Month: May 2010

By Anton Eljwizat

What is the “Trade Balance”?

The British Trade Balance report is an indicator that measures the difference in value between imported and exported goods and services during the reported month. A positive number indicates that more goods and services were exported than imported, and hence supports the currency. As the economy steadies and oil prices climb, imports are likely to rise.

This report has two major effects on the GBP. One – foreigners that import British goods and services must buy the local currency to pay for the nation’s exports. Two – the amount of exports the nation is producing says a lot about its economy, and investors are fairly wise to know how to understand these figures. It means that investors are more likely to invest their funds in countries that have better exporting data, and therefore create more demand for the local currency, and this has a direct impact on the value of the currency.

How This Survey Can Help the British Pound?

The government report this week is expected to show that the trade balance probably widened to -6.5 billion in March, according to estimates, from -6.2 billion the prior month. Commerce will release the report on May 13 at 8:30 GMT. If the trade balance data will come in-line with expectations or higher, the GBP may see its bullish trend continue based on the trade balance’s value.

How This Survey Can Hurt the British Pound?

However, if the number will turn out to be lower than forecasted, this might weigh on the British currency since it would be consistent with fears that the British economy is at risk of entering a deeper economic recession. A negative release of this kind may actually force the GBP into a bearish correction, testing the 1.4700 level against the USD in the short-term.

Forex Market Analysis provided by Forex Yard.

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Market Analysis provided by eToro

The euro remains heavy, and the break of the final 62% retracement of the Fri-Mon rally now points to a retest of last week’s low of 1.2529.  The debate about German financing of the aid package will keep markets jittery in the days to come.

Click here to read the full daily Review

USDCHF remains in uptrend from 1.0434 and the price action from 1.1245 is more likely consolidation of uptrend. Support is at the rising trend line on 4-hour chart, as long as the trend line support holds, another rise to 1.1400 is still possible after consolidation and a break above 1.1245 could signal resumption of uptrend, only a clear break below the trend line support could suggest that the upward movement from 1.0434 has completed.

Daily Forex Forecast

By GCI Forex Research

Fundamental Outlook at 1400 GMT (EDT + 0400)

€

The euro depreciated vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2665 level and was capped around the $1.2800 figure.    The common currency extended yesterday’s losses as traders expressed skepticism that the rescue packages announced by eurozone officials early yesterday will suffice in addressing the bloc’s major debt woes.  In fact, the common currency traded lower than Friday’s close following last week’s major sell-off.  Ireland’s budget deficit-to-GDP ration remains 14.3% and Greece’s remains 13.6%, underscoring the major debt problems faced by many eurozone countries including these, Spain, Portugal, and Italy.  There are renewed forecasts that the common currency will eventually decline to parity with the U.S. dollar.  European Central Bank member Nowotny reported “the intention is to get again control of the unorderly markets and I think this is a goal that has been achieved remarkably in an effective way.”  EMU-16 central banks yesterday began purchasing eurozone government bonds in the secondary market as a quantitative easing measure.  ECB member Wellink went one step further today, saying “If there are excessive deficits at a certain moment, fines should be considered more quickly. Deny countries who are erring the access to European structural funds.”  Data released in Germany today saw the April consumer price index decline 0.1% m/m and up 1.0% y/y while the EU-harmonized index was off 0.1% and up 1.0% y/y.  Also, the April wholesale price index was up 1.7% m/m and 6.0% y/y.  In U.S. news, Fed Chairman Bernanke reported the eurozone’s approximate US$ 1 trillion aid package is “basically not a panacea” and called for “fundamental underlying changes” in countries’ economies.  The Senate today approved an amendment to a regulatory overhaul bill that will audit the Fed’s emergency-lending programs during the financial crisis over the past couple of years.  Richmond Fed President Lacker reported “We are already seeing evidence that employment is on the path to steady growth.”  Data released in the U.S. today saw March wholesale inventories decline to +0.4% from the prior reading of +0.6%.  Euro bids are cited around the US$ 1.2585 level.

¥/ CNY

The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥92.21 level and was capped around the ¥93.40 level.  Traders again moved back into yen as doubts resurfaced regarding the adequacy of the €500 billion deal announced over the weekend to support debt-laden eurozone countries.  Bank of Japan Deputy Governor Yamaguchi yesterday said the central bank has “no need to alter the outlook in our semi-annual economic report” following recent market volatility.  Finance minister Kan reported equity and currency markets will “start to stabilize.”  Minutes from last month’s BoJ Policy Board meeting were released yesterday and policymakers observed “balance sheet adjustments in the banking sector and the fiscal deficit problem in some European countries might further slow the pace of economic recovery” in the region.  BoJ yesterday injected ¥2 trillion into the financial system for a second day, the first back-to-back same-day operations since October 2008.  Also, BoJ reestablished a U.S. dollar currency swap agreement with the Fed and other central banks this weekend to help stabilize global financial markets.  Data to be released in Japan overnight include April official reserve assets.  The Nikkei 225 stock index lost 1.14% to close at ¥10,411.10.  U.S. dollar offers are cited around the ¥96.85 level.  The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥116.90 level and was capped around the ¥119.40 level.  The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥139.65 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥82.95 level. In Chinese news, the U.S. dollar depreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8293 in the over-the-counter market, up from CNY 6.8266.  People’s Bank of China adviser Xin Bin said the central bank’s quarterly report released yesterday is a signal the central bank will permit the yuan to appreciate vis-à-vis the U.S. dollar.  The central bank yesterday yielded some clues regarding the possibility of ending its U.S. dollar peg, reporting it will manage the yuan “with reference to a basket of currencies” – language that was absent from the central bank’s previous quarterly summary.  Many data were released in China overnight. First, the April trade balance expanded to US$ 1.68 billion from the prior reading of –US$ 7.24 billion.  Second, April NDRC housing prices improved to 12.8 from the prior reading of 11.7.  Third, April producer prices were up 6.8% y/y and April consumer prices were up 2.8% y/y.  Fourth, April retail sales growth decelerated to +18.5% y/y.  Fifth, April industrial production was up 17.8% y/y.  Sixth, April new yuan loans expanded to CNY 774.0 billion from the prior reading of CNY 510.7 billion.

£

The British pound appreciated sharply vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.5005 level and was supported around the $1.4720 level.  Cable moved higher after Prime Minister Brown resigned from office and tendered his resignation to Her Majesty the Queen, who quickly accepted incoming Prime Minister Cameron’s plea to form a new government.  Sterling moved higher on this news on the premise that a Tory-Liberal Democrat coalition may be more successful in reducing the U.K.’s bloated debt and deficit problems than a Labour-Liberal Democrat coalition.  Today’s political drama ends more than twelve years of uninterrupted Labour rule.  Data released in the U.K. saw the April RICS house price balance increase to 17% from the prior reading of 9%.  Also, March industrial production was up 2.0% m/m and 2.0% y/y with manufacturing production up 2.3% m/m and 3.3% y/y.  The April NIESR GDP estimate will be released tonight.  Cable bids are cited around the US$ 1.4335 level.  The euro depreciated vis-à-vis the British pound as the single currency tested bids around the £0.8475 level and was capped around the £0.8615 level.

CHF

The Swiss franc appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.1035 level and was capped around the CHF 1.1135 level.  Data released in Switzerland today saw the April SECO consumer confidence survey improve to +14 from the prior reading of -7, exceeding expectations.  April producer and import prices will be released tomorrow.  Swiss National Bank Chairman Hildebrand reiterated the central bank’s policy is prepared to fight inflation and deflation and reiterated the SNB will not permit an excessive appreciation of the franc.  U.S. dollar offers are cited around the CHF 1.1270 level.  The euro moved lower vis-à-vis the Swiss franc as the single currency tested bids around the CHF 1.4030 level while the British pound appreciated vis-à-vis the Swiss franc and tested offers around the CHF 1.6620 level.

Forex Daily Market Commentary provided by GCI Financial Ltd.

GCI Financial Ltd (”GCI”) is a regulated securities and commodities trading firm, specializing in online Foreign Exchange (”Forex”) brokerage. GCI executes billions of dollars per month in foreign exchange transactions alone. In addition to Forex, GCI is a primary market maker in Contracts for Difference (”CFDs”) on shares, indices and futures, and offers one of the fastest growing online CFD trading services. GCI has over 10,000 clients worldwide, including individual traders, institutions, and money managers. GCI provides an advanced, secure, and comprehensive online trading system. Client funds are insured and held in a separate customer account. In addition, GCI Financial Ltd maintains Net Capital in excess of minimum regulatory requirements.

DISCLAIMER: GCI’s Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be U.S.ed as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.

5 Golden Rules for Trading in a Volatile Market – By One Financial

1. Use Stop Losses

Using a stop loss – a preset level at which an open trade is automatically closed – is standard good practice; this limits your downside risk and also shows trading discipline, which is paramount in developing a healthy trading account. However, when markets are incredibly volatile, you could see some slippage with the position not being able to be closed at the exact level specified. In volatile markets there is often a “gap” on the open, where an index opens substantially lower or higher than expected, perhaps by as much as 10-15%. With a normal stop loss you will get the first available price.

One Financial will provide stop loss cushions with the aim of reducing the effect of slippage on stop loss orders. The stop loss cushion has been developed to provide the client with an element of protection over such market moves. Our stop loss cushions allow for a slippage of 10 pips in the underlying market before the effects are seen on the client’s account.

It is notoriously difficult to set your stop loss at the right distance from the current traded price, but when markets are volatile, you should set your stop losses wider apart than normal. Otherwise you risk being stopped out before having made any money at all.

2.  Reduce Your Trade Size

Margin is one of the biggest advantages of CFD trading and at One Financial our 1% on FX, Bullion and Indices and 3% on commodities are amongst the most competitive in the marketplace but with any margin trading you should always be aware of how much is required to keep your position in the market.

A general rule of thumb is that no single trading position should amount to risk exposure of more than 5% of your available capital. However, in volatile market conditions this kind of leverage is dangerous as any losses will be magnified even more than normal. The best market practice would be to halve your normal trading size over volatile trading conditions.

3. Limit Your Trades

Volatile markets are associated with high volumes of trading which may cause delays in execution. While online trading normally means you place a trade at the bid and offer you see on the screen, some market-makers may widen bid/offer spreads or even temporarily withdraw tradeable prices. This means that execution can be delayed and prices to execute at may not be available at all. One Financial provides fixed spreads no matter what the market conditions but in times of increased volatility it is sometimes better to limit trade execution.

4. Look to Hedge Positions

In extreme market volatility, trading one product could wipe out your trading capital. One way to limit your exposure to these kinds of risk is to trade a combination of correlated and inversely correlated products.

The strategy would limit any downside while taking advantage of volatility. An example would be to buy Gold to take advantage of safe haven buying and then to also buy dollars to hedge your Gold trade. Dollars have been the safe haven currency when times are troubled but Gold can be a more attractive alternative.

The idea of hedging positions means you use inversely related products which do the opposite to each other therefore giving the trades protection if a strategy risks going wrong.

Another approach is to simply sit out the storm on the sidelines and wait until market volatility calms down. When markets are volatile it offers an opportunity to learn faster than normal. In most cases, due to investors pulling out, an inefficient market is created with potentially more profits to be made.

5. Stick to Your Strategy

During volatile times it is easy to be shaken and diverted from your normal trading strategy but most experienced traders apply the same approach to choosing investments as they normally do.

While it’s tempting to react to the volatility, it’s incredibly difficult to predict moves in the short term, so you have to stick to your trading strategies and limit your risk exposure when times are volatile.

About One Financial

One Financial Markets is one of London’s leading online brokers, offering a range of trading platforms for FX, share, index and commodity trading. As regular contributors to financial television news including CNBC, One Financial Markets provides regular free market updates and analysis for investors and traders.

By Fast Brokers – The Aussie has stumbled back below its psychological .90 level as the risk trade struggles across the board.  The EUR/USD is sliding towards Thursday lows with investors and analysts questioning the effectiveness of the $1 trillion rescue package.  The Aussie has naturally followed the risk trade lower today considering RBA could lay off of its hawkish monetary policy stance.  In addition to the influence of the EU, the Aussie is also reacting negatively to today’s disconcerting data and news from China.  Chinese pricing data eclipsed analyst estimates, stoking speculation that the government will need to get more aggressive in cooling the economy.  In fact, a comment emanated from the central bank stating that China is nearly ready to begin tightening and appreciating the Yuan.  The SCI tumbled in reaction to these developments, officially entering a bear market.  This is negative for the Aussie since a slowdown in China’s economy could take a large bite out of demand for Australia’s resources, a key component of GDP.  Hence, the Aussie is losing a bit of its allure as an outperformer in the FX markets.  Australia will light up the data wire tomorrow by releasing its home loans figure.  Should the number disappoint this could weigh on the Aussie since the RBA may determine that its rate hikes are having their desired impact.  On the other hand, strong home loans data could buoy the Aussie due to speculation that the RBA could stay aggressive monetarily next month.  The EU, UK, and U.S. will also release key data points, meaning the Aussie could remain active for the next 24 hours.

Technically speaking, the Aussie faces technical barriers in the form of the psychological .90 area along with intraday and 5/5 highs.  As for the downside, the Aussie has technical cushions in the form of intraday and 5/6 lows along with the psychological .89 and .88 levels.

Price: .8961
Resistances:  .8964, .8976, .8987, .9001, .9017, .9036, .9057
Supports:  .8947, .8932, .8920, .8908, .8888, .8879, .8855
Psychological:  .90, .89, .88

(click chart to enlarge)

Market Commentary provided by Fast Brokers.

Disclaimer: FastBrokers’ market commentary is provided for information purposes only and under no circumstances should be regarded neither as an investment advice nor as a solicitation or an offer to sell/buy any financial product. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained.

Risk Disclosure: There is a substantial risk of loss in trading futures and foreign exchange. Please carefully review all risk disclosure documents before opening an account as these financial instruments are not appropriate for all investors.

By Fast Brokers – Gold is surging higher today, testing its December 2009 highs as the precious metal benefits from its win-win position as we explained yesterday.  Gold is in a unique spot right now considering its status as a safe haven along with its negative correlation with the greenback.  Investors are beginning to question the potential effectiveness of the EU’s rescue package, sending the risk trade lower across the board.  Such uncertainty and risk aversion is clearly acting as a positive catalyst for gold right now.  In addition to uncertainty in the EU, China’s SCI officially entered a bull market and the UK parliament is in the midst of intense negotiations.  Hence, it’s tough to find stability anywhere at the moment, making gold a desirable purchase for the near-term, or at least until uncertainty settles.  The data wire will pick back up tomorrow, beginning with Australia home loans and ending with U.S. trade balance data.  Hence, considering the amount of news stories floating around, the combination of key data could make for another active 24 hours.

Technically speaking, gold faces technical barriers in the form of intraday and December 2009 highs.  As for the downside, gold has multiple uptrend lines serving as technical cushions along with intraday lows and the highly psychological $1200/oz area.  Gold is beginning to run low on technical barriers, normally a positive sign concerning near to medium term performance.

Present Price: $1219.23/ oz
Resistances: $1222.07/oz, $1225.66/oz
Supports: $1215.41/oz, $1211.97/oz, $1209.69/oz, $1207.76/oz, $1204.58/oz, $1202.01/oz
Psychological: $1200/oz, December 2009 highs

(click chart to enlarge)

Market Commentary provided by Fast Brokers.

Disclaimer: FastBrokers’ market commentary is provided for information purposes only and under no circumstances should be regarded neither as an investment advice nor as a solicitation or an offer to sell/buy any financial product. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained.

Risk Disclosure: There is a substantial risk of loss in trading futures and foreign exchange. Please carefully review all risk disclosure documents before opening an account as these financial instruments are not appropriate for all investors.

By Fast Brokers – The Cable wasn’t able to hold 1.50 and is trading back around 1.48 as negotiations in parliament heat up.  Both Labour and the Tories are vying for an alliance with the Lib Dems, and Brown even offered to step down as PM should Clegg opt to side with his party.  Should this happen, the ability of parliament to pass meaningful legislation to curb the nation’s fiscal deficit could be hampered.  Either way, the uncertainty is weighing on the Cable as the risk trade has little to be optimistic about in general.  China’s SCI officially entered a bear market this week amid fears that the government will need to be more aggressive in slowing down its overheating economy.  Additionally, analysts and investors are questioning the effectiveness of the EU’s $1 trillion rescue package, punishing the risk trade in the process.  On a positive note, UK manufacturing production surged as a weak Pound boost demand for manufactured goods.  The positive reading is giving the Pound a bit of relative strength despite the weakness in the risk trade, highlighted by a sliding EUR/GBP.  Investors will continue to keep their eyes on the news wires regarding any updates concerning the intense negotiations in parliament.  Additionally, the UK will release CCC data, followed by a public address from King and the BoE inflation report.  It will be interesting to see if UK employment continues to improve.  If so, this could feed the Pound’s present relative strength.  Furthermore, investors will be looking to see if inflation is continuing its uptrend, also a positive for the Cable since the BoE would be less inclined to loosen.

Technically speaking, the Cable obviously faces multiple downtrend lines considering the extent of last week’s pullback.  The Cable also faces near-term technical barriers in the form of 1.50, intraday highs and 5/10 highs.  As for the downside, the Cable has a couple uptrend lines in place along with the psychological 1.48 and 1.47 levels.

Present Price: 1.4816
Resistances: 1.4852, 1.4870, 1.4886, 1.4902, 1.4922, 1.4945, 1.4968
Supports: 1.4806, 1.4784, 1.4761, 1.4740, 1.4718, 1.4704
Psychological: 1.50, 1.49, 1.48, 1.47, May lows

(click chart to enlarge)

Market Commentary provided by Fast Brokers.

Disclaimer: FastBrokers’ market commentary is provided for information purposes only and under no circumstances should be regarded neither as an investment advice nor as a solicitation or an offer to sell/buy any financial product. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained.

Risk Disclosure: There is a substantial risk of loss in trading futures and foreign exchange. Please carefully review all risk disclosure documents before opening an account as these financial instruments are not appropriate for all investors.

By Fast Brokers – The EUR/USD has decline back towards its 1.27 level as optimism fades quickly in the wake of the EU’s announcement of a $1 trillion rescue package.  The functionality of the package has many unanswered questions (please refer to blogs.fastbrokers.com for further analysis), leaving the EUR/USD in a vulnerable position technically as Thursday lows inch closer.  Hence, the currency pair is by no way out of the woods at this point and investors should continue to watch EU bond yields as we mentioned in yesterday’s commentary.  Meanwhile, the risk trade as a whole is being dragged lower by the SCI officially entering a bear market.  Chinese pricing data popped higher and the central bank issued a comment suggesting further tightening and Yuan appreciation could be around the corner.  Hence, it’s becoming clear that China may need to get more aggressive in terms of slowing down its economy, a negative for global equities and the risk trade since China has been an engine for the global economic recovery.  Investors and analysts will continue to dissect the EU bailout package with most people unsure whether to interpret the action as a positive or negative development.  Either way, the $1 trillion is massive and should have a long lasting impact on the FX markets.  The EU will light up the data wire tomorrow by releasing prelim GDP data.  Should fundamentals stay strong this could help buoy the EUR/USD and keep it above Thursday lows.  On the other hand, should prelim GDP disappoint this could result in immediate risk aversion.  The BoE will release its inflation report tomorrow followed by U.S. trade data, meaning the FX markets should remain active tomorrow.

Technically speaking, the EUR/USD wasn’t been able to hold 1.30, a disconcerting technical near-term development.  However, the currency pair is still trading above Thursday lows, meaning a bottom could form from present levels.  As for the topside, the EUR/USD faces a wealth of downtrend lines along with the psychological 1.28 and 1.29 levels.

Present Price: 1.2730
Resistances: 1.2734, 1.2758, 1.2779, 1.2807, 1.2819, 1.2854
Supports:   1.2704, 1.2671, 1.2652, 1.2622, 1.2603, 1.2581
Psychological: May 2010 low, March 2009 lows, October 2008 lows, 1.28, 1.27, 1.26, 1.25

(click chart to enlarge)

Market Commentary provided by Fast Brokers.

Disclaimer: FastBrokers’ market commentary is provided for information purposes only and under no circumstances should be regarded neither as an investment advice nor as a solicitation or an offer to sell/buy any financial product. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained.

Risk Disclosure: There is a substantial risk of loss in trading futures and foreign exchange. Please carefully review all risk disclosure documents before opening an account as these financial instruments are not appropriate for all investors.

By Adam Hewison – Perhaps no other market in the world elicits such emotion and passion than the world’s gold market. One only has to mention gold, and theories just come out of the woodwork in regards to conspiracy, market manipulation, and a host of other less than savory subjects.

So what’s a trader to do?

Regardless of how you feel about gold, this market presents some great trading opportunities that you can capitalize on using our “Trade Triangle” technology.

Now, hard-core gold bugs will not subscribe to this method of trading as they prefer to buy physical gold and hold onto it or bury their bars in their backyard, and to be honest with you, there is nothing wrong with that belief.

I’ve been asked to update our outlook on gold, so I thought that today I would make a short video to share with you some of the points I see in the current market.

Watch the New Video Now…

As always, our videos are free to watch and have no obligation. The only thing that we ask is that you share your views on our blog. The views can be bullish on gold or bearish on gold, the choice is yours to make.

Enjoy the video,
Adam Hewison
President, INO.com
Co-creator, MarketClub.com