Beta 2 Forex News, Jovi Overo, Beta 2 Ltd, Thursday November 17 2011

Inflationary pressures are declining in the US economy, a phenomenon that could lead the Fed to begin another round of quantitative easing (QE). For the fourth consecutive month headline inflation fell with the October numbers showing a -0.1% m/m contraction. Year-over-year CPI was up 3.5%. Core inflation was in-line with consensus forecasts, climbing by 0.1% in October and up 2.1% y/y. Leading the decline in prices were raw material costs while the cost of food rose only 0.1% for the smallest gain since the beginning of the year.

The decline of inflation is in-line with the most recent Fed forecasts, a topic Bernanke has stressed multiple times. Traders should focus on how the Fed will address a drop in US prices. As Bernanke said in a speech in Cleveland in late September, the Fed has the tools to act should the risk of falling prices become apparent. This would suggest another round of bond buying (QE3) to support the US economy. While this would likely be a negative for the USD, perhaps traders should look to the crude oil markets for a sign of what is to come.

Yesterday spot crude oil prices broke above $100 for the first time since July, adding more than 1/3rd of its value since the October low. During QE2 commodities and the commodity currencies such as the AUD and CAD were some of the strongest performers versus the USD. Dollar bulls should take note.

With yesterday’s BoE Inflation Report the UK central bank took one step closer towards additional quantitative easing. The report suggests near-term growth will be affected by both UK austerity measures and headwinds in the global economy. The central bank forecasts GDP to increase by only 1% throughout 2012. They also expect a reversal of inflationary pressures. CPI currently stands at 5.1% y/y while the BoE forecasts CPI to fall below the 3% target the central bank keeps to 1.3% in 2013.

With the depressing outlook for the UK economy the BoE is likely increasing market expectations for additional easing of UK monetary policy via bond purchase. This would likely weigh on sterling in the near-term. The GBP/USD has support at the October 18th low of 1.5630 with resistance coming in at the bottom of the late October-early November consolidation at 1.5860.

In its Monetary Policy Statement the Bank of Japan reduced its economic assessment of the Japanese economy but also spent a large amount of time devoted to the global economic environment. The interest rate was kept unchanged between 0-0.1%, in-line with consensus expectations.

The USD/JPY was stable yesterday, trading in a tight 30 pip range. However, the pair continues to drift lower towards its all-time low of 75.55. But first the pair will need to close below its 55-day moving average at 76.95. Initial resistance remains at Monday’s low of 76.80 with resistance at 77.50 from the mid-October consolidation, followed by the trend line from the 2007 high which comes in at 79.25.

Spot crude oil prices have peaked above the psychological barrier of $100 and have extended gains following the release of stronger than expected industrial production numbers and inflationary data that showed prices in the US declined more than forecasted. Crude oil prices have been on a tear since the end of October, rising over 33%

The quick appreciation in spot crude oil prices may be based on two assumptions; a recovering US economy and expectations of QE3 from the Fed. Yesterday data showed US industrial production in the month of October rose 0.7% on consensus forecasts of 0.4% growth. This comes on the heels of stronger retail sales data released on Tuesday.

Declining inflationary pressures in the US may also force the Fed to act to curb any threat of deflation. Data released on Wednesday showed consumer prices fell in October with CPI contracting by -0.1% m/m on forecasts for 0.0%. This follows Tuesday’s PPI numbers that showed producer prices declined by -0.3% in October.

As Bernanke said in a speech in Cleveland in late September, the Fed has the tools to act should the risk of falling prices become apparent. This would suggest another round of bond buying (QE3) to support the US economy. While this would likely be a negative for the USD, perhaps the gains in crude oil prices suggest markets are already pricing in QE3.

Jovi Overo

Beta 2 Forex News, Jovi Overo, Beta 2 Ltd, Tuesday November 15 2011

After two weeks of following the European political scene US economic data releases return to the spotlight. Today important data will be released beginning with retail sales, PPI, and the Empire State Manufacturing Index. Markets expect that the positive economic momentum that began in Q3 will likely carry over into Q4. An improvement in market sentiment is forecasted with a sharp pickup in the manufacturing sector. Retail sales numbers are expected to show continued growth in consumption though at a slower pace than in the month of September. Inflation pressures on the producer side (PPI) are forecasted to fall while the headline consumer inflation numbers (CPI) continue to rise to 3.9% y/y in September. CPI data for October will be released on Wednesday.

The Fed expects inflationary pressures to drop and in the worst case scenario a deflationary environment would take hold of the US economy. To avoid the threat of deflation the Fed would likely increase its balance sheet through additional bond purchases (QE3). This puts extra significance on Wednesday’s CPI figures as some economists expect the Fed could announce QE3 as early as its December 13th meeting.

Yesterday the EUR came under pressure as peripheral bond yields began to climb once again. Italy had a successful debt auction of 5-year notes but the bonds were priced at their highest yield since Italy came into the EMU. Yields on the Spanish 10-year note climbed above 6% for the first time since the summer and the spread between the Spanish and German 10-year bond yields widened; an indicator of market stress. Spain is coming back into the picture as the Spaniards will go to the polls on Sunday in a general election.

Today brings euro zone flash GDP data. Consensus estimates are for growth of 0.2% and will likely highlight the struggling European economy. ECB President Mario Draghi said the euro zone economy will slip into a mild recession and previous PMI surveys suggest a slowdown in growth. The German ZEW Economic Sentiment survey should also show a more severe downturn in market sentiment, potentially weighing on the EUR.

With increased pressure on peripheral Europe the EUR has come off of its Friday highs versus both the USD and against the JPY. The EUR/JPY is approaching the key 104.70-105 level with the only support remaining on the charts coming in at the September low of 100.75.

Yesterday Japanese Q3 GDP was released in-line with consensus expectations as the Japanese economy grew by 1.5. However, the report had a negative tone as the revised Q2 data showed the economy contracted by -0.5%, more than the previous results showed which were at -0.3%.

The JPY continues to strengthen despite a Japanese economy that is stalling. Neither the traditional intervention nor the “covert intervention” as discussed in yesterday’s FOREXYARD Daily Analysis has been able to stop the JPY’s appreciation.

Wednesday will bring the BOJ meeting and no new policy measures are expected. This could continue the one way movement in the USD/JPY. Yesterday the pair dipped below its 55-day moving average. There is a lack of supports for the USD/JPY until the all-time low at 75.63. Resistance is back at the October 12th high of 77.50.

Today will bring another letter from BOE Governor Mervyn King to the Chancellor of the Exchequer George Osborne, explaining why the rate of inflation is yet again above the central bank’s target of 3%. However, there are some economists who are of the opinion that UK inflation has peaked and will begin to decline. Certainly King and a majority of the Monetary Policy Committee believes this as the BOE suggested in their previous meeting minutes the BOE could start another round quantitative easing to stave off deflationary pressures. Today’s CPI is expected to come in at 5.1%, down from a peak 5.2% in September. A surprise to the upside will likely support sterling while a reading below market expectations and traders could sell sterling on expectations of additional easing by the BOE.

Jovi Overo

Beta 2 Forex News, Jovi Overo, Beta 2 Ltd, Friday September 23 2011

The dollar rallied broadly on Thursday as mounting concerns about the global economy pushed investors to embrace safety while shunning riskier assets, with the euro tumbling to an eight-month low. By yesterday’s close, the dollar rose against the EUR, pushing the oft-traded currency pair to 1.3440. The dollar experienced similar behaviour against the GBP and closed at 1.5350.

The U.S. Federal Reserve said Wednesday it will shift its portfolio toward longer-term debt to bolster the economy, and investors’ unwound leveraged positions funded in dollars in response. The Fed’s program was intended to put more downward pressure on long-term interest rates. One important dollar-positive by-product of the Fed’s program is higher short-term rates. The Fed’s not increasing the money supply supported the dollar.

As for today, the calendar is lacking any major economic data releases for today’s trading. As such, traders will want to follow the movements of the major equity indices as the dollar has recently been trading in an inverse relationship to equities. Weakness in stocks could propel the EUR/USD to its next support line which rests at 1.3200.

The euro fell to a fresh eight month low against the dollar on Thursday a day after the Federal Reserve pointed to significant downside risks for the U.S. economy and stopped short of bold monetary easing. By yesterday’s close, the EUR fell against the USD, pushing the oft-traded currency pair to 1.3440. The EUR experienced similar behaviour against the JPY and closed at 103.00. The 16 nation currency did see some bullishness as well as it gained over 30 points against the GBP and closed at 0.8770.

Analysts questioned whether the move the Fed did make — shifting its portfolio toward longer-term debt would bolster the economy and unwound leveraged positions funded in dollars in response.

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 Yen experienced a bullish trading session yesterday, as it appreciated against most of its major currency pairs. The JPY extended gains versus the EUR during yesterday trading session and closed at 103.00. The Japanese yen also saw bullishness against the USD as it jumped around 50 pips and closed at 76.30.

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.

Crude oil prices fell more than 4% to 79.80 on Thursday as equity markets in Europe and Asia tumbled after the US Federal Reserve said the economic outlook remained grim, which overshadowed an unexpectedly steep drop in crude supplies in the world’s top oil consumer.

Oil prices had risen in earlier trade after government data showed US crude inventories last week dropped 7.3 million barrels, the biggest one-week drop since December, suggesting supplies were tighter than expected.

But the market turned bearish after the Fed said it would extend the maturity of its treasury holdings but didn’t unveil more aggressive measures to boost a US economy it said faces “significant downside risks”.

Jovi Overo

 

Beta 2 Forex News, Jovi Overo, Beta 2 Ltd, Friday September 16 2011

The US dollar (USD) was seen moving lightly bearish late Thursday as investors sought the higher yielding assets from speculation on a minor market uptick following recent releases on inflation. A stronger-than-forecast uptick in US CPI data added to risk appetite for many investors, leading some to await today’s news before entering more strongly.

The downtick seen in the greenback was significantly milder than in other currencies, especially as its safe-haven appeal remains and the economy isn’t out of troubled water just yet. This may be partially due to the USD’s disconnection from some of the market turmoil, but it could also be from some optimistic data emerging from the economy lately.

Most significant on today’s calendar will be the US publication of its TIC Long-Term Purchases data and consumer confidence data. Should today’s news foreshadow a modest growth in the US investments, an assessment that does, however, seem less likely from data released these past few weeks, there is a possibility that more investment will get pushed towards the higher yielding abilities of the European currencies as investors seek to diversify their portfolios, which could also drop the USD in short-term trading.

The euro (EUR) was seen trading with largely mixed results yesterday as traders moved into and away from riskier assets across the region. Against the US dollar (USD) the euro was seen trading bullish in late trading as shifts away from the greenback, due to optimism about global inflation levels, caused several market participants to opt for other stores of value. The pair was last seen holding near 1.3500 in late trading Thursday.

The euro was recently seen dropping sharply against the USD following last week’s announcement regarding interest rates. Stuttering mildly ahead of the decision, there was an atmosphere of EUR avoidance in the market even prior to the statement by ECB President Jean-Claude Trichet. This week, however, the news appears to be favoring the EUR and today may not be much different, especially if the US TIC investment data beats forecasts.

With nearly every analyst failing to anticipate yesterday’s move, the market appeared set for some upheavals in value, with the EUR suddenly resurging and the greenback taking losses. For now, traders appear to be looking to a strengthening of the EUR through the remainder of the week.

The Japanese yen (JPY) was seen consolidating in an ascendant flat formation these past few days, as market reports showed modest declines across the boards. Despite recent reports on Japan’s shrinking housing sector, yesterday’s publication of Japanese bank lending and machinery orders showed a broadening contraction striking several sectors of the island economy.

 

Expectations for these reports were for modest growth from last month’s reading. The actual figures shrank below forecasts, however, leading to some odd downticks in JPY values amid an environment of risk aversion. National data on housing and manufacturing has somewhat halted the JPY’s ascent as many investors hesitate to move into the once-burgeoning JPY. This data, combined with the recent interventions by the BOJ, has so far caused the yen to weakly move bearish.

Crude Oil prices found support Thursday, moving towards $90 a barrel in late trading as sentiment appeared to shift in favour of a price increase following news that supply in the United States declined by 4 million barrels this week. With supply falling and manufacturing and industry in decline, the balance between supply and demand appear to be reaching agreement as the value of oil seems to be levelling out in recent trading, despite the recent swings in currency values.

As investors seek shelter from recent market uncertainty, the value of crude oil, which was seen holding steady all week, may see additional gains before today’s close. A sudden jump in dollar values due to a sudden return to risk aversion, as was expected following the recent interest rate announcements, could drive many investors into lower investments on physical assets; driving oil prices back downward by the middle of next week.

Jovi Overo

Beta 2 Forex News, Jovi Overo, Beta 2 Ltd, Thursday September 15 2011

The US dollar (USD) was still seen trading bullish Wednesday after retail sales reports out of the United States disappointed many investors and drove trades towards safe haven assets. A sudden wave of risk aversion seems to have helped the greenback surge this week and data so far has only reinforced this momentum.

Additionally pessimistic data was released from several other economies as well. Switzerland inflation at the producer level appears to be in decline, industrial production across the euro zone and in Japan is stagnating, and the Australian housing market is contracting. The only optimistic piece of data out yesterday was the employment reports from Great Britain which saw, not necessarily job growth, but a not-as-bad-as-expected rate of unemployment growth.

With another unusually intense news day ahead, traders are anxiously awaiting the large string of reports out of the US which should clear up the picture somewhat in regards to inflation, manufacturing, and industrial production. The Current Account will also be published, though its impact is not expected to be as high as the manufacturing reports out of New York and Philadelphia. Traders should look towards another bullish day on the dollar should news continue to disappoint.

The direction of the Swiss franc (CHF) has been sharply pressured into one of distinct bearishness among investors as the Swiss National Bank (SNB) rate decision approaches. Against the US dollar (USD) the franc has actually been trending mildly flat despite the greenback’s bullish moves against its other currency rivals. But the Swissie has seen some setbacks brought about by poor regional fundamentals and a general atmosphere of risk flight, particularly following the SNB’s move to peg the CHF to the value of the EUR at 1.20.

A mood of deep pessimism is growing in regards to the investment in Europe at the moment. Market bears still seem to be gnawing on the EUR’s strength, sapping its value as its peripheral members struggle with bond auctions and other financial woes. Switzerland was formerly in a position to capitalize on the flight to safety, but saw its exporting capability deeply gouged by an unremitting currency appreciation. The SNB move to peg the currency has so far done its job by keeping the CHF’s rise in check.

Sentiment in Switzerland appears to have turned negative this week as well, with many analysts and economists expecting moves towards safety by traders following the SNB’s rate statements. An attitude of dovishness has gained traction and investors are worried that a continuation of low rates, coupled with the possibility of a rate reduction in Europe in 2012, could diminish currency values as we get deeper into the third quarter.

The Australian dollar (AUD) is expected to be weighed down this week as market reports continue to show contraction across the boards. Piling atop recent reports on Australia’s shrinking housing sector, recent publications of Australian consumer and business confidence is starting to show a broadening contraction striking several sectors of Australia’s economy, as well as its psyche.

Expectations for these recent reports have been for modest growth, and in some instance, at best, zero movement. The week’s reporting has so far led many investors to pull away from the Australian dollar (AUD) in recent trading. National data on housing and employment has also driven many investors away from the once-burgeoning AUD. This data, combined with dismal housing starts figures and building approvals reports, has so far dragged the Aussie lower and looks to continue doing so this week.

Crude Oil prices gained mild support Wednesday as sentiment appeared to favour an uptick brought about by a sharp reduction in US stockpiles. The weekly report revealed yesterday that the US has shed roughly 6.7 million barrels from its reserves. This news has so far countered the notion of a sinking price of oil brought about by higher USD values and pushed oil into a bullish posture from supply shortfall speculations.

An expected dip in oil values due to this week’s risk sensitive environment, which saw the greenback climbing sharply, has so far not affected the price of physical assets in any clearly visible way. The stockpile report out Wednesday surprised many investors who had priced in a far milder decline in reserves. With this sentiment grabbing hold among many traders, oil prices could see resurgence above $90 a barrel in the near future.

Jovi Overo

Beta 2 Forex News, Jovi Overo, Beta 2 Ltd, Monday September 12 2011

The US dollar (USD) was seen trading heavily bullish Monday morning as traders saw a sharp rise in risk aversion following last week’s economic reports and interest rate statements. The EUR/USD dropped from week’s high of 1.4281 to a low of 1.3581, a mark not seen since early February. The USD/JPY saw somewhat milder gains, with the greenback inching above 77.80 before levelling off.

Interest rate statements from last week portrayed a global economy in crisis. Each central bank seemed to be taking a wait-and-see approach with monetary policies, holding rates steady and declaring a pessimistic outlook. The impact appeared to get magnified with each bank statement, forcing a sharp return in safe-haven appeal which helped the greenback make significant gains, especially considering the removal of the Swiss franc (CHF) from buy status due to a pegging strategy by the Swiss National Bank (SNB).

As for this week, the US economic releases will focus mostly on retail sales, consumer confidence, and inflation. Today’s publications appear to be JPY-heavy, however, with no significant reports coming out of the United States. Liquidity will likely be mild in today’s afternoon trading as low market activity is being forecast.

The euro (EUR) was seen trading with largely bearish results this morning following last week’s sobering assessments by central banks worldwide. Against the US dollar (USD) the euro was trading near a 7-month low of 1.3581, with few signs of halting this bearish movement. Against the Great British pound (GBP), the EUR witnessed a similar plummet in strength, hitting a March 2011 low of 0.8575.

Traders appear to be ditching the 17-nation common currency in exchange for safe-haven assets amid expectations of a double-dip recession. A pessimistic sentiment towards investing in the EUR at the moment has many investors on edge. An embattled euro zone, fending off market bears amid turmoil in its peripheral nations, looks to be standing on uncertain ground as traditional safe-havens, like the Swiss franc (CHF) and Japanese yen (JPY), are removed from such status by central bank manoeuvres, making the USD the only stable store of value in the foreign exchange market.

Economic sentiment across the euro zone remains negative, with many analysts and economists expecting moves towards safety by traders this week following last Friday’s sudden surge of risk aversion. With a light news day ahead, many traders are awaiting more data releases later in the week before coming back to the EUR. If today’s data also turns negative, the EUR is likely to take another hit.

The Japanese yen (JPY) was seen trading moderately higher versus most currencies this morning as its value as an international safe haven begins to get challenged by the prevailing economic conditions. Being linked to international risk sentiment, the yen has experienced an expected uptick during a period when shifts away higher yielding assets became prominent. With several bank interventions from Japan’s central bank, and a mood of seeking more stable stores of value among investors, the yen appears to be on shaky ground.

The latest moves of the JPY are causing some concerns, however, as many speculators were anticipating a downturn following the Bank of Japan’s (BOJ) latest rate statement. A strengthening yen has benefits for the buying power of the island economy, though its dependence on exports makes a strong yen unfavourable for longer-term growth in Japan’s current financial model. The persistence of the yen’s rising strength is causing some furrowed brows in Japan’s economic circles, and this may be a cause of its mixed trading behaviour.

The price of Gold found weak support over the weekend amid the surging strength of the US dollar, the currency in which such assets are valued. Gold has been trading with stronger price action since early August, but traders have been awaiting a price correction from the rampant increase in risk aversion due to rising tensions from the euro zone’s periphery and a sudden lift off in dollar values.

As investors seek safety, the value of Gold, which has been seen trading with mixed results, is expected to rise following its current consolidation pattern near $1855 per troy ounce, but a selloff in commodity futures pulled down on precious metals last week. A sudden rise in dollar values due to this week’s uncertain environment is expected to assist the sentiment favouring Gold. Should risk sentiment continue to bounce in sporadic directions this week, the price for this precious metal may continue to experience similar

Jovi Overo

Beta 2 Ltd, Jovi Overo, Beta 2 Ltd, Thursday September 8 2011

The US dollar (USD) was seen trading mildly bearish early Tuesday as investors balanced risk sentiment ahead of this week’s series of interest rate announcements. A sudden wave of risk appetite seemed to have dropped the greenback following a move by the Swiss National Bank (SNB) to peg the CHF to the value of the EUR at 1.20 on Tuesday. Wednesday, however, saw the greenback paring some of those earlier losses and consolidating near 1.4000 against the EUR in late trading.

Optimistic data from the Canadian manufacturing sector yesterday also signalled an uptick in output from the previous month in the North American region. The news has done little to the forex market; however, though it could ripple through longer-term analyses on capital markets should they come into play later on. Most traders seemed to be awaiting further rate decisions, however, prior to making any sizeable bets.

With today’s releases revolving around European and British interest rate decisions, most traders appear to be on edge. The consolidation trends witnessed as forming in the major crosses are part and parcel of this anxiety. Many are anticipating dovish sentiment to emerge from the euro zone following mixed fundamental signals and recent talks about Italy’s austerity budget and Greece’s sovereign debt crisis. The US will also release its trade balance, though that news is likely to be overshadowed by Europe’s news.

The direction of the British pound (GBP) is lacking uniformity among speculators as the Bank of England’s (BOE) rate decision approaches. Against the US dollar (USD) the pound has actually been trending upwards despite the greenback’s bullish moves against its other currency rivals. But the pound has seen some setbacks brought about by poor regional fundamentals and a general atmosphere of risk flight.

Traders are looking for a way to balance a renewal of risk aversion with continued shakiness in global markets. A mildly pessimistic sentiment towards investing in the US dollar at the moment has many investors on edge. An embattled euro zone, fending off market bears amid turmoil in its peripheral nations, Italy flaring up recently, also looks to be losing ground in financial markets. With today’s rate statements on tap, wide swings in value and intense volatility should be anticipated.

Sentiment in Britain appears to have turned negative this week, with many analysts and economists expecting moves towards safety by traders following the BOE’s rate statements. An attitude of dovishness has gained traction and investors are worried that a continuation of low rates, coupled with the possibility of a rate reduction in Europe in 2012, could diminish currency values as we get deeper into the third quarter.

The latest moves of the Japanese yen (JPY) are causing some concerns among investors as many speculators are anticipating another round of intervention by the Bank of Japan (BOJ). With interest rate decisions out yesterday morning, traders appeared to show zero surprise in the announcement that rates would be held near zero. A strengthening yen has benefits for the buying power of the island economy, though its dependence on exports makes a strong yen unfavourable for longer-term growth in Japan’s current financial model. As the island currency remains bullish, the pressure begins to mount for the expected bank move to lower its currency strength.

The yen was indeed seen trading mildly lower versus most other currencies this morning as its value as an international safe haven was being challenged by an air of impending intervention by the BOJ. Being linked to international risk sentiment, the yen has experienced an expected uptick during a period when shifts away higher yielding assets became prominent. The JPY has been experiencing several long strides lately from the various shifts into riskier assets.

Crude Oil prices held steady Wednesday 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.

An expected dip in dollar values due to this week’s risk sensitive environment has helped many investors ram up their long-taking positions on physical assets, but with the USD’s losses not materializing in large enough numbers, sentiment appears to have the price of crude oil holding steady. Should Crude Oil sentiment continue to flatten this week, oil prices may reach a decision point which forces a wide swing by mid-week.

Jovi Overo

 

 

Beta Forex News, Jovi Overo Beta 2 Ltd, Monday September 5 2011

The disappointing data from the US economy continues to roll in. Friday’s NFP report showed the US failed to add new jobs in the month of August. Average hourly earnings fell to -0.1% from a gain of 0.5% which takes a bit of the bite out of last week’s strong personal spending data. The number of aggregate hours worked also declined.

In contrast to Europe the US economy is stalling but not contacting. This will likely bring policy responses from both the fiscal side as well as the monetary policy side. With pressure from Republicans, President Obama has moved his economic speech to September 7th where the ideas being kicked around range from extending US unemployment benefits, an extension of the payroll tax break, and a potential jobs program that may fall short of such previous ambitious programs of the Works Progress Administration from the mid-1930s.

A monetary policy response may come from the2-day Fed meeting in September. The potential exists for the Fed to increase the length of maturities of the debt it holds on its balance sheet or perhaps a pledge to target inflation at a particular rate, similar to the Fed’s commitment to hold interest rates until mid-2013. Additional bond buying seems unlikely at this time given the uptick in US inflationary pressures.

After a stellar Q1 where the German economy grew by 1.5%, Q2 stands in stark contrast with growth sputtering to 0.1%. Expectations are not rising with euro zone manufacturing PMIs falling below the 50 boom/bust level in August. The French economy has also stalled with zero growth in Q2. Additional pressures are being felt in both Italy and Spain with PMIs falling to new lows.

Europe has been engulfed in a debt crisis and in contrast to the US will not allow for a fiscal policy response. The opposite approach has been taken to implement additional austerity measures in Italy and Spain which may intensify the stagnant growth just as the global economy begins to slow. The options for the ECB remain limited in its upcoming policy meeting. Last week Trichet hinted at a slowing of inflationary pressures and a reduced inflation forecast will likely be formally made on Thursday. It is unlikely the ECB will back away from its two interest rate increases earlier this year as to do this would be the admission of a failure to correctly implement monetary policy. Note that in 2008 the ECB continued to raise interest rates as the world crept towards the financial crisis, only to backtrack in light of the Lehman Brothers collapse.

Additional pressures are being felt in Greece. The Troika has packed up and left Athens early after failing to complete their review of Greece’s finances. The Greek government has admitted that GDP will likely contract further than expected and therefore the country will likely fail to reach its previously outlined budget deficit reductions. Greek 2-year yields have been trading at their highest levels prior to the July 21st agreement.

As such the EUR/USD has fallen from 1.45 to below 1.42 this morning in Asian trading. The pair has broken its rising trend line from the July low and is moving towards the 1.4100 level where the August 11th low coincides with the 61% Fib retracement from the July to August move. The EUR/USD could remain range bound unless the pair moves below the 1.4050 level. The EUR/CHF also looks vulnerable after closing the August 15th gap. The EUR/CHF dropped a dramatic 1000 pips in only a week.

The Reserve Bank of Australia will be meeting tomorrow and the forex trading blogs have been widely speculating of an impending RBA rate cut, similar to that of Turkey and Brazil. However, growth in Australia is not slowing as it is in other parts of the global economy. Retail sales continue to post strong returns and commodity prices remain well supported. The speculation of an RBA rate cut may be premature and could leave some upside potential for the Aussie dollar.

This morning the AUD/USD gapped lower and this level of 1.0625 followed by 1.0800 should serve as the first two resistance levels. To the downside, movement may be capped at 1.0310. The AUD/NZD is showing a bullish head and shoulders reversal pattern with the neckline providing resistance at 1.2750 with a measured move of roughly 400 pips.

Spot crude oil prices continue to struggle to maintain their gains. Last Friday’s disappointing NFP report did little to bolster expectations for increased global economic growth or demand for the commodity. Stagnant US unemployment continues to weigh on the US economic recovery but hopes of additional policy easing by the Fed may allow a test of the $90 resistance level. Support may be found at $84.50, $83.00, and $79.40.

Jovi Overo

Beta 2 Forex News, Jovi Overo, Beta 2 Ltd, Friday September 2 2011

The EUR/USD was seen moving towards 1.4270 late yesterday as investors attempt to speculate on market direction ahead of today’s highly anticipated Non-Farm Payroll release. A weaker-than-forecast uptick in US private sector employment Wednesday added to risk sensitivity for many investors, leading some to await today’s news before entering more strongly.

With private sector employment rising in the US at a slower pace over the past few months, the value of the USD appears to be consolidating as riskier currencies like the EUR adjust ahead of this month’s interest rate decisions. Bank interventions in Japan are also making the appeal of safe-havens diminish, helping to prevent a strong rise in the dollar in this week’s trading.

Most significant on today’s calendar will be the US publication of its Non-Farm Payrolls (NFP) data. Should today’s news foreshadow a modest growth in the largest economy’s employment sector, an assessment that seems less likely from data released just days ago, there is a possibility that more investment will get pushed towards the higher yielding abilities of the European currencies as investors seek to diversify their portfolios.

The euro (EUR) was seen trading with largely mixed results yesterday as traders moved into and away from riskier assets across the region. Against the US dollar (USD) the euro was seen trading sideways in late trading as shifts away from the greenback, due to uncertainty about the US employment sector, caused several market participants to opt for other stores of value. The pair was last seen consolidating near 1.4270 in late trading Thursday.

The mixed reports out of Europe yesterday have appeared to confound traders who were anticipating a string of bearish results. Though debt concerns still loom in the region, optimistic data has had the impact of muting the EUR’s losses against its primary basket of currencies. With a heavy news day expected today, traders should see some added volatility in today’s EUR market.

On tap today, traders will witness the release of a highly significant report from the United States on its non-farm employment sector. Should the data come in bearish, we could see heftier shifts to safer assets in the days and weeks ahead. This would likely push the value of the EUR lower over the long-haul as traders flee risk.

The Australian dollar (AUD) was seen making leaps and bounds yesterday, as market reports showed modest growth across the boards. Despite recent reports on Australia’s shrinking housing sector, yesterday’s publication of Australian retail sales showed a broadening expansion striking several sectors of Australia’s economy.

Expectations for the retail sales report was for a modest growth of 0.3% from last month’s contraction of 0.1%. The actual figure of 0.5% growth has led many investors to push back into the Australian dollar (AUD) in recent trading. National data on housing and employment has somewhat halted this ascent as many investors hesitate to move into the once-burgeoning AUD. This data, combined with dismal HPI and building approvals reports, has so far caused the Aussie to still see gains, albeit weakly.

Crude Oil prices found solid support Thursday, moving towards $89 a barrel in late trading as sentiment appeared to favour mild stability in global manufacturing demand. Data releases out of the UK and Europe these past two weeks were driving many investors back into safer assets as most reports suggested contraction among the major industrial nations of the West would gain momentum. If proven accurate, the new outlook would have oil prices falling back into a bearish channel as demand decreases further, but so far traders are seeing market fundamentals push oil prices higher.

As investors seek shelter, the value of crude oil, which was seen holding steady all week, may see additional gains before today’s close. A sudden jump in dollar values due to a sudden return to risk aversion, as expected, could drive many investors into lower investments on physical assets; driving oil prices downward by the middle of next week.

Jovi Overo

 

Beta 2 Forex News, Jovi Overo, Beta 2 Ltd, Wednesday August 31 2011

The US dollar (USD) was seen trading mildly bearish on Tuesday as traders viewed comments by the Fed as a sign of potentially impending hawkish moves on the policy front. The sudden jolt to risk appetite generated by such movement pushed down on the greenback, but seems to have lifted following fears of another bank interventions in Japan and a string of reports out of the euro zone today which could reverse much of the markets recently acquired short-term stability.

Data from the American housing market Monday also signalled a downtick in housing demand from the previous month, contradicting yesterday’s news that housing prices were decreasing at a slower pace. The news has done little to the forex market, however, though it could ripple through longer-term analyses on US capital markets.

As for today, the US economic releases will focus mostly on employment and manufacturing. Today’s leading publication of ADP’s Non-Farm Employment Change will likely lead the day’s volatility. Liquidity will likely be higher in today’s mid-day trading as several European events are being published in rapid succession alongside the release of a handful of American events. Look for wide swings in currency values today.

The euro (EUR) has been seen trading with largely bullish results so far this week as traders assess risk appetite across the region. Against the US dollar (USD) the euro was seen trading mildly bullish in late trading as shifts away from the greenback, due to uncertainty about the US employment and housing sectors, caused a stir in the foreign exchange market.

The economic calendar this week has been mostly bearish for the region, however, with housing and manufacturing reports disappointing traders. The manufacturing data across the euro zone and Britain has also shown little change. Italian retail sales contracted this past month, as revealed in yesterday’s data releases, and British news turned almost exclusively bearish.

On tap today, traders will witness the release of regional retail sales reports and employment data, though few consider them to be highly impactful given the series of significant releases out of the US economy a bit later in the day. Focus will undoubtedly be on the US employment and manufacturing sector today as both will be publishing highly relevant reports later in the afternoon. Should news produce bearish results there is a chance that traders will move away from the EUR and back into safe-haven assets.

The Australian dollar (AUD) was trading mostly weaker versus its currency counterparts yesterday after data releases have begun to shift traders into higher yields with solid capital markets. The Aussie has been losing momentum these past few weeks as risk sentiment flutters in the global market. Overriding these concerns, moreover, is a sudden dip in the Australian housing market which saw building permits and new home sales decline.

This movement has gouged the AUD against all of its currency rivals, especially against safe-havens like the US dollar (USD) and Japanese yen (JPY). Being tied to commodity prices could help lift the AUD in the near future, however, as oil prices hold above $86 a barrel, but general risk aversion is likely to push the currency lower as traders flee risk. On tap today, forex traders will see the release of Australia’s private sector credit figure measuring consumer demand of private loans. If negative news arrives, traders may see a heavier move towards risk aversion in early trading today.

Crude Oil prices held steady Tuesday as sentiment appeared to favour a downturn in global stocks ahead of a speculated double-dip recession. 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 manufacturing demand.

An expected jump in dollar values due to this week’s risk averse environment has helped many investors ram up their short-taking positions on physical assets, but with the USD’s gains not materializing, sentiment appears to have the price of crude oil holding steady. Should Crude Oil sentiment continue to flatten this week, oil prices may reach a decision point which forces a wide swing by mid-week.

Jovi Overo