Month: August 2011

USDCHF moved sideways in a range between 0.7769 and 0.8014. Key support is at 0.7769, as long as this level holds, the price action in the range is treated as consolidation of uptrend, and one more rise to 0.8100 area is still possible. On the other side, a breakdown below 0.7769 could indicate that a cycle top has been formed at 0.8014 on 4-hour chart, and the rise from 0.7067 has completed, then the following downward move could bring price back to 0.7500 zone.

Written by ForexCycle.com

By CountingPips.com

The latest Commitments of Traders (COT) report, released on Friday by the Commodity Futures Trading Commission (CFTC), showed that large futures speculators increased their long positions for the euro against the US dollar last week after two weeks of declines. Non-commercial futures positions, those taken by hedge funds and large speculators added to long positions for the euro, Japanese yen, Swiss franc and the Australian dollar against the US dollar while trimming bets for the Canadian dollar, New Zealand dollar, British pound sterling and the Mexican peso, according to CFTC data on August 16th.

This week’s changes include the euro contracts leveling back over in positive long territory while British pound positions fell back over to the short side and Mexican peso positions touching the lowest level since September 2010.

EuroFX: Currency speculators increased their futures positions for the euro against the U.S. dollar after two consecutive weeks of declines and net contracts were back in the positive column. Euro positions rose as of August 16th to a total of 6,726 net long contracts from the previous week’s total of 8,273 net short contracts on August 9th. Euro positions on August 9th were at their lowest point since January 11th when net contracts were on the short side at -45,182.

The COT report is published every Friday by the Commodity Futures Trading Commission (CFTC) and shows futures positions as of the previous Tuesday. It can be a useful tool for traders to gauge investor sentiment and to look for potential changes in the direction of a currency or commodity. Each currency contract is a quote for that currency directly against the U.S. dollar, where as a net short amount of contracts means that more speculators are betting that currency to fall against the dollar and net long position expect that currency to rise versus the dollar. The graphs overlay the forex spot closing price of each Tuesday when COT trader positions are reported for each corresponding spot currency pair.

GBP: British pound sterling positions decreased for the second straight week and fell back over to the short side for the first time since July 19th. Pound positions declined to a total of 3,096 short positions following a total of 245 net long positions as of August 9th.

JPY: The Japanese yen net contracts increased as of August 16th after contracts dipped the previous week. Yen net long positions rose to a total of 47,348 net long contracts reported on August 16th following a total of 42,149 net long contracts reported on August 9th.

CHF: Swiss franc long positions rebounded after falling to the lowest level all year on August 9th. Speculators increased bets on Swiss currency futures to a total of 9,008 net long contracts as of August 16th following a total of 4,655 net long contracts as of August 9th.

CAD: The Canadian dollar positions declined sharply for a second straight week and fell to the lowest level in over a month. CAD net contracts dropped to a total of 4,121 net long contracts as of August 16th following a decline to a total of 23,704 net long contracts on August 9th.

AUD: The Australian dollar long positions rose just slightly as of August 16th following a sharp decline the previous week. AUD futures positions edged higher to a total net amount of 29,723 long contracts as of August 16th following a total of 29,016 net long contracts reported as of August 9th. The August 9th level at 29,723 marked the lowest level for Australian dollar speculative positions since November 2010.

NZD: New Zealand dollar futures positions declined for a second consecutive week to a total of 18,417 net long contracts on August 16th following a decline to 20,427 registered on August 9th. NZD contracts had increased for five straight weeks to their highest level in over a year at 24,126 net long positions as of August 2nd.

MXN: Mexican peso long contracts continued to fall lower for a second straight week as of August 16th. Peso positions declined to a total of 22,634 net long speculative positions as of August 16th following a total of 41,293 contracts that were reported as of August 9th. Peso positions are currently at their lowest level since September 14th of 2010 when net contracts equaled 14,957.

COT Data Summary as of August 16, 2011
Large Speculators Net Positions vs. the US Dollar

EUR +6726
GBP -3096
JPY +47348
CHF +9008
CAD +4121
AUD +29723
NZD +18417
MXN +22634

The key event in central banking, and certainly the mind of the markets, for this week will be Ben Bernanke’s “Jackson Hole speech” scheduled to take place Friday the 26th of August at 10am ET.  The regular event is where US Federal Reserve Chairman, Ben Bernanke, in 2010 introduced the idea of a second round of quantitative easing (aka QE2).  Naturally this has driven a lot of speculation about what he may say this time; certainly if nothing else, it will provide an insight into what the FOMC (Federal Open Market Committee) is thinking about the US economy, and how it is factoring that into its policy making.  Listed below are some of the key facts that have been released on the 2011 symposium so far:

And see EWI’s long-term forecast in the updated “Free Fall” chart

By Elliott Wave International

In the May 2008 issue of his monthly Elliott Wave Theorist, Robert Prechter showed this chart of the Dow Jones Industrials. As you can see, prices go back to the 1970s.

Please note that on the day this chart published (May 16), the Dow closed at 12,987 — barely eight percent below the Dow’s all-time high of the previous October.

Yet, as you can also clearly see, Prechter labeled the white space below the May 2008 price level as “Free Fall Territory.”

At the time, no one else dared to publish such a bearish forecast. This was before the Lehman bankruptcy, the bailout binge, the home foreclosure crisis, and certainly before the worst of the stock market collapse.

In his June 2011 Theorist, Prechter published an update to the chart above, and here’s the major difference: The updated chart “telescopes out” by one full degree of trend. Prices go back to the 1930s. The scale of the white space surrounding this chart’s “free fall territory” label will show you what Prechter truly means.

His commentary in that issue also observed that

“the March-April [2011] rally was one of the most passionate bouts of stock buying I have ever witnessed.”

Bob Prechter made this observation not in admiration, but as a warning.

In the past three weeks, the Dow Industrials have plummeted nearly 2,000 points. Most investors are confused and scared. How far down will the decline travel? Will it end tomorrow or go on for years?

The answers to these questions are crucial to your financial health. You can still get ahead of the trend, but only if you prepare now. Read EWI’s long and near-term forecast. Get it in one comprehensive package — and stay ahead of the crowd.

And — get Bob Prechter’s August Elliott Wave Theorist. It includes “many dozens” of charts. Bob will also record this Theorist as a rare “video issue” — you’ll be able to watch and listen as Prechter himself presents all the content.

Also — as part of the same package, you get the August issue of our Elliott Wave Financial Forecast — you’ll see and read about the latest big picture in stocks, dollar, gold and more.

SAVE 57% with this LIMITED-TIME OFFER: See what we see next for the markets now via this instant-access discount subscription offer.

The past week in monetary policy saw just 5 central banks meeting to review monetary policy settings.  Those that changed interest rates were: Iceland +25bps to 4.50% and Georgia -25bps to 7.50%.  Meanwhile those that held interest rates unchanged were: Colombia 4.50%, Sri Lanka 7.00%, and Chile 5.25%.  Elsewhere the Monetary Authority of Singapore released a statement affirming is monetary policy stance, following significant financial market movements.  Similarly the Swiss National Bank announced even further measures to counter the strong Swiss franc.  Also on the radar was the ECB releasing data showing in the week ending the 12th of August it had spent 22 billion euros on bond purchases as part of its SMP.

One of the most common themes in the monetary policy statements of the banks that met last week was concerns about slowing growth in the EU and US.  Likewise most of the central banks also noted the heightened levels of risk aversion and volatility in financial markets over the past few weeks; largely a result of concerns on the sovereign debt situation in the US with the debt level debate and credit rating downgrade.  As for the Eurozone, continued sovereign debt trouble and fears of contagion, with as yet seemingly only temporary solutions, also detracted from confidence levels.  However, on their own economies the central banks were much more optimistic, reflecting the fact that most of the central banks in question were in emerging market economies.

Listed below are some of the key quotes from the monetary policy statements:

• Central Bank of Iceland (increased rate 25bps to 4.50%): “The interest rate increase is in accordance with recent MPC statements and reflects the fact that the inflation outlook for the coming two years has deteriorated still further since the Committee’s last meeting,” and noted “It is necessary to act now to contain inflation and reduce potential pressure on the krona”.
• National Bank of Georgia (decreased rate -25bps to 7.50%): (translated) the high rate of inflation (8.5% in July) was mainly driven by food price rises (6.7%), and it expects inflation to reduce in the coming months; towards target by the end of the current year.  The interest rate decrease was preventative in nature, in order to keep inflation around the target level in the medium term.  The Bank also noted the economic growth risks in the US and eurozone economies; commenting that it may ease pressure on commodity prices, but also impact on global growth risks.
• Central Bank of Colombia (held rate at 4.50%): “The board considered it prudent to pause in interest rate increases, especially given the high uncertainty in international financial markets and their potential negative effect on the growth of the world economy in general, and Colombia in particular,”.  On its own economy, the Bank said (translated): “the Colombian economy maintained good growth, driven primarily by strong household consumption.  Indicators of consumer confidence and the industry continue at high levels and the growth of credit to households and businesses continue to grow in an environment of real interest rates below their historical averages.  The GDP growth forecasts published in the last Inflation Report remain unchanged”.
• Central Bank of Sri Lanka (held rate at 7.00%): “with the continuous improvements in the supply of most food items, inflation is expected to moderate in the coming months,” and further noted that “the central bank will continue to closely monitor the growth of monetary aggregates and will implement appropriate measures if demand-side pressures in the economy increase.”
• Central Bank of Chile (held rate at 5.25%): “Domestically, output, demand and labor market figures are evolving strongly and are showing signs of moderation at the margin.  However, in the case of product and demand,such moderation has been less than foreseen in the baseline scenario of June’s MonetaryPolicy Report.  CPI inflation has hovered around 3% y‐o‐y while measures of core inflationremain bounded.  Inflation expectations show a significant decline and are close to the target.”

Looking to the central bank calendar, the key events in central banking in the week ahead include the central bank meetings listed below, but also on the agenda later in the week is the speech scheduled by Ben Bernanke, Chairman of the US Federal Reserve, at the Jackson Hole symposium in Wyoming, USA.

• PLN – Poland (National Bank of Poland) – expected to hold at 4.50% on the 23rd of August
• HUF – Hungary (Magyar Nemzeti Bank) – expected to hold at 6.00% on the 23rd of August
• TRY – Turkey (Central Bank of Turkey) – expected to hold at 5.75% on the 23rd of August
• THB – Thailand (Bank of Thailand) – expected to hold at 3.25% on the 24th of August
• MXN – Mexico (Banco de Mexico) – expected to hold at 4.50% on the 26th of August

Source: www.CentralBankNews.info

Article source: http://www.centralbanknews.info/2011/08/monetary-policy-week-in-review-20.html

The Banco Central de Chile held its monetary policy interest rate unchanged at 5.25%.  The Bank noted concerns about the global environment, including slower growth in the EU and US, as well as and increase in “financial volatility and risk aversion”.  On its own economy the Bank said: “Domestically, output, demand and labor market figures are evolving strongly and are showing signs of moderation at the margin.  However, in the case of product and demand,such moderation has been less than foreseen in the baseline scenario of June’s MonetaryPolicy Report.  CPI inflation has hovered around 3% y‐o‐y while measures of core inflationremain bounded.  Inflation expectations show a significant decline and are close to the target.”

The Chile’s central bank previously also held the monetary policy interest rate unchanged at 5.25% at its July meeting.  The Bank last raised its monetary policy interest rate by 25 basis points to 5.25% at its June meeting this year.  The Bank said core inflation is holding around 3%, which is in the middle of the Bank’s 2-4% inflation target.  Chile reported annual consumer price inflation of 2.9% in July, compared to 3.4% in June, 3.3% in May 2011, and 3.2% in April this year.  The Chilean economy grew 8.4% in the first half of 2011, driven by strong domestic demand; full year GDP growth is expected around 6.5%, while inflation is seen around 4% by the end of the year.

The Central Bank of Sri Lanka maintained its benchmark repurchase rate unchanged at 7.00%, and also held the reverse repurchase rate at 8.50%, and the Statutory Reserve Ratio at 8%.  The Bank said: “with the continuous improvements in the supply of most food items, inflation is expected to moderate in the coming months,” and further noted that “the central bank will continue to closely monitor the growth of monetary aggregates and will implement appropriate measures if demand-side pressures in the economy increase.”

Sri Lanka’s central bank also held its monetary policy stance unchanged during its July meeting this year.  Sri Lanka reported an annual headline inflation rate of 7.5% in July, compared to 7.1% in June, and 8.2% in May.  The Bank noted that in H1 Sri Lanka received US$413 million in foreign direct investment (FDI) inflows, which compares to the country’s target of US$1 billion in FDI in 2011.  Sri Lanka is aiming for 8.5% GDP growth in 2011, after its economy expanded 8% in 2010, meanwhile inflation is expected to slow to 6% by the end of 2011.

The Central Bank of Colombia held its benchmark monetary policy interest rate unchanged at 4.50%.  The Bank said: “The board considered it prudent to pause in interest rate increases, especially given the high uncertainty in international financial markets and their potential negative effect on the growth of the world economy in general, and Colombia in particular,”.  On its own economy, the Bank said (translated): “the Colombian economy maintained good growth, driven primarily by strong household consumption.  Indicators of consumer confidence and the industry continue at high levels and the growth of credit to households and businesses continue to grow in an environment of real interest rates below their historical averages.  The GDP growth forecasts published in the last Inflation Report remain unchanged”.

Previously the Central Bank of Colombia increased its interest rate by 25 basis points to 4.50% at its July monetary policy meeting this year, following a 25bp increase in June.  Colombia reported annual inflation of 3.42% in July, up from 3.23% in June, 3.02% in May, and 2.84% in April; which compares to the Bank’s inflation target of 3%.  Goldman Sachs previously forecast 2011 GDP growth at 5.5%, while Morgan Stanley had forecast just 4.9% growth for the Colombian economy.  The Bank noted that Colombia saw economic growth of 5.1% in the first quarter.  The Colombian peso (COP) last traded around 1,783 against the US dollar, placing the COP up about 8% this year.

The Monetary Authority of Singapore confirmed its monetary policy stance and position in regards to recent market movements in the SOR.  The MAS noted: “In response to media queries on recent market movements in the SGD Swap Offer Rate (SOR), the MAS spokesperson reiterated that interest rates in Singapore are market-determined and that the current monetary policy stance, announced in April 2011, remains appropriate.”  The MAS also noted: “Singapore’s domestic money markets continue to function in an orderly manner and MAS has had no need to undertake any extraordinary measures.  The monetary policy stance remains as that announced in the April 2011 Monetary Policy Statement (MPS), which was reaffirmed at the MAS Annual Report Press Conference on 21 July 2011.” 

Aug. 19 (Bloomberg) — Richard Anthony, head of derivatives and equities at BGC Partners LP, talks about equity market volatility and investment strategy. He speaks with Erik Schatzker on Bloomberg Television’s “InsideTrack.” (Source: Bloomberg)