No Recovery in Sight!
By Mike Conlon | February 4, 2010
US Initial Jobless Claims came in worse than expected this morning, rising to 480K, the highest level seen in three weeks. Analysts were expecting a slight decrease, so that makes this number “unexpected”. (As a side note, how sick and tired are you of hearing about “unexpected“economic reports as reported by media outlets?) Also to note this morning is that both the UK and the Euro zone left rates unchanged, which was not “unexpected”. So needless to say, this morning is a risk-aversion day.
Here’s the rundown of world currencies:
Aussie (AUD): The Aussie is down this morning as expected. The major news for the Aussie will be made overnight as the RBA will come out with its quarterly monetary policy statement. There was a bit of new this morning that retail sales figures in Australia were down (MoM) to -.7%, showing a negative figure as consumers are starting to become more interest-rate sensitive.
Kiwi (NZD): The Kiwi is getting smacked this morning with the double whammy, losing value due to risk-aversion but also contributing was their unemployment report. Unemployment in New Zealand rose to 7.3%, the highest level in over 10 years, dampening hopes for any rate hikes in the near future.
Loonie (CAD): Building permits in Canada increased in December, showing signs that there may be hope for economic growth. However, the Loonie is down this morning, suffering from its correlation to oil and the general risk-aversion theme.
Euro (EUR): The Euro is down this morning against all but the Aussie and Kiwi, assuming its rightful place in the risk pecking order. The ECB voted to keep interest rates unchanged at a record low 1%, as concern about Greece stills weighs heavily on the common currency. There is a fine line the Euro zone countries are walking, attempting to encourage growth while at the same time reduce deficits and rein in budget shortfalls.
Pound (GBP): The BOE also kept rates unchanged at .5% and has also announced plans to not expand its bond purchase program (QE) for the first time since the program was initiated last march. The UK is trying to balance the threat of inflation at the expense of economic growth. It is also important to know that general elections are coming up in May and the “throw the bums out” mentality has made its way to the other side of the pond and is not only popular in the US. So the BOE is also taking potential political change into account.
Dollar (USD): I’ve already touched on the bad news about initial jobless claims, and tomorrow’s Non-Farm Payrolls Report (NFP) is weighing heavily on the US economy. Readers of this blog know that of course that means the dollar is up, as the flight to safety trade takes hold. Lost in the mix are pretty decent earnings reports coming out of the stock market, though as a most likely result of cost-cutting and firing workers. See the irony here?
Yen (JPY): Lastly, the Japanese yen is the big winner this morning, benefiting from the risk-aversion trade. Because of its status as the reserve currency for the carry trades, when risk aversion takes place, demand for yen goes up as traders flee riskier currencies.
As I scan the different news wires, I can’t help but notice that I haven’t seen one piece of encouraging news out there that would lead me to believe that economic recovery is gaining traction. The only silver lining I found, decent corporate earnings, is a joke compared to what’s going on out there.
At the US market open, stocks are down. Europe is down currently and Asia closed down overnight. Not to be Debbie Downer here but today could be ugly with a capital ‘U’. Oil is down to 76 and change, and gold is down testing 1100.
Remember, in order to benefit from a strengthening dollar, you have to sell a different currency and buy dollars to make gains! Just having dollars in your bank account does you no good except potentially influence your purchasing power. The only way to take advantage of these moves is through the forex market. When you’re sitting there looking at a red screen (because everything is down) and have no idea where to put your money, the forex market can give you a safe haven.
Isn’t it time you looked at this today? To get set up for a free, real-time practice account, click here.
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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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Busy Week Ahead!
By Mike Conlon | January 25, 2010
Rumors abounded last week that Fed Chairman Ben Bernanke was losing political support for re-confirmation and there was some speculation that he might not get the “nod’. Combine that with president Obama’s populist rhetoric and the markets sold off because of the uncertainty. The one thing I cannot stress enough is that THE MARKETS HATE UNCERTAINTY!
Realizing the consequence of their actions, politicos this weekend conceded that Bernanke will most likely be re-confirmed so it was game on for the markets again. As a result, the theme so far this morning is mild risk-taking. The Aussie (AUD) and Kiwi (NZD) are up, the Japanese yen (JPY) is down.
The yen drop also comes as a result that “people familiar with the situation” claim that the Bank of Japan will expand bond buying to keep the yen from strengthening too much and encourage weakness to help exports.
The British pound (GBP) is also showing strength this morning, as the UK GDP report is expected to show an expansion of .4% in Q4 vs. a previous contraction of .2% in Q3. The pound is also near 5-month highs against the Euro (EUR) which is currently under pressure from problems with the PIIGS countries, particularly Greece.
Also on tap this week is GDP reports from the UK on Tuesday and Annualized GDP from the US on Friday.
Consumer Price Index (CPI) reports from the Euro Zone and Australia on Wednesday and Japan on Thursday.
Interest rate decisions from Japan on Tuesday and the US and New Zealand on Wednesday.
That plus a smattering of consumer confidence numbers from various regions plus the US and President Obama’s State of the Union address should make for a volatile week!
When trading markets that are expected to have a higher degree of volatility, it is important to stay nimble and not “get married” to a position. Remember to cut your losers short and let your winners run!
Happy trading!
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To follow these events live in a free, real-time practice account, get started here!
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Obama Spooks the Markets!
By Mike Conlon | January 22, 2010
In what can only be described as adding insult to injury, President Obama announced yesterday his plan for regulating the too-big-to-fail banks and bring back some provisions of the Glass-Steagall Act. Now don’t get me wrong, I think these banks should be reigned in and be subject to stricter regulation, but man, his timing couldn’t have been worse.
After the employment figures came out yesterday and the Philly Fed announcement, the stock market began to tank and we saw a rapid shift to risk-aversion. Combine that with the uncertainty created by Obama and we saw a volatile confluence of events. The sad part of all of this is blame game going on between Washington DC and Wall St.
The American people responded in Massachusetts by pushing back against the political machine and its a shame that the administration feels the need to pile on with the timing of this proposal. The “be careful what you wish for” line of thinking in Washington is disgusting, and the fear and bully tactics won’t gain them any political goodwill.
In general, I can’t stand politics but unfortunately this needed to be addressed as government actions can have a MAJOR effect on the market place.
This morning, I’m seeing a brief respite from yesterdays move but that doesn’t mean it won’t continue. Japanese yen (JPY) is strong this morning and the US dollar (USD) is weak.
Also this morning there was weaker than expected retail sales figures coming from both Canada and the UK. Both the Loonie (CAD) and the British pound (GBP) are down this morning. The Loonie is seeing added weakness as the price of oil has pulled back to around $76 on weak demand.
So if you’re an investor, I would lighten up on the risk-taking and keep an eye on news coming out of Washington DC. Either way expect market volatility to pick up.
To learn more about how politics and your investments are intertwined, be sure to check out our forex trading courses!
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US Jobless Claims Rise!
By Mike Conlon | January 21, 2010
I don’t know why I even bother to express surprise anymore when every economic figure that comes out is “unexpected”. Trying to peg certain figures by using analyst expectations can be a fool’s folly. Let’s take today’s US Jobless claims figures which showed a rise of 36K more claims, as opposed to the analyst expectation of a small decrease.
As a result, the equity markets did an about face and proceeded to sell despite the fact the Goldman Sachs reported “record earnings”. Don’t lose sight of the fact that this comes on the back of the US taxpayer, but what’s a few billion dollars among friends?
So now that the stock market is down considerably, we have switched from mild risk-taking to risk aversion. This means that both the US dollar and Japanese yen are now the favored currencies of the day. Let’s take a look at a chart of the Aussie/Yen (AUD/JPY) to show the extreme volatility of this move. (click chart to enlarge)
As you can see, the market is still VERY skittish regarding any bad economic numbers that will show the recovery is not moving along as may have been previously thought. In markets as volatile as these, it’s important to keep tight stops and to look for reversals. As the new year is just starting, the markets are trying to find some sort of direction in what can only be described as “rudder-less ship trading”. In other words, extreme volatility.
As a quick aside, this AUD/JPY pair is down another 30 pips to 82.35 in just the time its taken me to put up this post. Wow. If you own stocks, today might be an ugly day.
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Tags: account, AUD, Aussie, blog, course, currenc, currencies, currency, currency trading, dollar, dow, economic, forex, forextrading, free, fx, fxedu, Il, Japan, jpy, market, mike conlon, pair, pips, practice, ssi, stock, stocks, time, Yen
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Chinese Growth Unstoppable?
By Mike Conlon | January 21, 2010
Wow. Chinese GDP has reportedly come in with a 10.7% increase for last QUARTER. This is the highest percent gain in China since 2007, when they were operating in overdrive to prepare for the Beijing Olympics! To put this in perspective, there are still countries out there reporting negative GDP growth!
If this number is for real (some would argue that’s always a question when dealing with China), then its pretty clear that their growth will be leading the globe out of recession. As a result, we are seeing a bit of risk-taking in the market today, with both the Aussie (AUD) and the Kiwi (NZD) benefiting. After all, China does import a lot from those countries so when the goings good in China, its probably going well in Australia and New Zealand as well.
The yen (JPY) is also down the most, as it is resuming its status as the world’s funding currency for carry trades and risk-taking.
Coming out of Europe, the Euro (EUR) is down slightly against the US dollar (USD), having been down lower during the Euro session to its lowest levels in 6 months. However, it is still holding support at 1.40, an important psychological level for the Euro. Rumors are floating that the Euro Zone may offer an emergency loan to Greece, but this is being vehemently denied as that would set a bad precedent for the other PIIGS countries.
The British pound (GBP) is down as well, as the UK budget deficit widened the most in almost 15 years.
So the overall tone today is mild risk-taking, which could also just be a rebound from yesterday’s increased appetite for risk-aversion.
To learn more about how economic events can affect currencies and how you can profit in the forex market, be sure to check out our forex trading courses!
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Canada CPI, Risk Aversion Rule!
By Mike Conlon | January 20, 2010
This morning, Canada reported its CPI number which came in at -.3% for December and the year over year number at 1.3%, both of which were less than expected. This is significant because the CPI is a measure of inflation, and this number is much less than the Bank of Canada’s inflation target of 2%.
What this means is that it is highly doubtful that that the Bank of Canada will raise rates anytime soon. As I mentioned yesterday, this all but takes a rate hike off of the table until at least the second half of the year. As a result, the Canadian dollar (CAD) is down the most today, especially against the US dollar (USD) and the Japanese yen (JPY) -1.7% and 1.3% respectively.
Also to note is that today is a risk-aversion day. News out of China that they are going to restrict bank lending is a sign that they may be trying to slow down growth and are growing concerned about a potential real estate bubble. As a result, both the Aussie (AUD) and the Kiwi (NZD) are down as well.
The US stock market is also down on China fears, as is both oil and gold. So the Loonie is getting hit with the “triple whammy” today between risk aversion AND CPI numbers.
To learn more about how world events and economic figure can affect the forex market and how you can PROFIT from it, please check out our currency trading courses!
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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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Canada Rate Decision Imminent!
By Mike Conlon | January 19, 2010
Canada’s interest rate decision is due out at 9:00AM this morning. It is widely accepted that they will leaves rates unchanged at .25%, which is a record low. Inflation appears to be well within the Central Bank’s target rate of 2%, which could mean that they won’t consider a rate hike until the second half of the year.
Part of the reason to remain flat is due to Canada’s reliance on a US economic recovery, as the US is the largest market for Canadian exports. So it is quite possible that we won’t see a rate hike in Canada until we see one in the US. While the recovery is taking place in Canada, its not strong enough to warrant rate hikes at this time.
According to Bank Governor Mark Carney, the economy will operate with “slack” throughout the middle of next year as the Canadian dollar’s 20% gain versus the US dollar has hampered exports.
So barring any unlikely rate hikes, I expect the Loonie to trade sideways until inflation becomes a problem in Canada, and the Loonie will continue to benefit from its status as a commodity currency.
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Tags: bank, canada, central bank, commodity, course, currenc, currency, decision, dollar, economic, economy, forex, forex trading, fx, fxedu, Il, interest, interest rate, loonie, market, Mike Conlon, rate decision, ssi, time, trade
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Quiet Day Today!
By Mike Conlon | January 18, 2010
Without the benefit of the US stock market trading today, the currency market is meandering around, trying to decide which way it wants to go. It appears as though there is slight risk-taking, with the commodity currencies up vs. the US dollar (USD) as traders re-establish positions that they had taken off for the long weekend. The Euro is also weak, but up marginally against USD.
While there appears to be heightened risk in the world markets, the dollar is not responding that way– yet. This week all eyes will be on the quality of US earnings reports, as well as any news out of the Euro Zone in regards to the mounting situation in Greece.
This week is somewhat quiet as far as news events go, with the Bank of England policy meeting minutes, Canadian CPI, and the US Philly Fed highlighting the potential market movers.
When the US markets reopen tomorrow, I expect to see risk-taking trends continue unless/until some news hits the tape. But without decent volume today, I’m on the sidelines.
I’m actually going to do some testing of some automated trading systems we are going to be offering so stay tuned for teh results!
To learn more about the forex markets, be sure to check out our currency trading courses!
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