Kathy Lien Talks with CNBC Asia during her recent visit to Singapore
August 28, 2009
Lien provides her view about a recent central banker meeting
Find out if a recent meeting of world central bankers in Jackson Hole, Wyoming, provided any clues of potential inflation issues that could arise in developed countries.
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Risk Appetite Means Bounce for Higher Yielding Currencies
August 28, 2009
U.S. dollar falls as risk appetite rises
One of the things to remember about the forex market is that it is often linked to risk. During times when risk is better tolerated, forex traders look for high yields. When there is concern about the future and the economy, lower yields are accepted in exchange for the security of a "safer" currency.
Right now, higher yielding currencies like the sterling and the euro are doing well in forex trading against the U.S. dollar. The U.S. dollar has been seen as a safe haven currency during this recession, and that has meant that it has done well while uncertainty prevailed. Now that there is hope for economic recovery, the greenback is falling out of favor.
Of course, it is important to remember that the currency market is fluid; what is the case today may not be the case tomorrow. It is possible that the U.S. dollar is decoupling from risk and that new factors will begin to influence its performance on the forex market.
See Also
- U.S. Dollar in Forex Trading
World currencies on the forex market
Will We See Increased Job Creation Come Fall?
August 28, 2009
A job loss recovery is not likely to be in the cards for this recession
One of the concerns for some lately has been concern over the continuing high rate of unemployment. Even though the rate of job loss has slowed, there are still worries about the labor market. Some are starting to speculate that we will see a job loss recovery to this recession.
This gloomy prognostication is not necessary, though, according to FX Street. Even though a job loss recovery is what was seen right after the dot com bust, there are definite differences this time around. FX Street compares the two recessions, and makes a case for improve employment numbers in the fall:
At this juncture, most economists are skeptical about the prospects for a rapid return to job creation in the U.S. After all, even though profits resumed soon after the end of the 2001 recession, firms continued to reduce headcounts for 23 months (a “job-loss” recovery). Why would it be different this time around? The answer is profit margins. We believe that the hiring decision of firms is also conditional on a given level of profitability. As today’s Hot Chart shows, it took no less than two years after the start of the 2001 recovery to restore profit margins to a level that is generally conducive to job creation. As shown, this is not the case this time around as margins remain higher than usual at this stage of the cycle. For this reason, we think that job creation will resume this fall.
See Also
- Economic Information for Forex Traders
Helpful insights for forex trading
Is a Higher Yen on the Way?
August 28, 2009
Japanese yen forex trading forecast
It is going to be an interesting weekend in Japan. Elections are going on right now, and there is a good chance that some policy changes will result. In this case, it is likely that the policy changes could mean a higher yen in currency trading.
GFT’s Boris Schlossberg takes a look in FX360 at what the elections are likely to mean for the Japanese yen forex trading forecast:
Nevertheless, this week-end’s upcoming election clearly signals a massive change of course for Japan and the near term impact on the currency market is likely to result in further appreciation for the yen with USD/JPY
possibly targeting 9000 level by the fall.
Right now, the Japanese stock market is also on the rise on the pending elections. It will certainly be an interesting result, and could signal a turning point in Japanese economic policy.
See Also
- More on the Japanese Yen and the Economy
Effects of a rising yen
Planning Your Trades
August 28, 2009
Sooner or later, the trader who won their first trade puts on a loser and acts much like the trader above who lost their first trade.
When most people start trading, they do not put much thought into their trades. They will either buy or sell a currency pair (probably the EUR/USD) because they think they see a trend or maybe even because they put a moving average on the chart. Sometimes there is no reason at all for the trade, they just want in. Either that trade nets a small profit or the trades starts going against the new trader. The trader that gets the small profit will feel invincible and likely base trades in the near future on the same reason as the first one. Of course they expect every trade to win. The trader whose position moves against them leaves their position open, stares at the their computer without blinking, and laments that they will get out if the market only goes back to break even.
London Session – August 28, 2009 8:32 AM
August 28, 2009
The London session was relatively quiet as traders bid adieu to one of the slowest weeks of the year. European bourses have rallied smartly and are more than 1% in the green at last look. Eurozone data was mixed as consumer confidence missed expectations slightly while the business climate indicator came in better than forecast. Commodities retained their bid with oil trading upwards of while gold remains comfortably above the 0 pivot here. Full text »
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Asia Session – August 28, 2009 1:41 AM
August 28, 2009
The Asia session today seemed to change its recent formula, as what has become the usual wild fluctuations in the Chinese equity markets failed to illicit any serious moves in risk as it had done for most of this week. Most of today’s action in the markets could be attributed to two factors, traders squaring up positions ahead of the Japanese Lower House elections on Sunday, and some yen weakness on the back of a record high unemployment rate of 5.7%. Many reports show the opposition Democratic Party of Japan with an overwhelming lead over the ruling Liberal Democratic Party where they may take control of 300 seats which would in essence break the 50 year hold the LDP has on Japan’s reigns. Many expect a DPJ win to give a short term boost to Japanese equities. EUR/JPY pushed higher as traders sold off recent long yen positions, bringing the pair to a 134.90 high after a humble beginning near 134.10. GBP/JPY did the same, starting the day near 152.00 and topping out close to 152.90 highs on the day. USD/JPY continued higher after hitting a two month low of 93.21 earlier in NY. The Pair eventually reached 93.85 before sagging near 93.70 late in the day. Full text »
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New York Session – August 27, 2009 5:15 PM
August 27, 2009
The NY session finally brought the much awaited break in currencies. The risk trade offered little direction as equities closed about flat for the fourth consecutive day this week. US economic data was mixed with the backward looking 2Q GDP revision coming in better than expected at an unchanged -1.0%. Meanwhile, initial jobless claims were a touch worse than forecast at 570K after a 580K print the prior week. This left stocks better offered in early NY trading but they would eventually grind their way back up into the close. Full text »
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Rising Yen Could Spell Trouble for the Japanese Economy
August 27, 2009
Japanese yen in forex trading
Right now, the only major currency doing well against the U.S. dollar is the Japanese yen. This is not much of a surprise, since both are safe haven currencies and these are in demand today as risk aversion rises.
While risk aversion does play its part in the gains posted by the Japanese yen in forex trading on the currency market. It doesn’t tell the whole story. Nor does it tell the story of what could happen to the Japanese economy of the yen continues to gain strength in currency trading.
GFT’s Boris Schlossberg comments on the challenges faced due to a rising yen in FX360:
However, the biggest reason for yen’s strength tonight may have to do with an announcement by Japanese authorities that they will waive taxes on repatriated profits from April 1 to help support the economy. Under previous laws, companies had to pay a combined 40 percent tax on overseas earnings.
Although the impulse behind this gesture by the Japanese government was to stimulate domestic demand by bringing capital back home, the unintended consequences of this policy could result in further contraction of the Japanese economy in the second half of this year. A massive influx of capital back to Japan in September could drive the yen higher perhaps even targeting the 9000 level. This will occur just as China – Japan’s most important trading partner – is looking to limit its massive capital spending. A rising yen at a time when the country’s biggest customer is looking to curb demand could spell disaster for export oriented Japanese companies as their profit margins become squeezed once again as they did in Q1 of 2009.
See Also
- Japanese Yen in Currency Trading
Forex trading on the currency market
U.S. Dollar Maintains Pace in Currency Trading
August 27, 2009
Risk aversion sends greenback higher in forex trading
The U.S. dollar is rising in currency trading on the FX market, thanks to risk aversion. Even today’s reasonably positive jobless claims data has not been able to help risk appetite. As a result, the U.S. dollar is up against both the sterling and the euro in forex trading.
The Japanese yen is the only major currency having luck against the U.S. dollar today, and that is because the yen is the safe haven currency that others turn to as even more safe than the dollar. The dollar is considered safe because it is guaranteed by a very stable and reliable taxpayer base.
For now, the U.S. dollar is once again coupled with risk. As risk aversion grows, the greenback climbs in forex trading.
See Also
- Greenback in Forex Trading
Currency trading on the FX market
