CURRENCY TRADING SUMMARY - 28th May (00:30GMT)
U.S. Dollar Trading (USD) was on the back foot as risk aversion gave way to risk appetite when global stock markets rallied for 24 hours. Q1 GDP was at 3.0% slightly worse then 3.4% forecast but still strong. Weekly Jobless claims improved to 460k vs. 471k previously. In US stocks, DJIA +258 points closing at 10258, S&P +35 points closing at 1110 and NASDAQ +81 points closing at 2277. Looking ahead, April Core PCE is forecast at 0.1% vs. 0.1% previously m/m and Chicago PMI is forecast at 62 vs. 63.8 previously.
The Euro (EUR) rebounded off support at year lows on an official Chinese rebuke of the review of the EU investments story widely accredited for the sell off on Wednesday. China Premier Wen said they were willing to deepen China-EU cooperation. EUR/USD traded with a low of 1.2182 and a high of 1.2396 before closing at 1.2350. Looking ahead, Swiss April Trade Balance previously at 2007mn.
The Japanese Yen (JPY) was the weakest currency in the market as the heavily bought up safe haven currency was hit from profit taking and surging commodity currency crosses. AUD/JPY jumped 5% to test the Key Y77 level which was the previous major support and USD/JPY rallied to Y91. Future direction will rely upon the sustainability of the stock market rally and EU sentiment recovery. Overall the USDJPY traded with a low of 89.91 and a high of 91.10 before closing the day around 90.90 in the New York session. UPDATE April Unemployment Rate 5.1% vs. 5.0% previously and April Retail Sales at 4.9% vs. 3.7% forecast.
The Sterling (GBP) took advantage of the solid improvement in risk appetite to reclaim 1.4500 on cable and surge above Y132 on GBP/JPY. May CBI Realized Trades fell to -18 vs. 13 previously. May Gfk Index forecast at -18 vs. -16 previously. Overall the GBP/USD traded with a low of 1.4379 and a high of 1.4610 before closing the day at 1.4570 in the New York session.
The Australian Dollar (AUD) was the best performing currency as the heavily beaten down Aussie enjoyed a major buying spree and gained over 4% against the USD. Q1 CAPEX was weaker than expected at -0.1% vs. 1.4% forecast but this had little effect. Key resistance is found at 0.8580 the previous Year low before May 19. Overall the AUD/USD traded with a low of 0.8224 and a high of 0.8532 before closing the US session at 0.8510.
Oil & Gold (XAU) Held above $1200 on USD weakness and general commodity gains but was capped by the decrease in alternative currency. Overall trading with a low of USD$1205 and high of USD$1218 before ending the New York session at USD$1208 an ounce. Crude Oil surged up +4% in a major move higher. WTI Oil Closed +$3.04 at $74.55 a barrel.
Showing newest 24 of 45 posts from May 2010. Show older posts
Showing newest 24 of 45 posts from May 2010. Show older posts
Friday, May 28, 2010
Thursday, May 27, 2010
27 May 10 : Recovery in EUR
FX Highlights
* The USD is trading lower as equity markets rally, the EUR is supported by report that China denied that it is reconsidering its EUR bond holdings, the EUR sold off hard in the US trading session Wednesday in reaction to a Financial Times report which suggested that China may review its EUR holdings, the Chinese denial that it is reviewing its EUR holdings helped reduce some fear of the risk of contagion from the EU debt crisis, China says that Europe is a key investment market and report of review of EUR holdings groundless, GBP trades higher despite report of weaker than expected UK retail sales, commodity currencies trade higher tracking firmer equity and commodity markets with AUD supported by report that the RBA may soon resume tightening of monetary policy, JPY trades lower as risk appetite improves and Japans export sales slow
* Focus turns to today's release of US initial jobless claims and revised Q1 GDP
* The Financial Times says China may review its EUR holdings, it is estimated that China holds €650bln, the article says China may not sell EUR but could increase holdings of other currencies, A Chinese official says FX diversification objective will not change, ECB's Nowotny says EUR depreciation is a positive development, EUR higher
* Japan's April trade surplus widened to ¥742.3bln, exports rise by 40.4%, exports rise by 24.2%,JPY lower
* Australia's Q1 CAPEX falls 0.2%, a press report says that the RBA is close to resuming its tightening policy, AUD higher
* UK May CBI retail sales at -18 compared to +13 last month, reading of +12 was expected, GBP higher
* Swiss Q1 nonfarm payrolls rose 0.1%,CHF higher
* US five year bond auction yield declined to 13 month low
* CBO says the stimulus plan has created between 1.2 and 2.8mln jobs
* The New York Times reports that the EU debt crisis could slow US recovery, Fed's Bullard says contagion from the EU debt crisis to the US economy looks unlikely and the crisis should be contained by US and Asian growth, senior White House economics adviser Romer warns that sudden budget cuts could hurt the recovery
* US equity markets set to open sharply higher, European equities 2% higher, Nikkei closed 117 points higher
Upcoming Events
* US-Thursday, initial jobless claims for week ending 05/22 will be released expected at 455k compared to 471k last week along with revised Q1 GDP expected at 3.4%
* CAN-Thursday, no major Canadian economic data is due for release today
* The USD is trading lower as equity markets rally, the EUR is supported by report that China denied that it is reconsidering its EUR bond holdings, the EUR sold off hard in the US trading session Wednesday in reaction to a Financial Times report which suggested that China may review its EUR holdings, the Chinese denial that it is reviewing its EUR holdings helped reduce some fear of the risk of contagion from the EU debt crisis, China says that Europe is a key investment market and report of review of EUR holdings groundless, GBP trades higher despite report of weaker than expected UK retail sales, commodity currencies trade higher tracking firmer equity and commodity markets with AUD supported by report that the RBA may soon resume tightening of monetary policy, JPY trades lower as risk appetite improves and Japans export sales slow
* Focus turns to today's release of US initial jobless claims and revised Q1 GDP
* The Financial Times says China may review its EUR holdings, it is estimated that China holds €650bln, the article says China may not sell EUR but could increase holdings of other currencies, A Chinese official says FX diversification objective will not change, ECB's Nowotny says EUR depreciation is a positive development, EUR higher
* Japan's April trade surplus widened to ¥742.3bln, exports rise by 40.4%, exports rise by 24.2%,JPY lower
* Australia's Q1 CAPEX falls 0.2%, a press report says that the RBA is close to resuming its tightening policy, AUD higher
* UK May CBI retail sales at -18 compared to +13 last month, reading of +12 was expected, GBP higher
* Swiss Q1 nonfarm payrolls rose 0.1%,CHF higher
* US five year bond auction yield declined to 13 month low
* CBO says the stimulus plan has created between 1.2 and 2.8mln jobs
* The New York Times reports that the EU debt crisis could slow US recovery, Fed's Bullard says contagion from the EU debt crisis to the US economy looks unlikely and the crisis should be contained by US and Asian growth, senior White House economics adviser Romer warns that sudden budget cuts could hurt the recovery
* US equity markets set to open sharply higher, European equities 2% higher, Nikkei closed 117 points higher
Upcoming Events
* US-Thursday, initial jobless claims for week ending 05/22 will be released expected at 455k compared to 471k last week along with revised Q1 GDP expected at 3.4%
* CAN-Thursday, no major Canadian economic data is due for release today
Labels:
FX Trading
Wednesday, May 26, 2010
26 May 10 : FX Markets Stage Rebound
CURRENCY TRADING SUMMARY - 26th May (00:30GMT)
U.S. Dollar Trading (USD) was extremely volatile from the start with stocks falling aggressively in Asia and the Europe before the sentiment reversed aggressively for the final part of the day. CB Consumer Confidence jumped to 63 vs 57 previously shrugging off recent stock market declines. In US stocks, DJIA -22 points closing at 10043, S&P +1 points closing at 1074 and NASDAQ -2.6 points closing at 2210. Looking ahead, April Durable Goods Orders +1.3% vs. -1.2% previously. April New Home Sales are forecast at 0.43mln vs. 0.41mln previously.
The Euro (EUR) hit week lows on massive selling in Europe to push below 1.2200 before reversing aggressively with the change of sentiment in the US. March Industrial Orders jumped 5.2% vs. 2% forecast. EUR/JPY broke below Y110 and hit fresh year lows under Y108. EUR/USD traded with a low of 1.2176 and a high of 1.2389 before closing at 1.2290. Looking ahead, June GFK index forecast at 3.6% vs 3.8% previously.
The Japanese Yen (JPY) was very strong early in the day as the crosses fell and the USD/JPY was dragged down below Y90 before ending near resistance at 90.40. EUR/GBP and GBP/JPY were big movers on the crosses each trading in 4 Yen ranges. Overall the USDJPY traded with a low of 89.24 and a high of 90.51 before closing the day around 90.30 in the New York session.
The Sterling (GBP) came under pressure as GBP/JPY sales pushed cable under 1.4300 unable to benefit from the revised higher GDP figures. Q1 GDP rose to 0.3% vs. 0.2% previously. EUR/GBP was stuck inside a tight range between 0.8500-0.8600 as the market awaits fresh direction. Overall the GBP/USD traded with a low of 1.4257 and a high of 1.4451 before closing the day at 1.4410 in the New York session.
The Australian Dollar (AUD) is beholden to the changes in risk appetite with year lows under 0.8100 tested before the major rebound in the US session sent the commodity currency straight back up to retest 0.8300. AUD/NZD in a holding lower range between 1.22 and 1.24 as the AUD collapse consolidates. Overall the AUD/USD traded with a low of 0.8064 and a high of 0.8309 before closing the US session at 0.8265.
Oil & Gold (XAU) Broke through $1200 as buyers returned in force. Overall trading with a low of USD$1185 and high of USD$1204 before ending the New York session at USD$1203 an ounce. Tested below $68 in the US session but finished with a sharp rally to test $70. WTI Oil Closed -$0.50 at $69.70 a barrel.
U.S. Dollar Trading (USD) was extremely volatile from the start with stocks falling aggressively in Asia and the Europe before the sentiment reversed aggressively for the final part of the day. CB Consumer Confidence jumped to 63 vs 57 previously shrugging off recent stock market declines. In US stocks, DJIA -22 points closing at 10043, S&P +1 points closing at 1074 and NASDAQ -2.6 points closing at 2210. Looking ahead, April Durable Goods Orders +1.3% vs. -1.2% previously. April New Home Sales are forecast at 0.43mln vs. 0.41mln previously.
The Euro (EUR) hit week lows on massive selling in Europe to push below 1.2200 before reversing aggressively with the change of sentiment in the US. March Industrial Orders jumped 5.2% vs. 2% forecast. EUR/JPY broke below Y110 and hit fresh year lows under Y108. EUR/USD traded with a low of 1.2176 and a high of 1.2389 before closing at 1.2290. Looking ahead, June GFK index forecast at 3.6% vs 3.8% previously.
The Japanese Yen (JPY) was very strong early in the day as the crosses fell and the USD/JPY was dragged down below Y90 before ending near resistance at 90.40. EUR/GBP and GBP/JPY were big movers on the crosses each trading in 4 Yen ranges. Overall the USDJPY traded with a low of 89.24 and a high of 90.51 before closing the day around 90.30 in the New York session.
The Sterling (GBP) came under pressure as GBP/JPY sales pushed cable under 1.4300 unable to benefit from the revised higher GDP figures. Q1 GDP rose to 0.3% vs. 0.2% previously. EUR/GBP was stuck inside a tight range between 0.8500-0.8600 as the market awaits fresh direction. Overall the GBP/USD traded with a low of 1.4257 and a high of 1.4451 before closing the day at 1.4410 in the New York session.
The Australian Dollar (AUD) is beholden to the changes in risk appetite with year lows under 0.8100 tested before the major rebound in the US session sent the commodity currency straight back up to retest 0.8300. AUD/NZD in a holding lower range between 1.22 and 1.24 as the AUD collapse consolidates. Overall the AUD/USD traded with a low of 0.8064 and a high of 0.8309 before closing the US session at 0.8265.
Oil & Gold (XAU) Broke through $1200 as buyers returned in force. Overall trading with a low of USD$1185 and high of USD$1204 before ending the New York session at USD$1203 an ounce. Tested below $68 in the US session but finished with a sharp rally to test $70. WTI Oil Closed -$0.50 at $69.70 a barrel.
Labels:
FX Trading
Tuesday, May 25, 2010
25 May 10 : US Dollar Up
FX Highlights
* The USD is trading sharply higher as global equity markets tank on fear of contagion from the EU debt crisis, focus remains on Spanish banks and speculation that Spanish bank troubles may be a sign that the EU debt crisis is spreading, Italian/German ten year bond spread widens the most since the EU/IMF rescue announcement, GBP trades lower but outperforms in reaction to report that Q1 UK manufacturing activity rose sharply and Q1 GDP grew slightly faster than expected, commodity currencies trade lower with AUD at a 10 month low versus USD pressured by rising risk aversion and falling commodity prices, crude oil trades more than two dollars a barrel lower, JPY trades higher supported by safe haven flows, EUR/JPY trades at a nine-year low
* Focus turns to today's release US consumer confidence and Case Shiller home price index
* The IMF urges Spain to do more to overhaul its ailing banks, says consolidation has been too slow, and takeover for a small failing Spanish bank has sparked the latest fear that EU debt contagion may be spreading
* EU March industrial orders rose the fastest in 10 years up 5.2%,Italy plans to cut it budget by €26 billion over the next two years, EUR lower
* UK Q1 GDP revised to 0.3%, GBP lower
* NEC's Summers says the US economy is growing but jobs growth is lagging, US faces balancing act on the economy and budget reduction
* IMF ‘s chief economist says doubts remain about whether the EU will deliver on pledged aid to Greece
* US equity markets set to open sharply lower, European equities 2% lower, Nikkei closed 298 points lower
Upcoming Events
* US-Tuesday, May Case Shiller home price index will be released expected at 2.4 compared to 0.6 last month along with May consumer confidence expected at 59 compared to 57.9 last month
* CAN-Tuesday, no major Canadian economic data is due for release today
* The USD is trading sharply higher as global equity markets tank on fear of contagion from the EU debt crisis, focus remains on Spanish banks and speculation that Spanish bank troubles may be a sign that the EU debt crisis is spreading, Italian/German ten year bond spread widens the most since the EU/IMF rescue announcement, GBP trades lower but outperforms in reaction to report that Q1 UK manufacturing activity rose sharply and Q1 GDP grew slightly faster than expected, commodity currencies trade lower with AUD at a 10 month low versus USD pressured by rising risk aversion and falling commodity prices, crude oil trades more than two dollars a barrel lower, JPY trades higher supported by safe haven flows, EUR/JPY trades at a nine-year low
* Focus turns to today's release US consumer confidence and Case Shiller home price index
* The IMF urges Spain to do more to overhaul its ailing banks, says consolidation has been too slow, and takeover for a small failing Spanish bank has sparked the latest fear that EU debt contagion may be spreading
* EU March industrial orders rose the fastest in 10 years up 5.2%,Italy plans to cut it budget by €26 billion over the next two years, EUR lower
* UK Q1 GDP revised to 0.3%, GBP lower
* NEC's Summers says the US economy is growing but jobs growth is lagging, US faces balancing act on the economy and budget reduction
* IMF ‘s chief economist says doubts remain about whether the EU will deliver on pledged aid to Greece
* US equity markets set to open sharply lower, European equities 2% lower, Nikkei closed 298 points lower
Upcoming Events
* US-Tuesday, May Case Shiller home price index will be released expected at 2.4 compared to 0.6 last month along with May consumer confidence expected at 59 compared to 57.9 last month
* CAN-Tuesday, no major Canadian economic data is due for release today
Labels:
FX Trading
25 May 10 : Market RED RED RED
Temasek Appoints Hsieh Fu Hua As Executive Director, President
Singapore investment company Temasek Holdings (Temasek) has appointed former Singapore Exchange (SGX) chief Hsieh Fu Hua as its executive director and president. Hsieh, 59, will take on the full-time appointment from August. He is currently serving in a part-time capacity as Temasek’s Special Advisor to the CEO and as a board director. Meanwhile, Temasek also announced the appointment of Dilhan Pillay Sandrasegara, 47, as its Head of Portfolio Management. Sandrasegara, who is WongPartnership’s managing partner, will join Temasek on Oct 18.
Yangzijiang To Prepare For Issuance Of Taiwan Depository Receipt
Yangzijiang Shipbuilding (Yangzijiang) is seeking a Taiwan Depository Receipt listing of up to 100m new ordinary shares on the Taiwanese Stock Exchange (TSE). It has appointed Sino- Pac Securities Corp as the adviser and lead underwriter for the proposed issue and will be making preparation to submit a listing application to the TSE. The new shares will compose 2.66% of the enlarged capital if fully issued.
Tat Hong’s FY10 Earnings Slide On Lower Revenue
Tat Hong posted a 44% slump in its FY10 earnings on the back of a 22% drop in revenue, as infrastructure and resource spending was cut back in its key markets. All business segments reported slumps in the numbers, except the tower crane unit, which registered a 37% growth in revenue in FY10. As a result from that, the company’s over gross profit decreased by 21% yoy. Nevertheless, Tat Hong’s overall gross margin was marginally higher at 38.5% in FY10 as compared to 38.2% in FY09. Meanwhile, the company came into the current financial year with some $77m in cash (up from $46m last year).
SIA Stays Alert Despite Promising Travel Bookings
Singapore Airlines (SIA) remains cautious about restoring capacity amid continuing uncertainty in the global economy despite promising travel bookings and demand for business class seats. SIA will raise capacity about 2% this financial year, comparing to 11% cut capacity in FY10 as travel demand shrunken. In 4Q10, the passenger load factor gained 8.8 percentage points to 80%. Higher jet fuel prices is another area SIA is keeping a close eye on, as fuel accounts for about 35% of the airline’s costs. For 4Q10, SIA posted a net profit of $278m, up from $41.9m a year earlier. Revenue was $3.3b. Full-year net earnings were $216m, compared with $1.06b a year earlier.
Labels:
Market Update
25 May 10 : The Bears Are Back Again
U.S. Dollar Trading (USD) saw solid strength on the back of renewed Eurozone concerns and a very weak close in US stocks sparking safe haven demand. April Existing Home Sales jumped 7.6% to 5.77m vs. 5.62mln forecast. In US stocks, DJIA +125 points closing at 10193, S&P +16 points closing at 1087 and NASDAQ +25 points closing at 2229. Looking ahead, March Case Shiller HPI is forecast at -0.3% vs. -0.1% and CB Consumer for May forecast at 59 vs. 57.9 previously.
The Euro (EUR) was under pressure for most of the day as weekend press focused on the Bank of Spain take over of a regional bank and Banking stocks in the US were hammered on heightened credit risk flowing throughout the markets. EUR/USD traded with a low of 1.2331 and a high of 1.2540 before closing at 1.2350. Looking ahead, March Industrial Orders forecast at 2% vs. 1.5% previously.
The Japanese Yen (JPY) the USD/JPY performed well grinding higher above Y90 and helping crosses rally until the last hours of US trade in which US stocks fell heavily and the Yen found safe haven demand. Fear of BOJ price checking below Y90 is keeping the losses limited for the moment. Another big level in the market is EUR/JPY at 110 Overall the USDJPY traded with a low of 89.73 and a high of 90.65 before closing the day around 90.10 in the New York session.
The Sterling (GBP) was well supported on dips from GBP/JPY buying and EUR/GBP selling to push GBP/USD up above 1.4500 briefly in Europe before falling on the slide in the Euro. Concerns about UK Debt are still in focus. Overall the GBP/USD traded with a low of 1.4350 and a high of 1.4531 before closing the day at 1.4410 in the New York session. Looking ahead, Revised GDP Q1 forecast at 0.3% vs. 0.2% previously.
The Australian Dollar (AUD) was able to rally to resistance at 0.8350 before sliding at the end of the US session as risk aversion spiked higher. AUD/JPY is once again providing most of the momentum as bargain hunters buy at the bottom and sellers track the stock market lower. Overall the AUD/USD traded with a low of 0.8183 and a high of 0.8361 before closing the US session at 0.8240.
Oil & Gold (XAU) rallied as Euro concerns resurfaced and push the alternative currency higher. Overall trading with a low of USD$1181 and high of USD$1197 before ending the New York session at USD$1192 an ounce. Was stable edging back above $70 for most of the day. WTI Oil Closed +$0.10 at $70.20 a barrel.
The Euro (EUR) was under pressure for most of the day as weekend press focused on the Bank of Spain take over of a regional bank and Banking stocks in the US were hammered on heightened credit risk flowing throughout the markets. EUR/USD traded with a low of 1.2331 and a high of 1.2540 before closing at 1.2350. Looking ahead, March Industrial Orders forecast at 2% vs. 1.5% previously.
The Japanese Yen (JPY) the USD/JPY performed well grinding higher above Y90 and helping crosses rally until the last hours of US trade in which US stocks fell heavily and the Yen found safe haven demand. Fear of BOJ price checking below Y90 is keeping the losses limited for the moment. Another big level in the market is EUR/JPY at 110 Overall the USDJPY traded with a low of 89.73 and a high of 90.65 before closing the day around 90.10 in the New York session.
The Sterling (GBP) was well supported on dips from GBP/JPY buying and EUR/GBP selling to push GBP/USD up above 1.4500 briefly in Europe before falling on the slide in the Euro. Concerns about UK Debt are still in focus. Overall the GBP/USD traded with a low of 1.4350 and a high of 1.4531 before closing the day at 1.4410 in the New York session. Looking ahead, Revised GDP Q1 forecast at 0.3% vs. 0.2% previously.
The Australian Dollar (AUD) was able to rally to resistance at 0.8350 before sliding at the end of the US session as risk aversion spiked higher. AUD/JPY is once again providing most of the momentum as bargain hunters buy at the bottom and sellers track the stock market lower. Overall the AUD/USD traded with a low of 0.8183 and a high of 0.8361 before closing the US session at 0.8240.
Oil & Gold (XAU) rallied as Euro concerns resurfaced and push the alternative currency higher. Overall trading with a low of USD$1181 and high of USD$1197 before ending the New York session at USD$1192 an ounce. Was stable edging back above $70 for most of the day. WTI Oil Closed +$0.10 at $70.20 a barrel.
Labels:
FX Trading
Monday, May 24, 2010
24 May 10 : Market Open for a new week
CURRENCY TRADING SUMMARY - 24th May (00:30GMT)
U.S. Dollar Trading (USD) pared back gains as US stock markets rebounded into the close on Friday allowing risk currencies to rally. With no economic data from the US the bounce was chalked up to rumors that Goldman Sachs had reached an agreement with the SEC and recent selling has been overdone. In US stocks, DJIA +125 points closing at 10193, S&P +16 points closing at 1087 and NASDAQ +25 points closing at 2229. Looking ahead, April Existing Home Sales forecast at 5.62mln vs. 5.35mln previously.
The Euro (EUR) was volatile but quite buoyant as the rebound continued. Highs were seen in Asia above 1.2650 but the market struggled to hold these lofty levels into the weekend. Supporting the rebound was news German's Government had approved the Greece Bailout. German IFO was at 101.5 vs. 101.9 forecast. EUR/USD traded with a low of 1.2464 and a high of 1.2672 before closing at 1.2572.
The Japanese Yen (JPY) the yen crosses tracked the stock market rallying in Asia before falling at the start of US as the Dow Jones broke below 10000. The Goldman Sachs inspired 250 point Dow Jones Rally then lifted the USD/JPY back to Y90. The BOJ held at 0.1% as widely expected. Overall the USDJPY traded with a low of 89.09 and a high of 90.47 before closing the day around 90.03 in the New York session.
The Sterling (GBP) was well supported on dips as the new conservative government outlined there 6bn saving plan and the US Public Sector borrowing came in as expected at 10bn vs. 23bn previously. GBP/JPY recovered the Y130 level on heavy short covering. Overall the GBP/USD traded with a low of 1.4318 and a high of 1.4496 before closing the day at 1.4486 in the New York session.
The Australian Dollar (AUD) continued to trade in a volatile 200 point range, rallying off 0.8077 lows in Asia to surge to above 0.8300. AUD/JPY flows are responsible for much of the movement as very attractive rates inspire bargain hunting. The proposed 40% Super Profits Mining tax however is continuing to weigh on the Aussie. Overall the AUD/USD traded with a low of 0.8077 and a high of 0.8366 before closing the US session at 0.8313.
Oil & Gold (XAU) was mixed with liquidation of long positions being countered by dip buyers. Overall trading with a low of USD$1166 and high of USD$1188 before ending the New York session at USD$1177 an ounce. Ended roughly unchanged after testing support at the $69 level. WTI Oil Closed +$0.30 at $70.10 a barrel.
U.S. Dollar Trading (USD) pared back gains as US stock markets rebounded into the close on Friday allowing risk currencies to rally. With no economic data from the US the bounce was chalked up to rumors that Goldman Sachs had reached an agreement with the SEC and recent selling has been overdone. In US stocks, DJIA +125 points closing at 10193, S&P +16 points closing at 1087 and NASDAQ +25 points closing at 2229. Looking ahead, April Existing Home Sales forecast at 5.62mln vs. 5.35mln previously.
The Euro (EUR) was volatile but quite buoyant as the rebound continued. Highs were seen in Asia above 1.2650 but the market struggled to hold these lofty levels into the weekend. Supporting the rebound was news German's Government had approved the Greece Bailout. German IFO was at 101.5 vs. 101.9 forecast. EUR/USD traded with a low of 1.2464 and a high of 1.2672 before closing at 1.2572.
The Japanese Yen (JPY) the yen crosses tracked the stock market rallying in Asia before falling at the start of US as the Dow Jones broke below 10000. The Goldman Sachs inspired 250 point Dow Jones Rally then lifted the USD/JPY back to Y90. The BOJ held at 0.1% as widely expected. Overall the USDJPY traded with a low of 89.09 and a high of 90.47 before closing the day around 90.03 in the New York session.
The Sterling (GBP) was well supported on dips as the new conservative government outlined there 6bn saving plan and the US Public Sector borrowing came in as expected at 10bn vs. 23bn previously. GBP/JPY recovered the Y130 level on heavy short covering. Overall the GBP/USD traded with a low of 1.4318 and a high of 1.4496 before closing the day at 1.4486 in the New York session.
The Australian Dollar (AUD) continued to trade in a volatile 200 point range, rallying off 0.8077 lows in Asia to surge to above 0.8300. AUD/JPY flows are responsible for much of the movement as very attractive rates inspire bargain hunting. The proposed 40% Super Profits Mining tax however is continuing to weigh on the Aussie. Overall the AUD/USD traded with a low of 0.8077 and a high of 0.8366 before closing the US session at 0.8313.
Oil & Gold (XAU) was mixed with liquidation of long positions being countered by dip buyers. Overall trading with a low of USD$1166 and high of USD$1188 before ending the New York session at USD$1177 an ounce. Ended roughly unchanged after testing support at the $69 level. WTI Oil Closed +$0.30 at $70.10 a barrel.
Labels:
FX Trading
Sunday, May 23, 2010
23 May 10 : S&P 500 Candlestick Shows Reversal
Seemed to me the benchmark S&P 500 formed a bullish harami at a key support level.
Labels:
Market Update
Friday, May 21, 2010
21 May 10 : Asian Stocks Dive
Asian stock markets slid on Friday as worries about the euro zone and the flare-up in market volatility prompted investors to sell shares and keep cash until calm returns.
Trading was choppy in foreign exchange markets as the euro bounced back against the dollar on short-covering and the Australian dollar recovered from 10-month lows on talk of central bank intervention.
"Investors are shifting toward cash as you can see from such moves as investors were even selling gold yesterday," said Masaru Hamasaki, a senior strategist at Toyota Asset Management.
"There's uncertainty over the extent of the fallout from the crisis, such as whether it would end up leading to a halt in financial trades like after the Lehman shock."
In Asian trade, the euro firmed to $1.2561 from $1.2507 late in New York on Thursday when it climbed as high as $1.2598. It got a boost on Thursday, helped by its gains versus the Swiss franc and speculation European monetary officials might intervene to prop up the single currency.
On the year, however, the euro is down about 12 percent against the dollar. Despite the recent rebound, sentiment on the currency remains decidedly negative, with investors concerned about a seeming lack of unity among euro zone leaders in addressing the debt crisis.
Japan's Nikkei average <.N225> fell as much as 3.2 percent to 9,710.92, a five-month low. The index has lost over 5.3 percent since the start of the week, when renewed worries about the euro zone began.
The MSCI index of Asia-Pacific shares outside of Japan <.MIAPJ0000PUS> fell 0.89 percent to an eight-month low.
The Australian dollar bounced to $0.8288 from 10-month lows of $0.8075 after talk of central bank intervention sparked short-covering. The currency had fallen 3 percent on Thursday.
Spot gold prices fell to a two-week low to $1165.50 an ounce as investors remained nervous about the turmoil on financial markets. Spot platinum fell more than 3 percent.
U.S. crude futures fell below $70 a barrel on fears that crude demand could suffer because of Europe's debt crisis. NYMEX crude for July delivery was down almost 1 percent at $69.90 a barrel by 10:10 p.m. ET but then recovered to $70.30.
Trading was choppy in foreign exchange markets as the euro bounced back against the dollar on short-covering and the Australian dollar recovered from 10-month lows on talk of central bank intervention.
"Investors are shifting toward cash as you can see from such moves as investors were even selling gold yesterday," said Masaru Hamasaki, a senior strategist at Toyota Asset Management.
"There's uncertainty over the extent of the fallout from the crisis, such as whether it would end up leading to a halt in financial trades like after the Lehman shock."
In Asian trade, the euro firmed to $1.2561 from $1.2507 late in New York on Thursday when it climbed as high as $1.2598. It got a boost on Thursday, helped by its gains versus the Swiss franc and speculation European monetary officials might intervene to prop up the single currency.
On the year, however, the euro is down about 12 percent against the dollar. Despite the recent rebound, sentiment on the currency remains decidedly negative, with investors concerned about a seeming lack of unity among euro zone leaders in addressing the debt crisis.
Japan's Nikkei average <.N225> fell as much as 3.2 percent to 9,710.92, a five-month low. The index has lost over 5.3 percent since the start of the week, when renewed worries about the euro zone began.
The MSCI index of Asia-Pacific shares outside of Japan <.MIAPJ0000PUS> fell 0.89 percent to an eight-month low.
The Australian dollar bounced to $0.8288 from 10-month lows of $0.8075 after talk of central bank intervention sparked short-covering. The currency had fallen 3 percent on Thursday.
Spot gold prices fell to a two-week low to $1165.50 an ounce as investors remained nervous about the turmoil on financial markets. Spot platinum fell more than 3 percent.
U.S. crude futures fell below $70 a barrel on fears that crude demand could suffer because of Europe's debt crisis. NYMEX crude for July delivery was down almost 1 percent at $69.90 a barrel by 10:10 p.m. ET but then recovered to $70.30.
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Market Update
21 May 10 : Another Disaster in Dow Jones
USD higher, jobless claims jump, spike in risk aversion
* USD: Higher, stocks extend losses after report of a surge in jobless claims and a dip in LEI
* JPY: Higher, tracking risk sentiment, Q1 GDP outpaces the US and EU, deflationary pressures continue
* EUR: Lower, EU nations divided over how to combat the debt crisis, Juncker sees no immediate intervention
* GBP: Lower, retail sales rise for third month in a row, pressured by risk aversion /global risk fears
* CAD and AUD: AUD & CAD lower, deleveraging of stocks and commodities, RBA/BOC rate hike doubts
Overview
USD and JPY surged in Thursday's trade supported by a spike in risk aversion as equity markets tumble in reaction to speculation that the EU lacks a unified response to the sovereign debt crisis and central banks refrained from coordinated intervention to support the EUR. There are reports that the German ban on naked short selling caught some of the EU members by surprise. This surprise sparked speculation that the EU lacks unity to try and combat the sovereign debt crisis and to restore confidence in the EUR. EU's Juncker sees no immediate currency intervention to support the EUR. Equity markets and the EUR were also pressured by widening of EU credit spreads and more strikes in Greece protesting Greek austerity plans. GBP traded lower despite report of improving UK retail sales pressured by spillover from the EUR. Commodity currencies traded sharply lower in reaction to a spike in risk aversion and weaker equity markets. Asian equity markets traded at an eight-month low. JPY surged supported by safe haven demand and gains in cross trade versus Europe and commodity currencies. Investors continue to deleverage from higher risk assets seeking safety in the USD, JPY and CHF. Today's US economic data was disappointing with jobless claims posting a surprise rise, leading indicators posting an unexpected dip and the Philly Fed rose by slightly less than expected. Stocks tumbled after today's US economic reports and USD and JPY extended early gains.
Today's US data:
Initial jobless claims for week ending 05/15 rose by 25k, to 471k, a reading of 440k was expected. April LEI declined by 0.1%, a reading of 0.2% was expected. May Philly Fed came in at 21.4, a reading of 22 was expected.
Upcoming US data:
There are no major US economic reports scheduled for release Friday.
JPY
JPY traded sharply higher supported by a spike in risk aversion as equity markets tumble. Asian markets traded at an eight-month low, European equity markets were 2% lower and US equity markets extended early losses in reaction to report of a surprise jump in US jobless claims. Investors fear the fallout from the EU debt crisis will contribute to slower global growth in the second half of the year and are deleveraging dumping higher risk assets. Investors are also concerned about the potential negative impact of new financial regulations that are being proposed in Europe and the US. JPY gained over 3% versus the AUD and EUR and 2% versus the GBP as investors seek safe haven in the USD and JPY. The Nikkei closed 156 points lower. Japan's Q1 GDP came in below market expectations but confirmed that Japan's first-quarter growth was stronger than in the US and the EU. Japan's Q1 GDP rose by 1.2% and 4.9%y/y. Japans annual GDP growth rate was expected at 5.5%. CAPEX spending rose by 1% and the deflator declined by a record 3%. Japan's Q1 GDP confirms that the recovery is gaining momentum but deflationary pressures continue. JPY price direction remains closely linked to risk appetite and developments in regard to EU sovereign debt risk.
On May 21st March revised leading indicators will be released expected 4.5% compared to 1.2% last month.
Key technical levels to watch in USD/JPY include support at 87.95 the May 6th low with resistance at 91.88 the May 20th high.
EUR
EUR traded sharply lower Thursday failing to hold yesterday's rebound. The latest wave of selling in the EUR is attributed to speculation that there is no unity among the EU nations to combat the debt crisis or a plan to intervene in support of the EUR. In order to restore confidence in the EU financial markets and EUR the EU nations will have adopt reform that consolidates EU monetary and political union. Yesterday's unilateral announcement that Germany was banning naked short selling on some stocks, bonds and credit default instruments appeared to catch other members of the EU by surprise. The unilateral nature of the German regulatory actions coupled with the fact that thus far other EU nations have not followed Germany in regard to naked short selling ban suggests to investors that the EU lacks unity. EUR was also pressured by the rising cost of funding EU debt as credits default swap yields rise and in reaction to new strikes in Greece protesting Greek austerity measures. The Greek strikes put investors on edge and contribute to a sharp selloff in European equity markets. Part of yesterday's rebound in the EUR was attributed to rumors that the ECB and possibly the Fed were planning intervention in support of the EUR. Intervention has yet to emerge and the EU's Juncker said that although he is concerned about the pace of the EUR decline he sees no immediate currency intervention to support the EUR. Negative sentiment towards the EUR is growing as a number of bank forecasters lower their year end EUR targets. UBS says that the European crisis will result in the new normal for the EUR of 1.10.Analysts at Merrill and B of A say the EUR could hit 116 by year end. Nomura lowered its EUR year-end forecast to 115. In addition, the Korean central bank says that the EU debt crisis makes the EUR less attractive as an alternative reserve currency. EUR posted a modest rebound from the days lows supported by a statement from ECB President Trichet that the ECB has not adopted quantitative ease and he defended the ECB's independence. The ECB's decision to buy bond generates concern about price stability and ECB's independence.
On May 21st EU flash May manufacturing and services PMI and German May IFO index will be released. Manufacturing PMI is expected at 57.9 compared to 57.3 last month and the services PMI is expected at 55.7 compared to 55.6 last month. German IFO is expected at 101 compared to 101.6 last month. EU March current account will also be released on May 21st expected at - 6.1bln compared to -5.2 million last.
The technical outlook for the EUR is mixed as EUR struggles to hold above 1.2300. Expect EUR support at 1.2143 the May 19th low with resistance at 1.2577 to May 14th high. Trade will monitor the 50% retracement level of 0.8225-1.6038 range at 1.2135.
GBP
GBP traded at a 14 month low versus the USD pressured by spillover from weaker EUR and in reaction diminished risk appetite as global equity markets tumble. GBP was pressured in Wednesday trade by dovish BOE policy minutes for the May policy meeting and in reaction to the announcement of the German ban on naked short selling. The May BOE policy minutes state that the BOE voted unanimously to maintain the current level of interest rates and asset purchases. The BOE minutes also state that there is substantial spare capacity in the UK economy and this should bring down inflation in the months ahead. The BOE minutes noted that UK inflation has been rising lately and the rise was likely a result of weak GDP and rising energy prices. The BOE minutes also noted uncertainty about the impact of UK deficit reduction for the EU economy and inflation. Tuesday, the UK reported that UK inflation rate rose 3.7%. This is well above the BOE's 2% inflation target. BOE Governor King said that the rise in UK CPI was likely temporary reflecting higher energy prices. King expects the UK inflation rate to fall below 2% within the coming year. King's comments suggest that rising UK inflation will not encourage the BOE to consider earlier normalization of monetary policy or restrict the BOE from consideration of additional quantitative ease if necessary. There was little reaction to report that UK retail sales rose 0.3% m/m and 1.8%y/y. The UK retail sales rise was overshadowed by uncertainty about the UK budget outlook as he EU debt crisis shines a light on UK fiscal woes. Focus turns to Friday's release of UK public sector borrowing.
On May 21st April money supply and will be released. Money supply is expected to rise by 0.4% compared to 0.2% last month. That public-sector borrowing is expected to expand by 24.3bln compared to 23.4bln last month.
The technical outlook for GBP is negative as GBP trades below 1.4500. Expect near-term support at 1.4110' the March 30th low with resistance at 1.4522 the May 18th high.
CAD
CAD traded sharply lower pressured by weaker equities and a spike in risk aversion sparked by ongoing concerns about the EU debt crisis. EU nations appear to be divided over how to combat the debt crisis and this division contributes to risk aversion and dumping the higher risk and growth led currencies like the CAD. Commodity currencies have been hit hard by deleveraging from investors with crude oil trading below $69 a barrel in Thursday's trade. Report of an unexpected spike in US jobless claims adds to negative market sentiment. The trade ignored a report of slightly better than expected Canadian leading index. Canada's leading indicators for April rose 0.9%, a 0.8% rise was expected. The rise in Canada's leading index confirms that the Canadian economy continues to improve but there are worries that the recent slowdown in the Chinese economy and the fallout from the EU debt crisis will curb global growth in the second half of 2010.Recent Canadian economic data confirms that the domestic economy is strengthening. Canadian officials said they do not expect fallout for the Canadian markets from the EU debt crisis. It is becoming less clear whether the EU debt crisis and tumbling equity markets will prevent the BOC from tightening monetary policy. CAD is pressured by doubts about a BOC rate hike. Focus turns to Friday's released Canada's CPI and retail sales. A strong CPI rise will likely tip the scales in favor of a June BOC rate hike this will have to be balanced against the impact of the EU debt crisis.
On May 21st April CPI will be released expected at 0.1% compared to -0.2% last month with the annual inflation rate expected at 1.5%. March retail sales will also be released on May 21st expected at 0.2% compared to 0.5 % last month.
The technical outlook for CAD is negative as USD/CAD trades above 1.0600. Look for near-term support at 1.0431 the May 20th low with resistance at 1.0780 the February 9th high.
AUD
AUD traded sharply lower pressured by what appeared to be panic liquidation of the currency sparked by rising risk aversion and tumbling equity and commodity markets. The continued rise in risk aversion sparked by the EU debt crisis has prompted deleveraging of high risk assets like the AUD. The AUD has also been weakening in reaction to concern that a proposed 40% tax on resources may cripple the resource industry in Australia and drive commodity prices low lower. The AUD may also have been pressured by growing political uncertainty in Australia as pre-election polls suggest the risk of a hung parliament in Australia. The Australian elections are six months away but the polls seem to contribute to additional selling pressure of the AUD. Recent Australian economic data points to a slowdown in Australia's domestic economy. Australia's May Westpac consumer confidence index declined by 7%. The decline in consumer confidence may diminish the risk of additional RBA rate hikes and contribute to speculation that the RBA is likely to hold monetary policy steady in the months ahead. Tuesday the RBA released its minutes for the May 4th policy meeting. The RBA minutes state that recent rate hikes leave policy well placed for now and that the inflationary effects of resource price gains is outweighed by EUR concerns. The minutes suggest that the RBA plans a pause in its tightening cycle and is likely to hold rate policy steady for the next few months. Fear of EU contagion and recent tightening of credit conditions in China may have encouraged the RBA to consider a pause in its rate hike cycle. Last week Australia reported an unexpected drop in March housing finance, and a decline in business conditions and weekly job ads. Weaker business conditions, the drop in job ads and weaker housing finance may reflect recent tightening of monetary policy by the RBA. These reports coupled with Wednesday's report of weaker Australian consumer confidence contribute to speculation that the RBA will pause its tightening cycle.
The technical outlook for the AUD is negative as the AUD trades below 8300. Expect AUD support at 8393 the May 19th low with resistance at 8640.
* USD: Higher, stocks extend losses after report of a surge in jobless claims and a dip in LEI
* JPY: Higher, tracking risk sentiment, Q1 GDP outpaces the US and EU, deflationary pressures continue
* EUR: Lower, EU nations divided over how to combat the debt crisis, Juncker sees no immediate intervention
* GBP: Lower, retail sales rise for third month in a row, pressured by risk aversion /global risk fears
* CAD and AUD: AUD & CAD lower, deleveraging of stocks and commodities, RBA/BOC rate hike doubts
Overview
USD and JPY surged in Thursday's trade supported by a spike in risk aversion as equity markets tumble in reaction to speculation that the EU lacks a unified response to the sovereign debt crisis and central banks refrained from coordinated intervention to support the EUR. There are reports that the German ban on naked short selling caught some of the EU members by surprise. This surprise sparked speculation that the EU lacks unity to try and combat the sovereign debt crisis and to restore confidence in the EUR. EU's Juncker sees no immediate currency intervention to support the EUR. Equity markets and the EUR were also pressured by widening of EU credit spreads and more strikes in Greece protesting Greek austerity plans. GBP traded lower despite report of improving UK retail sales pressured by spillover from the EUR. Commodity currencies traded sharply lower in reaction to a spike in risk aversion and weaker equity markets. Asian equity markets traded at an eight-month low. JPY surged supported by safe haven demand and gains in cross trade versus Europe and commodity currencies. Investors continue to deleverage from higher risk assets seeking safety in the USD, JPY and CHF. Today's US economic data was disappointing with jobless claims posting a surprise rise, leading indicators posting an unexpected dip and the Philly Fed rose by slightly less than expected. Stocks tumbled after today's US economic reports and USD and JPY extended early gains.
Today's US data:
Initial jobless claims for week ending 05/15 rose by 25k, to 471k, a reading of 440k was expected. April LEI declined by 0.1%, a reading of 0.2% was expected. May Philly Fed came in at 21.4, a reading of 22 was expected.
Upcoming US data:
There are no major US economic reports scheduled for release Friday.
JPY
JPY traded sharply higher supported by a spike in risk aversion as equity markets tumble. Asian markets traded at an eight-month low, European equity markets were 2% lower and US equity markets extended early losses in reaction to report of a surprise jump in US jobless claims. Investors fear the fallout from the EU debt crisis will contribute to slower global growth in the second half of the year and are deleveraging dumping higher risk assets. Investors are also concerned about the potential negative impact of new financial regulations that are being proposed in Europe and the US. JPY gained over 3% versus the AUD and EUR and 2% versus the GBP as investors seek safe haven in the USD and JPY. The Nikkei closed 156 points lower. Japan's Q1 GDP came in below market expectations but confirmed that Japan's first-quarter growth was stronger than in the US and the EU. Japan's Q1 GDP rose by 1.2% and 4.9%y/y. Japans annual GDP growth rate was expected at 5.5%. CAPEX spending rose by 1% and the deflator declined by a record 3%. Japan's Q1 GDP confirms that the recovery is gaining momentum but deflationary pressures continue. JPY price direction remains closely linked to risk appetite and developments in regard to EU sovereign debt risk.
On May 21st March revised leading indicators will be released expected 4.5% compared to 1.2% last month.
Key technical levels to watch in USD/JPY include support at 87.95 the May 6th low with resistance at 91.88 the May 20th high.
EUR
EUR traded sharply lower Thursday failing to hold yesterday's rebound. The latest wave of selling in the EUR is attributed to speculation that there is no unity among the EU nations to combat the debt crisis or a plan to intervene in support of the EUR. In order to restore confidence in the EU financial markets and EUR the EU nations will have adopt reform that consolidates EU monetary and political union. Yesterday's unilateral announcement that Germany was banning naked short selling on some stocks, bonds and credit default instruments appeared to catch other members of the EU by surprise. The unilateral nature of the German regulatory actions coupled with the fact that thus far other EU nations have not followed Germany in regard to naked short selling ban suggests to investors that the EU lacks unity. EUR was also pressured by the rising cost of funding EU debt as credits default swap yields rise and in reaction to new strikes in Greece protesting Greek austerity measures. The Greek strikes put investors on edge and contribute to a sharp selloff in European equity markets. Part of yesterday's rebound in the EUR was attributed to rumors that the ECB and possibly the Fed were planning intervention in support of the EUR. Intervention has yet to emerge and the EU's Juncker said that although he is concerned about the pace of the EUR decline he sees no immediate currency intervention to support the EUR. Negative sentiment towards the EUR is growing as a number of bank forecasters lower their year end EUR targets. UBS says that the European crisis will result in the new normal for the EUR of 1.10.Analysts at Merrill and B of A say the EUR could hit 116 by year end. Nomura lowered its EUR year-end forecast to 115. In addition, the Korean central bank says that the EU debt crisis makes the EUR less attractive as an alternative reserve currency. EUR posted a modest rebound from the days lows supported by a statement from ECB President Trichet that the ECB has not adopted quantitative ease and he defended the ECB's independence. The ECB's decision to buy bond generates concern about price stability and ECB's independence.
On May 21st EU flash May manufacturing and services PMI and German May IFO index will be released. Manufacturing PMI is expected at 57.9 compared to 57.3 last month and the services PMI is expected at 55.7 compared to 55.6 last month. German IFO is expected at 101 compared to 101.6 last month. EU March current account will also be released on May 21st expected at - 6.1bln compared to -5.2 million last.
The technical outlook for the EUR is mixed as EUR struggles to hold above 1.2300. Expect EUR support at 1.2143 the May 19th low with resistance at 1.2577 to May 14th high. Trade will monitor the 50% retracement level of 0.8225-1.6038 range at 1.2135.
GBP
GBP traded at a 14 month low versus the USD pressured by spillover from weaker EUR and in reaction diminished risk appetite as global equity markets tumble. GBP was pressured in Wednesday trade by dovish BOE policy minutes for the May policy meeting and in reaction to the announcement of the German ban on naked short selling. The May BOE policy minutes state that the BOE voted unanimously to maintain the current level of interest rates and asset purchases. The BOE minutes also state that there is substantial spare capacity in the UK economy and this should bring down inflation in the months ahead. The BOE minutes noted that UK inflation has been rising lately and the rise was likely a result of weak GDP and rising energy prices. The BOE minutes also noted uncertainty about the impact of UK deficit reduction for the EU economy and inflation. Tuesday, the UK reported that UK inflation rate rose 3.7%. This is well above the BOE's 2% inflation target. BOE Governor King said that the rise in UK CPI was likely temporary reflecting higher energy prices. King expects the UK inflation rate to fall below 2% within the coming year. King's comments suggest that rising UK inflation will not encourage the BOE to consider earlier normalization of monetary policy or restrict the BOE from consideration of additional quantitative ease if necessary. There was little reaction to report that UK retail sales rose 0.3% m/m and 1.8%y/y. The UK retail sales rise was overshadowed by uncertainty about the UK budget outlook as he EU debt crisis shines a light on UK fiscal woes. Focus turns to Friday's release of UK public sector borrowing.
On May 21st April money supply and will be released. Money supply is expected to rise by 0.4% compared to 0.2% last month. That public-sector borrowing is expected to expand by 24.3bln compared to 23.4bln last month.
The technical outlook for GBP is negative as GBP trades below 1.4500. Expect near-term support at 1.4110' the March 30th low with resistance at 1.4522 the May 18th high.
CAD
CAD traded sharply lower pressured by weaker equities and a spike in risk aversion sparked by ongoing concerns about the EU debt crisis. EU nations appear to be divided over how to combat the debt crisis and this division contributes to risk aversion and dumping the higher risk and growth led currencies like the CAD. Commodity currencies have been hit hard by deleveraging from investors with crude oil trading below $69 a barrel in Thursday's trade. Report of an unexpected spike in US jobless claims adds to negative market sentiment. The trade ignored a report of slightly better than expected Canadian leading index. Canada's leading indicators for April rose 0.9%, a 0.8% rise was expected. The rise in Canada's leading index confirms that the Canadian economy continues to improve but there are worries that the recent slowdown in the Chinese economy and the fallout from the EU debt crisis will curb global growth in the second half of 2010.Recent Canadian economic data confirms that the domestic economy is strengthening. Canadian officials said they do not expect fallout for the Canadian markets from the EU debt crisis. It is becoming less clear whether the EU debt crisis and tumbling equity markets will prevent the BOC from tightening monetary policy. CAD is pressured by doubts about a BOC rate hike. Focus turns to Friday's released Canada's CPI and retail sales. A strong CPI rise will likely tip the scales in favor of a June BOC rate hike this will have to be balanced against the impact of the EU debt crisis.
On May 21st April CPI will be released expected at 0.1% compared to -0.2% last month with the annual inflation rate expected at 1.5%. March retail sales will also be released on May 21st expected at 0.2% compared to 0.5 % last month.
The technical outlook for CAD is negative as USD/CAD trades above 1.0600. Look for near-term support at 1.0431 the May 20th low with resistance at 1.0780 the February 9th high.
AUD
AUD traded sharply lower pressured by what appeared to be panic liquidation of the currency sparked by rising risk aversion and tumbling equity and commodity markets. The continued rise in risk aversion sparked by the EU debt crisis has prompted deleveraging of high risk assets like the AUD. The AUD has also been weakening in reaction to concern that a proposed 40% tax on resources may cripple the resource industry in Australia and drive commodity prices low lower. The AUD may also have been pressured by growing political uncertainty in Australia as pre-election polls suggest the risk of a hung parliament in Australia. The Australian elections are six months away but the polls seem to contribute to additional selling pressure of the AUD. Recent Australian economic data points to a slowdown in Australia's domestic economy. Australia's May Westpac consumer confidence index declined by 7%. The decline in consumer confidence may diminish the risk of additional RBA rate hikes and contribute to speculation that the RBA is likely to hold monetary policy steady in the months ahead. Tuesday the RBA released its minutes for the May 4th policy meeting. The RBA minutes state that recent rate hikes leave policy well placed for now and that the inflationary effects of resource price gains is outweighed by EUR concerns. The minutes suggest that the RBA plans a pause in its tightening cycle and is likely to hold rate policy steady for the next few months. Fear of EU contagion and recent tightening of credit conditions in China may have encouraged the RBA to consider a pause in its rate hike cycle. Last week Australia reported an unexpected drop in March housing finance, and a decline in business conditions and weekly job ads. Weaker business conditions, the drop in job ads and weaker housing finance may reflect recent tightening of monetary policy by the RBA. These reports coupled with Wednesday's report of weaker Australian consumer confidence contribute to speculation that the RBA will pause its tightening cycle.
The technical outlook for the AUD is negative as the AUD trades below 8300. Expect AUD support at 8393 the May 19th low with resistance at 8640.
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FX Trading
Thursday, May 20, 2010
20 May 10 : Euro Short Covering... But what next...
CURRENCY TRADING SUMMARY - 20th May (00:30GMT)
U.S. Dollar Trading (USD) in a unique day of trading the Euro rallied aggressively across the market even as Risk was taken off the board. Rumors swept through the market that the ECB would make an announcement on the currency's depreciation and although this was denied the market held on to the gains. April's CPI fell -0.1% m/m and the Core rate at 0.9% y/y is at multi decades lows. In US stocks, DJIA -66 points closing at 10444, S&P -5 points closing at 1115 and NASDAQ -18 points closing at 2298. Looking ahead, Weekly Jobless Claims are forecast at 440k vs. 444k previously.
The Euro (EUR) Started Europe under pressure and tested day lows after Germany's Merkal stated the Euro was in Danger but then enjoyed a stunning reversal to close above 1.2400 in the US session. The gains were aggressive especially against the risk currencies AUD and NZD. EUR/USD traded with a low of 1.2143 and a high of 1.2433 before closing at 1.2410. Looking ahead, April German PPI is forecast at 0.5% vs. 0.7% previously m/m.
The Japanese Yen (JPY) was extremely volatile gaining over 300 sen against the AUD and GBP before reversing aggressively on ECB intervention mutter and profit taking. USD/JPY bounced off Y91 but the uptrend is now fiercely in debate. Overall the USDJPY traded with a low of 90.93 and a high of 92.18 before closing the day around 91.60 in the New York session. UPDATE Q1 GDP at 1.2% vs. 0.9% previously.
The Sterling (GBP) tracked the Euro higher in Europe and was able to pair losses against the Yen but sentiment is still fragile. EUR/GBP rallied as the Euro outpaced but the downtrend is still not threatened and 0.8600 is capping for now. Overall the GBP/USD traded with a low of 1.4236 and a high of 1.4469 before closing the day at 1.4400 in the New York session. Looking ahead, April Retail Sales forecast at 0.2% vs. 0.4%.
The Australian Dollar (AUD) capitulated as the year low at 0.8580 broke in the Asian session and hedge funds and large investors liquidated. AUD/JPY led the way lower falling from Y79 to Y76.50 rapidly before volatile action for the rest of the day. Adding to the weak sentiment was the drop in Consumer Confidence to -7 vs. -1 previously m/m. Overall the AUD/USD traded with a low of 0.8356 and a high of 0.8616 before closing the US session at 0.8480.
Oil & Gold (XAU) profit taking hit the precious metal hard with the pair breaking through the $1200 and sliding below $1190 before stabilizing. Overall trading with a low of USD$1186 and high of USD$1228 before ending the New York session at USD$1195 an ounce. Oil rallied back above $70 a barrel. WTI Oil Closed $0.80 at $70.40 a barrel.
U.S. Dollar Trading (USD) in a unique day of trading the Euro rallied aggressively across the market even as Risk was taken off the board. Rumors swept through the market that the ECB would make an announcement on the currency's depreciation and although this was denied the market held on to the gains. April's CPI fell -0.1% m/m and the Core rate at 0.9% y/y is at multi decades lows. In US stocks, DJIA -66 points closing at 10444, S&P -5 points closing at 1115 and NASDAQ -18 points closing at 2298. Looking ahead, Weekly Jobless Claims are forecast at 440k vs. 444k previously.
The Euro (EUR) Started Europe under pressure and tested day lows after Germany's Merkal stated the Euro was in Danger but then enjoyed a stunning reversal to close above 1.2400 in the US session. The gains were aggressive especially against the risk currencies AUD and NZD. EUR/USD traded with a low of 1.2143 and a high of 1.2433 before closing at 1.2410. Looking ahead, April German PPI is forecast at 0.5% vs. 0.7% previously m/m.
The Japanese Yen (JPY) was extremely volatile gaining over 300 sen against the AUD and GBP before reversing aggressively on ECB intervention mutter and profit taking. USD/JPY bounced off Y91 but the uptrend is now fiercely in debate. Overall the USDJPY traded with a low of 90.93 and a high of 92.18 before closing the day around 91.60 in the New York session. UPDATE Q1 GDP at 1.2% vs. 0.9% previously.
The Sterling (GBP) tracked the Euro higher in Europe and was able to pair losses against the Yen but sentiment is still fragile. EUR/GBP rallied as the Euro outpaced but the downtrend is still not threatened and 0.8600 is capping for now. Overall the GBP/USD traded with a low of 1.4236 and a high of 1.4469 before closing the day at 1.4400 in the New York session. Looking ahead, April Retail Sales forecast at 0.2% vs. 0.4%.
The Australian Dollar (AUD) capitulated as the year low at 0.8580 broke in the Asian session and hedge funds and large investors liquidated. AUD/JPY led the way lower falling from Y79 to Y76.50 rapidly before volatile action for the rest of the day. Adding to the weak sentiment was the drop in Consumer Confidence to -7 vs. -1 previously m/m. Overall the AUD/USD traded with a low of 0.8356 and a high of 0.8616 before closing the US session at 0.8480.
Oil & Gold (XAU) profit taking hit the precious metal hard with the pair breaking through the $1200 and sliding below $1190 before stabilizing. Overall trading with a low of USD$1186 and high of USD$1228 before ending the New York session at USD$1195 an ounce. Oil rallied back above $70 a barrel. WTI Oil Closed $0.80 at $70.40 a barrel.
Labels:
FX Trading
Wednesday, May 19, 2010
19 May 10 : Stock Market Bulletin
Dow Declines 1.1% As Dollar Gains
The Dow ended 1.1% lower on Tuesday as the dollar surged to a new four-year high against the euro. This is even after eurozone ministers vowed to fix the region’s finances while expressing concern at their plunging currency. The S&P lost 1.4% and the Nasdaq shed 1.6%, following plans by Germany to ban naked short-selling of government debt and shares of major corporations at the country’s 10 most important financial institutions. Consumer staples, telecom and energy were the day’s best performers, while financials, techs and consumer discretionary were the weakest links. Oil dropped below the US$70 mark to settle at a seven-month low of US$69.41 a barrel. Gold lost more than US$10 to settle at US$1,214.30 an ounce.
United Envirotech’s FY10 Earnings Increases 4-Fold
United Envirotech’s FY10 net profit quadrupled to $14.9m in tandem with a 61.3% rise in revenue from a year ago. The group said the better performance was due to its engineering segment, which registered higher contribution largely from its Guangzhou engineering, procurement and construction project. Its wastewater treatment, which had higher treatment capacity in its operational plants, also contributed to the growth. Going forward, the group said there are opportunities in China’s water and wastewater treatment industry for new and upgrading projects to be secured, both in the municipal and industrial sectors. Its total treatment capacity is expected to double in 2 years’ time after the completion of the 2 Build-Operate-Transfer projects.
China Fishery Acquires Peruvian Fishmeal Firm For US$95m
China Fishery Group announced a US$95m acquisition of Dorbes Holding Corporation, which owns Pesquera Alejandria SAC (Alejandria), the sixth largest fishmeal company in Peru. This will allow the group to gain access to Alejandria’s steam-dried fishmeal processing plant, which will bring China Fishery’s share of annual allowable catch of Peruvian anchovy to 6.05% and 10.91% in northern and southern Peru, respectively. Since 3Q09, the average market price of fishmeal has risen from about US$900 to over US$1,900 per metric tonne.
TTJ Holdings Secures $31.3m Worth of New Contracts
TTJ Holdings unit, TTJ Design and Engineering, clinched new contracts amounting to about $31.3m, which the group expects to complete by end of 2012. The projects include the Marina Bay Sands Integrated Resort, a petrochemical project in Jurong Island, MRT Downtown Line 2 and a number of public sector projects. TTJ chairman and managing director Teo Hock Chwee feels that the momentum of the company’s contract wins attest to the buoyancy of the construction and civil engineering sectors in Singapore. With the recent wins of contracts, its order book was boosted to $130.8m.
Valuetronics Announces 9-Fold Surge in 4Q10 Earnings
Valuetroncis Holdings’ (Valuetronics) 4Q10 net profit jumped more than 9 times year-on-year to HK$22m as orders rose in line with the economic recovery. Its revenue also rose 92.7% to HK$307m for the quarter ended March 31. The strong 4Q10 performance pushed Valuetroncis’ full-year sales past the billion-dollar mark to HK$1.1b while earnings was 10.8% higher. It has also proposed a final dividend of HK$0.07. Looking ahead, the company plans to build a new warehouse and acquire production equipment for its factory at China’s Daya Bay, providing the factory space and production capacity for new projects.
The Dow ended 1.1% lower on Tuesday as the dollar surged to a new four-year high against the euro. This is even after eurozone ministers vowed to fix the region’s finances while expressing concern at their plunging currency. The S&P lost 1.4% and the Nasdaq shed 1.6%, following plans by Germany to ban naked short-selling of government debt and shares of major corporations at the country’s 10 most important financial institutions. Consumer staples, telecom and energy were the day’s best performers, while financials, techs and consumer discretionary were the weakest links. Oil dropped below the US$70 mark to settle at a seven-month low of US$69.41 a barrel. Gold lost more than US$10 to settle at US$1,214.30 an ounce.
United Envirotech’s FY10 Earnings Increases 4-Fold
United Envirotech’s FY10 net profit quadrupled to $14.9m in tandem with a 61.3% rise in revenue from a year ago. The group said the better performance was due to its engineering segment, which registered higher contribution largely from its Guangzhou engineering, procurement and construction project. Its wastewater treatment, which had higher treatment capacity in its operational plants, also contributed to the growth. Going forward, the group said there are opportunities in China’s water and wastewater treatment industry for new and upgrading projects to be secured, both in the municipal and industrial sectors. Its total treatment capacity is expected to double in 2 years’ time after the completion of the 2 Build-Operate-Transfer projects.
China Fishery Acquires Peruvian Fishmeal Firm For US$95m
China Fishery Group announced a US$95m acquisition of Dorbes Holding Corporation, which owns Pesquera Alejandria SAC (Alejandria), the sixth largest fishmeal company in Peru. This will allow the group to gain access to Alejandria’s steam-dried fishmeal processing plant, which will bring China Fishery’s share of annual allowable catch of Peruvian anchovy to 6.05% and 10.91% in northern and southern Peru, respectively. Since 3Q09, the average market price of fishmeal has risen from about US$900 to over US$1,900 per metric tonne.
TTJ Holdings Secures $31.3m Worth of New Contracts
TTJ Holdings unit, TTJ Design and Engineering, clinched new contracts amounting to about $31.3m, which the group expects to complete by end of 2012. The projects include the Marina Bay Sands Integrated Resort, a petrochemical project in Jurong Island, MRT Downtown Line 2 and a number of public sector projects. TTJ chairman and managing director Teo Hock Chwee feels that the momentum of the company’s contract wins attest to the buoyancy of the construction and civil engineering sectors in Singapore. With the recent wins of contracts, its order book was boosted to $130.8m.
Valuetronics Announces 9-Fold Surge in 4Q10 Earnings
Valuetroncis Holdings’ (Valuetronics) 4Q10 net profit jumped more than 9 times year-on-year to HK$22m as orders rose in line with the economic recovery. Its revenue also rose 92.7% to HK$307m for the quarter ended March 31. The strong 4Q10 performance pushed Valuetroncis’ full-year sales past the billion-dollar mark to HK$1.1b while earnings was 10.8% higher. It has also proposed a final dividend of HK$0.07. Looking ahead, the company plans to build a new warehouse and acquire production equipment for its factory at China’s Daya Bay, providing the factory space and production capacity for new projects.
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Market Update
19 May 10 : FX Morning Update
* USD: Higher, housing starts rise, building permits fall, PPI declines, core PPI rises more than expected
* JPY: Lower, tracking risk sentiment, consumer confidence at two year high, Reuters Tankan rises
* EUR: Lower, Greece to receive €14.5 billion to repay bond debt, German investor confidence declines
* GBP: Lower, CPI rises more than expected, BOE's King says the CPI rise is temporary
* CAD and AUD: AUD lower & CAD higher, RBA rate pause, Canada's foreign investment inflows slow
Overview
USD opened lower Tuesday pressured by diminished gloom about the EU debt crisis as the EU provides €14.5bln in aid to Greece to help Greece repay on its bonds. The distribution of aid to Greece today helped to boost equity markets and dampen risk aversion. In addition, EU finance ministers are discussing details of a plan to try and stop contagion debt risk in the EU.EUR traded higher with gains limited by report of sharp drop in German investor sentiment and speculation that the rebound in the EUR will be short-lived because of ongoing uncertainty about the EU debt crisis. The New York Times carried a report today which says that there is concern that the EU debt crisis may snowball. GBP initially traded higher supported by report of above forecast UK inflation. GBP gains were limited by a statement from BOE Governor King that the inflation rise is likely temporary. Commodity currencies traded mixed to higher with the CAD outperforming supported by a sharp rebound in the price of crude. AUD gains were limited by the release of the RBA policy minutes for the May meeting which suggest that the RBA rate hike cycle is on hold. JPY traded lower pressured by a slight improvement in risk appetite and a rebound for European currencies in cross trade. Today's US economic data was mixed with housing starts reported rising 5.8%, and building permits declined by 11.5%.The housing starts rise may reflect buyers jumping ahead of the end of the home buyer's tax credit. The decline in building permits may better reflect the state of the US housing recovery. Headline PPI came in weaker than expected with the core rate rising slightly more than expected. USD pared the early decline in reaction to report that Fitch says that the UK faces a daunting fiscal challenge and Fitch affirmed its negative outlook for the Greek debt rating.
April building permits declined by 11.5% to 606k a reading of 680k was expected, housing starts rose to 672k, a reading of 643k was expected. April PPI declined by 0.1%, ex-food and energy PPI rose by 0.2%. The core PPI rate was expected to rise by 0.1%.
On May 19th April CPI will be released expected unchanged at 0.1%. On May 20th initial jobless claims for week ending 05/15 will be released expected at 440k compared to 444k last week. Leading indicators for April and May Philly Fed will be released on May 20th. Leading indicators are expected to rise by 0.2% compared to 1.4% last month. The Philly Fed survey is expected 22 compared to 20.2 last month.
JPY
JPY traded lower pressured by a modest improvement in risk appetite sparked by firmer equity market trade and the announcement that the EU provided €14.5 billion to Greece to help Greece repay on its bonds. The news of the disbursement of Greek aid helped to boost the EUR in cross trade to the JPY. GBP firmed in cross trade to the JPY supported by report of higher than expected UK CPI.AUD/JPY traded higher with AUD supported by a rebound in the Shanghai stock index. JPY traded lower despite report of mixed to positive economic data from Japan. Gains for European currencies and the AUD in cross trade were reversed mid-session as the Fitch ratings agency affirms its negative outlook for Greek debt. The Reuters Tankan manufacturing sentiment index rose to its highest level since March 2008 reported at +4 and consumer confidence in Japan rose to a two-year high. The tertiary index for March declined by 3%.Today's Japanese economic data suggests that Japan's domestic economy is gaining momentum. Japan's Finance Minister Kan says the Japanese economic recovery is intact. Improvement in Japan's domestic economy and rising export sales point to stronger Japanese GDP. Japan's GDP for Q1 will be released Thursday and is expected at 1.3% with an annualized growth rate of 5.4%. JPY price direction remains closely linked to risk appetite and developments in regard to EU sovereign debt risk.
On May 19th March revised industrial output will be released at 0.3% compared to -0.6% last month. On the 20th Q1 GDP will be released expected at 1.3%. On May 21st March revised leading indicators will be released expected 4.5% compared to 1.2% last month.
EUR
EUR edged higher supported by a rebound in global equity markets and the reaction to report that the EU has released €14.5 billion in aid to Greece. European equity markets rallied in reaction to the news of the EU aid disbursement for Greece. The improvement in risk sentiment carried over into the US markets with US equities benefiting from report of better than expected earnings at Home Depot and report of a much stronger-than-expected rise in US April housing starts. EUR was also supported by comments from EU Monetary Affairs Commissioner Rehn that fiscal consolidation in Europe will not take place in a uniform way and this means that EU recovery won't be choked by an austerity drive. EU finance ministers are expected to meet again on May 21st to work out specific details of how the emergency funding mechanism will work. EUR gains were limited by ongoing skepticism about the efficacy of the EU/IMF rescue plan and in reaction to report of much weaker than expected investor sentiment from Germany. The German ZEW index declined to 45.8 from 53 last month. There was limited impact to report that EU CPI for April rose by 0.5%, a 0.4%% rise was expected. The EUR is extremely oversold and a lot of negative news has been priced into the 14% decline of EUR versus USD since the beginning of the year. Because of the oversold technical makeup of the EUR and extreme bearish sentiment we expect to see the EUR hold above 120 in the near term with a possible range of 1.20- 1.2750. 1.2012 is a 50% retracement of the record EUR low at 0.82 from the EUR rally high above 1.60. This retracement level should provide significant near-term support for the EUR. It remains uncertain whether EU/IMF efforts to contain the EU sovereign debt crisis will be successful. The ECB decision to buy EU bonds may temporarily relieve some of the stress in EU financial markets and help to reduce the cost of funding EU debt. This should buy the EU some time to try and restore confidence in the EUR and European Monetary Union. The EU debt crisis will not be easy to solve. Absent a plan to unify the EU fiscal outlook the EUR remains vulnerable to additional selling pressure. The major risk to the EUR is fear of contagion. If this fear grows the EUR could be heading to 115 by the end of the year and possibly parity in the years ahead.
On May 20th German April CPI will be released expected at 0.8% compared to 0.7% last month. On May 21st EU flash May manufacturing and services PMI and German May IFO index will be released. Manufacturing PMI is expected at 57.9 compared to 57.3 last month and the services PMI is expected at 55.7 compared to 55.6 last month. German IFO is expected at 101 compared to 101.6 last month. EU March current account will also be released on May 21st expected at - 6.1bln compared to -5.2 million last.
GBP
GBP traded mixed to lower giving back initial gains that were sparked by report of above forecast UK CPI. UK April consumer prices rose by 0.6%m/m and 3.7%y/y. The UK annual rate of inflation rise is well above the 3% topside range of the BOE's inflation target and the annual rise was expected to be at 3.5%. The initial positive reaction for GBP to the inflation report gave way with GBP pressured by a statement from BOE Governor King that the rise in UK CPI was likely temporary reflecting higher energy prices. King expects the UK inflation rate to fall below 2% within the coming year. King's comments suggest that rising UK inflation will not encourage the BOE to consider earlier normalization of monetary policy or restrict the BOE from consideration of additional quantitative ease if necessary. GBP price direction remains closely tied to speculation about the outlook for the UK budget deficit. The UK emergency budget will be released on June 22nd. The budget is expected to include $8.9bln in spending cuts. The impact of the UK budget announcement will depend on whether the announcement satisfies the ratings agencies and diminishes the near-term risk of a UK debt downgrade. The Fitch ratings agency said that UK fiscal outlook is daunting. This week's main focus will be Friday's release of UK net sector public borrowing.
On May 20th April retail sales will be released expected at 0.6% compared to 0.4% last month. On May 21st April money supply and public-sector borrowing will be released. Money supply is expected to rise by 0.4% compared to 0.2% last month. That public-sector borrowing is expected to expand by 24.3bln compared to 23.4bln last month.
CAD
CAD traded higher supported by a rebound in the price of crude oil which traded more than two dollars a barrel higher and in a reaction to firmer equity market trade and improving risk sentiment. Report that the ECB dispersed funds to Greece to help Greece pay off its short-term debt obligations contributes to a temporary improvement in risk appetite and helped to boost equity markets. CAD consolidated early gains despite report of a sharp net divestment of foreign investor holdings in Canada during March. Net foreign investment flows to Canada in March came in at $C616mln, a $C5bln inflow was expected. This marked the first divestment from Canada since December 2008. Recent Canadian economic data confirms that the domestic economy is strengthening. Canadian officials said they do not expect fallout for the Canadian markets from the EU debt crisis. The EU debt crisis is less likely to prevent the BOC from tightening policy. The BOC is expected to raise interest rates midyear. Yield and growth differential is moving in favor of the CAD as investors look for alternatives to the EUR and, Western economies are expected to grow faster than Europe. This week's main focus will be Friday's release of Canada's CPI and retail sales. A strong CPI rise will likely tip the scales in favor of a June BOC rate hike.
On May 19th March wholesale sales will be released expected at 0.2% compared to last 1.2% last month. On May 20th April leading indicators will be released expected at 1.1% and 1% last month. On May 21st April CPI will be released expected at 0.1% compared to -0.2% last month with the annual inflation rate expected at 1.5%. March retail sales will also be released on May 21st expected at 0.2% compared to 0.5 % last month.
AUD
AUD opened higher supported by a rally in the Shanghai stock index and an uptick in risk appetite. As noted above, equity markets experienced a relief rally today as EU officials deliver financial aid to Greece to help Greece pay off its debt. The fear of EU debt contagion has been temporarily reduced by the disbursement of financial aid to Greece. AUD gains were limited by the release of the RBA policy minutes for the May 4th policy meeting. The RBA minutes state that recent rate hikes leave policy well placed for now and that the inflationary effects of resource price gains is outweighed by EUR concerns. The minutes suggest that the RBA plans a pause in its tightening cycle and is likely to hold rate policy steady for the next few months. Fear of EU contagion and recent tightening of credit conditions in China may have encouraged the RBA to consider a pause in its rate hike cycle. Last week Australia reported higher than expected headline unemployment rate with stronger than expected jobs growth last month. 33,700 new jobs created last month. Last week Australia reported an unexpected drop in March housing finance, and a decline in business conditions and weekly job ads. Weaker business conditions, the drop in job ads and weaker housing finance may reflect recent tightening of monetary policy by the RBA. These reports may contribute to speculation that the RBA will pause its tightening cycle. Uncertainty about the strength of the global recovery sparked by fears of tightening in China and new austerity measures in Europe could dampen demand for the AUD.
This week's Australian economic calendar includes the May 19th release of Q1 labor prices expected 0.7% compared to 0.6% last quarter. On May 20th April new car sales will be released expected to rise by 2%.
* JPY: Lower, tracking risk sentiment, consumer confidence at two year high, Reuters Tankan rises
* EUR: Lower, Greece to receive €14.5 billion to repay bond debt, German investor confidence declines
* GBP: Lower, CPI rises more than expected, BOE's King says the CPI rise is temporary
* CAD and AUD: AUD lower & CAD higher, RBA rate pause, Canada's foreign investment inflows slow
Overview
USD opened lower Tuesday pressured by diminished gloom about the EU debt crisis as the EU provides €14.5bln in aid to Greece to help Greece repay on its bonds. The distribution of aid to Greece today helped to boost equity markets and dampen risk aversion. In addition, EU finance ministers are discussing details of a plan to try and stop contagion debt risk in the EU.EUR traded higher with gains limited by report of sharp drop in German investor sentiment and speculation that the rebound in the EUR will be short-lived because of ongoing uncertainty about the EU debt crisis. The New York Times carried a report today which says that there is concern that the EU debt crisis may snowball. GBP initially traded higher supported by report of above forecast UK inflation. GBP gains were limited by a statement from BOE Governor King that the inflation rise is likely temporary. Commodity currencies traded mixed to higher with the CAD outperforming supported by a sharp rebound in the price of crude. AUD gains were limited by the release of the RBA policy minutes for the May meeting which suggest that the RBA rate hike cycle is on hold. JPY traded lower pressured by a slight improvement in risk appetite and a rebound for European currencies in cross trade. Today's US economic data was mixed with housing starts reported rising 5.8%, and building permits declined by 11.5%.The housing starts rise may reflect buyers jumping ahead of the end of the home buyer's tax credit. The decline in building permits may better reflect the state of the US housing recovery. Headline PPI came in weaker than expected with the core rate rising slightly more than expected. USD pared the early decline in reaction to report that Fitch says that the UK faces a daunting fiscal challenge and Fitch affirmed its negative outlook for the Greek debt rating.
April building permits declined by 11.5% to 606k a reading of 680k was expected, housing starts rose to 672k, a reading of 643k was expected. April PPI declined by 0.1%, ex-food and energy PPI rose by 0.2%. The core PPI rate was expected to rise by 0.1%.
On May 19th April CPI will be released expected unchanged at 0.1%. On May 20th initial jobless claims for week ending 05/15 will be released expected at 440k compared to 444k last week. Leading indicators for April and May Philly Fed will be released on May 20th. Leading indicators are expected to rise by 0.2% compared to 1.4% last month. The Philly Fed survey is expected 22 compared to 20.2 last month.
JPY
JPY traded lower pressured by a modest improvement in risk appetite sparked by firmer equity market trade and the announcement that the EU provided €14.5 billion to Greece to help Greece repay on its bonds. The news of the disbursement of Greek aid helped to boost the EUR in cross trade to the JPY. GBP firmed in cross trade to the JPY supported by report of higher than expected UK CPI.AUD/JPY traded higher with AUD supported by a rebound in the Shanghai stock index. JPY traded lower despite report of mixed to positive economic data from Japan. Gains for European currencies and the AUD in cross trade were reversed mid-session as the Fitch ratings agency affirms its negative outlook for Greek debt. The Reuters Tankan manufacturing sentiment index rose to its highest level since March 2008 reported at +4 and consumer confidence in Japan rose to a two-year high. The tertiary index for March declined by 3%.Today's Japanese economic data suggests that Japan's domestic economy is gaining momentum. Japan's Finance Minister Kan says the Japanese economic recovery is intact. Improvement in Japan's domestic economy and rising export sales point to stronger Japanese GDP. Japan's GDP for Q1 will be released Thursday and is expected at 1.3% with an annualized growth rate of 5.4%. JPY price direction remains closely linked to risk appetite and developments in regard to EU sovereign debt risk.
On May 19th March revised industrial output will be released at 0.3% compared to -0.6% last month. On the 20th Q1 GDP will be released expected at 1.3%. On May 21st March revised leading indicators will be released expected 4.5% compared to 1.2% last month.
EUR
EUR edged higher supported by a rebound in global equity markets and the reaction to report that the EU has released €14.5 billion in aid to Greece. European equity markets rallied in reaction to the news of the EU aid disbursement for Greece. The improvement in risk sentiment carried over into the US markets with US equities benefiting from report of better than expected earnings at Home Depot and report of a much stronger-than-expected rise in US April housing starts. EUR was also supported by comments from EU Monetary Affairs Commissioner Rehn that fiscal consolidation in Europe will not take place in a uniform way and this means that EU recovery won't be choked by an austerity drive. EU finance ministers are expected to meet again on May 21st to work out specific details of how the emergency funding mechanism will work. EUR gains were limited by ongoing skepticism about the efficacy of the EU/IMF rescue plan and in reaction to report of much weaker than expected investor sentiment from Germany. The German ZEW index declined to 45.8 from 53 last month. There was limited impact to report that EU CPI for April rose by 0.5%, a 0.4%% rise was expected. The EUR is extremely oversold and a lot of negative news has been priced into the 14% decline of EUR versus USD since the beginning of the year. Because of the oversold technical makeup of the EUR and extreme bearish sentiment we expect to see the EUR hold above 120 in the near term with a possible range of 1.20- 1.2750. 1.2012 is a 50% retracement of the record EUR low at 0.82 from the EUR rally high above 1.60. This retracement level should provide significant near-term support for the EUR. It remains uncertain whether EU/IMF efforts to contain the EU sovereign debt crisis will be successful. The ECB decision to buy EU bonds may temporarily relieve some of the stress in EU financial markets and help to reduce the cost of funding EU debt. This should buy the EU some time to try and restore confidence in the EUR and European Monetary Union. The EU debt crisis will not be easy to solve. Absent a plan to unify the EU fiscal outlook the EUR remains vulnerable to additional selling pressure. The major risk to the EUR is fear of contagion. If this fear grows the EUR could be heading to 115 by the end of the year and possibly parity in the years ahead.
On May 20th German April CPI will be released expected at 0.8% compared to 0.7% last month. On May 21st EU flash May manufacturing and services PMI and German May IFO index will be released. Manufacturing PMI is expected at 57.9 compared to 57.3 last month and the services PMI is expected at 55.7 compared to 55.6 last month. German IFO is expected at 101 compared to 101.6 last month. EU March current account will also be released on May 21st expected at - 6.1bln compared to -5.2 million last.
GBP
GBP traded mixed to lower giving back initial gains that were sparked by report of above forecast UK CPI. UK April consumer prices rose by 0.6%m/m and 3.7%y/y. The UK annual rate of inflation rise is well above the 3% topside range of the BOE's inflation target and the annual rise was expected to be at 3.5%. The initial positive reaction for GBP to the inflation report gave way with GBP pressured by a statement from BOE Governor King that the rise in UK CPI was likely temporary reflecting higher energy prices. King expects the UK inflation rate to fall below 2% within the coming year. King's comments suggest that rising UK inflation will not encourage the BOE to consider earlier normalization of monetary policy or restrict the BOE from consideration of additional quantitative ease if necessary. GBP price direction remains closely tied to speculation about the outlook for the UK budget deficit. The UK emergency budget will be released on June 22nd. The budget is expected to include $8.9bln in spending cuts. The impact of the UK budget announcement will depend on whether the announcement satisfies the ratings agencies and diminishes the near-term risk of a UK debt downgrade. The Fitch ratings agency said that UK fiscal outlook is daunting. This week's main focus will be Friday's release of UK net sector public borrowing.
On May 20th April retail sales will be released expected at 0.6% compared to 0.4% last month. On May 21st April money supply and public-sector borrowing will be released. Money supply is expected to rise by 0.4% compared to 0.2% last month. That public-sector borrowing is expected to expand by 24.3bln compared to 23.4bln last month.
CAD
CAD traded higher supported by a rebound in the price of crude oil which traded more than two dollars a barrel higher and in a reaction to firmer equity market trade and improving risk sentiment. Report that the ECB dispersed funds to Greece to help Greece pay off its short-term debt obligations contributes to a temporary improvement in risk appetite and helped to boost equity markets. CAD consolidated early gains despite report of a sharp net divestment of foreign investor holdings in Canada during March. Net foreign investment flows to Canada in March came in at $C616mln, a $C5bln inflow was expected. This marked the first divestment from Canada since December 2008. Recent Canadian economic data confirms that the domestic economy is strengthening. Canadian officials said they do not expect fallout for the Canadian markets from the EU debt crisis. The EU debt crisis is less likely to prevent the BOC from tightening policy. The BOC is expected to raise interest rates midyear. Yield and growth differential is moving in favor of the CAD as investors look for alternatives to the EUR and, Western economies are expected to grow faster than Europe. This week's main focus will be Friday's release of Canada's CPI and retail sales. A strong CPI rise will likely tip the scales in favor of a June BOC rate hike.
On May 19th March wholesale sales will be released expected at 0.2% compared to last 1.2% last month. On May 20th April leading indicators will be released expected at 1.1% and 1% last month. On May 21st April CPI will be released expected at 0.1% compared to -0.2% last month with the annual inflation rate expected at 1.5%. March retail sales will also be released on May 21st expected at 0.2% compared to 0.5 % last month.
AUD
AUD opened higher supported by a rally in the Shanghai stock index and an uptick in risk appetite. As noted above, equity markets experienced a relief rally today as EU officials deliver financial aid to Greece to help Greece pay off its debt. The fear of EU debt contagion has been temporarily reduced by the disbursement of financial aid to Greece. AUD gains were limited by the release of the RBA policy minutes for the May 4th policy meeting. The RBA minutes state that recent rate hikes leave policy well placed for now and that the inflationary effects of resource price gains is outweighed by EUR concerns. The minutes suggest that the RBA plans a pause in its tightening cycle and is likely to hold rate policy steady for the next few months. Fear of EU contagion and recent tightening of credit conditions in China may have encouraged the RBA to consider a pause in its rate hike cycle. Last week Australia reported higher than expected headline unemployment rate with stronger than expected jobs growth last month. 33,700 new jobs created last month. Last week Australia reported an unexpected drop in March housing finance, and a decline in business conditions and weekly job ads. Weaker business conditions, the drop in job ads and weaker housing finance may reflect recent tightening of monetary policy by the RBA. These reports may contribute to speculation that the RBA will pause its tightening cycle. Uncertainty about the strength of the global recovery sparked by fears of tightening in China and new austerity measures in Europe could dampen demand for the AUD.
This week's Australian economic calendar includes the May 19th release of Q1 labor prices expected 0.7% compared to 0.6% last quarter. On May 20th April new car sales will be released expected to rise by 2%.
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FX Trading
19 May 10 : German Ban Naked Shorting
U.S. Dollar Trading (USD) weakness in Asia due to profit taking and short covering on the majors was reversed abruptly when Germany announced a ban on short selling in some German Banks and EU Bonds. US Data was overlooked but strong with April US Housing Starts jumping 5.8% m/m. In US stocks, DJIA -114 points closing at 10510, S&P -16 points closing at 1120 and NASDAQ -36 points closing at 2317. Looking ahead, April CPI forecast at 2.4% vs. 2.3%. Also Released, Weekly Crude Inventories forecast at 0.7mln vs. -1.2mln previously.
The Euro (EUR) the market traded above 1.2400 for most of the European session until the German short selling announcement fanned the fears of another Lehman brothers style crash and the Euro plunged to new year lows under 1.2200. The inability of the ECB to control the situation is worrying investors and adding to the downside spiral. EUR/USD traded with a low of 1.2143 and a high of 1.2446 before closing at 1.2205.
The Japanese Yen (JPY) was stronger across the board as risk aversion spread and key levels were broken. AUD/JPY broken through Y80 but it was EUR/JPY that led the way lower falling over 3 Yen from above Y115 and is targeting the Y110 level. USD/JPY held above 91.80 but is also under pressure. Overall the USDJPY traded with a low of 91.84 and a high of 92.99 before closing the day around 92.05 in the New York session.
The Sterling (GBP) was not immune to the general market selloff and the GBP made fresh 2010 lows below 1.4250 in late US trade. EUR/GBP was largely unchanged after testing both 0.8600 and 0.8500. GBP/JPY closed below Y131 and is targeting the Y130 major big figure level. Overall the GBP/USD traded with a low of 1.4253 and a high of 1.4525 before closing the day at 1.4255 in the New York session.
The Australian Dollar (AUD) the risk aversion hit the commodity currencies hard with AUD, CAD and NZD all falling heavily. AUD/JPY broke through Y80 and traditionally this has led to Japanese investor liquidations and sharp losses. RBA minutes signaled that the central bank may pause for a while. Overall the AUD/USD traded with a low of 0.8587 and a high of 0.8791 before closing the US session at 0.8610. Update May Consumer Confidence -7 vs. -1 previously.
Oil & Gold (XAU) was weaker as the $1218 support broke but the market did not fall far as the crash in the Euro increased demand for the alternative currency. Overall trading with a low of USD$1206 and high of USD$1229 before ending the New York session at USD$1210 an ounce. Oil continued to crash falling over $3 from day highs as investor confidence slumps. WTI Oil Closed $0.67 at $69.41 a barrel.
The Euro (EUR) the market traded above 1.2400 for most of the European session until the German short selling announcement fanned the fears of another Lehman brothers style crash and the Euro plunged to new year lows under 1.2200. The inability of the ECB to control the situation is worrying investors and adding to the downside spiral. EUR/USD traded with a low of 1.2143 and a high of 1.2446 before closing at 1.2205.
The Japanese Yen (JPY) was stronger across the board as risk aversion spread and key levels were broken. AUD/JPY broken through Y80 but it was EUR/JPY that led the way lower falling over 3 Yen from above Y115 and is targeting the Y110 level. USD/JPY held above 91.80 but is also under pressure. Overall the USDJPY traded with a low of 91.84 and a high of 92.99 before closing the day around 92.05 in the New York session.
The Sterling (GBP) was not immune to the general market selloff and the GBP made fresh 2010 lows below 1.4250 in late US trade. EUR/GBP was largely unchanged after testing both 0.8600 and 0.8500. GBP/JPY closed below Y131 and is targeting the Y130 major big figure level. Overall the GBP/USD traded with a low of 1.4253 and a high of 1.4525 before closing the day at 1.4255 in the New York session.
The Australian Dollar (AUD) the risk aversion hit the commodity currencies hard with AUD, CAD and NZD all falling heavily. AUD/JPY broke through Y80 and traditionally this has led to Japanese investor liquidations and sharp losses. RBA minutes signaled that the central bank may pause for a while. Overall the AUD/USD traded with a low of 0.8587 and a high of 0.8791 before closing the US session at 0.8610. Update May Consumer Confidence -7 vs. -1 previously.
Oil & Gold (XAU) was weaker as the $1218 support broke but the market did not fall far as the crash in the Euro increased demand for the alternative currency. Overall trading with a low of USD$1206 and high of USD$1229 before ending the New York session at USD$1210 an ounce. Oil continued to crash falling over $3 from day highs as investor confidence slumps. WTI Oil Closed $0.67 at $69.41 a barrel.
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FX Trading
Tuesday, May 18, 2010
18 May 10 : Euro Market Morning Update
CURRENCY TRADING SUMMARY - 18th May (00:30GMT)
U.S. Dollar Trading (USD) was volatile ending the day slightly higher than Friday's close but well off intraday highs. In Asia, fresh year lows on the EUR/USD due to Eurozone break up fears saw stock markets and risk taken off the table. A solid bounce ensued but volatility remained for the rest of the day. May NY FED Factory Index fell to 19 vs. In US stocks, DJIA +5 points closing at 10625, S&P +1 points closing at 1136 and NASDAQ +7 points closing at 2354. Looking ahead, April PPI forecast at 0.1% vs. 0.7% previously m/m. Also released, April Housing starts previously at 1.6% m/m.
The Euro (EUR) Monday opened in the same theme as Friday with the Euro under pressure from the get go. The market broke through two year lows at 1.2330 and fell quickly to low 1.22's before staging a mild recovery for the rest of the day. News from the ECB they will be taking deposits helped alleviate fears of quantitative easing. EUR/USD traded with a low of 1.2233 and a high of 1.2416 before closing at 1.2345.
The Japanese Yen (JPY) was generally stronger especially in Asia but gave up most the gains by the end of the US session. Japanese stocks were down over 2% and this helped support the safe haven Yen. EUR/JPY was volatile trading in a 3 Yen range. March Machinery Orders up 5.4% m/m. Overall the USDJPY traded with a low of 91.75 and a high of 92.71 before closing the day around 92.55 in the New York session.
The Sterling (GBP) opened under even more pressure than the Euro as the market responded to concerns over the weekend that the outgoing labor government had spending black holes and the government fiscal situational was worse than first thought. The Bounce into Europe was stirred from news that a new plan to save 6bn Pounds being initiated by the new government. Overall the GBP/USD traded with a low of 1.4249 and a high of 1.4513 before closing the day at 1.4460 in the New York session.
The Australian Dollar (AUD) risk aversion pushed the pair lower in Asia before AUD/JPY buying in Europe pushed the Aussie back above 0.8800. EUR/AUD rebounded from below 1.4000 and kicked higher again in the US session as Oil came under pressure. Overall the AUD/USD traded with a low of 0.8684 and a high of 0.8856 before closing the US session at 0.8760.
Oil & Gold (XAU) kept Broadly to Friday's Range with gains in Asia on Eurozone concerns pared back in Europe after the ECB term deposit announcement. Overall trading with a low of USD$1218 and high of USD$1243 before ending the New York session at USD$1225 an ounce. Oil tested below $70 a barrel throughout the day but ended back above the key psychological level with the US stock market rallying into the close. WTI Oil Closed -$1.53 at $70.08 a barrel.
U.S. Dollar Trading (USD) was volatile ending the day slightly higher than Friday's close but well off intraday highs. In Asia, fresh year lows on the EUR/USD due to Eurozone break up fears saw stock markets and risk taken off the table. A solid bounce ensued but volatility remained for the rest of the day. May NY FED Factory Index fell to 19 vs. In US stocks, DJIA +5 points closing at 10625, S&P +1 points closing at 1136 and NASDAQ +7 points closing at 2354. Looking ahead, April PPI forecast at 0.1% vs. 0.7% previously m/m. Also released, April Housing starts previously at 1.6% m/m.
The Euro (EUR) Monday opened in the same theme as Friday with the Euro under pressure from the get go. The market broke through two year lows at 1.2330 and fell quickly to low 1.22's before staging a mild recovery for the rest of the day. News from the ECB they will be taking deposits helped alleviate fears of quantitative easing. EUR/USD traded with a low of 1.2233 and a high of 1.2416 before closing at 1.2345.
The Japanese Yen (JPY) was generally stronger especially in Asia but gave up most the gains by the end of the US session. Japanese stocks were down over 2% and this helped support the safe haven Yen. EUR/JPY was volatile trading in a 3 Yen range. March Machinery Orders up 5.4% m/m. Overall the USDJPY traded with a low of 91.75 and a high of 92.71 before closing the day around 92.55 in the New York session.
The Sterling (GBP) opened under even more pressure than the Euro as the market responded to concerns over the weekend that the outgoing labor government had spending black holes and the government fiscal situational was worse than first thought. The Bounce into Europe was stirred from news that a new plan to save 6bn Pounds being initiated by the new government. Overall the GBP/USD traded with a low of 1.4249 and a high of 1.4513 before closing the day at 1.4460 in the New York session.
The Australian Dollar (AUD) risk aversion pushed the pair lower in Asia before AUD/JPY buying in Europe pushed the Aussie back above 0.8800. EUR/AUD rebounded from below 1.4000 and kicked higher again in the US session as Oil came under pressure. Overall the AUD/USD traded with a low of 0.8684 and a high of 0.8856 before closing the US session at 0.8760.
Oil & Gold (XAU) kept Broadly to Friday's Range with gains in Asia on Eurozone concerns pared back in Europe after the ECB term deposit announcement. Overall trading with a low of USD$1218 and high of USD$1243 before ending the New York session at USD$1225 an ounce. Oil tested below $70 a barrel throughout the day but ended back above the key psychological level with the US stock market rallying into the close. WTI Oil Closed -$1.53 at $70.08 a barrel.
Labels:
FX Trading,
Market Update
Devalue Euro ?
One of the constant refrains of the Greek-EMU debt crisis is that for the Greeks, this time things are different. Athenian politicians cannot devalue their currency to restore competitiveness and debase the value of their debt with inflated drachmas because they are part of the euro. The Greeks can, however, devalue the euro. They have done so in spectacular fashion. Since the government of Prime Minister George Papandreou admitted late last year that the Greek 2009 deficit was 12.7%, more than twice what had been admitted by the previous administration, the euro has plummeted 18.4% from its December high of 1.5139. Even by historical drachma standards that is quite an achievement. While it is true that the devaluation of the euro does not benefit the Greek economy as much as an equivalent fall in the drachma would have in its pre-euro days because a part of Greek international trade is within the EMU and not subject to currency movements, an almost 20% devaluation with the rest of the world is not trivial.
It is also noteworthy that the rest of the EMU has been mum about the euro's precipitous fall. A good portion of the blame for the prolonged EU debt crisis can be attributed to the dilatory and calculated response of the European community. Is there a chance that the exporting nations of the EMU, rife with criticism of their Greek partners, have a stake in the devaluation of the euro?
It is also noteworthy that the rest of the EMU has been mum about the euro's precipitous fall. A good portion of the blame for the prolonged EU debt crisis can be attributed to the dilatory and calculated response of the European community. Is there a chance that the exporting nations of the EMU, rife with criticism of their Greek partners, have a stake in the devaluation of the euro?
Labels:
FX Trading
Monday, May 17, 2010
17 May 10 : USA Market Morning Update
FX Highlights
* The USD is trading mixed as the EUR posts a modest recovery from a four year low, EUR traded at a four-year low versus the USD in overseas trade pressured by concern over EU debt/growth worries and in reaction to rumors that France may dump the EUR, EUR rebound is attributed to rumors of SNB intervention in EUR/CHF cross, short covering ahead of today's EU meeting concerning the debt crisis and a denial from French authorities that France will leave EMU, GBP rebounds supported by report that UK manufacturing orders rose to 21 month high, commodity currencies mixed with AUD pressured by weak Asian equity market trade and CAD stabilizing as crude oil prices post a modest rebound, JPY trades lower pressured by rumors of a possible Japanese debt downgrade and in reaction to a rebound in European and US equity markets
* Focus turns to today's release US Empire manufacturing index and NAHB housing market Index
* Rumors are circulating that Fitch may downgrade Japanese government debt rating, Fitch took no action on Japan's debt Monday, Japan's April CGPI rose by 4.0%, March manufacturing orders rose by 5.4%,JPYlower
* UK May Rightmove house prices rose by 0.7%, UK emergency budget to be released on June 22, the budget is expected to include $8.9bln in spending cuts, GBP higher
* ECB President Trichet calls for a "quantum leap " in policymaking to help stamp out the EU sovereign debt crisis, ECB's Nowotny says EUR drop no specific concern to the ECB,EUR steady
* RealityTrac Inc says that foreclosures fell 2% from a year ago and were down 9% in April
* Fed's Fischer says economy gaining momentum, unemployment the constraining factor, USD to remain reserve currency, Fed's Lacker warns that keeping rates too low for too long to create asset bubbles
* CFTC reports that short positions on the IMM in the EUR are at a record high
* US equity markets set to open higher, European equities 1% higher, Nikkei closed 227 points lower
Upcoming Events
* US-Monday, May Empire State manufacturing index will be released expected at 30 compared to 31.8 last month and me NAHB index expected at 20 compared to 19 last month
* CAN-Monday, no major Canadian economic data is due for release today
* The USD is trading mixed as the EUR posts a modest recovery from a four year low, EUR traded at a four-year low versus the USD in overseas trade pressured by concern over EU debt/growth worries and in reaction to rumors that France may dump the EUR, EUR rebound is attributed to rumors of SNB intervention in EUR/CHF cross, short covering ahead of today's EU meeting concerning the debt crisis and a denial from French authorities that France will leave EMU, GBP rebounds supported by report that UK manufacturing orders rose to 21 month high, commodity currencies mixed with AUD pressured by weak Asian equity market trade and CAD stabilizing as crude oil prices post a modest rebound, JPY trades lower pressured by rumors of a possible Japanese debt downgrade and in reaction to a rebound in European and US equity markets
* Focus turns to today's release US Empire manufacturing index and NAHB housing market Index
* Rumors are circulating that Fitch may downgrade Japanese government debt rating, Fitch took no action on Japan's debt Monday, Japan's April CGPI rose by 4.0%, March manufacturing orders rose by 5.4%,JPYlower
* UK May Rightmove house prices rose by 0.7%, UK emergency budget to be released on June 22, the budget is expected to include $8.9bln in spending cuts, GBP higher
* ECB President Trichet calls for a "quantum leap " in policymaking to help stamp out the EU sovereign debt crisis, ECB's Nowotny says EUR drop no specific concern to the ECB,EUR steady
* RealityTrac Inc says that foreclosures fell 2% from a year ago and were down 9% in April
* Fed's Fischer says economy gaining momentum, unemployment the constraining factor, USD to remain reserve currency, Fed's Lacker warns that keeping rates too low for too long to create asset bubbles
* CFTC reports that short positions on the IMM in the EUR are at a record high
* US equity markets set to open higher, European equities 1% higher, Nikkei closed 227 points lower
Upcoming Events
* US-Monday, May Empire State manufacturing index will be released expected at 30 compared to 31.8 last month and me NAHB index expected at 20 compared to 19 last month
* CAN-Monday, no major Canadian economic data is due for release today
Labels:
FX Trading
17 May 10 : Euro Morning Report
* After last week's price action the sentiment remained negative for the EURUSD during the Asian trading session. As risk aversion soared, the EURUSD collapsed to a four-year low at 1.2234 after failing to break this week's opening session high at 1.2373.
* The EU/IMF trillion dollar bailout-package is losing the battle to keep the euro afloat so far. According to Paul Volcker, the former Fed chairman, it is difficult to have a common currency without a common government.
* Friday's weaker headline figure for the University of Michigan consumer index combined with downward revisions for durable goods and factory orders did not help sentiment. This weaker news on fundamentals from the US supported the USD upward trend.
* Oil prices drop to near $70 a barrel earlier today on investor concern Europe's handling of sovereign nation debt will hinder global economic growth. Oil, which is priced in dollars, became more expensive to investors holding other currencies when the dollar advances.
* The dollar advance did not stop gold from resuming its recent uptrend. Currently trading at 1240, the benchmark contract returns to historical highs after briefly pulling back last Thursday and Friday.
Currency to watch out for: EURUSD & GBPUSD
* The EURUSD pivot point is at 1.2395 with a preference to enter into a short position at 1.2385
* The GBPUSD pivot point is at 1.4495 with a preference to enter into a short position at 1.4485
Today's calendar and market movers:
* US Empire State Manufacturing Index expected to fall to 30.1
* US TIC Long-Term Purchases expected to climb to 50.5B
Equity Markets:
US equities finished in negative territory as Eurozone debt concerns returned with France at the centre of attention. At the close; the S&P 500 closed down 1.88%, the DJIA closed down 1.51% and the NASDAQ 100 closed down 1.97%. EU equities closed lower with the FTSE 100 -3.14%, the DAX -3.12% and the CAC 40 -4.59%. In Asia, the Nikkei is currently at -2.17% and the Hang Seng at -2.48% at the time of writing.
* The EU/IMF trillion dollar bailout-package is losing the battle to keep the euro afloat so far. According to Paul Volcker, the former Fed chairman, it is difficult to have a common currency without a common government.
* Friday's weaker headline figure for the University of Michigan consumer index combined with downward revisions for durable goods and factory orders did not help sentiment. This weaker news on fundamentals from the US supported the USD upward trend.
* Oil prices drop to near $70 a barrel earlier today on investor concern Europe's handling of sovereign nation debt will hinder global economic growth. Oil, which is priced in dollars, became more expensive to investors holding other currencies when the dollar advances.
* The dollar advance did not stop gold from resuming its recent uptrend. Currently trading at 1240, the benchmark contract returns to historical highs after briefly pulling back last Thursday and Friday.
Currency to watch out for: EURUSD & GBPUSD
* The EURUSD pivot point is at 1.2395 with a preference to enter into a short position at 1.2385
* The GBPUSD pivot point is at 1.4495 with a preference to enter into a short position at 1.4485
Today's calendar and market movers:
* US Empire State Manufacturing Index expected to fall to 30.1
* US TIC Long-Term Purchases expected to climb to 50.5B
Equity Markets:
US equities finished in negative territory as Eurozone debt concerns returned with France at the centre of attention. At the close; the S&P 500 closed down 1.88%, the DJIA closed down 1.51% and the NASDAQ 100 closed down 1.97%. EU equities closed lower with the FTSE 100 -3.14%, the DAX -3.12% and the CAC 40 -4.59%. In Asia, the Nikkei is currently at -2.17% and the Hang Seng at -2.48% at the time of writing.
Labels:
FX Trading
17 May 10 : Weekly Outlook for FX
Last week's currency trading review
The Dollar enjoyed the EUR/USD inspired gains across the board. Oil was down over $7 a barrel and stocks finished under pressure as the Eurozone debt crisis refused to go away. The US Trade Balance weakened to -40.4bn in March as the US imported more petroleum than forecast. Also released, April Retail Sales at 0.4% vs. 0.3% forecast. The Euro traded near 2 year lows at 1.2330 on the back of rumors that France could be downgraded and that France's President Sarkozy threatened to quit the EU region during the Greece Bailout negotiations. Also adding to the woes was deadly riots in Greece and a sharp reversal from Monday's relief rally. The EUR/USD lost -3.18% closing at 1.2358, after opening the week at 1.2751.
The Japanese Yen ended the week on the front foot but was slightly weaker than the dollar which gained the title of safe haven of choice. Some concerns are beginning to be heard about the Japanese Debt situation which could inspire fresh ratings downgrades as the economy struggles to combat deflation and government deficits. The USD/JPY fell +0.91% closing at 92.44, after opening at 91.60 previously. The GBP enjoyed a brief rally on Monday as the conservatives formed an alliance with the Liberal Democrats and optimism pushed the pair back above 1.5000. The mood changed in the later half of the week however as EU concerns and bearish comments from BOE Governor King sent the Pound Spiraling lower. The GBP/USD fell -1.80% closing at 1.4539 after opening at 1.4801. The AUD reacted to good Employment numbers pushing the Aussie back above 0.9000 but like the rest of the market the Aussie succumbed to selling pressure on Thursday and Friday falling heavily. April Employment Change was +33.7k vs. +22.6k forecast. The AUD/USD gained -0.28% closing at 0.8856 after opening at 0.8881.
The forex trading week preview
In the States; On Monday, March TIC Flows forecast at 50bn vs. 47bn previously. On Tuesday, April Housing Starts are forecast at 650k vs. 626k previously. On Wednesday, April CPI is forecast at 2.4% vs. 2.3%. Also released, May FOMC Minutes. On Thursday, Weekly Jobless Claims are forecast at 440k vs. 444k previously. We will provide our previews and reviews of these data releases in the daily summary.
In the Eurozone; On Tuesday, May German Zew is Forecast at 46 vs. 53 previously. April CPI is forecast at 1.5% vs. 1.4% previously. On Friday, German May IFO is forecast at 101.8 vs. 101.6 previously. Also released, EU PMI Services forecast at 55.4 vs. 55.6 previously and PMI Manufacturing forecast at 57 vs. 57.6 previously. In the UK; On Tuesday, April CPI is forecast at 3.5% vs. 3.4% previously. On Wednesday, BOE minutes. On Friday, April Mortgage approvals. We will provide our previews and reviews of these data releases in the daily summary.
In Japan; On Thursday, Q1 GDP is forecast at 1.4% vs. 0.9% previously. On Friday, BOJ target Rate forecast at 0.1%. In Australia; On Tuesday, RBA Minutes from the May Meeting. We will provide our previews and reviews of these data releases in the daily summary.
The Dollar enjoyed the EUR/USD inspired gains across the board. Oil was down over $7 a barrel and stocks finished under pressure as the Eurozone debt crisis refused to go away. The US Trade Balance weakened to -40.4bn in March as the US imported more petroleum than forecast. Also released, April Retail Sales at 0.4% vs. 0.3% forecast. The Euro traded near 2 year lows at 1.2330 on the back of rumors that France could be downgraded and that France's President Sarkozy threatened to quit the EU region during the Greece Bailout negotiations. Also adding to the woes was deadly riots in Greece and a sharp reversal from Monday's relief rally. The EUR/USD lost -3.18% closing at 1.2358, after opening the week at 1.2751.
The Japanese Yen ended the week on the front foot but was slightly weaker than the dollar which gained the title of safe haven of choice. Some concerns are beginning to be heard about the Japanese Debt situation which could inspire fresh ratings downgrades as the economy struggles to combat deflation and government deficits. The USD/JPY fell +0.91% closing at 92.44, after opening at 91.60 previously. The GBP enjoyed a brief rally on Monday as the conservatives formed an alliance with the Liberal Democrats and optimism pushed the pair back above 1.5000. The mood changed in the later half of the week however as EU concerns and bearish comments from BOE Governor King sent the Pound Spiraling lower. The GBP/USD fell -1.80% closing at 1.4539 after opening at 1.4801. The AUD reacted to good Employment numbers pushing the Aussie back above 0.9000 but like the rest of the market the Aussie succumbed to selling pressure on Thursday and Friday falling heavily. April Employment Change was +33.7k vs. +22.6k forecast. The AUD/USD gained -0.28% closing at 0.8856 after opening at 0.8881.
The forex trading week preview
In the States; On Monday, March TIC Flows forecast at 50bn vs. 47bn previously. On Tuesday, April Housing Starts are forecast at 650k vs. 626k previously. On Wednesday, April CPI is forecast at 2.4% vs. 2.3%. Also released, May FOMC Minutes. On Thursday, Weekly Jobless Claims are forecast at 440k vs. 444k previously. We will provide our previews and reviews of these data releases in the daily summary.
In the Eurozone; On Tuesday, May German Zew is Forecast at 46 vs. 53 previously. April CPI is forecast at 1.5% vs. 1.4% previously. On Friday, German May IFO is forecast at 101.8 vs. 101.6 previously. Also released, EU PMI Services forecast at 55.4 vs. 55.6 previously and PMI Manufacturing forecast at 57 vs. 57.6 previously. In the UK; On Tuesday, April CPI is forecast at 3.5% vs. 3.4% previously. On Wednesday, BOE minutes. On Friday, April Mortgage approvals. We will provide our previews and reviews of these data releases in the daily summary.
In Japan; On Thursday, Q1 GDP is forecast at 1.4% vs. 0.9% previously. On Friday, BOJ target Rate forecast at 0.1%. In Australia; On Tuesday, RBA Minutes from the May Meeting. We will provide our previews and reviews of these data releases in the daily summary.
Labels:
Forex
Euro woes continued
U.S. Dollar Trading (USD) the on going sovereign debt crisis continued to dominate of the FX market. Concerns on Friday were on rumors of an EU breakup and France downgrade. No matter how truthful the rumors are, the damage was done and sentiment remains fragile. April Retail Sales were solid at 0.4% m/m. In US stocks, DJIA -162 points closing at 10620, S&P -21 points closing at 1135 and NASDAQ -47 points closing at 2346. Looking ahead, May NY FED is forecast at -32 vs. -36 previously.
The Euro (EUR) the slump accelerated and the pair broke through 1.2500 and 1.2400 as sentiment deteriorated. Markets noted that Core Spanish Inflation turned -0.1% y/y as austerity measures hurt prices. EUR/GBP is also under pressure but Cable selling is picking up and offering some protection. EUR/USD traded with a low of 1.2359 and a high of 1.2575 before closing at 1.2380.
The Japanese Yen (JPY) was buoyant like the Dollar on Safe haven demand. USD/JPY struggled as EUR/JPY selling intensified in Europe and not even solid US data allowed much support. GBP/JPY and AUD/JPY selling also added to the Yen strength. Overall the USDJPY traded with a low of 91.80 and a high of 93.10 before closing the day around 92.25 in the New York session. UPDATE March Machinery Orders up 5.4% m/m.
The Sterling (GBP) came under pressure as the media reported concerns about the ability of the new coalition government to reign in spending and how this would affect GDP. The European Debt concerns could easily migrate across the channel and pull the UK into it's own debt crisis. Overall the GBP/USD traded with a low of 1.4497 and a high of 1.4638 before closing the day at 1.4536 in the New York session.
The Australian Dollar (AUD) was under pressure due to weak stocks and AUD/JPY selling but held up better than most as EUR/AUD selling supported the commodity currency. The Canadian dollar was the hardest hit however as Oil continued falling faster than metals. Overall the AUD/USD traded with a low of 0.8852 and a high of 0.8973 before closing the US session at 0.8854.
Oil & Gold (XAU) tested $1150 before slumping back to $1120 on profit taking in the US session. Overall trading with a low of USD$1217 and high of USD$1250 before ending the New York session at USD$1236 an ounce. Oil continued to crash on European demand concerns. WTI Oil Closed -$2.79 at $71.60 a barrel.
The Euro (EUR) the slump accelerated and the pair broke through 1.2500 and 1.2400 as sentiment deteriorated. Markets noted that Core Spanish Inflation turned -0.1% y/y as austerity measures hurt prices. EUR/GBP is also under pressure but Cable selling is picking up and offering some protection. EUR/USD traded with a low of 1.2359 and a high of 1.2575 before closing at 1.2380.
The Japanese Yen (JPY) was buoyant like the Dollar on Safe haven demand. USD/JPY struggled as EUR/JPY selling intensified in Europe and not even solid US data allowed much support. GBP/JPY and AUD/JPY selling also added to the Yen strength. Overall the USDJPY traded with a low of 91.80 and a high of 93.10 before closing the day around 92.25 in the New York session. UPDATE March Machinery Orders up 5.4% m/m.
The Sterling (GBP) came under pressure as the media reported concerns about the ability of the new coalition government to reign in spending and how this would affect GDP. The European Debt concerns could easily migrate across the channel and pull the UK into it's own debt crisis. Overall the GBP/USD traded with a low of 1.4497 and a high of 1.4638 before closing the day at 1.4536 in the New York session.
The Australian Dollar (AUD) was under pressure due to weak stocks and AUD/JPY selling but held up better than most as EUR/AUD selling supported the commodity currency. The Canadian dollar was the hardest hit however as Oil continued falling faster than metals. Overall the AUD/USD traded with a low of 0.8852 and a high of 0.8973 before closing the US session at 0.8854.
Oil & Gold (XAU) tested $1150 before slumping back to $1120 on profit taking in the US session. Overall trading with a low of USD$1217 and high of USD$1250 before ending the New York session at USD$1236 an ounce. Oil continued to crash on European demand concerns. WTI Oil Closed -$2.79 at $71.60 a barrel.
Friday, May 14, 2010
14 May 10 : Mid Day Update
Dollar Resumes up trend as risk aversion rises!
The USD was mixed yesterday, though it did gain VS the EUR and GBP as equities closed down over 1%. Oil and Gold are also down to 73.98 and 1234 at the time of writing. Fiscal concerns over EU countries continue to weigh down on the EUR making the prospects of a modest recovery, anaemic, if at all. Dollar and Yen were also boosted on some concern on the job market as initial jobless claims failed to impress, slowing the prospects of a US recovery. Sterling was still feeling the pressure from BoE's King bearish inflation report. Trade balance also failed to improve things as deficit widened to 7.5 b in March. GBPUSD price action was between 1.4640 and 1.4584.
Latest developments in Europe show that Portugal and Spain adopted voluntarily austerity, measures in order to prevent excessive budget deficits, so as to avoid a similar Greece situation. In particular, Portugal will seek to save 2billion, half from spending and half from tax hikes. While Spain will cut civil servants pay by 5% this year and freeze it completely in 2011. They also plan to cut investment spending and pensions but also cut 13.000 public sector jobs in order to comply with their EU targets. EURUSD price action was between 1.2560 and 1.2519.
The Australian Dollar (AUD) Unemployment surprisingly jumped to 5.4%, yet the AUD rallied in Asia as Employment grew by 33.7K jobs. The AUD was the best performing currency against the USD on Thursday but failed to sustain gains as equity markets fell in the US. The AUD traded with a low of 0.8933 and a high of 0.9024.
Currency to watch out for: EURUSD & USDJPY
* § The EURUSD pivot point is at 1.2620 with a preference to enter into Short positions at 1.2610
* § The USDJPY pivot point is at 92.50 with a preference to enter Long positions at 92.55
Today's calendar and market movers:
* § US Retail sales are expected to be released at 0.3% versus previous 1.9% BoE Inflation Report
* § Industrial production is also released on Friday expected to be seen at 0.6%, previous 0.1%
* § US Consumer sentiment is expected to rise to 73.5 from 72.2.
Equity Markets:
US share markets saw the Dow Jones fall by 114 points (-1.05%), S&P down 1.26%, and the NASDAQ down 31 points (-1.22%). The European bourses were mixed yesterday with the CAC closing -0.06% the DAX and the FTSE closing up at 1.11% and 0.93%. The NIKKEI and the HSI at the time of writing is -1.50% and -0.34% respectively.
The USD was mixed yesterday, though it did gain VS the EUR and GBP as equities closed down over 1%. Oil and Gold are also down to 73.98 and 1234 at the time of writing. Fiscal concerns over EU countries continue to weigh down on the EUR making the prospects of a modest recovery, anaemic, if at all. Dollar and Yen were also boosted on some concern on the job market as initial jobless claims failed to impress, slowing the prospects of a US recovery. Sterling was still feeling the pressure from BoE's King bearish inflation report. Trade balance also failed to improve things as deficit widened to 7.5 b in March. GBPUSD price action was between 1.4640 and 1.4584.
Latest developments in Europe show that Portugal and Spain adopted voluntarily austerity, measures in order to prevent excessive budget deficits, so as to avoid a similar Greece situation. In particular, Portugal will seek to save 2billion, half from spending and half from tax hikes. While Spain will cut civil servants pay by 5% this year and freeze it completely in 2011. They also plan to cut investment spending and pensions but also cut 13.000 public sector jobs in order to comply with their EU targets. EURUSD price action was between 1.2560 and 1.2519.
The Australian Dollar (AUD) Unemployment surprisingly jumped to 5.4%, yet the AUD rallied in Asia as Employment grew by 33.7K jobs. The AUD was the best performing currency against the USD on Thursday but failed to sustain gains as equity markets fell in the US. The AUD traded with a low of 0.8933 and a high of 0.9024.
Currency to watch out for: EURUSD & USDJPY
* § The EURUSD pivot point is at 1.2620 with a preference to enter into Short positions at 1.2610
* § The USDJPY pivot point is at 92.50 with a preference to enter Long positions at 92.55
Today's calendar and market movers:
* § US Retail sales are expected to be released at 0.3% versus previous 1.9% BoE Inflation Report
* § Industrial production is also released on Friday expected to be seen at 0.6%, previous 0.1%
* § US Consumer sentiment is expected to rise to 73.5 from 72.2.
Equity Markets:
US share markets saw the Dow Jones fall by 114 points (-1.05%), S&P down 1.26%, and the NASDAQ down 31 points (-1.22%). The European bourses were mixed yesterday with the CAC closing -0.06% the DAX and the FTSE closing up at 1.11% and 0.93%. The NIKKEI and the HSI at the time of writing is -1.50% and -0.34% respectively.
Labels:
Forex
14 May 10 : Market Update for Foreign Currencies
* USD: Higher, jobless claims drop, import prices rise, EU deficit and growth worries
* JPY: Higher, record current account surplus in Japan, exports surge
* EUR: Lower, austerity measures may slow EU growth, accommodative ECB policy
* GBP: Lower, widening of the UK trade balance, dovish BOE inflation report
* CAD and AUD: AUD & CAD higher, stronger Australian employment growth
Overview
The USD traded mixed Thursday gaining versus Europe and weakening versus the commodity currencies and the JPY. EUR was pressured by concern about EU growth and the outlook for continued accommodative ECB monetary policy. Portugal announced plans for new austerity measures. Austerity measures in Europe generate concern about weaker growth outlook for the EU. ECB officials signaled that interest rates are appropriate. EUR/CHF trades a new record low with CHF supported by safe haven demand sparked by the EU fiscal crisis. GBP traded lower pressured by report of the widening of the UK trade deficit and Wednesday's release of a dovish BOE inflation report. Commodity currencies traded higher supported by a modest improvement in risk sentiment as European equities rally. AUD was supported by report of strong Australian employment growth. Commodity currency gains were limited by weaker commodities as crude oil prices tumble. JPY traded higher supported by report of a record current account surplus in Japan and by gains in cross trade to Europe. US economic data was mixed with jobless claims down but the decline was less than expected. Import prices rose more than expected. Although the EU/IMF bailout plan for Greece generates hope that the EU debt contagion will be contained investors are selling the EUR on concern about EU growth outlook and speculation the EU fiscal crisis will force the ECB to delay its exit strategy. Growth and yield differential is emerging a key focus of the trade.
Today's US data:
Initial jobless claims for week ending 05/08 declined by 4k to 444k, a reading of 440k was expected. April import prices rose by 0.9%.
Upcoming US data:
On May 14th April retail sales industrial production, capacity utilization and University of Michigan sentiment will be released along with March business inventories. Retail sales are expected to rise by 0.3% compared 1.6% last month. Industrial production is expected to rise by 0.5% compared to 0.1% last month. Capacity utilization is expected at 73.6 compared to 73.2 last month. Michigan consumer sentiment is expected at 73.2 compared to 72.2 last month. Business inventories are expected to rise by 0.3% compared to 0.5% last month.
JPY
JPY traded higher supported by report of a record current account surplus in Japan and gains in cross trade to Europe. Japan's current account surplus rose to a record ¥2.53trln, a reading of ¥2.15trln was expected. The current account surplus grew by 65.1% as exports surged by a record amount. Exports rose by 45% and imports were up 22% in March. The rise in Japan's export sales reflects improved global economic outlook and suggests that recent strength of the JPY is having limited impact on export sales. Japan also reported that April service sector sentiment rose to a three-year high of 49.8 and the April M2 money supply rose by 2.9%. The improvement in the service sector sentiment and increase in money supply growth was partly offset by report that Japan's April lending declined the most in four years. Today's Japanese economic data suggests that the Japanese recovery remains uneven and still largely dependent on exports. JPY traded more than 1% higher in cross trade to the EUR and GBP with EUR pressured by EU growth worries and the GBP pressured by report of the widening of the UK trade deficit.
Key technical levels to watch in USD/JPY include support at 92.21 the May 11th low with resistance at 93.64 the May 13th high.
EUR
EUR traded at a 14 month low versus the USD pressured by speculation that austerity measures will curb EU growth. Portugal announced new austerity measures following Spain's announcement of a series of spending cuts yesterday. Portugal plans to cut €2bln out of its 2010 budget deficit. The new austerity measures are prompted by EU pressure for peripheral European nations to reduce their budget deficits to come in line with the EMU stability pact. The EU/IMF aid plan and emergency loan facility requires that nations seeking support must agree to reduce spending. The announcement of austerity measures in Greece, Spain and Portugal generate concern about the EU growth outlook. Greece reported that the unemployment rate for February rose to 12.1% from 11.3% in January and the IMF warns that Greek unemployment could reach 15%. Unemployment in Spain is close to 20%. EUR was also pressured by speculation that the ECB will be forced to maintain accommodative policy because of the impact of the Greek fiscal crisis and by selling in cross trade to the CHF. Because the Greek fiscal crisis may curb EU growth the ECB is expected to maintain steady rate policy into 2011.The ECB said that the interest rate is appropriate and expect an uneven recovery for the EU. EUR/CHF traded in a record low as investors look to the CHF for safe haven from the EU fiscal crisis. EUR remains vulnerable to concern that EU austerity measures will slow the EU recovery.
The technical outlook for the EUR is negative as EUR trades below 1.2600. Expect EUR support at 1.2425 the November 21st low with resistance at 1.2684 the May 13th high.
GBP
GBP traded lower pressured by report that the UK trade deficit widened last month and in reaction to Wednesday's release of a dovish BOE inflation report. GBP had experienced a relief rally in reaction to news that the Conservative Party has formed a new coalition government and pledged to take quick action on the UK budget deficit. March trade balance widened to 7.5bln from 6.3 million last month a gap of 6.6bln was expected, Exports rose just 1% and imports rose by 5.2%.The Conservative Party is the new ruling party of the UK and the leader of the Conservative Party, Cameron is the UK's new prime minister. The Conservative Party has pledged to take quick action to reduce the UK budget deficit. The positive news on the UK budget deficit reduction plans was offset by a dovish BOE inflation report and a statement from BOE Governor King that the central bank has not ruled out additional bond purchases. King went on to say that it's too early to consider tightening of monetary policy. The BOE inflation report said that UK inflation is expected to fall below the 2% target within two years. King's comments and diminishing UK inflation risk opens the door for additional easing by the BOE. Investors will monitor how the UK governments addresses the UK deficit and how the BOE responds to the government austerity measures.
The technical outlook for GBP is negative as GBP trades below 1.5000. Expect near-term support at 1.4720 the May 11h low with resistance at 1.5054 the May 10th high.
CAD
CAD edged higher supported by gains in cross trade to the EUR. Investors are fleeing the EUR because of concern about the impact of the EU fiscal crisis and new austerity measures on the EU economy. Canada's domestic economy is strengthening and the BOC is expected to raise interest rates midyear. Yield and growth differential is moving in favor of the CAD as investors look for alternatives to the EUR and, Western economies are expected to grow faster than Europe. Gold continues to trade near a record high supported by investors search for safety from rising global sovereign debt risk. Higher gold prices support demand for the CAD. There were no major Canadian economic reports released in today's trade. Wednesday, Canada reported a much smaller than expected trade surplus as exports sales slowed. Canada's March trade balance widened by C$245mln, a C$1.55bln surplus was expected. A smaller than expected Canadian trade surplus reflects the impact of the strong CAD on Canada's export sales and weaker energy prices. Canada also reported the ninth consecutive monthly rise in its housing price index. CAD gains were limited by mixed to weaker US equity markets and a sharp drop in the price of crude.
On May 14th March manufacturing shipments and new motor vehicle sales will be released. Manufacturing shipments are expected up 0.6% compared to 0.1% last month. Motor vehicle sales are expected to rise by 3% compared to 8.1% last month.
The technical outlook for CAD is mixed as USD/CAD trades below 1.0300. Look for near-term support at 1.0101 the May 3rd low with resistance at 1.0360.
AUD
Australia reported higher than expected headline unemployment rate with stronger than expected jobs growth last month. 33,700 new jobs created last month. AUD traded higher in reaction to the report of stronger than expected jobs growth. This marked the eighth consecutive month of new job growth in Australia. Continued strong employment growth in Australia may revive RBA rate hike speculation. Recent Australian economic data however suggests that the Australian domestic economy may be slowing. The threat of tightening of credit conditions in China may increase fears of slower Australian growth the second half of 2010. Wednesday Australia reported an unexpected drop in March housing finance. Earlier in the week Australia reported a decline in business conditions and weekly job ads. Weaker business conditions, the drop in job ads and weaker hosing finance may reflect recent tightening of monetary policy by the RBA. These reports may also contribute to speculation that the RBA will pause its tightening cycle. The RBA Monetary Policy report released last Friday states that the RBA believes interest rates are near average level. This suggests that the RBA plans to soon pause in its rate hike cycle. Diminished RBA rate hike speculation is negative for the AUD. Today's Australian employment report clouds RBA policy outlook. AUD gains were limited by weaker US equity market trade and declining commodity prices. Uncertainty about the strength of the global recovery sparked by fears of tightening in China and new austerity measures in Europe could dampen risk appetite and demand for growth led currencies.
The technical outlook for the AUD is mixed as the AUD trades above 9000. Expect AUD support at 8803 the May 7th low with resistance at 9095 the May 6th high.
* JPY: Higher, record current account surplus in Japan, exports surge
* EUR: Lower, austerity measures may slow EU growth, accommodative ECB policy
* GBP: Lower, widening of the UK trade balance, dovish BOE inflation report
* CAD and AUD: AUD & CAD higher, stronger Australian employment growth
Overview
The USD traded mixed Thursday gaining versus Europe and weakening versus the commodity currencies and the JPY. EUR was pressured by concern about EU growth and the outlook for continued accommodative ECB monetary policy. Portugal announced plans for new austerity measures. Austerity measures in Europe generate concern about weaker growth outlook for the EU. ECB officials signaled that interest rates are appropriate. EUR/CHF trades a new record low with CHF supported by safe haven demand sparked by the EU fiscal crisis. GBP traded lower pressured by report of the widening of the UK trade deficit and Wednesday's release of a dovish BOE inflation report. Commodity currencies traded higher supported by a modest improvement in risk sentiment as European equities rally. AUD was supported by report of strong Australian employment growth. Commodity currency gains were limited by weaker commodities as crude oil prices tumble. JPY traded higher supported by report of a record current account surplus in Japan and by gains in cross trade to Europe. US economic data was mixed with jobless claims down but the decline was less than expected. Import prices rose more than expected. Although the EU/IMF bailout plan for Greece generates hope that the EU debt contagion will be contained investors are selling the EUR on concern about EU growth outlook and speculation the EU fiscal crisis will force the ECB to delay its exit strategy. Growth and yield differential is emerging a key focus of the trade.
Today's US data:
Initial jobless claims for week ending 05/08 declined by 4k to 444k, a reading of 440k was expected. April import prices rose by 0.9%.
Upcoming US data:
On May 14th April retail sales industrial production, capacity utilization and University of Michigan sentiment will be released along with March business inventories. Retail sales are expected to rise by 0.3% compared 1.6% last month. Industrial production is expected to rise by 0.5% compared to 0.1% last month. Capacity utilization is expected at 73.6 compared to 73.2 last month. Michigan consumer sentiment is expected at 73.2 compared to 72.2 last month. Business inventories are expected to rise by 0.3% compared to 0.5% last month.
JPY
JPY traded higher supported by report of a record current account surplus in Japan and gains in cross trade to Europe. Japan's current account surplus rose to a record ¥2.53trln, a reading of ¥2.15trln was expected. The current account surplus grew by 65.1% as exports surged by a record amount. Exports rose by 45% and imports were up 22% in March. The rise in Japan's export sales reflects improved global economic outlook and suggests that recent strength of the JPY is having limited impact on export sales. Japan also reported that April service sector sentiment rose to a three-year high of 49.8 and the April M2 money supply rose by 2.9%. The improvement in the service sector sentiment and increase in money supply growth was partly offset by report that Japan's April lending declined the most in four years. Today's Japanese economic data suggests that the Japanese recovery remains uneven and still largely dependent on exports. JPY traded more than 1% higher in cross trade to the EUR and GBP with EUR pressured by EU growth worries and the GBP pressured by report of the widening of the UK trade deficit.
Key technical levels to watch in USD/JPY include support at 92.21 the May 11th low with resistance at 93.64 the May 13th high.
EUR
EUR traded at a 14 month low versus the USD pressured by speculation that austerity measures will curb EU growth. Portugal announced new austerity measures following Spain's announcement of a series of spending cuts yesterday. Portugal plans to cut €2bln out of its 2010 budget deficit. The new austerity measures are prompted by EU pressure for peripheral European nations to reduce their budget deficits to come in line with the EMU stability pact. The EU/IMF aid plan and emergency loan facility requires that nations seeking support must agree to reduce spending. The announcement of austerity measures in Greece, Spain and Portugal generate concern about the EU growth outlook. Greece reported that the unemployment rate for February rose to 12.1% from 11.3% in January and the IMF warns that Greek unemployment could reach 15%. Unemployment in Spain is close to 20%. EUR was also pressured by speculation that the ECB will be forced to maintain accommodative policy because of the impact of the Greek fiscal crisis and by selling in cross trade to the CHF. Because the Greek fiscal crisis may curb EU growth the ECB is expected to maintain steady rate policy into 2011.The ECB said that the interest rate is appropriate and expect an uneven recovery for the EU. EUR/CHF traded in a record low as investors look to the CHF for safe haven from the EU fiscal crisis. EUR remains vulnerable to concern that EU austerity measures will slow the EU recovery.
The technical outlook for the EUR is negative as EUR trades below 1.2600. Expect EUR support at 1.2425 the November 21st low with resistance at 1.2684 the May 13th high.
GBP
GBP traded lower pressured by report that the UK trade deficit widened last month and in reaction to Wednesday's release of a dovish BOE inflation report. GBP had experienced a relief rally in reaction to news that the Conservative Party has formed a new coalition government and pledged to take quick action on the UK budget deficit. March trade balance widened to 7.5bln from 6.3 million last month a gap of 6.6bln was expected, Exports rose just 1% and imports rose by 5.2%.The Conservative Party is the new ruling party of the UK and the leader of the Conservative Party, Cameron is the UK's new prime minister. The Conservative Party has pledged to take quick action to reduce the UK budget deficit. The positive news on the UK budget deficit reduction plans was offset by a dovish BOE inflation report and a statement from BOE Governor King that the central bank has not ruled out additional bond purchases. King went on to say that it's too early to consider tightening of monetary policy. The BOE inflation report said that UK inflation is expected to fall below the 2% target within two years. King's comments and diminishing UK inflation risk opens the door for additional easing by the BOE. Investors will monitor how the UK governments addresses the UK deficit and how the BOE responds to the government austerity measures.
The technical outlook for GBP is negative as GBP trades below 1.5000. Expect near-term support at 1.4720 the May 11h low with resistance at 1.5054 the May 10th high.
CAD
CAD edged higher supported by gains in cross trade to the EUR. Investors are fleeing the EUR because of concern about the impact of the EU fiscal crisis and new austerity measures on the EU economy. Canada's domestic economy is strengthening and the BOC is expected to raise interest rates midyear. Yield and growth differential is moving in favor of the CAD as investors look for alternatives to the EUR and, Western economies are expected to grow faster than Europe. Gold continues to trade near a record high supported by investors search for safety from rising global sovereign debt risk. Higher gold prices support demand for the CAD. There were no major Canadian economic reports released in today's trade. Wednesday, Canada reported a much smaller than expected trade surplus as exports sales slowed. Canada's March trade balance widened by C$245mln, a C$1.55bln surplus was expected. A smaller than expected Canadian trade surplus reflects the impact of the strong CAD on Canada's export sales and weaker energy prices. Canada also reported the ninth consecutive monthly rise in its housing price index. CAD gains were limited by mixed to weaker US equity markets and a sharp drop in the price of crude.
On May 14th March manufacturing shipments and new motor vehicle sales will be released. Manufacturing shipments are expected up 0.6% compared to 0.1% last month. Motor vehicle sales are expected to rise by 3% compared to 8.1% last month.
The technical outlook for CAD is mixed as USD/CAD trades below 1.0300. Look for near-term support at 1.0101 the May 3rd low with resistance at 1.0360.
AUD
Australia reported higher than expected headline unemployment rate with stronger than expected jobs growth last month. 33,700 new jobs created last month. AUD traded higher in reaction to the report of stronger than expected jobs growth. This marked the eighth consecutive month of new job growth in Australia. Continued strong employment growth in Australia may revive RBA rate hike speculation. Recent Australian economic data however suggests that the Australian domestic economy may be slowing. The threat of tightening of credit conditions in China may increase fears of slower Australian growth the second half of 2010. Wednesday Australia reported an unexpected drop in March housing finance. Earlier in the week Australia reported a decline in business conditions and weekly job ads. Weaker business conditions, the drop in job ads and weaker hosing finance may reflect recent tightening of monetary policy by the RBA. These reports may also contribute to speculation that the RBA will pause its tightening cycle. The RBA Monetary Policy report released last Friday states that the RBA believes interest rates are near average level. This suggests that the RBA plans to soon pause in its rate hike cycle. Diminished RBA rate hike speculation is negative for the AUD. Today's Australian employment report clouds RBA policy outlook. AUD gains were limited by weaker US equity market trade and declining commodity prices. Uncertainty about the strength of the global recovery sparked by fears of tightening in China and new austerity measures in Europe could dampen risk appetite and demand for growth led currencies.
The technical outlook for the AUD is mixed as the AUD trades above 9000. Expect AUD support at 8803 the May 7th low with resistance at 9095 the May 6th high.
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FX Trading
Thursday, May 13, 2010
13 May 10 : Daily FX update
Daily Forex Report-USD mixed, EUR gives back early gains
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Written by Michael J. Malpede
Wednesday, 12 May 2010 16:37 GMT
* USD: Higher, risk appetite improves, trade balance widens, concern over EU aid plan
* JPY: Lower, tracking stocks, MOF will seek to extend Japan's debt maturities will
* EUR: Mixed, cost of funding EU debt drops, GDP and industrial output beat expectations
* GBP: Lower, dovish BOE inflation report, Conservatives pledge quick action on the budget
* CAD and AUD: AUD lower & CAD mixed, gold trades at record high, Australian budget to return to surplus
Overview
After recent volatility a relative calm has returned to the global equity and financial markets as ECB purchase of sovereign debt in peripheral European nations helps to reduce the cost of debt financing in Europe. The decline in the cost of debt financing in Europe contributes to a slight easing of worries about the EU debt crisis. EUR traded higher supported by easing EU debt worries and in reaction to report of better than expected EU Q1 GDP and strong EU industrial output. In addition, Spain has announced that it is taking measures to cut wages and reduce its budget deficit. Spain's action to try and reduce its deficit may reduce some of the fear of debt contagion in Europe. GBP traded mixed initially supported by report that the Conservative Party will head the new UK government. Conservative Party leader Cameron will become the new UK PM. The Conservative Party pledged to take action within weeks to begin reducing the UK budget deficit. The impact of positive UK political news was offset by a dovish BOE inflation report and the statement from BOE Governor King that the central bank has not ruled out further bond purchases. Commodity currencies initially traded higher and the JPY traded lower as equities rally and risk appetite returns. Commodity currencies were also supported by a rise to a record high in the price of gold. Canada's trade surplus narrowed and the housing price index rose. AUD gains were limited by concern about China's economy and fear of a credit bubble in China. CAD gains were limited by weaker crude prices. US economic data was mixed with the trade balance widening to its highest level since October 2008 Exports rose by 3.2% and imports by 3.1%.USD is closely tracking risk sentiment and the direction of equities.
Today's US data:
March trade balance widened to -40.42bln, a reading of -40bln was expected.
Upcoming US data:
On May 13th April import prices and jobless claims for week ending 05/08 will be released. Import prices are expected to rise by 0.8% compared to 0.7% last month. Jobless claims are expected to fall to 438k from 444k last week. On May 14th April retail sales industrial production, capacity utilization and University of Michigan sentiment will be released along with March business inventories. Retail sales are expected to rise by 0.3% compared 1.6% last month. Industrial production is expected to rise by 0.5% compared to 0.1% last month. Capacity utilization is expected at 73.6 compared to 73.2 last month. Michigan consumer sentiment is expected at 73.2 compared to 72.2 last month. Business inventories are expected to rise by 0.3% compared to 0.5% last month.
JPY
JPY traded lower as stocks rebound and risk appetite improves. A modest decline in the cost of financing EU debt supported equity markets and risk appetite. There was limited reaction to a statement from MOF official Kaizuka that Japan plans to take action to extend the maturity of its debt to reduce funding risks. Kaizuka said that Japan will not be the next Greece because Japan can service its debt domestically by tapping Japan's huge domestic savings. Shifting to longer dated maturities will help Japan mitigate some of the cost risk for funding its budget deficit. Tuesday Japan's Finance Minister Kan said that he seeks a cap Japan's debt issuance. Ratings agencies have warned that Japan's sovereign debt rating could be cut if JGB bond issuance continues to rise. According to Kan Japan's new fiscal year bond issuance should not top ¥44.3 trillion. This is close to the threshold that may trigger a downgrade of Japan's debt rating. Japan's economic data was mixed with March leading indicator rising by +4.4 and the coincident indicator at +1.1. JPY direction is expected to trade inversely to equities and risk sentiment.
On May 13th March current account will be released expected at ¥2.15trln compared with ¥1.47trln last month. April money supply and bank lending will also be released on May 13th. Money supply is expected to rise by 0.1% compared to 0.2% last month and bank lending is expected to rise by 0.4% compared to 0.2% last month.
Key technical levels to watch in USD/JPY include support at 92.21 the May 11th low with resistance at 93.55 the May 10h high.
EUR
EUR traded higher supported by easing worries about the EU debt crisis as the cost of funding EU debt falls and Spain takes action to reduce its deficit. The ECB has been buying sovereign debt of peripheral European nations for last few days and these bond purchases have helped to reduce the cost of financing EU debt. The ECB says that it will not announce the size of its bond purchases and there is some confusion over whether the ECB plans to sterilize all of its bond purchases but for the moment the speculative assault on the European bond markets has slowed. The ECB bond purchases could create credibility issues for the ECB if the bond purchases disrupt price stability. EUR was also supported by report of better than expected EU Q1 GDP and strong EU industrial output. EU Q1 GDP rose by 0.2% and March industrial output rose by 1.3%. The impact of these reports was limited as investors are concerned that the momentum of the EU recovery will likely slow as peripheral European nations introduce austerity measures to cut budget deficits. Wednesday Spain announced a series of measures to cut its deficit which include a cut of public-sector wages by 5% this year and a freeze on wages in 2011. Increases in pensions will be suspended next year and public investment will be cut by €6bln.Spainih unions are protesting wage cuts and investors will be monitoring the protests to see if violence erupts as it did in Greece. EUR gains will likely be limited by continued uncertainty about the EU debt crisis and questions about the sustainability of the EU recovery.
On May 13th German Q1 GDP will be released expected at 0.3%.
The technical outlook for the EUR is mixed as EUR consolidates near 1.2700. Expect EUR support at 1.2586 the May 7th low with resistance at 1.2803 the May 11th high.
GBP
GBP traded mixed initially supported by the latest UK political news which finds that the UK has a new government and prime minister. The Conservative Party is the new ruling party of the UK and the leader of the Conservative Party, Cameron is the UK's new prime minister. The Conservative Party has pledged to take quick action to reduce the UK budget deficit. The positive news on the UK budget deficit reduction plans was offset by a dovish BOE inflation report and a statement from BOE Governor King that the central bank has not ruled out additional bond purchases. King went on to say that it's too early to consider tightening of monetary policy The BOE inflation report said that UK inflation is expected to fall below the 2% target within two years. King's comments and diminishing UK inflation risk opens the door for additional easing by the BOE. GBP gains were also limited by a statement from a UK government source that the UK has no plans to join the European Monetary Union. The Daily Telegraph reports that Europe will not help the UK in event of a GBP crisis. UK economic data was mixed with April claimant count declining by 27,100 and weekly earnings reported at +4%. Investors will monitor how the UK governments addresses the UK deficit and how the BOE responds to the government austerity measures. A new budget is expected within 50 days.
On May 13th March trade balance will be released expected to widen to -7.2bln from -6.2bln in March.
The technical outlook for GBP is negative as GBP trades below 1.5000. Expect near-term support at 1.4720 the May 11h low with resistance at 1.5054 the May 10th high.
CAD
CAD traded higher supported by improving risk appetite as equity markets rally and in reaction to a record rise in the price of gold. Equity markets were supported by declining cost of funding of EU debt. Canadian economic data was mixed with the trade surplus widening by less than expected and home prices coming in line with expectation. Canada's March trade balance widened by C$245mln, a C$1.55bln surplus was expected. A smaller than expected Canadian trade surplus reflects the impact of the strong CAD on Canada's export sales and weaker energy prices. The March new housing price index posted its ninth monthly gain reported up 0.3%.CAD gave back early gains after the release of today data and in reaction to a sharp drop in crude prices Today's Canadian economic data may increase the risk of intervention but should not dampen speculation of an earlier BOC rate hike. Canadian officials have stated that the strength of the CAD is a risk to the Canadian recovery. Investors will be watching to see whether Canadian officials try to talk the CAD lower. Recent Canadian economic data has been strong with last Friday's report of a record monthly rise in employment growth. The combination of stronger employment growth and rising house prices may increase pressure on the BOC to consider a June rate hike. The main obstacle to a June the BOC rate hike may be developments from the Greek debt crisis and concern that a rate hike may boost demand for the CAD. The BOC is likely to consider a June rate hike barring any substantial new fallout from the EU sovereign debt crisis. Canada may have to learn to live with a stronger CAD as the economic recovery gains momentum.
On May 14th March manufacturing shipments and new motor vehicle sales will be released. Manufacturing shipments are expected up 0.6% compared to 0.1% last month. Motor vehicle sales are expected to rise by 3% compared to 8.1% last month.
The technical outlook for CAD is mixed as USD/CAD trades below 1.0300. Look for near-term support at 1.0101 the May 3rd low with resistance at 1.0360.
AUD
AUD opened higher supported by firmer equity markets and improving risk sentiment. European and US equity markets posted modest gains as EU debt worries ease. AUD was also supported by the Australian budget outlook which is in much better shape than many of the G-7 nations. Australia's Treasury Secretary Swan said that Australia's debt size is the envy of the world and the Australian budget deficit is expected to return surplus within the next two years. The reduction in the deficit will partly reflect stronger growth. Australia's debt is expected to be paid off by 2019. AUD gains were limited by reported weaker than expected Australian housing finance report. Australia's March housing finance declined by 3.4% a 3% rise was expected. Monday, Australia reported that April NAB business conditions index declined to +8 from +13 last month and Australia's April job ads declined by 1.2%. Weaker business conditions, the drop in job ads and weaker hosing finance may reflect recent tightening of monetary policy by the RBA. These reports may also contribute to speculation that the RBA will pause its tightening cycle. The RBA Monetary Policy report released last Friday states that the RBA believes interest rates are near average level. This suggests that the RBA plans to soon pause in its rate hike cycle. Diminished RBA rate hike speculation is negative for the AUD.
On May 13th April employment growth and unemployment rate would be released. Employment growth is expected at 25k compared to 19.6k last month. The unemployment rate is expected to fall to 5.2% from 5.3% last month.
The technical outlook for the AUD is mixed as the AUD trades above 9000. Expect AUD support at 8803 the May 7th low with resistance at 9080 the May 10th high.
Print E-mail
Written by Michael J. Malpede
Wednesday, 12 May 2010 16:37 GMT
* USD: Higher, risk appetite improves, trade balance widens, concern over EU aid plan
* JPY: Lower, tracking stocks, MOF will seek to extend Japan's debt maturities will
* EUR: Mixed, cost of funding EU debt drops, GDP and industrial output beat expectations
* GBP: Lower, dovish BOE inflation report, Conservatives pledge quick action on the budget
* CAD and AUD: AUD lower & CAD mixed, gold trades at record high, Australian budget to return to surplus
Overview
After recent volatility a relative calm has returned to the global equity and financial markets as ECB purchase of sovereign debt in peripheral European nations helps to reduce the cost of debt financing in Europe. The decline in the cost of debt financing in Europe contributes to a slight easing of worries about the EU debt crisis. EUR traded higher supported by easing EU debt worries and in reaction to report of better than expected EU Q1 GDP and strong EU industrial output. In addition, Spain has announced that it is taking measures to cut wages and reduce its budget deficit. Spain's action to try and reduce its deficit may reduce some of the fear of debt contagion in Europe. GBP traded mixed initially supported by report that the Conservative Party will head the new UK government. Conservative Party leader Cameron will become the new UK PM. The Conservative Party pledged to take action within weeks to begin reducing the UK budget deficit. The impact of positive UK political news was offset by a dovish BOE inflation report and the statement from BOE Governor King that the central bank has not ruled out further bond purchases. Commodity currencies initially traded higher and the JPY traded lower as equities rally and risk appetite returns. Commodity currencies were also supported by a rise to a record high in the price of gold. Canada's trade surplus narrowed and the housing price index rose. AUD gains were limited by concern about China's economy and fear of a credit bubble in China. CAD gains were limited by weaker crude prices. US economic data was mixed with the trade balance widening to its highest level since October 2008 Exports rose by 3.2% and imports by 3.1%.USD is closely tracking risk sentiment and the direction of equities.
Today's US data:
March trade balance widened to -40.42bln, a reading of -40bln was expected.
Upcoming US data:
On May 13th April import prices and jobless claims for week ending 05/08 will be released. Import prices are expected to rise by 0.8% compared to 0.7% last month. Jobless claims are expected to fall to 438k from 444k last week. On May 14th April retail sales industrial production, capacity utilization and University of Michigan sentiment will be released along with March business inventories. Retail sales are expected to rise by 0.3% compared 1.6% last month. Industrial production is expected to rise by 0.5% compared to 0.1% last month. Capacity utilization is expected at 73.6 compared to 73.2 last month. Michigan consumer sentiment is expected at 73.2 compared to 72.2 last month. Business inventories are expected to rise by 0.3% compared to 0.5% last month.
JPY
JPY traded lower as stocks rebound and risk appetite improves. A modest decline in the cost of financing EU debt supported equity markets and risk appetite. There was limited reaction to a statement from MOF official Kaizuka that Japan plans to take action to extend the maturity of its debt to reduce funding risks. Kaizuka said that Japan will not be the next Greece because Japan can service its debt domestically by tapping Japan's huge domestic savings. Shifting to longer dated maturities will help Japan mitigate some of the cost risk for funding its budget deficit. Tuesday Japan's Finance Minister Kan said that he seeks a cap Japan's debt issuance. Ratings agencies have warned that Japan's sovereign debt rating could be cut if JGB bond issuance continues to rise. According to Kan Japan's new fiscal year bond issuance should not top ¥44.3 trillion. This is close to the threshold that may trigger a downgrade of Japan's debt rating. Japan's economic data was mixed with March leading indicator rising by +4.4 and the coincident indicator at +1.1. JPY direction is expected to trade inversely to equities and risk sentiment.
On May 13th March current account will be released expected at ¥2.15trln compared with ¥1.47trln last month. April money supply and bank lending will also be released on May 13th. Money supply is expected to rise by 0.1% compared to 0.2% last month and bank lending is expected to rise by 0.4% compared to 0.2% last month.
Key technical levels to watch in USD/JPY include support at 92.21 the May 11th low with resistance at 93.55 the May 10h high.
EUR
EUR traded higher supported by easing worries about the EU debt crisis as the cost of funding EU debt falls and Spain takes action to reduce its deficit. The ECB has been buying sovereign debt of peripheral European nations for last few days and these bond purchases have helped to reduce the cost of financing EU debt. The ECB says that it will not announce the size of its bond purchases and there is some confusion over whether the ECB plans to sterilize all of its bond purchases but for the moment the speculative assault on the European bond markets has slowed. The ECB bond purchases could create credibility issues for the ECB if the bond purchases disrupt price stability. EUR was also supported by report of better than expected EU Q1 GDP and strong EU industrial output. EU Q1 GDP rose by 0.2% and March industrial output rose by 1.3%. The impact of these reports was limited as investors are concerned that the momentum of the EU recovery will likely slow as peripheral European nations introduce austerity measures to cut budget deficits. Wednesday Spain announced a series of measures to cut its deficit which include a cut of public-sector wages by 5% this year and a freeze on wages in 2011. Increases in pensions will be suspended next year and public investment will be cut by €6bln.Spainih unions are protesting wage cuts and investors will be monitoring the protests to see if violence erupts as it did in Greece. EUR gains will likely be limited by continued uncertainty about the EU debt crisis and questions about the sustainability of the EU recovery.
On May 13th German Q1 GDP will be released expected at 0.3%.
The technical outlook for the EUR is mixed as EUR consolidates near 1.2700. Expect EUR support at 1.2586 the May 7th low with resistance at 1.2803 the May 11th high.
GBP
GBP traded mixed initially supported by the latest UK political news which finds that the UK has a new government and prime minister. The Conservative Party is the new ruling party of the UK and the leader of the Conservative Party, Cameron is the UK's new prime minister. The Conservative Party has pledged to take quick action to reduce the UK budget deficit. The positive news on the UK budget deficit reduction plans was offset by a dovish BOE inflation report and a statement from BOE Governor King that the central bank has not ruled out additional bond purchases. King went on to say that it's too early to consider tightening of monetary policy The BOE inflation report said that UK inflation is expected to fall below the 2% target within two years. King's comments and diminishing UK inflation risk opens the door for additional easing by the BOE. GBP gains were also limited by a statement from a UK government source that the UK has no plans to join the European Monetary Union. The Daily Telegraph reports that Europe will not help the UK in event of a GBP crisis. UK economic data was mixed with April claimant count declining by 27,100 and weekly earnings reported at +4%. Investors will monitor how the UK governments addresses the UK deficit and how the BOE responds to the government austerity measures. A new budget is expected within 50 days.
On May 13th March trade balance will be released expected to widen to -7.2bln from -6.2bln in March.
The technical outlook for GBP is negative as GBP trades below 1.5000. Expect near-term support at 1.4720 the May 11h low with resistance at 1.5054 the May 10th high.
CAD
CAD traded higher supported by improving risk appetite as equity markets rally and in reaction to a record rise in the price of gold. Equity markets were supported by declining cost of funding of EU debt. Canadian economic data was mixed with the trade surplus widening by less than expected and home prices coming in line with expectation. Canada's March trade balance widened by C$245mln, a C$1.55bln surplus was expected. A smaller than expected Canadian trade surplus reflects the impact of the strong CAD on Canada's export sales and weaker energy prices. The March new housing price index posted its ninth monthly gain reported up 0.3%.CAD gave back early gains after the release of today data and in reaction to a sharp drop in crude prices Today's Canadian economic data may increase the risk of intervention but should not dampen speculation of an earlier BOC rate hike. Canadian officials have stated that the strength of the CAD is a risk to the Canadian recovery. Investors will be watching to see whether Canadian officials try to talk the CAD lower. Recent Canadian economic data has been strong with last Friday's report of a record monthly rise in employment growth. The combination of stronger employment growth and rising house prices may increase pressure on the BOC to consider a June rate hike. The main obstacle to a June the BOC rate hike may be developments from the Greek debt crisis and concern that a rate hike may boost demand for the CAD. The BOC is likely to consider a June rate hike barring any substantial new fallout from the EU sovereign debt crisis. Canada may have to learn to live with a stronger CAD as the economic recovery gains momentum.
On May 14th March manufacturing shipments and new motor vehicle sales will be released. Manufacturing shipments are expected up 0.6% compared to 0.1% last month. Motor vehicle sales are expected to rise by 3% compared to 8.1% last month.
The technical outlook for CAD is mixed as USD/CAD trades below 1.0300. Look for near-term support at 1.0101 the May 3rd low with resistance at 1.0360.
AUD
AUD opened higher supported by firmer equity markets and improving risk sentiment. European and US equity markets posted modest gains as EU debt worries ease. AUD was also supported by the Australian budget outlook which is in much better shape than many of the G-7 nations. Australia's Treasury Secretary Swan said that Australia's debt size is the envy of the world and the Australian budget deficit is expected to return surplus within the next two years. The reduction in the deficit will partly reflect stronger growth. Australia's debt is expected to be paid off by 2019. AUD gains were limited by reported weaker than expected Australian housing finance report. Australia's March housing finance declined by 3.4% a 3% rise was expected. Monday, Australia reported that April NAB business conditions index declined to +8 from +13 last month and Australia's April job ads declined by 1.2%. Weaker business conditions, the drop in job ads and weaker hosing finance may reflect recent tightening of monetary policy by the RBA. These reports may also contribute to speculation that the RBA will pause its tightening cycle. The RBA Monetary Policy report released last Friday states that the RBA believes interest rates are near average level. This suggests that the RBA plans to soon pause in its rate hike cycle. Diminished RBA rate hike speculation is negative for the AUD.
On May 13th April employment growth and unemployment rate would be released. Employment growth is expected at 25k compared to 19.6k last month. The unemployment rate is expected to fall to 5.2% from 5.3% last month.
The technical outlook for the AUD is mixed as the AUD trades above 9000. Expect AUD support at 8803 the May 7th low with resistance at 9080 the May 10th high.
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FX Trading
Wednesday, May 12, 2010
12 May 10 : Singapore Market Update
Singapore stock market and companies daily report
Dow Drops; Gold Prices Shoot Up
The Dow ended lower Tuesday as investors locked in some profits on stocks and sent gold to a new closing high as geopolitical worries left the market a little anxious. The Dow Jones Industrial Average shed 0.3%, to close at 10,748.26. The S&P 500 lost about 4 points, or 0.3%, while the Nasdaq ended up less than a point. Materials, energy and financials were the worst-performing sectors in the S&P 500, while utilities and consumer discretionary were the best performers. Gold shot up about $20, with the May contract settling at a new Comex closing high of $1,219.90 an ounce. After the Comex closing, the June contract topped $1,230, surpassing the all-time high of $1,226.10. Oil fell slightly, settling at $76.37 a barrel while the dollar rose against the euro.
Higher Revenue Lifts Wilmar Q1 Net Profit
Wilmar Int’l (Wilmar)’s 1Q10 net earnings up 6% in tandem with a 36.4% jump in revenue. This was driven by both increased volume and higher average selling prices for palm and laurics, oilseeds and grains, consumer products, as well as further expansion in its manufacturing presence and distribution network in major consuming markets. In the meantime, an increase in interest income and share of results of associates also led to the jump in bottomline.
Sim Lian’s Q3 Earnings Up 38% To $18.4m
Sim Lian Group 3Q10 net profit jumped 38% yoy on the back of a 132% increase in revenue. The increase in topline was mainly boosted by a 164% jump in revenue from property development and construction division. On the other hand, Sim Lian posted a 69% and 28% increase in its 9M10 net earnings and revenue respectively. With the strong Singapore residential property market, Sim Lian plans to develop a condo with nearly 700 units at Tampines Ave 1/10 facing Bedok Reservoir that will be launched sometime in October-December this year.
Marco Polo’s 1H10 Net Earnings Soars 174% To $12.2m
Marco Polo posted a 174% increase in its 1H10 net profit as turnover rose 14%, mainly from a 57.3% increase in ship chartering operations but partially offset by lower shipbuilding and repair revenue from shipyard operations. The rise in earnings was also mainly due to $6.0m in other operating income, of which $5.7m came from gain on disposal of vessels. Going forward, new revenue contribution from ship repair and the completion and deliveries of more sophisticated AHTS vessels will diversify Company’s revenue base as well as add to profit growth in FY10.
Dow Drops; Gold Prices Shoot Up
The Dow ended lower Tuesday as investors locked in some profits on stocks and sent gold to a new closing high as geopolitical worries left the market a little anxious. The Dow Jones Industrial Average shed 0.3%, to close at 10,748.26. The S&P 500 lost about 4 points, or 0.3%, while the Nasdaq ended up less than a point. Materials, energy and financials were the worst-performing sectors in the S&P 500, while utilities and consumer discretionary were the best performers. Gold shot up about $20, with the May contract settling at a new Comex closing high of $1,219.90 an ounce. After the Comex closing, the June contract topped $1,230, surpassing the all-time high of $1,226.10. Oil fell slightly, settling at $76.37 a barrel while the dollar rose against the euro.
Higher Revenue Lifts Wilmar Q1 Net Profit
Wilmar Int’l (Wilmar)’s 1Q10 net earnings up 6% in tandem with a 36.4% jump in revenue. This was driven by both increased volume and higher average selling prices for palm and laurics, oilseeds and grains, consumer products, as well as further expansion in its manufacturing presence and distribution network in major consuming markets. In the meantime, an increase in interest income and share of results of associates also led to the jump in bottomline.
Sim Lian’s Q3 Earnings Up 38% To $18.4m
Sim Lian Group 3Q10 net profit jumped 38% yoy on the back of a 132% increase in revenue. The increase in topline was mainly boosted by a 164% jump in revenue from property development and construction division. On the other hand, Sim Lian posted a 69% and 28% increase in its 9M10 net earnings and revenue respectively. With the strong Singapore residential property market, Sim Lian plans to develop a condo with nearly 700 units at Tampines Ave 1/10 facing Bedok Reservoir that will be launched sometime in October-December this year.
Marco Polo’s 1H10 Net Earnings Soars 174% To $12.2m
Marco Polo posted a 174% increase in its 1H10 net profit as turnover rose 14%, mainly from a 57.3% increase in ship chartering operations but partially offset by lower shipbuilding and repair revenue from shipyard operations. The rise in earnings was also mainly due to $6.0m in other operating income, of which $5.7m came from gain on disposal of vessels. Going forward, new revenue contribution from ship repair and the completion and deliveries of more sophisticated AHTS vessels will diversify Company’s revenue base as well as add to profit growth in FY10.
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Market Update
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