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Showing posts with label Articles. Show all posts
Showing posts with label Articles. Show all posts
Bernanke Gives Traders An Early Christmas Present
Markets watched the FOMC announcement yesterday with great anticipation. Only 11% of economic analysts supported tapering at this meeting. Even though analysts including this writer did not expect to see tapering the overall market opinion yesterday and expectation was a $10 billion cut and that is exactly what Mr. Bernanke gave them. Maybe it was a Christmas present. Historically the Fed has not made any changes to its policy in December. With the changeover in leadership next month from Mr. Bernanke to Janet Yellen analysts were expecting Mr. Bernanke to leave things on hold. But never say that Mr. Bernanke did not know how to play to an audience. Instead of going out with a whimper he left with a roar. When the decision was published markets went for a wild ride, even those traders who were hoping for the tapering were surprised. The US dollar soared and then tumbled and then adjusted and corrected and for a while ended up just where it had started close to the 80.20 price. This morning the greenback is now at 80.75 and continuing to climb. The tapering was nice but it was the upward revision in 2014 GDP, and the positive comments on the accelerating jobs market and the fact that unemployment was falling faster than expected. The Fed painted a glowing picture of the US economic recovery.
The euro gave up 22 points to trade at 136.63 after soaring to the 1.38 price after the announcement. It was amazing to see market reaction on the charts after the Fed statement. The decision to taper is “ultimately positive for the dollar,”, because the Fed has become the first major central bank to begin policy normalization and has essentially endorsed the strength and stability of the U.S. economy. The dollar had initially weakened as news of the taper was offset by a dovish statement. German business sentiment picked up in December, according to a business-confidence index from the Ifo institute, paving the way for broader growth next year. The upbeat sentiment data comes a day after the ZEW sentiment survey showed German economic expectations jumped in December to their highest level since April 2006. Overnight the EU ministers agreed on a banking supervisor and policing activities for all banking in the Eurozone with the powers being turned over to the EU as opposed to individual member states.
Sterling climbed to $1.6398, paring some of its gains against the greenback after the Fed decision. Data released earlier Wednesday showed that the U.K.’s unemployment rate unexpectedly dropped to 7.4% in October, approaching the 7% threshold set by the Bank of England for when it could consider raising interest rates. The BOE currently expects the unemployment rate to fall to 7% by the third quarter of 2015.
The Japanese yen topped 104 against the greenback before the close and remained above in the Asian session. For Bank of Japan officials, the Federal Reserve’s decision to slow asset purchases is a good sign for Japanese exports as it reflects a continued U.S. economic recovery but the resulting further weakening of the yen is a double-edged sword for a resource-poor country. The Fed’s tapering method may provide a hint for the BOJ’s eventual exit from its own aggressive easing but for now, BOJ board members are mulling over options privately, pointing that before discussing the issue in public, they have to ensure the economy will overcome an expected slump in demand after the April tax hike.
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The Pound Moves Higher on Strong Inflation Data
The Pound was able to gain traction on Tuesday as investors shied away from the greenback on the heels of continued failure of the US congress to come up with an agreement that would reopen the government. The US treasury will run out of capital on October 17, 2013, with its first substantial payment due on October 31, 2013. A default by the US government would rock the financial markets increasing volatility and reducing the value of the US dollar.
The strength in Cable has also been a function of stronger than expected economic data, and increasing inflation expectations. Tuesday report by the UK government showed that year over year CPI increased by 2.7% compared to the 2.6% expected by economists. Later in the week the UK will report its claimant count and its unemployment rate which will give investors a view of labor cost inflation, as well as, the potential for a tightening labor force. YBS will report on its House Price Index and additionally, the UK will report retail sales which will help gauge overall consumer sentiment.
Another important currency related piece of news is that the UK and China have reached some agreements today with regard to currency trading. China has granted the UK a 8 billion QFII quota. The UK has become the most important offshore center yuan trading, after Hong Kong. It accounts for a little more than 60% of yuan trading outside of China and Hong Kong, according to SWIFT.
Late in the US trading session, US Senators announced that they would suspend discussions until the House was able to come up with a new proposal on handling the debt issue. The House has been coming up with new provisions to handle Obama care, which would likely not pass through the Senate or the White House. At the end of the day on Tuesday, there were no deals in the works, and the likelihood of passing a bill before the October 17thdeadline is relatively small.
The technical outlook for the pound is mixed. Support is seen near and upward sloping trend line that connects the low seen in July, August and September and then the recent lows at 1.5920. Resistance on sterling is seen near the 10-day moving average at 1.6046.
Momentum on the GBP/USD currency pair is negative with the MACD (moving average convergence divergence) index printing in negative territory with a negative trajectory. The MACD measures momentum by viewing the difference of two moving averages and then comparing that difference to the moving average of the difference. The MACD generated a sell signal on the pound in early October where the index moved from positive territory to negative territory. The relative strength index (RSI) reflects consolidation as it is printing at 52 which is in the middle of the neutral range.
By Marcus Holland from ForexBonus.co.uk.
To Taper Or Not To Take That Is The Question On Investors Minds – Well Mr. Bernanke ?
It is widely expected that the Fed may decide to start cutting its stimulus program this week’s meeting. Many economists believe that a string of upbeat economic data and easing fiscal restraints could prompt top Fed officials to moderate the pace of asset purchases soon. On the economic front, U.S. industrial production jumped 1.1 percent in November after a modest 0.1-percent increase in October, marking the biggest gain in a year, said the Fed in a report released on Monday.
Meanwhile, manufacturing conditions in December were flat for New York manufacturers, according to a survey released on Monday by the Federal Reserve Bank of New York. The survey showed manufacturing activity in the region rose 3.19 points to 0.98 in December from a negative reading in November. Moreover, U.S. nonfarm business sector labor productivity increased at a 3.0-percent annual rate during the third quarter, said the Labor Department.
“A series of positive economic releases from the US has once again re-ignited anticipation for an early taper to take place,” he said. The Fed’s key policymakers are to meet for two days from Tuesday to weigh whether growth is strong enough to merit cutting back its $85bil-a-month, bond-buying scheme. The so-called tapering would likely boost the greenback, making dollar-priced oil more expensive for countries using other currencies, dampening demand. The US dollar is down this morning at 80.20 giving up 4 points. There have been no clear moves by the greenback over the past week first falling to trade in the 79 level and then recovering to the mid 80 price remaining well below its expected trading range.
The euro on the other hand rebounded after better than expected manufacturing numbers in Germany and the overall eurozone helped push the euro to trade at 1.3769 adding 7 points this morning. The euro may see support in data today forecast to show German investor confidence rose to the highest level in more than four years. The ZEW Center for European Economic Research in Mannheim will probably say its index of investor and analyst expectations, which aims to predict economic developments six months in advance, climbed to 55 in December from 54.6 the previous month, according to the Bloomberg survey median. If confirmed, that would be the strongest reading since October 2009.
Across the Pacific investors seem comforted by the BoJ’s massive monthly purchases, bond-market investors have been more or less ignoring the signals of higher inflation in the pipeline — which would normally be reflected in higher yields. Stock-market investors, on the other hand, have been following the opposite line, building into their valuations and projections of equity-price performance the expectation that Japan will indeed soon be posting 2% inflation. TheJapanese yen is trading at 103 which new estimates that it could fall to the 110 level in the spring when the BoJ is expected to add more stimulus to offset the sales tax hike. Renewed signs of the BoJ’s undaunted pro-easing boas have emerged at the same time as indications that the Ministry of Finance and the BoJ are following an overt interest-rate policy through the asset-purchase program.
RBA minutes released this morning weighed on the Aussie which is trading well below the 90 price range after RBA Governor Steven’s mentioned intervention as a tool last week and said that the currency was overpriced in the current market.
Manufacturing PMI Data In China, Germany and France Keep Currency Traders On Alert
The countdown to the Federal Reserve meeting has begun. The two day meeting is slated to begin tomorrow and conclude on Wednesday and every trader or analyst you ask seems to have a different opinion as to what to expect on Wednesday. Today most of the Asian equity indices are trading in the red despite a positive closing of the US stock markets on Friday.
From the international currency front the US dollar index is trading lower by 0.14% at 80.10 while the euro and the pound are up marginally by 0.13 % and 0.02% respectively. The euro has added 16 points to trade at 1.3758 while the pound has added 10 points at 1.6305. From the eurozone traders have the PMI and the trade balance numbers to be released. Later in the day from the US we have the Industrial production, capacity utilization, empire manufacturing and the Net tic flows numbers. Considering the aforementioned factors it could be a volatile day for the euro dollar. French and German PMI data could upset the euro today if Germany misses the mark.
Asian markets are trading on a negative note today on the back of unexpected decline in China’s manufacturing index. Further, increasing worries over the action of QE tapering to be taken by the Federal Reserve in its meeting starting tomorrow acted as a negative factor. China’s HSBC Flash Manufacturing PMI declined by 0.3 points to the 50.5 mark in December from 50.8 levels in November after an upward revision.
The Australian dollar hovered near a three-month low on Monday ahead of what could be an eventful week with investors awaiting a key U.S. Federal Reserve meeting, while the New Zealand dollar held firm. The Aussie went as far as 68.6 on a trade-weighted basis in New York, its lowest level in more than three years. Versus its U.S. counterpart, it was last at $0.8934, having touched $0.8909 on Friday.
It briefly dipped to $0.8920 after HSBC’s flash report on China’s manufacturing sector showed growth slowed to a three-month low in December. The Aussie dollar is sensitive to news out of China, a key export market for Australia.
It briefly dipped to $0.8920 after HSBC’s flash report on China’s manufacturing sector showed growth slowed to a three-month low in December. The Aussie dollar is sensitive to news out of China, a key export market for Australia.
Across the Tasman Sea, the kiwi traded at $0.8255, after recovering from a slide to $0.8198 late last week. Technical support was seen at $0.8260, the 32.8 percent retracement of its October-November sell-off. Offers suspected above $0.8300 were capping gains.
Speculators anticipate a reading of third-quarter domestic growth due on Thursday could be supportive for the kiwi given that many economists expect it to show that the economy grew at a quarterly rate of 1.1 percent, faster than many other developed nations. This would underpin the view that the Reserve Bank of New Zealand will raise interest rates early next year. New Zealand’s government is expected to maintain its forecast of a return to a budget surplus by 2014/15 when it announces its midyear budget update on Tuesday, while few anticipate major changes to its bond issuance programme. As a result, the currency impact was seen as limited.
Euro Rises On Weaker Dollar Ahead of Fed Meeting
The GBP/USD also gained ground mostly because of short-term oversold conditions and the weaker dollar. The dollar fell amid speculation the Fed will refrain from reducing monetary stimulus at this week’s two-day policy meeting on December 17 and 18. Traders are also reacting today to a lower than expected U.S. Flash Manufacturing PMI report released this morning.
Oversold conditions and a lower dollar also helped boost February Gold prices. After turning the main trend to up on the daily chart last week on a move to $1267.50, the market plunged sharply lower. Buyers stepped in on Friday, however, to temporarily stop the slide. If a secondary higher bottom does form at $1219.50 then this could serve as a sign that a bottom has been reached at $1210.10. If the Fed refrains from tapering on December 18 then look for the dollar to plunge and for gold to accelerate to the upside.
February crude oil is also receiving support from oversold technical conditions and a weaker dollar. The market made trade sideways to higher until December 18 when the latest weekly inventory figures will be released as well as the Fed monetary policy statement. Last week, the Energy Information Administration reported a 10.6 million barrel drop in supply. Many traders believe the figure was overstated and are looking for some kind of an adjustment this week.
Financial Evolution Creates Wealth Opportunities By Melissa Long
The modern forex trading market offers both novice and professional brokers a platform on which to trade and take advantage of the speculative opportunities to boost investment values. Forex and commodities brokers have invested significant resources and pooled years of market experience to create a dynamic trading environment which provides support to clients twenty four hours a day. It is hard to imagine the development that the forex industry has undertaken during the age of the internet for speculation on currencies is a relatively recent phenomenon.
How It All Began
Many years ago traders used a barter system so goods and services were routinely traded for other items and services. Even the creation of a money based financial system did not instantly create the sort of speculative opportunities we see today because currencies were traditionally backed with gold. Any paper based monetary system promised to pay the bearer of a financial note the equivalent sum in gold. This system was known as the gold standard and led to a boom and bust culture as nations and banks struggled to deal with large fluctuations in money supply. This system is credited with the origination of phrases such as “worth their weight in gold” and runs on banks were common as groups were able to exercise economic power by withdrawing their savings and putting pressure on a bank to release its reserves of gold. Speculation was increasing though any market activity has to be based on accurate information so the lack of widely available information hindered the development of a full scale forex market. Activity was often conducted at local level and although news did travel quickly, it was not at a sufficient pace to enable the sort of opportunities that exist today.
Impact Of War
In 1931 the gold standard was removed and with it the opportunity to speculate on currencies as previously. The change had been introduced to protect nations from political and market instability. Sentiment was sufficient to drive activity to a point at which transactions became unsustainable and it was felt that a more stable monetary system would be of benefit to the global economy. Towards the end of World War II an economic conference hosted in Bretton Woods, New Hampshire, rejected the advice of respected economist John Maynard Keynes to create a new world reserve currency and opted for a new system based on the US Dollar. A system of fixed exchange rates linked currencies to the US dollar which in turn was linked to the price of gold as the dollar was set at $35 per ounce of gold. The system was established as a permanent solution to exchange rate volatility but pressures from national economies pulling in different directions led to the eventual collapse of the Bretton Woods agreement in the early 1970′s.
Evolution Of Markets
The removal of the Bretton Woods system has led to the removal of restrictions in capital flows in most countries of the world. Currencies are traded according to the perceived value placed on them and although attempts have been made at fixing rates such as the European Monetary System and the Maastricht Treaty in 1991, none have succeeded and the development of technology has resulted in the creation of a huge financial industry.
How To Trade
Although individuals now have the information required to make sound decisions when speculating in forex markets and have the necessary technology, there are still a number of barriers to entry, notably access to capital. The existence of spreads and dealing costs means that traders must execute trades at high volumes in order to realise sufficient returns on their investment. Whilst professional traders may have access to capital, other individuals may have the tools and business knowledge to trade successfully but not the funds. Broker platforms do offer opportunities to leverage trades using a relatively small stake, the costs or benefits are multiplied by large multiples and this removes a barrier to entry for the smaller investor. It is still advisable for investors to have sufficient funds to deal with potential losses and anyone earning a regular income should be able to obtain an unsecured loan to create an investment fund. Although personal debt levels have reached record levels there are still many available products to assist investors with their funding strategies. Anyone confident in their ability to generate an income from their investments may seek to raise capital from unsecured loans. Money.co.uk recommends comparing rates, this enabling investors to choose from a wide range of available solutions. Whilst the value of investments can go down as well as up, the investment tools now available coupled with information services that provide up to the minute data, mean that opportunities to grow investments are within the reach of smart investors.
Freedom Of Information
In order to be a successful trader it is necessary to have good quality financial information. The increase in the provision of financial information first enabled commercial traders to gain access to trading platforms and deal in currencies and commodities by placing trades over the phone. Mobile phone technology expanded opportunities as it enabled traders to react quickly to changing information. Although they were established in the eighteenth century, companies like Thomson Reuters are at the heart of trading activity as analysts scour the news for information that will aid speculative decision making. News is now real time with the creation of twenty four hour television news channels and the internet enabling organisations to reach a global audience when releasing news updates. Individuals with no professional trading experience can now trade in currencies or commodities and the distinction between amateurs and professionals is shrinking. It is no longer necessary to be based on a trading floor or in an office because anyone with a computer screen, fixed or mobile, can gain access to similar information. Brokers can be used to trade when a certain price target is reached meaning that the investor does not even have to be present to execute a trade. Trading tools such as stop loss implementation mitigate the risks of switching off meaning investors do not have to constantly watch the progress of their trades to maintain control. This has opened up the markets to many new investors and has changed the way in which experienced traders do business. Trading platforms now carry news feeds and allow access to articles which can help form opinions over the suitability of investments. The rate of change has been rapid due to the advance of broadband and internet technology and the opportunities keep growing.
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