Posts Tagged ‘USD/JPY’
Forex Trading Analysis – Waiting for Empire State Manufacturing Index
Monday, August 17th, 2009The Greenback gained against the EUR but extended losses versus the JPY since Friday, after the U.S. Consumer Sentiment index unexpectedly declined in early August. The data aided the Dollar, which in many instances has tended to move in the opposite direction to its economy, due to higher risk aversion. The most significant data anticipated today is the Empire State Manufacturing Index and TIC Long-Term Purchases from the U.S. at 12:30 GMT and 13:00 GMT. It’s suggested that you open big positions in the USD’s main pairs now, as market volatility builds up today. (more…)
The Shift from Fundamentals is Coming….
Thursday, July 23rd, 2009The equity markets are a marker for risk appetite, and the dollar and Yen usually suffers as investors flock to stocks to quench their hunger. But this week has seen the reverse happen alongside puzzling comments from US Federal Reserve Chairman Bernanke, ECB President Trichet and to some degree, the Japanese Finance Minister as well.
As the US stock index, the Dow Jones Industrial Average raced towards 9,000, a level unseen since October 2008, the Dollar too made gains, albeit not as dramatic. The Nikkei Index was also up this week while the Yen as well did not suffer for the excitement of it all.
Patterns like this are rare, and make trading difficult, especially for fundamental traders who rely on hard data, not theoretical formulas and exotically named technical achievements (no offense Fibonacci…).
Yesterday saw Ben Bernanke, AKA helicopter Ben, give a second round of testimony to congress, this time in front of the Senate Banking committee. And while he pretty much towed the party line that he established the day before, he made one alteration which sent the Dollar on a roller coaster as Forex traders tried to figure out what he was saying.
He spoke of positive signs out of the housing market one day after putting part blame for the woes of the country on the depressed housing market. It is inconsistencies like this that can cause panic, and for a while with the Dollar it seemed as if it had.
I trade on fact, things I read, things I hear, things I piece together like a jigsaw puzzle – and for the most part it has worked out well for me. The stock market is not the same kind of market as the Forex, it is a market where emotions and psychology can rule the day.
The Forex market is too large for that, Online Forex traders know this to be true, sentiment cannot move a currency – but hard data, good or bad can. But what I witnessed this week has made me reconsider this. What I saw this week was pattern trading based on emotional instinct, not fact and numbers.
The US is in a bind, and while the Chairman of the Central Bank might allude to positive signs, the warning signs are large and in our faces. With swelling debt, with an administration bent on “fundamentally changing the United States of America” (Obama’s words, not mine) by redistributing wealth and socializing private industry at an enormous cost to not only the current taxpayer, but future ones as well – I do not see a strong Dollar right now. And I might not ever again if this continues.
It would be comforting to know that I am wrong, I would want nothing more than that. But seeing how the game of politics has consumed every inch of what is supposed to be objective and non-partisan departments – I do not believe I am.
Trichet wants to keep his job. Bernanke does too. Is it fair that their impartiality can lead to their dismissal (or non re-upping of their contracts)?
But, unfortunately, this is what we have – and in the long run it will ruin the trust that the markets have in any data that come out– and lead to the equitization of the Forex – we saw the beginning this week.
CIT Bailout Adds to Risk Appetite, Safe-Havens in Decline
Tuesday, July 21st, 2009Yesterday’s rally on Wall Street, which led to a devaluation of the major safe-haven currencies such as the USD, was led by a decision from CIT, a large financial firm, in favor of a $3 billion bankruptcy protection bailout. The resultant boost in confidence led stock markets into a strong rally, followed by a declaration from the Bank of Japan (BOJ) that their economy may no longer be getting worse. All of this optimism has helped to increase risk appetite and lower the appeal of safe-haven investments.
USD – Dollar Tumbles as Stock Markets Rally
The Dollar tumbled to its lowest level in over a month vs. the EUR, as Wall Street rallied on Monday. The rally was initiated by U.S. commercial finance company CIT board approving a $3 billion rescue package. The USD’s subsequent devaluation and Wall Street’s gains yesterday were also owed to increased risk appetite, as traders were taking into account continued optimism from the 2nd quarter, following last week’s optimistic results from U.S. banks. Adding to optimism for the U.S. economy, U.S. housing data released yesterday points to stabilization of the U.S. housing sector.
The Dollar Index touched 78.799 on Monday, the lowest level since the 3rd of June. The USD tumbled against the JPY by over 70 pips to 93.92, as traders ditched the greenback for higher yielding assets. The GBP/USD jumped by 120 pips to 1.6518, as the GBP acted positively to the optimism in the banking sector. The EUR/USD closed nearly 60 pips higher at 1.4214, as the USD’s safe-haven status is dissipating as signs of global economic recovery are in the making. It seems that as long as global equities rally, the USD will continue to slide vs. the major currencies.
Looking ahead to today, there are some crucial releases that are set to come out of both the U.S. and Canada. Canada is set to publish both the BOC (Bank of Canada) Rate Statement and Overnight Rate at 13:00 GMT. The results of these are set to determine the USD/CAD rate in the coming week. At 14:00 GMT, U.S. Federal Reserve Chairman Ben Bernanke will testify before the Financial Services Committee in Washington, DC. This is significant for future U.S. monetary policy. Surrounding this event, the forex market is likely to experience heavy volatility.
EUR – EUR Hits 6-Week High against USD
The EUR hit a 6-week high against the USD yesterday, as U.S. and global equities rallied. This was owed to optimistic U.S. and European data in the past week. Also, the U.S. largely led the rally, as U.S. financial firm CIT’s bondholders agreed to $3 billion of emergency financing to prevent bankruptcy. The GBP also hit a 3-week high against the USD due to global banking industry expectations. The 2 things that helped the Pound gain yesterday was risk, as traders felt comfortable in diversifying their investments due to renewed optimism.
The EUR/USD cross hit as high as the 1.4250 level on Monday, before closing at 1.4210. This bullish pattern of the pair is much owed to the USD’s safe-haven status declining as the global economic recovery kicks in. The GBP/USD closed at 1.6518, while the EUR/GBP cross finished lower by 30 pips at 0.8603. Much of the GBP’s bullishness recently has been owed to rising energy prices and the recovery of the banking sector, as the British economy is very dependent on these 2 industries.
Today, we can expect economic news releases from both Europe and Britain. Switzerland is set to release her trade balance figures at 06:15 GMT. A high figure will be good for the CHF, as this would show a higher surplus of exported goods during the previous month. Britain is set to release public sector net borrowing figures at 08:30 GMT. A lower than forecasted 15.7 billion Pounds may help the GBP today, further adding to recent optimism in the British currency.
JPY – JPY Climbs on CIT Rescue Plan
The JPY climbed against a number of its currency pairs yesterday, as a result of the rescue plan by the shareholders of U.S. finance company CIT. This automatically helped spread the rise in equities from the U.S. to Japan. As a result, the JPY climbed against its major currency pairs. The JPY climbed against the USD by 70 pips to 93.92, as investors put their money in higher yielding assets. The Japanese currency also made gains vs. the EUR, to close 64 pips higher at 133.34.
The strength of the Japanese currency may be owed to the fact that the Japanese economy has bottomed out. Therefore, forex traders are willing to put more of their money in the Japanese currency, as the global economic situation improves. Additionally, as this occurs, investors are beginning to pour their money back into Japan. The result will therefore lead to a stronger Japanese currency for the foreseeable future. We may see the USD/JPY drop below 93.50 in today’s trading.
Crude Oil – Crude Oil Hits a 2-Week High
The price of Crude Oil hit a 2-week high of $65.86 yesterday, before closing at about $65.30. Crude prices rose on Monday for a number of reasons. There was much optimism coming out of the U.S., spurred by the CIT rescue plan. In turn, the equity rally in America led traders to diversify their investments. Thus the USD declined, which helped boost the price of Crude Oil. The gains in commodities extended throughout the day.
There are some investors now that are talking of a price correction in Oil. However, if there is enough optimism to support the price of Crude, there is no reason that prices won’t rise to over $66 per barrel of Crude in today’s trading. This could come sooner rather than late, providing that the U.S. Dollar continues to plummet. In addition, optimism from U.S. Federal Reserve Chairman Ben Bernanke’s speech may add to possible gains to Crude prices later in the day.
Article Source – CIT Bailout Adds to Risk Appetite, Safe-Havens in Decline
