FOREX TRADING

It is good to say that the opposite correlation observed between the US Dollar (and also the Yen) and global equities is mostly a product of the carry trade. “The U.S. stock market bottomed and the U.S. Dollar Index peaked nearly at the same time in March. When U.S. stocks are up more than 50% in that time, the Dollar Index (which measures the greenback’s value against the euro, the yen, the British pound, the Canadian dollar, the Swedish kroner and the Swiss franc) is down closely 12%,” observed one analyst.

Upon one level, this represents a return to 2008, before the explosion of the credit crisis, when carry trading was THE dominant theme in forex markets. Nonetheless, there’s one significant difference. When the Dollar and Yen were the funding currencies then and now (due to their low interest rates), there has been a slight shift in the currencies selected for the opposing/long end of the trade. (more…)

The performance of the Australian Dollar over the last six months has been nothing short of incredible: “Since the end of February, the Australian dollar has risen 29% versus the U.S. Dollar,” and a still-impressive 18% if you turn back to January, while the Aussie was still in free-fall. (more…)

Today’s U.S. Consumer Confidence data release is set to dominate the trading between the Dollar and its major currency pairs. A number of other factors are also likely to impact the forex market today, such as the British BBA Mortgage Approvals at 8:30 GMT. The results of today’s data are likely to determine the USD’s trend going into rest of the week’s trading. (more…)

Forex Markets sentiments are boosted by another round of solid data from US. Conference Board consumer confidence rose sharply to 54.1 in Aug, just below May’s high of 54.8. S&P Case-Shiller home price index for 20 cities dropped -15.4% yoy in June, much better than anticipation of -16.4% and was the best reading since April 2008. The data provides some other positive signal that the housing markets in the US are stabilizing. US stocks extends recent rally with DOW breaking through 9600 level to as high as 9620 til now. Crude oil also followed stocks and touches 75 level. US Dollar and Japanese Yen, on the other hand, are sharply lower versus other major currencies. (more…)

Currency markets took little notice as US President Barack Obama announced that he will nominate current Federal Reserve Chairman Ben Bernanke to another term when the central bank chief’s term in office. The final revision of Germany’s second-quarter GDP figures and Switzerland’s Employment figures top the calendar in European hours.

Key Overnight Developments

• New Zealand’s Inflation Outlook Bolsters Case for Interest Rate Cuts
• Euro, British Pound Yield Flat Result as Bears Fail to Keep Momentum

• US President Obama to Nominate Fed Chief Ben Bernanke To 2nd Term (more…)

Canadian dollar hikes sharply in early US session on the back of much stronger than anticipated retail sales from Canada. Headline sales arose 1.0% mom in June against anticipation of a -0.1% fall. Ex-auto sales also managed to rise 1.0% mom, much better than consensus of 0.1%. Also, crude oil firms up in early US session and is set to extend recent rally, which provides additional support to the Loonie. One thing to note is that Canadian dollar has regained some strength broadly since last week following the sharp rally in crude oil. For instance, the EUR/CAD’s recovery should have completed at 1.5695 after hitting 55 days EMA and the development dampens the case that choppy fall from 1.7499 has completed at 1.5183 in July. Instead, we are looking at the prospect of a new low below 1.5183 as the down trend resumes. (more…)

Last week noticed a sharp drop in the US Dollar’s value, specially versus the EUR and the CHF. The biggest question for this week is whether the Dollar will continue to see bearish trends against the major currencies, or reverse. It seems that the upcoming data from the U.S. economy will play a main role in this week’s trading, and traders are advised to follow these main publications closely. (more…)

Japanese Yen crosses are broadly higher as the week starts as Asian equities are generally higher on optimism of global economic recovery, following last week’s upside break out in US stocks. Strength in developed markets are more apparent as seen with Nikkei up 3.3% to 10581 and is set to make new high above 10630 this week, and target 11691 key resistance later. Crude oil also remains firm above 74 level on recovery in demand. US Dollar pares some of last week’s lost versus major currencies, with the help of rally in USD/JPY, but strength is so far mild. (more…)

Greenback  Faces Another Plunge, How Will Fundamentals Shape Things?

Fundamental Outlook for US Dollar: Bullish

- Existing home sales see a record increase in July thanks to deflated prices through foreclosures, inventories
- Fed Chairman Bernanke offers a cautiously optimistic outlook among his peers at Jackson Hole
- Will the dollar topple or has resistance set the stage for a true reversal?

The US dollar ended this past week in a precarious position. After four consecutive days of selling pressure (the currency’s worst trend since the end of May), the greenback once again finds itself within arm’s reach of its yearly lows. The market has flirted with renewing the dollar’s bear trend for nearly two months now. It is only a matter of time and speculation before the world’s reserve currency finds direction once again – especially as the global recovery gathers traction and the scales between risk and reward tilt towards higher returns. In determining what may be the ultimate catalyst for a renewed trend, we have to determine what traders are more concerned about: risk appetite or growth potential. Investor sentiment is notoriously difficult to gauge as it is notoriously fickle and often sparked by innocuous factors that quickly snowball through speculation. However, there is a good chance that, in the end, both paths may lead back to growth. (more…)

European Market Update

Markets take Greece at its word that it will not default on its sovereign debt; UK Pre-budget report to highlight rest of session

ECONOMIC DATA

(SZ) Swiss Nov Unemployment Rate: 4.2% v 4.2%e; Unemployment Rate SA: 4.1% v 4.2%e

(GE) German Oct Trade Balance: €13.6B v €10.7B; Current Account: €11.0B v €9.4Be
(GE) German Nov CPI M/M -0.1% v -0.2%e; Y/Y: 0.4% v 0.3%e
(GE) German Nov Final CPI- EU Harmonized M/M: -0.2% v -0.1%e; Y/Y: 0.3% v 0.4%e

(FR) French Oct Trade Balance: -€4.4B v -€2.3Be

(HU) Hungary Q3 Final GDP Y/Y: -7.1 v -7.2% prior

(CZ) Czech Q3 Final GDP Q/Q: 0.8 v 0.8% prior, Y/Y: -4.1 v -4.1% prior
(CZ) Czech Nov CPI M/M: 0.2% v 0.0%e; Y/Y: 0.5% v 0.4%e

(DE) Danish Oct Current Account (DKK): 5.5B v 6.5Be v 8.4B prior; Ex Shipping: 6.9B v 4.4Be

(SW) Swedish Oct Industrial Production M/M: -2.7% v 0.9%e; Y/Y: -16.1% v -12.5%e
(SW) Swedish Oct Industrial Orders M/M: 1.5% v 0.7% prior, Y/Y: -13.1% v -12.1% prior; Activity index: 101.1 v 101.7 prior

(SA) South African Oct Retail Sales Constant Y/Y; -6.5% v -6.2%e

4 (UK) Oct Visible Trade Balance: -£7.1B v -£6.9Be; Total Trade Balance:-3.2B v -£3.2Be; Trade Balance non EU: -£3.5B v -£3.5Be

(more…)

Just two weeks ago, analysts were singing about afresh day for the Greenback, which had arisen on the foundation of good news for the first time in months. In hindsight, it seems like such talk was premature, as the US Dollar has returned to its old ways. Good news once more drives the Greenback to fall, while bad news drives it to rise.

This development (or lack thereof) suggests that investors may have gotten ahead of themselves, when they sent the Dollar soaring after the employment picture brightened slightly. At the time, the news was interpreted as a signal that rate hikes were imminent. On a broader level, it was a signal that investors had dumped the paradigm of risk aversion, in favor of a model based on comparing economic fundamentals. Since then, investors have slowly moved to distance themselves from the notion that the Fed will soon rise rates, and in the process have moved back towards trading based on risk dynamics. (more…)

Trading with Aroon Oscillator involves the following signals:
Aroon Oscillator line above the zero — suggestion of a bullish market.
Aroon Oscillator line below zero — a bearish market.
The further the Oscillator line is from Zero level, the stronger the trend.
When values are near Zero line, the market is trending nowhere.

Details
The idea behind Aroon Oscillator

Aroon oscillator is based on Aroon Indicator. Aroon Oscillator is a trend-following indicator that illustrates the strength of a current trend and its potentials to last. (more…)

The Greenback is anticipated to go volatile today on U.S. Homes Sales data and the speech by Federal Reserve Chairman Ben Bernanke at 14:00 GMT. Bernanke is anticipated to discuss the economic crisis and recovery. With regards to the home sales data, the figure is anticipated to arise to 5.03 million, up from the previous figure of 4.89 million. Forex traders should follow both of these events closely as they’re set to determine the USD’s main crosses for Friday’s trading. (more…)