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, 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, Friday July 22 2011

The US dollar was seen trading higher yesterday as traders began to revaluate the recent dip in USD values from notions of growing risk appetite brought about by optimistic housing and earnings data. The EUR/USD was seen meeting resistance near 1.4250 yesterday and plummeted towards 1.4200 in late trading. The greenback saw similar movements against most other currency pairs as well.

The series of data released yesterday painted a relatively weak picture for the US economy’s growth; but growth is shown to be occurring nevertheless. Weekly unemployment claims saw a worse than forecast rise, hitting 418,000 for the past week. A manufacturing index out of Philadelphia, Pennsylvania, showed a solid uptick, beating expectations. The frontrunner in yesterday’s data, however, was a long string of reports out of Europe that showed the region experiencing stagnation which has gouged investor appetite for risk.

With a moderately heavy news day expected Friday, dollar traders should be anticipating some exciting currency movements brought about by heightened liquidity. The economic calendar, though, will be focused on Canada with several reports on CPI and retail sales. The greenback is in focus as the week concludes considering the intense rollercoaster it experienced these past few trading days. If news continues bearish, the dollar may see some added gains before the week comes to an end.

The euro was seen trading lower yesterday in light of data releases suggesting stagnation across the euro zone. Following yesterday’s flash manufacturing and service reports in the euro zone, traders appeared more concentrated on news out of the US to determine values, and we’ve seen a retracement of the USD versus its primary currency counterparts as a result of this sentiment.

While growth variances between the US and Europe came into view this past week, the higher yielding assets like the GBP and EUR appeared positioned to lose as traders turned away from risk, despite the uptick in risk taking seen by mid-week. The growth in risk aversion may have many investors choosing to store their value in lower yielding currencies, like the USD and JPY as the week comes to a close.

As for Friday, the euro looks to be anticipating an evaluation of its recent downturn against the other major currencies with mild bias to the downside. The euro zone will be publishing a few economic events on today’s calendar. Traders should try and follow the significant publication emanating from the Canadian and German economies today, however, as a heavy string of reports are expected throughout the day, the German Ifo Business Climate report at 9:00 GMT primarily among them.

The Japanese yen (JPY) was seen trading higher versus most other currencies yesterday after news began to shift many traders back into safe-haven assets. The yen has been a top performer these past several months considering many traders bank on the Japanese carry trade during times of intense risk appetite and move towards the JPY in times of risk aversion, making it an appealing currency in these recent times of ominous reports.

 

The JPY was in a position to make solid gains yesterday after a series of flash manufacturing and service data reports revealed stagnation in Europe. Moves toward riskier currencies halted as pessimism took hold and drove much of yesterday’s trading liquidity towards traditional stores of value. As such, traders appear to be anticipating a mild uptick in the JPY prior to this week’s close.

Crude Oil prices rose yesterday, reaching as high as $99.60 in late trading. Growth differentials between the Atlantic states have risen into view this week while manufacturing output and service data revealed mild weakness in Europe. This has so far led several large investors and analysts to consider a shift away from the EUR and other risky assets in exchange for the safety of the USD and JPY.

As investors sought safety, the value of crude oil, which has been seen holding steady most of the week, rebounded to a weekly high of $99.60 a barrel. A sudden jump in dollar values due to this week’s risk sensitive environment has helped many investors move hesitantly away from assets like gold and silver, but crude oil appears untouched by this sentiment. Should Crude Oil prices hold steady this week, we may continue to see some gains going into the week’s final hours.

Jovi Overo

Beta 2 Forex News, Jovi Overo, Beta 2 Ltd, Thursday 21 July 2011

The US dollar (USD) has experienced a rather sudden about face this week. The EUR/USD was seen moving back towards 1.4270 yesterday while the GBP/USD inched just above 1.61. Data from the American economy was largely bullish, which may have helped spark some risk-taking among investors, pulling additional capital away from the greenback.

The potential for the passage of a deficit reduction plan proposed by a bipartisan group called the “Gang of Six” has also helped boost this week’s market optimism. With increased market volatility on today’s forecast this momentum may find additional weight as a long series of reports get published out of Europe and the United States throughout the trading day. Most importantly, the US economy will be publishing a string of reports concerning unemployment, manufacturing, housing, and natural gas storage.

Federal Reserve Board Chairman Ben Bernanke is also due to testify on the implementation of the Dodd-Frank Act today, which was passed to further regulate financial markets. Should today’s news foreshadow a continuation to this week’s bullish outlook, there is a possibility that more investment will get pushed towards the higher yielding assets like the EUR, leading to a weaker USD over the coming days.

The euro (EUR) has been trading bullish these past several trading days on recent shifts in investor risk appetite. The EUR was able to get some relief yesterday after a surge in optimism led investors to begin taking on more risk and expanding their outlook for additional growth this year. The catalyst was strong earnings statements by several large firms, as well as stable growth in the American and Canadian housing markets.

The news has been positive for risk taking, as was much of the data released by the American economy ahead of Bernanke’s testimony later today. The EUR moved above 1.4260 against the USD before the market came to a close yesterday, but it continues to struggle against its regional currency counterparts, particularly the British pound sterling (GBP). With flash manufacturing and service data on tap today, forex traders should receive ample news to fill in part of the growth outlook which is missing for the month of July.

Today’s market should be highly volatile and traders will want to be on guard as they traverse today’s investment landscape. The most impactful news of the day will come from both the United States and Europe which will be publishing a series of reports ranging from manufacturing, services, unemployment claims, housing and natural gas inventories. Bernanke’s testimony will also likely have a heavy impact on forex values today as he is set to speak about legislation regulating the financial markets in the United States.

The Japanese yen (JPY) was seen trading with largely neutral results versus most other currencies yesterday following this morning’s less-than-surprising data reports by the Bank of Japan (BOJ). As was reported this week, regional growth in the Pacific has been only mildly better than forecasts, and in several instances worse. The Australian dollar (AUD) was seen in decline for the past two weeks after several data sets revealed an economic slump was underway; though it has regained some of those losses in the past two days.

This week’s news has so far strengthened the higher yielding Pacific currencies like the Kiwi and Aussie, fuelled by improvements to fundamental data from the world’s leading economies and a general sentiment of risk appetite among investors. With this morning’s release of Japan’s trade balance data, many were expecting the island nation to begin addressing its growth outlook. As the JPY begins to take losses from external factors affecting its value, primarily a return of risk appetite, traders appear to be awaiting further news later today to more accurately gauge the direction that lies ahead for global risk sentiment. The JPY could be set to make gains if today’s reports come out worse than forecast.

Crude Oil prices found support near $97 a barrel Wednesday as sentiment appeared to favour a mild growth in global industry alongside a potential uptick in demand for the black gold. Data releases out of the US and China this week have been driving many investors back into riskier assets as most reports suggested a surprise flattening out in growth among global industrial output and consumer spending.

As investors sought higher yields, the value of crude oil, which has been seen swinging widely all week, in fact rose to a weekly high of $98.35 a barrel. A sudden slump in dollar values due to this week’s earnings reports and housing data has helped lift oil values. The value of oil, therefore, found modest support and began to make strides. If this sentiment can persist, the value of Light, sweet crude may continue to gain through the rest of the week, targeting $100 a barrel.

Jovi Overo

 

 

Beta 2 Forex News, Jovi Overo, Beta 2 Ltd, Wednesday July 20 2011

The US dollar was seen trading with mildly bearish results at the start of Wednesday’s trading sessions as traders began to view the improved housing sector a sign of positive growth in capital markets and stabilization, albeit weakly, on Wall Street. The dollar has been primarily gaining from the recent shift into safer assets, but yesterday’s rising stock values helped push some traders into riskier positions.

Though news has been both positive and negative, traders have been predisposed to short the higher yielding assets in general as the US and European economies falter. Moreover, as the August 2 deadline for lifting the US debt limit rapidly approaches, we are beginning to see some hedging behaviour with the Swiss franc (CHF) and Japanese yen (JPY) acting as alternate stores of value should the US default on its loans.

As for today, the US economy will be publishing another instalment of the optimistic housing data released yesterday. On today’s docket is a report on existing home sales, with expectations for additional growth in the US housing sector. With the latest direction of the housing market looking positive, this report could either reverse yesterday’s appetite for risk or feed it. Trader should expect heavier than normal volatility as this report approaches.

The euro (EUR) was seen trading somewhat higher yesterday following news of optimistic growth in the US housing sector. Against the US dollar (USD) the euro was trading above 1.42 briefly before settling near 1.4150 at day’s close. The EUR/CHF was also finally experiencing some bullishness with a strong upward move coming by mid-Tuesday, followed by a flattening towards the day’s conclusion. The pair opened this week at a record low of 1.1414 after closing last Friday at 1.1539, but so far it has seen a retracement back towards 1.1650.

It appears the EUR also moved mildly higher versus the Japanese yen as safe-haven assets across the board experienced a small downtick due to increased market optimism from the bump in American housing data. With only minor news expected out of the euro zone today, much of this sentiment is not likely to be reversed today unless US Existing Home Sales disappoints.

Sentiment across the euro zone remains mostly negative, with many analysts and economists expecting further moves towards safety by traders this week unless the housing market gives cause for seeking out physical assets. Any more bearishly-leaning news out of either economy will likely pull down on the EUR even further as investors again tuck tail and flee risk.

The Australian dollar (AUD) was seen trading moderately higher versus most other currencies last Tuesday after news began to shift many traders back into riskier assets. The Aussie has been experiencing several wide swings lately from the various shifts into and away from riskier assets. A vote on China’s economic confidence after its latest rate hike also impacted the AUD heavily, causing movements away from the soaring Aussie. However, China’s latest increase in demand for oil has helped the commodity-linked currencies, like the AUD, Norwegian krone (NOK) and Russian ruble (RUS), experience a strong uptick.

As traders witnessed a turn towards safety after last Friday’s economic reports from the United States. The resultant move into safe-haven assets has helped to push down on the AUD throughout the early hours of this week as traders shied away from its high interest rates in order to store value in lower yielding assets like the Japanese yen (JPY) and US dollar (USD). A sudden return of risk appetite due to positive earnings reports on global stock markets from companies like IBM, and from the growing stability of the US housing market, has so far helped to prop up the Aussie in mid-week trades. This sentiment could continue if the US publishes further optimistic data regarding existing home sales later this afternoon.

The price of Crude Oil found support this week as large oil consumer China increased its demand for the black gold. A barrel of Light, sweet crude traded above $98 for a short while yesterday afternoon and evening as investors viewed China’s sudden binge as a sign that further growth in the global market place would return shortly. Stock market gains have also pushed the value of the US dollar (USD), which oil is valued in, slightly lower, helping to bolster the upward movement of crude.

As investors seek out risk, the value of crude oil, which has been seen trading with mixed results, jumped to a weekly high of $98.94 per barrel. A sudden stagnation in dollar values due to this week’s somewhat riskier trading environment has so far assisted this price movement. Should risk sentiment hold steady this week, the prices for commodities could continue to gain.

Jovi Overo

 

 

Beta 2 Forex News, Jovi Overo, Beta 2 Ltd, Monday July 11 2011

The Canadian dollar was seen in decline last week as traders began to view the lacklustre performance of the US economy these past several weeks as a sign that regional economic growth will be limited. The USD/CAD moved from its two-month low of 0.9563 to 0.9693 on Wednesday before consolidating near its current price level of 0.9625.

Though news from Canada has been primarily bullish, forex traders investing in the CAD, charmingly known as the Loonie, have been predisposed to short the region in general as the US economy falters. Assisting this shift was a dismal NFP jobs report out of the American economy which revealed sluggishness in US employment growth that may affect economic and financial outlook for the US and its neighbours.

As for today, the US economy will be absent from the economic calendar, but Canada is set to release two significant reports which may impact the Loonie greatly. The first is a housing report expected at 13:15 GMT which is forecast to show continued growth along the lines seen last week.

At 15:00 GMT, the Bank of Canada (BOC) will release its Business Outlook Survey that should summarize the points made above more clearly. The CAD may be consolidating, but if the BOC report can capitalize on the independent growth of Canada beyond American economic prosperity, the currency could see some gains today.

The euro (EUR) was seen trading lower last Friday following news of pessimistic growth in the US job sector. Against the US dollar (USD) the euro was trading somewhat bearish in late trading as shifts into safe-haven investments pulled money out of the euro and into stores of value. The EUR/GBP, however, was more straightforward, with a severe downturn coming Thursday, followed by even more bearishness on Friday. The pair ended the week moving from 0.9050 to 0.8860.

It appears the EUR also moved mildly lower versus the Japanese yen as safe-haven assets across the board experienced a rise due to increased market pessimism. Today’s industrial production figure out of France may see the region’s second largest economy returning to growth in the industrial sphere, but should the data disappoint market forecasts, a quick swing into additional safety will likely ensue.

Sentiment across the euro zone has turned negative, with many analysts and economists expecting a move towards safety by traders this week. Last Friday’s NFP jobs report out of the American economy forced a re-evaluation by several large investors who had become hopeful after ADP published positive growth in the private sector. Any more bearishly-leaning news out of either economy will likely pull down on the EUR even further as investors flee risk.

The Japanese yen (JPY) was seen trading moderately higher versus most other currencies last Friday after news began to shift many traders back into risk averse assets. The yen has been a top performer these past several months considering many traders turn to the island powerhouse in times of risk aversion; a sentiment of high frequency these past four years.

Given this understanding, traders witnessed a turn towards safety after last Friday’s NFP report from the United States. The resultant move into safe-haven assets has helped to lift the JPY as traders turn to its record low interest rates as a way to store value in times of uncertainty. Japan’s economy is publishing several reports this morning, all of which will likely impact the value of the yen very little. Traders should keep an eye on data out of Europe and the United States for signals on the direction of risk appetite this week.

The price of precious metals like Gold and Silver found support this past week despite the rising strength of the US dollar, the currency in which such assets are valued. Precious metals bear their name as a result of their traditional store of value in times of uncertainty. Gold has been trading with rather mild price action since this past April, but traders have been awaiting price resurgence due to the rampant increase in risk aversion due to rising tensions from Greece and dismal jobs reports out of the US.

As investors seek safety, the value of gold and silver, which have been seen trading with mixed results, jump to a 2-week high of $1542.60 and $36.60 per troy ounce, respectively. A sudden jump in dollar values due to this week’s risk averse environment has so far done little to suppress this price movement as all three assets serve as traditional stores of value. Should risk sentiment hold steady this week, the prices for these precious metals may continue to find support as the week moves ahead.

Jovi Overo

(more at Beta 2)

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 News, Jovi Overo, Beta 2 Ltd, Thursday may 19 2011

The US dollar was trading with mixed results yesterday after traders began to hedge on their euro positions given the recent economic news vacuum in the euro zone. The Strauss-Kahn affair has overshadowed much of the positive comments coming out of the ECOFIN meetings and for that reason traders have tried to balance between European debt woes and interest rate differentials. This dynamic has generated a range-trading pattern for several major currencies, including the dollar.

Economic figures out of the United States have also been partially behind this flatter movement. Monday’s TIC long-term purchases figure was well below expectations, as were Tuesday’s housing figures. But yesterday’s flattening out in US oil stockpiles may have given a short bump to the greenback as traders assumed higher consumption by industry ahead of today’s manufacturing figure out of Philadelphia. The Fed’s recent policy minutes also signalled healthier growth and relatively hawkish statements about interest rates.

As for today, the euro zone remains absent during the week-long ECOFIN meeting, but the US is scheduled for a heavy news day. To kick things off, the US Department of Labour will publish its weekly unemployment claims figure at 13:30 GMT which may show fewer applications for unemployment benefits than were seen last week.

Shortly thereafter will be the publication of important housing figures followed by the Philly Fed Manufacturing Index and Mortgage Banker Association’s report on mortgage delinquencies. All in all, the USD should see some heavy volatility today, but if traders continue to hedge while awaiting more news out of Europe, the dollar may continue to see mixed results.

The euro rose has been trading flat this week as economic news, mixed with some political drama, has had investors balancing between debt concerns and interest rate differentials. Soft data out of the American economy this week has held many traders leery of seeking safety in the greenback, whereas the current absence of news out of Europe has many others sceptical of healthy movements towards handling the current debt crisis. The result has been this week’s odd range-trading pattern for EUR pairs.

As for today, the euro zone will be absent from the calendar again as the ECOFIN meetings continue. Hawkish statements could hint towards a tightening monetary policy in the near future, but traders should be wary of a return to risk aversion should the meeting produce less-than-stellar commentary. Major housing and manufacturing news out of the United States today may help provide some needed commentary on this week’s soft US data, but any continuation of such weakness may further keep the greenback in a holding pattern.

The Japanese yen (JPY) began trading in a bearish direction against most of its currency rivals yesterday after the Bank of Japan (BOJ) released data which showed the Japanese economy contracting by 0.9% so far this quarter. After a week of ups and downs, the Japanese yen now appears to be in a weaker position and is taking a beating by traders in today’s early hours. The dominant stance of risk aversion overarching this week and last had many traders moving towards the yen until yesterday. The dominant stance now appears to be a flight to other safe-havens like the Swiss franc and, in many instances, the Scandinavian kroner.

As of this morning, the USD/JPY has moved up over 50 pips from 80.00 to 80.53. Japan’s tertiary activity was published yesterday morning and also revealed a severe downturn of approximately 6.0%. This morning’s GDP figure was another bearish marker on the currency and so far traders are moving away from their JPY investments as a result. As with the rest of this week, market news released out of the US today will likely be the driving force behind JPY values, though, and traders will definitely want to consider what effect today’s GDP data will have on the island economy.

Oil prices jumped above $100 a barrel this morning following a report out of the United States which revealed zero growth in their weekly stockpile data. These US oil stockpile reports had shown growth of over 3 million barrels a week for the past two consecutive weeks. The sudden halt of this inventory growth had a sharp effect on the value of Crude Oil as its price jumped above $100 a barrel shortly after the report was published.

Whether oil traders decide to respond with a bearish push on oil prices is yet to be determined, especially considering the strangeness of the inverse relationship to USD values this week. The greenback’s decline yesterday may have a delayed effect today and oil traders may see the price bouncing even higher if that is the case. The Strauss-Kahn affair in the US is also creating some instability in trading as it masks the commentary emerging from the current ECOFIN meetings. Commodity prices may therefore receive a bump in the rest of this week’s trading if this rumour mill doesn’t die out.

Jovi Overo

Market commentary by Jovi Overo, Beta 2 Ltd, Monday April 4 2011

The U.S payrolls printed strong numbers on Friday coming in at 216k with the unemployment rate extending its downtrend. The report was further supported as the February numbers were revised higher to 1964k from 192k. The unemployment rate dropped to 8.8% from 8.9%. Also showing improvement was the ISM Manufacturing PMI which came in above expectations at 61.2 with economists forecasting only 61.1.

Five consecutive months of job growth in the U.S economy boast well for the recovery and will probably start to influence the Federal Reserve. Earlier in the week, the hawks inside the Fed had started a vocal campaign advocating a through discussion of exit policy.

Today’s speech by Fed Chairman Ben Bernanke in Atlanta will carry extra significance in the FX markets. Should he come out with a more hawkish tone, this could be the beginning of a turnaround for the dollar.

On Friday, Fitch rating agency cut the Portuguese sovereign debt rating by three notches from A- to BBB-, the lowest investment grade level, saying the debt-laden country needed external financial aid. The downgrade followed Thursday’s publication of the results of the bank stress test which showed that Ireland’s four troubled banks needed a further 24 billion euro’s to be properly capitalised.

Last week, the eurusd headed higher despite a fairly strong U.S payrolls report on Friday due to comments by NY Fed Dudley that “the March payrolls hadn’t changed the outlook for Fed monetary policy” as a result, investors looked forward to the ECB meeting on Thursday expecting the ECB to officially start its tightening cycle.

While a 25bp increase may already be priced into the euro, there may be further room for euro appreciation should the ECB continue to pre-commit to interest rate hikes. A signal of further interest rate increases during the accompanying statement would be catalysts for the euro. However, a change in the U.S interest expectations is a risk to the euro.

The calendar is uneventful in both the UK and EMU, later on in the week the UK PMI and industrial production may present some food for thought but the majority of eyes will be on the aforementioned ECB and the BoE policy meetings.

For the BoE, we expect no change as we believe the governors will stick to their vote of March, leading to a 3 way split with the majority still in favour of no change. There is little new information for the governors to change their views. The key meeting will be the May one, when the MPC will have information on Q1 GDP, more survey evidence and the inflation report.

The Japanese yen remains weak vs. the dollar and the euro over speculation widening interest rate gap between Japan and other major economies and concerns over the Fukushima Daiichi nuclear plant made the Japanese currency less attractive to hold.

It is looking likely that the BoJ will probably not raise rates until 2013, in stark contrast with it’s counterparts in Europe and the U.S, which are expected to bring to an end the current credit easing policies.

Also, a renewal of the carry trade has added momentum behind the yens decline with further weakness attributed to the rebound in the global equity markets following the selling that occurred after the geopolitical unrest in Libya and the natural disasters in Japan.

Crude oil moved to a two and half year high near the $108.50 mark last week on stronger than expected U.S job growth in March and weakness in the dollar.

A weaker dollar tends to boots the price of dollar priced commodities as it lowers the price to holders of other currencies and reduces the value of the currency oil producers receive for their products.

Written by Jovi Overo

Market Commentary by Jovi Overo. Beta 2 Ltd, Monday March 14 2011

Due to the devastating earthquake and tsunami in Japan, gold moved higher by about 1%. Japan is battling a nuclear catastrophe, has seen whole villages and towns wiped off the map and estimates of those feared dead have risen to 10,000.

Japan will move to import more liquefied natural gas and low sulphur fuels to generate power at thermal plants and replace nuclear electricity supplies put out of action after the worst earthquake in Japan’s history.

The dollar rebounded from near record lows vs. the yen this morning boosted by hedge fund buying after the BOJ injected trillion yen into the money markets to help ease nervousness following Friday’s massive earthquake.

On Friday, the yen surged higher against the dollar on talks of repatriation flows as the disaster unfolded and was seen likely to extended gains especially if Japanese insurers try to raise funds by selling overseas holdings-crucial to USD/JPY near term direction is the size and financing sources for Japan’s reconstruction.

The spreads between bonds issued by euro zone loan rates states and benchmark German bunds narrowed today in reaction to an unexpected agreement by EU leaders to boost the powers of the bloc’s bailout fund.

Euro zone leaders agreed to increase the full lending capacity of the European financial stability and allow it to buy bonds of distressed countries primary markets and lower interest rates of Greece’s bailout.

Irish spreads were little changed however as better bailout terms were only announced for Greece. Spanish, Portuguese, Italian and Greek spreads were last around the 10bp narrower on the day.

US crude futures on Monday fell by more than $2 to below $99 a barrel on fears that economic growth will slow in the wake of Japan’s earthquake and tsunami, while easing unrest in the Middle East threw the focus back onto ample oil supplies.

US crude fell $2.26 to $98.90 in the early deals of Monday. Japan’s strongest earthquake on record shut refineries and other industrial plants in the world’s third-largest oil consumer.

The country is battling to avert a nuclear catastrophe in its worst crisis since World War Two after Friday’s earthquake, which is feared to have killed more than 10,000 people.