Development of main currencies

Inviato il 17 November 2010 da Rod

The euro is linked to growing concerns about the budget problems of many European states and is target to continuous pressure. The currency pair EUR / USD fell to 1.3850. In the coming days and in the coming hours we must be careful; for those wishing to invest in the market, the trend of this currency pair may go in favor of the greenback. Bring also attention to news coming from the U.S., which could be very heavy.
The U.S. dollar showed some strength against the application and declined to relatively high-risk activities.
The British pound was also under pressure, due to the release of the development of house price for the month of October, which showed an unexpected drop of 49%, against the expected value of  39%. After an initial descent by early European session, the pound was able to go uphill.
The Japanese yen showed a sort of stabilization, the currency pair USD / JPY fell to 80.50 yen level. The Japan’s currency rose against its main competitors such as China, following the announcement of the decision to strengthen monetary control measures.
Regarding oil prices, it is traded at about $ 86.90 per barrel, in the context of strengthening of the U.S. dollar. The gold instead reached a new record level of $ 1422.00 per ounce.
Regarding instead the minor currencies, we can see that the exchange rate between the dollar and New Zealand dollar the Reserve Bank of Australia has released the country’s financial stability report, which had no specific effect on the New Zealand dollar, then the currency pair USD / NZD has traded at $ 0.7820.

Alternative investments

Inviato il 18 November 2010 da Rod

When you decide to invest in the market there are several things you should necessarily take into consideration. If you study the market trend, if you make wise choices and if you have a little luck, then you will most likely be able to have an interesting and positive return on your investment. Nothing makes an investor more devastated than the fact of having to rely on year-end losses instead of profits. The recession that recently has hit thousands of investors is the proof.
Some experts say it is a good time to invest again in the market, if until now you have been on the sidelines. The question is, where to invest? And if you were to reinvest in something that could then lose value? Fears of a recession is loose, but not disappeared. The development of  currencies leaves many with the doubt of wondering where to invest.
We’re going to see some “safe harbors” that investors have already used successfully in previous years, where the stock market seemed to be more inhospitable.
Investment in services. Since most service companies operate under rate regulation at the state level, the U.S. power companies listed on stock exchanges are often regarded as an area that will not go down, even in difficult times. Although government regulations have a major impact on profitability, the highly regulated environment also protects against fluctuations. Some of the biggest names on which you can choose to invest are Exelon, FirstEnergy and Mirant.
Blue-Chips. Investors may have had a bad experience with GM, but there are other companies that are still going strong even after years, like General Electric and Pfizer. Even McDonald’s is one of the favorite stocks and low-risk, especially when long-term investment.

How are currencies proceeding after the G20

Inviato il 22 November 2010 da Rod

The dollar had its first weekly gain after Ben Bernanke, chairman of the U.S. Federal Reserve, has opened the way for further quantitative easing. The rally of the dollar has come down to the last meeting of G20 leaders in Seoul, where there have been little progress in defusing the tensions international currency. Instead, events outside the sphere of influence of those who gathered in Seoul see a return to risk aversion.
After hitting its lowest level, the dollar has risen by 1, 2 percent against the yen, at a value of 82.15. The euro has had the worst performance among the major currencies, after the re-emergence of concerns over the debt of the euro-zone countries. Ireland was the last country to create such fears. Meanwhile, rumors of an imminent bail-out Irish have brought down the euro against the dollar of 1.6 percent.
The turmoil of sovereign debt in Ireland and Portugal has raised concerns that the contagion could drag other countries in the euro zone in trouble and that delaying the ECB attempts to normalize interest rates in the region it could be even more serious.
The crisis in the euro zone is set to become even worse if nothing is done. The ECB policy makers are once again called upon to reverse course from implementing exit strategies. The fact remains vulnerable euro against the currencies.
In addition, even speculation that China has stopped its efforts related to monetary tightening after the stronger expected inflation data has prompted fears of weakening demand. The possibility of increased rates of Chinese debt woes in Europe and continues to have a fairly marked effect on the currencies. Meanwhile, the disclosure of information about the willingness of the Chinese People’s Bank of China to raise the reference rate for the renminbi.
The pound has been rather quite in flux, as investors remained uncertain about the next move by the Bank of England.

The British pound proceeds better than euro and dollar

Inviato il 1 December 2010 da Rod

In the last article we began to see the current situation of the British pound. In addition to those already considered, another argument in favor of the pound is the fact that inflation is still very high in the United Kingdom. After three consecutive months of stagnant inflation, the rate is once again on the rise, reaching 3.2 per cent share in the month of October.
This means that the chances that the Bank of England put up another round of quantitative easing is increasingly unlikely. With inflation at these levels just six weeks before the jump of 2.50 percent VAT, a rise in interest rates in the United Kingdom must be almost certain.
The moment this happens, the pound would begin to appear more attractive to investors around the world, which could help push the value even higher.
It’s not only the positive news coming from the UK that are supporting the pound, but also the fact that it is not an area that is suffering as the States and the euro zone. For some time the dollar has suffered losses in response to concerns that the U.S. could slip back into recession, while the euro is under pressure because of the fear related to your debt due to the Irish, Greek and Portuguese. Against these currencies, the British pound gained, as the British economy is seen as relatively healthy, sick or at least not as in Europe and the United States.
Here you make the forecast of exchange rates extremely challenging and difficult, as nobody is willing to say too much about predicting the trend against the euro and the pound against the dollar. Surely the next trading week will be very busy and to take control.

The stories of success are important

Inviato il 25 November 2010 da Rod

The stories of success in Forex are crucial to understanding the real potential of this sector. However, since it does not take much to make up a story only to attract attention,  you’ll always need to deepen the story you are reading. You can not take a book on forex and then start trading the next day. You must carefully follow the directions and build skills and above all their confidence. The only thing that you can not learn from a trading system is your emotional response to the winnings and losses.
Most forex systems should be started with fake money, or with the demo account. This helps to develop skills. However, since you are using counterfeit money, there is no element of risk. So we just develop the skills, while the transition to trading with real money will also add pressure.
The success stories of traders are able to provide a comprehensive framework as to how they treated the trading with real money. From the moment the changes are very emotional for some people, success stories can help paint a clearer picture while you are still learning to trade. The stories that provide the greatest benefit are those that dig deep into the commercial aspects, including stress.
This is a whole new world. The more you begin to understand the world in which you are participating in the more you develop unique abilities.
Self-discovery of how to react to wins and losses are part of learning to make money with Forex. Everything counts, even the most insignificant.
The Forex is so different from most investment systems that you prefer not to learn it. But if we consider how many hours you invest to be experts in a field, then you also understand how the Forex can be learned.

Should you invest in the pound?

Inviato il 1 December 2010 da Rod

Most analysts agree that if the EU sovereign credit crisis continues, the pound would have a certain advantage over the euro. In addition, the quantitative easing that, now, the United Kingdom, it is becoming less likely, the pound has an advantage against the dollar. Needless to say, the United Kingdom is experiencing its risks, but for now the focus is elsewhere and this should contribute to the fact that the pound should keep the head above water, for the first time in a long period.
Some people think that we should invest in the pound, by converting some of the investments previously made in euro or dollars. Considering the highly volatile currency markets and the fact that there is a real possibility that the strength of the pound has recently shown it can meet this currency, then it might be time to re-invest their money, or at least a part of it.
Please note that the prediction o f the evolution of exchange rates is very difficult now. The pound is better than other currencies, but experience tells to stay alert to possible danger. There are steps you can take to try to take advantage of investment opportunities that can be given away by the pound.
Some say to make the cover of their investment, ensuring a certain amount of investments made in euro or dollars in the hope that the market continues to improve. Experts warn that volatility in currency markets is above historical averages and the risk of weakening of the pound can not be excluded. Any change in perspective of the United Kingdom, in particular with regard to the quantitative easing, could push the pound to fall again.
With the debt crisis in Europe being worse, no one can predict how the pound will be affected.

Irland accepts the salvage plan

Inviato il 2 December 2010 da Rod

The Irish government faced imminent collapse during these days, but only after signing for acceptance of a plan to save 100 billion dollars, paving the way for a new election early next year and injecting the threat of political instability within the European financial crisis that is already at the very limit.
Faced with the high-level defections from his coalition government, Prime Minister Brian Cowen said he would dissolve the government after the passage of the 2011 budget, which will take place in early December. His announcement capped a bad day for Ireland, with the agency Moody’s Investors Service has downgraded the debt rating of Ireland.
By accepting the new election, Cowen was sure to become the first political casualty of the debt crisis in the euro area. Meanwhile we awaits developments, given that financial markets and policy in the euro area have to calculate the austerity measures to be imposed.
The imminent collapse of the Irish Government, after the use of the rescue, only seems to confirm fears that the financial crisis is far from passed. Analysts have indicated that heavily indebted countries such as Portugal and Spain, that are making of unpopular budget cuts, could soon face an uncomfortable choice too.
It will be the same story in all these other countries and Ireland is only a step forward and has done things before. All countries must make major adjustments.
Meanwhile, Cowen’s abilities have helped to maintain in the country for three consecutive years, in a situation of economic contraction, followed by the collapse of the largest banks outside of Iceland, and now the use of this bailout forcing the country to review its accounts.

The state of markets

Inviato il 4 December 2010 da Rod

The Euro shows a bit of relief after the Irish bailout, even if the fear of contagion in Spain is real. There are a number of significant data to be considered for our currency. Germany will issue its GDP for the third quarter, in addition to the index of consumer confidence. These data favor only the concern about the gap between the results of the best countries in the region, Germany, and those who are now getting worse, namely Greece and Ireland.
The British pound had a good performance against the euro. However, against the dollar and yen currency is aligned around a level of risk. With heavy exposure to Ireland, the UK is already taking advantage of the weight attached by its austerity measures. In the event that such concerns were to expand, the third-quarter GDP data may lead to some significant surprises.
In Canada, though officials have worked to defuse the political, the Canadian dollar is still a currency risk.
We know that the Japanese yen is seen as a safe haven. However, in a market where all the functions and values of the market are related, an increase in risk tolerance indicates that the stimuli can be made by the BoJ.
The New Zealand dollar confirmed what Moody’s said, but the market remains in doubt. New Zealand was one of the currencies that PIA has lost during the session, because of the combination of different trends of the risk, without going to see in detail what are the big trends, you should go see how your New Zealand dollar will move against the U.S.. In any case, for those who want to invest in this currency, the rating agency Moody’s says that this is a relatively strong.

The rating used in financial transactions

Inviato il 7 December 2010 da Rod

The rating agencies can play a key role in the structure of financial transactions. Unlike a “typical” loan or debt issues, in which a borrower offers to pay a certain amount in return on a loan, financial transactions can be seen both as a series of loans with different characteristics or different groups of small loans, each of which features all the same. Credit ratings often determine the interest rate or price assigned to a segment in particular, on the basis of credit quality or the quality of the activities that took place within that grouping.
The companies involved in the financing arrangements often consult credit rating agencies to make a better decisions, so that everyone receives the desired rating. For example, a company might want to borrow a large sum of money by issuing debt securities. However, the amount is so great that investors may ask questions of such securities if they were put on the market on a single issue, since the costs would be prohibitive. That same company decides to issue three separate bonds, each of which has a separate credit rating: A (low-medium risk), BBB (medium risk) and BB (speculative).
The company expects the effective interest rate that will pay on bonds with high ratings will be much lower than the rate to be paid in securities rated BB. Overall, the amount you must pay for the capital it can obtain is less than if you pay the entire amount was put on the market with a unique condition.
This is how the company may see a credit rating agency to see how each part should be structured, what types of goods are to be used to guarantee the debt of each installment and how the tranches receive the desired rating.

China is improving its exchange rate

Inviato il 7 December 2010 da Rod

We know that all major states and governments of the world, primarily in the United States, began a kind of struggle against China to push the country to a more natural swing in its currency. According to many, in fact, the Eastern country would be deliberately holding down the value of its currency to support its exports and, therefore, seek to grow more than other countries.
Yesterday, Assistant Governor of Bank of China, Li Dongrong, has rejected criticism about the slowness with which China is setting up the choices and strategies to get to have a more flexible exchange rate regime, saying that the management of the currency of the country has contributed to global economic stability.
Speaking to an intervention ‘China meets Europe’, held in Hamburg, has promised that China will continue to improve the exchange rate regime, on the basis of market supply and demand.
These comments came after a senior official of the European Central Bank, also on Thursday, who called on China to make even the potential for adjustments in exchange rates. So it seems that China is moving towards a more flexible regime of exchange rates. According to experts, it appears that a greater flexibility of the yuan, that of the Chinese currency, would be another favorable element to have, ultimately, a more balanced growth of all currencies and a better and more sustained global economic recovery.
Constancio was speaking at the same event.
Addressing these problems, Li said the Dongrong PBOC will continue to “promote economic restructuring” to move the economy on a more stable, and “strengthen supervision macro potential.”
“The bank of China has attached great importance to the coherence and stability of its monetary policy,” he said.

Risk Appetite Lifted Up By Strong Economic Data Of US

In US session as the risk appetite is lifted up by the strong economic data of US that makes the USD to get reversed earlier in the Forex online trading market. It is seen in the market that the manufacturing index of ISM is dropped to 59.7 point from the high level of 60.4 in the month of May. but, it can be said that it seems to be better than the expected rate of the market. Also it gets the achievement of the expansion reading steadiness from the ten consecutive months. since May 2004 it was noticed that the employment component details are also solid and now the details reaches to the high level of 59.8 which provides a ray of hope to the non-farm payroll reading. There was a solid increment is noticed in the exports that is of 62 level, it is the highest level seen after December 1988.

There was a rebound is seen in the DOW and crude oil after the mid-day that is the DOW drops-down to 10038 level where as the crude oil seems to fall to the 71.64 level. USD index got the resistance at the level of 87.46 where as it rebounds after reaching the low of 86.5. Sterling was the biggest hit of Yesterday as it reaches to the highest level because of the fall of the Asian AIG Prudential's takeover. This news not only boosted the Sterling but it also favors the UK stocks as the rise is also seen in the stocks. The UK rise also supports the pound. As we have noticed from the past 16 years PMI manufacturing data remains unchanged from the high level of 58. There was a rise in home prices of 8.5 percent is shown in this year earlier and it is also said by the experts of the market that it is the first time from the past September 2007 a fastest pace is seen in the home prices.

EURO gets a hit in early yesterday as the ECB presents its financial report which acknowledges that the banks are already made a significant improvements as per their financial condition. But still there are 2 important factors that may hurts the financial stability of the market. The first factor is the intensification of public finances and second is the possibility of the obstinate between the public finances and financial sector. These two factors is expected to cause a disorder in the financial situation of the market. Unemployment rate of euro zone countries seems to rise up by 12 year high where as Germany unemployment falls to 7.7 percent in the month of May. While there is a rebound shown by the euro after getting support from the stocks.

Bank of Canada rises the rate yesterday from 25 bps to 0.5 percent as it was the first G7 Central bank that have tighten their policies after the recession period. As this was expected by the market earlier times. The euro zone debt crisis leads to the uncertainty in the market but we have to remain cautious about the Global economic market after the rate hike of 0.5 percent. In early times the RBA makes the decision to hold its rate hike because of the continuous fall of euro currency due to the sovereign debt crisis. RBA only mentioned that the current monetary policies are decorous can bring rate hikes to an average situation. RBA has taken a "pause" from the May month but at that time it was predicted that it will give some good results for June hike but after observing the current situation the RBA again takes a decision for a pause in rate hike.

Dollar index sharp rebound of yesterday suggested that the combinations are still in the progress to reach a high of 87.46. The investors are still expecting the resistance hold at the level 87.46 and expected to again reach the high of 89.62 that was the high of 2009 year. GBP/CAD also rebounds and reaches the level of 1.4831 is now resuming. This rise is seen in the currency pair due to the strength gained by the Canadian Dollar and the support given to the pound from the stocks. These all things supported the currency pairs to rebound from their lows and reaches to the high position in the Forex market.

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Rumours Of Iran Euro Sales Heigtens the USD Currency

Rumors from Iran Central bank said that the management had decided to diminish EURO reserves to 20-25 percent from 50 percent and then convert the euro currency into the Dollars and Gold. It is also heard in the market that the sales of the first stage is begin and its target seems to be 15 billion was expected to be finish off till the end of September. EUR 45 billion is expected amount for the whole sales. Iran is expected to reduce its cost of oil sales in euro. While buying seems to be low and USD stays tight against all the major currencies of the Forex online trading market. Prime Minsiter of Japan has announced its resignation leads to the Japanese currency Yen in the soft order in the market. This announcement of resignation is just come before week and now the currenct finance minster of Japan is the successor as the market expects for the chair of Prime Minsiter.

According to the report presented by the Challenger, Gray the US planned to dropped layoff early makes a fall of 65 percent in the month of May where as eurozone PPI rises to 0.9 percent mom. Aussie GDP reaches to a high of 0.5 percent qoq and 2.7 percent yoy in the first quarter of this year that is 2010. While Swiss retail sales rises to 1.3 percent yoy in the month of April. Monetary base roses to 3.7 percent yoy in the end of the may month. Although the Japan currency is not going as good because of the political uncertainity where as apart from this the US currency is gaining as the demand of risky assets rose.

We have seen that the currency pair USD/JPY reaches to the high level of 92.36 first time after the eigteenth of may where as the currency pair EUR/JPY reaches to 113 level as anticipated in the market after the recovery of the US labor market. In the market rumuors are going on about the next leader of Japan that was expected to the current finance minster will take the vacant position of the Prime Minster of Japan that ultimately leads the Yen currency to lag behind in the market from some past days. Th finance minister of Jpana suggested the BOJ to do not look steady at the market try to fight against the deflation to stop it. While rise is seen in the Asia Pacific of 2.4 percent and the Nikkie embedded the goodness in the stocks by rising 2.46 percent more. The stocks seems to be rebound and also triggers the risk appetite because of the japanese investors amendment foriegn bond net purchases to the most expected till the month of September.

There was a advancement shown in the currency pair of AUD/USD that seems to be rises to 0.5 percent and the currency pair NZS/USD rises to 0.4 percent in the consecutive second day at the Forex market. This is all due to the strong economic data that comes from US while the Aussie demands for the risk appetite. Where as the trade balance of the Australian trade adds the surplus in the month of April as there was a high jump shown in the iron ore exports that is of 25 percent more from the past, coal shipments rises to 40 percent more where as the exports also rises to 11 percent as comapred to the April month. RBA has forecasted that the boom of Asia srocks may lag the Australias's trade in the coming time.

The currency pair EUR/USD seems to be in good path as it seems to be rises from 1.2111 to 1.2281 on first june. It gets the support from the stocks rise in the starting of this month. While as about the US economy it was predicted yesterday that the US comapnies are ready to launch 70,000 jobs as the intial jobless came fells to 455,000 from the previous 460,000. In this week there was a meet fixed between the Finance minsters with central bankers of G20 in Bussan that was in South Korea which decides about the current situation of EURO debt crisis. The currencty finance minster of Japan mentioned in his one of the interview that the european debt crisis leads an adverse effect on the Global economic growth of the country merely because of the leading trading countries that is China, india and Brazil are still ready to fight against the deflation as they are robust enough.

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Stock Market Weekly Update, Sep 07, 2010

The Week Ahead: Unemployment inched up a notch on the U-3 measurement to 9.6%, but U-6 unemployment pushed to 16.7%. The private sector did add jobs for the eighth consecutive month. Two retail reports on Wednesday, the ICSC-Goldman Store Sales and the Redbook will give clues to consumer retail purchases. The Fed Beige Book and Consumer Credit will also be released. Thursday brings the International Trade figures as well as the Jobless Claims. Friday ends a short week with the Wholesale Trade numbers.

Stocks to Watch: After hitting new 52 week lows last Tuesday, the Select Sector Financial ETF (XLF) was one of the best performers last week as bank, insurance, and real estate stocks led the way. Campbell Soup (CPB) fell 3% on two times normal volume even after beating year ago numbers and estimates possibly indicating a trend change. Agricultural stocks charged higher as corn prices are now higher than a year ago: Caterpillar (CAT) rose 2.2%, Deere & Co. climbed 1.3%, and an exchange traded note that tracks corn prices and other grains (JJG) was up 3.3% reaching a 52 week high just 3 months after hitting a 52 week low.

Special Note: The stock markets surge from oversold levels early last week was either a flash in the pan due to seasonal factors surrounding the Labor Day holiday or the start of another advance in what appears to be a sideways trading range since May. One indication in support of the latter is the push through the 50 day moving average which in recent months has acted as a magnet to the 200 day moving average. Another is that some foreign indexes like the London FTSE index and the India Fund (IFN) have pushed through their August highs. An argument for the former is that September is historically the weakest month of the year.

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Weekly Market Newsletter, September 13 2010

The Week Ahead: Slow growth continues to plague the U.S. economy. An additional 4 million jobs have been lost since the beginning of the Obama Administration. Retail Sales which makes up 2/3 of GDP will be released on Tuesday and afterwards Business Inventories will be announced. The MBA Purchase Applications will measure the health of the housing market on Wednesday with the Industrial Production report to follow. By Thursday, markets will focus on the Producer Price Index (PPI) then on Friday the Consumer Price Index (CPI) followed by Consumer Sentiment.

Stocks to Watch: PG&E Corp. (PCG) fell 8.35% on ten times normal volume after a gas line explosion in California. The stock was near its 2007 high before the incident happened. Nokia (NOK) has a new CEO aboard and a new N8 Smart Phone coming out later this week pushing the stock up nearly 2%. The company has the largest phone software business worldwide. Watson Pharmaceutical (WPI) dropped 4% after a competitor's potassium drug was approved by the FDA for return to the market.

Special Note: An upward wedge pattern or triangle on the DOW and S&P 500 in recent days is similar to a larger wedge that occurred from July 13 to August 9 that concluded at the most recent peak last month. Look for the completion of this very short term pattern this week with a stab above the 200 day moving average followed by a protracted sell off. Are stock analysts bullish or bearish? Bloomberg recently reported that 29% of brokerage firm ratings of stocks were buys while over 54% were holds and only 5% were sells.

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Weekly Market Newsletter, September 20, 2010

The Week Ahead: Gold and Silver price breakouts are helping to fuel speculation of higher prices in all markets even as the CPI was flat at its core rate, and household net worth fell 3% in the second quarter. Significant reports to watch will be: the Housing Market Index on Monday, the Housing Starts figures on Tuesday followed later by the Federal Reserve's announcement of interest rate policy, the Existing Home Sales and Leading Indicators on Thursday, and Durable Goods Orders preceding the New Home Sales numbers on Friday.

Stocks to Watch: Oracle Corp. (ORCL) beat the street estimates in its most recent quarterly report sending the stock up 8% on 5 times normal volume and reaching levels not seen since 2001. Micron Technology (MU) and Sandisk Corp. (SNDK) both sank as falling chip prices worldwide and weaker demand for consumer electronics are expected to squeeze profits. NetSuite ( N) reached a 52 week high as the business software firm will add 150 new workers for its 'cloud computing' services. Finally, Arena Pharmaceutical (ARNA) continued to collapse after the FDA rejected its obesity medicine.

Special Note: The Nasdaq 100 technology index (NDX) has done something beyond what it last did in January 1991 and that is 12 consecutive days without its prices touching the 5 day moving average. There are a number of extreme overbought readings the market is flashing now including a new 60 year low in the cash holdings of mutual funds now at 3.4% which is below the levels of the market peaks of 2000 and 2007. Another is the American Association of Individual Investors (AAII) whose sentiment poll shows more bulls now than at the recent April peak and less bears than the all time peak in the DOW and S&P 500 in 2007..

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Weekly Market Newsletter, 10-04-2010

The Week Ahead: Manufacturing activity grew at a slower pace in September versus August confirming other reports that economic growth is slowing. Reports to watch on Monday are Factory Orders and Pending Home Sales. Tuesday, the service sector will be tracked by the ISM Non-Manufacturing Index. Chain Store Sales will give a peak at the health of the retail consumer on Thursday, and the Consumer Credit figures will show if outstanding credit is still contracting. The Employment Report on Friday a month ahead of elections will take on added importance to the market.

Stocks to Watch: Citigroup (C) jumped 4.6% on a huge 770 million shares as the U.S. Treasury has now sold half the shares it received from the bailout. Energy and Material Sectors outperformed with Consol Energy (CNX) rising 3.7% as the mining company will close its Utah mine and layoff 231 workers. Freeport Mcmoran (FCX) reached a multi-month high as gold prices hit record highs. The Wall Street Journal reported that Gymboree Corp. (GYMB) is seeking private equity buyers that may have an interest in the company. Fidelity National Financial (FNF) and First American (FAF) came under pressure as questions arose over paperwork that may put millions of real estate titles into question.

Special Note: Markets are starting to show waning upside momentum as the S&P 500 is up a net 3.5 points over the last 9 trading days. Daily Sentiment readings from trade-futures.com are once again at extreme bullish levels typically found near peaks for many markets such as stocks 87%, gold 90%, silver 95%, bonds 93%, Euro 90% and many other commodities. Talk of a second quantitative easing or QE2 by the Federal Reserve no doubt has sparked much of the enthusiasm for the different asset classes, but the market seems to have discounted much of the upside from this potential action already.

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Weekly Market Newsletter 10-11-2010

The Week Ahead: Job losses continued to mount after September showed an additional 95,000 people lost employment net of the private sector's small gain. A couple of retail sales reports including the Redbook numbers will be out by Tuesday after the Columbus Holiday on Monday. The MBA Purchase Applications figures on Wednesday will provide a peak at coming home sales. The International Trade report and the Producer Price Index are released Thursday. Multiple reports arriving on Friday include: the Consumer Price Index, Retail Sales, Consumer Sentiment, and Business Inventories.

Stocks to Watch: With grain prices on the rise, agricultural related companies have been some of the best performers including Agrium (AGU) and CF Industries (CF) both hitting 52 week highs. On the other hand companies that buy loads of grains and meat are on the decline such as Tyson Foods (TSN) which was down 8% on big volume and Smithfield Foods (SFD) which was down 7%. The hedge fund Pershing Square now holds close to a 17% stake in JC Penney (JCP) and 11% in Fortune Brands (FO) as both companies reached 2010 highs.

Special Note: The major indexes have now surged up 5 of the last 6 weeks despite a declining 5 day moving average of the advanced decline line and a sliding relative strength indicator. Most of the technical and sentiment extremes noted over the past month are still in effect. The disparity between the weak fundamentals the economy is exhibiting and market performance is expanding. This behavior typically pre-stages a period of high volatility for share prices.

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Weekly Market Newsletter October 18, 2010

The Week Ahead: With the second quantitative easing program by the Fed on the way, currency markets have seen many imbalances as most foreign currencies rise against the falling dollar. This situation may be addressed on Friday as G20 finance ministers and bank governors meet in Seoul, South Korea. The first two notable reports on Monday are the Industrial Production number and the Housing Market Index. The Housing Starts figures get attention on Tuesday and the Fed's Beige Book on Wednesday. Two additional reports on Thursday include Jobless Claims and Leading Indicators for the economy.

Stocks to Watch: Bank stocks continued to slide against the market's trend. Bank of America (BAC) had its rating cut by S&P do to foreclosure concerns and J.P. Morgan (JPM) is reviewing its foreclosure procedures. Capital One (COF) nosedived 7.6% as it increased the amount of credit balances it does not expect to collect on. Technology stocks continued to soar with Google's (GOOG) better than expected earnings and Apple Computer (AAPL) due to report after Monday's close. Seagate Technology (STX) was approached to go private by a potential buyer and the stock shot up 22%.

Special Note: The number of S&P 500 stocks now above their 50 day moving average is just under 93% about where this percentage was at the April high. Also keep in mind that the Daily Sentiment Index (trade-futures.com) has also reached the same levels as the April high for both the S&P 500 and Nasdaq at a bullish 92% and 90% respectively. Being bullish near term is a crowded trade. Another noteworthy point is that despites technology's rapid ascent some of the generals have been noticeably lagging such as Cisco Systems, Intel, and Microsoft among others which are all down for the year.

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Weekly Market Newsletter 11-8-2010

The Week Ahead: The unemployment rate remained unchanged while pending home sales fell 1.8% after expectations were for it to rise 3%. Still, markets were undeterred and rose 3% or more last week. A quiet reporting week relative to last week starts Tuesday with the ICSC Index which will track the major retail chain store sales followed by the Wholesale Trade numbers. Wednesday, markets get a look at the International Trade figures and Jobless Claims. Thursday is Veteran's Day but stock markets are open. Friday, Consumer Sentiment and Money Supply reports are released.

Stocks to Watch: Earnings from the financial sector beat all other sectors with a 95% increase in Q3 as the lagging KBW Bank ETF (KBE) rose to its highest level since early August. Conversely, telecom sector earnings fell by 9%. Sprint Nextel (S ) sank to its August lows on fears that mobile provider Clearwire (CLWR) which provides a 4th generation mobile network to Sprint could fail as its cash will last only to the middle of next year unless further credit is secured. Massey Energy (MEE), 6 months after its mining disaster, is the subject of takeover rumors with at least 3 mining companies interested.

Special Note: U.S. stock indexes broke above their April highs with the exception of the S&P 100 (OEX) and Russell 2000. Confirmation from all averages would imply a new cycle breakout starting from the July low that may carry into next year with the bullish seasonal bias from November to January. A note of caution though is the Daily Sentiment Index (trade-futures.com) for S&P traders which at 94% bulls nears a 4 year extreme, and the percentage of bulls minus bears near 30% is the highest since the bear market began in 2007 (American Association of Individual Investors). Also, company insiders are selling at a pace not seen
posted by NobleTrading

Has the Swiss Franc Reached its Limit?

The second half of 2010 witnessed a 20% rise in the Swiss Franc (against the US Dollar), which experienced an upswing more closely associated with equities than with currencies. It has managed to entrench itself well above parity with the Dollar, and has become a favored destination for investors looking for a safer alternative to the Euro. Still, there are reasons to wary, and it could be only a matter of time before the CHF bull market comes to a screeching halt.
The forces behind the Franc’s rise are easily identifiable. It basically comes down to risk aversion. While it can’t compete with the Dollar and Yen – its main safe haven rivals – in size and liquidity, it benefits from its perceived economic and fiscal stability, as well as through contradistinction with the surrounding Eurozone. In fact, the Franc’s rise against the Euro has been even steeper than its rise against the Dollar. As the Eurozone crisis radiates further away from Greece, Switzerland has come to seem more like an island in a sea of chaos.
Even an abatement in the EU storm has failed to produce a Swiss Franc correction. That could be because the bad news coming out of Europe seems to be never-ending; one country’s rescue is followed by the downgrade of another country’s sovereign credit rating and warning of imminent collapse. In addition, even as investors have embraced risk-taking, they still remain prone to sudden backtracking. Thus, the Franc has been one of the primary targets of risk-averse capital fleeing the Egyptian political turmoil.
Capital controls and intervention have scared investors away from some currencies, but the Swiss National Bank (SNB) lacks the credibility afforded to other Central Banks. The SNB lost $25 Billion in 2010 in a vain effort to hold down the Franc, and currency investors believe that it has neither the stomach nor the mandate to engage in a similar loss-making campaign in 2011. Besides, the Swiss economy has held up remarkably well, and the trade surplus has actually widened in the face of currency appreciation. The markets might be keen to test the limits of the Swiss export sector, in much the same way that they have challenged Japan by pushing up the Yen.

Still, their are limits to high the Franc can rise, and it appears that I’m no longer the only analyst who thinks it’s undervalued. Don’t forget- the Swiss economy is comparatively minuscule. Its capital markets can absorb only a small fraction of the inflows that the US and Japan can handle, and the Swiss Franc represents a mere 3.5% of all foreign exchange volume, 12 times less than the US Dollar’s share. In other words, it’s only a matter of time before investors run out of Swiss assets to buy, at which point they will have to decide whether to accept short-term returns of 0% in exchange for capital preservation and financial security. My bet is that they’ll walk.
Of course in the short-term, it’s possible that a handful of risk-averse investors will continue to steer capital towards Switzerland, and/or that another mini political or economic crisis will trigger a spike in risk-aversion. When investors once again look at fundamentals, they will be forced to reckon with the Franc’s 40% appreciation over the last five years, and probably conclude that perhaps it was a bit much…

Posted by Adam Kritzer

CFTC / NFA Enhance Regulation of Forex

In 2010, the US Commodity Future Trading Commission (CFTC) formally released a series of new regulations governing all retail foreign exchange dealers. Having given all applicable firms almost six months to bring their operations up to speed with the new regulations, the CFTC is now moving to bring enforcement actions against those that are still not in compliance.
Among other things, the regulations required all retail forex broker-dealers to register accordingly with the National Futures Association (NFA), and for firms that “solicit orders, exercise discretionary trading authority or operate pools with respect to retail forex” to register as introducing brokers. Out of curiosity, I scoured the NFA Background Affiliation Status Information Center (BASIC) to see if/how forex brokers have registered themselves.

As you can see from the table above, there are approximately [I would be grateful if you could inform me of any known omissions!] 28 registered forex firms, and the CFTC recommends that (US) retail forex traders that manage their own accounts should deal with these firms exclusively.
Unfortunately, many firms continue to advertise that themselves as forex brokers when they aren’t registered as such, or even worse, aren’t registered at all. As a result, the CFTC recently filed simultaneous enforcement actions against 14 forex firms, alleging that, “In all but two of the complaints…a defendant acted as an RFED; that is, it offered to take or took the opposite side of a customer’s forex transaction without being registered. In the remaining two complaints, ZtradeFX LLC and FXPRICE, the CFTC alleges that the defendant solicited customers to place forex trades at an RFED without being registered as an Introducing Broker.” The following companies stand accused:

To be a fair, NFA membership doesn’t necessarily imply compliance with NFA regulations, nor does it even guarantee upright behavior. In fact, the NFA is currently scrutinizing all of its member firms “for any signs they are designing computer systems to take advantage of what is known in the industry as ‘slippage,’ or small price movements that happen between the time a customer orders a trade and when that trade is actually executed.” In October, the NFA settled two such cases with IKON FX and Gain Capital, assessing a combined $800,000 in fines. Let’s hope that this isn’t the real explanation for the fact that forex trading is vastly more profitable for brokerages than other types of retail securities trading.
While the NFA hasn’t indicated that this is the case, the current retail forex MO (whereby brokers also act as market-makers) could be under attack. As one advocate for traders told the WSJ, “If a foreign-exchange firm is acting as a market-maker, or taking the other side of a client’s trades, it is doubtful the investor is getting the best possible price.” The problem is at the moment, the industry remains far from transparent, and if not for the NFA investigations, traders probably wouldn’t be able to establish whether their broker(s) acted unscrupulously.

Posted by Adam Kritzer

Forex Markets Look to Interest Rates for Guidance

There are a number of forces currently competing for control of forex markets: the ebb and flow of risk appetite, Central Bank currency intervention, comparative economic growth differentials, and numerous technical factors. Soon, traders will have to add one more item to their list of must-watch variables: interest rates.
Interest rates around the world remain at record lows. In many cases, they are locked at 0%, unable to drift any lower. With a couple of minor exceptions, none of the major Central Banks have yet raised their benchmark interest rates. The same applies to most emerging countries. Despite rising inflation and enviable GDP growth, they remain reluctant to hike rates for fear that they will invite further speculative capital inflows and consequent currency appreciation.
Emerging markets countries can only toy with inflation for so long. Over the medium-term, all of them will undoubtedly be forced to raise interest rates. The time horizon for G7 Central Banks is a little longer, due to high unemployment, tepid economic growth, and price stability. At a certain point, however, inflation will compel all of them to act. When they raise rates – and by much – may well dictate the major trends in forex markets over the next couple years.
Australia (4.75%), New Zealand (3%), and Canada (1%) are the only industrialized Central Banks to have lifted their benchmark interest rates. However, the former two must deal with high inflation, while the latter’s benchmark rate is hardly high enough for carry traders to take interest. In addition, the Reserve Bank of Australia has basically stopped tightening, and traders are betting on only one or two 25 basis point hikes in 2011. Besides, higher interest rates have probably already been priced into their respective currencies (which is why they rallied tremendously in 2010), and will have to rise much more before yield-seekers take notice.
China (~6%) and Brazil (11.25%) are leading the way in emerging markets in raising rates. However, their benchmark lending rates belie lower deposit rates and are probably negative when you account for soaring inflation in both countries. The Reserve Bank of India and Bank of Russia have also hiked rates several times over the last year, though again, not yet enough to offset rising prices.
Instead, the real battle will probably be fought primarily amongst the Pound, Euro, Dollar, and Franc. (The Japanese Yen is essentially moot in this debate, and its Central Bank has not even humored the markets about the possibility of higher interest rates down the road). The Bank of England (BoE) will probably be the first to move. “The present ultra-low rates are unsustainable. They would be unsustainable in a period of low inflation but they are especially unsustainable with inflation, however you measure it, approaching 5 per cent,” summarized one columnist. In fact, it is projected to hike rates 3 times over the next year. If/when it unwinds its quantitative easing program, long-term rates will probably follow suit.
The European Central Bank will probably act next. Its mandate is to limit inflation – rather than facilitate economic growth, which means that it probably won’t hesitate to hike rates if inflation remains above its 2% threshold. In addition, the front runner to replace Jean-Claude Trichet as head of the ECB is Axel Webber, who is notoriously hawkish when it comes to monetary policy. Meanwhile, the Swiss National Bank is currently too concerned about the rising Franc to even think about raising rates.

That leaves the Federal Reserve Bank. Traders were previously betting on 2010 rate hikes, but since these have failed to materialized, they have pushed back their expectations to 2012. In fact, there is reason to believe that it will be even longer than that. According to a Bloomberg News analysis, “After the past two U.S. recessions, the Fed didn’t start raising policy rates until joblessness had fallen about three- quarters of the way back to the full-employment level…To satisfy that requirement, the jobless rate would need to be 6.5 percent, compared with today’s 9 percent.” Another commentator argued that the Fed will similarly hold off raising rates in order to further stabilize (aka subsidize) banks and to help the federal government lower the real value of its debt, even if it means tolerating slightly higher inflation.

When you consider that US deposit rates are already negative (when you account for inflation) and that this will probably worsen further, it looks like the US Dollar will probably come out on the losing end of any interest rate battles in the currency markets.

Posted by Adam Kritzer | in Central Banks, US Dollar | No Comments »