FOREX TRADING

Currency pair USD/CHF

Presumably impulse formation [v] of A comes to an end. If the assumption is true, in the ambassador of its termination, it is possible to expect the beginning of intermediate term growth of pair as construction of correctional wave B of (2).

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• USD: Higher, pending home sales rise, Challenger says job cuts back to pre-recession levels
• JPY: Lower, Japan’s PM resigns, Finance Minister Kan is the likely successor
• EUR: Lower , EU inflation rises more than expected, Iran to sell EUR reserves
• GBP: Lower, mortgage approvals rise, construction PMI at a three-year high, King expects inflation to fall
• CAD and AUD: AUD lower & CAD higher, speculation more BOC rate hikes are in the pipeline

Overview

USD traded in a narrow range Tuesday against most of the major currencies with the main focus on a sharp decline in the JPY and a strong rally in the CAD. JPY traded lower pressured by news that Japan’s PM Hatoyama has resigned. European currencies opened higher supported by gains in cross trade to the JPY with upside progress limited by positive US employment and housing data. EUR struggled to hold overseas gains that were sparked by report of higher than expected EU inflation rise and comments from a number of central bankers reaffirming commitment to the EUR. EUR was pressured by report that Iran plans to covert its EUR reserves to USD. GBP traded lower despite report of rising UK mortgage approvals and stronger construction PMI pressured by BOE King’s statement that he expects inflation to fall back to target. Commodity currencies traded mixed with AUD finding limited support from report that Australia’s GDP rose by 0.5% in Q1. CAD traded higher with gains attributed to speculation the BOC will raise interest rates again before year end. Today’s US economic data was positive with the Challenger Gray employment survey showing little change from last month. This suggests that employers are becoming more optimistic about the strength of the recovery and are shedding fewer jobs. April pending home sales rose by 6%, a 4% rise was expected. (more…)

• USD: Higher, refocus on EU debt crisis, weaker equities, existing home sales rise 7.6%
• JPY: Lower, all industry activity declines, Shanghai index rose 3.5%, mixed risk signals
• EUR: Lower, Bank of Spain takes over a regional Spanish lender, EU debt/growth worries
• CHF: Lower, SNB reported selling EUR, business sentiment declines
• GBP: Lower, UK to cut $9bln from the budget deficit
• CAD and AUD: AUD & CAD higher, strong Australian auto sales, Canadian markets closed for holiday

Overview

USD traded higher Monday supported by a spike in risk aversion sparked by fresh worries over the European debt crisis and fear that the debt crisis to may slow the EU and global growth. Report that the Bank of Spain took over a regional bank refocused attention on the EU debt crisis. The EUR was also pressured by a statement from Chinese officials expressing concern about EU sovereign debt crisis. China had been diversifying into the EUR as an alternative to the USD but this diversification appears to have stopped as China was a major buyer of US treasuries last month. GBP outperformed supported by report that the new UK government plans to cut $9bln from the UK budget deficit. CHF traded at a new low for the year versus the USD and gained in cross trade versus the EUR supported by safe haven flows. Cash sources indicate that the SNB may have sold the EUR today to diversify out of some of its recent intervention purchases of the EUR. Commodity currencies traded higher supported by a rebound in the price of metals with AUD supported by report of stronger than expected Australian auto sales a 3.5% rise in the Shanghai index. Canadian markets were closed for holiday. USD was also supported by an NABE report which forecasts above trend US growth for 2010/11 ands strong existing home sales. US existing home sales came in stronger than expected reported up 7.6%. Risk aversion is the main market driver for the Forex trade.

Today’s US data:

April existing home sales rose to 5.77k, reading 565k was expected. (more…)

• USD: Lower, risk aversion, de-leveraging continues
• JPY: Lower, Japan’s finance minister expressed concern about JPY strength
• EUR: Higher, German parliament approves EU rescue plan, German GDP slows, business sentiment dips
• GBP: Higher, net public sector borrowing rose at a record pace, mortgage approvals at one year low
• CAD and AUD: AUD & CAD higher, RBA intervention, rise in Canada’s inflation rate, retail sales strong

Overview

Market volatility continues sparked by fears about global debt and growth. Intervention or the threat of intervention contributed to a degree of stability in the EUR and wild price swings in JPY cross trade. EUR traded higher supported by report that the German lower house of parliament has voted in favor of the EU rescue package. EUR gains were limited by weaker equity markets, report of slower than expected Q1 growth in Germany and a dip in German business sentiment. GBP underperforms pressured by report that UK public-sector borrowing rose at a record pace last month. Commodity currencies were mixed with the AUD posting a sharp rebound versus the USD and JPY supported by rumors of RBA intervention. Part of the EUR recovery Thursday was attributed to SNB Intervention in the EUR/CHF cross. CAD traded higher supported by report of faster than expected rise in Canada’s inflation rate and strong retail sales. JPY traded lower pressured by a statement from Japan’s Finance Minister Kan warning that excessive JPY rise is undesirable. Although Kan said that the market should determine FX levels his statement about excessive JPY rise increases the risk of intervention from Japan. Risk aversion, deleveraging and threat of intervention remain the main market drivers for the Forex trade.

Today’s US data:

No major US economic data was released in today’s trade. BLS reported that mass layoffs rose sharply in April.

Upcoming US data:

Next week’s US economic calendar includes the May 24th release of April existing home sales expected at 559k compared to 559k last month. On May 25th March Case Shiller Home Price Index will be released expected unchanged at 0.6 along with May consumer confidence expected 59.1 compared to 57.9 last month. On May 26th April durable goods will be released along with April new home sales. Durable goods are expected to rise by 0.9% compared to -0.6% last month. New home sales are expected at 420k compared to 411k last month. On May 27th preliminary Q1 GDP will be released expected unchanged at 3.2% along with initial jobless claims for the week ending 05/22 expected as 460k compared for 471 last week. On May 28th April personal income and consumption will be released expected at 0.4% and 0.3% respectively along with April core PCE deflator, final May University of Michigan sentiment and May Chicago PMI. The PCE deflator is expected unchanged at 1.3%. Michigan sentiment is expected at 73.5 compared to 73.3 last month and Chicago PMI is expected at 63 compared to 63.8 last month. (more…)

• USD: Higher, stocks extend losses after report of a surge in jobless claims and a dip in LEI
• JPY: Higher, tracking risk sentiment, Q1 GDP outpaces the US and EU, deflationary pressures continue
• EUR: Lower, EU nations divided over how to combat the debt crisis, Juncker sees no immediate intervention
• GBP: Lower, retail sales rise for third month in a row, pressured by risk aversion /global risk fears
• CAD and AUD: AUD & CAD lower, deleveraging of stocks and commodities, RBA/BOC rate hike doubts

Overview

USD and JPY surged in Thursday’s trade supported by a spike in risk aversion as equity markets tumble in reaction to speculation that the EU lacks a unified response to the sovereign debt crisis and central banks refrained from coordinated intervention to support the EUR. There are reports that the German ban on naked short selling caught some of the EU members by surprise. This surprise sparked speculation that the EU lacks unity to try and combat the sovereign debt crisis and to restore confidence in the EUR. EU’s Juncker sees no immediate currency intervention to support the EUR. Equity markets and the EUR were also pressured by widening of EU credit spreads and more strikes in Greece protesting Greek austerity plans. GBP traded lower despite report of improving UK retail sales pressured by spillover from the EUR. Commodity currencies traded sharply lower in reaction to a spike in risk aversion and weaker equity markets. Asian equity markets traded at an eight-month low. JPY surged supported by safe haven demand and gains in cross trade versus Europe and commodity currencies. Investors continue to deleverage from higher risk assets seeking safety in the USD, JPY and CHF. Today’s US economic data was disappointing with jobless claims posting a surprise rise, leading indicators posting an unexpected dip and the Philly Fed rose by slightly less than expected. Stocks tumbled after today’s US economic reports and USD and JPY extended early gains. (more…)

• USD: Higher, risk appetite improves, trade balance widens, concern over EU aid plan
• JPY: Lower, tracking stocks, MOF will seek to extend Japan’s debt maturities will
• EUR: Mixed, cost of funding EU debt drops, GDP and industrial output beat expectations
• GBP: Lower, dovish BOE inflation report, Conservatives pledge quick action on the budget
• CAD and AUD: AUD lower & CAD mixed, gold trades at record high, Australian budget to return to surplus

Overview

After recent volatility a relative calm has returned to the global equity and financial markets as ECB purchase of sovereign debt in peripheral European nations helps to reduce the cost of debt financing in Europe. The decline in the cost of debt financing in Europe contributes to a slight easing of worries about the EU debt crisis. EUR traded higher supported by easing EU debt worries and in reaction to report of better than expected EU Q1 GDP and strong EU industrial output. In addition, Spain has announced that it is taking measures to cut wages and reduce its budget deficit. Spain’s action to try and reduce its deficit may reduce some of the fear of debt contagion in Europe. GBP traded mixed initially supported by report that the Conservative Party will head the new UK government. Conservative Party leader Cameron will become the new UK PM. The Conservative Party pledged to take action within weeks to begin reducing the UK budget deficit. The impact of positive UK political news was offset by a dovish BOE inflation report and the statement from BOE Governor King that the central bank has not ruled out further bond purchases. Commodity currencies initially traded higher and the JPY traded lower as equities rally and risk appetite returns. Commodity currencies were also supported by a rise to a record high in the price of gold. Canada’s trade surplus narrowed and the housing price index rose. AUD gains were limited by concern about China’s economy and fear of a credit bubble in China. CAD gains were limited by weaker crude prices. US economic data was mixed with the trade balance widening to its highest level since October 2008 Exports rose by 3.2% and imports by 3.1%.USD is closely tracking risk sentiment and the direction of equities.

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• USD: Higher, skepticism about the EU rescue plan, wholesale sales rise, Lacker warns on rates
• JPY: Higher, tracking stocks, Japan may seek a debt cap, Yuan revaluation speculation
• EUR: Lower, concern about slowing growth, widening deficits and potential new debt downgrades
• GBP: Lower, political uncertainty, retail sales drop, house prices rise, industrial production jumps
• CAD and AUD: AUD lower & CAD higher, weaker equity and commodity markets, China rate hike threat

Overview

The USD traded higher Tuesday supported by doubt that the $1trln EU/IMF rescue plan announced Monday will contain sovereign debt risk from spreading in Europe and in reaction to accelerating inflation in China. There are numerous concerns about the impact of the EU/IMF rescue package. In order for countries to receive aid they must adopt extreme austerity measures. The austerity measures are likely to hurt the EU recovery. There also is concern that the ECB plan to buy bonds could be inflationary. ECB officials say that bond purchases will be sterilized. The EU/IMF rescue plan may not prevent future sovereign debt ratings downgrades in peripheral European nations. EUR was also pressured by speculation that the EU sovereign debt crisis will force the ECB to maintain accommodative monetary policy. As the US economy shows signs of recovery and the Fed is likely to consider a hike before year-end, yield and growth differential are moving in favor of the USD. USD was also supported by a spike in risk aversion as equity markets trade lower and accelerating inflation in China generates the risk of further tightening of monetary conditions in China. China’s inflation rate rose at its fastest pace in 18 months to 2.8%. The Shanghai index closed 1.8% lower partly on fear of tightening of monetary policy in China. The commodity currencies traded lower pressured by weaker equities and threat of tightening in China. CAD downside was limited by gains in cross trade to the EUR. GBP traded lower in volatile trade mainly pressured by UK political uncertainty as the UK political parties try to form a new coalition government. The latest report is that the Liberal Democrats and Labor Party are trying to form a coalition government. This coalition could be a negative for the UK budget outlook and may increase the risk of a downgrade in the UK sovereign debt rating. JPY traded higher supported by safe haven demand sparked by weaker equities and skepticism about the Greek rescue plan. JPY was also supported by a statement from Japan’s finance minister that Japan is considering a debt cap and in reaction to the Reuters report which says China is moving closer to a decision to allow Yuan revaluation. US economic data was mixed with wholesale sales rising more than expected. USD is closely tracking risk sentiment and the direction of equities. (more…)

• USD: Higher, ADP employment rose more than expected, layoffs dropped by 43%, services ISM unchanged
• JPY: Higher, Japanese markets closed for holiday, supported by a spike in risk aversion
• EUR: Lower, fear of Greek contagion risk, Moody’s puts Portugal on review for downgrade, Greek rioting
• GBP: Lower, downside limited by report of rising retail prices, strong construction PMI, election polls
• CAD and AUD: AUD & CAD lower, deleveraging of stocks, commodities and currencies

Overview

Stocks currencies and commodities continue to fall in reaction to Greek contagion fears and tightening of credit conditions in China. USD continues to benefit from safe haven demand with the EUR trading at a fresh one-year low. The ECB’s Weber warns of the potential risk of serious contagion to other EU states from the Greek debt crisis. The Wall Street Journal reports that the EU parliament may not agree to disperse funds to Greece. The cost of funding the Greek debt spiked higher as German Chancellor Merkel warns of financial contagion if debt crisis is not stopped in Greece. There is fear the Greek contagion may be spreading to Portugal and Spain. EUR traded to the day’s lows in reaction to report that Moody’s has placed Portugal on review for possible downgrade. Rumors are circulating that Portugal may need €100bln in aid. Additionally there is a growing chorus of analysts warning of a possible breakup of European Monetary Union. Investor Jim Rogers says he expects the single EU currency could be dead within 15 to 20 years. GBP outperformed supported by the latest UK election polls which point to a victory for the Conservative Party and in reaction to report of strong UK construction PMI and rising retail price inflation. Commodity currencies traded lower pressured by weaker equities and lower commodity prices. Crude prices have declined over 8% in the last two days. The VIX index jumped 25% Tuesday and another 13% Wednesday reflecting a spike in investor risk aversion. CAD is trading at a five-week low versus the USD. AUD traded lower despite report of a sharp rise in Australian building approvals. Economic data is overshadowed by fear of European debt contagion and rising risk aversion. JPY traded mixed with Japanese markets closed for holiday. Challenger Gray says that US layoffs declined to near a four year low in April. US economic data was mixed with ADP employment growth reported higher for the third consecutive month and non-manufacturing ISM came in weaker than expected at unchanged. Investors will continue to monitor developments on EU sovereign debt risk and US economic data. Focus turns to the ECB policy meeting and US jobless claims report Thursday and Friday’s release of US April unemployment and nonfarm payrolls. The trade expects the US employment report to confirm that the US labor market is improving and beginning to create jobs. (more…)