FOREXYARD: Forex News Blog

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• Scandinavian Currencies Weighted by Euro Zone Woes
• COT Data Shows Traders Now Bearish on CAD
• FX Technical Analysis – USD/CAD Bearish Divergence
• Japanese Trade Deficit Holding Steady
• Yields Favor Gains for Swedish Krona
• Japan Publishes Positive Financial Growth
• Interest Rates, Sovereign Debt, and Event Risk
• Swiss Franc Boosted by Retail Sales Data; Risk Aversion
• Moody’s Places Japan in Path of Bond Downgrade
• Japanese Yen – Fundamentals and Technicals (Part II)
• Japanese Yen – Fundamentals and Technicals (Part I)

Scandinavian Currencies Weighted by Euro Zone Woes Posted: 13 Jul 2011 06:24 AM PDT The fear of debt contagion spreading across the more fragile nations within the euro zone has begun to affect its regional neighbors to the north. The economies of Sweden, Norway and Denmark have all been bulwarks of stability during the economic crisis of the past several years. While this sentiment does not appear changed, the short-term impact of a debt fear and lowered consumer confidence has been to place an added weight to the value of the rising kroner of Scandinavia. The Norwegian krone (NOK), as the first example, has been affected by stock prices seen in decline for several of its major companies, particularly in the telecommunications and technology fields. Climbing oil prices these past few days have also dragged on the NOK as it is commonly tied with the value of oil; Norway being a heavy exporter of crude oil. Sweden's currency woes are perhaps less severe, given a recent hike in interest rates by the Riksbank to 2% from 1.75%, but this week's modest downtick has Swedish ministers noting the impact euro zone debt fears are having on regional growth at a more macro level. Bank governor Anders Borg has cemented his role as a fiscal conservative, however, taking lessons from Sweden's financial crisis of the early 1990s to implement steps aimed at shoring up Sweden's growth potential through 2015. Denmark, too, has had its currency (DKK) affected by regional woes, but appears a formidable stalwart in a region relatively shaken by Greece's debt concerns. The Scandinavian kroner may be in a mild downturn this week, but sentiment remains optimistic for the northerly region. Traders may want to anticipate the price shifts as risk sentiment is priced in, but take heed of the notion that Scandinavia is significantly more stable than its southerly counterparts. Read more forex trading news on our forex blog.

COT Data Shows Traders Now Bearish on CAD Posted: 27 Jun 2011 02:03 AM PDT Data from this past week's CFTC Commitment of Trader's Report (COT) shows leveraged money traders have an overall short position in the Canadian dollar for the first time in a year. Data from this past week's CFTC Commitment of Trader's Report shows leveraged money traders have an overall short position in the market for the Canadian dollars for the first time in a year. The Commodity Futures Trading Commission’s Commitments of Traders (COT) report shows long positions in the Canadian dollar have been exhausted and the market is now positioned short on the CAD. Net Noncommercial Positions on the IMM stand on the short side of the CAD by 9011 contracts versus last week's bullish positioning of 10429. The last time the COT showed the market was positioned against the CAD was in August of 2010 when the USD/CAD traded as high as 1.6050. This Friday the pair closed at 0.9869. An analysis of the open interest also displays some interesting points. We can see that the open interest has fallen dramatically to 87905, the lowest level of contracts open since early July. This tells us that the recent rise in the price of the USD/CAD may be due to shorts covering their positions and is a bearish indicator (for the Canadian dollar). Given the flip in market positioning of leveraged traders to being short the CAD as well as a subsequent drop-off in open interest, I'm skeptical of the long term trend downtrend resuming in the near term. Read more forex trading news on our forex blog.

FX Technical Analysis – USD/CAD Bearish Divergence Posted: 23 Jun 2011 03:08 AM PDT Technical signals show a potential resumption in the long term downtrend of the USD/CAD. The recent uptrend in the USD/CAD looks to have been capped at a series of technical levels. On June 16th the pair reached as high as 0.9875, a level that coincides with the 200-day moving average and the trend line falling from the mid-October high. The 14-day RSI displays a series of lower highs over the course of the recent uptrend. This price divergence signals weakening upside momentum and strengthens the case for a resumption of the downtrend. Support is found at the rising support line from the May 20th low which comes in today at 0.9680. A break here would test the 0.9510 support followed by the low at 0.9450. Any additional moves higher will run into resistance at the trend line as well as the June 16th high and the mid-March high of 0.9975. Read more forex trading news on our forex blog.

Japanese Trade Deficit Holding Steady Posted: 20 Jun 2011 10:56 PM PDT A report from the Bank of Japan (BOJ) this morning gave several investors reason for optimism in regards to Japan's exporting capabilities. Given the surging strength of the yen for the past few years, many had anticipated a slowdown in Japan's ability to boost exports, which it depends on for growth. The trade balance figure released less than an hour after market opening today revealed the island economy's trade deficit holding steady at 0.47T yen. Expectations were for a widening trade gap to 0.54T, but today's steady figures could prove a solid gauge of the country's impending bounce back in the months ahead. Read more forex trading news on our forex blog.

Yields Favor Gains for Swedish Krona Posted: 15 Jun 2011 03:57 AM PDT Fundamentals appear in favor of the Swedish krona according to interest rates and bond yields. One of the major driving factors in the valuation of a currency is interest rates and Sweden enjoys higher yields versus both its European and US counterparts. The Riksbank is forecasted to continue to raise interest rates over the mid-term which should be supportive of the Swedish krona. Currently the repo rate maintained by the Riksbank is 1.75%. The EU interest rate currently stands at 1.25% and is expected to rise 25 bps in the next ECB meeting in July. The US maintains an interest rate below 0.25% and is forecasted to continue its ultra-loose monetary policy. Strong yield differentials between the Swedish 2-year bond and the 2-year German bund are in Sweden's favor by 81 bps while Sweden enjoys a 197 bps spread between the equivalent US 2-year Treasury. Currently the Swedish 2-year yields 2.41%. However, traders should be aware that the 2-year US Treasury note has plummeted since April (bond prices and yields have an inverse relationship) as the yield has risen to 0.44%. As such, traders may look to play the euro versus the Swedish krona rather than the USD. Read more forex trading news on our forex blog.

Japan Publishes Positive Financial Growth Posted: 08 Jun 2011 12:16 AM PDT Three reports out of Japan this morning have given cause for traders to heighten interest in the Japanese yen. The first two were the 12:50 GMT publications by the Bank of Japan (BOJ) regarding its annualized bank lending level and M2 money stock reports. While bank lending posted a decline of 0.7%, it was better than the previous month's decline of 0.9% and thus reflects a positive movement with a bearish twist. The M2 money stock report revealed a basic growth of 2.7%, perfectly in line with expectations. The third report was a significant growth to 0.55T yen in Japan's Current Account, as published by Japan's Finance Ministry at 12:52 GMT. These three figures together have given yen traders a reason to feel confident in their investments' strength. The yen may gain from this news but traders should bear in mind that a movement towards a Euro-centric view is beginning to overshadow such fundamental data reports. Read more forex trading news on our forex blog.

Interest Rates, Sovereign Debt, and Event Risk Posted: 06 Jun 2011 05:12 AM PDT This week's trading is highlighted by a mix of potential monetary policy moves and sovereign debt risks. The dollar bloc central banks of Australia and New Zealand are due to meet this week. The former (RBA) is expected to keep interest rates on hold but may perhaps surprise the market with a signal to increase rates in the near term. The latter (RBNZ) is forecasted to hold rates steady and not signal any near term changes to monetary policy. On Wednesday both the Bank of England (BoE) and the European Central Bank (ECB) will hold their respective press conferences. The BOE will not be making any adjustment to the interest rate nor to the Asset Purchase Facility as the central bank will most likely attempt to delay raising interest rates as long as possible in order to aid the ailing British economy. On the opposite side of the spectrum ECB President Trichet will likely signal a rate increase to come in the following month. This event will most likely be the highlight of the trading week event risk runs high. Traders should remember the March 5th ECB press conference where Trichet failed to use the expected wording and the EUR/USD began to unwind from its 17-month high. The interest rate story will be the headline event but the European sovereign debt crisis has only temporarily been put on the back burner at many of the major forex trading desks. While a temporary deal looks to have been cut between the EU/IMF and Greece in order to stave off a default in July, the parties continue to negotiate a potential restructuring of Greek sovereign debt. The political winds have shifted in Portugal as the incumbent party looks now to form a political coalition. This development has Portuguese sovereign debt yields easing from highs last week. Turning to the US, last week's dismal non-farm jobs report and increased unemployment rate underscores how slow the US economic recovery is progressing. Talk of QEIII was in most of the major financial newspapers over the weekend as economists and talking heads weigh the odds given the political headwinds the US faces going into an election year and the flack the Fed took with QEII. Moody's note last week warning on the US debt rating also puts increased pressure on the President and Congress to come up with a potential solution to the deficit. Read more forex trading news on our forex blog.

Swiss Franc Boosted by Retail Sales Data; Risk Aversion Posted: 01 Jun 2011 11:31 PM PDT The surprise results from Switzerland's retail sales report yesterday helped the Swiss franc (CHF) make sharp gains against most of its currency rivals. An international shift into safe-haven investments aided this move as forex traders tend to buy the CHF in tough times as a store of value. Switzerland's Federal Statistical Office published a retail sales figure a 7.5%, year-on-year, for the Swiss economy; well beyond the expected 1.9% growth. Last month's reading was published as part of a contraction in spending, but this month's jump carries strong signals of optimism among Swiss consumers. Read more forex trading news on our forex blog.

Moody’s Places Japan in Path of Bond Downgrade Posted: 01 Jun 2011 04:00 AM PDT Moody's Investor Services may end up placing Japan's Aa2 local and foreign currency bond rating up for review this month; a move which has placed significant strain on the value of the Japanese yen. The move by Moody's comes just days after the Fitch ratings agency downgraded its debt outlook for Japan. The JPY was recently seen plummeting against several of its currency rivals as traders anticipate a shift in value for their yen holdings. A Moody's report noted that faltering industrial data and a dovish response by the Bank of Japan (BOJ) to address debt has instigated a review of Japan's bond rating in lieu of its ability to effectively tackle a deficit reduction. Read more forex trading news on our forex blog.

Japanese Yen – Fundamentals and Technicals (Part II) Posted: 25 May 2011 04:31 AM PDT The technicals for the USD/JPY are beginning to signal a potential move higher, a move that is in-line with the fundamentals. Weekly stochastics are rising, indicating longer term momentum is swinging to the upside. The daily chart's 14-RSI is also moving steadily higher confirming the short term bullish run. The USD/JPY has already retraced 38% of the April to May move lower and a rebound in the pair could continue further. The 50% and 61.8% retracement levels stand out as potential targets, coming in at 82.55 and 83.25 respectively. Before these retracement targets, near term resistance comes in at 82.20 followed by 82.80. The rising trend line off of the May low should prove to be supportive with significant support at this week's low at 81.30. Click here to read Part II, fundamental analysis of the Japanese yen. Read more forex trading news on our forex blog.

Japanese Yen – Fundamentals and Technicals (Part I) Posted: 25 May 2011 02:34 AM PDT The yen continues to ease as both fundamentals and technicals are aligning against the Japanese currency. Below is part I of II discussing the fundamentals of the yen and the Japanese economy Yesterday the Bank of Japan meeting minutes from the April 28th meeting showed a single board member, Deputy Governor Kiyohiko Nishimura, came out in favor of additional credit easing to aid the Japanese economic recovery. Nishimura said, "The need for additional momentary easing had increased, taking into account the current outlook for the economy and prices". Exports declined 12.5% for a year-over-year decline in April. The number was in-line with consensus forecasts for a decline of 12.4%. Due to the drop in exports the trade balance fell to a deficit of -463.7B JPY. This is the first deficit in 3-months. Earlier in the week the BoJ issued a negative economic assessment. The report for the month of May shows production has fallen and domestic private demand continues to weaken following the earthquake and tsunami on March 11. Q1 GDP contracted by 3.7% on an annualized basis. Fundamentals point to a potential easing of monetary policy and a weakening economic position, all negatives for the Japanese yen. Click here to read Part II, technical analysis of the USD/JPY. Read more forex trading news on our forex blog.

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