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April 30, 2010

ECB’s Bini-Smaghi: No Plan B for Greece

Filed under: Central Banks — Tags: , , , — admin @ 5:42 pm

We’re working on Plan A, not Plan B, says Bini-Smaghi.

The Aussie – Gold Connection & Potential Intraday Breakout

Filed under: Currency Charts — Tags: , , , , , — admin @ 3:57 am

The AUD/USD has reached an intraday double-top, with prices now exhausting between 0.9288 and 0.9292. This caps what has been a strong two-day rally in the AUD/USD, with the Australian Dollar strengthening against the U.S. Dollar. The current levels represent an important pause in the market as the bulls decide whether there is enough buying momentum to challenge the 0.9300 level, or whether the bears take over and push the market lower, correcting a rally of over 140 pips that started on April 28.

4-29-2010 5-43-05 PM.jpg

The Triangle pattern that has formed on the 30-minute chart will be an excellent barometer of sentiment as the trading week comes to a close. The Initial Trend market cycle reading of only three bars indicates very little current trend on this time frame, with prices trading within a narrow range. If the AUD/USD can rally through 0.9282 (R), know that the 0.9292 high, as well as selling pressure at the 0.9300 “big figure” level, will be significant obstacles for follow-through higher. Should the AUD/USD correct lower, look for weakness through 0.9265 (S) as price break the Triangle’s uptrend line support.

4-29-2010 6-02-03 PM.jpg

If the current direction in Gold (above) in any indication where the AUD/USD – known as a “commodity currency” for its correlation to Gold and the commodities sector in general – is heading next, there is likely some weakness and sideways volatility on the horizon: Gold has broken lower through its own Triangle uptrend line support and, more importantly, been rejected at the downtrend line at 1,169 (R). If resistance holds, Gold prices could follow-through lower to the Forecast area between 1,158 and 1,151; however the current distribution cycle – indicated by the four-bar Initial Trend reading – points to exhaustion (and near-term support) at 1,162 which could lead to a push higher and therefore help the AUD/USD break the Triangle resistance.

Charts courtesy of Autochartist

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AUD/USD Continues Downward Biased Consolidation

Filed under: Forex News — Tags: , , , , — admin @ 3:16 am

By Fast Brokers – The AUD/USD is continuing its wild, volatile consolidation patter exhibiting a downward bias.  The AUD/USD has now set consecutive lower highs (4/9, 4/21, 4/26, 4/29).  Hence, the AUD/USD doesn’t seem to have the strength to break out into a new uptrend due to fiscal problems in the EU.  However, the AUD/USD continues to rally strong and stay within striking distance of previous April highs since the RBA still has the most aggressive monetary policy stance around the globe.  On the other hand, should fiscal problems in the EU continue and destabilize further then the RBA may be inclined to keep its monetary policy unchanged come May’s meeting.  After all, Stevens recently hinted that the benchmark rate has almost reached a fair value, signaling that the rate hike campaign could have an end in sight.  Australia will reenter the data wire tomorrow by releasing new home sales and private sector credit figures.  Should new home sales cool and private sector credit tighten, this could show that the RBA’s hawkish monetary policy is having its desired impact, an Aussie negative.  On the other hand, of the data points print strong then the Aussie should remain locked into its uptrend.  Attention will then shift to the U.S. with a key data set on the way, highlighted by advance GDP.  That being said, the trading week could end on an active note.

Technically speaking, the Aussie faces technical barriers in the form of intraday, 4/26, 4/21, 4/15 and 4/12 highs.  Additionally, the psychological .93 and .94 levels could serve technical obstacles over the near-term.  As for the downside, the Aussie has multiple uptrend lines serving as technical cushions along with intraday and 3/22 lows.

Price: .9266
Resistances: .9268, .9283, .9294, .9304, .9311, .9319
Supports: .9259, .9251, .9240, .9230, .9220, .9208
Psychological: .93, .94, .92, April highs and lows

(click chart to enlarge)

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Daily analysis and trading strategies 4-29-10

Filed under: Technical Analysis — Tags: , , , , — admin @ 3:05 am

EURUSD

Trading strategy: looking to sell at 1.3315, stop at 1.3375 (1% risk), objective at 1.3200

The euro is orbiting around 1.3200 facing high downside pressure as talking on Greece problems continue and Spain was downgraded from AA to AA+ by the S&P – outlook being negative. The FOMC left rates unchanged, as widely expected, and retains “extended period” language. A fresh low was reached at 1.3114 in yesterday’s whipsaw sessions and current recovery above 1.32 remains corrective in nature, lacking the chances of extending too far up. The overall sentiment remains highly bearish and most corrections are likely to face massive selling around key short-term levels, not far away, such as 1.3280/00 and 1.3500. Current exchange rate is 1.3227 @06:03 GMT

Support: 1.3200, 1.3150, 1.3100/15 and 1.3000
Resistance: 1.3280/00, 1.3440 and 1.3500
Market sentiment: long term – bullish, medium term – bearish, short term – bearish, intra-day – bullish


EURUSD 4hrs 4-29-2010
EURUSD 4hrs 4-29-2010

GBPUSD

Trading strategy: standing aside

Cable lacks the strength to recover from current weekly bottom around 1.5150 and feels heavy, providing clues that the decline will probably continue, next downside objective being 1.5070 – the 61.8% of last up leg from 1.4790 to 1.5520. Short-term sentiment is bearish and a recovery back above 1.5300 is needed to resume uptrend. Keep an eye on the 1.5125/50 support as a potential breakdown might be violent – accelerating towards next barrier at 1.5070. Current exchange rate is 1.5150 @06:03 GMT

Support:   1.5125/50, 1.5070/80 and 1.5000
Resistance: 1.5200, 1.5280/00, 1.5360, 1.5400 and 1.5500/20
Market sentiment: long term – bearish, medium term – bearish, short term – bearish, intra-day – bearish


GBPUSD 4hrs 4-29-2010
GBPUSD 4hrs 4-29-2010

Have a great day!



© liviu for innerfx.com, 2010. |
Permalink | Post tags: eurusd, gbpusd

Arizona Boycotts the Peso

Filed under: Currency — Tags: , , — admin @ 2:46 am

Key News

  • European confidence in the economic outlook improved to the highest in more than two years in April. (Bloomberg)
  • When he wasn’t busy helping create a $127 billion mess for taxpayers to clean up, former Fannie Mae Chief Executive Officer Franklin Raines, two of his top underlings and select individuals in the “green” movement were inventing a patented system to trade residential carbon credits. (The Examiner)
  • Standard & Poor’s on Wednesday cut its ratings on Spain by one notch to AA from AA-plus; the outlook is negative, reflecting the possibility of another downgrade if Spain’s fiscal position worsens more than S&P currently expects, the agency said in a statement. (Reuters)

Quotable

“The demagogue is one who preaches doctrines he knows to be untrue to men he knows to be idiots.”

                           H. L. Mencken

FX Trading – Arizona Boycotts the Peso

When the “moral champions” of the world gang up on Arizona, Arizona sells pesos.

That seems to be what happened this week in the wake of Arizona’s crack-down on illegal immigration.

MXNUSD Daily

Okay … maybe that’s not exactly it!

There’s a pretty good chance Arizona had nothing to do with the peso’s fall. Especially when you look at the fact that the peso has, since February, pretty much hitched a ride on the risk-taking express.

MXNUSD Daily and S&P 500 Daily

Hombre, that’s a pretty tight correlation if I ever saw one.

And I want to say there’s a simple connection here: the S&P has been rockin’ and rollin’ because of signs of recovery in the US; and the Mexican economy is tightly hinged on the US economy.

But what if Arizona has set the precedent on immigration reform? What if the derelict federal government (or several other state governments) follows Arizona’s lead?

Mexican President Felipe Calderon seems to think Arizona’s law is a big deal; and he doesn’t appear to like it one bit because of its potential to breed intolerance and hate.

First, why should Mr. C have any say in the enforcement of immigration laws in the US?

Second, why should Mr. C have any say in the enforcement of immigration laws in the US?

That’s right – the answer to both questions is: he shouldn’t.

But did I mention he referred to immigration as a “social and economic phenomenon”?

Hombre, think of the burden it lifts off the Mexican government’s shoulders when he can see off hard-working citizens to find jobs in the US and repatriate money back to relatives in Mexico.

Remittances have bounced back sharply, as of the end of March:

And another thing: there have been some outlines of an amnesty bill in the US that would actually send US taxpayer money to Mexico, incentivizing Mexicans to stay in Mexico. It’s like an economic stimulus bill that Mexico doesn’t even have to pay for.

Why would Calderon approve of the US cracking down on illegal immigrants as a way to deter Mexicans from entering the US when he can have it both the ways he wants it – a recovery in remittances and the US government sending money to Mexico?

Ultimately this whole immigration thing has come down to the economy in Mexico. Mexicans are not fleeing to the US because of political oppression or anything similar; they’re coming for jobs (and perhaps the American Dream, though I hear that may become unavailable soon.)

So what is Mexico’s economy doing to deserve such flight?

The head of Mexico’s Central Bank, Agustin Carstens, recently said the Mexican economy could end up growing 4-5% this year. That’s nothing to shrug about. An estimate on first-quarter growth, due out tomorrow, is expected to exceed 4%.

But Carstens isn’t completely satisfied. Consumption and investment are sluggish still. It is the industrial complex that is making the difference in growth.

Consumer Confidence is Struggling

Ditto for Gross Fixed Investment

And here’s another chart that might indicate a reason why Mexican’s who’ve exhausted all efforts must resort to the US:

It shows the year-over-year percent change in consumer credit. Note that the most recent data is from the end of 2009. Quite a dramatic collapse that apparently is not expected to rebound very quickly, keeping the domestic economy tied and leaving Mexicans scurrying for financial solutions.

Despite the fact that Mexican banks anticipate lending growth of 10% this year, apparently those loans are mostly bound for businesses, not consumers.

Strict regulations let Mexico avoid the fate of many economies during the recent financial crisis. But as it works its way out of decline, it may want to consider loosening up the reins to get its domestic sector pumping again.

But regardless of the steps Mexico takes, and makes, the peso may be stuck on the S&P 500 and the US economy for a while still.

MXNUSD Weekly and S&P 500 Weekly

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Daily Economic Roundup – April 29, 2010

Filed under: Currency Charts — Tags: , , , , — admin @ 1:34 am

What’s on the Economic Horizon

UK House Prices Up by 0.4% in April
Japanese Inflation Reports on Deck
German Unemployment Change Seen at -11,000
Initial Jobless Claims to Expected Drop to 442K

United States

The dollar was unable to find a clear direction in yesterday. The dollar ended the day higher against the pound and the yen but slightly lower versus the comdolls and the euro. More…

Eurozone

The euro managed to salvage part of its losses against the yen and greenback following a very steep decline last Monday. The EURJPY rallied back to 124.24 from 122.77. The EURUSD, however, was only able to climb to 1.3201 from 1.3177. More…

United Kingdom

Another day of losses, argh! The pound can’t seem to catch a break this week as it kept sliding down against the greenback. Rumors that a UK debt saga could be in the works caused the pound to lose its appeal. More…

Japan

With Japanese traders on a holiday yesterday, the yen’s major counterparts took advantage and pocketed some gains of their own. At the end of the day, the yen was markedly weaker against the greenback and the Aussie. Still, it was able to put up a good fight against the euro and the pound. More…

Canada

A day after rising over 150 pips, the USDCAD gave back half of its gains as commodity trading picked up yesterday. The pair dropped about 80 pips from its opening price to end the day at 1.0090. More…

Australia

Mid-week reversal anyone? A day after getting swept away by a wave of risk aversion, the risk appetite high-tide came back to hit the trading shoreline. The AUDUSD erased almost all its losses from the previous day, rising 100 pips to close at 0.9248. More…

New Zealand

After slipping by more than a hundred pips, the Kiwi was able to bounce back and rally in yesterday’s trading. The NZDUSD recovered most of its losses by rising to 0.7204 from 0.7111. More…

Switzerland

The lack of hard-hitting economic news kept the Swissy’s price action range bound yesterday. The USDCHF just bounced around its session highs and lows, ending the US trading session barely changed at 1.0860. More…

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Markets Force Action!

Filed under: Business — Tags: , , — admin @ 12:32 am

In the wake of the S&P downgrades of European debt, pressure is being applied to Germany in a call to action, politics be damned.  The Euro is in real danger of structural collapse, as exploding debt and rising yields are encouraging defaults every day this continues without resolution.

In the meantime, unemployment figures came in better than expected in Germany which may ease the political tension over the bailouts which may allow the government to take action more swiftly.   European stocks are higher as earnings have been improving.  So what we are seeing is an improving economic picture, with this debt situation looming as the fly in the ointment.  While having a lower Euro is good for growth, there needs to be a debt resolution to prevent it from falling beyond the point of no return.

In other news, UK home prices were higher; New Zealand maintained interest rates, and US initial jobless claims were better than the previous month.  So this all adds up to a resumption of moderate risk-taking, with all eyes and ears on the EU and its debt crisis.

In the forex market:

Aussie (AUD):   The Aussie is higher on risk-taking and on a report that home prices growth is slowing showing signs that the previous five rate hikes have been helping to allow growth to proceed moderately.

Loonie (CAD):   The Loonie is higher this morning on risk-taking as oil is higher to just above $84.  The BOC Governor Carney will be testifying today and the market may be concerned that he may attempt to further squash hopes of a rate hike in a follow up to yesterday’s quote about nothing being “pre-ordained”.  The Loonie is getting an added boost from the New Zealand decision to keep rates stable.

Kiwi (NZD):   The Kiwi is higher on risk-taking as well despite the fact that the RBNZ maintained rates at a record low 2.5% citing “elevated risks” in the marketplace.  Future rate hikes will be forthcoming down the road provided a broad-based recovery continues.  In addition, trade balance figures came in better than expected, showing signs that indeed recovery is taking place.

Euro (EUR):   Unemployment figures came in much better than expected, and Euro zone confidence figures came in better than expected despite all of the problems related to the Greek debt crisis.  I wrote a while back that the term “Chermany” was going to be important in the global economy in the near future.  China is to the US what Germany is to the rest of the EU.   They export goods and encourage debt.  China has prospered due to its currency peg; and Germany due to its EU participation.  If Germany continues to drag out this bailout process, they may ultimately be responsible for the Euro’s demise.

Pound (GBP):  The Pound is higher this morning as UK home prices advanced the most since 2007, halting a two-day decline as risk appetite returned to the market.  Expect the Pound to continue to trade sideways until after the outcome of the next week’s elections.

Dollar (USD):   The Dollar is lower this morning as the Fed left rates unchanged yesterday and continued with the “extended period” language.  They also signaled that sustained job gains would be necessary to consider moving on rates.  Initial jobless claims figures dropped 11K to 448K, but don’t let the “Lamestream” Media fool you into believing that the jobs picture is getting better.  This is most certainly a case of “less bad” and at this pace the Fed will be keeping rates low for a very LONG “extended period”.

Yen (JPY):  The yen is lower on a resumption of carry trades as yield-seeking is taking place.

Within the next two weeks, we should have a good idea of what level of risk there is in the marketplace.  There are two major elections occurring over that time span, one in the UK, the other in Germany.

If the current regime in Germany can maintain its power in the May 9th elections, than expect a resolution to happen rather quickly despite its unpopularity.  If the balance of power should shift, then there could be further delays which could cause problems with Greece’s next debt payment due in mid-may.
So until these elections pass, I expect some range-bound trading.  We will certainly have days of different measures of risk based on economic data points, but the election and subsequent resolution to the EU debt crisis is paramount.

So my bias is toward risk appetite, with a quick trigger to get out if risk-aversion should heat up.  In other words, I am keeping my trading short-term and taking what the market gives me, rather than trying to guess what will take place.  I advise traders out there to do the same.

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!

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United and Continental near merger deal

Filed under: Business — Tags: , , , , — admin @ 12:32 am

NEW YORK (CNNMoney.com) — Continental Airlines Inc. and UAL Corp.’s United Airlines are nearing a deal to consolidate into the world’s largest airline, the Wall Street Journal reported Thursday.

The commercial carriers’ boards of directors are expected to discuss the negotiations through the weekend and announce the merger on Monday, said the Journal. The union would allow the company to overtake Delta Air Lines (DAL, Fortune 500), which merged with Northwest Airlines in 2008, as the world’s biggest airline.


The deal could still fall through, as it did when the two airlines discussed combining in 2008 and Houston-based Continental backed out. But despite an earlier dispute on pricing, the Journal said discussions are still on track.

United boasts a stronger financial position this time around. Earlier this week, the Chicago-based company reported a first-quarter loss of $82 million, much narrower than the $382 million loss posted a year earlier. And revenue jumped 15% to $4.2 billion.

Thanks to an improved financial performance, United was expected to have more weight in the talks. Last weekend, the company pushed to base the deal on the closing price of its shares the day before an agreement is signed.

But since merger talks were unveiled earlier in April, United’s parent company’s stock has climbed more than Continental’s, so the value of the deal would be lower for Continental’s shareholders.

Continental decided to proceed with the talks and will consider a range of prices to resolve the disagreement, the Journal said.

The report said the combined airline will likely fly under the United brand and maintain its Chicago base.

Shares of UAL (UAL) were up 1.7% in after-hours trading; Continental’s (CAL, Fortune 500) stock was up 0.8%.

Continental chief executive Jeff Smisek would lead the merged airline; UAL’s chief executive will serve as non-executive chairman for two years, after which Smisek will also assume that role.

Representatives from both airlines declined to comment.

Earlier this month, United also discussed the possibility of merging with he Phoenix-based US Airways (LCC, Fortune 500).  To top of page

April 29, 2010

BOC’s Carney: Persistent CAD strength could have inflation and mon pol impact

Filed under: Central Banks — Tags: , , , , , , — admin @ 5:28 pm

Sounds like Governor Carney is not in as much of a rush to tighten policy as the market may have hoped.

He says the persistent strength of the CAD could have impact on the inflation outlook and on monetary policy.

The strong currency dampens inflation and reduces foreign demand for Canadian goods, all else being equal, reducing the need for higher rates.

USD/CAD is little changed after the comment, at 1.0045.

What We Learned

Filed under: Forex Strategies — Tags: — admin @ 5:24 pm

OK, here’s what we learned yesterday:

* The Fed is nowhere near putting rates up or, evidently, moving towards asset sales

* RBNZ tightening will be fairly modest

* Brazil’s central bank is taking the more aggressive route, as they hiked by 75 bp yesterday

* The Grim Reaper at S&P has now scored a hat-trick, as Spain was downgraded (following on from similar moves in Greece and Portugal)

*Oh, and there’s an agreement in principle between Europe and the IMF to stump up €100 – €200 bio for Greece over a thee year period, thereby obviating the need for the Hellenic Republic to come to market over that period.

€100 -€200 billion over three years. That is a LOT of money. The good news, of course, is that if such funds were actually delivered, Greece should effectively disappear from radar screens…especially as the Europeans seem committed to avoiding bondholder haircuts.

The bad news, of course, is that €100 – €200 billion is a lot of money…and someone’s gonna have to stump it up. Needless to say, the IMF’s portion would blow away by many multiples Greece’s quota, necessitating further contributions from the Fund’s members. While the BRICs might be content to contribute, thereby accessing more SDR bonds, it’s not altogether clear how well writing a big check will play in fiscally-challenged countries like the US and UK.

Moreover, the Europeans themselves will be adding to their own aggregate fiscal borrowing, as that kind of dough doesn’t grow on trees. They had best hope that this package deflects sovereign risk fears more or less permanently….for what would happen if similar or greater amounts were required to rescue other PIIGS?

A back of the envelope calculation suggests that German and French banks each have €300 -€350 billion worth of exposure to Greece, Portugal, and Spain. That’s yet another reason to hope that this package succeeds.

Yesterday Macro Man suggested that the equity trade was better than the currency trade. Here’s an example of why. Financials make up some 30% of the Eurostoxx 50 (versus roughly 17% of the S&P 500.) Among the top 13 stocks in the European index include luminaries such as Banco Santander, BBVA, and Unicredito. As you can see, the market projection of 2011 dividends has eased off recently, and remains well below the early January highs.

Small wonder, then, that the S&P has outperformed the Eurostoxx by a fairly dramatic margin. (The chart below shows the price ratio between the SPX and SX5E.) This is the shape of line one would expect to see in a European meltdown scenario, not the meandering path taken by EUR/USD shown yesterday.

If (and it’s a big if) you think that the European rescue package will prove to be a panacea, then this will prove to be a wonderful opportunity to take the other side of the trend. If you remain sceptical, however, that taking the other side of any temporary outperformance of European equities would be richly rewarded.

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