Wednesday, July 27, 2011

FOREXYARD: Forex News Blog

FOREXYARD: Forex News Blog

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Oslo Attack Dents Value of Regional Kroner

Posted: 26 Jul 2011 06:59 AM PDT

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The recent attacks in Oslo, Norway, have generated a rapid market reaction with quick sell-offs in regional investments. The Norwegian krone (NOK) was hardest hit by the devastation wrought by the attacker, Anders Behring Breivik, in last Friday's bombing and shooting rampage.

The knee-jerk reaction of markets during a time of intense unrest is to flee the country under attack. The initial response of Friday's attack was a quick dump-off in the forex market of regional kroner. The NOK fell versus most of its currency counterparts, the USD chiefly among them.

The EUR/NOK initially fell 0.4% to a 7.8179 before regaining its feet. The USD/NOK saw harsher losses with an approximate 1% value change immediately following the first reports of terrorism from Oslo.

The neighboring kroner were less affected but felt a pull in afternoon trading Friday. All three Scandinavian currencies were heading back into a bullish posture by Monday evening, with the NOK once more slowest to recover. The Swedish krona (SEK) has seen the most rapid bounce back with solid gains seen all week. The Danish krone (DKK) likewise was holding steady with moderate upticks viewed against its major counterparts all day Monday and Tuesday.

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Bank of Japan Intervention Rumored

Posted: 26 Jul 2011 06:52 AM PDT

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Rumors are beginning to circulate that the Bank of Japan (BOJ) is considering another intervention into the forex market after the value of the yen (JPY) surged late last week and has continued to gain this week. The USD/JPY was seen trading near 78.00.

The last time such a value was approached the BOJ stepped in to purchase vast quantities of US dollars (USD) in order to push the value of the yen lower by releasing more of its domestic currency into circulation. With the yen once again climbing to these intervention levels, it appears only a matter of time before the BOJ makes a decision to step into the spotlight once more, or not.

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GfK Consumer Climate Dips in Germany

Posted: 26 Jul 2011 06:47 AM PDT

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Few traders viewed this morning's publication a surprise given the tense nature of the foreign exchange (forex) market these past few weeks. Risk aversion is gaining momentum as the August 2 deadline approaches for the US to lift its debt ceiling and as Europe continues to experience less-than-stellar performance.

Debt woes on both sides of the Atlantic appear to be crushing any sentiment of growth. The publication by GfK of its consumer climate reading in Germany revealed a minor downtick in optimism, though the overall mood remains positive. The EUR was little affected by such data given the overarching events of the week.

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Dollar Declines Across the Board Following Obama Speech

Posted: 26 Jul 2011 04:23 AM PDT

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Dueling speeches by both Obama and House Speaker John Boehner unsettled the forex market as the two parties appear to be further away from a deal to raise the US debt limit. The US dollar was down across the board versus the majors as markets may face a potential US default or at least a downgrade of the US's AAA credit rating.

A WSJ article highlighted the steps elected officials, rating agencies, and large institutional investors are taking to stave off a potential US default. At this stage the two parties seem further apart than ever as in a speech last night Obama warned of a potential default on US Treasuries. This is in stark contrast to last Friday's sentiment when it looked as though the two sides were on the verge of a breakthrough. It is hard to imagine the Democrats and Republicans are playing a game of chicken with the financial markets caught in the middle but that is exactly the case. The uncertainty has pressured the US 10-year Note with the yield rising to 3% for the first time since early July, though equities have been steady with the Nikkei up almost half a percent while FTSE 100 is down only 0.2%. This lends to the idea that markets expect a positive outcome before the August 2nd deadline, a scenario that could spark a "risk-on" environment leading to additional dollar declines.

The USD has not been spared as the dollar declined sharply versus the major currencies in Asian trading and extended losses into the European session. The EUR/USD moved above 1.45 for the first time since July 5th, crossing the falling resistance line from the May and July highs. The euro's recovery against the dollar may have scope to the June high near 1.4700. Support is seen at Friday and Monday's lows of 1.4325.

Sterling was higher as UK GDP was released in-line with consensus forecasts of 0.2%. While this is a tepid increase traders were looking for a worse print with expectations down the road for additional quantitative easing from the BOE. Today's GDP report does not rule out more QE but sets the bar a bit higher. Cable may reach the late May high at 1.6550 not on sterling strength but rather on dollar weakness.

The dollar block currencies were the best performers versus the USD with the NZD/USD rising to a new all-time high. The AUD/USD was up sharply after RBA Governor Stevens said Australian spending will likely rebound. The Aussie dollar moved above its last resistance at 1.0890 before its all-time high at 1.1010. The Loonie broke below last week's low and the USD/CAD moving closer toward its next major level at 0.9400.

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