Beta 2 Forex News, Jovi Overo, Beta 2 Ltd, Wednesday August 24 2011

The US dollar (USD) was experiencing mild downswings yesterday as investors took recent signs of decent manufacturing growth in Europe to mean a ramp up in the intensity of risk appetite. Recent speculation of a move by the Federal Reserve to ease capital markets in the US was felt yesterday, as well, with large firms betting on a move to weaken the greenback.

With a report from the American housing market being released yesterday, traders have begun to see a sudden loss of strength in the core assets of the American economy. Though housing comprises only a portion of US economic strength, it does impact the value of much else by way of home furnishings, retail sales, loans, lending, consumer sentiment and economic outlook. As such, yesterday’s downtick caused the greenback to take losses in late trading.

With a heavy news day expected today, traders are sure to see a growth of portfolio adjustment as volatility becomes elevated. The US economy will be publishing reports on crude oil inventories and another report on housing, admittedly more minor than yesterday’s news. Should today’s news disappoint, there is a possibility that some investment will get pushed towards the safety of the USD.

The euro (EUR) has been seen trading with largely bullish results so far this week as traders continue to assess risk sentiment across the region, with a renewal of favourability for alternate stores of value. The EUR was seen trading bullish in late trading as shifts away from the greenback, due to a mild swing back into global stocks and higher yielding assets helped drop the value of traditional safe havens.

With yesterday’s reports on PMI and economic sentiment showing disparate results, traders are wondering whether the uptick in manufacturing and services will be enough to offset consumer worries about future growth. Indications point to a mild recovery since last week, but the reading on outlook from ZEW showed increasing pessimism which could stifle such advances.

On tap today, traders will witness the release of a correlated report on consumer confidence from the Ifo institute. The euro zone will also be releasing its regional finding on industrial new orders for the month of July, revealing the level of demand for industrial goods from the euro zone region. Should the Ifo report reveal even more pessimism than yesterday’s ZEW finding for Germany, then the euro may get dragged down from yesterday’s highs. Decreases in industrial orders could behave in similar fashion.

The Australian dollar (AUD) was trading mostly weaker versus its currency counterparts yesterday despite data releases showing a return to heightened risk appetite. The Aussie has been losing momentum these past few weeks as risk aversion becomes predominant in the global market. Fears emanating from the current market environment have led many to seek safety.

This movement has gouged the AUD against all of its currency rivals, especially against safe-havens like the Swiss franc (CHF) and Japanese yen (JPY). With significant reports being released this morning, forex traders are likely to see heavy movement by the Aussie in today’s trading hours. News out of New Zealand later in the trading day is also expected to hike volatility throughout the Pacific countries of China, Japan and Australia. Pacific traders should be cautious in this week’s trading, similar to last week’s environment.

Crude Oil prices rose slightly Tuesday as sentiment appeared to favour a mild uptick in global stocks following reports of monetary moves being made by several central banks. Data releases out of Europe and the US last week are still driving many investors back into safe-haven assets as many reports suggested a surprise downtick in growth among global industrial output and consumer spending. The potential return of Libyan oil also has many speculators eyeing production data and the impact it could have on the price of oil in the near future.

An expected rise in dollar values due to this week’s risk sensitive environment has helped many investors ram up their short-taking positions on physical assets, but with the USD’s gains not materializing in large enough numbers, sentiment appears to have the price of crude oil falling mildly late Tuesday. Should Crude Oil sentiment continue to flatten this week, oil prices may reach a decision point which forces a wide swing by mid-week; direction is still unclear regarding the swing.

Jovi Overo

 

 

Beta 2 Forex News, Jovi Overo, Beta 2 Ltd, Tuesday August 9 2011

The US dollar (USD) was seen struggling to hold its value yesterday amid severe market pessimism due to a downgrade of US debt by S&P’s ratings agency. The value of safe-haven assets like the Swiss franc (CHF) and Japanese yen (JPY) have been buoyed by a shift away from higher yielding assets, though the CHF has seen only mild gains and the JPY was brought to bear by an intervention by Japan’s central bank. The greenback appears to be holding strength despite the downgrade as it remains a central store of value for most investors.

China unleashed a lengthy diatribe against the US on Monday during the emergency G20 summit as a reaction to S&P’s historic move. The talk was aimed at the loss of value China foresees as impending due to what it viewed as fiscal irresponsibility on the part of Congressional leadership. Moody’s Investor Services, however, did defend the AAA rating of US debt yesterday, attempting to forestall a sharper decline on Wall Street and justify the USD and US Treasury notes as stable stores of value in this shaky global market.

With a heavy news day expected today, traders are sure to see heightened volatility with potentially wide swings in value from the plummeting stock market. The US economy will be publishing several reports on productivity, labour costs, and the latest decision on short-term interest rates, known as the Federal Funds Rate. The Federal Funds Rate announcement will be of prime importance today considering its timing in relation to these other historic events. How the Fed portrays itself this week may be key to determining the USD’s value in the weeks and months ahead.

The British pound (GBP) has been seen trading with largely bullish results so far this week as traders assess the risk sentiment across the region. The Cable was seen trading bullish in late trading as shifts away from the greenback, due to uncertainty surrounding US markets after an historic downgrade by S&P of US debt led many to favour sterling in early week trades.

News of debt contagion spreading across the euro zone, however, has also led several economists to worry that a toppling of consumer confidence may be up next. Whether Britain is affected by this regional tug is a matter for speculation at the moment, but one trader should bear in mind considering the wide spill-over effect running through global markets this week. Should today’s reports on industrial and manufacturing output indicate a downturn in productivity, and thus growth, there is a chance that traders will take the news to mean the pound sterling could meet resistance in the near future.

On tap today, traders will witness the release of a highly significant monthly report on manufacturing production in Great Britain at 9:30 GMT, concurrent with the nations less important industrial production and trade balance data. Should the figures reveal stagnation in manufacturing and industry growth, we could see heftier flights to safety in the days and weeks ahead. This would likely push the value of the GBP lower over the long-haul as traders continue to flee risk in larger numbers.

The Australian dollar (AUD) was trading mostly weaker versus its currency counterparts yesterday after data releases have begun to shift traders back into safety. The Aussie has been losing momentum these past few weeks as risk aversion becomes predominant in the global market. Fears emanating from the recent downgrade of US debt have made the forex market jittery so far this week, leading many to seek safety.

This movement has gouged the AUD against all of its currency rivals, especially against safe-havens like the Swiss franc (CHF) and Japanese yen (JPY). With further housing reports getting released this morning, forex traders are highly likely to see heavy movement by the Aussie in today’s trading hours. News out of China today is also expected to hike volatility throughout the Pacific countries of Japan, New Zealand and Australia. Pacific traders should be cautious in today’s trading.

Crude Oil prices dropped sharply Monday as sentiment appeared to favour a massive downturn in global stocks following a downgrade of US debt by S&P’s ratings agency this weekend. Data releases out of Europe and the US last week are still driving many investors back into safe-haven assets, but dominating sentiment this week has been the debt downgrade in the US, widening bond yields in Spain and Italy, and a sharp decline in stocks and futures as a result of portfolio shifts and pessimistic forecasts.

An expected dip in dollar values due to market outlook has caused oil futures to plummet, driving many investors away from such physical assets. Should Crude Oil sentiment continue to flop this week, oil prices may fall well into $80 price range. Traders appear weary of the value of oil as its volatility has increased these past several trading weeks. Should the stock market fail to find support in the days ahead, oil futures will likely remain bearish, pulling prices lower over the next few days.

Jovi Overo

 

 

Beta 2 Forex News, Jovi Overo, Beta 2 Ltd, Thursday June 2 2011

The US dollar (USD) halted its resurgence against most currencies yesterday as traders sought safety following a downgrade of Greece by Moody’s Investor Services. Positive news regarding Greece’s debt woes helped the euro (EUR) initially hold its ground against the USD’s resurgence Tuesday but yesterday’s news has pushed the pair back to 1.4350 from its 3-week high of 1.4458.

The shift into safe-haven assets like the Swiss franc (CHF) and Japanese yen (JPY) carries an ill wind for global growth assessments which have begun anticipating faster growth in the second half of 2011. Weak fundamentals out of the US and other leading economies have some analysts a bit sceptical nowadays, especially with ADP’s non-farm employment change report yesterday showing sluggishness.

Today, the United States is scheduled to release a series of significant data sets. The most impactful figure being published will be the weekly unemployment claims report, set to be released at 13:30 GMT. With a week focused on employment in the United States, this report may transfer over to recent consumer sentiment, but traders are also in a holding pattern ahead of tomorrow’s NFP report. Forex traders may be withholding funds today ahead of such important economic news as a result.

The EUR/USD fell from its three-week high yesterday, sinking downwards of 1.4340 before flattening out in today’s morning session. A technical cap that was triggered near 1.4450 ended up pushing the pair lower later in the day and a downgrade of Greece’s bond rating by Moody’s Investor Services added insult to injury.

The euro (EUR) now appears to be slumping against all of its currency rivals as traders are seeking safety in the Swiss franc (CHF) and Japanese yen (JPY).

Although the euro has been a top performer against the other major currencies lately, the ratings downgrade was a sharp blow to the recent uptick in the region’s currency values. Coupled with the poor fundamental data out of the United States, traders have taken the cue to move away from higher yields and into safety prior to tomorrow’s NFP report out of the US.

As for Thursday, the euro looks to be continuing its losses as a shift in sentiment is not likely to fully play out with an expected thin trading environment. Most of Europe will be on holiday in observance of Ascension Day, and global investors are also hesitant to invest prior to tomorrow’s NFP figure.

The Japanese yen, which took a sharp dive yesterday against most of the other major currencies, pared most of those losses in yesterday’s late trading sessions after Moody’s Investor Services downgraded Greece’s bond rating. Yen pairs and crosses were last seen moving in a direction favourable to the JPY as the shift in risk aversion has helped boost safe-havens like the yen and Swiss franc (CHF).

Yen traders have been weighing risk sentiment lately, attempting to decipher the direction of the economy during this news heavy week. With Friday’s Non-Farm Payrolls (NFP) ahead, much can be said about the increase in speculative shifts taking place in the market right now. Last week’s data provided a temporary bullish uptick for the island currency, but Tuesday’s news from Moody’s about reviewing Japan’s bond rating reversed much of this sentiment until yesterday’s shift in risk appetite.

Oil prices pushed beyond $103 a barrel yesterday after investors viewed the recent downward correction as a natural process to help get prices in line with supply. However, a shift in risk sentiment which favoured the US dollar (USD) against the euro (EUR) has helped drop commodity values after investors shifted into safer assets. The Swiss franc (CHF) and Japanese yen (JPY) are on the rise and physical assets usually would jump with heightened risk aversion, but the positive movement of the dollar asserted itself over the value of oil.

The decision point anticipated since Monday appears to have been reached yesterday morning, but technical forces appeared to have tested the recent jump and found it wanting. Whether oil traders decide to lift oil prices again will depend on manufacturing and industrial growth figures out of the major global economies. Employment also appears to be a top priority in this growth sentiment and oil traders are eyeing this week’s NFP data out of the United States to verify their revamped growth schedule for oil prices, especially with Europe on holiday today.

Jovi Overo

Market News, Jovi Overo, Beta 2 Ltd. Friday May 27 2011

The dollar has begun to weaken again as traders are turning to substitutes for a safe-haven currency rather than the traditional US dollar. Weak US data has kept a negative tone in the market for dollars and yesterday was no exception. The US preliminary GDP report was released in turn with the weekly jobs report and both fell short of market forecasts. US Q1 GDP came in at 1.8% on expectations for an increase of 2.2% while new jobless claims rose 424K on forecasts of only 403K. The negative data reports initially fed into USD selling but the trend reversed itself until comments Jean-Claude Juncker shifted market sentiment in favour of the safe haven currencies.

Following the remarks, the Swiss franc rose to a record high versus the dollar with the USD/CHF falling to a new low at 0.8541. The USD/JPY also fell sharply to 80.89 before recovering to the 81 level.

Despite the increased tensions in Europe over the Greek debt crisis the dollar has not been a main beneficiary of the market environment, rather the Swiss franc has become the preferred method of shorting the euro. Weak US economic data has weighed on the dollar and may continue to keep the EUR/USD supported above the 1.4000 level barring any significant change in the Greek debt situation or a drastic improvement in US economic data.

Yesterday comments by the head of the euro zone finance ministers Jean-Claude Juncker shifted FX market sentiment and increased the anxiety of euro longs which helped to drop the euro back below its weekly highs. Junker commented that Greece may not achieve this year’s deficit target and therefore would be ineligible to receive its next tranche of funding from the EU/IMF negotiated bailout. Following the comments the euro fell from its intraday highs and hit a new record low versus the Swiss franc at 1.2164.

While the proposed austerity measures are expected to be implemented, many market pundits have low expectations of Greece’s ability to reach its stated deficit reduction levels. Comments such as yesterday’s from Junker continue to weigh on the FX markets as Greece may fail to service its debt as early as July. Steps are being taken by the Greek government in the right direction as further austerity moves have been made as well as a hastened privatization program.

The intensification of the European debt crisis as well as the politicking that continues in order to extract increased concessions from the indebted nations may well continue. A similar situation that comes to mind is the low Irish corporate tax rate, something which Irish government officials have been firm in their negations with the EU/IMF as this topic is off limits. Both Germany and France may attempt to leverage this issue should Ireland request a lower interest rate than it originally received from the bailout package.

The yen rebounded sharply versus the dollar and yesterday following the comments from Jean-Claude Juncker. The sharp one day appreciation in the yen comes at a time when the yen was beginning to weaken versus the dollar over the past month given a broad rebound in the greenback. However, the flair up of the Greek debt crisis combined with increasingly negative US data threatens to derail any rebound in the USD/JPY. Traders will often use the Japanese yen as a safe-haven currency in times of high market stress and anxiety.

Yesterday the USD/JPY fell to a low of 80.89 from 81.88 before recovering to 81.04. The initial support at 81.30 was easily taken out and the next support level rests at 80.30, followed by the May low at 79.60. To the upside the previous trend line off of the May low should serve as resistance as well the May high at 82.20.

The price of spot crude oil dipped yesterday but stayed above the psychological price level of $100. Crude prices were sent lower following the US data releases that came in below market expectations. After the disappointing GDP and weekly employment numbers spot crude oil prices dipped to a low of $100.60 before climbing back to close at $100.78.

US Q1 GDP grew a paltry 1.8% on market expectations of an increase to 2.2% while weekly unemployment claims rose to 424K on forecasts of only 403K. The noticeable downturn in US economic data has increased pressure on crude oil prices. While much of the recent demand for crude oil is driven by growth in China, the US still makes up a significant portion of crude oil consumption.

Technicals for crude oil remain constructive with the price locked in a triangle consolidation pattern on the daily chart. Resistance comes in at $102.60 with support at $97.85 followed by $96.40.

Jovi Overo

MARKET COMMENTARY BY JOVI OVERO, BETA 2 LTD, 07/12/2010

If yesterday is a sign of things to come, then this week should be very interesting. The continuing jitters over Euro zone debts, calls for increased EU bailouts and Ben talking up QE3 weighed on risk appetite with the Euro and equities closing in negative territory.

Meanwhile, Gold and Silver continued to gain ground on pockets of diversification with gold setting a new all time high in US dollar in addition to Euro. Silver again outperformed gold on substitution interest, testing above $30 an ounce for the first time since 1980.

Gold and silver set fresh highs of $1427 and $30.29 as buying continued in after market trade. This year, gold is up 30% and silver a staggering 75% up and given speculation the Fed may need additional funding to the $600bn already announced and growing fears of debt contagion in the EU investors seems likely to favour safe-haven asset types in the coming sessions with gold and silver poised for fresh highs.

With regards to the euro, the main concern lately has been the likely spread of the debt contagion which was meant to be contained by the financial bailout of Ireland. These concerns do not seem to be going away and investors have once again started to take profits on their EUR shorts, driving the currency lower in the short term.

Fed Chairman Ben Bernanke helped a rebound in the US dollar against it major counterparts. The EURUSD after moving higher on Friday, has given back much of those gains to currently trade just under 1.3500.

Big Ben suggested that the sentiment the US economy was not likely to fall back into recession any time soon and that the Fed may consider expanding its asset purchasing facility.

Asian markets have seen a more positive start despite disappointing Japanese Leading Indicators and the RBA’s decision to keep interest rates on hold at 4.75%. Currently the MSCI Asia Pacific Index is up 0.5% although the Nikkei is lagging, down 0.25% at the time of writing. In the currencies the euro is trading up 0.3% against the dollar and yen; USD/JPY is little changed, AUD/USD is up 0.4% as Australia continues to command a strong interest rate premium over the rest of the developed world despite RBA Governor Glenn Stevens implying rates would not increase till mid-2011.

The Japanese yen has been climbing the last few trading days. The USD/JPY fell from a recent high of 84.39 last week to a 1-month low of 82.46, despite the recent gains experienced by the US dollar against its other rivals. The EUR/JPY has undergone similar price movements, with the pair dropping over 110 pips yesterday and currently trading at a price of 109.63.

Japanese stocks have also experienced a dip in price recently as investors anticipate a resurgent yen. It appears their sentiment could be correct. Fed Chairman Bernanke made statements yesterday about possibly expanding the asset purchasing program known as QE2 while Europe continues to also face a threatening debt contagion.

The safe haven investments which remain are the Japanese yen and precious metals, like Gold and Silver, all of which have been rising for some time now. The JPY looks to continue a rising trend this week and the Nikkei 225 may be looking to enter a bearish transition over the coming days as traders shift their equities.

After spiking towards $89.60 a barrel, the price of Crude Oil appears to have settled over the last day and a half. The price of black gold has entered a mild decline on USD gains and currently trades just under $89 a barrel.

As expected, the winter heating oil season in the northern hemisphere has driven oil prices higher, appearing to have broken out of the $80-88 price range. However, with the US dollar on the rise, commodity gains may become muted as the week wears on.

Written by Jovi Overo Beta 2

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MARKET COMMENTARY BY JOVI OVERO, BETA 2 LTD 11/11/2010

The US dollar lost steam in late trading after three days of gains but remained close to significant barriers which if broken could see its short-covering rebound stretch higher against the likes of the yen and euro. In Seoul G20 leaders were gathering to discuss currencies and global economic imbalances. But negotiators wrangled over the wording of a communiqué expected on Friday, and the statement was not expected to venture much beyond a finance ministers’ agreement last month.

USD

The USD rallied Wednesday, advancing strongly against the yen and euro, as the release of several economic indicators showed encouraging signs for the U.S. economy. After the data, the dollar hit an intraday high against the yen, reaching 82.67, the strongest since Oct. 7.

The dollar gained as weekly unemployment claims report showed a higher than expected decline in weekly jobless claims as well as a narrowing of the trade deficit. An unsuccessful 30 year Treasuries auction later in the day as well as the release of further details concerning the Fed’s Bond buying program weighed on the greenback causing it to lose some of its gains against the yen. The EUR/USD pair closed the day virtually unchanged from the morning session.

The US dollar has rallied more than 3 percent against a basket of major currencies in the past three sessions, breaking above 78.0 for the first time in two weeks on Wednesday. However, it stopped short of October’s highs at 78.273 and 78.364, resistance to beat if its correction is to extend much higher. It was last at 77.548, down 0.1 percent.  The euro, which hit a five-week trough of $1.3670 on Wednesday, rose 0.1 percent to 1.3800. It has corrected sharply from a 10-month high above $1.4280 set a week ago.

With a bank holiday in the US today no news is expected from the region. Traders should, however, follow any news that might come from the G20 meeting throughout the day. The low liquidity combined with possible news regarding future monetary moves is likely to provide a rather volatile trading day.

EUR

The EUR/USD pair heavy price swings continued Wednesday, as sovereign debt concerns continue to plague the euro with the common currency falling to $1.3671 as an unsuccessful Irish debt auction highlighted the high cost of insuring weak members of the euro-zone against debt default. The euro has since recovered however, gaining back to above $1.38 in today’s early Asian trading.

It seems that the markets are torn between quantitative easing measures by the Federal Reserve on the one hand and euro zone’s sovereign-debt crisis on the other, signalling that the massive swings in the pair’s prices will likely continue in the short term.

GBP

The pound remained strong versus the USD and rose to a six week high vs. the euro as the BOE, in its latest quarterly inflation report, indicated inflation will likely remain above 2% for the time being, indicating the Bank of England is not likely to follow the Federal Reserve by expanding monetary easing policies.

The bank, which in august said the risks to growth remained “weighted to the downside”, suggested that growth was now judged to be “a little more likely to be above its historical average than below”.

The bank added that there was risk of a bigger overshoot in inflation from higher commodity prices and that its near-term inflation forecast was higher in November than in August.

JPY

After rising almost to its September pre-intervention low of 82.87 yen on Wednesday, the dollar was holding above 82.00 yen with a re-test of the 82.87 barrier not ruled out. But there was talk of dollar sell orders from Japanese exporters above 82.50 yen, with more near-term resistance at 83 yen. Long-yen speculative positioning remained high, increasing the risk of position unwinding into the year end, while a rise in US-Japan yield differentials could also help. The Veterans Day holiday in the United States, where some markets will be shut, was helping keep the market subdued.

No major news are expected today from the region as well as most other major markets; however, traders should follow the G20 meeting taking place today and tomorrow for clues about the future of currency relations.

Crude Oil

The price of light, sweet crude oil futures contract for December delivery rose $1.09, or 1.3%, to $87.81 a barrel on the New York Mercantile Exchange. The contract hit an intraday high of $88.10 Wednesday, continuing its rise in today’s early Asian trading, and is currently trading around $88.30 a barrel.

Crude oil prices rallied to a two year high after a Department of Energy report showed a steeper than expected drop in fuel stockpiles, continuing a slide from 27-year highs. Oil inventories fell 3.4 million barrels in the week ended Nov. 5.

Gold

Gold prices edged up on physical demand and a pause in a dollar rally as investors closely watched for currency signals from the Group of 20 leadership summit that began on Thursday in Seoul. Gold gained 0.3 percent to $1,407.35 an ounce off the all-time high of $1,424.10 hit on Tuesday. A deeply divided G20 struggled to move beyond broad promises of economic cooperation and into thorny issues of exchange rates and trade balances as world leaders gathered in Seoul for a two-day summit. The gold-silver ratio, used to measure how many ounces of silver are needed to purchase one ounce of gold, stood at 51.11, just above 50.92 hit on Tuesday, it’s lowest since mid-2008 and well under a 28-year average at 64.79.

Written by Jovi Overo Beta 2

MARKET COMMENTARY BY JOVI OVERO, BETA 2 LTD 03/11/2010

The Dollar was under pressure as investors wait for the fresh round of quantitative easing from the Federal Reserve. The USD suffered as the prospect of additional monetary stimulus from the Fed following its policy meeting today helped risky assets such as equities and commodities.

Also hampering the dollar was the surprise interest rate rise from the Reserve Bank of Australia which, along with monetary tightening in India, highlighted the contrast between the accommodative monetary policy stance of the Fed and that of many commodity sensitive and emerging market economies.

Dollar Weakens Ahead of Election Results

The U.S. dollar dropped against most of the major currencies, especially the euro, ahead of the Congressional Election results, which saw the Democrats lost the House but held the Senate.  The main reason for the dollar’s fall is the speculation regarding asset purchases by the Federal Reserve. In the mean-time, several significant economic releases are expected from the U.S. today, and along with the ripple effect of the elections results, harsh volatility is likely to be observed.

USD

The U.S. dollar fell sharply against the euro on Tuesday. The dollar dropped about 150 pips vs. the European currency, and the EUR/USD has peaked at the 1.4055 level as of this morning. The greenback also fell against most of the major currencies, including the Australian dollar and the Swiss franc.

The dollar weakened yesterday on speculation a resumption of asset purchases by the Federal Reserve will lead to higher inflation and extend the dollar’s bearish trend. Investors seem to be uncertain about holding the dollar due to the expectations that the Fed is likely to introduce a new stimulus. As a result, the dollar saw an unclear trend over the past few days, especially vs. the euro, its greatest counterpart.

The dollar’s ups and downs might continue into the near future, until the Fed puts an end to rumours and declares the amount of debt it is planning to purchase.

In any event the dollar could still be subject to downside risks as further QE from the Fed was likely to make reserve managers, who were already uncomfortable with the dollar holdings, more eager to diversify away from the US currency as much as possible. The US was also likely to face increasing difficulty in financing its external debt.

Looking ahead to today, an extremely heavy news day is expected from the U.S. economy. The ADP is scheduled to release its forecast for Non-Farm Payrolls at 12:15 GMT.

The ADP’s forecast is considered to be very reliable, and thus tends to have a significant impact on the market. Traders are also advised to follow the Federal Funds Rate announcement. The effect of the announcement is likely to be muted as the Fed is expected to leave rates at a record low of less than 0.25%. Nevertheless, traders should be prepared for the possibility that the Fed will manipulate rates, as this is likely to have an unusual impact on the market.

EUR

The euro rallied yesterday against all of the major currencies. The euro gained about 150 pips vs. the U.S. dollar, and the EUR/USD has reached the 1.4055 level as of this morning. The euro gained about 100 pips vs. the British pound and about 150 pips against the Japanese yen, as well.

The euro gained yesterday as the U.S. Federal Reserve began a two-day meeting regarding a possible stimulus to the economy. The Fed is expected to issue a statement by the end of the meeting, and investors expect it to include a large bond-buying program to support the sluggish U.S. economy. This is expected to spur inflation, and to weaken the greenback. As a result, the euro, which is the dollar’s greatest rival, is strengthening, despite resurgent worries about the euro-zone’s more indebted countries such as Greece, Spain, Ireland and Portugal.

As for today, there aren’t any significant news releases scheduled from the euro-zone. Traders are advised to focus on the major publications from the U.S. and the British economies, as these are likely to have a great impact on the euro as well.

GBP

The USD rose 0.1% to 1.6020 against the pound, however, as a weaker than expected survey of activity in the UK construction sector weighed on sterling. The construction data had more significance than usual given that the sector was the driving force behind the stronger than expected UK growth data released last week.

With other sectors disappointing and now including the construction sector, this would suggest the UK economy is vulnerable.

The pound fell 1.1% to 0.8758 against the euro.

JPY

The Japanese yen saw a bearish trend against most of its major rivals during yesterday’s trading session. The yen dropped about 150 pips against the euro, and the EUR/JPY is trading near a weekly high. The yen also saw modest losses vs. the U.S. dollar and the British pound.

The yen weakened during yesterday’s trading as U.S. stocks rose, and on speculations that global economic recovery is likely to proceed at a faster pace. This has increased risk appetite in the market, and as a result declined demand for the yen. It currently seems that investors have more confidence in the recovery of western economies, and as a result are reducing demand for safe-havens, such as the yen. If the leading economies will continue to provide positive data, the yen might see further bearishness versus its rivals.

Looking ahead to today, Japanese banks will be closed in observance of Culture Day. Traders are advised to follow the major updates from the U.S. as they are likely to have the largest impact on the market. Special attention should be given to the U.S. Congressional Elections results, as updates are likely to be released throughout the trading day.

Crude Oil

Crude oil prices rallied during yesterday’s trading session. Crude began yesterday’s trading around $83.20 a barrel. Crude oil’s prices advanced throughout the trading day, and eventually peaked at $84.50, marking a 6-month high.

Crude oil rose on Tuesday following depreciation of the U.S. dollar and as U.S. stocks gained on expectations the Federal Reserve will purchase debts in order to support the economy. This has added to optimism that the U.S. economic recovery will proceed at a faster pace, and as a result will boost demand for energy. In addition, the dollar’s fall has also supported crude, as it increased the appeal of commodities for an alternative investment.

As for today, traders are advised to follow the leading economic releases from the U.S, such as the ADP Non-Farm Payrolls forecast and the Federal Funds Rate announcements, as these are likely to have a large impact on crude oil prices. Traders should also follow updates regarding the U.S. elections results as these are likely to affect prices as well. In addition, traders should focus on the U.S. Crude Oil Inventories report, which is scheduled for 14:30 GMT, as this report tends to have an instant impact on crude oil trading

Gold & Silver

Gold dropped in response to speculation that a second round of QE by the Fed may miss investors’ expectations, boosting the USD and hurting demand for the precious metal.

Gold dropped as much as 0.5% to 1351 with gold surging by as much as 24% this year hitting a record high of 1387 on October 14^th.

The Fed is expected to buy at least $500 billion of long term securities and this has already been reflected in gold prices. If this amount falls short then a negative impact on gold should be the outcome.

Unless the Fed announces a big surprise it is possible to see a muted reaction or even a correction with Silver even reacting more violently.

Silver fell as much as 0.8% to 24.71 an oz. Silver has risen 47% this year

Written by Jovi Overo Beta 2

MARKET COMMENTARY BY JOVI OVERO, BETA 2 LTD. 02/11/2010

It seems investors spent the first session of November positioning themselves for what should be a very important week of the year, with the US preparing for further economic stimulus and the data calendar brimming with market moving potential.

The key question remains as to what extent the Fed will be prepared to expand its balance sheet to provide the economy with further monetary stimulus.

The U.S dollar rose on Monday, spurred by strong U.S. and Chinese manufacturing data, as investors awaited mid-term U.S. congressional elections and more monetary easing from the Federal Reserve in the days ahead.

USD

The U.S dollar rose against most of its major currency pairs on Monday after stronger-than-expected U.S. manufacturing data, though gains were fleeting as markets braced for more monetary easing from the Federal Reserve this week. By yesterday’s close, the USD rose against the EUR, pushing the oft-traded currency pair to 1.3895. The dollar experienced similar behaviour against the CHF and closed at 0.9910.

The Fed is likely to announce on Wednesday a fresh round of quantitative easing under which the U.S. central bank would buy bonds and essentially flood the economy with dollars in an attempt to revitalize it. That should push Treasury yields lower and diminish the allure of some U.S. assets, forcing investors to seek higher returns elsewhere.

The dollar has lost 7.5% against major currencies since September in anticipation of Fed easing. Most economists expect the Fed to buy $80 billion to $100 billion in assets per month, with total purchases seen at anywhere from $250 billion to $2 trillion.

Investors may look for the unusual price volatility to continue in the EUR/USD as the pair attempts to stabilize and find new support and resistance lines. Large price jumps such as these are not common place and present terrific opportunities to take advantage of the price swings for large profitable gains.

The Aussie Dollar moved up to parity with the USD after the central bank unexpectedly raised interest rates for the first time in 6 months with the overnight cash rate up by a quarter percentage point to 4.75%. The Australian Governor, Glenn Stevens saying “risk of inflation rising remains”.

The Aussie was also boosted by speculation the Fed reserve and the Bank of Japan will take further monetary easing measures this week, widening Australia’s yield advantage. The Aussie moved up 1.2% and the Aussie vs. the Yen climbed up 1.4% to 80.55.

Australia’s benchmark rate compares with as low as zero in the U.S. and Japan, attracting investors to the South Pacific nation’s higher yielding assets.

EUR  

The EUR fell to a session low against the dollar on Monday after the dollar strengthened on earlier data showing business activity in the U.S. manufacturing sector came in stronger than expected in October. After yesterday, the 16 nation currency fell sharply against the USD, pushing the oft-traded currency pair to 1.3895.The EUR also saw bearishness against the JPY and closed at 111.90.

The EUR surrendered gains against the U.S. dollar on Monday, falling to session lows, as riskier assets such as U.S. stocks pared gains. Analysts also said investors felt uncomfortable pushing the EUR higher given the huge amount of bearish trades on the dollar, which suggests a near-term recovery in the U.S. currency is on the horizon.

There will be only one data release from Euro-zone today as the Manufacturing PMI will be announced during early trading. This indicator tends to have a relatively small impact on the market. A rising trend will have a positive effect on the nation’s currency. In addition, traders should pay close attention to the response of equity market to determine how to continue with EUR positions. Investors should pay close attention to the news and place their transaction accordingly with the developments throughout the day.

GBP

The Pound traded near the highest level in nine months against the dollar before policy makers from the U.S. Federal Reserve and the Bank of England meet to decide on interest rates and quantitative easing measures this week.

The pound rose 0.2% to 1.6071 as of 8.47am and weakened the same amount to 86.85 pence per euro. Sterling climbed 0.3% to 129.44 yen.

JPY

Nervous day for the Yen particularly the Yen crosses as investors expected Japanese authorities to intervene at any moment. Such was the state of high alert, that a mistrade triggered a brief, but strong wave of sell orders until traders realised it was not the concerted selling of the Ministry of Finance/Bank of Japan intervention.

The Japanese Yen experienced a bullish trading session yesterday, as it appreciated against most of its major currency pairs. The Yen extended gains versus the EUR on Monday, to trade at about 111.90 amid a broad sell-off in the EUR. The JPY also saw bullishness against the GBP and closed at 129.20.

The JPY’s trends will be affected by the rallies of its primary currency pairs today. It seems that the USD and EUR are expected to continue a volatile trading session today, especially against the Japanese currency. Traders should keep a close look on the news coming from the U.S. and Europe as these economies will be the deciding factors in the JPY’s movement today. It is also advisable for traders to follow any unexpected comments coming from key Japanese governmental figures, as this is also likely to lead to further JPY volatility.

Commodity Markets

The strength in the commodity markets was generated by the Chinese data as fears that growth was being reigned in by government enforced trading curbs receded, suggesting that China’s latest PMIs indicate that the economic rebound has further room to go.

Metals were higher on speculation of stronger demand for raw materials, but precious metals were a little weaker as their exposure to the stronger Dollar weighed.

The International monetary Fund has stepped up its sales of Gold taking advantage of the strong demand of Gold that has lifted the metal to a series of record highs.

The IMF has been almost alone as a seller of Gold from the so-called official sector, which includes central banks, governments and sovereign wealth fund as well as international organisation. As a whole, the sector is expected to be a small buyer of gold this year as purchases by Russia, the Philippines, Thailand and others outweigh the IMF’s sale.

Most advisors to the central banks believe that buying will continue next year. Without the IMF’s sales as a counterbalance, the official sector could become a net buyer. Net purchases could be quite significant next year: 100-120 tonnes or more which would be a sharp reversal from the trend of the past two decades, when central banks, mostly in Europe, sold about 7500 tonnes of gold, equivalent to three years mined output.

Crude oil prices ended nearly 2% higher on Monday, boosted by comments from the Saudi Arabian oil minister that an oil price between $70 and $90 a barrel was comfortable for consumers.

Countries in the OPEC oil-producing cartel, including Saudi Arabia, Nigeria, Venezuela and Iran, have the power to restrict output and push up prices or rein in prices by producing more.

In addition, Oil has risen in recent months on the weak US dollar, as investors turn to the commodity as an alternative asset.

As for today, traders are advised to watch carefully after the leading stock markets and the major economic indicators which will be published from the U.S, Britain and Euro-Zone in order to predict the next movements in oil prices.

Written by Jovi Overo Beta 2

MARKET COMMENTARY BY JOVI OVERO, BETA 2 LTD. 26/10/2010

G20 Summit Leaders Agree to Prevent Currency Devaluation War

Regardless of an agreement at the weekend’s G20 summit to avoid a currency devaluation war, investors have begun to price in the expectation of an asset purchasing facility by the Fed following their upcoming policy meeting on November 2-3. Traders have been forecasting such a move for some time, and it appears that recent statements at the G20 hint at an upcoming QE move by the Fed, which has put strong bearish pressure on the Dollar.

USD

The US dollar was hard pressed to make gains yesterday amid highly positive figures from the housing sector of the US economy. Existing home sales jumped to 4.53M, beating expectations for a gain of only 4.29M. The figures appear to have added momentum to estimates of consumer confidence, but were countered by speculation of a quantitative easing move being anticipated for early November.

Against the euro, the USD was trading lower at a price of 1.4075 from 1.3960 early in the trading day. As of this morning, the price has come down somewhat, trading at 1.3946 in mid-Asian trading. Against the Japanese yen, the Dollar fell back towards its 15-year low mark.

EUR

Agreements at the weekend’s G20 summit to curb any attempts at a devaluation war have helped the euro in short-term trading. Investors still anticipate a move by the Fed to lower the US dollar and this has pushed many traders into the higher-yielding assets, such as the EUR and AUD. The surge in commodity prices, brought on by a lower dollar, assisted in the Australian dollar’s recent rise.

The EUR/USD was trading higher at 1.4075, in late trading before coming down somewhat in today’s early hours. The EUR/GBP is trading at 0.8869, while the EUR/JPY trades at 112.65, up from 112.40 yesterday.

Adding further bullishness to the EUR’s recent movement was a sharp jump in industrial new orders in the euro zone. Forecasts yesterday were for an increase of 2.1%, from a previous decline of 1.8%. However, the figure showed a surge of 5.3% in industrial orders, highlighting the recent growth experienced by the euro zone. If today’s German GfK consumer climate report shows improvement, as expected, the EUR may continue to gain modestly against its primary currency rivals.

GBP

The UK will release its GDP figures today and will be the first results from a Group of seven nations. In anticipation of this the Pound rose 0.4% against the Dollar and has risen 10% since falling to a 14 month low in May.

Former policy maker Charles Goodhart said that today’s GDP report will matter “quite a lot” as the Bank of England decided whether to add further stimulus. Minutes of the October 7^th decision published last week showed policy makers are starting to lean towards further emergency bond purchase.

The Bank left its benchmark rate at 0.5% and kept its asset-purchase program at 200 billion pounds. Policy makers will consider whether to buy more bonds at the decision on November 4^th.

JPY

The Japanese yen made surprising gains against the US dollar in yesterday’s trading as investors ditched the Dollar for other currencies on the view that the Fed will intervene in the currency market soon. The JPY did not see similar gains against its other rivals. The EUR/JPY and EUR/GBP both appeared to flatten a bit, as did the CHF/JPY.

With today’s economic news focused on the US and Europe, the Japanese currency will likely base its short-term value today on its primary counterpart, the USD. Expectations for the US consumer confidence report from the Conference Board may show an increase in individual sentiment. Overall pressure appears to be down on the US currency, but a positive read could give the buck a modest boost against the yen.

Crude Oil

Crude Oil prices experienced steady growth over the last 24 hours as the value of the US dollar sank. Expectations among analysts are for a move by the Fed to devalue its currency through an asset purchasing program, in essence releasing more dollars into the market. Commodity prices have gained support as a result.

The price of a barrel of oil climbed to $82.57 yesterday, and looks to be continuing higher as of this morning. It appears analysts are expecting a rise in commodity prices to coincide with the greenback’s fall, leading up to the day of the announced monetary easing program by the Fed. The boost in oil prices has helped contain some of inflationary concerns in countries like Britain, but don’t appear to be enough to combat other growth concerns in many of the more developing countries.

Written by Jovi Overo Beta 2

MARKET REPORT BY LANE CLARK, BETA 2 LTD, 14/10/2010

PIVOTAL DAY FOR THE FX MARKET:

Today could really set the tone of what we should anticipate in the FX arena for the short term.

We’ve been talking about the ranges and resistance that many key currencies have been facing over the last week in most of our blogs and reports, and it seems like the markets are prepared to take out these levels- if this morning is anything to go by.

Both AUDUSD and EURUSD were facing key FIBO levels and psychological resistance barriers- AUD at parity, EURUSD at 1.40 and even GBPUSD at 1.60. Well 2 of these 3 currencies are actually above these levels this morning.

We’ve commented that the markets will either continually test these levels and fall back, or breach them and set new ranges. One thing we didn’t think would happen would be for these currency pairs to continue to trade around these levels- and we still don’t think that.

So the question is, can EURUSD stay above 1.40 and can GBPUSD stay above 1.60? They’re certainly making a good stab at it currently, and this is why we think today (and the next few days) could be critical for the short term FX levels.

If these pairs can remain above these levels today and for the next few days, then we may well see new levels of support form at the previous resistance levels. With it, there will be a vast change in market sentiment too.

So stay tuned, and hold tight.

The QE rumours just won’t go away and even though many believe it has already been factored into the markets- try telling that to people who are still selling dollars.

Dr Doom (Nouriel Roubini) certainly didn’t help the dollar yesterday either when he suggested that there is a 35-40% chance of the US economy dipping back into a recession, and face the dreaded double dip recession scenario.

The good thing with the Doctor is that he generally doesn’t make these comments unless he backs up his comments and just like when he predicted the whole subprime credit crunch- he has good reasons for his latest statements.

He believes the fact that 2nd qtr GDP was only 1.7% in growth, and since then nearly every piece of economic data we have seen has been of a negative variety- the growth can only go one way- and that’s down! So if qtr 3 is lower and with 4 lower again- how low can growth go?

Best case he believes we may see 1% growth in the US by the time Q4 comes around, but worse case………..you know the answer to that…..

He believes that even if the US doesn’t enter a double dip recession that the growth rate will be so low it will feel like one anyway.

Bearish words, from a very bearish man!

Moving onto a more positive note- the failure of the US Dollar is meaning there are many asset classes taking advantage of it. The FTSE was up 1.5% yesterday in the biggest 1 day rise in quite some time. Miners led the charge as the weak dollar led investors to look for dollar denominated commodities, which then had a knock on effect on companies like Anglo American and Antofagasta.

The Dow was also up again on the back of the weak dollar and some good earning reports including JP Morgan. With earnings coming out higher it’s boosting hopes of a stronger economic recovery.

FTSE is now up 6.9% on the year, and an impressive 3.9% in the last 4 weeks, but in comparison to Gold and Silver this is a minor return. Gold is up 26% on the year and 9% in the last 4 weeks, whilst silver is up 42% on the year and 23% in the last 4 weeks.

Looking at currencies- USD is now at a 15 year low v’s the JPY and at it’s lowest since trading started against the AUD in 1983! In fact, AUD is up over 19% in the last 4 months v’s USD and 7% in the last 4 weeks alone.

It could get better for the Aussie though as National Australia Bank Ltd have posted a note to their clients saying that they believe that the AUD could reach a 1.05 peak v’s the greenback and remain above parity v’s the USD until at least September 2011.

So to conclude- there’s a lot of talk in the FX arena right now, and with QE pending in the US- this talk could well increase. The fact that many pairs have just breached critical levels means that these next couple of days could be vital for the short term sentiment surrounding the FX market.

Happy Trading.

Written by Lane Clark Beta 2