. The rising trend line coming from .6475 also coincided with the recent bottom, so there are some valid reasons to keep the bullish view on NZD valid. Keep an eye on the .7400 handle as a breach is needed to fully confirm that the corrective cycle has ended.
Gold seem unstoppable and continues to rally to fresh highs on a regular basis – recently exceeding the upper boundary of the uptrend channel, as seen in the chart below, and the 1130 region is expected to provide support on pullbacks within the coming days. While it continues to push higher, dollar weakness across the board is likely to continue.
Let’s take a look at current Gold and S&P500 charts: both seem to provide enough bullish clues (for now) to support the ‘weaker dollar’ scenario. The important levels to watch are: 1130 support for Gold; 1095-1100 support region for the S&P500 along with the 1113 resistance.
- Gold chart 11-23-2009
- S&P500 short-term chart 11-23-2009
Have a great week!
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The World Series of Money (WSOM)
By Mike Conlon | October 21, 2009
Currency Markets, Vegas-Style!
Let’s face it; the currency market is akin to the ultimate final table in the World Series of Poker. At that table, you have eight people sitting around, all trying to bluff one another. Some have large stacks of chips, while others are short-stacked. Some like to talk a little more than others, while others prefer to let their cards do their talking. Ultimately, there will be one winner.
And that is where the similarities end. For in the currency market, there are many winners and many losers. But depending upon the actions of one player, a lot of money hangs in the balance. Imagine if every time Phil Helmuth blew up, you just lost some of your purchasing power. Also imagine that you had no choice in which player you were backing and that the player you have to back was based solely on where you live or work. And you’re watching in disbelief as the player you are forced to back is making dumb move after dumb move and slowly running out of chips. Sounds frustrating and scary, doesn’t it?
Welcome to the world as we know it.
And be thankful that the currency market exists! Why? Because even though you may be forced to cheer for the worst player in the room, you can still vote as to who you think is doing the best. You do that by buying the currencies of the strong players, and selling currencies of the weak ones. This is essentially known as a carry trade.
And in executing a carry trade, you also get rewarded by receiving the difference between the higher yielding currency (the one you buy) and the lower yielding currency (the one you sell) in the form of interest.
And just who are these players whose prowess or lack thereof affects the lives of so many? Why it’s the finance ministers, Central bank governors, and monetary policy makers of the most commonly-traded world currencies out there!
(Cue Michael Buffer voice) Representing the Euro-zone is Jean-Claude Trichet. From Japan, Hirohisa Fuji. From New Zealand, Allan Bollard. All the way from the outback of Australia, Glenn Stevens. Hailing from Canada, Mark Carney. Representing the UK, “Swervin’” Mervyn King. And last, but certainly not least, from the United States, Helicopter Ben Bernanke!
So how do you know who is winning (besides looking at the cards or the amount of chips)? Well that’s easy. Look for the guy who keeps raising the pot, and stay away from the guy who keeps telling you he has the best hand, yet keeps folding and has to borrow money to stay in the game. Also, be conscious of who is speaking the loudest but doing the least.
What you also may notice, is that there appears to be one empty seat at the table, as if there should be someone else playing in the game. This person holds a lot of chips, and can be seen giving them to one specific player time after time.
So when the WSOM (World Series of Money) rankings come out, can you guess who’s atop the leader-board and who is at the bottom?
1st Place: Glenn Stevens, Australia. Shows his willingness to raise the pot and actually does it.
2nd Place: Alan Bollard, New Zealand. Shows his ability to stay in hands by talking up the pot and may be very close to raising.
3rd Place: Jean-Claude Trichet, Eurozone. Keeps winning hands because others keep folding to him.
4th Place: Mark Carney, Canada. Also winning hands because others keep folding, but his talking down of his cards haven’t fooled anyone yet of his strength.
5th Place: Mervyn King, UK. Not winning many hands, but his erratic play is keeping everyone on their toes.
6th Place: Hirohisa Fuji, Japan. Just folds every hand and loses his blinds.
7th Place (Last): Ben Bernanke, USA. Continued bluffing has fooled no one, and is losing hand after hand and has to keep borrowing chips to stay in the game from the player who is not at the table.
Mystery Player: Zhou Xiachuan, China. Doesn’t sit at the table and therefore isn’t bound by its rules. Keeps lending chips to Bernanke and engages in backseat poker playing. Outcome is uncertain as he has never actually ever played a hand.
So, if you are forced to wager and bet on who the winner might be, you just may want to consult these rankings!
To learn more about the currency markets, be sure to check out our currency trading courses!
To get a real-time practice account, click here.
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ECB Comments and Risk Taking!
By Mike Conlon | September 8, 2009
In a continuation of Friday’s move out of the US dollar as signs of improved economic conditions are improving, EUR/USD is experiencing a nice move to the upside. Positive comments from ECB President Trichet and the notes out of the G-20 meeting are giving investors confidence that recovery is underway and therefore investors are selling dollars.
The top gainers on the morning are the Swiss franc (+1.14%) and the Euro (+1.01%). Look for this uptrend to continue as risk takers seek higher-yielding currencies.
Ready to trade the forex markets? Get a free, live practice account here
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