New York Session – March 31, 2010 4:34 PM

March 31, 2010

The USD finished out March trading in NY on a mixed note, higher against the JPY, but weaker against all other major currencies.  USD selling interest for Month-end/quarter-end fixings set the tone for a weaker greenback and disappointing US data added to the pressure.  The March ADP employment report disappointed with a -23K jobs decline instead of the expected +40K increase, briefly denting expectations for Friday US NFP employment report.  (The ADP report does not count government jobs, which are expected to contribute heavily to the March NFP report.)  The March Chicago Purchasing Managers Index also came up short, falling to +58.0 from +62.6, worse than the +61.0 market forecast.  February US factory orders provided a brief respite, rising 0.6% MoM vs. the forecast +0.5% increase.  In contrast, Canadian January monthly GDP advanced 0.6%, more than the estimated 0.5% expansion.  Full text »

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Handling News with an Open Position

March 31, 2010

Why do we need to worry about news announcements when we already have a position, and we already have our stop and profit target in place? We worry about this because a major news announcement can move the market a great deal.

Handling News with an Open Position

 I have already written about how to handle news announcements prior to having an open position ( Trading Around the News ).  Today I will cover how I handle an open position when a major news announcement is approaching.  Please not that this strategy is catered specifically to the trades I post on FX360.com.  There are probably some strategies where this exact plan wouldn’t be ideal.  However, this information should at least show the importance of having an idea what to do with a position when there is about to be a major news announcement.  Also, keep in mind that only major news announcements are relevant for this matter.  I would take no action if an announcement with low or moderate impact was on the horizon.  Also, we only care about announcements that pertain to the specific currency pair.  In other words, a big EUR announcement wouldn’t make me alter my USD/JPY position.

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Euro Looks for Strength in Forex Trading

March 31, 2010

German labor data helps the euro in forex trading

The euro is gaining in forex trading as German labor data comes back strong. This news is helpful to a euro zone that has been looking for good news since the Greek debacle started taking center stage. Now the euro zone has something to get excited about.

GFT’s Boris Schlossberg reports in FX360 on the improving German labor picture:

With  Greek financing issues taking backstage, though certainly not resolved, traders concentrated on the better economic data coming from the region. German unemployment declined by -31K versus forecasts of 10K suggesting a strong rebound in labor markets that bodes well for growth in Q2 of 2010.

The German economy is now expecting a strong rebound in the labor markets. This is in contrast with the U.S., which just reported that the economy is still shedding jobs. Hopes that the U.S. economy would begin adding jobs in March have been disappointed.

The labor market in the U.S. continues to struggle, and the optimism in the euro zone is helping the euro in forex trading, while the U.S. dollar falters, as in the U.S. investors mull the possibility of a labor market that remains stagnant.

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U.S. Dollar Loses Steam in Forex Trading

March 31, 2010

Employment data sends greenback lower in currency trading

The U.S. dollar is losing steam in forex trading on the currency market today as investors consider the latest jobs data. The ADP report indicates that the U.S. economy is still shedding jobs, and that is slowing the greenback in currency trading.

Yesterday, the dollar got a boost from the news that consumer confidence had improved. Consumer information has been helping the greenback recently in currency trading on the FX market, but today that is old news as investors focus on concerns about jobs.

The signs of struggle for the U.S. economy are prompting gains for the sterling and the euro in forex trading as these currencies get a bit of a boost from U.S. weakness.

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London Session – March 31, 2010 6:25 AM

March 31, 2010

Expectations that this week’s US payrolls data will show a positive number are consistent with the perception that the risk of a double dip recession in the US continue to dwindle.  The improvement in the appetite for risk is reflected in the fact that stocks market indices across the Americas, European and Asia have, with just a few exceptions, pushed higher this quarter.  Strengthening risk appetite is also evident in the pressure on the JPY.  In December last year the decision by the BoJ to provide a JPY10 trn in emergency credit coincided with a better than expected US payrolls report and had the effect of stirring expectations of diverging US-Japanese interest rate differentials and pushing USD/JPY higher.  This month, the BoJ extended their lending facility.   Insofar as the market is priced for a solid gain in March payrolls data, USD/JPY is reacting to a similar set of conditions; with the jump in US yields after last week’s poorly received t-note auctions having provided the trigger.   JPY weakness is being seen across the board.  CAD/JPY is breaking above levels that have held since October 2009 and AUD/JPY is close to pushing back to its 2010 high.  Insofar as the most recent CFTC data highlighted the crowded short positions held in both EUR and GBP it is not surprising that both EUR/JPY (currently near a 8 week high) and GBP/JPY have also been squeezed higher despite the lack of clear improvement in the fundamental positions of either the UK or the Eurozone.  These moves have helped lead both EUR/USD and GBP/USD higher this morning.
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Asia Session – March 31, 2010 1:41 AM

March 31, 2010

We actually got some nice moves today in Asia with USD/JPY finally breaking out of its usual lackluster ranges on the final day of the fiscal year in Japan. USD/JPY posted an almost four month high just short of 93.60 as the yen lost ground to a surging Nikkei. With a wave of recent data out of Japan looking optimistic, the safe haven yen was abandoned for the sweeter nectar of the riskier Nikkei 225, which reached an 18 month high today in moderate trading. As could be expected, the yen was also sold in the crosses, pushing risk higher across the spectrum. EUR/JPY was close to gaining a big figure, but fell short by ten pips at its 125.30 highs. GBP/JPY was able to post a big figure move and some extra, as it moved from 139.80 to just near 140.95. Full text »

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New York Session – March 30, 2010 5:24 PM

March 30, 2010

Euro resumed its downward path in the NY session after a short-squeeze above the 1.3500 zone proved short-lived. The common currency traded to a session low of 1.3395 as Greek debt concerns returned to the fore. The debt burdened country surprised markets with a bond auction that attracted little investor interest. Indeed, demand was less than half of what was on offer – a failed auction, if you will. Equity marts in Greece sank more than -2% while the government 10-year note squeeze up a whopping 15 basis points to the 6.44% zone. We have been banging the table on the belief that the debt problems will continue to send Euro lower in the mid/long term. Keep in mind that the true test will come starting in April as the bulk of the debt refinancing in the Eurozone periphery (Portugal, Italy, Greece, Spain) will take place. Should failed auctions become the norm, we should see the common currency scurry below the 1.30 level sooner rather than later. Full text »

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Sterling and Euro Recover in Forex Trading

March 30, 2010

Currency trading on the FX market

The sterling and the euro are both continuing their recovery in forex trading on the currency market. Indeed, both are showing signs of life as economic data points to recovery.

In Britain, things are showing improvement, and the pound has managed to move back above the 1.50 level. The economic optimism in Britain is starting to overcome concerns about the deficit.

In the euro zone, things are calming down as well. The Greek situation is mostly resolved, and the euro is making progress in forex trading. However, even though the euro is higher in currency trading on the FX market, it is still unable to break through the 1.35 level and remain there.

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U.S. Economic Data to Be Released

March 30, 2010

Currency market and economic data

Important economic data is due to be released today — data that is likely to affect the currency market. Yesterday, news of consumer spending increases in February helped boost the stock market and risk appetite in forex trading.

FX Street reports on what is expected from the economic data to be released today:

Today, housing data will be released from the world’s leading economy and is forecasted to show slight signs of enhancement as the housing sector continues to recover from the crisis but at a slow pace, whereas consumer’s sentiment regarding overall current economical conditions may have improved throughout this month.

There is speculation that the U.S. dollar weaken on news of recovery as forex traders and investors look for higher yielding assets. Risk appetite is likely to increase on the currency market, reducing the need for the U.S. dollar as a safe haven.

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London Session – March 30, 2010 6:30 AM

March 30, 2010

Spreads of Greek bonds over Bunds have been widening noticeably in the wake of the Greek 7 year bond sale yesterday.  The debt office is under pressure to reduce the cost of issuance.  The result was a smaller than expected coupon on yesterday’s 7 Yr bond and bids over just sufficient to cover the paper offered.  The Greek government have now raised enough funds to cover their funding requirements through to the end of next month but it will likely have to go to the market again before the summer.  Between now and then the market will be watching closely economic developments in Greece, though given flaky economic statistics and pledges of deep austerity a palpable improvement is unlikely.   Given that the market’s demand for a risk premium is essentially incompatible with the government’s need to reduce the costs of funding there is still the risk that Greece may still fail to raise sufficient funds on the open market this year.  The EU’s new support mechanism may yet be tapped by Greece and the IMF, with its relatively cheap funding, is also still in the frame.  EUR/USD has turned lower as the news of the lacklustre Greek bond sale.   Comments from the Bank of Spain calling the government’s fiscal consolidation programme “very ambitious” increased the worries in the market.  The Bank of Spain forecast that its economy would shrink -0.4% y/y in 2010 before growing modestly by +0.8% y/y in 2011.  Ireland is also back in focus this morning given fears that the new Irish ‘bad bank’ will force banks to increase capital requirements.  From a session high of USD1.3534, the EUR dropped back towards the 1.3450 level before buyers emerged. Full text »

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