Thursday, July 28, 2011

FOREXYARD: Forex News Blog

FOREXYARD: Forex News Blog

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Russian Ruble Reaches 2008 Peak vs. Currency Basket

Posted: 27 Jul 2011 07:24 AM PDT

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The value of the Russian ruble (RUS) was seen climbing in relation to a dollar/euro basket this week. An appreciation of 0.3% on the day has helped the RUS touch an index high not seen since December 2008. Debt concerns across Europe and the United States has helped spurn the value of emerging market currencies, which is lifting the ruble against its counterparts despite internal economic tensions.

Soaring oil prices have also fed the rise of the RUS in recent trading. A hold above $99 a barrel this week was fueling resurgence in ruble values against a basket of primary currencies. Other commodity linked currencies, like the South African rand (ZAR) and Australian dollar (AUD), were also seen in ascent through most of this week.

A report out of the Carnegie Endowment for International Peace (http://www.carnegieendowment.org/2011/07/21/russia-stable-but-critical/419w) has labeled Russia as stable, but critical, noting the investment worries expressed in a variety of reports recently that highlight a lack of investment and reliance on imports and inventory for growth. It also notes that Russian GDP growth has been halved since the financial crisis of 2007/08 and that even domestic investors are reluctant to hold the RUS for very long as part of their portfolio.

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American Manufacturing Hit Speed Bump in June

Posted: 27 Jul 2011 07:21 AM PDT

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The publication of this afternoon's report on durable goods orders highlighted the halting growth that many analysts had feared. The US Census Bureau reported a 2.1% decline in durable goods orders for the month of June, with a meager 0.1% growth in core durable goods orders.

The core report, which excludes transportation items, did show small growth, but the nominal reading highlights the sentiment that companies are not investing in their logistics and transportation infrastructure. The readings have so far helped fuel the rise of safe-haven investing among traders, and this sentiment appears to be holding steady through the rest of the week.

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Australian PPI Sees Growth Near 1%

Posted: 27 Jul 2011 07:18 AM PDT

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The Reserve Bank of Australia (RBA) published data on its producer price index (PPI) this morning revealing solid inflationary growth. Expectations for the quarterly figure were for a mild 0.7% on both the nominal reading and its trimmed mean (i.e. core) counterpart.

Actual results from the morning's data, however, underscored the growth experienced in the Pacific economies of Australia and New Zealand recently. The data produced solid 0.9% growth on the two indices, climbing above forecasts and helping the Australian dollar (AUD) hold steady in early morning trading.

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New Zealand Interest Rate Decision

Posted: 27 Jul 2011 05:32 AM PDT

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The Reserve Bank of New Zealand will announce its interest rate decision this evening and is expected to hold rates at 2.50%. Traders are increasing their expectations for an interest rate hike in the near term having bid the Kiwi to a 30-year high. Odds are in favor of the RBNZ to signal a future rate increase but given the global backdrop of two debt crises and market positioning, disappointment by the RBNZ could initiate a sharp pullback in the NZD/USD.

After the New Zealand interest rate decision the accompanying rate statement could contain more hawkish language given the strong GDP the New Zealand economy produced in H1. New Zealand GDP rose 0.8% in Q2 and 0.5% in Q1. Yesterday the NBNZ business confidence survey showed 47.6% of participants expect improving business conditions, up from 46.5%. Following the strong economic data markets have prices in 1.0% of tightening over the next 12 months.

But given the global economy currently faces headwinds with two major debt crises the RBNZ may wait another month before prepping the market for an interest rate increase. Should this occur, market positioning suggests the NZD/USD could decline sharply. Last week's IMM data shows speculators have increased their long positions to the highest level since November of last year. A pullback in the NZD/USD could take the pair lower to 0.8515, the 38% Fibonacci retracement from the move beginning in mid-July.

NZD IMM

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European Debt Crisis Still Here

Posted: 27 Jul 2011 04:55 AM PDT

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Traders should remember the euro zone debt crisis hasn't gone anywhere. Comments today by German Finance Minister Wolfgang Schaüble sent the euro lower when Schaüble said in a letter to the Bundestag, “it would be a mistake to think that the crisis of trust in the euro area can be solved by a single summit.” The comments sparked a widening of spreads between Italian bonds and German bunds as well as in Spanish bonds. The euro was lower versus the dollar and in the crosses.

Traders have been quick to offer the euro when the EUR/USD rises above 1.45. Initial Support comes in at 1.4440 but the euro could receive a bid should the 1.420 level hold. This is an important support as it coincides with last Friday's low and the rising trend line on the hourly chart.

Turning to the other debt crisis, Republicans and the President appear to be farther away from a deal and the US debt ceiling negotiations look to the be the key driver in the minds of forex traders. Core durable goods orders are due up shortly and are expected to show an improvement of 0.5%. A reading above this level would likely feed into dollar selling while boosting the dollar block currencies (NZD, AUD, CAD) which are trading at all-time highs.

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