Dumb Markets!
By Mike Conlon | May 11, 2010
Yesterday we saw the markets come back with a vengeance as both stocks and risk assets traded higher. The obvious driver of these moves was the EU bailout, but as I mentioned yesterday, the bailouts are going to be negative for the Euro in the long-term. It didn’t take the markets long to realize this, as the Euro is lower and taking other markets with it.
Part of the problem we are seeing is that because the PIIGS countries are going to have to adopt austerity measures, this by nature is going to stunt growth while the debt situations get under control. However, when the US was facing economic crisis, the EU only had to lower interest rates and did not engage in quantitative easing to stabilize its economy. Now granted, they are facing problems today, but I think that stability is more important than growth at this point.
Nevertheless, the market still relies on some of the correlations that have held up over the past couple of years, and my guess is that is going to change. While the Euro is known as the “anti-dollar”, it tends to trade with risk assets. If we use the premise that the Euro is going to go lower based on the dilutive actions taken to administer the bailout, then it likely follows that we’re going to see some Dollar strength.
However, we still are seeing good growth stories around the globe. Sure a weaker Euro will decrease demand for imported goods to the EU, but it will also be much better for Euro exports as now their goods are cheaper around the globe.
So pay attention to how the other markets react to a declining Euro. Right now the markets seem to be playing by the old rules. It may be a while before the market catches on to the new paradigm. So for now trade what you see and not what you think it will be!
In the forex market:
Aussie (AUD): The Aussie is lower this morning as fears that a European economic contraction may weigh heavily on global recovery. However, the economic story is still intact and a global slowdown could halt inflation down under.
Loonie (CAD): The Loonie is holding up fairly well despite the risk aversion in the market as investors are betting on a rate hike next month. Swap rates are higher as homeowners are attempting to lock in fixed-rate mortgages in anticipation.
Kiwi (NZD): The Kiwi is lower as risk aversion in the market is causing demand to weaken. The target date for a rate hike is still mid-year, but that could be pushed out further if inflation subsists due to a lack of Euro or Chinese demand.
Euro (EUR): So stocks are lower in Europe and the US futures are set to open lower as well as there is concern that the bailout plan will not be big enough to halt the debt problems. My take is that this bailout should be sufficient, as spending gets slashed and budgets get reduced throughout the region. As long as this backstop is in place, the troubled nations will receive aid initially and will be able to go out into the markets down the road once more and more confidence is established. While the crisis everyone speaks about is directly related to excessive debt, the real crisis in the EU is one of investor confidence. If this process can be managed skillfully, the confidence will come back. In the meantime, I am expecting the Euro to decline. And watch the flows into gold as an asset class as gold not only acts as a hedge against inflation, but also as a store of wealth. Gold is higher to $1210.
Pound (GBP): The Pound is higher this morning as industrial production figures came in much better than expected. The Pound was initially lower on risk aversion and due to a report that the Lib Democrats in Parliament were in talks to form a coalition government with the Labour party even though the Conservatives won the majority though not by a large enough margin to dominate Parliament.
Dollar (USD): The Dollar started the morning higher on risk aversion but is giving back some ground as the stock market gets set to open. Stock futures are off their lows of the morning and I could see this as a “turn-around” day as the economic story is improving in the US.
Yen (JPY): The Yen is giving back gains as the market is seemingly moving away from risk aversion. Japanese stocks were lower overnight, as fears of a Chinese slowdown may affect earnings going forward.
In my opinion, the bailouts in Europe should be viewed as a good thing and not bad. A lower Euro will not only help manufacturing countries such as Germany and France as their exports will be cheaper, but it will also help the PIIGS countries as tourism will increase.
I live here in the NYC, and for the last couple of years you couldn’t walk down the street without bumping into a European here on a shopping excursion. Even with the price of the airfare, it was still cheaper for them to shop here than at home.
Conversely, the last time I was in Europe, I felt like a pauper and was astounded at some of the dinner bills I racked up. Now, my wife and I are planning our next trips. Things will get worse in the EU before they get better, but in the long run a lower Euro will benefit them greatly.
We all have to make sacrifices in the grand scheme of things, and once the Greeks (and those who acted irresponsibly) realize how they can benefit, the quicker they can return to normalcy.
To learn more about how you can take advantage of world events through the currency market, be sure to check out our currency trading courses!
To follow these events live with a free, real-time practice account, click here! Don’t miss out on the world’s fastest growing market!
Tags: account, AUD, Aussie, cad, course, crisis, currenc, currency, currency market, currency trading, demo, dollar, dow, economic, economy, EUR, Euro, Europe, fear, forex, forex market, franc, free, fx, fxedu, gbp, gold, home, Il, interest, interest rate, interest rates, invest, investor, ISM, Japan, jpy, Kiwi, live, loonie, lower, market, Mike Conlon, nzd, piigs, pound, practice, practice account, RSI, scheme, ssi, stock, stocks, time, trade, USD, wealth, Yen
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Euro Trashed!
By Mike Conlon | April 28, 2010
I sometimes feel like a broken record when I go on and on about risk in the marketplace, but in my opinion this is the most important factor to consider. Many days worth of gains can be wiped out in one session, and that’s exactly what we saw happen yesterday.
It is no great secret that there are problems in the EU with regard to the Greek debt crisis. The mis-management of the situation by the EU has been particularly deplorable. And just yesterday, at roughly 11AM, S&P downgraded both Greek and Portuguese debt to junk status, adding further fuel to the fire. This sent the stock markets considerably lower, and the flight to safety trade strengthened the Dollar and Yen.
So while there are individual economic data that are reported for the various regions, this Euro crisis is clearly the elephant in the room. Today, the FOMC decision on interest rates is due out, but don’t expect any change to either the benchmark rate or the language surrounding it.
Today the market has seemed to have shaken off yesterday’s news and is bouncing higher, though gains may be short-lived as risk fears increase with every passing day of a Euro non-resolution.
In the forex market:
Aussie (AUD): The Aussie is higher this morning as inflation has picked up down under. The CPI figures show that prices climbed .9% last quarter, slightly higher than analyst expectations. The year-over year figure was also slightly higher to 2.9%, prompting analysts to increase their view that yet another rate hike may be forthcoming at next week’s policy meeting.
Loonie (CAD): The Loonie is also higher this morning on slight risk-taking and a rebound of commodity prices despite the fact that Bank of Canada Governor Carney said that “nothing is pre-ordained” with regard to a Canadian rate hike. This is a basic attempt to jaw-bone the Loonie lower, as a stronger currency poses a risk to economic recovery.
Kiwi (NZD): The Kiwi is higher on risk-taking ahead of the interest rate policy decision due out tomorrow in the overnight session. While rates are expected to remain stable, be aware of any clues that may signal a rate hike sooner than the market is currently expecting. In addition, NZ business confidence figures came in better than expected adding to Kiwi strength.
Euro (EUR): Oh the Euro! So the Euro breached 1.32 yesterday on the debt downgrades to junk status, and no resolution is in sight. The major impediment right now is that German delay tactics; and the market is pressuring action by selling the Euro and demanding higher yields to loan to troubled EU members. Part of the problem is that elections are taking place in Germany, and bailing out Greece would not be seen as popular. Meanwhile, the Greeks are striking to protest austerity measures which could slash salaries by 30-50%. Regardless of what happens in the near-term, this does not look good.
Pound (GBP): The Pound is lower this morning as a BOE policy-maker described the UK economy as being in a “fragile state”. This comes in advance of next week’s elections which frankly can’t get here soon enough. What was once thought of a strictly a battle between the Conservatives and the Labor Party has rapidly turned into a three horse race as the Liberal Democrats have charged onto the scene and are making the most headway. This all but guarantees a “hung Parliament”, but concerns over the UK budget deficit reduction plans and how it will affect economic recovery remain at the forefront.
Dollar (USD): Today’s FOMC meeting is expected to produce no change. Recent pockets of decent economic data show that the economy is improving, but at what rate? The pace of recovery is important because the longer it takes, the harder it is to gain the momentum necessary to grow and create jobs. Bernanke testified yesterday that the US has to do something about its budget deficit besides making phantom projections that we can grow our way out of it. The Goldman Sachs hearings yesterday only added to the view that elected officials are almost completely incompetent.
Yen (JPY): The Yen is weaker on the resumption of carry trades and that retail sales figures came in higher than expected, rising at the fastest pace in nearly 13 years. This is important because it shows signs that domestic demand may be improving in Japan, which had for years been known as a country of savers. This is just one data point that demonstrates that economic recovery may be taking place, after years of stagnation.
One of the great things about the forex market is that it is a relational market. By that I mean that regardless of how good or how bad a particular currency may seem, it will always trade with respect to other world currencies.
If the Euro were a stock right now, there’s a good chance it would be halted by the exchange to restore balance. If it was a commodity, it would probably be “limit down”. And yet here the Euro is, showing gains against the Dollar, Pound, and Yen despite all of the risk surrounding the region.
What this means is that there is good volatility which in turn means good opportunity. This can be seen day in and day out as the market vacillates between risk taking and risk aversion. It’s not that the market has forgotten about the risk related to the Euro, but rather knowing that a currency does not trade in a vacuum. In this regard there is money to be made from either point of view. The important things to remember are to be aware of the time frame you are trading in; and always use proven risk management techniques.
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, bank, Bernanke, BOE, cad, canada, carr, carry trade, commodity, course, crisis, currenc, currencies, currency, currency market, currency trading, data, decision, demo, dollar, dow, economic, economy, EUR, Euro, fear, forex, forex market, free, fx, fxedu, gbp, gold, Il, interest, interest rate, interest rates, Japan, jpy, Kiwi, live, loonie, lower, market, meeting, Mike Conlon, momentum, money, news, nzd, pound, practice, practice account, retail sales, RSI, short, ssi, stock, technique, time, trade, trades, USD, Yen
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“Loonie” for Canada!
By Mike Conlon | April 21, 2010
On the heels of yesterday’s interest rate policy meeting, the Loonie is seeing continued strength as the BOC set the stage for future rate hikes. The economy has been strong and while unemployment is a bit high, inflation fears are beginning to heat up as typically inflation will rise faster in Canada than in the US. This is taking place despite the risk aversion in the market this morning.
There is slight risk aversion in the forex market as the IMF/EU/ECB meetings with Greece are taking place. While this whole situation has become a comedy of errors, let’s hope it doesn’t end in Greek tragedy. Nevertheless, this drama will continue to play out until the final act. The Euro is lower this morning as a result.
More positive news came from the UK, as jobless claims fell more than expected, showing signs that the UK economy may be on the road to recovery. Minutes from the BOE policy meeting showed unanimous consent to keep rates steady, though as mentioned yesterday, there is some concern that inflation is starting to show up outside of accepted target rates.
Meanwhile, the US is picking up support in its quest to see a strong Chinese Yuan on a day which is devoid of major market moving news for the US.
In the forex market:
Aussie (AUD): The Aussie is slightly lower this morning on risk themes however if is near 6-month highs. In general the global economic news has been strong as of late, but risk coming from the Euro zone and the issue of Chinese Yuan re-valuation is weighing on investors. In addition, an index of leading economic indicators came in at 18-month highs, demonstrating further signs of Australian economic strength.
Loonie (CAD): The Loonie is stronger again this morning, trading at .997 vs. USD. Yesterday’s interest rate policy meeting has set the stage for future rate hikes in a straightforward manner, prompting some analysts to wonder why they didn’t just raise rates yesterday. Barring any further major risk-events, I expect the Loonie to trade at or below parity with USD.
Kiwi (NZD): The Kiwi is slightly lower on risk aversion and signs of a muted economic recovery. Tomorrow will bring consumer confidence figures which may give insight into near-term economic growth.
Euro (EUR): Debt talks begin today between Greece and the IMF/EU/ECB with how to handle the potential bailout. Credit-Default swaps are at a record high, showing signs that the market believes a default is imminent. It doesn’t help that the Greek finance minister is saying that Greece could activate the aid package before the talks are even over. Signs of contagion in the region are also picking up, with Portugal as the most likely to come under fire. Equities markets are lower in Europe today.
Pound (GBP): The Pound is higher this morning as jobless claims fell more than expected, showing further signs of economic recovery. In addition, the MPC minutes showed unanimous support for the no rate hike, yet the threat of higher-than-targeted inflation figures could cause the BOE to act. Retail sales figures are due out tomorrow, followed by GDP figures on Friday.
Dollar (USD): The Dollar is marginally higher this morning on risk themes, despite the slew of “good” corporate earnings reports. I suppose that companies that have trimmed the fat by firing workers should be reporting good earnings, but that’s a conversation for another day. In addition, big bank earnings once again beat expectations—today it’s Morgan Stanley—as the free money the Fed supplies these banks conveniently makes its way to trading desks on Wall St. and not Mom-and-Pop on Main St. The stock market futures are slightly higher, as are commodities.
Yen (JPY): The Yen is slightly lower as the mild risk-aversion to start the morning is not enough to cause the un-wind of carry trades. The Bank of Japan Deputy Governor was out saying that he sees “light at the end of the deflation tunnel”, and is expected to continue with accommodative monetary policy.
Today is a day marked by individual currency strength. Both Canada and the UK are strong, while the Euro zone is weak. Today can be classified as neither risk-taking nor risk-aversion. On days like today, use the individual currency fundamentals to guide your trading and keep an eye open for any changes to risk themes.
Without any major news to affect the forex market, take clues from both US stock market and both oil and gold. While the usual correlations may not be as strong as on other days, the disconnects can sometimes provide excellent trading opportunities.
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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Fearful Friday!
By Mike Conlon | April 16, 2010
This morning is starting out with a moderate bias toward risk-aversion. There is no real news in the marketplace that should change this bias going into the weekend. The themes are very familiar, as I pointed out yesterday, and I would be surprised if traders weren’t lightening the load going into the weekend.
Let’s start with the Euro. Greece has requesting a meeting with the EU, IMF, and ECB that will begin on Monday. Many believe that this will begin the process of requesting aid under the terms of the previous agreement. However, Germany is balking and the situation may become untenable as Greek bond yields are soaring through the roof, thereby raising the cost to Greece to receive funding.
In the UK, the first televised debate occurred last night and the consensus winner was….neither the conservative nor labor party candidate. It was actually a third-party candidate, now throwing the notion of political gridlock even further in the mix.
Lastly, Chinese Yuan forwards are higher as the market believes that China may be closer to relaxing it’s currency peg to try to slow down it’s overheating economy. No one is really 100% sure of what this is going to mean for the global economy, so uncertainty abounds.
In the US, Google (GOOG) earnings last night disappointed, but US housing starts came in higher than expected this morning. Consumer confidence figures are due out at around 10AM EST.
So all of this equals risk aversion, and I don’t expect a reversal going into the close today.
In the forex market:
Aussie (AUD): The Aussie is lower on risk aversion this morning. A potential Chinese slowdown will affect Australian exports. No other news from down under.
Loonie (CAD): The Loonie is lower this morning for the same reasons as the Aussie, and is now trading below parity with USD. Expect the Loonie to hover around parity until either a major risk event occurs in the marketplace prompting a flight to safety, or the BOC hints of a rate hike prior to its next policy meeting.
Kiwi (NZD): All is not lost in New Zealand! The Kiwi is actually higher this morning despite risk-aversion, as housing prices rose 1.7% from last month. However, this blip on the screen of inflation will not be enough to convince the central bank to raise rates, as the NZ economy is still mired in high unemployment and tight credit conditions.
Euro (EUR): The Euro. Wow. All I can say is wow. It didn’t take long at all for Greece to start asking for money and for Germany to already start back-pedaling. I think it’s unfortunate that Greece may not be given a chance to turn its economy around despite the position they have put themselves in. Germany’s holier-than-thou attitude is a major detriment to the entire structure of the EU, despite the fact that Germany was allowed to thrive on the back of the countries like Greece.
Pound (GBP): So now a third-party candidate has emerged in the battle for control over the UK government. At first it was the showdown between incumbent, Labor Party Brown vs. Conservative Party Cameron. Now Liberal Democrat Clegg has emerged as the winner of last night’s first televised debate, further complicating matters. So the Pound is lower and expect it to trade in a range heading into the May elections, all things being equal.
Dollar (USD): US equity futures are lower this morning as are commodities, as Google reported worse than expected earnings last night. The Dollar is higher as the flight to safety trade is in effect, and while housing starts came in better than expected, the market is starting to realize that more housing starts may mean further supply which could further depress prices, especially if these new projects come in under current market rates. Consumer confidence is coming out and if the number is worse than expected, I think we could see a further strengthening of US and weakening of stocks.
Yen (JPY): The Yen is higher as carry trades are being un-wound going into the weekend. Risk aversion affects the Yen as it is the vehicle of choice for most carry trades. The Yen pulled back a bit as a Japanese government official said that the BOJ should shoot for a 2% target inflation rate. It is widely believed that the only way to combat Japanese deflation is through a weaker Yen.
Despite encouraging economic data emerging from various parts of the globe, there is still MAJOR risk in the markets. While the US stock market may be humming along, there is still a major disconnect between Wall St. and Main St. The world is counting on US recovery but this may drag out for a long, long time.
In the meantime, if the Euro collapses because they can’t get their act together, it could set off a chain reaction the likes of which no one has seen before.
And throw China into the mix, which no one knows what they’re going to do, and it all adds up to a Fearful Friday.
Now is not the time for the “hero trade”, and I suggest paring back positions going into the weekend. Better to be safe than sorry.
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, Australia, bank, cad, carr, carry trade, central bank, China, commodities, course, currenc, currency, currency market, currency trading, data, demo, dollar, dow, ECB, economic, economy, EUR, Euro, fear, forex, forex market, free, fx, fxedu, gbp, Il, Japan, jpy, Kiwi, live, loonie, lower, market, meeting, Mike Conlon, money, new zealand, news, nzd, pound, practice, practice account, rate, RSI, ssi, stock, stocks, time, trade, trader, trades, unemployment, USD, Yen
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Top Performers!
By Mike Conlon | March 3, 2010
Forex System Selector (FSS) Top Performers!
When considering any automated forex system providers, not only is it important to have good strategies, but also it is equally important to have a good platform. FSS has you covered on both fronts!
When investors select individual EAs to use, market conditions will determine how effective any one EA will be. If market conditions aren’t ideal, even the greatest strategies can have less-than-desired results.
And that’s the problem with the “one size fits all” approach. You wouldn’t take a sports car four-wheeling, would you? Nor would you want a golf cart on the Autobahn!
Not to worry, the FSS has you covered, as there are over 40 different systems that can excel in a variety of different market conditions. Now you have the power!
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Here’s a look at our top 5 performing systems from last month:
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Tags: account, blog, demo, demo account, forex, forex trading, forextrading, free, fx, idea, Il, invest, investor, market, pip, pips, rate, ssi
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More Problems for the Euro!
By Mike Conlon | January 19, 2010
The Euro (EUR) is down again today against the US dollar (USD) and looks ready to test support at 1.42. The problems in Greece may have a carry-over effect which will diminish the Euro as a viable alternative to the US dollar.
The problem in the Euro Zone is two-fold: either the other Euro nations come to Greece’s aid and bail them out which will in turn send the wrong message to the other PIIGS countries, or they allow Greece to exit and risk possible defaults as credit spreads widen because of the increased risk. Either way, the solution for the Euro is not easily rectified and how this plays out will be interesting to say the least.
In either event, I expect continued Euro weakness and if the Euro breaks psychological support at 1.42, then the next stop could be 1.382, back to its 50% retracement levels against the US dollar.
Because of the lack of viable alternatives to the Euro, the British pound (GBP) is seeing some strength today, up across the board against all other currencies.
Until clarity emerges from the Euro situation, the pound appears to be ready to strengthen against the Euro.
Let’s look at 2 quick charts: (click charts to enlarge)
The first chart is of EUR/USD and illustrates the different Fibonacci levels which can act as support or resistance within larger trends. When trends reverse, these levels an act as “magnets”– pushing the prices toward those levels. So if the problems with the Euro persist, then keep an eye on these levels.
The second chart is of EUR/GBP and it shows the current action of the Pound vs. the Euro. The pound provides a viable alternative to the Euro, so even though the UK has their own set of problems, the market may deem the Euro’s to be worse so I’m expecting continued pound strength against the Euro. I’m looking for a move down to .85 for this pair.
To learn more about how you can use Fibonacci numbers or other technical analysis to enhance your trading, be sure to check out our currency trading courses!
If you want to follow these trades live to see how this may play out, get a free, live demo account here!
Tags: account, blog, charts, course, currenc, currencies, currency, currency trading, demo, dollar, dow, EUR, Euro, forex, forextrading, free, fx, fxedu, gbp, Il, interest, market, Mike Conlon, pair, rate, ssi, technical, trade, trades, trend, USD
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Yen Strength!
By Mike Conlon | November 25, 2009
As I’m getting ready to take off for Thanksgiving, was just taking a look through some different charts and noticed this one on dollar/yen (USD/JPY): (click chart to enlarge)
This 10-year chart of USD/JPY shows that the dollar is at its weakest against the yen in over 10 years! Remember that when this chart makes new “lows”, it actually means strength for Japanese yen. And you thought I was kidding about dollar weakness in my article below!
To learn more about how to use charts in your analysis, be sure to check out our currency trading courses!
To get started with a demo account, click here.
Happy Thanksgiving to All!
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Risk On, Risk Off!
By Mike Conlon | November 17, 2009
Much like Mr. Miyagi’s advice to Daniel-san, today’s forex market is a case of wax-on, wax off. The lesson to be learned here is that the more things change, the more they stay the same. What do I mean by this? Well, it is rare that any investment just moves in one direction without experiencing some sort of pullback, sideways action, or just a brief pause.
The thing that makes the currency market so nice to trade is that the market tends to “trend” more than other markets such as the stock or futures markets. The reason for this is because the currency markets are driven by fundamental policies of major countries around the world, and it is a rare situation that these policies shift as frequently as other markets.
So one of the easiest ways to participate is to just find currencies with identifiable trends– and then trade with them! I’m sure you’ve hear the phrase ,”the trend is your friend”– and this couldn’t be more true than in the forex market.
So today the market is risk-off day, as the last few days were risk-on! As to be expected, there is US dollar (USD) and Japanese yen (JPY) strength, and Australian (AUD) and Canadian (CAD) dollar weakness. So if you’re a short-term trader, you can make a few bucks playing the counter-trend move on the smaller time-frames.
However, overall, the thing you should be looking at is the trend. Let’s take a look at the AUD/USD pair: (click chart to enlarge)
So even though, this pair is down (1.01%) today, the overall trend is up. So this is what we would call a buying opportunity. Now, does that mean that this pair is going to continue higher forever? No, of course not. But until there is a fundamental change in the economy, policy, etc. this represents a low-risk opportunity to get into the trade. Not to mention the daily interest you will make from this pair!
And as a trader, this is exactly what you should be looking to do: get into trades that are low risk with potentially high rewards.
To learn more about how to identify trends, be sure to check out our currency trading courses!
Think you know about technical analysis and want to test the market? Sign up for a free, real-time demo account here!
Tags: account, AUD, blog, cad, course, currenc, currencies, currency, currency trading, demo, dollar, dow, economy, forex, forextrading, fundamental, fx, fxedu, interest, invest, jpy, market, Mike Conlon, pair, time, trade, trader, trades, trend, USD, Yen
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Whoops! Shoulda Zigged When I Zagged!
By Mike Conlon | November 13, 2009
Let me start by saying thank you to MT4 for having issues that have prevented me from trading. While my logic was correct in that “something had to give”, my choice was wrong predicting yen strength and Aussie/Kiwi weakness.
The exact opposite occurred!
Here’s a quick chart of Kiwi/Yen (NZD/JPY):
(click to enlarge)
My logic this AM was that barring some sort of news for Aussie/Kiwi strength, I figured that someone “knew something” about Japanese yen and why it was moving. Looks like that guess was wrong and this trade almost certainly would have ended in losses.
Just goes to re-enforce what I preach (but don’t always practice LOL) all the time– trade what you see and not what you think you know!
Wanna get started in this market today? Click here for a real-time, demo or live account today!
Tags: account, Aussie, blog, demo, forex, forextrading, fx, fxedu, Japan, jpy, Kiwi, live, market, Mike Conlon, news, nzd, practice, ssi, time, trade, Yen
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FOMC Rate Decision at 2:15 EST!
By Mike Conlon | November 4, 2009
Well here comes Bernanke again, who seemingly has become more of an English professor than an economist. Why do I say that? Well, all ears today will be on whether or not Bernanke is committed to keeping interest rates low for an “extended period”.
So basically, the market is waiting to hear those 2 magic words: EXTENDED PERIOD.
What happens if we heart those words again? Consensus is that the stock market and commodities will rally at least in the short-term, as will the commodity currencies (AUD, NZD, CAD) and the US dollar will fall against all but the Japanese yen (JPY). In other words, the risk-taking trade that I talk about so much.
Should the language change, then expect the risk-aversion trade to be on.
Either way, there are some encouraging signs that the economy is stabilizing if not improving, so rate hikes like the ones seen in Australia and Israel may be coming in the not-so-distant future.
So far in this mornings action, it looks like traders aren’t expecting any change in the language and haven’t waited, as JPY and USD are the biggest losers so far this AM.
So if your day-trading, remember to be careful around this announcement as the action can get VERY volatile in the minutes preceding and following the announcement.
Good trading to all.
If you’d like to follow the action live in a free, real-time demo account, click here.
Tags: account, AUD, cad, commodities, commodity, currenc, currencies, demo, dollar, economy, free, fx, fxedu, Il, interest, interest rate, interest rates, Japan, jpy, live, market, Mike Conlon, nzd, stock, time, trade, trader, trading, USD, Yen
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