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, Wednesday September 7 2011

The US dollar (USD) was seen trading mildly bearish early Tuesday as investors returned to trading following Monday’s holiday break. 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. Heightened stability led to some losses on the USD’s value as traders sought higher yields.

Data from the American manufacturing sector yesterday also signalled an uptick in output from the previous month. The news has done little to the forex market, however, though it could ripple through longer-term analyses on US capital markets. Manufacturing was forecast to slump moderately going into the third quarter as most indicators revealed decreased demand.

As for today, there will be few US economic releases, with most news focused on the Bank of Canada’s (BOC) impending interest rate decision. Liquidity will likely be higher in today’s early trading as the Bank of Japan (BOJ) is also publishing its latest interest rate move, both of which are expected to make no change in monetary policies. Interest rates are in focus this week and traders would do well to follow their releases and subsequent bank statements.

The Great Britain pound (GBP) is expected to be seen trading with bullish results this week ahead of a slew of reports on the country’s manufacturing, housing, and service sectors. Against the US dollar (USD) the pound has actually been trending upwards despite the greenback’s bullish moves against its other currency rivals.

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, also looks to be losing ground in financial markets as safe haven assets such as the Swiss franc (CHF) and Japanese yen (JPY) make gains; though the recent pegging of the Swissie to the euro at 1.20 may affect this attitude in days ahead.

Sentiment across the euro zone has turned negative, with many analysts and economists expecting moves towards safety by traders this week. Great Britain, however, appears positioned for a relatively better quarter than its southerly neighbours. With major interest rate decisions expected all week, the nation’s most poised for gains are those whose monetary policies are more stable, like Britain’s. The pound could see some bullish movement this week as a result.

The Japanese yen (JPY) was 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 Bank of Japan (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.

 

The latest moves of the yen are causing some concerns, however, as many speculators are anticipating another round of intervention by the BOJ. With interest rate decisions out this morning, traders are waiting to see what the BOJ will do. 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.

Crude Oil prices held steady 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.

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 2 Forex News, Jovi Overo, Beta 2 Ltd, Tuesday September 6 2011

US traders will return from their Labor Day holiday to find the state of markets in turmoil. A combination of the euro zone debt crisis and the slowing of the global economy are pressuring risky assets. With the US stock markets closed on Monday the S&P 500 looks to gap significantly lower upon Tuesday’s opening bell. As noted in yesterday’s daily analysis, US investors will be looking to both the President and the Fed for policy responses to stop the bleeding.

President Obama will speak on Thursday and will provide support with a fiscal response, most likely proposing an extension of the payroll savings tax cut, prolonged unemployment benefits, and a program to support employment with infrastructure development. The wild card remains the monetary policy response from the Fed. Economists continue to debate the merits of rolling the Fed’s short term debt it holds on its balance sheet into longer term Treasuries. Barring any significant fallout in the equity markets, QE3 remains relevant, just not for the September Fed meeting.

US data will be released today with the ISM services PMI due out at 14:00 GMT. The survey is expected to show continued weakness in the services sector though forecasts keep the data well above the 50 boom/bust level. The survey will be watched closely as it is considered a leading indicator in contrast to last week’s non-farm payrolls report which is a lagging indicator.

Prior to the European open the EUR/USD has made a push below the 1.4050 support level. Market positioning is directionless according to the most recent CFTC data.The next support for the EUR/USD is found at the 200-day moving average at 1.4010. However, the real test will be the long term trend line from May 2010 which comes in at 1.3975.

European equities were hit on Monday though one has to point out the light volumes due to the Labor Day holiday in the US. Nevertheless, the German DAX finished the day down by a whopping -5.28% and the London FTSE 100 was lower by -3.58%. French banks were hit hard as US money markets continue to pull their funding.

A rumour of an Italian ratings downgrade was also spreading and the source appears to be the Société Générale Rates Strategy team who noted the possibility in their daily note on Monday morning. Comments from Mario Draghi, the Italian who is set to take over the helm of the ECB on October 31st was quoted in the wires as saying the ECB buying of Italian bonds is temporary and is not a substitute for fundamental budgetary discipline. Italian 10-year bond yields are up to 5.58%, above the 5% yield the ECB has tried to maintain. The Italian parliament is attempting to pass budget reforms with an aim to balance the budget by 2013 with EUR 14 bn in cuts and an additional EUR 6 bn in new taxes.

Greek bond yields continue to come under pressure with the 2-year rising to a record 50.37%. The Greek 5-year CDS also stands at a record 2493 bp. A default of Greece is at risk once again which could bring about additional pressure on the EUR and European equities.

The EUR/CHF is trading back near the 1.10 level after almost touching 1.20, a truly a remarkable move. The SNB risks losing both its hard fought gains in the pair as well as the central bank’s credibility should the SNB not step into the market to stop the appreciation of the CHF.

The RBA agreed to hold its benchmark rate steady at 4.75% in light of the increasing risks to the European and US economies. Uncertainty in the global economy may only be temporary and the RBA maintained hawkish tone as inflation remains elevated and economic growth continues to increase due to higher commodity prices. On Monday company operating profits in Q2 rose 6.7% compared to a -2.2% decline in Q1.

On the other hand it appears the RBA is weighing heavily the global economic situation versus its own sovereign factors. The RBA may be leaving the door open to a holding period should the economies of Europe and the US continue to underperform.

The downturn in risk sentiment has left the AUD susceptible and the AUD/USD has sold off since Thursday’s high of 1.0763. Support for the pair stands at the mid-August low of 1.0315. As mentioned in yesterday’s daily analysis, traders should keep eyeing the AUD/NZD as the pair is encroaching on the neckline from a bullish head and shoulders pattern.

Spot gold prices climbed to a new record high this morning as risk sentiment hit the wall following yesterday’s European equity losses. Risky assets were down across the board with higher yielding currencies and commodities all taking a hit. Traders have been eager to move into gold as systematic threats continue to plague the euro zone and the possibility of an additional round of monetary policy easing has kept traders from moving into the USD as typically occurs during periods of low risk sentiment.

The price of gold has recovered all of its losses from late August following the raising of margin requirements in a number of international exchanges. With the rebound in the price to a new all-time high this leaves the big round number of $2,000 as the next potential resistance. To the downside the August 25th low of $1,702.50 will serve as support.

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

Beta 2 Forex News, Jovi Overo, Beta 2 Ltd, Tuesday August 30 2011

Liquidity will likely be higher in today’s early trading as several events are being published in rapid succession from Britain, Canada and the US. American liquidity will be heightened, and Canada will contribute to today’s movements with its inflationary data and current account (trade balance).

The US dollar (USD) was seen trading mildly bearish early Monday 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 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 yesterday also signalled a downturn in home sales from the previous month, revealing a slump in housing demand, potentially linked to a string of foreclosures expected in September. 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 housing and consumer confidence. Today’s publications, however, will mainly be Britain-centric. Liquidity will likely be higher in today’s early trading as several events are being published in rapid succession from Britain, Canada and the US. American liquidity will be heightened, and Canada will contribute to today’s movements with its inflationary data and current account (trade balance).

The euro (EUR) is expected to be seen trading with bullish results this morning ahead of a slew of reports from Great Britain, Canada and the United States. Against the US dollar (USD) the euro has been seen trading somewhat bearish as the greenback moves upward against its currency rivals.

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, also looks to be losing ground in financial markets as safe haven assets such as the Swiss franc (CHF) and Japanese yen (JPY) make gains; though central bank interventions in Japan may offset the JPY’s gains.

Sentiment across the euro zone has turned negative, with many analysts and economists expecting moves towards safety by traders this week. Any more bearishly-leaning news out of any major global economy will likely pull down on the EUR even further as investors flee risk. With a heavy news day ahead, many traders are anticipating significant data releases to move the market. If today’s data continues to reveal negative market directionality, the EUR is likely to remain bearish.

The Japanese yen (JPY) was 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 interventions by the Bank of Japan (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.

The latest moves of the yen are causing some concerns, however, as many speculators are anticipating another round of intervention by the BOJ. 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.

Crude Oil prices held steady Monday 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 beginning to generate some risk taking after statements by the Federal Reserve began to cause investors to seek out higher yields.

An expected dip in dollar values due to this week’s risk seeking 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 2 Forex News, Jovi Overo, Beta 2 Ltd, Monday August 22 2011

The US dollar (USD) may be seen trading mildly bullish Monday morning if traders see the global stock market persist in its decline. Although the value of US credit was downgraded, investors have little place else to move their troubled assets outside of US Treasuries. The downturn in the stock market last week has played into the strength of the US economy: its traditional store of value.

Though analysts view the downgrade as overall bearish for the USD, a sharp downturn was held in check by a continued purchase of bonds by European investors. Similar declines and ratings downgrades of several European peripheral nations have made the USD and gold all the more attractive as valued safe-havens.

As for this week, the US economic releases will focus mostly on housing, GDP, and manufacturing. Today’s publications, however, are euro-heavy. Liquidity will likely be higher in today’s early trading as several European events are being published in rapid succession. French and German liquidity will be heightened, and Canada will contribute to today’s movements with its retail sales reports. Traders will want to pay close attention to today’s euro zone data.

The euro (EUR) was seen trading with mixed results this morning following pessimistic reports on euro zone debt woes. Against the US dollar (USD) the euro was trading somewhat bearish in early morning hours Monday as the greenback moved upward against all currency rivals. The euro, however, does not appear in a position to capitalize on the gains being seen elsewhere; its structural weaknesses are gouging its value worldwide.

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, due to the S&P downgrade, has many investors on edge. An embattled euro zone, fending off market bears amid turmoil in its peripheral nations, also looks to be losing ground in financial markets as safe haven assets such as the Swiss franc (CHF) and Japanese yen (JPY) make gains; though central bank interventions in Japan may offset the JPY’s gains.

Sentiment across the euro zone has turned negative, with many analysts and economists expecting moves towards safety by traders this week. Any more bearishly-leaning news out of any major global economy will likely pull down on the EUR even further as investors flee risk. With a heavy news day ahead, many traders are anticipating significant data releases to move the market. If today’s data comes in negative, the EUR is likely to take another hit.

The Japanese yen (JPY) was seen trading moderately higher versus most other currencies this morning as its value as an international safe haven continues to push its value bullish. 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.

The latest moves of the JPY are causing some concerns, however, as many speculators are anticipating another round of intervention by the Bank of Japan (BOJ). 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 price of Gold found support over the past week amid the plummeting strength of the US dollar, the currency in which such assets are valued. Gold has been trading with rather mild price action since June, but traders have been awaiting price resurgence due to the rampant increase in risk aversion due to rising tensions from the euro zone’s periphery and a recent downgrade of US debt by S&P’s ratings agency.

As investors seek safety, the value of gold, which has been seen trading with mixed results, is expected to rise, 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 swings in value.

Jovi Overo

Beta 2 Forex News, Jovi Overo, Beta 2 Ltd, Monday August 15 2011

The US dollar (USD) may be seen trading mildly bullish Monday morning if traders see the global stock market persist in its decline. Although the value of US credit was downgraded, investors have little place else to move their troubled assets outside of US Treasuries. The downturn in the stock market last week has played into the strength of the US economy: its traditional store of value.

Though analysts view the downgrade as overall bearish for the USD, a sharp downturn was held in check by a continued purchase of bonds by European investors. Similar declines and ratings downgrades of several European peripheral nations have made the USD and gold all the more attractive as valued safe-havens.

As for this week, the US economic releases will focus mostly on housing and consumer inflation. Today’s publication of TIC’s Long-Term Purchases report will coincide with a housing index released an hour later at 15:00 GMT. Liquidity will likely be kept more to a minimum in today’s early trading as several European banks close in observance of Assumption Day. French and Italian liquidity will be absent, but Japanese data may offset the lower volatility. Traders will want to pay close attention to today’s American data.

The euro (EUR) was seen trading with mixed results this morning following pessimistic reports on euro zone debt woes. Against the US dollar (USD) the euro was trading somewhat bearish in early morning hours Monday as the greenback moved upward against all currency rivals. The euro, however, does not appear in a position to capitalize on the gains being seen elsewhere; its structural weaknesses are gouging its value worldwide.

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, due to the S&P downgrade, has many investors on edge. An embattled euro zone, fending off market bears amid turmoil in its peripheral nations, also looks to be losing ground in financial markets as safe haven assets such as the Swiss franc (CHF) and Japanese yen (JPY) make gains; though central bank interventions in Japan may offset the JPY’s gains.

Sentiment across the euro zone has turned negative, with many analysts and economists expecting moves towards safety by traders this week. Any more bearishly-leaning news out of any major global economy will likely pull down on the EUR even further as investors flee risk. With several European nations on holiday today, liquidity will likely be kept to a minimum, helping the EUR stave off intensely deep declines.

The Japanese yen (JPY) was seen trading moderately higher versus most other currencies this morning as its value as an international safe haven continues to push its value bullish. 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.

The latest moves of the JPY are causing some concerns, however, as many speculators are anticipating another round of intervention by the Bank of Japan (BOJ). 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. Another round of intervention may become more necessary if this morning’s GDP figures show a sluggish economy.

The price of Gold found support over the past week amid the plummeting strength of the US dollar, the currency in which such assets are valued. Gold has been trading with rather mild price action since June, but traders have been awaiting price resurgence due to the rampant increase in risk aversion due to rising tensions from the euro zone’s periphery and a recent downgrade of US debt by S&P’s ratings agency.

As investors seek safety, the value of gold, which has been seen trading with mixed results, is expected to rise, 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 swings in value.

Jovi Overo

 

 

Beta 2 Forex News, Jovi Overo, Beta 2 Ltd, Wednesday August 3 2011

The US dollar (USD) was seen trading with mixed results yesterday as investors weighed the finer points of the debt deal struck Sunday night. The value of safe-haven assets have been given a boost by a shift away from higher yielding assets, though the dollar has been receiving fewer of these gains as it tends to in times of uncertainty. Poor economic data in Europe and the US have helped drive this trend and this week appears to have risk aversion gaining in prominence.

Data so far has inched traders into a position of market pessimism which has dropped the value of riskier assets while garnering support for the safe-haven currencies. Little news has emerged which put a dent in the amount of pessimism surrounding the forex market, particularly in the fragile United States and euro zone in spite of calls for such a move to be edging closer.

With a heavy news day expected today, traders are sure to see a surge in portfolio adjustments as volatility becomes elevated. The US economy will be publishing several reports today, most importantly is ADP’s publication of Non-Farm Employment Change for the private sector at 13:15 GMT. The employment data is a foreshadowing of Friday’s Non-Farm Payrolls (NFP) data. The ADP report has a tendency to rapidly change the direction of the USD in trading and given the direction of employment changes this past week there is a chance it will surprise to the upside, helping to push the USD lower as the day progresses.

The euro (EUR) has been seen trading with largely bearish 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 debt deal, caused a stir in the foreign exchange market.

The economic calendar this week has been mostly bearish for the region with housing and manufacturing reports disappointing traders. The employment data across the euro zone and Britain has also shown little change. Switzerland, however, had a bullish trading day yesterday as its retail sales report astonished traders with a 7.4% surge, followed by optimistic growth in the nation’s PMI publication by SVME.

On tap today, traders will witness the release of the region’s retail sales report, though few consider it to be highly impactful given the series of significant releases out of the US economy today. 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 more traders will move away from the EUR and 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 back into safety. The Aussie has been losing momentum these past few weeks as risk aversion becomes predominant 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 alongside shrinkage in the nation’s house price index (HPI).

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 $94 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 retail sales figure as well as its trade balance. Both are forecast to show growth. If such is the case, traders may see the return of strength in early trading today.

Crude Oil prices held steady Tuesday as sentiment appeared to favour a downturn in global stocks as the US Senate debates the proposed budget deal. 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

Beta 2 Forex News, Jovi Overo, Beta 2 Ltd, Wednesday July 27 2011

The Congressional Budget Office informed the GOP that the plan presented by Speaker of the House John Boehner would only cut $850 billion from the budget deficit. Boehner himself had pledged to initially cut $1.2 trillion in spending over the next 10 years. In a blow to Republicans the bill will be sent back for rewriting and throw a wrench in a potential solution to raise the US debt ceiling.

While the debt ceiling negotiations takes the limelight US data yesterday showed disappointing data that fed into USD selling. Housing data continues to drag with the S&P Case-Shiller HPI showing a dip in housing prices by -4.5%. New home sales fell short at 312K on expectations of 321K while the Richmond Manufacturing Index declined to -1 from 3. A bright spot in yesterday’s data were increasing consumer confidence numbers but the three previous negative data releases combined with a very public debt ceiling fight had the greenback on its back foot.

Strong gains were booked against the dollar by all of the G7 currencies with significant moves in the dollar block currencies. Pressures in the financial markets are predominantly felt in the USD with the dollar index falling to a low of 73.446. The last time the dollar index traded this low was in May. Despite the USD weakness it appears that real money portfolio managers are expecting a positive outcome from the debt ceiling struggles as the yield on the 10-year note actually fell yesterday back below the 3% level. 30-year Treasuries also strengthened. If markets were forecasting a US default, pressures would be felt in the US government bond yields.

Sterling performed well yesterday after Q2 GDP numbers came in line with consensus forecasts at 0.2%. Traders were largely expecting a more disappointing figure. While growth of 0.2% is nothing to brag home about and does signal a stagnant UK economy, a figure that came in below this level may have supported additional asset purchases by the BOE. The GDP report does not rule out more quantitative easing but sets the bar a bit higher for additional easing of monetary policy. While the British pound is certainly no prize, in a contest of the least ugly with the dollar and the euro, it may just be pulling ahead.

The GDP data helped cable climb to its highest level since mid-June, rising above the previously broken trend line from the May 2010 low. The next resistance for the GBP/USD is found at the end of May high at 1.6550. Support is located at this week’s low at 1.6220.

The dollar block currencies were the strongest performers yesterday versus a weak US dollar. The AUD was supported by both comments from RBA Governor Stevens who suggested the Australian economy is improving and talked down a potential interest rate cut this year. Inflationary pressures also supported the AUD. Q2 inflation climbed 0.9% on consensus forecasts of 0.7%. Following the data release this morning traders pushed the AUD/USD to a 30-year high. The next target for the AUD/USD is the big round number at 1.1100.

 

The Kiwi is also trading at a 30-year high after strong business confidence numbers helped to boost the New Zealand dollar. Tonight the RBNZ is expected to keep the cash rate steady at 2.50% but the accompanying rate statement could contain more hawkish language given the strong GDP the New Zealand economy produced in H1. Any hint of an interest rate increase could boost the NZD/USD to the next big round number at 0.8800.

Spot gold climbed to a new all-time high at $1,625. This is the second consecutive day the price of spot gold has reached a new high as traders worry over the US debt ceiling crisis. Spot gold may also be receiving a bid due to the potential for the US to lose its AAA rating. S&P has warned its highest rating could be in jeopardy if the US doesn’t cut $4 trillion from the debt. On Monday President Obama warned the US could lose its rating for the first time in history. More gains in the commodity could be booked should Congress and the President fail to come to an agreement over the debt ceiling.

Jovi Overo

 

Beta 2 Forex News Jovi Overo, Beta 2 Ltd, Monday July 25 2011

The US dollar (USD) was seen trading bearish at the start of this 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 dollar has been primarily gaining from such momentum due to the shift into safer assets, but woes regarding the inability of Congress to address the impending debt crisis have begun to drag on the USD.

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. As the August 2 deadline 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. The USD/JPY in particular has fallen below intervention levels and now trades near 78.00.

As for today, the US economy will be absent from the economic calendar and most of the other major economies will be presenting only meagre reports. Risk appetite and market volatility are likely to be at a minimum today as investors gear up for the rollercoaster that lies ahead considering this week is the last before the deadline for a lifting of the US debt ceiling.

The euro (EUR) was seen trading higher this morning following news of pessimistic growth in both the US and European economies. Against the US dollar (USD) the euro was trading somewhat bullish in late trading Friday as shifts away from safe-haven investments pulled money towards the euro and away from stores of value. The EUR/CHF, however, experienced a downturn on Friday, plunging to 1.1715 after a week of gains.

Traders are looking for a way to balance a renewal of risk appetite with continued shakiness in global markets. A show of concern towards investing in the US dollar at the moment due to the debt limit talks taking place in Congress has unsettled many investors who were looking for gains at the start of this week. A failure to lift the debt ceiling could result in a default by the US government, causing ratings agencies to downgrade US debt and pull the global economy in several directions, likely bearish across the board.

Sentiment across the euro zone has also turned negative, with many analysts and economists expecting moves towards safety by traders this week. Any more bearishly-leaning news out of any major global economy will likely pull down on the EUR even further as investors flee risk, despite a moderate sentiment of bullishness taking hold this morning.

The Australian dollar (AUD) was seen trading moderately lower versus most other currencies this morning after inflationary data this morning caused a stir in Pacific markets. The Aussie has been experiencing several wide swings lately from the various shifts into and away from riskier assets. Traders witnessed a turn towards safety after last Friday’s economic reports, but sentiment appears mixed as of this morning.

The latest moves have helped to lift the AUD as traders turned to its high interest rates in order to seek profits in higher yielding assets like the AUD, NZD and Scandinavian currencies. The producer price index (PPI) published this morning beat forecasts, but so far has pushed down on the Aussie as traders had priced in positive growth ahead of time. The profit-taking could explain part of this recent downtick, but it doesn’t appear that it will last through the day.

The price of Gold found solid 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 June, but traders have been awaiting price resurgence due to the rampant increase in risk aversion due to rising tensions from Greece and faltering debt talks out of the US.

As investors seek safety, the value of gold, which has been seen trading with mixed results, jumped to an all-time high of $1623.95 per troy ounce. 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 gold serves as a traditional store of value. Should risk sentiment hold steady this week, the prices for this precious metal may continue to find support as the week moves ahead.

Jovi Overo