Asia Session – June 1, 2009 12:45 AM

May 31, 2009

Today’s market open looked promising for the US Dollar, with the Greenback making gains right out of the gate, however the move was short lived as it slipped right back to multi-month lows as traders looked to profit from higher yielding currencies. EUR/USD opened near 1.4140 and initially slipped below 1.4100 before punching back to session highs near 1.4166, just short of Friday’s six month high of 1.4170. The pattern was similar in GBP/USD as the pair slipped on the open and eventually made an almost seven month high of 1.62440, and this was repeated with the AUD/USD and NZD/USD as well. It would seem that the selling of the Dollar and the purchase of risk continues as investors are emboldened with more signs that the worst of the economic crisis is over. USD/JPY dropped lower to 94.66 after hitting initial highs of 95.45 as the Yen buying continued across the board, pushing all the yen based crosses lower. As the session creeps into London, it would seem that the yen crosses are almost complete in paring their losses. Good PMI data out of China help push the commodity currencies higher, as AUD/USD and NZD/USD continued their dynamic moves higher. This week will begin with market moving data and end with it as well, as we start the week in a precarious fashion in NY tomorrow with the supposed bankruptcy of General Motors, and from there we will see rate decisions from Australia, Canada and Great Britain, and finish the week with the US Employment data…..It should be quite a week. Full text » | Technorati | Stumble It!

05/31/2009 – USD weakness nearing extreme levels

May 30, 2009

* USD weakness nearing extreme levels
* Mr. Geithner goes to Beijing
* Data suggest recession still far from over
* A busy week for central banks; the ECB may steal the limelight
* Key data and events to watch next week

The US dollar consolidated for much of this past week, only to relapse into fresh weakness on the last trading day of the week/month. Healthy demand at US Treasury debt auctions and affirmations of US credit ratings by two rating agencies failed to stem the exodus from the USD, as fears that US deficits will inevitably lead to a weaker USD continue to dominate investor sentiment. The weakness in the USD has evolved into a full-blown downtrend, with commodity prices rallying sharply and gold prices finally surmounting the sticky 965/967 level. A vicious cycle of dollar weakness/commodity strength will eventually short-circuit itself, as higher commodity prices would undermine consumer spending and de-rail economic recovery, but not before potentially running further. While we continue to view the medium-term (multi-month) outlook for a sharp rebound in economic activity (see below) as highly premature, the investor stampede to own risk appears similarly highly resilient. Even the looming bankruptcy of the largest US automaker has left recovery sentiment apparently unfazed, but probably only because it has been expected for months now.  Full text »

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Brazilian Real Forex Trading Forecast

May 29, 2009

Real to gain as commodities recover

The Brazilian real is looking for some optimism in the forex trading forecast. The real is an emerging market currency, and one that relies on commodities. As a result, risk appetite is important to the real. With news that the U.S. economy is improving, general positive sentiment is returning. Commodities are rising and forex traders are starting to look for the higher yields offered by emerging market currencies.

Right now, the real has begun gaining so rapidly that the Brazilain central bank has started buying dollars. The goal is to slow the real’s rise to some degree, hoping to moderate the gains in the currency.

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U.K. Pound Surges in Currency Trading

May 29, 2009

Cable moves higher as bulls take over

The sterling is gaining in forex trading on the currency market today as optimism improves and the bulls take over. Positive economic news in the U.S. has optimism returning and confidence soaring. This is part of what is helping the U.K. pound remain above 1.6000. The other part of the sterling’s success in forex trading is coming from British economic news. Action Forex reports on the good news that has been supporting the pound over the past month:

After fighting off a dismal CBI release yesterday, bulls were waiting for a bit of good news to run with. Even though Britain’s economic releases have been mixed this week, investors should keep in mind Britain released a wave of optimistic data over the past month.

Cable does well when optimism prevails and signs of economic recovery increase. The sterling also tends to move with equity markets. With most equity markets doing reasonably well — at least for the month entire, there is support to be had for the sterling in forex trading.

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U.S. Dollar Collapses Against the Euro in Forex Trading

May 29, 2009

Greenback down in currency trading

The U.S. dollar has collapsed against the euro in forex trading on the currency market this morning. EUR/USD smashed through 1.4100 today, and is remaining there, in spite of a few feeble attempts by the dollar to reclaim some strength.

One of the main factors in the euro’s rally in forex trading is the latest GDP news coming out of the U.S. economy. Instead of contracting by 6.1%, as originally thought, it appears that GDP is only down 5.7%. That misses the target mark of 5.5%, but not by too much. And the new number is certainly much better than the original reading.

This news shows that the U.S. economic contraction might be slowing. It also points to an end to the recession — possibly by the end of the year as many economists are predicting. As a result of the new confidence in the economy, the greenback is expected to weaken.

Short-term, there is dollar weakness expected, since the focus right now is on the immediate economic data. There might be some hope for a medium-term dollar rally, if some of the current confidence and optimism fade. In the long-term, though, there is little doubt that the U.S. dollar is expected to remain weak against the euro in forex trading. Global economic recovery is expected to send forex traders looking for higher yields than what the dollar offers.

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Swiss Concerned About Their Place in the Banking World

May 29, 2009

Pressure to amend secrecy laws weighs on Switzerland

The Swiss are concerned right now that some sort of government intervention may be needed to help prop up the faltering Swiss economy. Switzerland relies heavily on its banking sector, and the deterioration in credit assets has been troubling. However, there are other issues that the Swiss have to contend with when it comes to banking. GFT’s Boris Schlossberg explains the Swiss problem in FX360:

The Swiss economic situation is unique because the country’s key banking sector has been under assault from both the deterioration of credit assets as well as pressure from other G-10 members to amend it bank secrecy laws in order to curtail tax avoidance in Europe and US. By succumbing to this pressure, the Swiss no doubt are losing their competitive advantage to other money center locations such as Singapore.

The U.S. has been especially interested in cracking down on tax havens in Switzerland. Already some banks have complied, turning over client lists. The idea that Swiss secret banking may no longer be very secret has many looking elsewhere. With Swiss banks so wounded, Switzerland is going to have serious problems rebounding.

And that means that forex traders who like the Swiss franc in currency trading are going to be rather disappointed.

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U.S. Economy Not As Badly Off as Thought

May 29, 2009

Revised GDP numbers for 2009 Quarter 1

The U.S. economy is not as badly off as originally thought. The GDP numbers for Quarter 1 of 2009 originally showed economic contraction at a rate of 6.1%. However, a revised number has been released today, to 5.7%. That number is still worse than expectations, but not as bad as thought. CNN Money reports on the main reason for the revision:

Much of the revision in first-quarter GDP was attributed to a lower reading in business inventories, as sales of domestic products were unchanged at a 3.4% annual rate of decline.

Inventories declined by .4 billion, compared to an initial reading of 3.7 billion. As a result, the subtraction to the annual rate of GDP growth was 2.3 percentage points, rather than 2.8.

There are expectations that contraction will slow to 2% this quarter. Indeed, there are many high flown expectations that contraction will stop altogether by the end of 2009. 

With the economic contraction slowing, it is no surprise that some economists think that the recession will end soon. Recovery is expected to begin by 2010.

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London Session – May 29, 2009 6:58 AM

May 29, 2009

Another wave of optimism with respect to the global economy is underpinning market sentiment this morning.  Stocks have risen across the board in Asia and in Europe, the USD has softened vs the EUR, JPY and GBP.  The AUD and the NZD have posted substantial gains vs the USD. Full text » | Technorati | Stumble It!

Asia Session – May 28, 2009 10:53 PM

May 28, 2009

The final Asia session of the week saw the greenback continue to give up recent gains.  After a choppy start to the session the USD seemed to trade one way against most of the majors.  Without the help of major market moving data, momentum fueled the Tokyo morning, traders quickly piled onto the dollar selloff.  EURUSD traded to multi session highs near the 1.4000 handle as AUDUSD gained nearly 60+ pips in a move toward .7900.  The Yen saw hefty gains as well, with USDJPY diving over 50+ pips from highs to lows. Full text » | Technorati | Stumble It!

New York Session – May 28, 2009 4:34 PM

May 28, 2009

The NY session saw the higher commodity, lower USD correlation play out. The latest weekly oil inventory report confirmed the recent move higher in prices as the supply/demand imbalance continued to narrow. Oil jumped above /bbl and we would think the /bbl level now remains vulnerable in the short-term. Crude oil and EUR/USD have been correlated by more than 90% in the month of May and this led to further upside. The pair remains in an hourly down-channel between 1.3970/1.3800 and tested the top of this formation multiple times in the session, before settling near 1.3940. A break back above 1.40 should see more buying interest emerge. Full text » | Technorati | Stumble It!

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