FOREXYARD: Forex News Blog

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• Italy Destined to Default?
• US Unemployment Claims Signal Improved Job Sector
• Germany Factory Orders See 1.8% Growth
• BoJ Intervention Weakens Yen Temporarily
• ECB and BOE Rate Decisions on the Heels of JPY Intervention
• Russian Ruble Pushed and Pulled by Market Forces

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.

US Unemployment Claims Signal Improved Job Sector Posted: 04 Aug 2011 06:31 AM PDT Following suit from last week's surprise unemployment claims data, this week's report also beat out forecasts, revealing only 400,000 new claims for unemployment benefits this week. The numbers are not stellar by any means, but a slowdown in unemployment insurance claims signals a modest strengthening of the US job market. ADP's report on Wednesday regarding private sector job growth also revealed a major upswing in job creation. Forecasts had anticipated approximately 100,000 new jobs. The actual report came in at 118,000 new jobs. That also marks 14 consecutive months of job growth in the private sector. Some could hold this data up as a rebuke to criticism of President Obama's handling of the economy during the worst recession since 1929, but that is a matter for future historians to debate. Read more forex trading news on our forex blog.

Germany Factory Orders See 1.8% Growth Posted: 04 Aug 2011 06:28 AM PDT Results for this month's reading on German factory orders surprised many investors this morning. Data released by Deutsche Bundesbank today at 11:00 GMT highlighted a solid 1.8% uptick in demand for factory goods. The news has been mixed for the euro zone's common currency, the euro (EUR), however, as the region struggles with debt woes in Italy and Spain. Expectations for today's report were for a contraction in demand as the euro zone continues to struggle with mired sluggishness. Analysts were anticipating a contraction ranging from 0.2% to 0.9%, making the sudden uptick of 1.8% all the more impactful on today's market. Should such numbers persist through the remaining months of summer, the region could be in a better position to better tackle the debt crisis affecting Germany's peripheral neighbors. Read more forex trading news on our forex blog.

BoJ Intervention Weakens Yen Temporarily Posted: 04 Aug 2011 05:59 AM PDT The Bank of Japan made a ¥10 trillion splash in the markets to prevent speculators from driving the value of the Japanese currency higher. Most likely the BoJ was forced to act following yesterday's quasi-quantitative easing by the SNB to weaken the CHF. The Asian forex trading session was more volatile than normal with the yen soaring as high as 80.22 from 78.30 at 02:00 GMT when the selling began. In addition to the intervention in the forex trading markets the BoJ also committed to increasing its asset purchase fund and additional fixed rate loans. Both of these programs will be worth ¥5 trillion each. At first glance the BoJ looks to have succeeded in weakening the yen. Early gains are impressive with the major pairs triggering stops and inflicting pain on both hedge funds and retail forex traders that have been long the JPY. To keep the pressure on those that seek the JPY as a safe-haven currency the BoJ has been selling yen intermittently throughout the day. While not exposing the entirety of the intervention program the BoJ will keep the markets on their toes with the chance the BoJ could begin selling the JPY again to keep speculators at bay. The technicals show a bleaker picture for the BoJ, particularly in the EUR/JPY which rose as high as 114.16, a level that has significant technical implications. This price close to the pair's 200-day moving average (113.91), the bottom line of a previous bearish flag pattern stemming from the mid-July low (114.05,) and the 38% Fibonacci retracement (114.25) from the April high to this week's low. The falling trend line from the April and July highs will likely find willing JPY buyers at the 115.50 level if the pair manages to move higher. To the downside the EUR/JPY may find support at 112.20. Read more forex trading news on our forex blog.

ECB and BOE Rate Decisions on the Heels of JPY Intervention Posted: 04 Aug 2011 12:47 AM PDT Increased bond yields and higher CDS rates for Spain and Italy are keeping the euro from making any significant inroads versus the USD. Yesterday Italian Prime Minister Silvio Berlusconi attempted to talk up the strength of Italian finances and the economy's solid fundamentals. Market players continue to trade in a difficult environment after yesterday's interest rate move by the SNB to lower the value of the CHF and today's intervention by the BoJ to weaken the yen. Today's Key Economic Events: JPY – BOJ Press Conference – 07:30 GMT The BoJ began selling yen on the open market overnight with reports of selling up to JPY 900 Bn. The move comes on the heels of the SNB interest rate cut and increased liquidity provisions to weaken the CHF. The BoJ was likely pressured into acting after the Swiss move. This creates a conundrum from traders seeking to shy away from risky assets. What should forex traders buy when moving out of higher yielding assets? US monetary policy is expected to remain ultra-loose and the possibility of QE3 may keep the USD on its back foot while the euro remains fundamentally flawed from the debt crisis. I suspect the one off moves in the JPY and the CHF will be just that and the long term trend of a strengthening yen and Swiss franc will continue. GBP – Official Bank Rate – 11:00 GMT Expectations: 0.5%. Previous: 0.5%. No change is expected to the UK interest rate but there is the potential for a loss of support in the hawkish camp. Additional easing measures could be enacted but unless the MPC acts now which may still be premature, we won't know the nature of the debate for two weeks when the MPC releases its meeting minutes. Resistance comes in at 1.6475 followed by 1.6550. Support is found at this week's low of 1.6220. EUR – Minimum Bid and ECB Press Conference Expectations: 1.50%. Previous: 1.50%. ECB rates will be held at their current levels but the risk is for Trichet to downplay additional tightening due to slowing growth in the US and weaker Euro zone PMI surveys. EUR/USD initial support is yesterday's low of 1.4140 followed by the July low/long term trend line from June 2010 at 1.3840. Resistance is found at the overnight high of 1.4370 and this week's high at 1.4450. 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.

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FOREXYARD: Forex News Blog

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• Australian Data Continues to Disappoint
• US Job Cuts Hit 16-Month Peak
• Euro Higher on Economic Data and SNB Intervention
• SNB Acts and CHF Tumbles

Australian Data Continues to Disappoint Posted: 03 Aug 2011 06:52 AM PDT Piling atop recent articles on Australia's shrinking housing sector, today's publication of Australian retail sales and its national trade balance show a broadening contraction striking several sectors of Australia's economy. The retail sales figure, perhaps most shocking, witnessed contraction in June. Expectations for the retail sales report was for a modest growth of 0.4% from last month's contraction of 0.6%. The actual report of 0.1% shrinkage has led many investors to pull away from the Australian dollar (AUD) in recent trading. The nation's trade balance also revealed sluggish growth of only A$2.05B as opposed to the expected A$2.22B, down from last month's A$2.70B. Read more forex trading news on our forex blog.

US Job Cuts Hit 16-Month Peak Posted: 03 Aug 2011 06:50 AM PDT Though Automatic Data Processing, Inc.'s (ADP) employment change figures gave cause for optimism today, the Challenger Job Cuts report furrowed some eyebrows. A near-60% increase in reported job cuts, year-on-year, was published earlier today by Challenger, Gray and Christmas, Inc., hitting a 16-month peak. The report supports the dismal outlook shared by many investors on Wall Street that the US economy is once more approaching recession. The Dow Jones has been trading consecutively lower these past few days and risk appetite appears to be waning. Moreover, yesterday's consumer spending reports revealed a decline in American consumption. All of which point to an economic downturn in the months ahead. Read more forex trading news on our forex blog.

Euro Higher on Economic Data and SNB Intervention Posted: 03 Aug 2011 06:00 AM PDT The euro was stronger across the board as a combination of strong retail sales numbers and SNB intervention to ease the CHF has helped boost the EUR. A recovery was seen in the euro this morning after strong retail sales of 0.9% on expectations of 0.5%. The May numbers were revised lower to -1.3% from -1.1% but the contraction failed to overshadow the positive headline number. Pressure remains in the euro zone with Italian and Spanish CDS trading at inflated levels along with increased yields in the nations' 10-year bonds trading at 6.28% a 6.16% respectively. However yields have fallen from these highs since the SNB intervention. Bond vigilantes will likely continue to prey on Italy and Spain as the EU summit from July 21st has essentially failed restore investor confidence in the two nations' sovereign debt. This will likely continue to weigh on the euro intermittently but at present dollar weakness looks to continue. EUR/USD resistance is found at 1.4440 with support at 1.4280 and 1.4120. The move to weaken the CHF by the Swiss National Bank (SNB) has provided a shot of adrenaline to deflated markets after yesterday's equity selling. The SNB cut its Libor target to 0.00-0.25% from 0.00-0.75%. Previous 3-month rates were already below this target so the announcement may be more symbolic. Additional measures were taken to weaken the CHF by increasing liquidity supplies to Swiss banks. Nevertheless the impact was felt in the forex trading markets with the EUR/CHF and the USD/CHF rising from their lows. But given the risk off environment the pause in the appreciation of the CHF may only prove to be temporary as there is currently a lack of safe-have assets available. The euro is facing a sovereign debt crisis while the US economy continues to underperform. This leaves the Japanese yen as a possible currency but the risk is increasing for the Japanese Ministry of Finance to step in to ease the JPY. Thus the relief the CHF has been dealt today may prove to be temporary until the next flare up in global risk metrics. Read more forex trading news on our forex blog.

SNB Acts and CHF Tumbles Posted: 03 Aug 2011 12:50 AM PDT Early this morning the Swiss National Bank said the CHF is "massively overvalued at present," and began flooding the market with liquidity to get the 3-month Libor rate as close to zero as possible. The CHF weakened sharply versus both the USD and the EUR. Yesterday the agreement to raise the debt ceiling was met by markets with a fall out in global equities with the major bourses down over 2% and the safe-haven currencies JPY and USD bid. Today's Key Economic Events: GBP – Services PMI – 08:30 GMT Expectations: 53.3. Previous: 53.9. Monday's manufacturing PMI was below the 50 boom/bust level while yesterday's construction PMI fared slightly better. A weak reading today will likely have the GBP/USD testing the 1.6260 support level with scope towards 1.6210 at the 38% retracement from the mid to late July move. Resistance comes in at 1.6325. USD – ADP Non-Farm Employment Change – 12:15 GMT Expectations: 101K. Previous: 157K. Last month the ADP report came in above market expectations and caused economists to up their forecasts for Friday's non-farm jobs report, only to have the jobs report grossly underperform market expectations. Traders should be wary of using the ADP report as a proxy for Friday's headline jobs report. However, today's ADP numbers if stronger would likely increase market sentiment and help the recovery in equities and higher yielding assets. EUR/USD initial resistance comes in at 1.4280 followed by 1.4450. Support is found at 1.4125. EUR/CHF resistance is located at 1.1200 followed by 1.1400. Read more forex trading news on our forex blog.

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