The Week Ahead!
By Mike Conlon | March 15, 2010
Not much happening today except the Empire Manufacturing number and Euro zone employment figures. There is speculation in the market that the Greek Tragedy will not be voted on at the 2-day EU meeting, making today’s theme risk-aversion to start the day.
Tomorrow will be the wrap up of the second day of meetings of EU finance ministers as well as the US FOMC meeting in the afternoon. Euro zone CPI figures will be reported. Japan is also expected to announce their rate decision in the overnight session.
On Wednesday news will be dominated by the UK, as jobless claims and the unemployment rate figures are due. PPI figures in the US will also be reported, which could give a hint to how we are doing on the inflation front. Considering this comes a day AFTER the FOMC, I wouldn’t expect this to matter that much to the market.
Thursday, we get US CPI figures, which could have a major impact if the numbers are hotter than expected. Depending on what the FOMC says on Tuesday, these figures could be in direct opposition to policy and could increase the chatter for higher rates in the US. We’re also going to get initial jobless claims, which could add fuel to the fire.
On Friday, Canadian CPI figures and retail sales figures come out which could put increased pressure on the Bank of Canada to raise interest rates. The Canadian economy seems poised for the move as all signs are pointing to economic recovery.
In currencies this morning:
Aussie (AUD): There is no major news due out for the Aussie this week so expect it to trade on overall risk themes. Things are starting to heat up in the China-US currency situation so this could have an impact on global risk and Chinese exports. This could affect Aussie strength. And while nothing is expected to happen this week, traders may start positioning themselves accordingly.
Kiwi (NZD): Like its big brother the Aussie, expect the Kiki to trade on risk themes as well. We are going to get New Zealand’s Consumer Confidence figures on Wednesday which could show how the domestic economy is doing. Should a worse than expected reading come in, then we could see some Kiwi weakness.
Loonie (CAD): This is an important week for the Loonie as the CPI and retail sales figures are due out on Friday. There has been much speculation in the market that the BOC will need to move higher on rates then the July timeline put forth by Governor Carney. Should these figures coming in hotter (higher) than expected, look for market to push the Loonie closer to parity with the US dollar.
Euro (EUR): Overnight, Euro zone unemployment figures came in a little worse than expected and today marks the start of a 2-day meeting of EU finance ministers. Early word is that they will not be deciding on an aid package for Greece, which has increased the uncertainty and heightened risk in the market. CPI figures are expected tomorrow but I can’t foresee them being higher, so there should be minimal impact to the market.
Pound (GBP): The Pound is paring back gains from last week and sits just above 1.50 vs. USD as news is re-surfacing about the potential for a hung Parliament as a result of the next elections. On Wednesday we’ll get an idea of the economy is doing as jobless claims and the Bank of England policy meeting minutes will be revealed.
Dollar (USD): The Dollar is higher this morning, despite the fact that Moody’s rating agency is saying that the US and the UK are “moving closer to losing their AAA credit ratings”. I guess Moody’s doesn’t mind becoming the target of government investigations. Just kidding. This morning the Empire manufacturing numbers came in ever-so-slightly higher than the expectation, which is good news as the number is not worse. Tomorrow is the FOMC meeting, and while they are not expected to move on rates, listen for the change of “extended period” language. Wednesday is PPI figures, and Thursday is CPI figures. I would think it would make more sense to have those figures reported BEFORE the FOMC meeting, but what do I know. At this point, why should anyone think that the Fed would care about possible inflation!
Yen (JPY): Don’t look for Japan to tighten policy at this week’s meeting. In fact, look for just the opposite. The yen could weaken further against the Dollar if risk themes do not undermine BOJ resolve to further weaken the Yen to encourage exports.
So there’s a lot going on this week, and it will be interesting to see the difference between perception and reality. Perception is what the policy meetings attempt to tell us, reality is what the price index numbers tell us.
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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Getting Pounded!
By Mike Conlon | March 1, 2010
The British pound has blown threw psychological support levels at 1.50 vs. USD this morning as polls in the UK show the minority party holding a slight lead in the upcoming elections. It is the biggest loser this morning and is at a 10-month low. I identified this potential trade last Tuesday, saying that the Pound could be near 1.50 in “no time flat”.
There is a lot of news out this week, with various readings from the UK contributing to Pound weakness today, as well as Canadian GDP due out later this morning. If Canadian GDP comes in better than expected, then look for the market to bet that rates will be advancing sooner than later this year.
In addition, we are going to get interest rate decisions from Australia, Canada, and the Euro zone, as well as first Friday’s Non-Farm Payrolls report here in the US, which is ALWAYS a market-mover. If overall global risk can be shown to be contained to a few areas, then expect to see some risk-taking this week.
In currencies:
Aussie (AUD): The Aussie is higher this morning as corporate profits came in higher for the first time in 5 months and manufacturing expanded at its fastest pace since 2007, ahead of tomorrow’s interest rate decision. It is widely expected that the RBA will raise rates at the meeting, though the market is trading cautiously this morning. The Aussie is at a 25-year high vs. the British pound, making this pair the largest gainer of the morning.
Kiwi (NZD): The Kiwi is mixed this morning, as the N.Z. economy may have lost some momentum as retail spending and the housing market have slowed in 2010. This may give the Reserve Bank reason to pause on rate hikes until GDP growth is definitive. It is widely expected that rates will higher than the current 2.5% by June.
Loonie (CAD): Congrats to Canada for winning Olympic gold in hockey yesterday over the US and for putting on one of the more memorable Olympic games in recent history. Canada is also going to report GDP figures this morning and a higher reading may suggest higher rates. Tomorrow will be the Bank of Canada interest rate decision, and while they are not expected to raise rates from the .25%, they could issue stronger language foreshadowing a hike to come.
Euro (EUR): The Euro is hovering right around 1.35 vs. the US dollar and is down against all currencies but the Pound, trading at .906 at the moment. The unemployment figures came in showing an official 9.9% unemployment rate which will all but guarantee that the ECB will not be raising rates at Thursday’s policy meeting. However, even with subdued economic growth prospects, benign interest rate policy, and possible defaults, the Euro zone may STILL be in better shape than the UK and we could see Euro-Pound parity soon.
Pound (GBP): In addition to the impact that a change in government might have on the UK economy, mortgage approvals dropped to an 8-month low. The UK may be heading for the dreaded double-dip recession as their housing-market recovery may be losing momentum. On Wednesday the UK will report consumer confidence figures which are expected to be low in light on conditions, and Thursday will bring the decision on interest rates (expected to remain unchanged) and the BOE decision on Asset Purchases which could put further pressure on the Pound if continued and expanded. The Pound is currently at 1.493 vs. USD.
Dollar (USD): The Dollar is mixed this morning as the market digests all of the weekend news and is looking ahead to this week’s action. The US ISM Manufacturing Index is due out this morning, which will show if we are seeing any type of economic expansion. Aside from that, we are seeing mild risk-taking this morning, though problems with the Euro and Pound are causing the dollar to advance.
Yen (JPY): The Yen is lower this morning as the battle between the Bank of Japan and the government over quantitative easing continues. Tonight, Japan will be reporting their unemployment figures, which are expected to show 5.5% unemployment. We could see some yen weakness on the Australian rate decision as carry-traders become emboldened if the RBA raises rates.
Oil is back over $80/barrel and gold is roughly 1118/oz.
The Euro zone must be thrilled with the problems in the UK which hopefully will shift focus away from their problems and on to the Brits. While some are likening the situation in the UK to that of Greece, it should be noted that these two economies couldn’t be more dissimilar. The UK has many more options than the Euro zone regarding how to grow the economy, so while we may see some temporary Pound weakness, the UK economy is still in better shape than the Euro zone.
But always remember; trade what you see, and not what you think you know!
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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Flip Flopping on Risk!
By Mike Conlon | February 23, 2010
This morning has seen some “flip-flopping” on risk themes as the overnight session was trading on risk aversion due in part to some economic figures out of the Euro zone. However, those themes had pulled back and we actually saw some risk-taking, only to set-up for risk-aversion again! Can you say volatile?
The back and forth nature of the forex market is what traders thrive on. As of right now, we are seeing some Japanese yen strength, but not all of the risk aversion plays one might expect to see. While the Kiwi is noticeably weak, the Aussie is holding up against all but the yen. This looks like its setting up to be a back and forth day, as the market attempts to re-align itself according to risk themes. I will probably play today short-term, and wait to see what the market reaction is to the US Consumer Confidence figures due out at 10 AM EST.
While I can’t imagine that they will be “good”, one never knows how the market will react. Also to note is that the US Housing Price Index will also be out a little earlier, giving a glimpse into the whole inflation/deflation debate. Combine that with the political landscape here in the US and the malaise surrounding it; and the market could be in for a wild ride today is this could be a recipe for disaster.
In currencies:
Aussie (AUD): The Aussie is holding up surprisingly well this morning despite the general risk-aversion themes we’ve seen this morning. This is more of a case of being “less-bad” than actually good. With problems in Europe (Aussie nearing 10-year highs vs. the Euro) and the UK, investors may start catching on to the fact that owning Aussie over Euro and Pound is LESS risky regardless of what the correlations say. In my opinion, the Aussie is THE place to be for both risk-taking (commodity plays) as well as risk-aversion. Now if the market would just begin to see it. In the meantime, I will continue to buy dips.
Kiwi (NZD): While lumped in with the Aussie and Loonie as commodity currencies and known as a “risk-taking” vehicle, the Kiwi is not nearly as strong as the Aussie yet sometimes benefits from Aussie strength. Until economic conditions improve in New Zealand or rate hikes seem imminent, the Kiwi will continue to trade on risk themes as it is not strong enough on its own to “buck trends”.
Loonie (CAD): I’ve been seeing a lot more of Canada lately (probably because my wife makes me watch ice-dancing in the Olympics) but I’m starting to come around to being positive on the Loonie. Despite record low interest rates and its close ties to the US, the Canadian economy is strong and recovering much faster than the US. Because of the Loonie’s tight correlation to oil, it will continue to trade as a proxy for the commodity as the market determines whether or not recovery will drive further demand for oil. The Loonie is lower this morning.
Euro (EUR): Is anyone surprised that Business Confidence figure in Germany are down this morning? No? Me neither. In fact, this prompted German Chancellor Merkel to lash out the banks that “created the problem” for speculating in the Euro—driving it lower naturally. It looks like she’s at stage 3 (anger) in the seven stages of grief. It’s starting to look more and more like the Euro zone actually knew about the derivatives that helped Greece obfuscate its debt to the point that it was allowed to gain entry to the Euro zone. In my eyes this is akin to going to a “jackets required” restaurant jacket-less, then taking off with the loaner they give you, rather than just being denied access in the first place. Any way you slice it, the trend for the Euro is clearly down.
Pound (GBP): The Pound is lower this morning as speculation abounds that the UK will continue its bond purchase program to help keep their currency lower to stimulate their economy. People forget that the UK is still an industrial power and a BOE Deputy Governor reminded the markets of that fact when he said that a “weaker currency will boost exports”. Should the current situation continue, the Pound could be near 1.50 vs. the US dollar in no time flat. This would also represent the 61.8% Fibonacci retracement that technical analysts love so much.
Dollar (USD): Home prices in the US are expected to rise for the seventh straight month, though incrementally and down over 3% from the previous year. Should the figures meet the expectation, then expect risk-taking to pick up as this would be a sign that inflation is nowhere to be found and confirming that interest rates will most probably remain unchanged for a long time. Consumer confidence is out at 10AM, if anyone is confident in this environment, then they need to have their head examined!
Yen (JPY): The Yen is higher on risk-aversion this morning despite the fact that the Japanese government and the Bank of Japan are in dispute over what is to be done to combat the deflation they are experiencing. Not surprisingly, government wants more liquidity to encourage inflation, and the BOJ wants fiscal discipline and reduced deficits. Sound familiar?
In overnight markets, the Nikkei was down while the Hang Seng was higher. In current trading, the European markets are lower though off of their lows. US stock futures are lower, and oil is down roughly 1.25% to 79.3, with gold following suit down to 1111 and change.
With the problems facing Europe, rampant deflation in Japan, and trouble in the UK, the markets may be re-assessing which currencies are actually “risky”. In fact, the reason why I introduce the currencies in this blog in the order that I do is based on the “hierarchy” of the risk themes. As the economic recovery picture becomes clearer, I would not be surprised to see this pecking order change in the not-so-distant future.
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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Fed Surprise!
By Mike Conlon | February 19, 2010
Just when you thought the markets were starting to calm down and that the news out of the Euro zone was beginning to fade, the US Fed dropped a bombshell on world markets last night at 4:30 PM EST, just after the US stock market closed. The Fed announced to everyone’s surprise that they would be raising the rate at the Fed discount window 25bp to .75%, effectively charging banks more for Fed borrowing.
The markets immediate reaction was to buy dollars and cover dollar shorts, and stock futures tanked. Asian equity markets were down big last night and Europe looks to be bouncing back from earlier lows.
This move was the dominant theme in the overnight market, as retail sales figures in the UK and Canada are taking a back seat, as is the US CPI report which came in less than expected showing that inflation may still be at bay.
The two major things to take away from this move are: 1) the Fed is stressing that this move is not to tighten credit on consumers and businesses, but is merely trying to remove some over the overly-accommodative measures they have taken, and 2) investors need to be wary of the fact that the Fed may continue with these “sneaky” off-hours moves to try to avoid inter-day market Armageddon. It will be interesting to see how the market reacts to this move once trading begins today.
In currencies:
Aussie (AUD): The Aussie is down this morning as it is the currency that is most likely to be affected by this move, all other factors being equal. While I wouldn’t classify today as a risk-taking or aversion day, this is the third day in a row that the Aussie is down against USD.
Kiwi (NZD): Like the Aussie, the Kiwi is down 3 in a row. In addition to being affected by the discount rate hike, New Zealand has just reported the widest budget cash deficit in almost 9 years on lower tax receipts and increased government spending.
Loonie (CAD): The Loonie is lower this morning on lower commodity prices and the US discount rate hike. Also, Canadian retail sales figures came in slightly less than expected, but were at least positive. This could be a sign that economic growth is not as strong as investors may think, and everyone is anticipating the inevitable “Olympic Hangover” as the one-time economic windfall goes away.
Euro (EUR): The Euro is at nine-month low to the Dollar after the discount rate hike in addition to all of the problems coming from the Euro zone. Now speculation is heating up that perhaps Italy used the same sort of derivative maneuver to conceal debt that allowed them to enter the EU as well as Greece. There’s a lot of tension and in-fighting right now among EU members. This could put further pressure on the Euro in weeks to come.
Pound (GBP): The Pound is also at a nine-month low to the Dollar as fiscal concerns continue that the UK may need to continue accommodative measure to revive their economy. Retail sales figures came in at a disappointing -1.2% vs. and expectation of -.5%, showing further economic weakness.
Dollar (USD): It is going to be interesting to see how the market reacts to the discount rate hike today. Personally, I think that this move shows that the Fed is trying to get the market to believe that economic recovery is taking place. This move is sort of a red herring, which induced a knee-jerk reaction from the market as soon as everyone hears “rate hike”. This move does not affect the Fed Funds Rate so it shouldn’t affect either businesses or consumers. So by the end of the day I expect that we’ll see some risk-taking as economic strength in the US is good for world economies and inflation is lower as reported by the CPI.
Yen (JPY): The yen is higher on risk-aversion, however I think the market may “have it wrong” as its gotten used to the risk-on, risk-off mentality. Let’s see if the Yen gives back some gains by day’s end.
In overnight markets, the Hang Seng and Nikkei were down over 2% and European markets have reversed prior losses and are trading higher. US futures are still negative, but trading well off their lows in the overnight session. Oil has reversed earlier losses and is trading around 79.5, and gold is back to around 1115.
When I saw the charts last night immediately following the Fed move, my initial reaction was similar to that of much of the market—sell everything, buy dollars and yen. However, as I thought about the implications of the move, I’m actually quite impressed with the timing of the move and think the Fed did a great job implementing this. And I haven’t been a big fan of the Fed as of late! In my view, this is positive for world markets.
Also, watch out for volatility as today is options expiration.
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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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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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!
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Risk Aversion Kinda Day!
By Mike Conlon | December 17, 2009
Overnight, world stock markets sold off as once again as Greece had their debt downgraded by S&P. As a result, EUR/USD is down 1.27% as mounting fears of debt default or a material change in the composition of the Euro is putting pressure on the region. The Euro is near a 3-month low at 1.435.
Also, UK retail sales “unexpectedly” fell in November. This has sent the British pound to a 2-month low vs. the US dollar. As of 9AM EST, GBP/USD is -1.44% to 1.61.
As I mentioned yesterday, the Fed really doesn’t need to do anything about interest rates to see dollar strength. As long as there are potential economic problems somewhere in the world, the flight to safety trade will cause investors to return to the US dollar. The forces of supply and demand then take over and the dollar rises as demand goes up.
In addition, the Aussie is also down 1.56% vs. USD, again high-lighting the risk aversion trade. And even though I’m in love with the Aussie and want to move there because of the way they run their economy LOL, I am a trader at heart and I do what the market tells me– rather than what I think should happen.
So, if the problems in the Euro zone aren’t dealt with soon, we will continue to see US dollar strength. This means no Aussie trades for me, even though I’d love to have the carry interest.
One last thing I want to mention. A lot of investors ask me, ” well if the dollar strengthens, isn’t that good for me? I hold US dollars in my bank account.”
Well, the answer is two-fold.
1) yes it can be helpful as it increases your purchasing power for foreign goods and services. But it does nothing to help you domestic purchasing power– unless of course merchants pass those savings along to the consumer, (which they won’t do unless they have to).
2) You won’t actually see monetary gains unless you trade dollars against other currencies. This involves the forex market. Many investors are afraid of this market and they shouldn’t be– as there are tremendous gains to be made.
To learn more about how you can get involved with this market, please check out our currency trading courses!
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More Problems for the Euro!
By Mike Conlon | December 11, 2009
I wrote earlier in the week in an article titled, Euro Dead Zone, that there is some potentially trouble brewing in the Euro. Part of this is due to structure of that currency, in that it is comprised of different economies at different levels of strength.
Typically, the stronger economies “balance out” the weaker ones, and as I mentioned there are starting to be a lot more weaker than strong. One of the “solutions” that I pointed out is that the ECB might consider a lowering rates to make it more affordable for the weaker countries to gain access to capital. It doesn’t appear that there is going to be inflation there anytime soon.
But today there is another solution being reported on Bloomberg: that perhaps the weak countries, most notably Ireland and Greece, would pull out of the European Monetary Union (EMU). Or they can pray that the IMF will bail them out.
This presents a problem that is two-fold: 1) I can’t imagine that these countries would leave the EMU voluntarily, which would mean that they have become “persona non grata”, namely not welcome or forced out; which would 2) undermine confidence in the Euro as a currency.
And today we are seeing this on the charts. Let’s look at a 4-hour chart of EUR/USD: (click chart to enlarge)
Now while part of this move can be attributed to US dollar strength, I can’t help but think that the Euro is inherently weak due to the competing interests of its members. If they expel the “weak” members every time there is a problem, the Euro is quickly going to turn back into the Deutschmark! As of this writing, EUR/USD is down .68%.
To follow this situation real-time with a free, practice trading account, click here!
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Weekly Outlook from InnerFX 12/07
By Mike Conlon | December 7, 2009
EURUSD
Despite several attempts to breach higher last week, the euro failed to hold gains as the dollar rallied across the board on Friday, as a result of better than expected unemployment figures. The 270 points decline of Friday has cleared half of euro’s gains accumulated during the previous two months, hence December started by favoring the dollar bulls. Is this the time of a prolonged correction? Could be… but I maintain my positive view on EUR against the buck, for now, treating such declines as potential opportunities to re-initiate EUR long positions. Speaking of current market conditions – short-term sentiment is slightly bearish due to recent rejection into the 1.5150 region along with Friday’s collapse below the 1.49 handle, back into the key support region around 1.4850. A rising trend line support coming from July’s low at 1.3830 has been reached and limited intra-day losses but in case of the decline’s resumption within the coming trading sessions, we should focus towards the next support levels – into the 1.4700/30 and 1.4600 regions. In case of a recovery, which at this moment seem more plausible to me, I expect the 1.5000 mark, along with 1.5050, to provide a minor barrier – a lot weaker than before (during October and November). A sustained breach above the 1.5 handle would also turn momentum positive, signaling that the correction is over. Also keep an eye on the S&P500 as important levels are still intact into the upside – the 1113 barrier which is still intact, despite several attempts to breach higher along with false breaks/spikes to as high as 1119. Another key barrier is the median retracement of the long-term decline from 1576 to 666.75 which is set at 1121. Due to the solid correlation between EURUSD and S&P500: no sustained break above 1113 -> no breach above the 1.5100/50 region, simple as that.
(click all charts to enlarge)
Gold
The superior band of the uptrend channel (seen in the chart below) is, once again, providing support on current pullback. In case of a break lower, next downside barriers into the 1126 and 1100 regions may limit losses. Short-term sentiment shows some bearish signs but it was about time to look for a correction – because it can’t just climb to record highs forever, right? However, if the correction continues – below 1100, bulls should start to worry. On a medium term basis – uptrend is intact and extended dips will favor further buying.
GBPUSD
In my previous article, when cable was trying to recover some ground pushing on the 1.6600 handle from below, I pointed out that more selling towards 1.64 was likely – further weakness emerging, as expected, and cable printed session lows around 1.6420 before closing the week .36% lower. Downside remains favored for now, and a break above 1.6700 is needed to confirm the positive bias. Recent hesitation into the 1.6700 zone confirms the indecision of both bulls and bears and the 1.6270-1.6700 range will probably remain valid for now. However, the said 1.6270/00 support region may limit extended losses and provide a reversal point, as that’s quite an important level.
NZDUSD
Former support provided by the rising trend line coming from .6475 of July has provided a stable resistance on last upside attempts into the .7280/00 region. A break was needed to resume uptrend but selling into rallies favored the current decline which extended to as low as .7130 on Friday. Although NZD’s losses have been relatively smaller comparing to EUR (-0.86% vs. -1.37%), there are no signs of uptrend’s recovery yet. Below current market levels, important support is formed around .7050 by the 61.8% fibonacci retracement of .6685 – .7635. We’ll see how it reacts if current decline continues.
Happy trading!
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Dubai Debt Panic!
By Mike Conlon | November 27, 2009
Well, not exactly a “Happy” Thanksgiving. As Americans like myself were stuffing our faces with turkey and stuffing yesterday, news broke of possible debt crisis in Dubai that may become a strain on the banking system. Stock and commodity futures have sold off heavily across the board, with investors fleeing to the safety of the US dollar and the Japanese yen.
I’ve written at length about the risk aversion trade and this is a perfect example of it. I wrote as recently as Wednesday that the only way the dollar would strengthen is if therewas a major crisis of confidence in the world economic recovery. This event could be it.
There has been a lot of talk about the possible collapse of the commercial real estate market and this possible default in Dubai could signal the start of that market crumbling. If the dominoes do start to fall, then this could easily take back much of the gains investors have seen in stocks, commodities, and currencies as the world slides back intothe dreaded “double-dip” recession. If this problem can be contained, then I would look to resume US dollar shorts.
Over the last 2 days, there have been major moves in the currency markets which have provided tremendous opportunities to those who were able to catch the. As Gordon Gekko said in the movie, “Wall St.”– “money never sleeps”.
And that is exactly why it is so important to have some exposure to the currency markets.
So if you’ve been reading this blog and have been contemplating getting involved in the forex market, I implore you to start today. It is really easy to get a live account set up, get educated, or get a free, practice account.
Don’t wait another day!
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