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August 31, 2011

Nothing Exciting Happened Today

Filed under: Forex Strategies — Tags: , , , — admin @ 4:44 pm

TMM get the feeling that the market is very well positioned for more bad news, which in the big macro scheme of things is just fine. The US economy is pretty screwed and until the great reckoning of wealth and cost rebalancing between East and West occurs, it will continue to be so. But we can’t play a 10yr view everyday or this blog would become very dull with daily posts just saying “Still f**ked”. Perhaps we should have a system of long term macro flags along our banner showing the 10 yr view which we hoist and rarely change.

But in the shorter term run of things, where we have to earn a dividend to pay the costs of our daily lives, we can’t afford to just sit and wait for the great “F**ked trade” to pay off and that is actually the problem with playing the markets. The table is not level and the need to make a daily crust just to survive, or even to pay for all the infrastructure needed to trade makes the whole game biased against the player. As costs of entry are going up through taxes and regulation whilst the pot of returns is falling – dividends and bond coupons are effectively the only money coming into the game when interest rates are effectively zero with other returns just one side of a zero sum game. With this happening perhaps we should look for the amount of life that the financial ecosystem can support to fall, which is just what you want if you are a western government determined to rebalance power away from the evil banker and speculator. But as the financial pond dries up the fish within it start flapping and thrashing trying to survive. The UK banks are today protesting against being allowed to die (or be sliced up alive) and smaller investors are desperately looking for yield on their investments. In the big picture this is probably a good thing. You can’t have a country running on the gains it hopes to make at a Casino despite the Equity bubbles and Housing bubbles doing their best to prove otherwise. Of course owning the Casino is a different matter altogether, and the major financial centres of the world have brought disproportionate wealth into their domicile economies. Unfortunately in London’s case Vince Cable doesn’t seem to see it that way and is determined to go Holy and upset the tables of the money lenders, no matter what revenue they may bring into the local economy.

The financial blogosphere is also doing its best to whip up action and, similarly to the main stream press, appears to thrive most on sensationalism and bad news sensationalism in particular (Hero Zedge – looking at you). The same signals are being picked up in TMM’s IB chat indicator, with banks providing about a 20/1 ratio of bad news headlines to good. And that isn’t just because there ARE 20 to 1 bad to good news stories out there. We mention this because we have noticed a trend in this blog’s comments. Currently if we mention anything bearish the comments are alive and buzzing and article referral is rife. If we mention anything bullish and the markets then fall the comments are again rife (normally with goading). However if, like yesterday, we mention a bullish tone and the markets stay flat or creep up, then their is relative silence. Now is this an indicator of market positioning or not? Or just a reflection on the lack of any mention of anything frighteningly terrible?

So here is today’s news:-

  • UK August weather was unsettled and the coolest since 1993.
  • No riots in the UK today, despite no action yet being taken to change society.
  • Seismic activity around the world didn’t cause any disasters.
  • Italian unemployment came out at 8% exactly where forecast.
  • The equity markets moved a little bit higher.
  • The Eurocrats have not issued conflicting statements today.
  • Libya is about to be reunified under a new leadership.
  • The London Olympic construction is ahead of plan and on budget.
  • Bill Gross didn’t surprise the market when he used nonsensical and factually inaccurate analogy.
  • No Republican contender has vowed to open a can of whoop ass on the Beard.
  • The Oil price is virtually unchanged from where it was the day the FOMC announced QE2.
  • Arsenal are still useless.
  • Pro Farmer came out with a constructive 148 bushels per acre for this years corn crop. bang in-line with what was the most accurate reflection of their ear counts in the seven states they covered.
  • TMM have a nice cup of tea, with a biscuit.

And finally, news from a year ago. 30th August was the start of a 6 month equity rally.

Lets see if that lot lights up the blogosphere!

How to gauge the EUR/USD weakness from today

Filed under: Currency Charts — Tags: , , , , — admin @ 6:59 am

I’ve got short the EUR/USD based upon the “two to four o’clock” 34EMA Wave angle on the daily time frame. This set up however has the Wednesday ADP number ot deal with as well as all the anxiety of Friday’s NFP so…

even though I am ahead with the short sell “fade” trigger at 1.4495, I have to begin to wonder how much lower the pair will go, especially when you look at the economic calendar for Wednesday morning and all the EUR data that’s ready to roll out.

I recorded this and I’m calling it the Forex Two Minute Drill. I love football, I love forex, and there nothing like a short video to explain my trade. If you all like these, please do let me know, and I’ll do more of these in the future.

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Swedish Krona Gouged by Risk-Off Mentality

Filed under: Forex News — Tags: , , , , — admin @ 6:59 am

Source: ForexYard


Despite reports of phenomenal growth in financial arenas and in GDP expansion, the Swedish krona (SEK) entered a downward slump over the past few weeks. Lying beneath this bearish groove is a history lesson that shows the krona persistently struggling during times of risk aversion.

The relatively high interest rates of the Swedish economy make the currency appealing in times when risk-taking is gaining ground among investors. The speculation that the Riksbank will lift interest rates at each meeting this year merely adds to this sentiment. But the downgrade of US debt by S&P’s ratings agency put global investors in a mentality of risk flight.

It is true that investors have seen some mild upticks in risk sentiment over the past few days, but such broodings have yet to flood back into the SEK in the way they were just one month ago. It is largely forgotten by now that the global recession of 2008 dramatically reduced the export capacity of the Swedish economy and that fears of a double-dip recession are beginning to do the same.

Growing pessimism and an outlook of impending recession are generating a lot of flight from the once-booming Swedish economy. It is true that Sweden weathered the financial storm better than most, but it is false to assume that it is above the present turmoil. The SEK may continue to see downward movement against its primary basket of currency rivals, having already shed 2% in the last two days.

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EURUSD Above 1.45, But For How Long?

Filed under: Technical Analysis — Tags: , , , — admin @ 6:59 am

Quote of the day: “There’s always somebody who is paid too much, and taxed too little – and it’s always somebody else.” ~ Cullen Hightower Good morning. The dollar continues to deteriorate against some of its major counterparts, such as euro which is currently changing hands above $1.4500. Next interim resistance stands at 1.4580/00, followed by Read More

© 2011 FX Trading Blog – |
Article Source | Post tags: AUDJPY, Australian Dollar, Dollar, Euro, EURUSD, Gold, Japanese Yen, Swiss Franc

Bank of America executives may know more than we think!

Filed under: Currency — Tags: , , , , , , — admin @ 6:59 am


"No iron spike can pierce a human heart as icily as a period in the right place."
                                    Isaak Babel

Commentary & Analysis
Bank of America executives may know more than we think!

Yesterday, while sitting comfortably in my living room, sipping a generous dram or two of 16-year Lagavulin (an Islay single malt scotch to the downtrodden who abstain from such pleasures), which I recently discovered and now think about constantly, I had the TV blaring subtly in the background; unfortunately it was tuned to CNBC. And of course, always looking for software to fill the void, another banking analyst was trotted out of the stable to share his view on Bank of America. The bottom line was that he believed that Bank of America’s dumping of half its stake in China Construction bank, raising a cool $8.3 billion and pocketing an estimated profit of $3.3 billion on the sale, was a sign of desperation. I wish I could discover some desperate profit with that many zeroes behind it!

It was pure desperation on Bank of America’s part, what else could it be? Well, it could be lots of things. As I went back to enjoying my new discovery, I thought to myself: Did this analyst ever consider that just maybe BOA executives know a bit more about Chinese “banking” than he does? Nah … likely never crossed his mind; all he knew was this maneuver was oddly timed.

A rational observer of financial markets, assuming such a creature exists, would likely say that China is “bubble-icous” based upon the Treadmill scenario we created several months ago.

Let’s tick off the forecasts we made shown in the chart below:

  • Currency appreciation? Check!
  • Social unrest? Check!
  • Inflation? Check!
  • Credit restraint? Checkmate?

As we have said before, paraphrasing a money manager whose name escapes us, China’s monetary controls have two speeds: flame thrower and fire extinguisher.

From The Wall Street Journal today:

As policy makers from the U.S. and Europe gathered in Jackson Hole, Wyo., to discuss ways to revive a fragile global recovery, China’s central bank was issuing a secret memo to further rein in lending in the world’s second-largest economy.

The tightening move by the People’s Bank of China, which was reported Monday by the official Xinhua news agency, highlights two key points about China’s economic management: how starkly it is diverging from that of other big economies–which continue to seek ways to pump money into the financial system–and how it remains shrouded in secrecy that some call unbefitting such an important global player.

So maybe China Premier Wen “Windbag” Jiabao was only blowing more smoke when he declared victory over inflation back on June 23rd: “China has made capping price rises the priority of macro-economic regulation and introduced a host of targeted policies. These have worked.” Mr. Wen wrote in the Financial Times. “We are confident price rises will be firmly under control this year. The overall price level now is within a controllable range and is expected to drop steadily. “

Take a gander back at that Treadmill Scenario on the page above. Notice the box that says “Non-Performing Loans”; that is where the banks take hits as a result of capital misallocation; this process theoretically and empirically can be swift.

Over to George Soros, the brilliant global macro strategist vintage 1987 version (not the liberal nut bag who has gone completely off the boards, al la 2011 version):

Collateral values have become greatly dependent on the stimulative effect of new lending and as new lending fails to accelerate, collateral values begin to decline. The erosion of collateral values has a depressing effect on economic activity, which in turn reinforces the erosion of collateral values. Since the collateral has been fully utilized at that point, a decline may precipitate the liquidation of loans, which in turn may make the decline more precipitous.

…In a bust, the reflexive interaction between loans and collateral becomes compressed within a very short time frame and the consequences can be catastrophic.

Now, with a nice hot cup of black coffee in front of me (but still thinking of my new discovery; that may be a red-flag come to think of it; oh well), I ask myself again: is it possible that BOA executives know a little bit more about Chinese banking than most cocksure Street analysts give them credit for knowing?

I am going to go out on a limb and answer yes!

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Israel Central Bank Holds Benchmark Rate at 3.25%

Filed under: Forex News — Tags: , , , , , , — admin @ 6:59 am

The Bank of Israel maintained its benchmark interest rate steady at 3.25%.  The Bank noted: “The decision to leave the interest rate for September at 3.25 percent is consistent with the process of returning the inflation rate to within the target price-stability range of 1–3 percent a year within the next twelve months, and with supporting economic growth while maintaining financial stability.  The future direction of changes in the interest rate will be dependent on the inflation environment, economic growth in Israel and abroad, the monetary policy of the leading central banks, and developments in the exchange rates of the shekel.”

Previously the Bank also held its monetary policy interest rate unchanged at its June and July meetings, after increasing the interest rate by 25 basis points to 3.25% at its May meeting this year.  Israel recorded annual inflation of 3.4% in July, compared to 4.2% in June, 4.1% in May, and 4.0% in April and just above the Bank’s inflation target range of 1-3%.  Israel reported GDP growth of 4.8% (annualised) in the March quarter, and 3.3% in the June quarter, the Bank said that: ‘The rate of growth in the second quarter was slower than in the first, mainly due to the slackening of global demand and its effect on exports, whereas domestic demand continued to increase.”

Euro Pulling Back. Potential Reversal Sign?

Filed under: Technical Analysis — Tags: , , , , , — admin @ 6:59 am

Quote of the day:“Train yourself to let go of the things you fear to lose.” ~ George Lucas Good morning. Yesterday I wrote an article on Breakout trading, so in case you missed it – you may want to check it out. There are some more things I’d like to add so I’ll continue the Read More

© 2011 FX Trading Blog – |
Article Source | Post tags: AUDUSD, Australian Dollar, EURAUD, Euro, EURUSD, FOMC

Daily Forex Fundamentals – August 31, 2011

Filed under: Currency Charts — Tags: , , , , — admin @ 6:58 am

What’s on the Economic Horizon

ADP Employment Change on Deck
Australian Retail Sales Expected to Have Turned Positive in August

U.S. Dollar (USD)

Dollar trading was as varied as the colors of the rainbow yesterday due to the mixed results of economic data released. While the dollar posted huge gains over the euro and the pound, it fell against the Aussie and the Kiwi. The U.S. dollar index ended the day at 74.36, 24 percentage points higher from the level it opened during the Asian trading session. Read more…

Euro (EUR)

The euro’s price action yesterday might not be all about the money, money like Jessie J said, but it was definitely all about the fundies, fundies! The euro got slammed across the board, losing against the yen and the Greenback. Here’s why: Read more…

British Pound (GBP)

The pound pulled off a Lady Gaga stint yesterday as it slipped against the dollar from an intraday high of 1.6420. Too bad it wasn’t able to end the day on a good note as GBP/USD closed 103 pips below its opening price. Read more…

Japanese Yen (JPY)

With the FOMC meeting minutes revealing that additional easing measures NOT out of the question, the yen was able to rally across the board yesterday. By the end of the U.S. trading session, the currency was able to a 15-pip gain over the dollar, a 64-pip gain over the euro, and a 104-pip gain over the pound. Read more…

Canadian Dollar (CAD)

Unlike its fellow comdolls, the Loonie wasn’t able to jump in the dollar-aversion frenzy yesterday. USD/CAD even went up to an intraday high of .9818 before it capped the day with an 8-pip gain at .9780. What gives? Read more…

Australian Dollar (AUD)

Thanks to renewed speculation of QE3 due to the Federal Reserve’s meeting minutes, the Aussie was able to edge higher versus the Greenback yesterday. AUD/USD started off the Asian trading session at 1.0654, but by the end of the day, it was sitting 54 pips higher at 1.0708. Read more…

New Zealand Dollar (NZD)

The Kiwi showcased its inner Maori warrior in yesterday’s trading as it spooked pips out of the dollar. NZD/USD ended the day 98 pips above its opening price at .8549. Read more…

Swiss Franc (CHF)

Is the Swissy losing its swag? The currency extended its losing streak against the dollar yesterday when USD/CHF ended the day 34 pips above its opening price at .8198. Meanwhile, EUR/CHF also ended the day higher by 4 pips at 1.1850. Read more…

Bonnie and Clyde, peanut butter and jelly, Justin Bieber and his hair. Some things just go well together.

In forex trading, you get better odds at securing pips when your fundamental analysis is complemented by technical analysis.

Head on to Big Pippin’s Daily Chart Art for some pip-locking technical setups!

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Fed Official Causes Gold To Spike Higher!

Filed under: Business — Tags: , , , , — admin @ 12:28 am

An interview this morning with Fed Governor Charles Evans produced a little more than the market expected.  While not scheduled to speak in an official capacity, he was giving an interview to CNBC where he was extrememly candid.  The interview did not inspire confidence in the economy or the Fed response to inflation, and as a result, gold went flying higher $35 in a few ensuing minutes. 

These Fed officials need to be more cognizant of the impact of their words and its a shame that a news outlet like CNBC is now creating news and not just reporting on it!

Exxon in Arctic deal with Russian oil giant

Filed under: Business — Tags: , , , , — admin @ 12:24 am
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