FOREXYARD: Forex News Blog | |
- What can be Expected Next from the ECB and BOE?
- ADP Non-Farm Payrolls Set to Create Heavy Volatility
- Platinum May be Set for a Bearish Correction
- ADP Non-Farm Data Could Help USD in the Short-Term
- Is a Currency War Looming?
- NOK Set to Make Gains Against Euro
- SEK Sees Major Gains Due to Strong Swedish Economy
- Spot Crude Oil Breakout Trade
- BOJ Slashes Interest Rate and Backs New Asset Purchases
- Currency Intervention Shows Signs of Increasing
| What can be Expected Next from the ECB and BOE? Posted: 06 Oct 2010 06:37 AM PDT
Can we expect further surprises from leading Central Banks after the surprise announcement by the BOJ yesterday? Quite likely. Tomorrow the European Central Bank and the Bank of England are expected to deliver their rate statements, and while a change in the interest rates is highly unlikely, changes to their monetary policy are keenly awaited. As recovery in the western nation continues to show dismal signs of improvement, leading central bank in the developed countries are returning to the quantitative easing measures they undertook at the start of the recession in an attempt to boost growth and combat stagnating unemployment numbers. More and more central banks are moving from talk of monetary tightening to expanding monetary easing programs and adding more money into their flailing economies in order to promote consumption. Nevertheless, there is hardly any consensus on the correct course of action as not everyone is sure pumping more money into the economy will create the expected boost in growth and consumption. At the Bank of England, there is currently a 3 way split on the course of action needed with member Andrew Sentance advocating higher interest rates while others advocating for the resumption of asset purchases after keeping its bond-buying program unchanged at 200 billion pounds ($317 billion) for the past 11 months. It is unlikely, however, that the BOE will hike interest rates in the near future, with economists predicting the first hike in Bank Rate to come in the third quarter of 2011. Stagnating growth is not the only problem the U.K is faced with. A historically high deficit also threatens U.K's recovery. Despite criticism the Government is planning multi-billion pound public sector cuts to tackle the deficit. Unchecked deficits will ultimately lead to a rise in interest rates and dampen growth even further. While the ECB is strongly set on monetary tightening, the debt issues plaguing several of the Euro-Zone members interfere with its execution. The ECB last week stepped up its government bond purchases for the first time in months as concerns indebted governments such as Ireland and Portugal will have to undergo drastic cuts to avoid default and thus stump economic recovery in their nations. The Euro-Zone faces even more ominous predictions. In a recent interview, economist Joseph Stiglitz doubted the Euro's survival. He stated that the inability of the countries that are running a deficit, such as Ireland, Portugal and Greece, to alter their exchange rate are lacking a major adjustment tool. . He suggests that one way to save the euro would be for Germany, the strongest economy in the Euro-Zone and one that is running a trade surplus, to leave the Euro-Zone, thus allowing the common currency to devalue and help struggling countries boost their exports. |
| ADP Non-Farm Payrolls Set to Create Heavy Volatility Posted: 06 Oct 2010 03:10 AM PDT
Traders may have noticed the US dollar’s downward movement as of late. Whether against the yen, euro or British pound, it seems like the greenback simply cannot catch a break. This might all change starting today. The Automated Data Processing (ADP) Non-Farm Payrolls figure, a precursor to the Non-Farm Employment Change scheduled for Friday, is set to be released at 12:15 GMT. Today’s report is considered to be fairly significant, largely because it is seen as being able to accurately predict the official government report. With analysts forecasting the ADP number to come in around 23K, as oppose to last month’s figure of -10K, the employment situation in the United States may finally be turning a vital corner. Whether or not this will help the ailing dollar is yet to be seen, but now may be a good time to consider some of the possible outcomes. Assuming today’s payroll figure comes in as predicted, the dollar may be able to pare some of its recent losses, at least in the short term. It will take much more than one positive employment report to get investors excited about the US economy again. At the same time, the high level of unemployment in the US has consistently hampered its ability to recover from the economic crisis. If today’s report is the start of a larger trend, the US dollar may slowly start to move up against its main currency rivals. Traders will want to take note of what is likely to happen should the ADP figure come in below expectations. Any negative news out of the US is likely to increase speculation that the Fed will enact new fiscal measures called quantitative easing, in order to prevent another economic downturn. Any news of quantitative easing is likely to send the dollar plummeting down over the next month. |
| Platinum May be Set for a Bearish Correction Posted: 06 Oct 2010 02:35 AM PDT
Platinum has seen substantial gains in the last few weeks, as the declining US dollar has increased demand for alternative investments like precious metals. With significant fundamental news on the horizon, technical indicators are now showing that the commodity may finally be in overbought territory, meaning a downward correction is likely to take place. We will be examining the daily chart for platinum, provided by Forexyard. The technical indicators we are using are the Stochastic Slow, Relative Strength Index and Williams Percent Range. 1. The Stochastic Slow shows a bearish cross has formed above the upper resistance line. This is typically seen as an indication that downward pressure exists, and that a correction may take place. 2. This theory is supported by the Relative Strength Index, which is currently right around 75. Anything above 70 is usually taken as a sign that the instrument is overbought, and that downward pressure is likely to take place. 3. Finally, the Williams Percent Range is currently well above the -20 level, which is widely considered to be the border between being overbought and neutral territory. Traders can take this as a clear sign that platinum prices will drop in the near future.
|
| ADP Non-Farm Data Could Help USD in the Short-Term Posted: 06 Oct 2010 12:01 AM PDT
After plummeting against all of its currency rivals, the US dollar is in a position to pare some of its losses with today's employment figures. ADP will be releasing its non-farm employment data on the private sector and is forecast to show mild growth. If the data comes in line with expectations, the USD could halt its recent decline. Here is a roundup of today's major events: 12:15 GMT: USD – ADP Non-Farm Employment Change - Automatic Data Processing (ADP) is due to release their non-farm employment data from the private sector of the US economy. This report is a precursor to Friday's NFP figures, but tends to carry less significance. On the other hand, this report has an ability to offer a more accurate forecast for Friday's numbers and should therefore not be overlooked. If employment in the private sector grew by 23K, as analysts are predicting, then the US dollar could pare some of its recent losses. 14:00 GMT: CAD – Ivey PMI - The Richard Ivey School of Business in Canada is due to release its survey data on last month's purchasing manager's index (PMI). This figure has a strong correlation with business and industry conditions across Canada and therefore has strong ties with the direction of the Canadian economy. If the figure comes out as expected, or better, the CAD may continue gaining against most of its currency counterparts throughout the rest of the week. |
| Posted: 05 Oct 2010 09:46 PM PDT
The Bank of Japan surprised the financial markets Tuesday by announcing a 35 trillion yen ($418 billion) monetary easing program as well as stating it would cut its key overnight call rate to a range of 0.0%-0.1% for the foreseeable future. It also launched a 5 trillion yen program to buy private and public sector assets. The new monetary easing measures were taken in order to spur economic growth and to combat the unrelenting deflationary pressures. While markets were expecting some form of intervention to combat the ever rising yen, the extent of the monetary easing program caught investors by surprise. Bank of Japan Gov. Masaaki Shirakawa stated that the decision to undertake additional monetary easing measures was based on a worse-than-expected outlook for the Japanese economy. The Japanese recovery was hurt greatly by the strong yen as the country's economy is export driven and a strong domestic currency diminished the gains from this sector. Unfortunately for the Bank of Japan, while it might have been the first central bank to act, as recoveries in industrial nations falter, it can be expected that several central banks will soon follow suite. The USD/JPY pair remained virtually unchanged following the surprise announcement as expectations mount the Federal Reserve will be the next to act, pumping money into the U.S. economy, negating Japan’s yen-weakening program. The Federal Reserve has signaled last month they may announce the purchase of more Treasuries as soon as their next policy meeting on Nov. 2-3 in an effort to boost growth and reduce the unemployment rate which is hovering near 10% for the past year. Federal Reserve Bank of Chicago Governer, Charles Evans, reiterated this notion today by calling on the Fed to do more to charge up the economy, including a new program of U.S. Treasury bond purchases and possibly setting a higher inflation target. While other Central Banks may not be looking into further quantitative easing measure, they are suspending their interest rate increases. The most notable recent example is the Reserve Bank of Australia which Monday, unexpectedly left its benchmark rate unchanged at 4.5% despite a widely expected increase to 4.75%. It seems that the BOJ's next move will depend on the Federal Reserve as well as other Central Banks among the G20 nations. With growth stagnating in the developed nations we may be at the beginning of what some analysts have nicknamed as a "monetary easing war." |
| NOK Set to Make Gains Against Euro Posted: 05 Oct 2010 07:58 AM PDT
The EUR/NOK pair has seen some heavy volatility over the last several weeks. After dropping as low as 7.8330 in the beginning of September, the cross has steadily gone up, and is currently trading around the 8.0420 level. As will be shown through a number of technical indicators, the euro is likely to enter into a bearish trend against its Norwegian counterpart in the near future. We will be looking at the daily chart for EUR/NOK provided by Forexyard. The technical indicators we are using are the Relative Strength Index (RSI), Williams Percent Range and Stochastic Slow. 1. As we can see, the RSI is currently slightly above the 70 level. Typically, when a currency pair goes above 70, that pair is in overbought territory, meaning a downward correction is likely to occur. 2. The Williams Percent Range is showing a similar trend. Currently, the indicator is around the -10 level. Anything above -20 is usually seen as a sign of impending bearish movement. 3. Finally, the Stochastic Slow has formed a bearish cross right above the upper support line. Taking this into account, along with other indicators already mentioned, traders can be fairly certain that the pair will experience downward pressure soon.
|
| SEK Sees Major Gains Due to Strong Swedish Economy Posted: 05 Oct 2010 07:52 AM PDT
The Swedish krona has recently emerged as one of the safest bets in the forex market. The Scandinavian currencies will likely have a volatile week ahead of them, as significant employment data is scheduled to be released from the United States. The ADP Non-Farm Employment Change figure on Wednesday, as well as the Non-Farm Employment Change figure on Friday, are both likely to generate heavy volatility in the currency market. At the moment, analysts are forecasting positive results from both reports. If true, investors will likely turn to riskier assets like the Scandinavian currencies as oppose to the safe haven dollar. Against the euro, the Scandinavian krone will likely have a harder time making gains, but, at least with the case of Sweden, bullish movement is likely. |
| Posted: 05 Oct 2010 04:08 AM PDT
Spot crude oil has shown a propensity to range trade between Fibonacci levels but a recent rally may have momentum behind it to break the sideways movement. Since the end of May spot crude oil prices have moved in trading ranges between the Fibonacci levels from the May high at 87.12, unable to breakout into a defined trend in either direction. A recent sharp appreciation in the price may have the ability to carry the price of spot crude oil past a significant resistance level into a breakout play. The resistance level lies in a range between the 76.4% Fibonacci level at 82.40 and the August high of $83 (R1). Should the price make a close above this level, the next target for spot crude oil would rest at the May high near $87 (R2). Traders should be patient and wait for confirmation of the breakout before initiating a long position. A protective stop should be placed near the support of $80 to defend against a false breakout.
|
| BOJ Slashes Interest Rate and Backs New Asset Purchases Posted: 04 Oct 2010 11:49 PM PDT
The yen takes center stage today following the policy meeting statement and BOJ press conference. With the yen's persistent appreciation versus the USD, analysts expect the Japanese government will intervene again in the foreign exchange markets. However, most economists were surprised to hear the interest rate will be lowered to 0% and a new fund will be opened to purchase assets. Here are some of the major news events for today: Services PMI – GBP – 08:30 GMT. It's the level of diffusion index based on a survey of purchasing managers in the services industry. The result is expected to fall to 51.1 from 51.3. This an expected drop in economic expectations. Support and resistance for the GBP/USD are found at 1.5670 and 1.5920. ISM Non-Manufacturing PMI – USD – 14:00 GMT The report is a leading indicator of economic health as it gives insight to the level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories. The result is expected to show marginal improvement, rising from 51.5 to 52.1. If the result is as expected or better this may help boost the USD further ahead of the highly anticipated Non-Farm Employment data which is expected this Friday. Support and resistance for the EUR/USD are located at yesterday's low of 1.3635 and this week's high of 1.3805. |
| Currency Intervention Shows Signs of Increasing Posted: 04 Oct 2010 05:06 AM PDT
Japan is not the only sovereign nation to enact policies to artificially weaken its currency in order to gain a trade advantage. Others are also taking similar steps which affect valuations in the currency markets. However, market forces are typically able to overcome the actions and policies of even the most powerful central banks that intervene in the FX market. Last week the Japanese Ministry of Finance confirmed that it did in fact intervene in the FX markets by spending 2.1149 Trn yen (25.37 Bn USD) in the month of September. Most of this sum was spent during trading on September 15th. This was the largest intervention by the Ministry of Finance in a single day. The previous record was the last intervention by Japanese officials in 2004 with a sum of 1.66 Trn JPY. While China does not actively intervene in the foreign exchange markets, it does need to absorb its large FX trade inflows, thereby increasing its own reserves. In June the People's Bank of China published data showing Chinese financial institutions doled out 243 Bn CNY in the month of August. Speculations abound that China is diversifying its FX holdings away from the US dollar and into other major currencies such as the yen, euro, and Australian Dollar. This is an issue of tension with the Japanese as the yen has significantly appreciated versus the dollar. A strong yen makes Japanese exports more expensive and less competitive in the global marketplace. Both Brazil and South Korea have been caught intervening in the FX markets to halt the appreciation of their respective currencies. The Bank of Korea said reported its FX reserves grew to a new high of 289.78 Bn USD during the month of September. In August the Bank of Korea had reserves totaling 285 Bn USD. A nation that attempts to weaken its currency through intervention in the FX market does so to boost the export sector of the national economy. A weak currency relative to its rivals increases exports and drives economic growth, something that is essential for an economy that is attempting to grow its way out an economic recession. However, market forces carry considerable clout and many times actions undertaken by a central bank to weaken a currency will be nullified by market players. This may be the case with the recent bout of currency intervention the Japanese Ministry of Finance. Following September's intervention the USD/JPY has retraced all the gains the pair made. This is only one example of the market's ability to overcome the actions and policies of central banks that intervene in the FX market. |
| You are subscribed to email updates from Forex Trading Education : Forex Trading Blog by FOREXYARD To stop receiving these emails, you may unsubscribe now. | Email delivery powered by Google |
| Google Inc., 20 West Kinzie, Chicago IL USA 60610 | |
No comments:
Post a Comment