Forex News – Kiwi plummets to new lows

Negative developments in risk have caused currencies across the board to reaction adversely with the New Zealand dollar taking the brunt of the force. In the wake of a devastating earthquake, which has killed many people and shut down the airport the New Zealand dollar plummeted to new lows.

THe break below the 0.7500 point is vital as the rest of the currencies followed suit to reach new yearly lows, the new price point has many believing that a decline to the 0.7340 level is possible as the currency finds new support. The situation is only further extended when one considers the narrowing of yield differentials and elevated risk aversion making a rise in the Kiwi not likely to be seen for quite a while to come. Geopolitical tensions has contributed greatly to this unstable situation as oil prices rose sharply during Monday trading after questions over the stability of Africa’s northern territories and parts of the Middle East

On the other side of the globe the defeat of German Prime Minister Merkel in the recent elections have caused many to believe that a new country head may cause the sovereign debt to spiral which have been working on the Euro during recent trading sessions. Should a new PM concentrate more on national debt as opposed to that of the other members of Euroland we would expect the Euro to begin testing lower support levels.

This can be clearly seen in the EURUSD which is actively seeking out a price below 1.3745. All signs are pointing to the next support of 1.3300 which can be seen in the recent head and shoulder formation in your charts, however should the currency move back above 1.3745 and close the trading session above that, there is hope the short term bearish moves are merely a bluff and would give me reason to reconsider placing any trades on a sell.

The USDJPY has the next resistance of 84.50 in its sights after soaring to 83.00 under a good bidding session. A bullish outlook is probable and I would imagine that should the next resistance be broken then it may be well supported over the next few days with only a break below the 82.50 level to cause any concern of a bearish outcome. Should the currencies close above 84.50 by Friday then we would have the confirmation that we are looking for to continue the bullish run.

THe GBPUSD is currently without direction after hovering around the 1.6300 level for quite some time. Only a break above the resistance of 1.6300 would give reason for a bullish outlook however with the currency stalling around this level and never succeeding it I believe that we may seen a decline to the support of 1.5960 in the trading sessions to come which may call for a bearish outlook in the short term.

Forex Market News – Static Dollar, Falling Yen

The USD is still hovering and waiting for a fundamental outcome to either risk appetite or growth potential in order to progress its bullish breakout past a merely technical outlook. The dollars lack of recovery can be attributed to the static news that has come out of the country in the past week and Wednesday’s FOMC minutes led to a large dollar decline seriously denting the rise over recent weeks. For the future it looks like an interest rate increase may dictate where to dollar moves to next, with the 2011 GDP forecast having been reevaluated it seems likely that a hawkish move for the currency has already been predicted and it will only be a matter of time before investors start to front run any movement.
However for the GBP it seems that the volatility has returned throughout the trading session on Wednesday. However with the lowering of growth output predicted by the BoE over the next two years and the unexpected rise in unemployment a rate hike by the bank is a very hard thing to justify to an already overstretched public. There is no clear direction for the GBP over the coming days and traders will await further news heading into next week.
For the Euro the sell of in Portugese debt and officials allowing WestLB AG bank more time to plan it restructuring the currency has been given time and seems to be improving (at least on paper!). However these decisions have only been suspended on a temporary basis and the impact of a later decision will undoubtedly affect the currency with the difficult financial conditions and the worry of a loss for senior bonds.
A slow down if not pull back for the Yen has been so long overdue it was starting to appear as a dream as the currency reached a new high against many of its major currency pairs and the inevitable pull back saw the yen falling for the past few weeks but perhaps without cause as the market was fairly stable for the yen and Japanese 10 year yields have advanced further so perhaps a correction will be coming in the near future.

USD An Uncertain Week Ahead?

The dollar continues its tentative moves this week as traders decide which way the currency will go. Over the past week the dollar looked to be gaining ground lost to all other currencies in the past few weeks, however bullish hopes have been left more than a little uncertain as only a few weeks ago the currency saw a rally and channel break from the S&P 500 reversed in one swift move after the weekend.

Whether this is another attempt at a bullish run will soon be revealed and whether it has more steam than the last one remains to be seen.
The dollar has only managed to sustain its run on risk trends or high level event risk, with the economic data providing a more robust platform for the currency over the past week, there has been little to effect the outcome of the currency. One might point out that due to less than impressive results on the employment front and PCE based inflation figures a slide in the dollar might come next, however the currency was buoyed by personal spending and manufacturing activity promising a sustainable recovery in the future. The long term picture remains uncertain though with unemployment and the participation rate at its lowest in 26 years that the US will be unable to sustain its recent growth and that the country will be unable to expand at its current rate.

The data from last week was less than interesting, with the S&P500 pushing 2.5 year highs perhaps capitalizing on a risk aversion move was the best one to make. There is a few factors which could push the dollar higher obviously risk appetite is at the top of this list, but a rally in gold for instance could help the dollar or indeed a fall in equities could help send it higher but these are all merely speculation, with the limited supply of market data it would appear that the volatility of the currency this week is going to be lost.

USD Underperforms Against All Currencies

Global risk taking returned as the dollar slumped in trading yesterday as Wall Street crept higher, providing investors with renewed confidence that the global recovery is now truly underway. The dollar is now at a two month low however the S&P 500 is trading at a new two year high, pushing through a further 33 points on what was already seen as a bullish move, recently a large push in the S&P 500 has only meant a retracement in later days and this will have to be watched in order to find a path for the greenback.

The JPY also followed the USD downwards overnight as Japanese stocks followed the Wall Street sentiment and found a pace with traders who were more than happy to take their kicks while they could get them.

In contrast the Euro is currently weighing up the value of yet another sovereign country as Portugal is now reassessing its debt ahead of the auction of its bills later, however while Portugal has before never had an issue with this in the past I believe it may find a taker a little harder to find this time round as other countries may not be as willing as debt costs have risen substantially. With no economic data on the horizon it looks like Portugal will be the deciding factor in Euro value. However this did not stop the Euro from moving higher against the dollar as risk sentiment took traders back to their positions on Wall Street.

The pound also outperformed the greenback sustained by good factory orders, however did little else on any other currency as the pound struggles to find its way through recent economic turmoil of government cuts and VAT rises. The biggest indicator is the recent NIESR (researching for both the treasury and the BoE) which is predicating a three quarter point rate hike by the end of the year.

Forex Market News

The Euro rally of last week appears to have been linked to a drop in the credit rating of the most debt ridden of Eurolands states namely Portugal, Ireland, Italy, Greece and Spain.  However with the absence of scheduled event risk, this weeks trading might allow for monetary policies to be put back into the driving seat.

This is in contrast to the GBPUSD which is currently tracking closely with the UK-US Treasury yield spread.  Traders are expecting the Bank of England to start raising its interest rates as it fights to stay on top of inflation; however the public may be at odds with this as they fight to assimilate the governments spending cuts and tax increases, another monetary increases might simply be too much to swallow.
The Bank had previously told the public that the inflation increases were a temporary measure, however one year on and we are still very much in the throes of ever increasing inflation and now the threatened rate increase.

The USDJPY is still tracking the US Treasury Yields and this remains most prominent in driving any move the pair makes at present.  The announcement by the Fed regarding monetary policy and of course 4^th Quarter GDP announcements will all have a role to play in the upcoming price action.  With GDP set to be the highest of the previous 3 quarters (3.5%) this will only serve to push the US yields even higher and no doubt the relationship will continue with the USDJPY and push it further still.

USDCAD is on par for a re-correlation in recent times as the US continues its recovery with boosts economic news.  As Canada exports nearly 80% of its exports to the US it seems likely that the recovery of its neighbour is going to be in Canada’s interest.

The AUDUSD continues its own correlation with gold at present, helped as the US seems to be making a recovery, shaky economic data from Europe and a slow down in the inevitable steam train that is China, the falling price of the yellow stuff had seen an increase in the Aussie dollar, however with a fall back into recession an almost unlikely event the recovery of the Australian dollar seems a long and slow process over very shaky ground.

USD Falls As It Waits On Shift In Options And Futures

THe prognosis for the dollar after todays trading is not looking too good with many traders reversing their positions towards further decline in dollar trading. It can still be said that I had predicted a strong outcome in 2011 for the dollar and I will stand by this in the short term, as many of the other currencies had struggled to match the dollar movement over recent months, however it does look that for the short term at least a sell on USD is now on.

Traders are also betting against further rallies in the GBP against the dollar, given the grave situation of high inflation and government spending cuts this cannot come as a surprise to many who trade this pair, the dollar had previously been performing well against GBP which has had rough year in terms of its economic data.

EURUSD strength has been matched in risk reversals and this would indicate that the Euro will not be reversing in the short term. But given the differing opinions on this pair we will be again watching closely to see where it will be moving over the next 11 months as without a confirming shift in options or futures the pair has no significant backing for the moves it is currently experiencing.

Overall it seems all pairs are struggling to find their true path as we begin 2011, take your trades where you find them but be aware that at present no currency is safe from the trend killing economic data that currently fills our fx websites.

GBPUSD Forecasts Slump In The Short Term

THe GBPUSD is currently under pressure as it tests the support levels at 1.5296 seen from September 2010. However the pair may move into a neutral position in the coming weeks with a high of 1.57 but analysts are predicting a drop and a break through the 1.5296 support.  In short it is to early to tell which way the pair will go in the short term and we are awaiting a long term signal

With the pound currently under pressure on all sides from economic data and growth concerns, the new rise in VAT to 20% will certainly not be adding any positive news for the pound any time soon.  Consumers have been struggling with inflation at 3% for some time with many expecting this alone to curb the spending power of the British public and a possibility of a double dip recession is now on the horizon.

Many companies are not passing on the VAT increases to the public just yet which may help to buoy demand in the near future and maintain an upwards motion for the currency but many believe that with the compounding bad economic news this will only be a short term stay.
THe governments extreme cuts have made the pound the least overvalued of the current pairs with both the FED and Bank of England seemingly stuck in a rut and neither moving in a clear direction and impairing the growth of the currency in the meantime.  However with Euroland in an unstable position it may be that the pound will seem the lesser of two evils, but with such a large undervaluing of the pair it may mean that other currency pairs seem more attractive and may prove more profitable in the near future.

Pound Falls Further As Borrowing Increases

The pound fell today as public sector borrowing rose to 22.8 billion pounds in November. This figure was revised from 8.6 billion in October as analysts struggled to get a hold of the reality of the situation. Alongside this the public finances rose to the highest it has been since September – making it the highest on record. With the governments plans to implement more spending cuts in the near future, this could mark the worst situation since world war two. As the Bank of England rate decision looms once more upon us many economists are predicting a .25 base point rise to combat the growing inflation worries.
The inflation report is currently at its highest level since April and amid a lowering in public spending it is likely that this will dictate the outcome of the BOE rates coming into 2011. The pound continued its 3 day fall and is moving towards the 200 day moving average for support – with everything pointing towards a further fall over the coming days and months.

Forex Trading News – Euro still in decline

The Euro moved sideways against the dollar in overnight trading backed up by an underperforming pound, whilst other major currencies managed to claw back some of the large losses made after Fridays trading session.

The largest mover had to be the New Zealand dollar which overperformed against all other currencies in last nights session. The move was in essence a corrective one as the New Zealand dollar lead the charge against a now ailing USD after last weeks rise to the top of the currency gains. This came about due to the Kiwi’s strong stance on interest rates for 2011 making it one to keep an eye on in the coming months

Traders are currently focused on macro level trends due to a lack of events on the economic calendar with those stock indexes tracking the US exchanges considerably lower. The Euro is still caught up in debt fears making the dollar appear one again a safe haven for traders. The announcement of a ‘permenant solution’ did little to calm the nerves of traders as they foresee not only long term struggle but also the possible bailouts still to come in the form of Spain, which on all terms would be considerably larger than that of Greece or Ireland.

We would advise a continuing short on the Euro and in the short term a long UDJPY.

GBPUSD – Pound Set To Fall Further

The pound fell sharply against the dollar today as jobless claims tumbled 1.2k in November on top of the already staggering 5.2 in October, a worse than expected result as many economists had predicted a fall of 3.0.  This came on top of a ILO employment rise of 7.9% in the 3 months prior to October making it the highest level since April as the number of people out of work rose to 2.5 million, as increase of some 35,000.
With the rate of unemployment expected to rise further in 2011 due to the fall in the provision of public sector jobs and increased taxes we can only predict that the economy will not be set to recover for many months to come.  It will only cement the theory by economists that further bad news for the UK is on the way.  Among these will surely be the export figures which look set to weaken further as trading partners find the market increasingly difficult.
All of these factors contributed to the pound extending its losses against most currencies but in particular the GBPUSD which broke below its short term rising channel.

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