Forex- money multiplier

In the recent times, there are various modes by which we can multiply our money. New forms of investment are coming up which fetches huge, profit and can even incur losses. One of the latest ways of trading is in “Forex” market which is also called foreign exchange. At present people have various options where one can invest their money based on different constraints like money, risk, duration, profit etc. Forex market is a perfect place for a active trader. Foreign markets are open 24 hours a day where a trader can login or exit anytime. That’s why it is called money multiplier.

For me it has proved to be a cash machine as I have earned huge profits. There are many ways by which we can earn profit. The easiest part is currency swap. It means to exchange one currency with other. This means I buy a currency at low and sell them at high against another currency. For example when a US Dollar was of Rs40, I brought 100 dollars of Rs4000. After 1 month, as the exchange rate raised I sold them at Rs42 per Dollar. This gave me a profit of Rs200 without bearing any risk. By the use of computers and internet, this form of market is now very popular. It has proved to be profit making machine for many.

It has been found that daily $1.5 trillion is being traded. Forex market is the Most largest and liquid form of market in the world. It is a very good option for trading lovers and a huge profit making machine for them.

Forex Charts

To become a successful forex trader and to maximize profit, knowledge of chart patterns and price movements is very important. There are huge numbers of price charts through which trend reversals, buy/sell/hold points etc can be determined. The Price charts I follow are:

1. LINE CHARTS:  All the price movements of currencies are plotted on the y-axis and the time on the x-axis. Each time the price change, the change is displayed on the chart. This gives traders the accessibility to examine currencies more minutely while also enabling them to spot the trends according to the duration of their investment.

A line chart’s has a simple design, displaying the currency’s closing price.

2. CANDLESTICKS: These are just like bar charts having four basic elements, the LOW, HIGH, OPENING and CLOSING price of a specified time period. It can be solid or transparent or empty. If closing price is lower than opening price the stick is solid or filled. The two dash line on the candle represents the high and low points.

Finexo Forex Market Comments

Congress finally reached a deal on the bailout package, which now looks set to pass into law in the immediate future. There are many adjustments in the details, but the general idea is still that the government takes toxic assets off the bank’s balance sheets with a $700 billion dollar purchase plan. The last minute counterproposals by House Republicans that threatened to end the entire bailout effort late last week were largely dropped.

The most important changes to the original plan involve heavier oversight from Congress (most likely a cumbersome task…) and a plan for the US govt. to receive equity stakes in the institutions it is helping to bail out. Part of the plan importantly makes provisions for reduction of payments and the amount owed on mortgages that have been bought by the US. This last point is very important for the eventual fate of the US consumer, as the enormous debt overhang in the US economy, and the likely shift in savings habits as US consumers look to shore up personal balance sheets will affect growth rate for a long time to come. A potential problem with this plan, many have pointed out, is that while the plan lifts bad assets off banks’ balance sheets, it doesn’t provide any new capital injection that banks can then lend, so the risk is that tight credit conditions continue to prevail.

Regardless of the longer range potential for this plan effectiveness, the short term reaction is the most important here, as credit markets are at a virtual standstill. If this plan is unable to loosen up the exchange of credit, then we will have to move to the next phase of the crisis, which could involve many more institutions failing. The meltdown scenario is still alive and well, unfortunately.

In other news, European banks are beginning to show signs of strain as well. The first victim has been Fortis bank, the largest Belgian bank. Already rumored to be in deep trouble late last week, the bank was partially taken over the weekend by the governments of Belgium, Holland and Luxembourg. Other and even larger European banks may also be in deep trouble if we are to believe the developments in the CDS market. European banks aren’t under the same mark-to-market rules as their US counterparts (new mark-to-market rules were ironically passed just last year in the US) but may be in just as much trouble. Continued bad news in the European banking sector could weigh on the EUR.

Risk appetite is taking a hit to open the week with the latest round of news from the financial sector, which includes the stories mentioned above, the B&B partial nationalization in the UK, and news that Wachovia is on the ropes and may have a shotgun wedding with Wells Fargo. This could weigh on the carry trades again, though we will need to see what the reaction in the US trading session to the passage of the bailout package.

Interesting data coming out of Australia tonight, though we’re not sure how much the market is really focusing on data just yet

Chart: EURJPY
The EUR could find itself under increasing pressure as long as credit markets remain frozen as there may be a pipeline of bad news in the banking sector ready to burst soon. In any case, EURJPY and other carry trades are likely to follow the general moves in risk appetite, and our outlook is one of “when” this pair resumes its downward slide, rather than “if”.

Forex market updates by Finexo Posted: 31st October 2008 by Somya Gabriel in Uncategorized 1

 JPY stronger again after odd-ball 20 bp cut. USD also plows stronger as recent EURUSD rally was apparently just a short squeeze.

End of month fixing madness may make for hairy trading environment today. Consumption drop in Q3 US GDP number bodes ill for Q4 growth tallies.

MAJOR HEADLINES – PREVIOUS SESSION

* Japan Sep. Jobless Rate out at 4.0% vs. 4.2% expected
* Japan Sep. Household Spending out at -2.3% vs. -4.0% expected
* Japan Oct. Tokyo CPI out at 1.2% YoY vs. 1.3% expected
* Japan Sep. National CPI out at 2.1% as expected
* UK Oct. GfK Consumer Confidence fell to -36 as expected and vs. -32 in Sep.
* Australia Sep. New Home Sales fell -1.8% MoM
* Japan BoJ Target Rate lowered 20 bps to 0.30% vs. -25 bps cut expected
* Japan Sep. Annualized Housing Starts rose 54.2% YoY vs. 52.0% expected
* Germany Sep. Retail Sales fell -2.3% MoM vs. -1.0% expected

THEMES TO WATCH – UPCOMING SESSION

Events Today:

* EuroZone Oct. CPI Estimate (1000)
* EuroZone Sep. Unemployment Rate (1000)
* Switzerland Oct. KOF Swiss Leading Indicator (1030)
* Canada Aug. GDP (1230)
* US Sep. Personal Income and Spending (1230)
* US Sep. PCE Core (1230)
* US Oct. Chicago PMI (1345)
* US Oct. Final University of Michigan Confidence (1400)

Market Comment:

The Bank of Japan was apparently trying to send some kind of message to markets overnight by only cutting 20 bps rather than moving in the usual and expected 25 bp increment. One can only imagine that they are trying to leave room to be able to cut 10 or 15 bps at a time, but they have so little yield left with which to work that the entire exercise is rather silly. In any case, the JPY hardly budged and its strengthening again late in the Asian session on nosediving equities suggests that the recent rally sequence in JPY crosses was mostly a short squeeze (this may be the case across markets really, combined with the equity/bond rebalancing we discussed previously). Still, one wonders whether we will be able to do much more than go back and test recent lows in some of these JPY crosses as the BoJ will undoubtedly be lurking the next time the action heats up. Still plenty of room on the downside between here and there. -

UK confidence was out overnight at the lowest levels since the oil crisis of 1974. And yet GBP has remained relatively bid in some of the crosses – especially vs. the Euro. One focus for the Euro of late has been its vulnerability relative to the turmoil in CEE currencies and it was notable that as these turned sharply south yesterday, so did EUR. Also weighing on the Euro are the divergent yields on various countries in the EU, what some have called the PIGS spreads (The yield on paper from Portugal, Italy, Greece, Spain vs. that of German benchmarks.) Still, with the JPY and USD moving stronger again, GBP is likely to stay on a weak footing against these currencies. With things looking so dire on the sceptered isle, many are talking up the possibility of the BoE moving by 100 bps next week.

Up today we have the final regional US manufacturing survey with the Chicago PMI. The other regional surveys have been awful this month and could set up the worst ISM number on Monday since the early 1980′s. The trends are all pointing to a truly ugly Q4 GDP picture for the USA: First, the strong export market was propping up US growth numbers previously, but the financial and economic implosion unfolding in EM and elsewhere have put an end to this phenomenon. So the slightly better than expected Q3 growth numbers still contained a bit of residual strength from the export sector that will not be there in Q4. Also, the Q3 growth numbers showed a sharp deceleration in consumer spending that is clearly deepening into Q4 and the combination will prove toxic for Q4 growth data. Clearly, none of this spells ill so far for the US dollar, where its strength related mostly to the global deleveraging issue – the more mayhem, the more the greenback strengthens, in other words. We’re also very curious to see the ISM non-manufacturing data for October next Wednesday as the resilient September number simply defied belief.

The EuroZone picture looks far from rosy as well. Just this morning, German retail sales for September look very weak and we have to consider that unemployment numbers in the less flexible European labor market have not even begun to tick higher in some places while they’ve already risen by a third in the USA. It’s hard to believe that the October unemployment rate for Germany, for example, ticked down to a new low since the integration of East Germany began in the early 1990′s – this in an economy that is crash landing….

Liquidity is absolutely atrocious and one should adjust leverage accordingly. At one point this morning in the late Asian session, GBPUSD jumped around 60+ pips back and forth – likely on hardly any flow at all. Today is also the last trading day of the month, which means end of month fixing based on relative market performance around the world and this could mean drastic swings in the 1200-1600 time block in London.

Be careful out there – markets may be more than a bit ghoulish on this Halloween.

Forex Recommendations and Analysis

EUR/USD swooning

Yesterday saw an extension of the rally in US equities ahead of the Thanksgiving weekend, a phenomenon we are assuming has more to do with end of the month effects and misplaced optimism by market participants rather than something to hang our hats on. It was interesting to note that the currencies largely shrugged off the move in equities, with JPY crosses virtually unchanged on the day and EUR/USD swooning to lower support before bouncing back to relatively unchanged. End of month analysis circulating out there suggests that due to the larger relative falls in US equities for the month of November, there could be a USD positive effect here at month end. In any case, it will be interesting to see how the market looks early next week in case what we’re seeing are these end of month effects rather than “real” moves.

We suspect that the EUR is an accident waiting to happen, judging from the failure in EUR/USD to hold short term support despite a horrific batch of US data yesterday and the action in EUR/GBP, which saw a significant break of short term support and confirmation of the Tuesday reversal. (Later in the day, the GBP saw a sharp move back lower as the ECB was out saying it would no longer accept certain types of syndicated loans from England and Wales as collateral, but this morning it appears the effects of this announcement have faded again).

The Friday after Thanksgiving – so called Black Friday

The Friday after Thanksgiving – so called Black Friday because it is said to be the point in the earnings year when retailer’s books move into profit for the year -  traditionally kicks off the US Christmas shopping season – a vital 4 weeks for US retailers. As we’ve discussed before, the retailers are trying to elbow one another aside simply to get customers to come through their doors and have already pre-discounted much of their merchandise ahead of the holidays, thus they may have already cannibalized some of their own sales from the Christmas shopping seasons. Year on year comparisons will be key for understanding what kind of mood the famous US consumer is in this year (remember the famous line “Don’t bet against the American consumer.”? If we were the betting kind, we’d be asking where we can place our bets…). A Canadian survey showed that Canadians planned to spend 14 percent less this year, and an American survey quoted in Marketwatch indicates that 63% of baby boomers plan to cut back on spending this Christmas. US Personal Spending for October fell at -1.0% rate MoM, the worst reading ever save for the month of the September 2001 terror attacks.

China announced a new rate cut – 108 bps

China was out announcing a massive new rate cut – 108 bps – as the desperate effort continues by the Chinese government to manufacture a soft landing for the world’s workshop when demand for its products is shriveling around the world. Economic theory states that in a slowdown, the sectors of the economy geared toward production are the most heavily impacted, and with a very imbalanced Chinese economy in the past cycle of expansion, we look at China with concern. Reports are cropping up of rioting related to lost jobs at factories. This is a situation worth watching. The pressures on the Chinese regime will mount exponentially with every percentage point decline in GDP growth below perhaps 7.0%.

CAD is experiencing turmoil related to the huge BCE takeover deal, which may be collapsing. This is a potentially very CAD bearish story, and yesterday’s energy rally may have hidden further potential for CAD weakness. Keep an eye on USD/CAD and beware the volatility.

Attention

Be aware that markets may be very thin and nervous. Many might expect that Thanksgiving would be a time for a rangebound market as many participants are absent, but the fact that this Thanksgiving weekend coincides with the month-end and its potential effects, anything can happen, especially as the market may have gotten too short on the USD here in the short term. Thanksgiving of 2006 saw a huge technical break in EUR/USD, for example.

New Year Seasons and Forex Analysis

The market action continues to show a market that isn’t sure what it wants to do here in the short term – and larger players are undoubtedly waiting for the New Year before putting on any meaningful positions. Still, volatility is easy to come by these days, especially with end of month/year fixing up today.

Even more ugly data out of the US yesterday with a larger than expected drop in home prices (not really surprising as this is oldish data from October, when the deleveraging panic was full upon us. Yesterday we discussed the idea that the December freefall in yields at the long end will likely aid a slowing of house price depreciation for the lower end of the housing market.) Consumer Confidence in December also posted a massive drop to a record low. This is a bit surprising considering the fact that the survey came after the US election, and after a huge additional drop in gasoline prices. Also, the other major surveys suggested a bit of stabilization. Still, this data is by no means a shock and speaks of the real economic pain being felt in the US economy. The mounting rate of job losses means that many are worried about their future as they see colleagues and relatives losing their jobs even if they haven’t lost their own yet. The viral effect of employment insecurity is going to result in a massive continued contraction in consumption in 2009.

With the lack of short term visibility for currency moves at present, we’ll take this opportunity to freshen up some of the developments we will be looking for in the New Year.

EUR weaker

We’ve covered this one extensively in recent days. The Euro has rallied for good reasons: it has refused to join the competitive devaluation impulse launched so aggressively by the Fed and the Bank of England and it is one of the most liquid currencies outside the USD in a world that is very concerned about illiquidity. Its economic weakness has also been less vicious so far on the whole as well, even if there are very troubled spots. But the single currency’s weaknesses may become much clearer in the New Year, including very likely bickering among the EuroZone members and the difficulty of coordinating policy among so many nations when the stresses of weak economies could make national agendas compete with the EU framework. We’re also concerned about the state of play in European credit markets, when so much debt must be rolled over in 2009 and the banks in Europe as well, particularly their exposure to Eastern Europe. The EUR is overpriced in the bigger picture – look at shorting EUR vs. SEK and NOK as a potential value play in the New Year or shorting the EUR on a trade-weighted basis.

The final deleveraging

Asset prices went into freefall in September and October of this past year as the AIG, GSE and Lehman failures shook the world and triggered a historic and vicious cycle of deleveraging. Subsequently, in November and December, governments and central banks, led by the US Fed, swooped in with astounding injections of liquidity and unprecedented expansion of the public balance sheet. Hedge funds, to avoid liquidating illiquid assets in the midst of the panic reneged on their redemption agreements when investors were looking to recoup their funds. But troubled assets are still out there and the unwinding of the black hole of risky derivative plays and troubled hedge fund strategies will continue, and this could lead to a second, very large round of deleveraging in 2009 that will also shake the currency world. This final deleveraging potential is a key reason we are reluctant to call for the immediate devaluation of the greenback. In the past, bouts of risk aversion have seen a boost in the USD. And, due to the US’ already very advanced state of economic weakness, it may be the first major country to show signs of stabilization. Any large scale rally in the USD should be seen as a historic opportunity to sell the currency, however.

Asian currencies stronger

The need to address global imbalances due to the destruction of the old paradigm of Asian oversaving and reinvestment in the US and the resulting overspending and excessive debt creation there. Eventually, the USD must continue to weaken, though the timing looks uncertain for the greenback’s next sell-off. The clearer trade is to be long a basket of Asian currencies – perhaps against the overvalued EUR to start. Consider EURJPY and EURCNY shorts in the New Year.

Moves from New Years Past

Here we offer a brief recap of moves in EURUSD from the past few years. It is clear from recent years that the first trading day of the New Year (January 2nd for 2009) often sees large moves, even if they don’t necessarily predict the subsequent direction.

• January 2002 - The single currency celebrates its inaugural year as a real currency and the first trading day of the year sees a sharp 2% rally. But that was the top for the month as EURUSD dropped 5% by the end of January – to the low of the year below 0.8600 before rallying over 20% into the end of the year

• January 2003 - EURUSD swoons on the first trading day of the year, but then picks up the old rally impulse to new highs well above parity as the world moves close to the Iraq war and the weak and low-yielding USD has become a popular funding currency for carry traders.

• January 2004 - EURUSD continues its rally from December unabated until mid-January, when at a spectacular new high of 1.2900, it suddenly swoons mid-month and then spends much of the year until the US election trading in a wide range.

• January 2005 - After rallying spectacularly into year end after the US election to a high above 1.3600 and on the themes of central bank reserve diversification, the EUR kicks off the New Year with a vicious sell-off already on New Year’s Eve. This is followed by further weakness toward 1.2750 by early February, presaging what would prove a difficult year for the Euro.

• January 2006 - after doing nothing for two weeks in December, EURUSD snaps to attention on January 3 with a sharp 2% rally that would prove the beginnings of a rocky climb into mid-year from the lows of late 2005.

• January 2007 - EURUSD rallies sharply on January 2nd in a weak attempt to look at the 2006 highs above 1.3300, but then crumbles sharply in the subsequent days. But the mid-January lows were the lows for the year.

• January 2008 - EURUSD sells off sharply on New Year’s Eve after a late December rush higher, but that move is reversed with a sharp rally on the first trading day of the year that market a renewed attempt in the subsequent days to challenge the high of the time at 1.4965.

All the best to you and yours and Happy New Year!

The US government’s moves to “stimulate” their economy will have a negative impact on the greenback

The Australian Dollar made a strong showing against the US Dollar as well.  Consumer prices fell the most in ten years which led investors hoping for large cuts in Australia’s interest rates as a device to curb offset the economic spiral that has also hit the Aussie nation.   The AUD hit .672 in early trading, a rise of more than 1%.  Along the same lines, the Canadian dollar also had a nice day against its neighboring currency.  According to the Daily FX updates the CAD rose more than 1% against the USD as the Canadian government pledged to cut billions of dollars in taxes as part of a stimulus package.  The CAD was trading at $1.208 in late trading Wednesday.

There is a big concern in the Forex market that the US government’s moves to “stimulate” their economy will have a negative impact on the greenback.  By pumping close to a Trillion dollars of money into the economy, the Fed is in effect raising its fiscal deficit to over two trillion dollars which will make it necessary for the US to increase borrowing and the printing of money which will dilute the value of the currency.  While investors see the US as a safe-haven, a passage of the proposed stimulus package, the second one in four months, might turn investors away from the currency and weaken the perceived strength of the USD in world markets.

In another alarming sign that things are getting worse before they get better, the International Monetary fund announced yesterday that they will run out of money if they had to address all the claims coming in for its help.  The IMF cut its global growth forecast to .5% revised down from 2.2%.  With so many countries in financial trouble and the main body responsible for helping economically challenged countries also experiencing difficulties – the outlook is bleak

Daily FX Updates and Recommendations

YEN The Yen fell to a three month low against the Dollar and Euro on Tuesday as continued concerns over the viability of Japan’s economy pushed investors out of the Japanese currency and into a variety of other options.  The Yen has rapidly lost its safe-haven status among investors who, even with the US’s problems, are flocking to the Dollar still.
At 5PM GMT the Yen was down 2% to the Euro at 122.64 and 1 ¾% to the USD at 96.24.  The British Poind also advanced on the Yen up 1.6% to 139.19 – the AUD rose 2 ½% to 62.1 and the Franc was up 2.2% to 82.7.
USD
US Housing prices fell an extraordinary 18.5% in December from the previous year as the scope of the crises that analysts theorize started the crisis in the US broadened (grew larger).  The US markets were also waiting on Federal Reserve Chairman Ben Bernanke as he delivers testimony to the US Congress.  The USD was trading mixed against a basket of currencies in advance of this news.  As well, President Obama is scheduled to deliver a speech to both houses of Congress Tuesday evening regarding his proposals for cutting the enormous US deficit.  Traders are skeptical of the plan which contradicts the recent stimulus package as it calls for raising taxes significantly.
At 5:10 GMT the Dollar was down 1/3rd to the Euro at 1.2738, the CAD to 1.2491, the CHF to 1.1647, the AUD to .6436 and the NZD to .5093.  The dollar did make gains against the GBP, up about ½% to 1.4428.
EUR
Germany came out with its much anticipated IFO business climate indicator which had fallen more than expected to 82.6 – estimates had the level remaining at 83.0.  The market did not respond as traders took Tuesday to play the Dollar and Yen in advance of the news coming out of Washington.
The Euro was up 1% versus the Pound to .8828, up slightly to the CHF to 1.4847 and the AUD at 1.9789 and trading flat to the NZD at 2.5.
Charts: GBPUSD  making a bid for higher levels – can GBPUSD continue to rally?
The GBP jumped to new recent highs versus the EUR and the USD to start this week as the Euro’s Eastern Europe exposure and internal strife have come into focus of late and on relief that the US did not appear to be on the road to nationalizing Citibank as it was rumored over the weekend, but rather was only looking to take a larger share of ownership. Any time the market expresses relief in the financial sector tends to help out GBP due to the UK’s extreme exposure to the sector. Taking a look at GBPUSD, if the rally is turned back here at the key 55-day moving average around 1.4600, then we could be in for more ranging action back to 1.4000, while a daily close above 1.4600 and the falling trendline could set up a sequence toward 1.50-1.55. The outcome will likely hinge on the reaction to Bernanke’s testimony on Tuesday.

G20 – This is Starting to Get Interesting

The story just keeps getting better.  When we last left of, yesterday, we spoke about the decision by the US President, Barack Obama, to ask the Chairman of General Motors to step down.   Yesterday, we heard more – as the president gave Chrysler 30 days to fix itself and headless GM 60 days, before deciding if he wanted to give them more money.  This news sent stocks tumbling and sent the dollar soaring as risk appetite waned and a flight to safety ensued.  “Safety” is not what I would call the US Dollar at this point in time, however this is what analysts have been saying.

Anyway, the pending G20 conference, just 2 days away, is turning out to be a pivotal moment in the lefe of this economic crisis.  Growing dissent over the British and American calls for increased spending along with an enormous rally in London is already making things interesting.  Take for instance the German Chancellor, Angela Merkel, who is on the record over the weekend as saying that a global new deal is not possible if those behind it do not have their own house in order. This is a nice way of saying “fix your own problems before you dictate to me how to fix mine.”

The fact that President Obama has flexed hi muscle with the Automakers coming to him with their hat in hand, again, is proof that he is listening to his foreign critics.  I suspect that he believes that if he shows strength in saying “no” to every conglomerate in need, he feels he might get somewhere in London later on this week.  Too little too late.  The fact is he has already spent an enormous sum of money trying to repair his banks and industry while tackling expensive pet projects like nationalized health care and green energy that he has lost “street cred” with his peers abroad.

Forex online blogs are anticipating a stalemate this week – as nothing will come pf the meeting but a declaration of unity will be made so as not to panic the markets any more.  I am guessing that the call for a global currency will be made by china and Russia in some form – and that it will be played down – but it will be out there.  

It is sad to see that the US’s biggest and closest friend (geographically) is so nice and politically correct in its criticism of the US administrations actions.  The fact is, the Canadians are in much better shape than the Americans at this point – considering that most of the cars made for GM and Chrysler are manufactured north of the border – they dont have labor union issues to deal with as the American do.  The fact that their currency is trading strong is another sign that things are not that bad in the frozen mineral and resource rich tundra that is Canada.  Now if only other major metals and commodities can go up like Gold has, Forex traders can see the Canadian Dollar perhaps become the alternative Dollar in the currency reserve world.

US GDP Hits 30 Year Low

The US Government released Gross Domestic Product (GDP) data on Wednesday that showed that in the first quarter of 2009, the economy contracted at a faster rate than was initially expected.  Analysts had predicted a 4.9 percent drop but the number came in at 6.1 and marked the first time the US Economy had shrunk in three consecutive quarters since 1975.  The report showed that the US was still in a deep recession and that US business inventories had fallen by 103.7 Billion Dollars.  Behind these numbers was an enormous 30 percent drop in exports, the largest drop since 1969, as well residential real estate investments dropped 38 percent and business investments fell a record 37.9 percent.  

Even still, the Federal Reserve concluded their two day policy meeting and in what stock investors took as good news, did not lower the near zero interest rate any further.  The Fed statement said that there are positive signs pointing to a recovery in the second half of 2009 and that no additional steps would be taken for now.

At 11:00PM GMT in online forex system, the US Dollar was down .75% to the Euro to 1.3244, down .9% to the Sterling to 1.4761, down 1.3% to the Canadian Dollar to 1.2034 and down 2.6% to the Aussie to .7244 and 2.2% to the Kiwi to .5707.

Forex online Reviews: Dollar Gains as Credit Fears Subside

 

USD Moody’s, one of the major credit rating agencies affirmed the Dollars “AAA” status “despite rising national debt” on Wednesday, sending the Dollar higher against most majors as credit worries eased.  Also, on Wednesday, a regional Federal Reserve president had said that the Chinese informed him they were “concerned” over the US’s rising debt in a meeting held last week.  Richard Fisher of the Dallas Federal Reserve in Texas said the primary concern of the Chinese is the Federal Reserve, the US’s Central Bank, financing spending by the treasury department which essentially amounts to printing money.  While China is worried about hyperinflation, analysts agree that at this time the US economy is slightly deflated.
However, data released late in the session in online forex market showed that the inventory of unsold homes had increased in the US, stoking fears that home prices will continue to fall next month.  The news dropped the dollar off of its highs and moved it negative against the Sterling.
At 11:45PM GMT, the Dollar was up .8% to the Euro to 1.3874, up .25% to the Japanese Yen to 95.26, down .45 to the British Pound to 1.5985, up .3% to the Canadian Dollar to 1.1194, up .5% to the Swiss Franc to 1.089 and up .1.13% to the Australian Dollar to .7775.

 

EUR A European Central Bank governor, Erkki Liikannen, said on Wednesday that interest rates could fall further if economic conditions worsen.  This turned the Euro negative on the day against many currencies as investors feared the currency’s valuation was worsening.  Analysts have said that the 1.40 mark on the EUR/USD has been a stubborn ceiling and that this time around, if the data continues to come out negative, the Euro could have a hard time climbing back towards that level.
At 12:05AM GMT in Daily FX, the Euro was down .5% to the Yen to 131.78, down .3% to the Sterling to .866, down .1% to the Canadian Dollar to 1.5523, and down .1% to the Australian Dollar to 1.7822.

Forex News: China backtracks on Dollar dump, Euro gets some good news

1

USD The Dollar traded steady Monday with no significant gains or losses other than a 1% rise to the Yen, as follow up remarks by China’s Central Bank ruled out imminent changes to its foreign exchange reserve policy and as investors took caution before key US jobs data due later this week.
The Dollar had come under pressure in the past few sessions as the debate about the use of an alternative global currency heated up, after Chinese officials renewed their call for a super-sovereign reserve currency last week.
At 11:00PN GMT, the Dollar was up .1% to the Euro to 1.4076, up 1.1% to the Yen to 96.03, up.15% to the British Pound to 1.6559, up .2% to the Canadian Dollar to 1.1565, up .02% to the Australian Dollar to .8076 and down .06% to the Swiss Franc to 1.0828.

EUR
The Euro had a strong opening on Monday, which lasted most of the session after data released showed that European business and consumer confidence rose for a third consecutive month in a row, but was still near its lowest point in over 20 years.
Tempering the Euro’s rally was a sobering statement from the EU which warned against being overly optimistic at “small gains”, saying the jump in consumer confidence does not go above current expectations in the Forex online market, and to date there has been no increase in output reported by companies.
At 11:15PM GMT, the Euro was down .1% to the British Pound to .8495, up .07% to the Swiss Franc to 1.5242, up 1.05% to the Japanese Yen to 135.18, up .27% to the Australian Dollar to 1.7423 and down .01% to the New Zealand Dollar to 2.1632.

Oil dip drops down under, Risk Aversion Back for Now

AUD

A sharp drop in oil prices weighed on the commodity-linked Australian Dollar on Wednesday, giving back sharp gains from a day earlier. The oil news comes one day after Australia’s Central Bank hints at the end of stimulus measures and the possibility if interest rate hikes in the near future.

At 11:00PM GMT, the Aussie was down 1.3% to the US Dollar to .8161, down .4% to the Euro to 1.7186, down .75% to the Japanese Yen to 77.61 and down .5% to the Canadian Dollar to .8903 which was also suffering broader losses overall as a result of the oil slump.

USD

Despite a poor showing at a Treasury bond auction a day earlier, the Dollar made some gains on Wednesday after a sharp decline in Durable Good orders were reported.

The data caused stocks to fall and the Dollar to rise as appetite for risk in the Forex market fell, after two straight days of gains for higher yielding currencies.

At 11:15PM GMT, the Dollar was up .9% to the Euro to 1.4035, up .5% to the Yen to 94.98, up .3% to the British Pound to 1.6375, up .9% to the Canadian Dollar to 1.0906, up .5% to the Kiwi to .8549 and up 1.2% to the Swiss Franc to 1.0876.

Chart: NZD/USD

The NZD/USD has been trading in a very tight range over the last several days ahead of today’s Reserve Bank of New Zealand meeting. Is there really any further fuel for a rally from these elevated levels? We shall see today.

Aussie Shines Again as Rate Hike Inches Closer

AUD

The Australian Dollar was mixed to higher on news from Reserve Bank of Australia Governor, Glenn Stevens, who said that the Australian interest rates will most probably be raised sooner than previously thought.

The Aussie has been the star performer in the Forex Online as of late, buoyed by round after round of positive economic data out of Australia and now a sign that the economy is faring so much better than expected that a rate increase is in the works.

At 10:30PM GMT, the Australian Dollar was up .33% to the US Dollar to .8706, up .2% to the Euro to 1.6746, up .4% versus the Japanese Yen to 78.45, up .11% to the Canadian Dollar to .9449 and up .09% to the New Zealand Dollar to 1.2181.

EUR

The Euro fell after European Central Bank President, Jean-Claude Trichet, commented that he backed the argument for a strong US Dollar in the Forex market.

The Euro fall on Tuesday was amplified after ECB Governing Council member, Ewald Nowotny, affirmed Trichet’s comments.  The US Dollar is under scrutiny for being the world’s primary reserve currency while at the same time the US is the world’s largest debtor.

At 10:40PM GMT, the Euro was down .32% to the US Dollar to 1.4582, down .08% to the British Pound to .9139, up .02% to the Canadian Dollar to 1.5821 and off .13% to the Swiss Franc to 1.5114.

Dollar Update

The US Dollar fell against most currencies on Thursday after data showed that the US economy grew in the third quarter, the first growth in over a year, reducing the greenback’s safe-haven allure and sending investors elsewhere for better returns. The firm gross domestic product numbers renewed investor optimism about a recovery in the global economy, bringing traders to buy higher-yielding currencies. The US GDP for the third quarter showed a growth of 3.5% against an estimate of 3.3%.

At 5AM GMT at Forex Online market, the US Dollar was trading down .18% to the Euro to 1.4845, down .3% to the Japanese Yen to 91.12, down .5% to the British Pound to 1.6555, down .8% to the New Zealand Dollar to .732 and down .13% to the Swiss Franc to 1.1075.

the US Dollar, after Dubai Crisis News!

As news from Dubai came out, Forex investors fled to the relative safety of the US Dollar, pushing the Greenback up across the board on Friday.

Although the closed US session on Thursday due to a holiday as well as the very light trading on Friday may have inflated the moves in Forex, the fear of Dubai’s credit default is certain to have lasting impacts on the markets.

The ICE Dollar index rose just under one percent on Friday after flirting with record lows only a day earlier. Analysts believe that while the restructuring request by government backed Dubai World of about $80 Billion in debt is big in itself; it could spell the beginning of another wave of defaults – this time on the governmental level.

At the close, the US Dollar was trading up 1.2% against the Euro to 1.4966, up .21% against the British Pound to 1.6497, up .33% versus the Australian Dollar to .9075, up .24% to the Swiss Franc to 1.0064 and even with the Canadian Dollar to 1.0625.

End of the year:seems cleansing process for the markets

While the end of the year signals nothing truly more than a change in desk calendars or the need to keep in mind the New Year as you write out checks or date anything, many see it as a cleansing process for the markets.

Fact is, simply put, that nothing changes – economic policies that guides the world today will still be in effect tomorrow, the leaders are the same, the debts are the same, the unemployed are still looking for work.  But for one night and the few weeks leading up to it, people can believe that change is coming.

The past year in the markets has been an interesting one.  We see a Dollar that started the year in a booming rebound from late 2008 dips that set it back three years, succumb to the reality and need I say gravity of the situation in America – specifically a very large bill that has two numbers on the left and is followed by twelve zeroes to their right.

Talk of the fall of the Dollar dominated much of the year, with nations like China and Brazil, Russia and India vocalizing what every Forex trader was thinking but hoping it would never be.

The UK endured a scandal in which many parliamentarians were caught living lavish lives on the taxpayer’s dime, and it was all legal. They saw a Central Bank scoff at the leadership for spending too much only to end the year off as the body responsible for most of the spending.

You have a Prime Minister who has blundered so often, it is not even front page tabloid news anymore when he does, and whose economic policies are questionable, and whose popularity is abysmal.

In the land of unity, the European Union, you have seen the divide between classes begin.  We saw the richer countries have an easy time at getting help for their ailing banks and industry while the poorer countries have had to fight hard, many times to no avail – and now we see that sovereign debt issues with some of the less fortunate members is beginning to tear the union apart.

It is Liberalism and Socialism at its best, until the poor threaten to take down the rich with them, then you see the true nature of those that have against those that do not; it is no wonder why the Euro has done nothing this past year.

As we move into 2010 we hope and pray for a new beginning, even though the story continues, exactly where it left off – Happy New Year – and please don’t drink and drive.

Forex and No Risks: Quite Surprising

Have you ever thought about the most common question that most of the traders ask? Their questions points to risks management tools or strategies of Forex to avoid loss. So, let’s try to find out the answer of this question.

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The risks involved in markets cannot be avoided and no tool or program is far more reliable than your own active mind that can make and compute the best trade position because you know better than the tool that what is suitable for you and what is not.

FED Chairman offers a relatively somber view on U.S economic situation

In his first appearance before congress, following his re-appointment last month, Federal Reserve Chairman Ben S. Bernanke offered a relatively somber view of the U.S economic situation before Congress yesterday, despite recent signs of strong growth.

Yesterday Bernanke presented the highly awaited for Federal Reserve’s semiannual Monetary Policy Report to the Congress. The Fed chairman opened to admitting that while the U.S economy is making a promising recovery, economic conditions still requires low interests to encourage both consumer and business demand, especially once the federal stimulus package expires.

“A sustained recovery will depend on continued growth in private-sector final demand for goods and services,” Bernanke told the House Financial Services Committee today in Washington at the start of his two days of semi-annual testimony before Congress. “Private final demand does seem to be growing at a moderate pace.”

Bernanke’s testimony follows the Federal Reserve Board’s decision last week to raise the cost of direct loans to banks by 0.25bps to 0.75%.

Last week, the Fed portrayed the move as a “normalization” of bank lending and said it had not altered the outlook for the economy or monetary policy -a message that was clearly re-iterated by Fed chairman throughout yesterday’s testimony in the forex online market.

The currency market was hoping that last’s week unexpected move would lead to a possible near-future “Tighter” monetary policy.

While Bernanke pointed out that the Fed will need to start tightening its policy “ at some point”, for the mean time, slack labor markets and low inflation will allow the Federal Open Market Committee to keep the benchmark lending rate, which has been in a range of zero to 0.25% for more than a year, low “for an extended period.”

Forex: Canadian Dollar Back on Track to Parity

The Canadian economy was stronger than expected as 2009 drew to a close and the coming week will bring the opportunity to see if the pace was maintained in the early part of 2010. Gross Domestic Product grew 5% on an annualized basis in the final quarter of 2009, almost a full percentage point more than economists were expecting.

Later today Statistics Canada will publish GDP figures for January and economists are predicting a 0.5% rate of growth. While this number is strong it is still less than the 0.6% rate of growth recorded in December.

“The new year got off to a flying start, thanks to a significant ramp-up in manufacturing and wholesaling activity . . . with some additional contribution from retailing,” CIBC World Markets economist Krishen Rangasamy said in a research note.

Analysts expect that these figures will not prompt the Canadian Central Bank to increase interest rates before July given than output remains well short of potential in the Canadian economy.

Millan Mulraine, an economic strategist with TD Securities said “In the coming months, we expect this positive momentum in the Canadian economy to remain largely intact, as the significant monetary and fiscal policy stimulus administered to the Canadian economy continues to bolster activity.”

Yesterday saw the Canadian Dollar rise for the second day against its US counterpart as gains in global equities and crude oil spurred demand for commodity currencies. It gained 0.20% against the US Dollar during trading to close at CAD 1.0192. The previous day it advanced 0.51% against the US Dollar to CAD 1.0214.

The currency has gained 3.6% against the US Dollar so far this year, the second best performer after the Mexican Peso among the 16 most traded currencies in the forex market. It will be the fourth straight quarterly rise for the currency, which tends to rise and fall with commodity prices.

“The Canadian Dollar remains a market favorite and after a brief correction last week appears to be back on track for a move towards parity”, said Steve Butler, director of foreign exchange trading in Toronto at Bank of Nova Scotia, Canada’s third largest lender.

Canada’s currency, dubbed the Loonie for the aquatic bird on the CAD $1 coin, reached CAD 1.0062 on March 19th, the strongest level since mid 2008 on speculation that the Bank of Canada would increase interest rates before the US Federal Reserve after a report showed that consumer prices gained more than forecast in February. It traded within one cent of parity with the US Dollar before slipping back as crude oil prices fell.

Forex Market: Spain’s Trouble Leads To Eerie Risk Aversion

Yesterday the market starts with eerie risk aversion momentum building because of the fear of the Spain’s banking trouble that are continuously suppressing the Forex trading market. We have noticed a lack of unity in the Euro zone member nation’s community as the German members are unhappy due to the joint EUR bond issue since it cause the nation to lead by using wrong policies. The euro zone financial calendar specifies about the increment of industrial orders to 5.2 percent along with ECB announcement of one week fixed term deposits.

FOMC minutes in US specifies about the favor coming from the three regional banks for the first rate hike to 1 percent as it helps to regain the past discount structure of interest rate. Although these are the concerns related to the economic recovery leads to the fear in the market but we know that there is a ray of hope in every dark night as this proves true by the consumer index as it gets the market into a surprise by reaching to the 63.3 level beyond the expectations of market.

US market equities after getting this news erased all its losses and closes at 0.4 percent at the late forex session. S&P also get a rise of 0.3 percent in this whole month. Where as the currency pair of USD/JPY also shown a high yesterday by reaching to 90 level. In UK there was a quarterly report release takes place yesterday which results shows a growth rate after the meeting. It also mentions about the cut in Government spending along with the public sector wages where as private consumption seems to be flat in the next quarter.

US labor market are seems to be in worry after the last week’s report of the US jobless claims that unexpectedly leads the sharp rise in the market. This news may rise a double dip recession if the US labor market seems to be stalled. The European country debt crisis was an obstacle for the US economic recovery and embeds the more concerns about the global economic recovery to the labor market in US. In the past US have made 500k jobs since market signifies that it may reflect the employment report improvement of BLS. Although we have noticed that the jobless claims had fallen sharply below the expectations eventually but the claim report still in the level above and would confirm that the US is still making more number of jobs than losing.

The Korean currency falls leads the Asian market fall yesterday. the trading in US dollars will remain instable from the morning session and the euro is also seen in the downtrend. The USD/JPY leads to Sterling currency under pressure after the drop down in yesterday market. Instead of all these things the EUR/GBP and GBP/JPY was seems to be a big mover of the day and reaches to the high level after crossing the four yen. These all happenings of Yesterday leads the market to the V variety across the board.

Forex: Canadian Dollar Back on Track to Parity

The Canadian economy was stronger than expected as 2009 drew to a close and the coming week will bring the opportunity to see if the pace was maintained in the early part of 2010. Gross Domestic Product grew 5% on an annualized basis in the final quarter of 2009, almost a full percentage point more [...]

Biggest Drop in Housing Prices in 19 Months

On the eve of publication of data on housing prices, DT Trading economists are predicting the biggest drop in a year ending in June, which assumes stagnation in the housing market and a continuing slow recovery in the US. According to the average estimate from 31 economists polled by Bloomberg, the S&P/Case-Shiller Home Prices Index in 20 cities dropped 4.6% since June 2010, which was the biggest drop in 12 months, since November 2009. Another report may show that consumer confidence fell in August to the lowest level in 10 months. It will probably only be possible to speak about a recovery in housing prices a few years from now, when the stream of cheap housing being offered as a result of unpaid mortgages finally dries up. The unemployment level is contributing more to the depressed situation on the housing market; it is hovering around 9%, while strict crediting regulations are painfully hitting borrowers’ pockets. DT Trading analysts explain that decreased equity in combination with the drop in stock prices this month will be detrimental to household welfare, increasing the risk that household expenses will continue to be restrained. “There are too many factors which will continue to pull housing prices down,” said Patrick Newport, an economist with HIS Global Insight in Lexington, Massachusetts. “We still have a lot of foreclosures on the horizon, a lot of overabundant supply, while demand for homes continues to weaken.” The three-month S&P/Case-Shiller Index will be published at 9:00AM in New York; estimates on the decrease are fluctuating between 4 – 5.5% after a 4.5% drop for the year ending in May.

Shares of property developers are significantly undervalued compared with other stocks on the broad market since the end of May, showing that investors are seeing more detrimental consequences for the industry in the current economic slump. The S&P Composite Index, which includes the stock of 12 developers, fell 26% yesterday alone compared with a 10% drop of the broad market S&P 500 Index.

During his speech at Jackson Hole, Wyoming, Federal Reserve Chairman Ben Bernanke said that “an overhang of distressed and foreclosed properties, tight credit conditions for builders and potential homebuyers, and ongoing concerns by both potential borrowers and lenders about continued house price declines” have held back the housing market. Bernanke added that the economy will likely improve in the second half of 2011 and said that the Fed may assist in the recovery if necessary. The housing issue is stabilizing, “if for no other reason than that ongoing population growth and household formation will ultimately demand it,” Bernanke reassured his audience.

1/9/2011 – The Current Market Sentiment

The falling of EU Manufacturing PMI of August below 50 in the contracting territory to 49 while the markets were waiting for 49.5 from 50.4 in July raised the markets worries about the growth outlook in the Euro zone showing its needs for stimulation while it's required currently from most of the Euro zone countries to implement governmental austerities plans cutting its spending and raising its taxes for improving their financial situation amid continued investors' concerns about the debt crisis in theEuro zone.These weak manufacturing data have come in line with the falling of Aug Germane IFO last week to 108.7 while the markets were waiting for from decreasing to 111.3 from 112.9 in June following the big drop of Aug EU ZEW to -40 while the consensus was referring to improving to -7.6 from -7 in July and also this week earlier release of EU consuming confidence index falling to -17 in August while it has been forecasted to -12 from -11.6 in July showing increased downside risks facing the European economic growth.

The Single currency has fallen versus the greenback below 1.4327 supporting after inability to get over 1.4383 again and it is now finding support at 1.4262 and in the case of breaking it, this cane open the way by God's will for further falling to another supporting levels at 1.4211, 1.4149, 1.4102 then 1.4054 again before the psychological level at 1.40 while moving up can meet resistances at again at 1.4383, 1.4464, 1.4548 which was the high of this week and the breaking of it can be followed by facing 1.4576 whereas the pair has formed its lower high below 1.4695 which came below 1.4939 which was the formed top in December 2009.

While the markets are waiting now to know more about the manufacturing sector in US waiting for the release of Aug Manufacturing ISM index which is expected to get down below 50 too at 48.5 from 50.9 in July before the focusing turning back again to the US labor markets ahead of the waited release of US labor report of August tomorrow by God's will, which is expected to show new 90k added jobs to the non-farm payrolls from 117k in July with standing of the unemployment rate at 9.1% as it was in July.

Congress Hears Out President Obama’s Jobs Plan

Yesterday at an expanded session of Congress, US President Barack Obama expressed his disappointment with the national economy, a problem which is threatening his political career. He ordered Congress to pass a $447 billion plan to create jobs, tilted heavily toward the republican’s plan to lower taxes. Speaking before both houses of Congress, Obama demanded six times that lawmakers act “immediately” according to the plan which will increase spending on infrastructure, reduce the number of teachers who are approaching retirement age, and cut income tax paid by employees and small business owners twofold.

“The question is whether, in the face of an ongoing national crisis, we can stop the political circus and actually do something to help the economy,” Obama said to lawmakers yesterday. Employment growth ground to a halt while the unemployment rate has hovered at and above 9% for the past two years. The president’s approval ratings fell to a new low after US society’s doubts about his capability to fix the economy grew. DT Trading experts noted that American society’s opinion of Congress fell even lower. Tax cuts make up more than half of the dollar amount of the president’s latest plan to restore the economy while representatives of the Obama administration are promising to make the greatest appeal to the Republican part of Congress. The president dared his challengers to oppose wider and deeper income tax cuts that are due to expire on December 31.

“I know some of you have sworn oaths to never raise any taxes on anyone for as long as you live,” Obama said. “Now is not the time to carve out an exception and raise middle-class taxes, which is why you should pass this bill right away,” the president concluded.

Literally only a few hours before Obama’s televised speech to congress, Federal Reserve Chairman Ben Bernanke said that at the next meeting this month, politicians will discuss a package of instruments they could use to “promote a stronger economic recovery in the context of price stability.” Speaking before the Economics

Club of Minneapolis, Bernanke refrained from saying what he would consider the best option to help the economy.

Bond prices dropped at the same time that futures on the Standard & Poor’s 500 Index went up after Obama reported on his plan. Yields on 10-year treasury bonds increased three basis points to 2.01% as of 11:04AM in Tokyo. Futures on the S&P 500 went up 0.5% after a 0.6% fall.

Obama emphasized that he intends to pay for the entire jobs package with compensation from spending cuts and increased tax revenues over the next decade. He said that the exact measures would be announced before September 19.

Obama didn’t speak about the overall cost in his televised address. He also didn’t use the word “stimulus,” although Republican lawmakers were quick to draw parallels with a 2009 program to cut $825 billion in spending and taxes that was unpopular among voters.

California Representative Kevin McCarthy, the third-ranking Republican in the House, called the new plan “Stimulus 2.0.” According to DT Trading analyts, the package includes spending proposed by Democrats. It will include $105 billion in spending for infrastructure projects to modernize schools, transportation projects, and rehabilitation of vacant government assets. The economic effect of expenditures on the majority of infrastructure projects will materialize only next year, although some of it will come in 2013, according to administration representatives who spoke to journalists on condition of anonymity.

Americans Preparing the Markets For Take-Off

  President of the European Central Bank Jean-Claude Trichet announced at a press conference on Thursday that the Euro zone’s economic development will move at a much slower pace than had been predicted, while inflationary risks weakened for the medium term outlook. ECB economists revised their predictions on the Euro zone’s GDP growth downward. At the moment, ECB experts are expecting GDP growth in 2011 to be 1.4%-1.8%, although in June they had predicted 1.5%-2.3%; predictions on GDP growth for 2012 are currently 0.4%-2.2% versus June’s forecast of 0.6%-2.8% growth. Market players immediately took these announcements into consideration and directed them against the European currency, which lost more than 150 points against the US dollar after the start of the press conference.

RoyalMaxBrokers experts noted that, while Trichet didn’t tell the market what it wanted to hear, he also didn’t signal that the central bank would refrain from raising the interest rate in the future.

Trichet noted at the monthly press conference that the ECB sees “increased downward risks” for the Euro zone in conditions of “especially high uncertainty.”

In a speech which started at 3:00AM (Moscow Time), US President Barack Obama presented a $447 billion plan for jolting America’s economy into action. The president believes that the plan will give the economy immediate stimulation if Congress passes it swiftly. This plan “will provide impetus to the stalled economy and infuse companies with certainty that, if they invest their money, they will find buyers for their products and services.” Obama advised Congress, “you should immediately pass this plan to increase the number of jobs.”

Obama’s plan made provisions for lowering taxes on salaries for employees and companies as well as allocating money to repair roads and bridges and extending unemployment benefits. RoyalMaxBrokers analysts report that a more detailed report of the plan’s financing is to be presented later. In the upcoming week, the president should present a plan to reduce the budget deficit.

Quotes on gold, which just finished a two-day correction, are continuing to grow and are returning to their previous record highs. The cost per troy ounce has added more than $40 in a day and is trading at $1862/oz. Before Trichet’s, Bernanke’s, and Obama’s speeches, investors opted to refrain from buying risky assets such as stocks and commodities and instead turned their attention to gold.

Quotes on oil fell as a result of trading on Thursday, September 8. Investors, as already mentioned, tried not to risk before the important speeches, and therefore publication of data on commercial oil reserves in the US for the previous week led to only short-term growth to $90.23 per barrel on WTI, after which quotes slipped below $89. US commercial oil reserves dropped to 4 million barrels due to the recent hurricane and tropical storm restricting imports.

At 12:30PM (Moscow Time), the UK National Statistics Agency will report on inflation in the manufacturing sector. Analysts forecast lowered risks for the monthly dynamic.

At 4:00PM (Moscow Time), traders will assess the report on the condition of Canada’s labor market, which will be presented by STCA – Statistics Canada. The majority of analysts are of the opinion that this indicator will remain at 7.2%.

Markets Assess Last G-7 Summit

  Friday was “black” for European stock markets – the leading indices crashed 3-4% while the Milan stock market fell almost 5%. The panic attack among investors was instigated by European Central Bank executive board member Jurgen Stark’s resignation, which reflects the conflict among the bank’s leadership over buying up obligations from the Euro zone’s most troubled countries.

Differences of opinion among Europe’s politicians about how to cope with the crisis are growing stronger. Because of this, market players are dumping shares of banks since they would suffer first in the event of a default in Greece or any other Euro zone country.  Shares of the French bank Societe Generale dropped 10% in one session; the Euro rolled back to settle at $1.37.

America is also bringing investors some additional disappointments: Fed Chairman Ben Bernanke’s address didn’t reveal any concrete plans for preventing the recession in the country’s economy. In response, oil dropped to its lowest level of the week – a barrel of Brent crude oil is trading at $112 in London.

World economic leaders’ opinions are diverging on how to get out of the crisis; this is was even more apparent from the meeting among the finance ministers of the G-7 countries in Marseilles, France. While the US president proposed a new costly plan on stimulating employment (in the amount of $447 billion), Euro zone countries one after the other are tightening their budgets and are trying to reduce their debts.

The new head of the IMF Christine Lagarde is ordering Europeans to think more about how to avoid a recession. “There aren’t any doubts that in economically developed countries, budget stability should be restored. But politicians, especially financial authorities, should be prepared to take additional measures if necessary to stimulate economic growth, and this includes non-traditional measures.”

Traditional measures, it seems, have been exhausted. After the 2008 crisis, the G-7 countries pumped hundreds of billions of dollars into the financial system, for which they had to turn on the printing press and increase borrowing. Now, the question for many experts is only when the stagnation will turn into a recession. Investors this week await new turbulence on the markets because of the worsening debt problem in Europe and expectations of a new helping of weak economic statistics from the US.

Chancellor Angela Merkel made a pretty harsh announcement yesterday on the situation surrounding Greece’s abilities to solve its debt problems. DT Trading analysts explain that Germany is finally starting to realize that Athens is in no condition to resolve them. This is a serious signal that Greece could default and simultaneously leave the Euro zone. The year-and-a-half epic “salvation of Greece” seems not likely to end in Athens’ favor. Berlin will probably sacrifice Greece in the name of saving the Euro zone as a whole.

Amid all this negative news, the unified currency fell to February levels and may likely continue to drop until a decision is made on whether Greece can pay its debts. The market will soon digest Merkel’s words and if Athens is to actually be “released into a free float” this will be a good signal for growth of the Euro in the long-term. In the meantime, DT Trading experts think that markets will take a wait-and-see approach and the US dollar will possibly still receive some support.

Hedge Funds Stripping Assets from Europe

  Managers on the US money market, headed by Vanguard Group Inc and Legg Mason Group Inc, are cutting loans to French banks so fervently, that it may force these banks to increase their capital by selling stocks, said William Prophet, an analyst with Deutsche Bank Securities Inc. Meanwhile, Italian officials, led by Prime Minister Silvio Berlusconi, conducted negotiations with their Chinese colleagues about potential investments in the EU’s third-largest economy. Signs of the “Greek contagion” are threatening to infect Italy and have pushed yields on the country’s bonds to a record high since the Euro zone’s creation. Berlusconi’s government swiftly passed a 54 billion Euro austerity package through parliament to convince the European Central Bank to buy its debt. But DT Trading analysts note that over 60 billion Euros spent on buying up European bonds the past five weeks have not convinced investors to buy Italian bonds.

American funds are reducing their shares in European banks amid fears that financial institutes may run into problems with financing after the sovereign debt crisis escalates. Moody’s Investors Service may lower the ratings for BNP Paribas (BNP) SA, Societe Generale SA and Credit Agricole SA (ACA) this week because of a Greek debt package that these banks hold in their funds.

Funds financed by BNP Paribas, Societe Generale (GLE) and Credit Agricole are taking an average of 6.7 basis points more from them on three-month loans as of September 8 than the rate which creditors could pay for analogous financing at the LIBOR market rate in London. In July, these banks could have received financing on commercial paper or short-term promissory notes which would have been lower than the LIBOR rates in London.

Nevertheless, Italy will hold its auction for 7 billion Euro ($10 billion) for selling its own bonds. This comes the day after interest rates on loans increased as the threat of Greece slipping into default spins the flywheel on world markets.

The Italian treasury will sell 4 billion Euros’ worth of its new five-year bonds after yields on 10-year bonds rose to a five-week high of 5.571%. During yesterday’s auction, investors were asking 4.153% from Italy on one-year promissory notes, compared with 2.959% a month earlier. “It’s rather unfortunate that the Italian auction is taking place when the market is in panic mode,” said Fabrizio Fiorini, the head of fixed income at Aletti Gestielle SGR SpA in Milan. “Borrowing costs are likely to remain at elevated levels. The rise in Italian yields is manifestation of a lack of market confidence in European leaders’ ability to tackle the problem.”

The 1.9 trillion Euro debt – more than Spain, Greece, Ireland, and Portugal combined – leaves Italy extremely vulnerable to any advances in borrowing costs while it goes deeper into the pit to refinance its old debts. Sales, which also include at least 3 billion Euros with a turnover time before 2018 and 2020, will help gather 14.5 billion Euros for payments on old debts scheduled for September 15.

Today we await the publication of data on the second part of the inflationary report in the UK. As the Bank of England recently announced in the last published minutes from its July meeting, inflation may reach 5.0% by the end of the year. In light of this assessment, DT Trading economists are expecting the Consumer Price Index to grow by 4.6% in August in annual terms, compared with 4.5% growth according to the July report.

French Banks Take a Reprieve Amid Predictions of a Greek Default

  US stock marketswent up, European stock markets’ benchmark index rose from a two-year low, American treasuries fell after French banks put to rest rumors that they had no access to financing, and investors for their part detected signs of progress in efforts to curb the debt crisis in the Euro zone. The Standard & Poor’s 500 Index went up 0.9% at 4:00PM in New York. The Stoxx Europe 600 Index increased 0.9%. Shares of Societe Generale SA, which added 8.1% a day earlier, increased 15% while BNP Paribas SA added 7.2% after a 12% drawdown. What helped stocks go back up again were the announcements by these banks that they were able to finance their operations. Yields on 10-year American bonds immediately rose four basis points to 1.99% and oil futures rose 2.3%. The MSCI Emerging Markets Index fell, continuing its drop from its peak so far this year to 20%.

German newspaper Rheinishce Zeitung reported that Germany’s Minister of Finance Wolfgang Schauble had said that Greece will not receive any more aid. According to Mario Blejer, a former Bank of England advisor, Greece should default on its obligations in order to stop its economy from getting any worse. Yields on one-year Greek bonds rose to more than 130%. “Greece should default, and default big,” said Blejer, who advised Bank of England Governor Mervyn King from 2003 to 2008. “You can’t jump over a chasm in two steps.” Stocks jumped up after Societe Generale (GLE), France’s third-largest bank, said that it may dispute the freeze in dollar funding on US money market funds which reduced the crediting to European banks because of the Euro zone debt crisis.

Meanwhile, after last weekend’s summit between the finance ministers of G-7 countries in Marseilles, it became apparent that the summit had to widen its scope of participants and that US Treasury Secretary Timothy Geithner should definitely be present. Apparently, the ministers wanted to invite ministers from other Euro zone countries outside of the G-7 to the talks and also have it in a more discrete location than Marseilles, such as Wroslaw, Poland.

Geithner managed to express his opinions in an interview with Bloomberg last Friday, saying “[European leaders] will have to demonstrate to the world that they have enough political will.” He said that the US has “a huge interest in helping the Europeans overcome [the debt crisis] and we plan to do all we can to convince them to take more decisive actions.” The G-7 finance ministers spoke out about their support of banks and will try to strengthen the economic recovery.

White House Press Secretary Jay Carney dismissed any sort of special interest on the part of the G-7 finance ministers, saying that Geithner was going only for “a consultation with his European colleagues.” According to DT Trading analysts, the question of dividing up responsibility among EU member countries after Greece leaves and how its debts will be distributed will be brought up at the meeting in Poland. Geithner’s presence there will be to represent the position of American investors and investment banks, in particular, Goldman Sachs, which is one of Greece’s creditors on its so-called off-balance accounts.

Today we await the publication of data on retail sales in the US. DT Trading analysts are expecting this figure to grow in August by 0.2% compared with July. Such growth is also expected in the figure which doesn’t account for automobile or fuel sales.

16/9/2011 – The Current Market Sentiment

  While the markets were waiting for the European Economic and Financial Affairs Council meeting results, The Single currency has managed to ease back again versus the greenback under the pressure of having €2.5B EU Trade Balance deficit in July while the markets were waiting for €1.7B surplus from €1.5B deficit in June after it had failed to get over its previous resistance at 1.3935 falling below 1.377 whereas it has started its rising following the news of offering 3 months loans by the ECB for the European banks in an coordinated action with the Fed, SNB, BOE and BOJ for underpinning the US dollar liquidity into the European banking system for longer time as this has been allowed for just one week by the ECB.

God willing, further EURUSD declining can meet over the short term supporting levels at 1.3702, 1.3635, 1.3554 then 1.3494 again whereas it has started to correct its loses reaching the current levels and the breaking of it can open the door for further falling to 1.2873 which has been recorded low of this year on the 10th of last January while the way of ascending can face resistance again at 1.3935 then the psychological level at 1.4 and the breaking of it can lead to a higher resistance at 1.4278 which has been reached by the SNB's action to limit the EURCHF drawing down over 1.2 last week but it could not hold its gains falling back again on persisting worries about the European economy after the ECB had downgraded its forecasts of the EU growth in 2011 and 2012 without hinting about new steps to stimulate the economy, while the worries about Greece were ascending by suspending the talking between the lending troika and Greece from a side and from another side by Greece Fin Min announcement about the Greek GDP shrinking this year by more than 5% while it was expected to be by just 3.8% on the back of the negative impact of the taken austerities measures by the Greek government.