It's fairly significant to notice as we prepare for the release of the US GDP that the we had such a surprise form the UK GDP last week. Expecting a reading of +0.6%, the data actually printed at +1.1%, nearly double the forecast.
Leading up to the release, the UK certainly had a mixed bag of fundamental data releases, nothing to make a trader expect that that the GDP would be double expectations. The same could easily be said for the US. Both are drowning in debt. Both are suffering from housing debilitation. Employment seems to be better in the UK, but not so much so that it would warrant such a surprise.
It is important to remember that Government releases are not always what they appear, and we can't always figure out why.
So we watch and wait to see how the data will post in 10 hours or so. But added to that mix is the overall report from the Bank of England, detailing further dovishness ahead. Mixing that with the recent notes from RBNZ, and falling inflation in the commodity block nations, perhaps we are starting to see the currencies beginning to misstep, and their counter move against the dollar coming to an end. Hopefully tomorrow will give us a better idea.
Happy Trading!
Bill
bill@thefxtradingmasters.com
www.thefxtradingmasters.com
Thursday, July 29, 2010
Wednesday, July 28, 2010
Forex News this Week
As previously mentioned, the RBNZ did indeed raise rates from 2.75% to 3.00%. However, the tone of the news conference to follow was exceptionally dovish, and directed traders to consider that going forward the bank was going to be far less likely to raise rates. The falling inflation rates of the commodity block, have signaled that the heralded recovery may not be ready to materialize.
A good deal of risk appetite will hang in the balance with the German Unemployment data to be released later on in the European session. The US dollar failed to inspire any confidence today as the Durables Goods Orders took a hit, failing to meet expectations.
Will this eventually turn attitudes toward risk aversion and US dollar bullishness again? Only time will tell. But if the German figures are a disappointment, there is far more risk to the downside than to the up.
So we'll see what unfolds over the next several hours, and I'll be back tomorrow with a new update.
Happy Trading,
Bill
bill@thefxtradingmasters.com
www.thefxtradingmasters.com
A good deal of risk appetite will hang in the balance with the German Unemployment data to be released later on in the European session. The US dollar failed to inspire any confidence today as the Durables Goods Orders took a hit, failing to meet expectations.
Will this eventually turn attitudes toward risk aversion and US dollar bullishness again? Only time will tell. But if the German figures are a disappointment, there is far more risk to the downside than to the up.
So we'll see what unfolds over the next several hours, and I'll be back tomorrow with a new update.
Happy Trading,
Bill
bill@thefxtradingmasters.com
www.thefxtradingmasters.com
Tuesday, July 27, 2010
Forex and Big Data
Just minutes ago news broke on the wires that the Aussie inflation data was only HALF what was forecast. The pair is currently getting crushed. Expectations for a rate hike were cut in half as well. Given the fact that New Zealand is announcing an interest rate "change" tomorrow around 21:00 GMT, and is widely expected to raise 1/4 of a percent, this could have a real impact. If Aussie inflation is falling, and Canadian inflation is falling, even if there is a rate hike tomorrow, it may very well be the last one for a while. That would make kiwi buyers dry up, and the currency fall sharply.
Tomorrow, we have durable goods orders due up for the US. They are expected to rise from last month, and that was actually revised upward. It is frankly very hard to make a case for rising orders at this point, but one can never tell.
Thursday will bring German unemployment. Given some of the other good news out of Germany, this could be potentially strong and move risk appetite back to the forefront of traders minds. This may be offset by the big dog of the news week on Friday.
Friday will bring the Advanced reading of US GDP. Economists are expecting a drop to 2.5% from 2.7% previously. A surpise one way or another may be really beneficial to the US Dollar.
Keep all these items on your calendar and your radar. They will be moving price action this week.
Happy Trading!
Bill
bil@thefxtradingmasters.com
www.thefxtradingmasters.com
Tomorrow, we have durable goods orders due up for the US. They are expected to rise from last month, and that was actually revised upward. It is frankly very hard to make a case for rising orders at this point, but one can never tell.
Thursday will bring German unemployment. Given some of the other good news out of Germany, this could be potentially strong and move risk appetite back to the forefront of traders minds. This may be offset by the big dog of the news week on Friday.
Friday will bring the Advanced reading of US GDP. Economists are expecting a drop to 2.5% from 2.7% previously. A surpise one way or another may be really beneficial to the US Dollar.
Keep all these items on your calendar and your radar. They will be moving price action this week.
Happy Trading!
Bill
bil@thefxtradingmasters.com
www.thefxtradingmasters.com
Monday, July 26, 2010
Forex and the Euro Stress Tests
Much like the bank stress tests in the USA, the standards for the Eurozone were subjective, lax and led to questionable results at best. Nevertheless, when the US results were released, it immediately supported the markets, inspite of the rather generically positive results.
As I mentioned last week, no Central Bank likes to release sour data, and the oversight board, the Committee of European Banking Supervisors, (CEBS) gave us no surprises. They did not release the time of their findings in advance and the whole world waited with bated breath to see what they would say (except us, of course). Strategically, they chose to release the results after the European markets closed on Friday, knowing that there were only a few hours left in the trading week, and that most of the traders had left their desks for the weekend. This gave an additional several days for traders to examine and mull over what the findings really were.
Here's the skinny, and you make of it what you will. Overall standards were fairly lax as the CEBS was looking for a capital requirement of 6%. To set that in comparison, the Swiss stress tests used a stiffer 8% baseline. Had that been used in Europe, the results would have been disastrous. Also, the seven firms that fall short of the capital requirement of 6% are already supported by the ECB in one way or another, so their threat is muted. Also, the whole purpose of the tests from the beginning was purported to be examining the exposure to a sovereign default, or severe regional crises. In the end, it does not appear that these items were even addressed (would you care to hazard a guess why?).
As it stands now, with the bond rates having very little differential between the two economies of the EZ and USA, the drift will likely be left to the one who has the likelihood of quickest sustainable recovery. Now that is a tough question!
When the tests were finished, the board determined that the total amount of capital that needs to be raised by the under capitalized banks is about 3.5 billion euros. The lowest economist' estimate was 35 billion, ten times as much as officially reported. In this case, I'm betting on the economists.
Also last week, the US reported that the budget deficit was going to be lower than expected. Instead of 1.6 trillion, it will only be 1.47 trillion. Of course, that's up from the 1.4 trillion last year. Sadly, the further out we look, the gloomier the forecasts become. Is America setting itself up for a bang-up recovery? Not with all this debt.
Nevertheless, our counterpart nations are dealing with debt problems that are equally staggering. In a spike of fear, the US dollar will still be the beneficiary, and as the world's reserve currency, we still have the advantage of the fact that economies around the world need US dollars to purchase every commodity which is settled in US dollars (like oil).
We'll keep watching to see if these realities bubble to the surface.
Happy Trading
Bill
bill@thefxtradingmasters.com
www.thefxtradingmasters.com
As I mentioned last week, no Central Bank likes to release sour data, and the oversight board, the Committee of European Banking Supervisors, (CEBS) gave us no surprises. They did not release the time of their findings in advance and the whole world waited with bated breath to see what they would say (except us, of course). Strategically, they chose to release the results after the European markets closed on Friday, knowing that there were only a few hours left in the trading week, and that most of the traders had left their desks for the weekend. This gave an additional several days for traders to examine and mull over what the findings really were.
Here's the skinny, and you make of it what you will. Overall standards were fairly lax as the CEBS was looking for a capital requirement of 6%. To set that in comparison, the Swiss stress tests used a stiffer 8% baseline. Had that been used in Europe, the results would have been disastrous. Also, the seven firms that fall short of the capital requirement of 6% are already supported by the ECB in one way or another, so their threat is muted. Also, the whole purpose of the tests from the beginning was purported to be examining the exposure to a sovereign default, or severe regional crises. In the end, it does not appear that these items were even addressed (would you care to hazard a guess why?).
As it stands now, with the bond rates having very little differential between the two economies of the EZ and USA, the drift will likely be left to the one who has the likelihood of quickest sustainable recovery. Now that is a tough question!
When the tests were finished, the board determined that the total amount of capital that needs to be raised by the under capitalized banks is about 3.5 billion euros. The lowest economist' estimate was 35 billion, ten times as much as officially reported. In this case, I'm betting on the economists.
Also last week, the US reported that the budget deficit was going to be lower than expected. Instead of 1.6 trillion, it will only be 1.47 trillion. Of course, that's up from the 1.4 trillion last year. Sadly, the further out we look, the gloomier the forecasts become. Is America setting itself up for a bang-up recovery? Not with all this debt.
Nevertheless, our counterpart nations are dealing with debt problems that are equally staggering. In a spike of fear, the US dollar will still be the beneficiary, and as the world's reserve currency, we still have the advantage of the fact that economies around the world need US dollars to purchase every commodity which is settled in US dollars (like oil).
We'll keep watching to see if these realities bubble to the surface.
Happy Trading
Bill
bill@thefxtradingmasters.com
www.thefxtradingmasters.com
Friday, July 16, 2010
Forex update 7/16/2010
During the London session we had some bad news for the Euro...it's trade account balance fell into the negative, and the previous month was revised downward. Remember, this means that they imported more than they exported in terms of euros. And this is a bad thing. What did the euro do? It popped up sixty pips! This is again what I was referring to yesterday when I mentioned seasons when even bad news is taken to be good. However, the pair stopped at the big figure of 1.3000, pulled back 50 pips, and has been pausing ever since. Some cracks in the dam? Has the bull finally spent his strength? Who knows? We came close to our stop, and another run up could be detrimental. We'll see.
For those who are in this trade, watch the price action through the end of the day. If we should close higher but not get stopped out, you may want to simply exit the position for the weekend. The reason being is that the euro has had some very large weekend gaps recently, and if it looks like the steam is building underneath it, it could gap open well past our stop. If, on the other hand, it appears to be moving lower, you may feel more comfortable about letting it ride, and we may even get a gap lower opening.
On the sterling side, the break appears to be starting, and we may have gotten in just in time. All these downside moves have been pretty well supported by buyers, but even if we get a move to half of the channel it should take us down to our target. A move to the bottom would be even better. Given the nice turn of events, be sure to move your stop down as recommended in the alert. You may even want to move it down to break even.
As I mentioned in the alert, I will be away next week and correspondence may be limited. I also need to step out of the office later today so I will not be around for the weekly close. If necessary, I'll send out a line or two tomorrow as I expect to be on the road when markets open on Sunday. Otherwise, we'll hold with the existing parameters.
Have a great weekend!
Bill
www.thefxtradingmasters.com
bill@thefxtradingmasters.com
For those who are in this trade, watch the price action through the end of the day. If we should close higher but not get stopped out, you may want to simply exit the position for the weekend. The reason being is that the euro has had some very large weekend gaps recently, and if it looks like the steam is building underneath it, it could gap open well past our stop. If, on the other hand, it appears to be moving lower, you may feel more comfortable about letting it ride, and we may even get a gap lower opening.
On the sterling side, the break appears to be starting, and we may have gotten in just in time. All these downside moves have been pretty well supported by buyers, but even if we get a move to half of the channel it should take us down to our target. A move to the bottom would be even better. Given the nice turn of events, be sure to move your stop down as recommended in the alert. You may even want to move it down to break even.
As I mentioned in the alert, I will be away next week and correspondence may be limited. I also need to step out of the office later today so I will not be around for the weekly close. If necessary, I'll send out a line or two tomorrow as I expect to be on the road when markets open on Sunday. Otherwise, we'll hold with the existing parameters.
Have a great weekend!
Bill
www.thefxtradingmasters.com
bill@thefxtradingmasters.com
Thursday, July 15, 2010
Forex Update 7-/15/2010
There seems no end to the current risk rally, with the market seeming to take everything as good news. There is already revision being done with the Chinese data, reporting that GDP actually came in 0.2% lower than forecast, but that's OK. Even though the world is looking for China's organic growth to pull the rest of the world out of this current slump, the spin is that this failing to miss expectations is good because China was trying to cool their economy. Really? And if that isn't bad enough, we read further spin on the Spanish bond auction this morning. The Auction was "successful" in that they floated enough loans for the month, and therefore, are getting the "approval" of the market that they are fiscally sound. The truth is, first of all that Spain is not fiscally sound, and in order to get their debt sold was required to pay higher rates than last month. Secondly, while the auction may allow them another month of financing, it's just that...financing. Continuing to give debt to a country that cannot pay what it already has, is like giving alcohol to a man suffering from the DT's just to relieve his pain.
I will still contend that the current rally in the Euro and Pound are corrective in nature, and are only part of a longer downtrend. That being said, the run, although very much overdone, may not be quite done yet. We could easily see a rise to 1. 5400 by the time today is over, and if the steam is rising, this could easily carry over the next resistance at 1.5450. Our current stop is at 1.5400, as I honestly estimated that the last rise would be the conclusion of this run. But when markets take bad news and make it good, they have reached a level where nothing is easily predictable.
So although I have a gut feeling we are nearing a top, we can always re-enter when the opportunity presents itself. We have risked 6% on this trade, and made a half percent on a position earlier this week, so it cuts our loss to 5.5%. If I am convincd that a trade is pretty sound, I don't mind risking up to 8%, but at this level, and with the current response to news items, I'm willing to cut this one loose.
If we get signs of weakness before the 1.5400 level, we'll see about entering a third position at this level. But I'll let you know by way of alert.
Stay tuned!
Bill
www.thfxtradingmasters.com
bill@thefxtradingmasters.com
I will still contend that the current rally in the Euro and Pound are corrective in nature, and are only part of a longer downtrend. That being said, the run, although very much overdone, may not be quite done yet. We could easily see a rise to 1. 5400 by the time today is over, and if the steam is rising, this could easily carry over the next resistance at 1.5450. Our current stop is at 1.5400, as I honestly estimated that the last rise would be the conclusion of this run. But when markets take bad news and make it good, they have reached a level where nothing is easily predictable.
So although I have a gut feeling we are nearing a top, we can always re-enter when the opportunity presents itself. We have risked 6% on this trade, and made a half percent on a position earlier this week, so it cuts our loss to 5.5%. If I am convincd that a trade is pretty sound, I don't mind risking up to 8%, but at this level, and with the current response to news items, I'm willing to cut this one loose.
If we get signs of weakness before the 1.5400 level, we'll see about entering a third position at this level. But I'll let you know by way of alert.
Stay tuned!
Bill
www.thfxtradingmasters.com
bill@thefxtradingmasters.com
Wednesday, July 14, 2010
Forex Update 7-14-2010
I wrote to yesterday to one of my friends that I thought if the UK employment data came out strong, that it might propel the usd/gbp higher to 1.5300. It appears we came within 5 pips or so of that target before pulling back. We are now right at the big figure of 1.5200 and hopefully everyone has had a chance to get in on the second entry recommended 12 hours or so ago.
The news during the early London session was positive for the UK. Jobless claims were forecast to fall by 20K, and that was bested (slightly) with a print at 20.8K. The unemployment rate was also slightly better at 7.8% as opposed to 7.9% forecast. The news pushed the pair higher as expected.
On the euro side, news was not quite so ebullient. While the CPI (Consumer Price Index) was flat, the Industrial Production figures were a good bit weaker than expected---missing the 11.4% figure with a release of 9.4%. The euro pulled back and fell below the key level of 1.2700. Some weakness seems inherent in the liquidity leading pair. Meanwhile the RSI has continued to fall as well.
But we'll look to the franc today for our short term trade. Having fallen more than 10 cents in the last month. The drop was stopped by support from back in March. We'll look for a bounce from here.
On the macro perspective, US retail sales fell slightly, -.5% as opposed to -.3 expected. And China's GDP figure which is due out on Thursday with expectations of 3.1%, has been rumored to see a revision down to 2.8%. Should that be true, it may really affect risk appetite.
So let's look forward to the day with the positions we have and see how the market reacts. Remember to keep your leverage as recommended, in case things don't pan out as expected.
The alert will be later tonight than usual, as I am planning dinner with my in-laws this evening, and will most certainly be back at the office rather late.
Happy Trading!
Bill
www.thefxtradingmasters.com
bill@thefxtradingmasters.com
The news during the early London session was positive for the UK. Jobless claims were forecast to fall by 20K, and that was bested (slightly) with a print at 20.8K. The unemployment rate was also slightly better at 7.8% as opposed to 7.9% forecast. The news pushed the pair higher as expected.
On the euro side, news was not quite so ebullient. While the CPI (Consumer Price Index) was flat, the Industrial Production figures were a good bit weaker than expected---missing the 11.4% figure with a release of 9.4%. The euro pulled back and fell below the key level of 1.2700. Some weakness seems inherent in the liquidity leading pair. Meanwhile the RSI has continued to fall as well.
But we'll look to the franc today for our short term trade. Having fallen more than 10 cents in the last month. The drop was stopped by support from back in March. We'll look for a bounce from here.
On the macro perspective, US retail sales fell slightly, -.5% as opposed to -.3 expected. And China's GDP figure which is due out on Thursday with expectations of 3.1%, has been rumored to see a revision down to 2.8%. Should that be true, it may really affect risk appetite.
So let's look forward to the day with the positions we have and see how the market reacts. Remember to keep your leverage as recommended, in case things don't pan out as expected.
The alert will be later tonight than usual, as I am planning dinner with my in-laws this evening, and will most certainly be back at the office rather late.
Happy Trading!
Bill
www.thefxtradingmasters.com
bill@thefxtradingmasters.com
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