Retail Sales Improve!
By Mike Conlon | March 12, 2010
All eyes were on the US retail sales figures, as the US consumer represents some two-thirds of US GDP. There was speculation that bad weather would affect this number, causing it to be lower than expected. Well, that hedge turned out to be unnecessary, as there was a negative expectation of -.2%. The number came in much better than expected, at + .3%, which is positive growth as opposed to a negative expectation. So expect stocks to rally higher, but be wary of the correlation of “stocks up, dollar down” as some in the market may feel that this could have a material impact on US interest rate policy.
In other news, Canadian employment figures came in better than expected and Japanese Finance Minister Kan used the dreaded “I” word—as in intervention, which readers of this blog know is not totally unexpected.
In currencies this morning:
Aussie (AUD): The Aussie is higher this morning as investors are seeking yield as economic conditions appear to be improving, particularly in the US. No real news but the Aussie has made one attempt at .92 vs. USD and could challenge 2010’s high of .932 in short order.
Kiwi (NZD): Retail sales figure came in at a better-than-expected .8%, showing signs that domestic demand in New Zealand is improving. This bodes well for their economic story but we shouldn’t expect any rate hikes until mid-year as the policy meeting told us earlier this week. However, should inflation start to pick up, we could see a surprise hike earlier than expected.
Loonie (CAD): Good news out of Canada as the jobless rate fell to a 10-month low, falling to 8.2%. The Loonie is higher across the board as hopes that economic recovery is taking hold. According to an RBC analyst, the Bank of Canada is, “running out of arguments against keeping rates low”. The Loonie currently buys 98.35 US cents, and the Loonie could be at parity with the Dollar for the first time since July 2008.
Euro (EUR): The Euro is mostly higher this morning, as European Industrial outputs expanded 1.7%, the largest gain in almost 20 years. The Euro challenged 1.38 vs. USD and EU President Junker argued that the Euro zone needs new tools to be able to combat future crises.
Pound (GBP): The Pound is higher this morning, extending yesterday’s rebound. Reports are that the sell-off in the Pound has been excessive, as house prices in the UK rose at the fastest pace in 7 years, showing that the economic recovery may be taking affect. The Pound is at 1.514 vs. USD.
Dollar (USD): The Dollar is lower vs. all but the Yen as retail sales figures came in MUCH better than expected, as I mentioned above. Consumer confidence figures are due out at 10AM EST, but don’t expect that to have a material impact on today’s action. Other reports are that President Obama wants to nominate Janet Yellen as Fed Vice Chair. Yellen is known to be dovish, meaning that she is not an inflation hawk. This could mean extended zero interest rate policy as the government attempts to inflate their way out of debt on the backs of consumers, who will be forced to pay higher prices for everything. Stay tuned.
Yen (JPY): As I’ve mentioned before, Japan is not adverse to using intervention as a tool to keep Yen from strengthening, and earlier today Finance Minister Kan confirmed this. It is likely that yen will weaken as the government hopes to stimulate exports to improve their economy. It will be interesting to see how this plays out and if the Bank of Japan has enough muscle to fend off risk-aversion plays should global economic recovery falter.
As you can see, there can be different market responses to good economic news. One could make a cogent argument for either Dollar strength or weakness based on today’s sales figures. Inflation hawks will claim this means that the Fed should be raising rates; while doves say the economy is still too fragile and investors should seek yield elsewhere.
Regardless of which way the Dollar moves and its affect on other currencies, this is good news for the US economy.
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Pound Gains!
By Mike Conlon | January 13, 2010
The British pound (GBP) is trading higher after a BOE policy maker stated that interest rates in the UK may need to rise this year. This could signal the end to the Quantitative Easing (QE) policy the UK had undertaken to stimulate its economy.
So what’s left to do?
Sit back and wait.
This is a refreshing stance in world where instant and immediate gratification need to happen to keep the public at bay. What this policy-maker is essentially saying is that its OK to let market forces happen and to see how the policies they put in place will work out. All too often governments are quick to react to any negative news regarding their economic situation and are always trying to “tinker’ with policy, rates, statements, intervention, etc.
I’m not certain where they dig up some of these people charged with setting policy, but its almost as if they have completely forgotten that economies move in cycles. What goes up, must come down. Basic laws of gravity. The fable of the Ant and the Grasshopper. I could go on and on.
So kudos to Andrew Sentance, BOE policy maker for keeping it real. While the UK is not yet back on firm ground economically, the “wait and see” approach is better than the overkill that we see here in the US.
So let’s take a quick look at a chart of the British pound vs. the US dollar (GBP/USD): (click chart to enlarge)
As you can see from the chart, the pound has been up for the last four days in a row for the first time since last November since we’ve seen dollar strength in December. 1.59 is a good support level. As this pair has broken through the 38.2% fibo retracement level, it looks like the next stop could be 1.636 at the 50% retracement level. This could happen sooner than later as the US CPI numbers come out on Friday. If this figure comes in lower than expected, then that could send this pair higher on dollar weakness. So I expect we will be at the 1.64 level in short time.
If we should breach that 50% fibo level, then I would move my stop up to the 23.6% fibo level at 1.612 for those who are long this pair. While it is important to find trades that look like they are at the start of a trend or in a trend, it is equally important to know how to manage trades and place stops to limit losses.
Happy Trading to all!
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Tags: account, blog, BOE, British, course, currenc, currency, currency trading, dollar, dow, economic, economy, EUR, forex, forextrading, free, fx, fxedu, gbp, Il, interest, interest rate, interest rates, intervention, lower, market, mie, Mike Conlon, news, pair, pound, practice, practice account, setting, short, ssi, technical, time, trade, trader, trades, trend, USD
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BOJ to End QE Program!
By Mike Conlon | October 30, 2009
The Japanese yen (JPY) is strengthening today as the Bank of Japan announced it will stop buying corporate debt by the end of this year. This essentially means that they will stop flooding the market with yen, which in turn means supply will be less, which should translate into higher yen values.
JPY is up today, most notably against the commodity currencies. What’s going to be interesting is how far the BOJ will let the yen strengthen before the talks of intervention begin to surface again. There is still lingering deflation in Japan, so don’t expect an interest rate hike anytime soon. However, Japan appears to be emerging from the recession as unemployment has fallen to a 4-month low and household spending has impoved.
But a strong yen affects Japanese exports so it will be interesting to see the battle between the philosophies of the BOJ and the finance ministry play out.
So I’m watching and waiting!
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Tags: account, bank, commodity, course, currenc, currencies, currency, currency trading, decision, fxedu, interest, interest rate, intervention, Japan, jpy, live, market, Mike Conlon, practice, practice account, recession, ssi, time, unemployment, Yen
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Bloomberg Forecasters Agree with my EUR/CHF position!
By Sean Hyman | July 20, 2009
Today I just wanted to share a piece of a Bloomberg.com article with you that backs up my view in “selling francs” along with the central bank when you buy the EUR/CHF pair.
Here’s what they had to say about it:
July 20 (Bloomberg) — Switzerland’s central bankers are breaking the will of foreign-exchange traders with their first solo currency-market interventions since 1992. Less than a month after betting the Swiss National Bank’s franc sales would fail to halt its rise, investors are the least bullish since 2007, options prices show. This year’s five most- accurate franc forecasters in Bloomberg surveys see the currency trading between 1.50 and 1.55 per euro by Dec. 31, the range it has been in since after the bank started intervening March 12. “The SNB has won its battles, and they’ve given no indication that they are ready to end this policy,” said Jessica Hoversen, an analyst in Chicago for futures broker MF Global Ltd. She advises buying euros and selling the franc when it approaches the 200-day moving average. The currency traded at 1.5196 per euro as of 11:16 a.m. in London; the 200-day average was 1.5104. By holding back the franc, policy makers led by Chairman Jean-Pierre Roth, 63, are trying to prevent deflation from worsening the steepest recession since 1992 and restore investor confidence.
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Sean Hymanwww.forextradingblog.com
Tags: account, article, bank, blog, central bank, central bankers, CHF, course, currency, currency trading, demo, demo trading, dow, ETF, EUR, Euro, forex, forextrading, franc, free, fundamental, fx, fxedu, Hyman, intervention, invest, investor, market, mywealth, news, pair, practice, rate, real time, recession, sales, Sean, Sean Hyman, ssi, station, Swiss, Switzerland, technical, time, trade, trader, trading station
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Rumors of more Swiss Intervention in EUR/CHF. U.S. Weekly Unemployment Claims Improve!
By Sean Hyman | July 9, 2009
Rumors of Swiss (SNB) intervention catapulted EUR/CHF upward about 60 pips within minutes. Also, the U.S. Weekly Unemployment Claims was quite a bit lower than last time and lower than expectations. So that’s a great improvement. Unemployment Claims came in at 565k vs. 608k expected and 617k the previous month.
Tags: CHF, EUR, fxedu, intervention, lower, minutes, mywealth, pip, pips, Sean Hyman, Swiss, time, U.S., unemployment
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Will the Swiss Central Bank’s Intervention hold?!?
By Sean Hyman | June 23, 2009
Lately, the Swiss National Bank (their central bank) has been intervening in their currency in particular vs. the euro. When the EUR/CHF exchange rate pushed below 1.45, their exporters were screaming from pain. This was crushing their exporters and thus far has reduced exports by a full 17%. The SNB had enough of it and started selling francs and buying euros. They pumped a large number of francs out into the market to hopefully “water down” the Swiss franc (CHF) especially in relation to the euro since that’s where a ton of their exports go. Watch the 1.50 “line in the sand” to see if it can hold and reverse the longer term downtrend. Click the chart to enlarge it. 
Tags: bank, blog, central bank, CHF, currency, downtrend, EUR, Euro, forex, forextrading, franc, Hyman, intervention, market, rate, Sean, Sean Hyman, Swiss
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Here’s the full story on the Swiss Franc.
By Sean Hyman | March 12, 2009
Here’s the full story on the Swiss franc this morning: http://www.bloomberg.com/apps/news?pid=20601087&sid=awHMlSPjSp8U&refer=home
Tags: CHF, currencies, currency, dollar, euro, forex, franc, fx, fxedu, interest rates, intervene, intervention, invest, lower, market, money, movement, mywealth, parabolic, Sean Hyman, spot, swiss, trade, trader, trend, uptrend, wealth, yen
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