FOREXYARD: Forex News Blog | |
- Long Term Support for Swedish Krona
- Gold at Two Week High over Euro-Zone, North Korea
- Prelim UoM Consumer Sentiment Expected to Boost USD
- Denmark May Raise Rates; Swedish Krona in Decline
- Fed Under Fire while Gold Surges to New Highs
- Spot Crude Oil Support and Resistance Levels
- SEK, NOK Losing Momentum from Monetary Policy Statements
- Can Crude Maintain its New Rally?
- Can we Expect Another Rally for Gold prices?
| Long Term Support for Swedish Krona Posted: 30 Nov 2010 03:23 AM PST
Following a month long plunge against the dollar, investors, along with Sweden's central bank official, anticipate an imminent rebound for the Swedish krona versus the USD. The Swedish currency plunged in late October as the Riksbank dampened investors’ expectations for further hikes in the interest rates. The currency dropped from 6.48 versus the dollar to currently trade at 7.05. Recent economic data, however, brought back expectations of a sooner than expected rise in interest rates, signaling that Sweden's economy will expand and interest rates will rise faster than in the U.S. or Europe. Recent data showed that consumer and business confidence is soaring with recent GDP data supporting the optimism. Swedish government's statistics agency said third-quarter gross domestic product expanded by a seasonally-adjusted 2.1% on a quarterly basis and grew 6.9% on an annual basis. The fundamentals provide strong support for the Swedish krona with the expectation of an interest rate hike in February; however, the recent GDP data and comments by Swedish officials in support of a stronger domestic currency have raised expectations of an interest rate increase as soon as December. The main obstacle facing the krona is the persistent euro-zone debt crisis as the region accounts for over 60% of its exports and therefore makes is vulnerable to any issues arising from the region. The currency is also very sensitive to overall market mood which is again extremely dampened over the euro-zone crisis, dragging down the krona's sentiment. |
| Gold at Two Week High over Euro-Zone, North Korea Posted: 23 Nov 2010 12:18 PM PST
Europe's sovereign debt concerns and escalating tensions between North and South Korea boosted Gold prices to a two week high as investors fled to the safety of the metal. Political and economic uncertainty tends to benefit the commodity as it is perceived as a haven investment. The renewed investment wave in the metal began as the Irish debt crisis unfolded as people began shedding risk. Gold futures for December delivery rose $16.50, or 1.2%, to $1,374.30 on the Comex in New York. Discouraging signs from the U.S economy also contributed to today's rally. It is difficult to say. However, whether today’s gains signal a short-term bounce or return to the momentum that has driven prices to a record high of $1424 an ounce earlier this month. Volatility has been extremely high in Gold trading over the past few months; driven mostly by economic growth expectations from China and uncertainty about the pace of rising demand. Monetary policy in the U.S and China tends to have the strongest impact on the commodity. Gold's rally was hindered by expectations of monetary tightening by China that may precede other developing nations thus curbing demand. Gold traded lower as investors were liquidating their positions throughout last week, ahead of today’s options expiration and as the rollover continues from December futures into 2011 contracts. As options expire Gold prices could trend lower. Overall the momentum seems to have subsided slightly with investors getting more nervous as we get close to year end. It is likely that Gold prices will remain higher for this week, heading to the long holiday weekend in the U.S as economic and political turmoil seems to dominate market sentiment. Any escalation in relations between the Koreas' or further disappointing news from the euro-zone will likely push Gold above $1380 an ounce. We are, however, unlikely to see Gold levels breaching $1400 again ahead of the new year. |
| Prelim UoM Consumer Sentiment Expected to Boost USD Posted: 12 Nov 2010 04:22 AM PST
The EUR/USD pair has been experiencing very volatile trading this week and the trend is likely to continue throughout the day with the release of the Prelim UoM Consumer Sentiment and Prelim UoM Inflation Expectations. According to the report, U.S. consumers' outlooks probably improved in November for the first time in three months. This is especially important heading to the Holiday season which is highly anticipated by retailers as sales tend to get a significant boost during the season. While the inflation expectation tends to have a lesser impact on markets, this release may be watched more closely in light of the Fed's recent decision to increase quantitative easing measures by pumping additional $600 billion in to the economy. This raised concerns that the oversupply of dollars may lead to hyperinflation in the long run. Though this scenario is highly unlikely, inflation expectations are, none the less, being watched very closely. Inflation expectations, within the desired limits or slightly higher, is actually a good thing since it means consumers are more likely to spend, stimulating economic growth, if they expect prices to increase. The recent rally in commodities, particularly oil prices helped push these expectations. The concern is, however, that the continuous drop in currency value combined with a continuous increase in energy prices and other commodities, particularly food, will counteract consumers' desire to spend as they will simply not be able to afford to do so. The recent economic data from the U.S provided some room for optimism. The recent release of the Non-Farm employment data showed increase in job offerings while yesterday's weekly unemployment claims dropped by more than expected. Retail sales and manufacturing are also showing modest signs of improvement. The release of the consumer confidence report will shed further light on the economic prospects and expectations in the U.S. if the report does indeed show improvement the USD will likely strengthen further versus the EUR, likely pushing the pair back to around $1.3600, particularly as the euro-zone is plagued with sovereign debt crises and recent data showed a slowing in growth in Germany and France. |
| Denmark May Raise Rates; Swedish Krona in Decline Posted: 09 Nov 2010 10:59 AM PST
The liquidity exit of the European Central Bank (ECB) may soon drive regional rates higher than Denmark's and subsequently dampen demand for the Danish krone (DKK). Despite their dependence on euro zone credit, Ireland, Greece, and Portugal may find themselves without ECB-added liquidity as the euro zone appears committed to its plans to withdraw emergency funds. The differential between euro-area interest rates and Denmark's interbank rates has begun to turn negative, leading to a higher probability of a rate increase in next month's meeting by Denmark's Nationalbanken. In Sweden, a moderate dip in the krona (SEK) was caused by USD profit-taking following the announcement of the US quantitative easing program (QE2). The USD/SEK rose almost 3.6% in the days following the announcement, and has since remained stable near the 6.7250 level. Sweden also appears poised to raise rates once more in the near future, but dovish statements from the Riksbank following the last rate change have speculators uncertain. USD/DKK Range-Trading The chart below is the USD/DKK daily chart provided by ForexYard. The pair appears to be range-trading between 5.2300 and 5.4270, represented by the 23.6% and 38.2% Fibonacci retracement levels, respectively. The pair appears to be approaching the upper border of its range-trading behavior and indicators are beginning to show impending downward pressure. The Stochastic (slow) on the chart below has what appears to be an impending bearish cross. After completing the cross, the pair is likely to experience growing sell pressure. The RSI has the price in an ascending pattern which suggests the pair has room to go higher. Once it reaches the over-bought region it will support the notion of going short on the pair. USD/DKK – Daily Chart |
| Fed Under Fire while Gold Surges to New Highs Posted: 09 Nov 2010 04:35 AM PST
With growing criticism from home and particularly abroad, the Federal Reserve's decision to pump additional $600 Billion to the U.S economy remains a center of controversy. The EUR/USD pair has seen fluctuations averaging 100 – 150 pips a day since the Fed's announcement. This trend is likely to continue as investors continue to battle long term negative Dollar sentiment and short term economic data publications. A major burden to global recovery these days is the frequent and sharp movement in exchange rates, especially between the euro and dollar. This creates unnecessary market uncertainty and hinders investment. The additional $600 Billion only exacerbated that problem. The recent release of the Non-Farm Employment data as well as several of this week's upcoming economic indicators raise the question of whether or not it was a premature move or indeed completely unnecessary. The Fed's main reason for the additional stimulus is the persistently high unemployment rate that has been hovering near 10% for the past year. However, last week's Non-Farm data showed a surprising increase in employment levels that beat investors' expectations; this followed a revision upward of Septembers' job loss figures, meaning, the economy lost less jobs than previously published. Though the unemployment rate remained unchanged this can be attributed to previously discouraged workers returning to the job market. While it is clear the job market is still struggling as evident by the first time Unemployment Claims numbers, which refuse to decline, some optimism may be in place. An indicator that may support this assumption may be Friday's Prelim UoM Consumer Sentiment report which is expected to show improvement, rising to 69.2 from 67.7 the previous month. While it is still well below the 89 averaged prior to the recession, this level will be the highest since June. One aspect that will undoubtedly benefit from the weak dollar is the deficit. The Trade Deficit likely narrowed in September, a report is expected to show Wednesday. A weak domestic currency helps exports by making the goods cheaper overseas. Increased exports mean increased production levels and a boost to economic recovery and growth. The problem is that a weak currency also makes oil and other commodities and products more expensive. Over supply of currency also increases inflation in the long run which will further erode the value of goods. Meanwhile the main beneficiary of the currency wars has been Gold which surged to record levels this week, currently trading at $1420 an ounce. |
| Spot Crude Oil Support and Resistance Levels Posted: 08 Nov 2010 01:04 AM PST
While the dollar may be the largest casualty from the Fed's commitment to purchase 600 billion dollars worth of US government bonds, the biggest winner may be crude oil. Following the Fed's announcement that essentially loosens US monetary policy, crude oil is testing its highest price since May. A weak dollar is one reason for the rise in the price of crude oil. As the greenback weakens, crude oil becomes less expensive for those who hold foreign currencies. Another reason for the price increase in crude oil is the expected recovery in the US economy. Looking at the weekly chart of crude oil, we can see that a key resistance level rests between $86 and $87 dollars. This resistance level stems from instances in December of last year and May of the current year. We will be looking for a close above the $87 level to induce further buying of crude oil. Two resistance levels traders should keep in mind are the $90.50 mark, along with the psychologically important $100 a barrel price. This week's supports rest at the mid October low of $79.80 and the long term rising trend line at $76.
|
| SEK, NOK Losing Momentum from Monetary Policy Statements Posted: 02 Nov 2010 11:16 AM PDT
Scandinavian interest rate decisions have been affecting the SEK and NOK heavily these past few trading days. Sweden decided to lift interest rates by 25 base points last Tuesday, following a fiery speech by the deputy governor of the Riksbank a week prior. However, the bank's official statements portrayed a slightly more conservative estimate for future rate hikes and growth, leading to some dampening investment in the nation's currency. The Swedish krona (SEK) began to trade lower against most of its currency counterparts as a result. The USD/SEK rose sharply from 6.5348 to as high as 6.7955 before settling near 6.6133 as of Tuesday afternoon. The EUR/SEK also rose from 9.1552 to a high of 9.4258 before paring some of its gains to currently trade near 9.3120. Norway, on the other hand, decided not to lift interest rates and offered a somewhat sobering assessment. Norges Bank announced it would hold rates at 2.0% and forecasted a holding steady of Norwegian interest rates for the next few quarters until economic conditions would permit a more steady return to normalcy. The Norwegian krone (NOK) held steady against its currency counterparts following the announcement, however. The rising price of crude oil has helped to maintain stability for the NOK, and the growth forecasts still paint a more optimistic picture than many of Norway's economic rivals. Technical Analysis The chart below is the daily chart for the USD/NOK by ForexYard. We can see from the Fibonacci retracement lines that the pair is currently holding steady in a consolidation pattern between the 23.6% level and 38.2% level. The bigger picture seems to also highlight a larger consolidation trend with a pivot point near the tip of the small-scale consolidation pattern occurring over the last few weeks. A break-out should occur in the next few trading days if the consolidation comes to an end at its tip near the price mark of 5.8500. The prices to watch after the break-out are marked with red lines. If the price breaks the red line above the current price, we may expect a break-out in a bullish direction with a target near the 50% retracement level at a price near 6.1100. Likewise, if we see the lower red line get touched then we can expect a breakout towards the second lower red line at a price of 5.6000, and possibly lower. Technical analysis seems to suggest that the downtrend of this pair is only experiencing a mild pause before it continues to run bearish. |
| Can Crude Maintain its New Rally? Posted: 02 Nov 2010 05:22 AM PDT
Oil prices received a boost yesterday after Saudi Oil Minister Ali Naimi suggested consuming countries are happy with oil between $70 and $90 a barrel, raising the price ceiling by 10$ from the previous range of $70 – $80. Oil received an additional boost following the release of better than expected manufacturing data from the U.S and China. Oil has advanced this year despite rising inventories as investors bet demand will increase as global economic substantiates. It appears that prices are heading back to around $85, with further room to appreciate. One major block in crude's resurging rally is the outcome of the U.S. Federal Reserve’s policy meeting on Tuesday and Wednesday. It is widely expected that further quantitative easing measures will be announce in order to recharge the lackluster U.S economic recovery. The only question is the size of the second "stimulus". Oil prices tend to have an inverse relation as oil is denominated in U.S. Dollar and a weak currency makes the commodity cheaper and therefore more attractive to investors. If the scope of the intervention is smaller than expected it is likely the greenback will regain some strength, putting pressure on oil prices. Tomorrow's release of U.S inventories is expected to show an increase of 1.7 million barrels last week, after a 5 million barrel jump the previous week. It seems, however, that despite the markets oversupplied, prices remain moderately steady. A bigger than expected increase, none the less, will likely suppress oil prices in the short term, pushing them back to below $82. |
| Can we Expect Another Rally for Gold prices? Posted: 29 Oct 2010 03:08 AM PDT
After reaching a record high of $1,376.70 an ounce on Oct. 14th, Gold prices have been falling steadily ever since, stabilizing around the $1335 level. Can we expect another rally for Gold prices? The answer may come after next week's FOMC meeting minutes on Nov. 3rd. Gold has been gaining from the start of the recession. Investors often turn to the metal as an alternative investment in times of financial instability and more recently as a hedge against inflation. This became the main fear as central Banks around the world embarked on the path of quantitative easing, pumping money in to the ailing economy in order to spark growth. However, such extreme measures can often lead to an oversupply of currency in the market and therefore, inflation. With the U.S economic recovery struggling to take hold, the Federal Reserve is again facing the decision of whether or not to expand quantitative easing. News of such deliberations propelled Gold prices to record highs during October. Prices have since dropped 4% on profit taking, accelerated by reports from the WSJ this week that the second round of quantitative easing would happen at a moderate pace. Originally investors were expecting a much larger amount to be pumped into the economy. This anticipation weakened the USD, making commodities such as Gold cheaper. The value of the USD will again be behind Gold's levels heading to next week and beyond. Investors are predicting that monetary easing will lead to a sharp devaluation of the Dollar, which combined with inflationary fears will likely boost Gold prices. However, this scenario is based on the assumption the Federal Reserve indeed undertakes further quantitative easing measures at sufficient levels. The recent slew of positive economic data from the U.S puts some doubt to these expectations. Gold will likely see a sharp drop if the Federal Reserve decides to take small steps or no steps at all combating the stagnating growth. In such a case we may see gold prices recede back to around $1200 throughout November. Another major indicator to affect Gold prices next week will be the Non-Farm Payroll Data which will be released Friday, Nov. 5th. As unemployment remains the main concern for the Federal Reserve, the data will likely affect their assessment of the U.S economic recovery as well as provide expectations for their next meeting. While it is unlikely Gold prices will reach Oct. 15th levels as the hysteria over monetary easing subsided and investors believe Gold has become overbought, any negative data from the U.S will likely push Gold prices higher, possibly to levels around $1350 – $1360. |
| You are subscribed to email updates from Forex Trading Education : Forex Trading Blog by FOREXYARD » In-Depth Analysis 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