FOREXYARD: Forex News Blog

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• Obama Job Plan Focuses on Middle and Lower Class
• Housing Demand in Australia Slumps Further
• Italy Destined to Default?
• Russian Ruble Pushed and Pulled by Market Forces
• Scandinavian Kroner Reaching Tipping Point vs. USD?
• AUD Price Deceleration Signals Reversal
• Swedish and Norwegian Kroner Sink as Traders Flee Risk
• Stockholm or Bust: Sweden’s Powerhouse Economy
• Canadian Economic Recovery Beating Out Forecasts
• AUD Toying with Key Resistance Levels
• Silver’s Price Moves: Anticipating a Fall?

Obama Job Plan Focuses on Middle and Lower Class Posted: 09 Sep 2011 06:55 AM PDT Thursday's job speech by US President Barack Obama is being called one of several defining moments of his presidency as the run-up to the 2012 presidential election gets underway. The focus of his new plan appeared to be three-fold, first was a repeated call for action by Congress, reflecting the impatient mood felt across America, with his repetitive statement for leaders to act "right away." Secondly, and perhaps most important, was his overriding emphasis on lower and middle class jobs in areas such as construction and teaching. A harkening towards the days of President Abraham Lincoln was intoned with a comment that America was one nation of rugged individualism that worked best on cooperative efforts, with emphasis on the latter. Noting that America was falling behind China in the construction of national infrastructure such as airports, highways and high speed rail lines, President Obama stated that such projects needed to become a priority in the months and years ahead. The third aspect was a compromising note on tax cuts which saw Obama proposing a heavy emphasis on tax cuts for the middle class and tax breaks for businesses hiring individuals who had been unemployed for more than six months. A call to lift the Bush-era tax cuts on the super-wealthy was put forth, with hominy paid to the notion of fairness. Overall, Obama's speech seemed to begin slowly and reluctantly, with a sense of dragging on through his repeated calls for action, but it picked up towards the end as he tried to embody the message of past presidents. Whether successful or not will depend on the specifics of his plan and whether an agreement on it can be reached. Additionally, how financial markets have responded to this message appears mixed. With many other global factors coming into play, it is tough to tell what derives from Obama's message and what is occurring as a result of today's G7 Summit and other economic data releases. Read more forex trading news on our forex blog.

Housing Demand in Australia Slumps Further Posted: 30 Aug 2011 07:14 AM PDT A building approvals report released this morning by the Australian Bureau of Statistics uncovered a slump in demand in the housing market. The monthly indicator was expected to see an uptick of approximately 2.1%. The actual result seemed to convince many investors to move away from the Australian dollar (AUD). Demand for new buildings is measured by this monthly indicator which reports on the percent change in new buildings approved for construction. The results revealed only 1.0% growth for the month of August, up from the previous month's 3.6% contraction, but still bearish when compared with estimates. The news appears to be weighing heavily on the AUD this week. Read more forex trading news on our forex blog.

Italy Destined to Default? Posted: 04 Aug 2011 06:37 AM PDT European debt woes have flared up once more this week, with Italy coming strongly into view as a result of its burgeoning debt and sluggish growth. Defying pressure for his resignation amid the talk, Italian Prime Minister Silvio Berlusconi vowed Wednesday to remain in office until his mandate comes to a close in 2013 and promised to work tirelessly towards shoring up Italy's finances. Italy's debt, a staggering $2.2T, is viewed all the more ominously when lined up with the country's economic output. As a portion of GDP, Italy's debt poses a far greater challenge than that of even the United States, as debated these past few weeks by Congress. Being the seventh largest economy worldwide, Italy's default would likely ripple through financial markets, dragging the euro zone down with it. The question is whether Italy, and the broader region, will respond, or is capable of responding, to this crisis in the same way it had for Greece. Read more forex trading news on our forex blog.

Russian Ruble Pushed and Pulled by Market Forces Posted: 03 Aug 2011 12:26 PM PDT Two headline events are causing a tumultuous push and pull effect on the Russian ruble (RUS) this week. First and foremost is the rumor that Prime Minister Vladimir Putin may run for president in next year's election. Investors have begun to buy up the RUS as a response to the potential run by the sitting PM, citing future strength and continuity as a cause for purchasing domestic assets in Russia. According to the Russian central bank, an approximate $21.3B net outflow left the country in the first quarter due to uncertainties surrounding the upcoming elections, followed by another exit of $9.9B in Q2. The stability Putin brings to the election circuit has helped stifle much of this revenue outflow, supporting the stability of the RUS despite Putin's opposition to parts of the West's global agenda. The second factor pulling on RUS values is a lowering in price of oil due to recent warnings about ratings downgrades. Moody's Investors Service hinted that US debt may receive a ratings downgrade should indecision result from the debates taking place in Congress over a lifting of the debt ceiling. The impact has been a decline in oil values from over $100 a barrel to a current price near $93, which is weighing on the ruble in this week's trading. The RUS still appears to be inching higher against its primary euro-dollar currency basket, but dips caused by lower oil prices may slow this growth and generate temporary downturns.

Scandinavian Kroner Reaching Tipping Point vs. USD? Posted: 16 May 2011 10:35 PM PDT Looking over the fundamentals tells the story of an ascendant Scandinavia in the currency world. The Swedish krona (SEK) and Norwegian krone (NOK) are among the globe's highest yielding currencies from a fundamental standpoint. But why then does the technical data read differently? Are we witnessing the wind being taken out of the sails of the Norwegian and Swedish kroner? Against the US dollar, both the SEK and NOK have pushed strongly bullish to the point of record highs. Several analyses herald the Swedish krona in particular as being among the top performers in the forex market since early 2010. The Riksbank is even on schedule to lift its short-term lending rate at each policy meeting this year. Norges Bank is also considering monetary policy tightening in 2011, though it has been far more reluctant than its Swedish neighbor in doing so. Growth in Norway has been only mildly limited in comparison but by no means insufficient for such a move by its central bank. The linkage of the NOK to Crude Oil prices may also have something to do with recent stagnation in the Scandinavian currency as oil has been trading flat within a tight range recently. Technical Data Supporting Reversal? Regardless of this fundamental data supporting a strengthening SEK and NOK, on the technical charts what we see is a consolidation on both pairs against the USD and a heavy push-back by the greenback. According to reports from several currency strategists, a material base may be forming just above the 6.20 level on the USD/SEK, with a confirmation of a trend reversal potentially found slightly above 6.50. The USD/NOK is forming a similar base near 5.45 with a confirmation point found a similar distance near 5.73. If the pairs move above their confirmation point, as opposed to dropping back within their heavily bearish trend, there is a chance the market will adjust its sentiment and begin shorting the Scandinavian currencies in expectations for a mid-year flop. Both pairs are approaching a decision point and it will be interesting to watch their next move unwind.

AUD Price Deceleration Signals Reversal Posted: 17 Mar 2011 06:13 AM PDT The shift in global risk sentiment has driven many currency pairs into above-average volatility. Japan's nuclear crisis is undermining the global recovery by forcing a policy reevaluation by central banks regarding risk exposure. The currencies experiencing the sharpest change in value are the Swiss franc (CHF), Japanese yen (JPY), US dollar (USD) and Australian dollar (AUD). The Aussie, in particular, has witnessed a wide swing in value over the past few weeks. As we can see in the charts below, the AUD/JPY dropped almost 1,000 pips, a change of 11%, while the AUD/USD fell over 400 pips before retracing some of these losses. What is striking about both pairs is the apparent deceleration of the AUD's uptrend versus both safe-haven currencies. Against the yen, the Australian dollar has just breached its trend-line but has yet to close below that significant support level. What this means is that the pair has suffered a downturn, but a trend reversal remains beyond the scope of this analysis for the time being. However, the trend-lines have become flatter since last June, suggesting that the pair's bullish strength is beginning to wane under shifts in risk appetite. AUD/JPY – Weekly Chart Pairing the AUD with the US dollar also shows a similar shift in sentiment. Most visibly, though, is the AUD/USD's more pronounced deceleration and possible head-and-shoulders formation on the weekly chart. The AUD/USD pair shows a similar attempt at a head-and-shoulders reversal between August 2009 and June 2010, but the "head" fell short of its shoulder levels, undercutting the formation's technical strength. We can see with the recent candlestick formation, between October 2010 and March 2011, that the "head" was indeed able to break above the shoulder line and we are beginning to see the technical downturn. If the pair can close below its support level near 0.9800 this should signal for a mass sell-off by technical traders, pushing the pair towards the 0.9400 level and perhaps beyond. AUD/USD – Weekly Chart A similar sentiment may be expressed in regards to the AUD/JPY. If the yen continues to strengthen unabated, with no currency intervention by the Bank of Japan (BOJ), then we could see a break below the 38.2% Fib line, with a more than 50% chance of a retracement to the 23.6% level just above 67.20. It doesn't seem likely that either Australia's or Japan's central bank would allow such a change in value for their respective currencies, but technical forces may push against their respective plans. Going short on the AUD appears like a solid choice for the foreseeable future as a result.

Swedish and Norwegian Kroner Sink as Traders Flee Risk Posted: 15 Mar 2011 03:27 PM PDT As Japan braces for a potential nuclear meltdown, banks and global investors watching the crisis have begun to reevaluate their currency positions given the rapid shift in risk appetite. As many large investors turned to safe-havens following the devastating earthquake and tsunami, forex traders have watched the value of the Japanese yen and US dollar regain much of their former glory versus a number of the more peripheral currencies, like the Scandinavian kroner. Many banks have begun to adjust their expectations regarding interest rate hikes given the deteriorating global risk sentiment. Australia and New Zealand have even hinted at a possible reduction in rates by mid-year given the dramatic shift seen this past week. Additionally, finance ministers in both Sweden and Norway have begun to propose higher capital requirements for banks and stricter controls on lending. The measure has been attacked by businesses as undermining competition, but financial overseers appeared favorable towards these initiatives given the region's higher exposure to risk in comparison with its larger euro zone neighbors. The impact of the shift in risk sentiment, a decrease in business confidence regarding the region's proposed bank regulations, and falling commodity prices have combined to undercut the strength of both Sweden and Norway's currency values. Against the US dollar, the Swedish krona (SEK) fell from 6.3071 to 6.4749 over the past three days, while the Norwegian krone (NOK) underwent a similar shift from 5.5704 to 5.7214.

Stockholm or Bust: Sweden’s Powerhouse Economy Posted: 08 Mar 2011 03:00 AM PST A variety of articles have analyzed the rising strength of the Swedish krona (SEK) to point of exhaustion. A key aspect emphasized, though – as is usual in this global economic environment – is caution. But is caution warranted when it comes to Sweden? Let's evaluate the claim. Sweden's krona is rising at a more-than-healthy rate. The USD/SEK has moved from 8.1311 last June to as low as 6.3614 today. The EUR/SEK witnessed a similar price movement from as high as 10.2695 in November 2009 to today's current price of 8.8760. The fear with this rising strength comes when viewing Sweden's concurrent economic growth, which rose 7.3% year-on-year in Q4 2010. Analysts have been forecasting a gouging effect from the rising SEK, which will eventually pull down on Swedish exports and dampening growth. This claim was made starting from late-2010, but has yet to bear any signs of occurring as expected. In fact, Sweden's economic growth appears dissonant with what is happening elsewhere in the world. As the Wall Street Journal recently pointed out, Sweden doesn't face many of the same problems as other global economies. Sweden faces no sovereign debt crisis like Europe; no deflationary fears like Japan; no unemployment or budgetary problems like the United States; nor fears of an over-strengthened currency by its central bank, like Switzerland. Indeed, the Riksbank actually raised interest rates to 1.5% in 2010, with an expectation to reach 3.0% by Dec. 2011. Swedish Finance Minister Anders Borg also told reporters lately that Sweden's government is expecting growth of 4.8% in 2011, an upward adjustment from the previous expectation of 3.7%. It appears that an apt metaphor for Sweden's trajectory is to view all global economies as being in a race to normalcy, with Sweden finishing first in Q4 2010. The prize is unprecedented growth lasting as long as the other global economies continue the race. The next logical question to ask, in regards to the caution urged by speculators, then, is “How close are the other economies to finishing?”

Canadian Economic Recovery Beating Out Forecasts Posted: 07 Mar 2011 06:00 AM PST The release of a 3.3% growth in Canada's GDP for Q4, 2010, appears to show moderate strength returning to Canada's economy, above what was previously expected. A surge in exports due to increased economic activity in the United States, as well as heightened global demand for industrial metals and crude oil, has helped support Canadian economic growth. High oil prices are also feeding a strong uptick in the Canadian dollar (CAD). The USD/CAD pushed below its 23.6% Fibonacci level (weekly chart), its lowest price since Feb. 2008. This descent well below parity has helped boost Canada's buying power in world markets, but will eventually gouge its exports. For the time being, Canada is reaping the benefits of healthy growth. USD/CAD – Weekly Chart The Loonie's pairing against other currencies, however, reveals not only healthy growth, but stability. Versus the Japanese yen and Swiss franc, two global safe-havens, the CAD has found solid support from its 23.6% Fib level and is trading in its most stable range between this line and the 38.2% resistance level. This has granted Canada a relative advantage against these two financial powerhouses and further enhanced its economic foundation. CAD/JPY – Weekly Chart CAD/CHF – Weekly Chart A number of economists have expressed recent concern for this surge in economic growth, however. This is because Canadian exports will begin to confront challenges brought on by its doggedly-persistent currency growth and seemingly-weaker output in industrial production. Though this sentiment weighs on speculation, three other forces strongly support the recent boom in Canadian optimism. The first is export growth, which was at its highest growth level in over six years. The second is consumer spending which has been increasing beyond forecasts over the past twelve months, with the exception of last month's 0.1% lower-than-forecast figure. The third is inflation which remains at or above desired levels, according to the Bank of Canada (BOC). Analysts appear unanimous in the judgment that Canada's recovery is confirmed and running ahead of forecasts. However, many have conditioned this judgment with a concern that the Loonie's surging growth rate may hinder exports over the next two quarters. And, as expressed above, the relatively lower output in Canada's industrial sector has raised flags among many investors. Nevertheless, the CAD appears to be a solid investment over the next several months.

AUD Toying with Key Resistance Levels Posted: 02 Mar 2011 03:00 AM PST For those watching, the persistent rise of the Australian dollar (AUD) was given impetus recently by soaring commodity prices. With Australia's economy linked with the price of precious metals, the climb in Gold and Silver has been met by a rise in the Aussie as well. What is interesting to note is where the Aussie has reached against a number of its currency rivals. Three pairs stand out in particular: AUD/USD, AUD/CAD, and AUD/CHF (see charts below). These pairs are all testing price parity (the AUD/CHF is not necessarily testing it, but is close enough to warrant interest). Both the AUD/USD and AUD/CAD reached this price mark in October 2010 and have been flirting with this level ever since. The AUD/CHF reached it much sooner, but has since fallen below parity due to the Swiss franc's rising appeal over the second half of 2010. What is worth noting for the first two – but not necessarily the third – is that parity against the USD and CAD represents a price range which has historically lacked sufficiently sustainable support. The question then to ask is, Can the AUD hold its gains against these monetary giants? The CAD is linked with Crude Oil prices which makes its decline versus the AUD somewhat intriguing. The fundamental support doesn't appear as strongly in that pair, but the AUD is rising relatively faster regardless. Making a speculative assessment, it seems the AUD is bouncing within a price range against a few of its primary rivals that has been historically difficult to break beyond. So long as precious metals continue to climb, which appears a given in today's market, the AUD should continue to find support. This makes it interesting to wonder why its value hasn't climbed well beyond parity against these currencies. It may be even more interesting to ask about what forces are holding it back. AUD/USD – Weekly Chart AUD/CAD – Weekly Chart AUD/CHF – Weekly Chart

Silver’s Price Moves: Anticipating a Fall? Posted: 25 Feb 2011 03:00 AM PST After this past week's surging price of precious metals, traders appear to be expecting some level of retracement in value for Silver. In an earlier article it was argued that Silver prices may outpace the spiking price of Gold, which has so far panned out. Gold reached just shy of its all-time nominal high, whereas Silver jumped to a 30-year peak and held steady, for the most part. As of yesterday, however, Silver prices appear to be coming back down. So far, it seems, there appear to be two fundamental factors and one technical aspect fueling this retracement. First, profit-taking among the precious and noble metals yesterday constituted the bulk of the sudden plummet in Silver prices. As several industries which apply Silver in their production posted above-expected profits in Q4, many analysts seem to be anticipating a pull-back as part of an impending cyclical downturn. Second, the flaring tensions in Libya, which have driven oil traders bonkers this week, have also created a capital shift towards safe-haven stores of value, like Gold. Gold's upward mobility pulled other associated metals higher along with it, but Silver's spike was given impetus by a multitude of other factors associated with growth among industry and hi-tech. As long as Libya's president, Muammar Qaddafi, fights to hold onto power, commodity prices will likely continue to find support. But traders should be cautious since revolutions like those spreading throughout the Middle East may end as abruptly as they began, creating a whiplash turnaround in market activity. Australia's central bank governor, Glenn Stevens, warned of such sentiment recently by calling on markets to begin pricing in the impending correction to the latest surge in asset prices. Gov. Stevens' concern is connected to the fact that Australia's economy is closely aligned with the value of precious metals and an overextension of investment could create a nasty backlash on the Economy Down Under. The technical factor is, as usual, a theoretical prediction. The daily and weekly charts on Silver show what may end up being the first shoulder and the head of a head-and-shoulders formation. If true, we may expect a retracement back towards $27 before a secondary surge, likely reaching as high as $31. If it does end up being such a formation, we may see Silver prices breaking out of its uptrend over the next few months, possibly falling back into the high $20s. Silver – Weekly Chart

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