Month: July 2011

July 26 (Bloomberg) — Jonathan Moulton, founder and chairman of Better Capital LLP, discusses the European sovereign debt crisis. Moulton, speaking with Linzie Janis and Owen Thomas on Bloomberg Television’s “Countdown,” also talks about investment strategy and the outlook for the U.K. economy. (Source: Bloomberg)

The recent attacks in Oslo, Norway, have generated a rapid market reaction with quick sell-offs in regional investments. The Norwegian krone (NOK) was hardest hit by the devastation wrought by the attacker, Anders Behring Breivik, in last Friday’s bombing and shooting rampage.

The knee-jerk reaction of markets during a time of intense unrest is to flee the country under attack. The initial response of Friday’s attack was a quick dump-off in the forex market of regional kroner. The NOK fell versus most of its currency counterparts, the USD chiefly among them.

The EUR/NOK initially fell 0.4% to a 7.8179 before regaining its feet. The USD/NOK saw harsher losses with an approximate 1% value change immediately following the first reports of terrorism from Oslo.

The neighboring kroner were less affected but felt a pull in afternoon trading Friday. All three Scandinavian currencies were heading back into a bullish posture by Monday evening, with the NOK once more slowest to recover. The Swedish krona (SEK) has seen the most rapid bounce back with solid gains seen all week. The Danish krone (DKK) likewise was holding steady with moderate upticks viewed against its major counterparts all day Monday and Tuesday.

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Rumors are beginning to circulate that the Bank of Japan (BOJ) is considering another intervention into the forex market after the value of the yen (JPY) surged late last week and has continued to gain this week. The USD/JPY was seen trading near 78.00.

The last time such a value was approached the BOJ stepped in to purchase vast quantities of US dollars (USD) in order to push the value of the yen lower by releasing more of its domestic currency into circulation. With the yen once again climbing to these intervention levels, it appears only a matter of time before the BOJ makes a decision to step into the spotlight once more, or not.

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July 26 (Bloomberg) — Howard Davies, former director of the London School of Economics, discusses today’s report on U.K. gross domestic product and expectations for the global economy. Gross domestic product rose 0.2 percent from the first quarter, when it increased 0.5 percent, the U.K.’s Office for National Statistics said today. Davies, speaking with Francine Lacqua on Bloomberg Television’s “The Pulse,” also talks about the U.S. economy. (Source: Bloomberg)

Few traders viewed this morning’s publication a surprise given the tense nature of the foreign exchange (forex) market these past few weeks. Risk aversion is gaining momentum as the August 2 deadline approaches for the US to lift its debt ceiling and as Europe continues to experience less-than-stellar performance.

Debt woes on both sides of the Atlantic appear to be crushing any sentiment of growth. The publication by GfK of its consumer climate reading in Germany revealed a minor downtick in optimism, though the overall mood remains positive. The EUR was little affected by such data given the overarching events of the week.

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July 26 (Bloomberg) — Shubhada Rao, chief economist at Mumbai-based Yes Bank Ltd., talks about India’s economy and central bank monetary policy. The Reserve Bank of India said yesterday curbing inflation remains an “unfinished task” even as economic growth slows, signaling it may raise interest rates today. Rao speaks with Rishaad Salamat on Bloomberg Television’s “On the Move Asia.” (Source: Bloomberg)

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.

By ForexYard

The value of the US dollar (USD) was seen trading lower during a day of risk aversion— which traditionally results in a stronger dollar. The surprise turn of events is tied with the failure of Congress and the White House to strike a deal over lifting its debt ceiling; an event whose deadline will be met early next week.

Economic News

USD – USD in Decline as Debt Talks Heighten Fear

The US dollar (USD) was seen decreasing yesterday as traders began to seek shelter following speculation that debt limit talks in the US may falter. The value of safe-haven assets like the Swiss franc (CHF) and Japanese yen (JPY) have been buoyed by a shift away from higher yielding assets, though the dollar has been skipped this time around due to the domestic nature of this risk aversion.

The news so far has inched traders into a position of market pessimism which has so far dropped the value of the USD as the other safe-haven currencies soar. With the economies of Europe and the US absent from yesterday’s calendar, little news emerged which put a dent in the amount of pessimism surrounding the forex market, particularly in the fragile United States and euro zone.

With a heavy news day expected today, however, traders are sure to see a return of portfolio adjustment as volatility becomes elevated. The US economy will be publishing two reports on housing and a measure of consumer confidence. Should today’s news disappoint, there is a possibility that more investment will get pushed towards the safety of the Swissie and yen, driving USD values lower in the process. Traders will also want to keep an eye on euro zone economic news as it may also impact risk sentiment heavily during the morning sessions.

EUR – German Consumer Confidence under Review

The euro (EUR) has been seen trading with mixed results so far this week as traders assess the risk sentiment across the region. Against the US dollar (USD) the euro was seen trading bullish in late trading as shifts away from the greenback, due to uncertainty about a possible failure to lift the US debt ceiling, caused a stir in the foreign exchange market.

News of debt contagion spreading across the euro zone also has several economists worried that a toppling of consumer confidence may be up next, followed by additional ratings downgrades that lead into an ever deepening spiral of debt and default. Rising inflation poses a threat in this scenario and the euro zone faces the debacle of lifting interest rates to quell inflation, but gouge their ability to pay off debt; or hold rates steady to allow for more growth while inflation takes off.

On tap today, traders will witness the release of a moderately significant report on consumer confidence in Germany. At 7:00 GMT, the organization known as GfK will be publishing its consumer climate reports for Germany. Should the figures reveal stagnation in consumer and business optimism, we could see heftier flights to safety in the days and weeks ahead. This would likely push the value of the EUR lower over the long-haul as traders continue to flee risk in larger numbers.

AUD – Risk Aversion has the Aussie Dollar Mixed

The Australian dollar (AUD) was trading mostly weaker versus its currency counterparts yesterday after data releases have begun to shift traders back into safety. The Aussie has been losing momentum these past few weeks as risk aversion becomes predominant in the global market. Fears of a debt contagion spreading from Greece to Italy now factor greatly into global risk assessment, as does the current deficit talks in the US to lift the national debt ceiling.

This movement has gouged the AUD against all of its currency rivals, especially against safe-havens like the US dollar (USD) and Japanese yen (JPY). With Australia’s central bank governor Glenn Stevens giving a speech at the Anika Foundation later today, there is a chance that speculators will pick up on several cues to adjust their positions in regard to the Aussie and its linked interest rates. Being tied to commodity prices could also help lift the AUD in the near future as oil prices soar, but general risk aversion is likely to push the currency lower as traders flee risk.

Oil – Oil Prices Holding Steady amid Market Turmoil

Crude Oil prices held steady Monday as sentiment appeared to favor a downturn in global stocks should the US fail to lift its debt ceiling by August 2. Data releases out of Europe and the US last week are still driving many investors back into safe-haven assets as many reports suggested a surprise downtick in growth among global industrial output and consumer spending.

An expected jump in dollar values due to this week’s risk averse environment has helped many investors ram up their short-taking positions on physical assets, but with the USD’s gains not materializing, sentiment appears to have the price of crude oil holding steady. Should Crude Oil sentiment continue to flatten this week, oil prices may reach a decision point which forces a wide swing by mid-week.

Technical News

EUR/USD

The EUR/USD has taken a step away from the edge after failing to get a close below its 200-day moving average and the price is testing the falling trend line from the May and July highs at 1.4450. Short term momentum is currently rising and break above this resistance line may find resistance at the peaks from July, June, and May at 1.4580, 1.4700, and 1.4940 respectively. However, a bearish tweezer candlestick pattern has formed on the daily chart from last week’s highs on Thursday and Friday, strengthening the argument for the 3-month old resistance line to hold. Support is found at 1.4015, 1.3835, and 1.3780 from the rising trend line off of the June 2010 low.

GBP/USD

After dipping as low as 1.5780 which is the 38% Fibonacci retracement level from the May 2010 to April 2011 move, Cable has broken above both the neckline from the head and shoulders pattern and the resistance line falling from the April and May highs. The pair has now found resistance at the previously broken trend line from the May 2010 low and now serves as initial resistance at 1.6360. A move above this line will likely go on to test the May high at 1.6545 though sterling bears may make a stand before the April high of 1.6745. To the downside support may come in where the neckline and the previous resistance line off the April and May highs intercept at 1.6190. Additional support is located at 1.6000 and the July low at 1.5780.

USD/JPY

The reemergence of yen strength has taken the USD/JPY one step closer to its all-time low at 76.11. Falling stochastics on the monthly, weekly, and daily charts all point to additional declines in the pair. Initial support is found at 78.20 followed by the lower line from the falling wedge pattern from December 2008 which comes in at 77.50. A move higher may find resistance at 79.60 and 81.50.

USD/CHF

An attempt to push the USD/CHF higher ran into resistance at 0.8270. Since failing to hold any gains the pair looks to test the most recent all-time low at 0.8080. Any attempt to move the pair higher will likely encounter resistance at 0.8270 and 0.8385 from the falling trend line off the February high. Relative value sellers of the pair may also be lurking at 0.8550.

The Wild Card

GBP/USD

With the release of today’s Q2 UK GDP the risk is for the numbers to come in on the lower side of economists’ forecasts. Consensus estimates are for an increase of 0.2% from 0.5% in Q1. For those traders who expect the US to come to some sort of agreement on the debt ceiling the dollar could receive a bounce going forward. Thus, a potential opportunity may exist for forex traders to short the GBP/USD as the pair has risen to 1.6360 where the previously broken trend line from the May 2010 lows is located. A protective stop could be placed above the trend line with a target at the July low of 1.5780.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

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Dueling speeches by both Obama and House Speaker John Boehner unsettled the forex market as the two parties appear to be further away from a deal to raise the US debt limit. The US dollar was down across the board versus the majors as markets may face a potential US default or at least a downgrade of the US’s AAA credit rating.

A WSJ article highlighted the steps elected officials, rating agencies, and large institutional investors are taking to stave off a potential US default. At this stage the two parties seem further apart than ever as in a speech last night Obama warned of a potential default on US Treasuries. This is in stark contrast to last Friday’s sentiment when it looked as though the two sides were on the verge of a breakthrough. It is hard to imagine the Democrats and Republicans are playing a game of chicken with the financial markets caught in the middle but that is exactly the case. The uncertainty has pressured the US 10-year Note with the yield rising to 3% for the first time since early July, though equities have been steady with the Nikkei up almost half a percent while FTSE 100 is down only 0.2%. This lends to the idea that markets expect a positive outcome before the August 2nd deadline, a scenario that could spark a “risk-on” environment leading to additional dollar declines.

The USD has not been spared as the dollar declined sharply versus the major currencies in Asian trading and extended losses into the European session. The EUR/USD moved above 1.45 for the first time since July 5th, crossing the falling resistance line from the May and July highs. The euro’s recovery against the dollar may have scope to the June high near 1.4700. Support is seen at Friday and Monday’s lows of 1.4325.

Sterling was higher as UK GDP was released in-line with consensus forecasts of 0.2%. While this is a tepid increase traders were looking for a worse print with expectations down the road for additional quantitative easing from the BOE. Today’s GDP report does not rule out more QE but sets the bar a bit higher. Cable may reach the late May high at 1.6550 not on sterling strength but rather on dollar weakness.

The dollar block currencies were the best performers versus the USD with the NZD/USD rising to a new all-time high. The AUD/USD was up sharply after RBA Governor Stevens said Australian spending will likely rebound. The Aussie dollar moved above its last resistance at 1.0890 before its all-time high at 1.1010. The Loonie broke below last week’s low and the USD/CAD moving closer toward its next major level at 0.9400.

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