Forex Signals Forex Trading Signals, Index Trading Signals, Forex News, Currency Trading News & Analysis

April 30, 2013

Daily Forex Fundamentals – April 29, 2013

Filed under: Currency Charts — Tags: , , , , — admin @ 1:28 am

What’s on the Economic Horizon

Q1 2013 U.S. GDP Misses Expectations
BOJ Stands Pat, JPY Gains
German Preliminary CPI Figures on Deck

U.S. Dollar (USD)

The Greenback took a major hit last Friday, no thanks to the worse-than-expected Advance GDP report for Q1 2013. The U.S. dollar index, which tracks the performance of the Greenback versus a basket of other major currencies, fell to 82.94 after it had opened the Asian trading session at 83.30. Read more…

Euro (EUR)

The euro clocked in another losing day against its counterparts last Friday as rumors of a possible ECB rate cut gained momentum. EUR/JPY slid by 135 pips while EUR/GBP also slipped by 10 pips. So what happened to EUR/USD? Read more…

British Pound (GBP)

The party ain’t over yet! GBP/USD continued to rally on Friday as the pair climbed close to the 1.5500 major psychological level. From there, cable got stuck in consolidation for the rest of Friday’s New York session until the start of this week. Will it head any higher? Read more…

Japanese Yen (JPY)

The Japanese yen ended the week with a big smile on its face as it rose substantially versus other major currencies. Against the U.S. dollar, for instance, the yen gained a whopping 128 pips (that’s huge in USD/JPY’s standards). Versus the euro, the yen rallied 135 pips. Read more…

Canadian Dollar (CAD)

Scooooooore!!! Canada might not have printed any economic report, but a weak U.S. data dragged USD/CAD by another 39 pips to 1.0169. What is this U.S. economic report anyway? Read more…

Australian Dollar (AUD)

For the seventh straight trading day, the Australian dollar was unable to make significant moves in the foreign exchange market. AUD/USD mainly traded sideways, finding support at around the 1.0260 area and resistance at 1.0340. The absence market-moving data from Australia seemed to be the reason behind the Aussie’s lack of direction. Read more…

New Zealand Dollar (NZD)

Just when it seemed like NZD/USD would be able to keep its head above the .8500 handle, the pair was unable to sustain its gains during Friday’s U.S. session as it tumbled to a low of .8470. Is further weakness in store for the Kiwi this week? Read more…

Swiss Franc (CHF)

Way to go, little one! The Swissy managed to pack some gains against the U.S. dollar in Friday’s trading as USD/CHF dropped back to the .9400 major psychological support. Will we see more gains for the franc this week? 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!

  • Currently 5/5
  • 1
  • 2
  • 3
  • 4
  • 5

Rating: 5/5 (1 votes cast)

April 28, 2013

Daily Forex Fundamentals – April 26, 2013

Filed under: Currency Charts — Tags: , , , , — admin @ 1:27 am

What’s on the Economic Horizon
U.S. Q1 2013 GDP to post 3.0% growth
BOJ to make interest rate decision today

U.S. Dollar (USD)

Not again! The U.S. dollar chalked up another losing day to most of its major counterparts as GBP/USD surged to the 1.5450 area while USD/JPY dipped back to the 99.00 handle. Are there any catalysts that could trigger a bounce today? Read more…

Euro (EUR)

Yesterday turned out to be an extremely wild day for the euro. At first, the currency staged a magnificent rally. But when the U.S. trading session began, the euro kept dropping like a hot potato. EUR/USD started the day at 1.3016, rose as high as 1.3095, and then closed near its open price at 1.3003. Read more…

British Pound (GBP)

Ha! Who’s the loser now? The pound blasted above its counterparts yesterday when the U.K.’s GDP report came out better than many had expected. Cable popped up by a nice 165 pips while Guppy also enjoyed a nice 132-pip rally. Read more…

Japanese Yen (JPY)

Brace yourselves, people! The BOJ is set to make its interest rate decision today and we all know what happened last time! USD/JPY is currently trading close to the 99.00 major psychological level, as traders wait for the central bank’s announcement. Which way will it go? Read more…

Canadian Dollar (CAD)

Despite the lack of economic data, the Canadian dollar managed to make a huge lunge forward thanks to increased appetite for risk. The Loonie closed the U.S. trading session at 1.0208 against the dollar, which is a respectable 49 pips higher from its day open price. Read more…

Australian Dollar (AUD)

What a topsy-turvy day for the Aussie! AUD/USD staged a strong rally from the 1.0275 area to a high of 1.0330 during the Asian session, before reversing and dipping back below 1.0300. What the heck was that all about? Read more…

New Zealand Dollar (NZD)

New Zealand was on a bank holiday for most of the day yesterday, so NZD/USD’s price action danced to the tune of risk sentiment. The Kiwi settled with a 34-pip gain on the Greenback after NZD/USD had popped up to an intraday high of .8564. Read more…

Swiss Franc (CHF)

Phew! The franc got a breather from its counterparts yesterday as USD/CHF slipped by 22 pips while EUR/CHF also dropped by 40 pips. What the heck happened? 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!

  • Currently 4/5
  • 1
  • 2
  • 3
  • 4
  • 5

Rating: 4/5 (3 votes cast)

April 26, 2013

The Art of Refinement

Filed under: Forex General — Tags: — admin @ 5:32 pm

When I was a young trader I used to test and backtest hundreds of different trading systems throughout the week. I was a trader who had ADHD when it came to developing trading systems – even though I consciously would affirm the statement that no perfect system exists, my actions (and subconscious) would be saying otherwise.

The problem these actions brought when I became more of a mechanical trader was that I never refined a system once it had a minor losing streak – it would lose two trades in a row. I would throw the system away, despise it and search for a better system. I went from trend trading to reversal trading to pattern recognition to fractals – heck I even went as far as to look at Elliott Theory and Gann!

Yet through all of those experiences the one thing I didn’t do was refine what I already had.

Here are some things I wish I had learnt earlier in my mechanical trading life:

  • Is the system trading to expectations? Are the trades that are being conducted ones that I would trade had I been manually trading this chart? If not, what aspects in my code can I refine to match what my manual expectations would be?
  • Are there elements in my code that are redundant? Am I doing two things the same? Can I make something more efficient? Could speed of execution be a problem with my orders? Start looking at ways where I can refactor the code – this skill will develop your coding ability more than your trading ability.
  • Can I make my code more modular? Can I break it up into smaller modules so that I can easily test and debug problems within my code? Why do I have everything in the start() function? Should I be running my code at different times during the day? Should I be running parts of my code at the change of every bar or at the change of every tick?
  • What parts of my trading system can I improve? This will only come through time when you review your trading system and see what elements are working well and which aren’t or what new elements you’ve discovered about your system that weren’t clearly evident from your initial scope. This is where your trading skills began to really take off!

These are some of the questions that should be prompting you to refine your system rather than throw it out completely.

My progression as a trader and as a programmer never eventuated to much during the years when I was an ADHD trader, but when I stopped trying to search for the perfect system and began working with what resonated with me and refining what I had already made then my skills as a trader and programmer began to improve.

If you find yourself going around in circles as a trader and not really being established in any one particular direction with a trading system, it’s time you stopped and chose a couple of methods that you like and began to build upon that foundation.

Daily Forex Fundamentals – April 25, 2013

Filed under: Currency Charts — Tags: , , , , — admin @ 1:28 am

What’s on the Economic Horizon

Traders Unfazed by Weak Durable Goods Orders Data
U.K. GDP Due Today
New Zealand Trade Balance On Tap

U.S. Dollar (USD)

Are the dollar bulls and bears experiencing calm before the storm? Though the dollar slipped against most of its counterparts, traders mostly ignored the weak data that came out of the U.S. Read more…

Euro (EUR)

Chop, chop, chop! EUR/USD sliced this way and that in yesterday’s trading sessions as the pair spiked to a low of 1.2955 then zoomed up to a high of 1.3035. At the end of the day, EUR/USD was still stuck around the 1.3000 major psychological level. Read more…

British Pound (GBP)

Despite the weaker-than-expected Distributive Trades Survey, Cable still managed to climb higher yesterday. It opened the day at 1.5242, rose to an intraday high of 1.5289, and then closed the U.S. trading session at 1.5265. Read more…

Japanese Yen (JPY)

Japan didn’t print any economic data yesterday, so the yen bears were given free passes on the yen crosses. USD/JPY, EUR/JPY, and GBP/JPY all inched higher than their open prices despite the release of weak reports from the U.S., the U.K., and the euro zone. What gives? Read more…

Canadian Dollar (CAD)

Ho hum… USD/CAD’s price action was pretty dull yesterday, although the pair did have an extra kick of volatility during the New York session. USD/CAD jumped to a high of 1.0277 then dipped below the 1.0250 handle towards the end of the day. Read more…

Australian Dollar (AUD)

Weak inflation? Pfft. Ain’t nobody got time for that! The Aussie bulls shrugged off the possibility of an RBA rate hike and pushed AUD/USD 14 pips above its open price instead. Awesome! Read more…

New Zealand Dollar (NZD)

The Kiwi closed sharply higher against the Greenback yesterday, thanks to the RBNZ’s interest rate decision. NZD/USD began the day at .8408 but found itself at 71 pips higher at .9479 by the end of the U.S. trading session. Read more…

Swiss Franc (CHF)

Due to the lack of market-moving events, the Swiss franc mainly moved sideways versus the safe haven U.S. dollar for the most part of the day. USD/CHF traded between 9474 and .9443 during both the Asian and European trading session, and then posted a new 3-week high at .9500 during the U.S. session. By the end of the day, however, the pair went back down to .9472. 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!

  • Currently 5/5
  • 1
  • 2
  • 3
  • 4
  • 5

Rating: 5/5 (2 votes cast)

April 25, 2013

Daily Forex Fundamentals – April 24, 2013

Filed under: Currency Charts — Tags: , , , , — admin @ 1:27 am

What’s on the Economic Horizon

U.S. Manufacturing Reports Disappoint
Australian CPI Prints Below Forecast
NZD Rallies on the RBNZ’s Optimism

U.S. Dollar (USD)

Like cheese and nachos, there’s no denying that the dollar and risk aversion go really well together. Concerns about slowing global growth sparked risk aversion in yesterday’s trading and allowed the dollar to score gains against all of its higher-yielding counterparts. Boo yeah! Read more…

Euro (EUR)

Awful, awful performance! Due to the generally weaker-than-expected manufacturing and services PMIs from the euro zone, the shared currency took a major dive yesterday. After starting out the day at 1.3062, the pair plunged as low as 1.2972 before settling at 1.2999 at the end of the U.S. trading session. Read more…

British Pound (GBP)

Both the pound bulls and bears got busy yesterday as they considered the U.K.’s grim reports and the overall risk aversion in the euro region. GBP/USD slipped by 40 pips but EUR/GBP also fell by 19 pips. Read more…

Japanese Yen (JPY)

Without any catalyst from Japan, the yen’s scorecard was as mixed as a bag of M&M’s in yesterday’s trading. While it gave up 11 pips to the dollar, it finished the day with a 36-pip gain against the euro when EUR/JPY closed at 129.29. Read more…

Canadian Dollar (CAD)

Although USD/CAD experienced quite a bit of volatility yesterday, the pair still ended up basically where it had begun the day. It opened at 1.0260, rose near the previous day’s high at 1.0286, and then closed at 1.0263. Read more…

Australian Dollar (AUD)

What a comeback! After plunging to its 7-week low at 1.0221 following the disappointing Chinese manufacturing report, AUD/USD pared its losses in the London session. By the day’s close, the pair was back to where it started the day at 1.0267. Read more…

New Zealand Dollar (NZD)

Nothing like central bank optimism to boost a currency! NZD/USD might have ended up with an 8-pip loss yesterday but it looks like things are turning around for the comdoll! Here’s why. Read more…

Swiss Franc (CHF)

The franc is back in the game, baby! After eons of merely reacting to its counterparts’ price action, the franc showed off its own moves yesterday. USD/CHF popped up by 108 pips while EUR/CHF moved closer to 1.2300 by rising by 81 pips. What the heck happened? 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!

  • Currently 5/5
  • 1
  • 2
  • 3
  • 4
  • 5

Rating: 5/5 (1 votes cast)

April 24, 2013

Daily Forex Fundamentals – April 23, 2013

Filed under: Currency Charts — Tags: , , , , — admin @ 1:28 am

What’s on the Economic Horizon

HSBC Prints Disappointing Chinese Manufacturing PMI
Euro zone PMIs Due Today
Canadian Retail Sales On Tap

U.S. Dollar (USD)

Another mixed day for the Greenback! With no major market theme dictating the currencies’ price action, the US dollar ended up all over the charts. It gained a bit on the euro and the franc but was knocked back by the pound and the yen. Read more…

Euro (EUR)

Without any economic data on tap, the euro just lacked some “Ooomph!” in yesterday’s trading. It tapped the 1.0300 handle against the dollar but failed to sustain its rally above the level. EUR/USD had to settle with a 6-pip loss for the day at 1.0273. Read more…

British Pound (GBP)

Thanks to encouraging comments from both the IMF and the World Bank, Cable was able to stage a very respectable rally yesterday. It opened the day at 1.5234, rose to an intraday high at 1.5292, and then finally settled at 1.5282. Read more…

Japanese Yen (JPY)

Finally, a breather! The yen recovered some of its losses against its counterparts yesterday after posting heavy losses following the G20 weekend meeting. USD/JPY, EUR/JPY, and even GBP/JPY ended the day a couple of pips below their open prices. Read more…

Canadian Dollar (CAD)

Without any economic data on tap from Canada, the Loonie was left with no other choice but to spend another day in the bear lair. USD/CAD hovered around the 1.0250 minor psychological handle for the most part of the day before closing 4 pips higher from its opening price at 1.0256. Read more…

Australian Dollar (AUD)

The Aussie sank deeper in the bear lair yesterday as AUD/USD registered another 7-pip loss by the end of the day. What the heck happened? Read more…

New Zealand Dollar (NZD)

Due to the lack of market-moving events, yesterday turned out to be a very slow day for the Kiwi. After starting the day at .8397, the Kiwi simply paced back and forth between support at the .8400 major psychological level and resistance at .8460. At the end of the day, the Kiwi was sitting at .8417. Read more…

Swiss Franc (CHF)

Yesterday didn’t turn out to be a good day for the Swissy as it depreciated notably versus the safe haven Greenback. USD/CHF began the day at .9317 but ended the U.S. trading session slightly higher at .9344. 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!

  • Currently 3/5
  • 1
  • 2
  • 3
  • 4
  • 5

Rating: 3/5 (2 votes cast)

April 23, 2013

Daily Forex Fundamentals – April 22, 2013

Filed under: Currency Charts — Tags: , , , , — admin @ 1:28 am

What’s on the Economic Horizon

Existing Home Sales Expected to Hit 5.02 Million
Euro zone PMIs Due Tomorrow
Japanese Yen Takes a Plunge on Taso’s Comments

U.S. Dollar (USD)

The dollar’s price action was as mixed as a piƱa colada last Friday. It traded notably higher versus the yen and the pound but it wasn’t able to perform the way same versus the euro. The U.S. dollar index that tracks the performance of the Greenback against a basket of other major currencies rose to 83.20 from 83.04. Read more…

Euro (EUR)

No need for Super Mario’s rescue this time! Thanks to a pretty lenient G20 meeting, the euro was able to score some serious gains against its counterparts. EUR/USD popped up to an intraday high of 1.3130 while EUR/JPY jumped by 174 pips. Read more…

British Pound (GBP)

The pound went down swingin’ with a 49-pip loss against the dollar in Friday’s trading. GBP/USD rallied at the start of the day but lost its momentum during the London session. By the day’s close, the pair was down at 1.5233. Read more…

Japanese Yen (JPY)

Awww, poor yen! It looks like traders are back to their old tricks again, selling the yen like there’s not tomorrow. The currency lost against most all major currencies, falling 174 pips versus the euro and declining 129 pips against the dollar. Read more…

Canadian Dollar (CAD)

Look who missed the risk appetite train! Canada’s data printed last Friday all popped up in the red, which is probably why the Loonie bulls didn’t jump in along with the other high-yielding currencies. USD/CAD had dropped to an intraday low of 1.0232 before it closed 3 pips higher than its open price. Ouch! Read more…

Australian Dollar (AUD)

The Aussie’s price action last Friday was as wild as a roller coaster ride. At first, the currency managed to stage a strong rally, but as the day went on, it eventually gave back its gains to end the day barely changed. AUD/USD began the day at 1.0297, rose as high as 1.0360, and then closed at 1.0288. Read more…

New Zealand Dollar (NZD)

Just when you thought the Kiwi was on its way to fly up to test the .8500 handle, it suddenly runs out of fuel! NZD/USD lost momentum halfway through the day and pared some of its earlier gains. The Kiwi only settled for a measly 21-pip win at .8433. Read more…

Swiss Franc (CHF)

Just like its European and comdoll counterparts, the Swiss franc was forced to give up its gains to the dollar in Friday’s trading on risk aversion and profit-taking. USD/CHF found support around the .9300 handle and closed 9 pips higher from its opening price at .9335. 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!

  • Currently 0/5
  • 1
  • 2
  • 3
  • 4
  • 5

Rating: 0/5 (0 votes cast)

April 20, 2013

Daily Forex Fundamentals – April 19, 2013

Filed under: Currency Charts — Tags: , , , , — admin @ 1:28 am

What’s on the Economic Horizon

G20 To Comment on BOJ Action?
Canadian CPI Figures on Tap

U.S. Dollar (USD)

Not much action on USD pairs yesterday, although we did see the Greenback give back some of its gains against its European counterparts from the day before. EUR/USD finished 21 pips higher at 1.3051, while GBP/USD closed at 1.5281, up 42 pips from its opening price. Read more…

Euro (EUR)

The euro was able to pare some of Wednesday’s losses as the markets took EUR/USD 21 pips higher to end at 1.3051. Is it getting ready to stage a comeback or was yesterday’s move just a dead cat bounce? Read more…

British Pound (GBP)

Weak retail sales? No problem! The pound got a breather from its losses yesterday when the currency bears ran out of steam. Cable even closed 42 pips higher than its open price while Guppy recovered from its intraday low at 148.75 end closed at 150.08. Phew! Read more…

Japanese Yen (JPY)

It was a day of consolidation for yen pairs, as we didn’t see much movement in the markets. With the weekend fast approaching, could that all change today? Read more…

Canadian Dollar (CAD)

Not much movement for the Loonie – USD/CAD ended the day just 5 pips lower at 1.0260. Without any Canadian reports to drive the markets, the pair never really traded more than 35 pips away from its opening price. Boooring! Read more…

Australian Dollar (AUD)

With no major data on tap, AUD/USD stuck within its average daily range, as it finished just two pips higher at 1.0296. Could we be in for another snoozefest today? Read more…

New Zealand Dollar (NZD)

The Kiwi got hit with a one-two punch yesterday when weak data from the U.K. and risk aversion in the euro region weighed on the comdolls. NZD/USD only popped up to an intraday high of .8470 before it settled with a 21-pip loss. Read more…

Swiss Franc (CHF)

Since Switzerland was void of economic reports yesterday, the franc’s price action was dependent on its counterparts. USD/CHF only slipped by 4 pips while EUR/CHF popped up by 14 pips. 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!

  • Currently 4.3/5
  • 1
  • 2
  • 3
  • 4
  • 5

Rating: 4.3/5 (3 votes cast)

April 19, 2013

Daily Forex Fundamentals – April 18, 2013

Filed under: Currency Charts — Tags: , , , , — admin @ 1:28 am

What’s on the Economic Horizon

Initial Jobless Claims and Philly Fed Index on Deck
U.K. Retail Sales to Fall 0.7%?

U.S. Dollar (USD)

Due to disappointing corporate earnings, risk aversion ended up as the dominating market theme yesterday. This meant that the Greenback reigned supreme, and showed everyone who the true king of the foreign exchange market is. The U.S. dollar index, which tracks the performance of the Greenback versus a basket of other major currencies, rose to 83.13 from 82.30. Read more…

Euro (EUR)

What a disaster! A day after zooming up the charts, EUR/USD came crashing down yesterday, erasing all its gains from Tuesday. The pair eventually finished at 1.3030, marking a 150-pip decline on the day! Read more…

British Pound (GBP)

Talk about having a tough day! The pound gave up ALL of its gains on Tuesday (and much more!) to the dollar. After GBP/USD opened at what turned out to be its intraday high at 1.5375, the pair dropped like a rock to close at 1.5240. Read more…

Japanese Yen (JPY)

If mixed is your thing, then you probably enjoyed how the yen moved yesterday. While it lost slightly against the dollar, the currency was able to post some gains versus both the euro and the pound. USD/JPY, for instance, rose to 97.21 from 97.60. EUR/JPY, in contrast, fell to 127.91 from 128.65. Read more…

Canadian Dollar (CAD)

Thanks to change of heart by the Bank of Canada, the Canadian dollar took a massive hit in yesterday’s trading action. After opening a shade above 1.0200, USD/CAD eventually zoomed higher following the BOC rate statement, eventually closing at 1.0265. What gives? Read more…

Australian Dollar (AUD)

Just when you thought the currency was going to stage a major comeback, it makes a complete 180 degree turn and sells-off! After its strong performance on Tuesday, AUD/USD suffered a major defeat yesterday and more than 100 pips. The currency pair ended the U.S. trading session at 1.0294, down from 1.0395. Read more…

New Zealand Dollar (NZD)

The Kiwi is now back in the red! After finishing higher against the dollar on Tuesday, the comdoll settled in the bear lair in yesterday’s trading. NZD/USD closed with a 70-pip loss at .8433. Boo! Read more…

Swiss Franc (CHF)

USD/CHF skyrocketed in yesterday’s trading faster than you could say, “There she blows!” The pair bounced off its day open price at .9221 and finished higher at .9331. What caused the franc’s loss? 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!

  • Currently 5/5
  • 1
  • 2
  • 3
  • 4
  • 5

Rating: 5/5 (2 votes cast)

April 18, 2013

Is the Aussie Safe to Short?

Filed under: Forex Strategies — Tags: , , — admin @ 4:43 pm

TMM thought it would be time to review their old friend, the Aussie. A couple of interesting research pieces have come out from the sellside at the same time as one member of TMM has been travelling downunder so we thought we would try to find some sense between the 10,000 ft world of the big picture and capital flows and slightly more granular information on capital expenditures from corporates.

Lets start with the big picture of Aussie capital flows and what is holding up the currency. Shorting AUD has been about as much fun as being in the octogon with George St Pierre – just when you think you’ve got the terms of trade flow right you get slugged with flight to quality flows and just when you think they are receding with normalization of the volatility regime you find mining majors rushing into the market to build mines and gas plants as fast as they can. Its about as much fun as being hit in the face, then kicked, then thrown on the ground and strangled until you tap stop out. Ie not fun at all. So, where are we now with respect to these key drivers of flows and where are we going?

First, it appears that portfolio flows have slowed down somewhat. There are some tentative signs of a slowing of reserve accumulation ex Japan and Australia has not seen material net inflows for a couple of quarters.

TMM are big believers in normalization of current account balances as being a sign of the world getting better and this does appear to be happening. So, if reserve assets are generally going down and the eurogroup does not do anything insane for a while, perhaps having had their false idol of Reinhardt and Rogoff smashed by a bit of basic spreadsheet math then there should be less net flows and much less flows to Australia. TMM won’t bet the farm on this one but having been blindsided by these flows despite having got the commodities picture largely correct we have stopped whimpering and gotten out of the fetal position on this one.

Second, what about European bank deleveraging? This provided a substantial tailwind to shorts in 2011 but has also tapered off as of late. BIS data seems to indicate that Eurobank exposures to Australia are now low enough that it is unlikely to be a key driver and anecdotal evidence from our trip down here indicates that most eurobanks that are leaving the market are down to their last couple of hundred million dollars of loans. The loan auction-palooza of 2011 appears to be a long way away now.

Third – what about all that mining investment? This is a bit more contentious and frankly much more important of a driver of flows in the last year and going forward. Investment continues to be torrid and while the coal sector is desperately looking to cut capacity after an apparent step function change in Chinese thermal power growth and iron ore projects get cancelled the gas sector rolls on. Or does it? Here is ANZ’s pipeline of future projects as of Jan 2013:

The problem here is that Browse has been cancelled and Arrow is being doubted by the market. While this does not do anything to change the peak in investment (2013) the rolloff of projects appears to be very steep indeed after 2014 with not much in the pipeline. Now, TMM know there is more to life than gas, coal and iron so we thought we’d look at the contractors sector of the AS51 for clues as to what their development pipeline looked like:
Ohh er. Not pretty. Worst hit are coal and iron ore oriented names but the rest are not exactly in great health – maybe that has something to do with public sector sources of revenue being closely tied to resources like Queensland which tends to curtail public sector projects like rail and roads:
One partner of a insolvency advisory in Australia described what was happening in the Hunter Valley and Bowen Basin, both major coal mining areas as “a nuclear winter setting in”. Not a lot of room for interpretation there. Word is that if you want to finance “yellow goods” – ie, things like bulldozers and massive trucks then you generally will not get much love from Australian banks who have seen this show before.
TMM have been wrong before on AUD but we are finding it hard to see what keeps it higher from here given the collapse in investment we are likely to see over the coming years. Even if the

investment flows do not do it then rate cuts cannot be that far behind.

Putting that lot together TMM feel that Aus$ is vulnerable to an old fashioned sharp move lower in a “thatshouldnthavehappened” style that is pure “Gold”.

Older Posts »

Powered by WordPress