Month: June 2011

With the votes 155 for and 138 against the greek parliament Thursday afternoon passed the austerity bill.

Senior Strategist Ib Fredslund Madsen comments on the news.

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Video courtesy of en.jyskebank.tv

Club EWI’s free “Independent Investor eBook, 2011 Edition” offers you an unorthodox view of the Fed’s quantitative easing program

By Elliott Wave International

The second round of the Federal Reserve’s quantitative easing program, better known as QE2, will expire this week.

The QE2 policy was officially announced on November 4, 2010, and has been widely credited with subsequent stock market gains. And now, according to rumors, the end of this “experimental” program will kill the stock rally — with potential impact across all markets.

Let’s think about that.

For starters, there is little “experimental” about QE2. As EWI’s November 2010 Elliott Wave Financial Forecast pointed out to subscribers, “In Japan, the very same remedy the U.S. is applying today — rate cuts followed by quantitative easing — finds its stock market still down more than 75% from its December 1989 peak.”

Also, this chart, from EWI president Robert Prechter’s January 2011 Elliott Wave Theorist, shows “the effect” the first round of quantitative easing (QE1) had on the market:

But investors have short memories. And even many of those who remember how powerless the Fed was during the 2007-2009 crash are convinced that “it’s different this time.”

What do the facts and the evidence say? Read the expanded, 2011 edition of our popular free Club EWI resource, The Independent Investor eBook.

From the very first pages, the charts and graphs will show you that the Fed’s QE programs are far less powerful than is commonly presumed.

In a bizarre circumstance, the news published on today’s calendar – beyond the Greece riots and austerity budget vote – are being released predominantly in line with market forecasts. Daily news tends to generate swings in currency values because actual results rarely line up with market forecasts and the adjustments in portfolios which occur after a release generate volatility.

Today’s news out of Japan, Switzerland, and Great Britain, however, have all come in line with forecasts, creating a flat technical trading day amid one of the most tumultuous news days in recent memory. The Greece vote and concurrent riots are still capturing the spotlight, but today’s snore-inducing news is aiding its central focus perhaps beyond what it otherwise would be. Is this good or bad for the EUR?

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The amount of Great British pounds (GBP) in circulation domestically in the United Kingdom, and deposited in local banks, grew a meager 0.1% this past month, below expectations for a 0.3% increase, month-on-month.

The report released on the M4 Money Supply this morning by the Bank of England (BOE) does not tend to have much impact on the currency market, but it struck me as interesting that the amount of GBP held locally shrank in June. The data lines up well with the ominous Current Account published yesterday that revealed a sharp increase to the nation’s trade deficit; indicative of a movement of local currency away from its home market.

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Today’s consumer price index (CPI) reports out of Canada gave traders reason to buy into the Canadian dollar (CAD), colloquially known as the Loonie. Both the nominal and the core readings came in well above forecasts in the northern giant’s first publication of highly bullish and impactful news since the June 10th publication of the country’s unemployment rate.

Forex traders took cue from the CPI figures as a sign to go long on the CAD. The nominal reading for the country’s CPI was in at 0.7%, beyond the expected 0.2%. The core reading, which does not take into account 8 of the more volatile goods and services that distort the underlying trend, revealed 0.5% growth, beyond a similar 0.2% expectation.

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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.

The dollar was lower across the board and as it currently looks the Greek austerity vote is set to pass. As such the safe-haven currencies yen and the Swiss franc are lower with equities performing well.

The euro is up versus the dollar and in the crosses as this week’s recovery continues. Protesters are clashing with police in the streets of Athens but the main event remains inside the Greek parliament where the vote for the medium-term fiscal strategy will take place. With the euro climbing to its highest level in a week and the FTSE 100 up by 1.50%, markets fully expect the legislation to pass, if only by a narrow margin. The euro looks to move higher on a successful vote but this would by no means leave the euro out of the woods as further risks down the road could provide selling opportunities as the Eurogroup meeting on July 3rd draws near. Both S&P and Fitch remarked today that French debt plan would need a 2nd look before an immediate declaration of a credit event.

Worst case scenario for today; should the legislation be voted down the euro would likely spiral lower towards support at 1.4115. As it stands the EUR/USD is currently testing the 1.4440 resistance level with the next resistance found at the falling resistance line from the May and June highs which comes in today at 1.4550.

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.

Source: ForexYard

With the Greece parliament voting on its newly proposed austerity budget today, most traders will be fixated on the outcomes in order to adjust their investment portfolios accordingly.

Economic News

USD – USD Trading Higher as Greece Austerity Vote Approaches

The US dollar experienced broad bullishness yesterday as traders began to seek shelter in expectations of heightened risk aversion surrounding today’s vote in the Greek parliament over its austerity budget. The EUR/USD was seen moving towards 1.4305 yesterday evening, however, before settling below this mark at day’s close and moving bearishly upon the opening of the early Asian sessions.

Yesterday’s bearish consumer confidence data out of the American economy has so far helped to lift the value of safe-haven assets as investors look for ways to store value ahead of any additional downward shifts in sentiment. The headline news today, however, will undoubtedly be the Greece austerity budget vote which may overshadow almost all other data releases, no matter how significant.

With a heavy news day expected, traders are sure to see heightened volatility. Most significantly for the United States, beyond the Greece vote, will be its housing figures and Crude Oil Inventory report. As with yesterday, risk sentiment surrounding euro zone debt concerns has gripped the market and many traders are casting economic data to the wind ahead of today’s vote. The news is certain to cause a shift in global investment portfolios.

EUR – Greece Austerity Budget Vote on Tap Today

The euro (EUR) was seen trading with mixed results yesterday following news of heightened risk aversion across the region. With the Greece parliament voting on its newly proposed austerity budget today, most traders will be fixated on the outcomes in order to adjust their investment portfolios accordingly. Prior to the vote, the EUR/USD – the leading currency pair in the forex market – was seen trading higher, edging above $1.43 for the first time in a week.

Debt concerns across the euro zone still linger and many investors have taken reports from the manufacturing and industrial sectors these past two months as an indication that the economy is slowing over the second quarter. Adding to these strains is the near-uncertainty and persistent rumor mill revolving around the Greece austerity vote. The hysteria caused by recent panics about European debt has pulled down heavily on global risk sentiment and consumer confidence.

Though Italian banks will be on holiday today, the rest of the euro zone will be active and traders will likely be moving in and out of the market today at faster speeds due to the risk sensitive nature of today’s vote. This increase in activity will likely generate several massive swings in value for the EUR today, and retail traders would be wise to enter the market with caution as this maelstrom unfurls.

JPY – Japanese Industrial Production Expected to Rise 5.6%

The Japanese economy has witnessed a sharp downturn in industrial output since back in April, when it dropped over 15%. Much like the recent reports on retail sales, however, the Japanese economy has recovered much of these losses and begun to move towards growth. Today’s preliminary industrial production data is set to release a similar publication.

Analysts are forecasting a strong jump in industrial output from the Japanese economy, with a target of 5.6% coming into view. Market pessimists decry such estimations as premature despite being turned around on Japan’s retail sales figures yesterday. Should Japan be able to publish such bullish figures, it may very well lead the nation’s currency, the yen (JPY), towards Bank of Japan (BOJ) intervention levels against the US dollar (USD).

Oil – Crude Oil Price Finds Weak Support at $92 a Barrel

Crude Oil prices dropped sharply towards $92 a barrel Monday morning as sentiment appeared to favor a downturn in global industry and manufacturing. The sudden halt to this downward movement came as a result of several forces Tuesday morning. Primarily leading the rebound in oil prices was a sense that risk aversion was on the rise and a favorable vote for an austerity budget in Greece could whip traders back into a buying session on industrial growth corollaries like oil.

Faltering dollar values may have also helped many investors pause on their short-taking positions on physical assets. With US Crude Oil Inventories getting released today, one week after the Obama administration announced a plan to release massive amounts of its strategic reserves to combat rising prices, traders appear to be anticipating a technical sell-off immediately after the inventories data; driving the price higher to capture the swing. Should sentiment hold steady this week, oil prices may fail to find support and begin to move back towards $90 a barrel.

Technical News

EUR/USD

Momentum has now turned lower as falling stochastics appear on the monthly, weekly, and daily charts. Initial support comes in at the June low of 1.4075 and the May low of 1.3970. A break here and technical traders will target the 200-day moving average at 1.3860. While the 8 cent decline from the May high is a sharp drop, traders should keep in mind that the correction the pair is currently undergoing is just that, a correction. Buyers may be lurking at the rising trend line from the June 2010 low. Resistance comes in at the recent high of 1.4440 where the 50-day and 20-day moving averages are floating.

GBP/USD

The pair has broken a significant technical barrier at the neckline from a head and shoulders pattern which measures a target at 1.5370. Monthly and weekly stochastics are turning lower so traders may expect further declines. Support is located at the March low at 1.5935 followed by the late January low at 1.5750. To the upside the neckline from the head and shoulders pattern at 1.6120 could offer traders a level to enter short as many times in a head and shoulders chart pattern the pair will revert back to the neckline only to head lower from there.

USD/JPY

Yen bears are making a stand at the 80 level. A previously broken trend line from the April high comes in at this level and will also support the bears. However, once this last bastion of support is broken the fallout could be similar the price action in March. Should the move higher continue, resistance is found at 81 and 81.75.

USD/CHF

The previous resistance at 0.8550 held and the all-time low at 0.8325 is continually being pressured so a break here may be in the works. An absence of supports or trend lines below this level makes it difficult to predict how low the pair could go.

The Wild Card

NZD/USD

The kiwi looks to be on a verge of a breakout higher from a bullish flag pattern. Current resistance is located at 0.8140 where the 20-day moving average lies. The pattern shows a potential measured move of roughly 300 pips from the spot of the breakout. forex traders should be patient and wait for confirmation of the breakout to the upside. Resistance is located at 0.8190 and the swing high at 0.8300 with support at 0.8000 and 0.7970.

Forex Market Analysis provided by ForexYard.

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The Swedish krona has been on its back foot versus the euro and yesterday’s decline in retail sales shows a considerable drop in activity. The report overshadowed the stability that was added to the country’s central bank the as Chairman Stefan Ingves was re-elected to another 6-year term as head of the Riksbank.

The krona has struggled to find footing versus the euro and yesterday was no different. Swedish retail sales numbers for the month of May contracted from the previous year by -1.1%. The data was off from the April numbers which showed a sharp 5.6% y/y gain.

The negative retail sales report overshadowed the additional 6-year term that was granted to current Chairman of the Riksbank Stefan Ingves. Despite the fact that 6-months remain in his current term, the Riksbank was out in front of the markets to announce Invges’ extension. This will provide a level of stability for the Swedish central bank and serve to underline its independence from Swedish political pressures. Such a situation is needed for proper management of Swedish monetary policy which faces rising inflationary pressures due to strong economic growth and rising wages.

Turning to the charts, the euro has just about retraced the entire move lower from the 2010 November high. The pair found support at the 9.1200 level and the next target for the EUR/SEK looks to be the 9.4250 off of the Q4 high.

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