Day Trading

Foreign Exchange Trading: USD and JPY Gain on Increasing Risk Aversion

Mark — Wed, 16 May 2012 13:21:08 +0000

Risk aversion remains the main theme across the markets this week with equity markets continuing to slide and the safe-havens of the US Dollar and Japanese Yen performing strongly.

Very positive German GDP yesterday gave the euro a boost in early trading but again developments in Greece have swamped any positive euro related news and driven the euro lower against the Dollar and Sterling.

News of large Euro outflows out of Greece by citizens is not helping the nagging feeling that a Greek exit from the Eurozone is approaching faster than European politicians would like.

They have desperately tried to manage the situation to ensure that if the worst did happen, Greece leaving could be orderly. The fear is now that politicians no longer have the ability to manage the situation and a disorderly exit may now be on the cards.

The Bank of England inflation report is due today at 10.30. We have covered what the Governor is likely to outline, namely lower that expected growth and higher than expected inflation.

The foreign exchange trading market has already built that into Sterling and the news will probably play second fiddle to news coming from the Eurozone for the rest of the week.

Tonight sees the Federal Reserve minutes released from the last meeting.

As ever, any hint or sign that the FOMC are considering further easing will see a sharp reversal from the trend in recent days. Moreover, equity markets will jump and the USD will sell off from its recent surge right across the board.

CFD trading, forex and financial spread trading are leveraged products. They carry a high level of risk. It is possible to lose more than your initial capital outlay with these products and therefore they may not be suitable for all investors, ensure that you fully understand the risks involved before trading and independent financial advice if necessary.

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FX Day Traders Seek Yen as US Jobs Data Falls

Mark — Fri, 11 May 2012 14:14:23 +0000

The dollar slid against the yen but rallied against currencies linked to global growth on Friday, as investors sought safety after US jobs data provided further evidence the economic recovery was losing momentum.

A third straight monthly decline in US hiring growth also weighed on the euro. In day trading, the single currency fell for a fifth straight session against the greenback and tumbled against the yen, ahead of the weekend’s key political elections in France and Greece.

Investors can speculate on forex futures and daily markets with Spreadex and CMC.

US employers added 115,000 workers last month, well below expectations of 170,000. The data followed a string of weak readings on the economy that fuelled speculation of more monetary stimulus from the Federal Reserve.

It was the third straight month in which hiring slowed, keeping fears alive that the US economy is losing momentum.

It also dampens hopes that a stretch of strong winter hiring signalled a turning point for the recovery.

The unemployment rate ticked a tenth of a point lower to 8.1 percent, a three-year low, as people left the workforce.

The jobless rate is derived from a separate survey of households, which showed a drop in the number of jobs in April.

Looking at the City Index charts, the Euro had a choppy week, hitting a two week low, as European Central Bank chief Mario Draghi said the Eurozone economy was likely to recover this year, although the outlook remained vulnerable to downside risks.

He spoke after the ECB kept rates unchanged at 1 percent. There is speculation the European Central Bank may provide Eurozone banks with more liquidity in a third long-term refinancing operation.

This comes after Eurozone data, in both indebted and core nations, confirmed a worsening economic outlook.

Italy’s manufacturing sector shrank more than expected, while data from Germany, Spain and France also showed factory activity falling significantly.

Political uncertainty also looms large, with elections in France and Greece having the potential to push the euro lower.

The above is a review of the forex market for 30/04/12 to 04/05/12.

CFDs, FX and Spread Trading are leveraged products and carry a high level of risk to your capital. It is possible to lose more than your initial investment. These products may not be suitable for all investors, therefore ensure you understand the risks involved and seek independent advice if necessary.

AUD FX Spreads Surge amid Positive Australian Jobs Data

Mark — Thu, 10 May 2012 11:25:33 +0000

Developments in Greece and Spain continue to weigh on Euro sentiment, driving the single currency lower across the board.

The Spanish government part-nationalised stricken lender Bankia, taking a 45 per cent stake in exchange for €4.5 billion in emergency loans. We can expect this to be the first of several injections of capital by the Spanish authorities into their struggling banking sector.

The search for a Greek government also looks set to drag on, after the second placed Syriza party in the recent elections failed to form a coalition.

The mandate now looks set to pass to the third placed Socialists in a ludicrous game of pass the parcel, with every failure racheting up the pressure to find a solution.

Much needed bail-out funds are being withheld until a government is in place, but with no end in sight to the election merry-go-round, EU officials need to act quickly to avoid making the situation worse than it already is.

This morning is an important one for Sterling with Industrial Production data due along with the Bank of England announcement on interest rates and the asset purchase scheme at midday.

The IP number for March is expected to show further declines in output but a number to the upside is a possibility after the rebound in construction in the last two months.

As we’ve mentioned before this week, it would be a huge surprise if the BoE made any changes to rates or QE.

Australian employment came in much better than expected, 4.9 percent against expectations of 5.3 percent catching the markets completely on the wrong side.

The AUD is off around 4 percent against the USD and GBP over the last few weeks after the central bank cut interest rates and looks set to cut further this year.

The market was quite short of the Aussie, and the buying back of those positions has forced a quick 50 point rally overnight.

Also out today is the ECB monthly report, closely watched to see the extent of bank borrowing from the central bank over the last month.

FX Spread Trading: French election Prompts Negative Euro Sentiment

Mark — Tue, 08 May 2012 11:37:27 +0000

Voters in France and Greece joined their counterparts in Ireland, Portugal, Spain, Italy and the Netherlands in forcing out leaders or ruling parties over the past two years.

Changes in leadership across the Eurozone have generally been Euro negative in the immediate aftermath as the markets digest the change in leadership and the Euro is pushing towards the key level of 1.30 against the dollar in early trading this morning.

The French public elected Francois Hollande, the socialist candidate, and a key pledge was to renegotiate the ‘fiscal pact’ agreed by members of the single currency.

The FX spread trading market remains nervous of the possibility of renegotiation mostly because of the uncertainty it would create and how it would affect the strong ties forged between Mr. Hollande’s predecessor and the German Chancellor.

Also adding to negative Euro sentiment is the non-result from the Greek election. No party secured enough of the vote to form a government.

New Democracy, who polled the most votes of all the parties has not been able to persuade others to form a coalition so it now falls to second place – the radical Syriza party – to try to form a government.

As many in the market have worried, an anti-austerity party in a position of power brings a Greek exit from the Euro that much closer.

Away from Europe, the Bank of England meets on Thursday to decide interest rates and the asset purchase scheme. No change is expected to either.

We also have the GDP estimate on Thursday expected to show a return to growth, and also the PPI figures on Friday.

There is little big ticket data from the US this week but in Australia we have the budget and employment data out later in the week and given the ACB cut rates last month, it may turn out to be softer than expected.

Spread Trading: Positive Sentiment Sees Canadian Dollar Strengthen

Mark — Fri, 04 May 2012 11:08:30 +0000

The Canadian dollar won on points in a week that saw the top half dozen currencies move by less than a cent against each other.

There was a general tilt among investors towards the commodity dollars.

With few economic indicators to encourage them, investors felt no compulsion to take the Canadian dollar any further ahead.

They were satisfied to see it holding its position slightly above the US dollar and close to its one- and two-year weekly average against the pound.

There were two sets of Canadian economic data. Wholesale sales for February rose by a monthly 1.6 percent, more than compensating for the previous month’s -1.1 percent decline.

February’s retail sales clocked a -0.2 percent decline, negating an identically-sized increase in January which was entirely the result of a spike in motor vehicle sales.

Contracts for Difference (CFDs), margined forex and financial spread trading come with high levels of risk to your investment. The leverage on these products means that you can lose more than your initial investment capital. When trading through these products, note that they may not be suitable for all types of investor. Ensure you only invest using funds you can afford to lose. Always ensure you fully understand the risks. Where appropriate, obtain independent advice.

Weekly update by www.moneycorp.com, Foreign Exchange since 1979.

Forex Trading: Sterling/Euro Falls as UK Construction Weighs on GDP

Mark — Wed, 25 Apr 2012 11:00:15 +0000

UK Q1 GDP has come in at 0.2 percent which means the UK will be confirmed as in a technical recession (the final GDP figure is out later in the month).

In the forex spread trading markets, the news has trimmed 50 points from Cable and Sterling-Euro in quick time and will keep the pound on the back foot for the rest of the day. As we thought it was the construction sector that dragged the number down, showing a decrease of 3 percent in Q1 2012.

Euro-zone data is light today so the focus will remain on the politics of austerity and how it continues to disrupt single currency governments.

With the Dutch cabinet resigning earlier in the week and the uncertainty over the outcome of the French election, Euro sentiment is taking a beating and dragging the Euro lower with it. The fact that German Chancellor Angela Merkel is facing open rebellion by other European nations over her demand for further austerity has not assuage the situation either.

Tomorrow German CPI is released, expectations are for a y-o-y figure of 2.2 percent very close to the ECB target level and on Friday we also get the consumer confidence number.

Neither should play a huge role in Euro trading over the next few days as Euro politicians continue to dominate the headlines.

Today marks the end of the two days FOMC interest rate meeting in the US. It is expected that the Fed will keep rates and QE on hold, but as ever, it will be what the Fed indicates it will be doing over further easing later this year that moves the financial spread trading markets.

Wording will be key, but we can expect the Fed to continue to the cautious optimism tone of recent meetings. Also later today is the US durable goods order figure, with consensus estimates showing a decline of around 1.5 percent in March?

French Presidential Elections to Act as a Limit on Euro/Dollar FX Spreads

Mark — Mon, 23 Apr 2012 13:23:29 +0000

The International Monetary Fund’s (IMF) has pumped an additional $430bn into the pot meaning another sheet of support to the Eurozone periphery should it be required.

However, several other uncertainties persist to bother markets signifying that any rally could be short lived.

There is plenty of data and events this week including central bank decisions in the US, Japan and New Zealand. In addition, US corporate earnings will stay under the spot light while bond auctions in the Eurozone will also provide spread trading market drive.

It is doubtful that the Fed meeting tomorrow and Wednesday will incite any change in the currently low FX volatility atmosphere given that strategy settings will stay unchanged. The bulk of FOMC members are likely to look for the first alterations at the earliest in 2014.

The Fed, as a result, is unlikely to stir the Greenback out of its daze and if anything a fall in durable goods orders, little change in new home sales and a pull back in consumer confidence will play in support to Dollar bears over the coming week.

Even a relatively firm reading for Q1 GDP will be seen as backward looking given the slowing expected in Q2.

Over to Europe and the single European currency will have to compete with political proceedings as it absorbs the outcome of the initial round of the French presidential elections.

The reality that the political course will carry on to a second round on 6 May could act as a limit on the Euro.

A variety of ‘flash’ purchasing managers indices (PMI) readings and economic opinion gauges will present some primary direction for the Euro but mostly stable to softer readings suggest little stimulation.

As a result, euro/dollar FX spreads will largely remain within its recent range although news from Spain and Italy and their debt markets will have the potential to bring into play larger moves in EUR.

Hold on QE Sees Pound Spread Trading Markets Strengthen

Mark — Fri, 20 Apr 2012 14:49:50 +0000

Sterling has been the star performer this week, driven higher by lower than expected jobless claims, an uptick in inflation, better than forecast retail sales this morning.

Further aiding the momentum was the Bank of England minutes which showed the MPC voted 9-0 in favour of keeping QE on hold for now.

Aside from the positive data which naturally push the pound up, the inflation figure and the Bank of England minutes are important because the forecast was for prices to fall gradually back towards the Banks target.

The figure was not altogether unexpected, given the recent surge in oil prices but given the MPC has been adamant that inflation would continue to fall, rising prices may mean the bank begins to think about symbolic rate rises in the coming months. It is this that has been reinforcing the move higher in the pound over the last few days.

Next Wednesday the crucial Q1 GDP figure is released. This will decide the short-term path of the pound, the expectation is for a mildly positive number because of the recent uptick in overall economic data.

However, worries remain over the construction sector which may have contracted enough in the first few months of the year to drag the overall GDP number into negative territory and confirm that the UK has re-entered a technical recession.

Away from the UK next week we have the Fed interest rate meeting, US GDP, durable goods orders and the Fed Chairman talking so it’s a busy week for America. QE seems to be back on the table now the surge in employment in Q1 has slowed down.

The financial spread trading market as ever will be waiting for a further softening in tone; it looks like risk assets will do well, and the US to sell off once more.

US Spread Trading Markets Edge Higher on IMF Growth Forecast

Mark — Tue, 17 Apr 2012 16:13:24 +0000

European and US spread trading markets are moving higher this afternoon as the International Monetary Fund raised its global growth forecasts following a positive shorter-duration bond auction for Spanish notes earlier today.

The auction, though not as significant as Thursday’s, was critical to help instil confidence into a market that could run, not walk, away from Spain’s ability to borrow if investors saw the bonds being dumped.

Investors are faced with the uncertainty of Spain and the Eurozone but with the lure of what seems to be endless liquidity from central banks if the state of affairs were to worsen so to require it.

After all, Bernanke and the fed only dampened the outlook of QE3 because of an improving outlook. So, if that were to change, and for any reason it would be reasonable to assume – Europe included – the fed are ready by the faucet.

But things are complicated. By printing so much, central banks are potentially damaging the economies they’re designed to facilitate and protect as a result of how much they’re expanding balance sheets as a percentage of GDP in return for a short-term benefit.

So, even with the likelihood of a depression happening near-term being negatively correlated with how much bond-buying occurs, the negative impact on future GDP these accounting tricks are likely to have will also, unfortunately, be positively correlated to that bond-buying.

Someone, somewhere, at some point will have to incur the liabilities these governmental bodies are kicking down the road. And until that happens, the financial spread trading markets will search for its next hit of liquidity.

Market review by Spreadex.

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EUR/USD Spreads Show Resilience amid Potential ECB Bond Purchasing

Mark — Thu, 12 Apr 2012 11:17:13 +0000

After a difficult start to the week which saw the euro wobble amid renewed fears over Spanish and Italian debt, the euro is showing tentative signs of building some gains after a week of selling pressure.

The euro is still heavily under the spotlight as Spanish and Italian debt is still dangerously high; however, sentiment that the ECB could resume bond buying has helped to ease fears.

The euro still remains pegged toward 1.31 against the USD and 1.30 remains a key support area for EUR/USD and given the consolidation at 1.31 we could see some recovery towards 1.3150 to 1.32.

The pound on the other hand is going from strength to strength and has hit a one year high on a trade weighted index- that is the pound as a measure against a basket of currencies.

The pound initially edged higher against the euro in line with euro concerns and improved economic numbers from the UK.

The pound however, has not managed a sustained push higher against the euro. This suggests a lack of appetite to sell the euro too much as the market adopts a wait and see approach to the developments on Spain and Italy.

In other news, the yen fell for a second day against the dollar and euro after Bank of Japan Governor Masaaki Shirakawa indicated further easing of monetary policy.

Later today we see further feedback from the US with initial jobless claims and the producer price index- with spread trading markets in risk off mode and following weaker than expected payroll numbers last week a good set of numbers is hoped for.