Fundamentals Do Matter!
By Mike Conlon | March 10, 2010
Now that the fears of global collapse have abated—for now—the markets have returned to heavier scrutiny on the fundamental numbers being reported in various countries. It is times like these that remind traders that indeed the fundamentals do matter. The longer the global economy can sustain itself without Armageddon taking place, the more and more traders will focus on specific stories and not overall risk themes.
So, while one might look at this morning’s action and be inclined to say that today is risk-taking because commodity currencies are higher, a more appropriate reaction would be that are actually both good and bad stories out there which are driving individual currency pairs.
More specifically, in currencies:
Aussie (AUD): One of the good economic stories out there is coming out of Australia which has had good gains as of late. Tomorrow they will be reporting their employment figures, which are expected to gain for the sixth straight month. In fact, the economy is buzzing along so well there that there is no an expectation that they may raise the benchmark interest rate again next month. The Aussie is in a clear uptrend and I expect it to test 2010 highs very soon.
Kiwi (NZD): The Kiwi is also another good economic story, though not as strong as the Aussie. While the interest rate decision due out tomorrow is expected to be unchanged, overall Asian recovery will benefit the Kiwi. The most important take-away from the rate decision will be the language used to give a clue as to a timeframe for further hikes. And should they surprise the market with a rate hike (highly unlikely), then lookout above!
Loonie (CAD): The Loonie is just kind of hanging out today, with no real news on tap in Canada. Oil is higher so the Loonie is up; and also riding the coattails of the Aussie and Kiwi. The only anomaly is USD/CAD, as there is dollar strength this morning.
Euro (EUR): The Euro is mixed this morning. On the one hand, now that the risk of a Greek default is mitigated, the focus is back on the fundamentals in the Euro zone. On the other, news out of Germany is that German exports are down, but German CPI is up. Traders are using this opportunity to cover some EUR/USD shorts, but otherwise the Euro is down vs. the commodities and up vs. the rest. I expect EUR/USD to be range-bound for a bit.
Pound (GBP): Another tough day for the Pound, which would be down across the board if not for the Yen. The Industrial production figures and manufacturing came in negative, marking the first decline since last August. This is likely to keep rates low in the UK for an extended period. Meanwhile, the BOE’s Adam Posen stated that he hopes their bond purchase plan “has done it” with regard to stimulating the economy but he didn’t rule out further quantitative easing.
Dollar (USD): There’s a bit of optimism about the dollar this morning as economic recovery appears to be going faster in the US than in Europe and Japan. As risk of a global collapse is lessening, traders are looking more toward the fundamentals. So the expectation is that we may see a rate hike in the US sooner than in Europe or Japan. However, don’t be surprised to see Dollar weakness should commodity inflation pick up.
Yen (JPY): The Yen is down across the board this morning in advance of the Japanese GDP report due out tomorrow as fears of deflation are warranted. Combine this with good news from the commodity currencies, higher commodity prices, and “risk-taking” and you have a recipe for Yen weakness. Carry traders are gaining more confidence and the Yen is the funding currency of choice.
As you can see, when global economic conditions become more stable, market fundamentals return to center-stage. Under “normal” conditions, currencies from the best economies will flourish, while those not doing as well will be sold.
And that’s the basic idea behind forex trading; that you want to own the strong currencies and sell the weak ones, hopefully picking up interest along the way!
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, cad, canada, carry trade, commodities, commodity, course, currenc, currencies, currency, currency market, currency pairs, currency trading, decision, dollar, dow, economic, economy, EUR, Euro, Europe, fear, forex, forex trading, fundamental, fx, fxedu, gbp, Il, interest, interest rate, Japan, jpy, Kiwi, live, loonie, market, Mike Conlon, news, nzd, oil, pair, pound, practice, practice account, rate decision, short, ssi, time, trade, trader, trend, uptrend, USD, Yen
Topics: What To Look At In The Market | No Comments »
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!
Well by now you must be thinking to yourself that, “these systems couldn’t possibly be any good”. Am I right?
Well how does earning 9000 pips in one month with a 95% winning rate sound to you? That’s the type of system you will find in the FSS.
Here’s a look at our top 5 performing systems from last month:
Are you skeptical like I am? Don’t take my word for it. Come see for yourself.
Sign up for a free, FSS demo account here and see what all of the excitement is about.
Say “good-bye” to individual EAs and MT4 and “hello” to FSS, the future of automated forex trading!
Tags: account, blog, demo, demo account, forex, forex trading, forextrading, free, fx, idea, Il, invest, investor, market, pip, pips, rate, ssi
Topics: What To Look At In The Market | No Comments »
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!
Tags: bank, British, cad, canada, course, dollar, dow, fear, fed, forex, forex trading, fx, fxedu, gbp, Il, invest, investor, Japan, jpy, loonie, market, market volatility, Mike Conlon, news, oil, pound, retail sales, RSI, stock, USD, Yen
Topics: What To Look At In The Market | No Comments »
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!
Tags: AUD, Aussie, course, currenc, currencies, currency, dollar, dow, economic, EUR, Euro, forex, forex trading, fx, fxedu, gbp, Il, jpy, lot, lower, market, mike conlon, nzd, pound, recession, ssi, trade, trades, USD, Yen
Topics: What To Look At In The Market | No Comments »
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.
To learn more about forex trading, be sure to check out our courses!
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
Topics: What To Look At In The Market | No Comments »
US Retail Sales Numbers Stink!
By Mike Conlon | January 14, 2010
From the “unexpected” category: US retail sales fell .3% in December, vs. analyst expectations that it would GAIN .5%. This is significant in that the December holiday season is one of the busiest times of the year and December is supposed to be a great month for sales. Holidays, end-of-year bargains, etc usually bring the shoppers out in droves. OUCH!
So what happened?
Well its clear that consumers are not confident in their own fiscal health which in turn affects their consumption patterns. With “official” unemployment figures at 10%– the reality is much higher and record housing defaults, its no wonder people are concerned. Not to mention the mounting debt the US is incurring that will have to be paid for at some time in the future. As tax receipts continue to decline, it won’t be long before everyone is called upon to “do their part”. Yep I’m talking about higher taxes.
So why is this disappointing figure so important? Well consumer spending in the US makes up close to 70% of US GDP!
Whoa. So if consumer spending is declining, foreclosures and unemployment are rising, it may be a VERY long time before we see an interest rate hike out of Bernanke and the Fed. And it looks like the markets have picked up on this, as the stock market has shook off this figure and has gone from an initial negative to positive. So that means the dollar is down against all but the Euro (see earlier post) as it is clear that the only thing driving world markets right now is the US zero interest rate policy (ZIRP).
So the risk-taking trade is on so far this morning. It will be interesting to see if stock investors come to their senses at all today– though I doubt that will happen in what’s become the bizarro world of investing!
Trade carefully!
To learn more about how these economic figures can have an impact on all markets, be sure to check out our forex trading courses!
Tags: Bernanke, course, dollar, dow, economic, EUR, Euro, forex, forex trading, fx, fxedu, holiday, Il, interest, interest rate, invest, investor, market, Mike Conlon, retail sales, stock, time, trade, unemployment
Topics: What To Look At In The Market | No Comments »
Non-Farm Payrolls Disappoint!
By Mike Conlon | January 8, 2010
The US Non-Farm Payrolls Report (NFP) is usually one of the biggest market moving numbers in the currency markets. Today’s number is no exception. The report came in for December at -85K, a very disappointing figure. Estimates were expecting this number to be flat, that we neither gained or lost jobs for the month. Although I had seen some pretty wild numbers tossed around, anywhere from +/- 200K. The revisions for the prior two months showed a net loss of 1K jobs, a negligible but encouraging figure.
So what does this all mean? Well in a word: trouble.
The US economy is not adding jobs nearly as quickly as the government had hoped. With all of the enormous amounts of stimulus spending, we have little to show for it. As a result of this figure, the US dollar reversed course and immediately began to weaken. If anyone had any delusions about a US rate hike in the first quarter of the year, they can pretty much forget about it as its now off of the table. Unless the dollar tanks so badly that Bernanke HAS to do something.
My guess is that we’re going to be looking at Japan 2.0 here in the US, our own version of their “lost decade”.
Just to illustrate the volatility that can occur around this figure, take a look at this chart of EUR/USD: (click chart to enlarge)
Close to 100 pips in a few minutes!
This could make an interesting year for the US dollar. There are 2 basic ways that we will see dollar strength this year; either through interest rate hikes or risk aversion plays. So while this logic may be a bit counter-intuitive to some, it’s going to be very important to take our clues from the other markets to see which theme is playing out.
And of course don’t forget that the dollar can continue to weaken well into this year, the question is going to be that if things don’t get better on the employment front, at what point does that filter through to the other markets?
Only time will tell.
To learn more about how these government figures can affect your savings, be sure to check out our forex trading courses!
Tags: Bernanke, blog, cad, course, currenc, currency, currency market, dollar, economy, EUR, eurusd, forex, forex trading, forextrading, fx, fxedu, Il, interest, interest rate, Japan, Mike Conlon, minutes, nfp, payrolls, pip, pips, time, USD
Topics: What To Look At In The Market | No Comments »
BOE Says: No Change!
By Mike Conlon | January 7, 2010
The British pound (GBP) is lower today after the Bank of England left interest rates unchanged at a record-low .5% for the foreseeable future. They also made no change to their bond buying (quantitative easing) program. While these moves were not unexpected, it is indicative of the greater economic problems going on in the UK. Housing prices rose the fastest last month, yet there are no other signs of economic improvement. This could cause further pressure on the pound, if bond investors start to pull out of the UK to seek higher yields elsewhere. In fact, an analyst at BNP Paribas analyst is predicting a 12% decline for GBP in 2010 as it “falls off a cliff”.
From the “well that settles that” department:
New Japanese Finance Minister Naoto Kan says that he favors a weak yen (JPY). Ask and you shall receive. As a result, the yen is down across the board today. This is in stark contrast to his predecessor Fuji, who wouldn’t say outright that he favored a weak yen. Kan says he will keep the yen at an “appropriate level” and doesn’t want a strong yen to derail economic recovery.
As the yen has resumed its place as the carry trade vehicle of choice, expect to see intervention should the yen strengthen at all during 2010. The only way that this happens though, is if we see the “flight to safety” trade pick up if there are problems with world economic markets.
Aussie Rules!
The Australian dollar (AUD) is at a 25-year high against the British pound (GBP). The commodity currencies have been on fire since the start of 2010, as gold and oil has been trading higher and investors are all for risk-taking this early in the year. Something to remember is that fund managers and large traders are usually willing to take greater risks early in the year, as they realize they have the entire rest of the year to make back any potential losses. So I expect to see gold and oil move higher in early 2010, which should take the commodity currencies higher with them.
Barring another financial crisis or a US Fed rate hike, this should be a pretty decent play. Keep an eye on the stock market and commodities to see if this holds up. I suspect we are going to see some commodity inflation, although the “official” inflation figures are ex-food and energy so don’t count on the Fed to recognize it anytime soon. It doesn’t take a rocket scientist to figure out that $3 gasoline or $5 milk is inflationary, yet the government will tell you otherwise.
The picture for the outset of 2010 is starting to become more clear. Tomorrow’s Non-Farm Payrolls report will be extremely important as it will show whether or not all of the stimulus is working and whether or not the US economy is improving enough for the Fed to begin to think about raising rates.
So all eyes are on this report at 8:30AM EST tomorrow. This will set the tone for Fed policy in 2010. So be sure to check back for my commentary on the report!
To learn more about how economic reports affect currencies, be sure to check out our forex trading courses!
Want to have some fun tomorrow and watch this event live in a free, real-time practice trading account? Click here to get free, no obligation access to this market!
Tags: account, AUD, Aussie, course, currenc, currencies, dollar, dow, economy, fed, forex, forex trading, fx, fxedu, gbp, Il, interest, interest rate, interest rates, invest, Japan, jpy, market, Mike Conlon, practice, ssi, time, trade, trader, Yen
Topics: What To Look At In The Market | No Comments »
Dollar/Yen at 3 Month Highs!
By Mike Conlon | December 30, 2009
The US dollar/Japanese yen (USD/JPY) trade is at a 3-month high as high as 92.5 in today’s session. I’ve been on this trade since early December, when I mentioned in this article about the possible trend reversal that occurred and that the Japanese government was attempting (turns out successfully) to jawbone the yen lower. This also comes about on US dollar strength, which I’ve repeatedly mentioned over the past few trading sessions.
Also interesting to note is some weakness in the Canadian dollar, otherwise known as the Loonie (CAD). Its down across the board, most notably against the US dollar, -1.00%. This is due in part to oil price fluctuation as well as a pullback from the recent strength its been showing.
Because we are at year -end, I tend not to put as much emphasis on the price charts as volumes are lower so the normal patterns and strength and resistance levels that I usually rely on can be compromised. So while I do see some intriguing set-ups, I’m going to keep the rest of my trades very short-term until we start the New Year.
This will allow time for the heavy hitters to come back and decide where they want prices to be. Call it a New Year “reset”. Liquidity risk is sometimes a factor that most traders don’t consider. I tend to become more cautious as the end of the year approaches as I like to hold on to my profits, thank you very much!
So if you are trading now, look to be a bit more cautious going into year end.
To learn more about how to trade in the currency market, be sure to check out our forex trading courses!
Have you been following this blog but have been afraid to check out the forex market?
Make it a New Year’s resolution to get a risk-free, real-time practice account to see what all the excitement is about!
Tags: account, blog, cad, charts, course, currenc, currency, dollar, dow, forex, forex trading, forextrading, free, fx, fxedu, Il, interest, Japan, jpy, market, Mike Conlon, practice, ssi, time, trade, trader, trades, trend, USD, Yen
Topics: What To Look At In The Market | No Comments »
A New Path for the US Dollar!
By Mike Conlon | December 21, 2009
I’ve written a lot about about the “tale of two trades” and how anti-dollar sentiment has been driving both the stock and commodities markets, but it appears as though this may be changing. Both the stock market and the US dollar Index are on pace to finish the last two months in positive territory, the first time this has happened since before the financial crisis of 2008.
This is due in part to the risk taking/ risk aversion correlation trades that have been taking place since that time. So it used to be US dollar (USD) down, everything else up; or dollar up everything else down. But this correlation seems to be unraveling, and today is a perfect example of this.
The stock market and oil are trading higher today, as is the US dollar index. Gold is lower today.
So what is all of this telling us? Its telling us that we can have an economic environment where both stocks and the dollar can go up in tandem. Since the aggressive measures the Fed took to stave off the Great Depression 2.0, companies have had an opportunity to get back into decent financial shape and now are able to produce “real” earnings if the economy is growing.
There is a good possibility that the Fed will raise interest rates some time next year, but I see this as more of a problem for gold and the housing market. Because the stock market has not been trading based on the fundamentals, I don’t expect to see a major sell-off if the Fed begins to raise rates. Part of this is because the rates right now are absurdly low, so even a few hikes would bring them back to historically “normal” levels. The other part is that if rates need to move higher, that means that we are growing the economy, which is the goal.
This Wednesday, the consumer confidence survey will come out which will be a good gauge of where people think the economy is. That’s the only real news for the US market in this shortened, holiday week.
We’re also going to be getting both the UK and New Zealand’s GDP figures. If these numbers come in less than expected, then we should see dollar strength on the flight to safety trade.
Also remember that volume is usually decreased during the holidays so we can see some increased volatility.
To learn more about how to take advantage of potential US dollar strength, be sure to check out our forex trading courses!
Tags: commodities, course, dollar, dow, economic, economy, fed, forex, forex trading, fundamental, Il, index, interest, interest rate, interest rates, lot, lower, market, mike conlon, news, oil, short, ssi, stock, stocks, time, trade, trades, USD
Topics: What To Look At In The Market | No Comments »