Category: Forex Zone
Forex Trading Weekly Forecast
US Dollar Surges as Dow Jones Tumbles – Reversal Risk High
Euro Bracing for EU Fin Min Summit, ECB Role in Crisis Fix in Focus
Aussie Could Rebound; But Tightening Liquidity Conditions to Weigh
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U.S. Dollar Top Performer, Again; Is the SNB About to Intervene in EUR/CHF?
Fundamental Headlines • Hungary Credit Rating Cut to Junk at Moody’s – Bloomberg • Spain’s Rajoy Seeks Proposals for Bad Bank – Bloomberg • Euro-zone Considering End to Future Private Sector Involvement – Reuters • Dollar Surges as Italian Yields Rise – WSJ • Italian Yields Jump after Poor Auction – WSJ European Session Summary Despite persisting light liquidity conditions, concerns have not abated over Europe. The Thanksgiving holiday week typically provides relief for markets; seasonality trends dictate the last few weeks of November and the month of December are bullish for higher yielding currencies and risk-correlated assets. This year has proven different, however, at least at the beginning of this typically bullish period: the U.S. Dollar (Ticker: USDOLLAR) is up 1.71 percent this week thus far. USD/CHF 1-minute Chart: November 25, 2011 Charts created using Strategy Trader– Prepared by Christopher Vecchio Fueling the drive to the U.S. Dollar have been lingering liquidity concerns as funding costs rise for financial institutions in Europe. Although the Euro was supported for the early part of the week, with Asian and European traders firmly in control as their American counterparts sat on the sidelines, holdings were dumped in favor of the ‘less-sick’ and [...]
Dutch Come Out in Support of ECB as Lender of Last Resort
Currencies looking to retest October lows against Buck German stance on crisis not helping the Euro FT article on Dutch stance could provide lift for risk Thanksgiving holiday makes Friday trade less relevant Currencies continued with their downward trajectory against the US Dollar into the final day of the week, and it appears that many of the major currencies are now fated to retest their key October lows against the Greenback. The latest bout of risk liquidation has been brought on by a number of factors including Germany Merkel’s ruling out prospects for jointly issued Eurobonds and her firm opposition to the idea of the ECB being a lender of last resort, along with Fitch’s downgrade of Portugal to junk status. Throw in some dovish comments from BOE Miles in reaction to the global slowdown and the Eurozone crisis, and some concerning comments relating to the Japanese economy, and the overall picture is not looking good for risk. However, there has been one development over the past several hours which perhaps has slipped under the radar of many market participants who have been distracted with Thanksgiving holidays or the Merkel/Sarkozy/Monti mini summit. The FT has released an article reporting that [...]
Guest Commentary: Forex Trading After Thanksgiving
The Western world grinds to a halt before Christmas and re-awakens after New Year’s Eve and trading volume is very thin. This is well known and many people are on vacation anyway. Yet volume begins to drop well beforehand. The US holiday of Thanksgiving marks the beginning of the shopping season in the US and also sees the beginning of the decline of market activity. Some currency pairs trade in narrower ranges due to the lack of activity, while others can experience volatile moves. Let’s see what we should be aware of. Sleepers and Shaker Currency pairs with higher volume on regular days tend to trade in smaller and narrower ranges. This includes EUR/USD, GBP/USD, USD/JPY and USD/CHF to some extent. Fewer players mean less significant moves, but there are still enough players to keep the pairs moving in ranges. These ranges can provide opportunities for day traders, but they can be also be very frustrating and boring. On the other hand, USD/CAD AUD/USD and NZD/USD have sufficient liquidity in normal days, but when the holidays approach, things can significantly change. The volumes in these “commodity currencies” can become so low, that every small order can rock the price. For [...]
Commodity Currencies Underperformed in 2011. What Happened?
The Australian, Canadian and New Zealand Dollars – the so-called “commodity bloc” – have been the worst performers against their US namesake among the majors so far this year. The outcome reflects the group’s sensitivity to global economic growth expectations and investors’ risk appetite at a time when the post-2008 crisis faces its most considerable headwinds yet, with output expansion increasingly expected to slow worldwide while the Euro Zone sovereign debt crisis threatens to unleash another credit disaster onto financial markets. Source: Bloomberg Drivers of the Commodity Currencies The fundamental forces behind the Australian, Canadian and New Zealand Dollars are clearly revealed in the currencies’ intimate correlation with the SP 500 benchmark stock index over recent years. An understanding this relationship illustrates precisely why the commodity currencies were so strong on the way out of the Great Recession previously and whey they’ve lost their appeal so dramatically this year. What does the SP 500 represent? Put simply, it is a reflection of the markets’ collective expectations of future earnings for the world’s largest companies. Looking past the minutiae of individual firms and evaluating the aggregate, those expectations are naturally a function of what investors believe about the pace of global [...]
Forex: Euro Searches For Support, Portugal Credit Rating Cut To Junk
Talking Points Euro: Fitch Cuts Portugal’s Credit Rating, Germany France To Unveil Treaty Proposition British Pound: BoE Sees Increased Risk For Double-Dip Recession U.S. Dollar: Weakness To Be Short-Lived, Choppy Price Action Ahead Euro: Fitch Cuts Portugal’s Credit Rating, Germany France To Unveil Treaty Proposition The Euro fell back from an overnight high of 1.3410 and the single currency may trade heavy over the remainder of the week as Fitch Ratings lowers Portugal’s sovereign credit rating to BB+ from BBB-. As the heightening risk for contagion bear downs on market sentiment, we may see the EUR/USD threaten the rebound from 1.3145, and the single currency is likely to face additional headwinds over the near-term as the fundamental outlook for the euro-area deteriorates further. French President Nicolas Sarkozy said France and Germany are determined to help Italy after meeting with Prime Minister Mario Monti and Chancellor Angela Merkel in Strasbourg, France, while Merkel reiterated that they ‘will do everything to defend the euro’ as the group plans to draw up a treaty proposition ahead of the EU Summit in December. However, European Union Economic and Monetary Affairs Commission Olli Rehn turned increasingly pessimistic towards the economy and warned that the debt [...]
