Forex Market Update

Fed Chairman Ben Bernanke didn’t drop more hints yesterday in his speech to GW University students.  Unlike Monday’s talk where he outlined the need for further stimulus to boost employment growth, Bernanke stayed the course with the subject content, and discussed how the Fed has assisted the US economy in the last few years. Bernanke defended the Fed’s Asset Purchases and near 0.0% interest levels as being beneficial for the overall US economy.

Aussie Seeing No Love

After a great start to 2012, the AUDUSD has been taken out to the woodshed in March.  At just above 1.0300 on Thursday, the pair is down over 5.0% from its late February high of 1.0850.  Triggering the downturn has been the combination of an overall US dollar rally, worries of a slowdown in Chinese economic growth, and the effects of the ongoing EU financial crisis on the global economy. Specifically, Forex traders are worried that although prices of precious metals may stay strong, overall commodity purchases may decrease.  This fear has caused firms in the mining sector to issue negative forecasts as they factor a drop in demand for 2012.

Will Low Iranian Oil Supplies Trigger Higher Prices?

Will Low Iranian Oil Supplies Trigger Higher Prices? That’s been one of the big questions as an embargo on Iranian Oil from EU nations is soon set to take place.  The embargo comes as Iran has already unilateraly decided not to ship oil to those countries.  Overall, Iranian supplies have dropped by 14%.  So far, the drop in supply has been made up by other oil producing countries. However, as talk of more sanction against Iran has heated up, Oil traders expect Iranian output to continue to decrease with the potential of higher prices.

GBPUSD Battle of the Banks

One of the great things about Forex trading is the various opinions on any Forex pair.  Chat rooms and forums will rarely see much of a consensus, with traders battling it out with their opinions.  Currently, we have such a battle in the GBPSUD from two leading banks in Europe.  On one side, Danish firm Danske Bank has recommended to clients to be buyers of the GBPUSD on nay dips with a target above 1.6000.  Contrasting their statements is German Commerzbank which believes the GBPUSD will see weakness as it tested but failed to cross above the 1.6000 figure. 

QE3 To Be Or Not To Be

The question for traders around the world is just how serious Fed Chairman Ben Bernanke was with his hints that the Fed was going to apply new stimulus to spur faster jobs growth.  After the initial spike in equity and commodity prices on Monday, follow through momentum failed to hold on Tuesday.  As a result, traders are now looking ahead to Wednesday’s Durable Goods Orders report for clues towards the US’s economy.  As a leading indicator of economic activity, a worse than expected Durable Goods figure may “seal the deal” for the Fed and lead to imminent easing actions.  Overall, trading in currencies, commodities, and sticks coukld be range bound over the short term until further clarity towards QE3 emerges.

Deutsche Bank Loves Risk

Just because every financial institution prints a risk disclaimer on the footer of every web page, email, brochure etc, about risk,  it doesn’t stop them from heeding their own advice.  This was obviously a problem for the likes of Lehman Bros, AIG, and Bear Stearns to name a few.  But now, a new member of the “financial gambling” party has emerged.  According to a recent report from Bloomberg, Deutsche Bank has recently surpassed BNP Paribas for the biggest bank in Europe in terms of balance sheet.  The companies assets have now hit $2.88 trillion; that’s nearly the size of all of Germany’s GDP.

Dollar Weakness Continues

The dollar is weaker this morning as momentum from yesterday’s dovish comments from Fed Chairman Ben Bernanke continues.  Currently, the dollar index has fallen to 78.80 from close to 80.00 yesterday.  Overall, Forex traders view yesterday’s comments as pretty surprising as they were directed to a conference that was against the FED initiating another round of QE now.  In addition, with US economic news showing steady improvement, the timing of Bernanke’s remarks were surprising.  

Bernanke to Markets “The FED is in Charge”

So, pretty much every Forex analyst (us included), spent the weekend writing up trading previews for this week talking about the plethora of US economic data coming out this week.  And how a positive run of economic news may finally cause the FED to lay off on its talk about a possible QE move.  Well, Fed Chairman Ben Bernanke wasn’t willing to wait until the end of this week to make any decisions and was pretty straightforward in his remarks to the National Association for Business Economics (the same members that earlier published a report showing a wide majority against QE).

Art Cashin Talking Oil, US Equities, and Chinese Bond Selling

Anyone who watches even a little bit of CNBC is familiar with Art Cashin.  Art Cashin is the Director of Floor Operations for UBS Financial Services and a regular markets commentator on CNBC.  In a recent interview with King World News, Mr Cashin shares his views on the US equity market, Oil, Bonds, and pretty much everything in between. These are some of his main statements during the interview.

Forex Traders Watching the US this Week

Coming up this week, US economic news is expected to lead trading action.  Impactful releases are scheduled for every day,; starting with today’s Pending Homes Sales, Tuesday’ Consumer Confidence, Wednesday’s Durable Goods Orders, Thursday’s Initial Claims numbers and concluding with Friday’s PCE Index.  Although each announcement on its own wouldn’t be considered to be a long lasting market moving event, the combination of five releases in a row could dictate the moves of the dollar as it trades towards next week’s Non Farm Payrolls release.

Barclay’s Capital Loves Oil, Do You?

In a research report, Barclay’s Capital was out with positive research notes for oil prices for the remainder of the year.  The investment bank expects prices to remain strong as oil benefits from low spare capacity, geo political issues, and rising economic growth.  

Apart from oil, Barclay’s also expects precious metals prices to do well overall as demand remains strong for commodities.   Apart from commodities, Barcllay’s continues to recommend lowering exposure to Europe as its ongoing credit crisis could hamper investment results.

Is It Time To Buy The EURCHF

One of the big questions for Forex traders now is whether to Buy the EURCHF around 1.2060 as it nears the 1.2000 price floor from the Swiss National Bank.  (For those unfamiliar, the SNB has placed a price floor on the EURCHF exchange rate at 1.2000. The purpose being to keep the Swiss franc weaker and allow Switzerland’s export market to remain healthy).  There has been lots of back and forth on this subject, but pretty much these are the two theories

Market Update - Canadian CPI Ahead

In early morning trading, the EURUSD  and GBPUSD have bounced off yesterday’s lows with the EURUSD trading just below 1.3200 and the GBPUSD at 1.5810.  However, yesterday’s big losers, the commodity currencies, continue to see selling pressure.  Dropping them yesterday was a worse than expected Manufacturing PMI number from China that raised fears that the fastest growing country in the world will be slowing its commodity purchases.

Analysts Get Bullish On US Stocks

Yahoo Finance’s Breakout staff met with Paul Hickey, from Bespoke Investment Group on whether bullish comments from Equity analysts is a sign of a market top.  As Mr. Hickey points out, analysts are only now starting to issue upside revisions as a whole, and have missed the entire second half of 2011 US economic growth rally.  So are analysts simply chasing a market that they missed out of, or are the good times for US stocks still ready to roll.

Chinese Manufacturing PMI Underwhelms

Chinese Manufacturing PMI data came in at 48.1 this morning.  The figure was below last month’s 49.7 level and was the fifth straight month of a below 50.0 report.  A surtvey figure below 50 indicates industry expansion.  Therefore, the PMI number this morning has added more fuel to the fire that China’s impressive growth is in fact slowing as global markets decrease demand.

GBPUSD Lower On MPC Minute Release

With minutes to go before the UK releases it annual budget, the GBPUSD has fallen to 1.5870 from an earlier high of 1.5923.  The drop is the result of the Banl of England’s MPC Minutes that were released earlier this morning and showed two of the central bank’s members calling for an increase to its Asset Purchase program.  The emergence of a Dovish faction calling for further monetary easing has as well as the BoE warning about short term inflation after yesterday’s UK CPI dropped to a 15 month low shows that the central bank may not be quite ready to pull back from its stimulus actions.  As a result, Forex traders have decided to unload the GBPUSD this morning, not taking further risks before the Budget data has been released.

US Recession Coming? Jim Rogers Thinks So

While George Soros and Jim Rogers no longer work together, one thing that does keep them in common is their penchant for big statements.  Recently, Rogers was out touting that the US is due for another recession in 2013-14 in an interview he gave for Opalesque Radio.  And, of course this comes as Us employment is improving and overall economic trends are all on the rise.  Roger’s, main concern is the valid point of the US’s massive debt load.

Commodity Currencies Under Pressure

A double whammy of negative news is hitting commodity currencies today and triggering sour forecasts from Forex traders and economists towards the future.  First up was the release of MPC Minutes from the Reserve Bank of Australia.  The report showed that the central bank will be holding interest rates unchanged for the next few months.  Later in the day were reports that China’s growth is in fact slowing which will decrease demand for commodities.

AUDUSD Falls on RBA & Mining News

In early morning trading, the AUDUSD fell as the Reserve Bank of Australia released its MPC Minutes from its recent Interest Rate Meeting.  While the central bank did indicate that it believes the global economy was seeing improvement, it signaled that interest rates will remain unchanged for the next several months.  Although on the surface the comments could be construed as dovish, Aussie bulls can take comfort that the RBA didn’t stress any worries about the currency’s strength.  As such, the central bank appeared to diminish chances that it would work to intervene to weaken the Aussie.  Such a stance could lead to further AUDUSD gains a Forex traders become more comfortable with Australia’s economic outlook.

German PPI Could Put Pressure on the EURUSD

German month over month PPI was just released at 0.4% versus 0.5% expectations.  The drop in PPI follows previous reports last month of the country experiencing negative growth.  As such, after an imppresive late afternoon rally yesterday to a high of 1.3265, the EURUSD could be vulnerable to selling pressure if it breaks below its 1.3220 support (see chart)

GBPUSD – Traders Await UK CPI

After trending higher yesterday, the GBPUSD is off this morning as it is trading around 1.5865, as Forex traders await UK’s upcoming CPI data.  Expectations for the year over year figure are 3.4% versus last month’s number of 3.6%.  Although the fall in inflation follows the Bank of England’s forecast that the UK’s rising inflation last year was only a temporary condition, it does raise the question of whether the fall is due to a soft economy.  As such, if CPI is seen dropping faster than expected, it could lead to pound weakness as Forex traders may interpret the news as proof of a further economic slowdown.

Apple Paying a Dividend?

Dividend or no dividend, that is the question for Apple today.  Investors are expecting that Apple CEO Tim Cook will announce a dividend as Apple’s cash hoard approaches $100 billion (that’s Doctor Evil territory).  Various estimates of how big a dividend will be announced have been put forward.  Second to plans on new products, how Apple will use its massive cash holdings is the big question for Apple.  Overall, signs are that the tech giant is maturing as even talk about a dividend, contrasts to Apple’s style from previous years.  For traders, a dividend, even if it is only symbolic in nature, could lead to increased demand for Apple shares as many portfolio managers are prohibited from buying non-dividend paying stocks in their fund charters.

Gold Rebounds in Early Trading

After falling more than $150 since late February, prices of Gold have started to stabilize and are up over 3.0% since last week’s lows.  Industry reports have stated that the fall in prices was met with buying by global central banks to take advantage of the lower price points.

5 Forex Storylines For This Week

EURCHF – Is trading dead?
USDJPY – is the rally over?
UK Budget Release
UK and Australia MPC Minutes
US Existing & New Homes Sales

Shares of Apple Hit $600 Share Ahead of IPad Release

Do you have an IPhone, IPad, IPod, or Mac? Chances are you do and so do hundreds of millions of others which has led shares of Apple to keep heading higher as sales continue to exceed expectations. Today, shares hit an all time high as they briefly passed $600 a share this morning.  The continued momentum in Apple has smothered worries that the company would suffer following the death of Steve Jobs.  On the contrary, shares have gained over 50% since his passing.

Bloomberg Survey Suggests 16% Rise in Gold Prices

Gold may have fallen $160 in two weeks from a February 29th high of 1792 to this morning’s lows of 1632, but Gold bugs continue to believe prices are poised to rally.  A recent Bloomberg survey of repsondents at Bloomberg’s Link Precious Metals Conference suggested prices could rise to $1897 by the end of the year, a 16% gain from recent prices.  Setting the move higher is a continuation of demand from global central banks and hoarding from private investors.

SNB Meeting Puts Swiss Franc in Focus

The Swiss Franc is in Focus this morning as the Swiss National Bank is holding their monthly Interest Rate Meeting with their decisions to be announced at 8:30 GMT. For Forex traders, the main topic is whether the SNB will raise its floor of the EURCHF to 1.25 from 1.20.  Current consensus is that the central bank will refrain from any changes as improvements in the region’s economy have put less pressure on the Swiss export sector.    Currently, the EURCHF is trading at 1.2120 after hitting a high of 1.2140 this morning.  Overall, the pair has been shown strength this week as it has rallied from a week low of 1.2040.

EURUSD Trends Lower

After trading to 1.3500 twice in February, the EURUSD has been in a downtrend.  The move culminated with a drop to a low of 1.3020 yesterday after the pair broke below its earlier support level of 1.3080.  However, the EURUSD has recently bounced off its morning lows to trade back around 1.3080, even as the dollar has been gaining overall..  Looking ahead, the question is whether the current gains mark a turnaround in the EURUSD and proof that Forex traders are willing to support the Euro, or will we see sub 1.3000 trading soon.

Dollar Continues Rally

Following no monetary policy changes from the FED at yesterday's FOMC Meeting, the Dollar has continued to rally.  Dollar bulls are being encouraged by the central bank's lack of mentioning any hints to an upcoming quantitative easing program.  As a result, the USDJPY has hit an 11 month high and the EURUSD has traded to a one month low.  Also, prices of Gold have fallen as worries of an escalation in US inflation has been removed.