Month: June 2011

This morning’s string of reports from France, Germany and the broader euro zone disappointed many investors seeking an excuse to turn towards riskier assets. The climactic week we’ve seen left many wanting more information on what direction markets will turn and were expecting today’s flash manufacturing and service numbers to fill in some gaps.

Most of the day’s reports were slightly below forecasts, suggesting what traders already knew: manufacturing is in decline this quarter. But the fall in services output from all but Germany gave cause for concern. Traders are beginning to see some downward movement in the riskier assets as a result of this morning’s news. One can only wonder when the recovery will be solid enough to warrant a return to normal market conditions.

Read more forex trading news on our forex blog.

June 23 (Bloomberg) — David Bloom, global head of currency strategy at HSBC Holdings Plc, talks about U.S. and U.K. central banks’ monetary policies and the outlook for global currencies. Bloom speaks with Rishaad Salamat on Bloomberg Television’s “On the Move Asia.” (Source: Bloomberg)

The dollar built on yesterday’s late gains following Ben Bernanke’s press conference.

The USD was stronger versus the G7 currencies as the rally in the greenback continued into today’s European session. Yesterday’s FOMC statement was overlooked as the 2nd press conference given by Ben Bernanke following a Fed Funds Rate release stole the show. Bernanke was adamant in the Fed’s expectations of a pickup in future growth numbers though the Fed did lower current year forecasts to 2.9% from 3.3% citing temporary factors. The Fed chief all but ruled out QE3 given the recent increase in inflation levels. Following the press conference the dollar began to gain and equities sold-off.

This environment continued today into the European trading session with the EUR/USD hitting a new low for the week. Strength in the greenback can be attributed a combination of dollar shorts covering, disappointment by those expecting QE3, and further Greek woes weighing on market sentiment. The EUR/USD is quickly approaching on the 100-day moving average and the next support comes in at the June low of 1.4070. A break here could test the May pivot at 1.3970.

Read more forex trading news on our forex blog.

Video courtesy of ForexCT – A leading Australian forex broker, liscensed by the Australian Securities & Investments Commission, offers the MetaTrader4 and PROfit Platform to retail traders. Other services include Segregated Accounts, Trading workshops, Tutorials, and Commodities trading.

Video courtesy of ForexCT – A leading Australian forex broker, liscensed by the Australian Securities & Investments Commission, offers the MetaTrader4 and PROfit Platform to retail traders. Other services include Segregated Accounts, Trading workshops, Tutorials, and Commodities trading.

Source: ForexYard

US housing data beat expectations yesterday, as the Office of Federal Housing Enterprise Oversight (OFHEO) released an assessment showing homes that were mortgaged by Fannie Mae and Freddie Mac saw a rise in value of approximately 0.8% this past month. The report came one day after the National Association of Realtors published the existing home sales data that also met growth forecasts. The numbers may prove a turning point in the US housing market if growth can continue along this trajectory.

Economic News

USD – Dollar Flat after Fed Held Rates Steady

The US dollar was seen trading flat late yesterday as traders began to seek riskier assets after the Federal Reserve released its rate statement, hinting at no future economic stimulus or monetary policy tightening. The EUR/USD was seen moving sideways along the 1.4450 support line yesterday as a result. Analysts expect the USD to see further downside as interest rate differentials between the US and Europe comes back into view.

On a different note, US housing data beat expectations yesterday, as the Office of Federal Housing Enterprise Oversight (OFHEO) released an assessment showing homes that were mortgaged by Fannie Mae and Freddie Mac saw a rise in value of approximately 0.8%. The report came one day after the National Association of Realtors published the existing home sales data that also met growth forecasts. The numbers may prove a turning point in the US housing market if growth can continue along this trajectory.

With another heavy news day expected today, traders are sure to see heightened volatility. Most significantly, the US will be publishing more housing info that could help strengthen the trend seen these past two days. The weekly unemployment claims report will also get released this afternoon alongside the natural gas storage report. Given recent events, many traders appear to be favoring short positions on the greenback.

EUR – EUR Traders Assessing Situation in Greece

The euro has been experiencing mixed results following yesterday’s rate statement by the US Federal Reserve. Despite a dovish report suggesting a lingering low interest rate in the US, traders appeared more concerned with the potential Greece implosion as its economy struggles to make steps to secure another installment of its financial bailout. The vote of confidence for the government of Greece was just another episode in the saga, but one which may prove pivotal in the weeks ahead.

While debt concerns loom in the euro zone, the higher yielding assets like the GBP and EUR still appear positioned to gain value as traders choose between debt worries and interest rate differentials. The growth in risk appetite may have many investors choosing the latter as their gauge of direction.

As for Thursday, the euro looks to be anticipating mixed results against the other major currencies with mild bias to the upside. The euro zone will be publishing a spattering of economic events on today’s calendar. Traders should try and follow the serial release of manufacturing and service data out of France, Germany and the broader region. These numbers may give an indication for how well the region will fare in the second quarter.

AUD – AUD Trading Higher after Greece PM Wins Vote

The Australian dollar (AUD) was seen trading higher versus most other currencies yesterday after news began to shift many traders back into riskier assets. The Aussie has been a top performer these past several months considering many traders bank on a strengthening of the AUD due to a rise in Chinese demand for Australian raw materials.

Helping to assist the AUD’s recent rise was the vote of confidence in Greece Tuesday evening. With news that the euro zone may soon tackle its debt woes more effectively, higher yielding assets are gaining ground, the Aussie chief among them. Moves toward riskier currencies tend to favor the high growth economies like Australia, China and India. With this morning’s publication of the Australian Conference Board’s (CB) leading index, traders may get another injection of good news that could lift the AUD even further.

Oil – Crude Oil Price Finds Support at $92.50

Crude Oil prices rose mildly after finding support near the $92.50 price mark Wednesday as sentiment appeared to favor a shift back into riskier assets and commodities. Interest rate differentials have come back into play and this has so far led several large investors and analysts to consider a shift back into the EUR and physical assets instead of the USD.

As investors sought risk, the value of crude oil, which has been seen plummeting all week, rose to a weekly high of $93.45 a barrel. A sudden dip in dollar values due to this week’s risk sensitive environment has helped many investors move hesitantly back into assets like oil. Should Crude Oil sentiment hold steady this week, oil prices may continue to make gains, possibly reaching back towards $95 by Friday.

Technical News

EUR/USD

Last week’s failure of the pair to close below the 100-day moving average should not dismay euro shorts. The late in the week rally failed to move above the 20-day moving average which may induce some traders to sell into any euro gains. Both monthly and weekly stochastics have turned lower and point to potential declines. Support is found at 1.4075 followed by the May low at 1.3970. The 200-day moving average may be a likely target and below that the rising trend line from the May 2010 low comes in this week at 1.3610. Resistance is found at Friday’s high of 1.4340 followed by 1.4500 and the early June high of 1.4690.

GBP/USD

Cable is on the verge of breaking the neckline of a head and shoulders top which comes in today at 1.6120. A breach at this level and a measured move from the chart pattern could take the GBP/USD lower to 1.5370. The likeliest target on the charts is the December low at 1.5350. On the way lower cable could encounter support at the May low of 1.6050 and the March low at 1.5940. To the upside the pair may see resistance at last week’s high at 1.6440 as well as 1.6550 off of the May high.

USD/JPY

The pair failed to establish a beachhead above the 81 yen level and proceeded to fall. This level will serve as initial resistance followed by the May 31st high at 81.75 followed by 82.20 and 82.57. Falling daily stochastics hint at further declines. Support comes in at the May low of 79.50 followed by the all-time low at 76.11.

USD/CHF

The USD/CHF rose to the May support which has turned into a resistance level at 0.8550, a phenomenon which often occurs in technical analysis. A break higher would run into the 50-day moving average which coincides with the falling trend line off of the February high at 0.8640. This may offer traders a good level to enter short into the long term downtrend. Additional resistance is located at the mid-May low at 0.8750 and the May high of 0.8950. To the downside the all-time low could be supportive at 0.8325.

The Wild Card

Gold

Yesterday spot gold prices attempted to move above the $1,553 resistance but failed to hold the gains before falling back to the opening day price. Yesterday’s commitment by the Federal Reserve to keep US interest rates at exceptionally low levels for an extended period may offer more upside potential for the commodity. Forex traders should look for a break of the short term resistance to test the all-time high at $1,576. Support for spot gold prices are found at the rising trend line from the late January low which comes in today at $1,528, followed by additional support at $1,5150.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

Technical signals show a potential resumption in the long term downtrend of the USD/CAD.

The recent uptrend in the USD/CAD looks to have been capped at a series of technical levels. On June 16th the pair reached as high as 0.9875, a level that coincides with the 200-day moving average and the trend line falling from the mid-October high.

The 14-day RSI displays a series of lower highs over the course of the recent uptrend. This price divergence signals weakening upside momentum and strengthens the case for a resumption of the downtrend.

Support is found at the rising support line from the May 20th low which comes in today at 0.9680. A break here would test the 0.9510 support followed by the low at 0.9450. Any additional moves higher will run into resistance at the trend line as well as the June 16th high and the mid-March high of 0.9975.

Read more forex trading news on our forex blog.

The Hong Kong Monetary Authority maintained its base interest rate unchanged at 0.50% following the decision of the US Federal Reserve to leave the fed funds rate unchanged at 0-0.25%.  In a statement to the media the HKMA said: "We understand that QE2 will end in June as scheduled,"…"We have noticed that there is strong demand in Hong Kong dollar credit loans and therefore, Hong Kong dollar lending and deposit rates have some upward pressure."

By Carla Pasternak, DividendOpportunities.com

Companies are sitting on record amounts of cash. Default rates on corporate bonds — even for companies with questionable credit that pay high yields — are plummeting.

So why did I just tell my High-Yield Investing subscribers to watch out?

There’s a danger lurking in the market. A danger that only comes up when there’s a perfect mix of low interest rates, cash-rich companies, and yield-starved investors.

Let me explain…

Back in February 2009, I bought US Cellular 7.5% Senior Notes. At the time — the height of the downturn — they traded at just over $17 each, despite having a par value of $25. (Par value is the face value of the note, at which companies can buy them back from investors.)

While the market was scared, there was an opportunity. In the roughly two years I held the bonds, they paid $4.72 each and the price soared back above the $25 value.

High-Yield Investing subscribers who bought and sold with me ended up making more than 68%… on a bond… in a little over two years.

So what’s the problem?

Just a few weeks ago, these notes were called. Not only did we lose our solid income stream, but the notes were trading slightly above their par value. That means when they were called at $25, investors who bought above that mark were hit with a capital loss.

I’m seeing this happen more and more. Income investors are starved for safe income and have piled into bonds, pushing prices up.

At the same time, companies are sitting on massive cash deposits and seeing record-low interest rates. They are taking the opportunity to buy back outstanding debt and refinance at lower rates.

This all means investors buying bonds and other callable securities over their par value need to be careful. It’s getting more common for these securities to be called back, leading to a possible loss if you paid more than par.

But that’s not the entire story.

A little known amendment sponsored by Senator Susan Collins to the Dodd-Frank financial reform bill affects one popular type of preferred stock banks issue, called trust preferreds.

The Collins amendment says banks with more than $15 billion in assets soon won’t be able to use trust preferreds to contribute to their Tier 1. (Tier 1 capital is the cash reserves a bank must keep to safeguard against problem loans.)

Banks aren’t required to redeem their trust preferreds. However, they may wish to because the securities will no longer count as Tier 1 capital and also because they can issue new debt at much lower rates today.

And they don’t have to wait until the stated call date. Instead, the banks can claim a legislative change provision has been triggered in their prospectus, allowing the trust preferreds to be called anytime.

Bottom line: If you hold — or are looking to buy — any security that can be called and is trading above par value, make sure the income it pays is worth the risk of owning right now, even if the shares were called back tomorrow.

Good Investing!

Carla Pasternak’s Dividend Opportunities

P.S. — For more income advice, be sure to view the webcast my colleague Dan Moser recently put together about some of the market’s highest-yielding stocks. He calls it “Why Buy a Stock Yielding 2% When You Can Buy One Paying 26%?” Click here to watch.

USDCAD had reached the uptrend line from 0.9444 to 0.9669. Deeper decline to test 0.9669 support would likely be seen later today, a breakdown below this level will confirm that the rise from 0.9444 had completed at 0.9898 already, then the following downward move could bring price back to 0.9500-0.9600 area. However, as long as 0.9669 support holds, the fall from 0.9898 is treated as consolidation of uptrend from 0.9444, and one more rise towards 1.0000 is still possible.

Daily Forex Forecast