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Euro Weakening - Pound gains Strength

The Euro was at Session Lows after New York opened, whilts Sterling was up at its highs.  The €uro fell to session lows Friday morning as the UK pound actually hit session highs against the US dollar, giving a sign of the contrasting views that have emerged on the European currencies this week.

The €uro fell to a new one-week low of $1.2794 as US stocks fell back on opening today, sending investors to the safety of the US dollar.

Meanwhile, this weaker €uro helped the pound to become mpore attractivfe, prompting a high of $1.4468 this afternoon. The pound looked oversold, with all the bad news built in to the trading price.  We feel the €uro needs some correcting, as does the dollar, despite being ‘the dollar’.  STG had been at a 23-year low against the USD, and with a feeling that the Bank of England will reduce interest rates further, towards the zero level, there could be a fresh boost to the gloomy economy.

It is thought that in Eurozone, despite weak data coming out, expectations are that the European Central Bank (ECB) may keep interest rates where they are when they give their decision next Thursdaym eveb though there is still great uncertainty over the region’s economic outlook, with more bad news to come.

When the US opened a couple of hours ago the €uro was at $1.2839, down from $1.2961 last nightm whilst the US dollar was at JPY 89.79, a smidge down from JPY 89.84. 

The €uro was at JPY 115.30, down from JPY 116.47.

The UK STG Pound was at US$1.4458, up from US$1.4331.

The USD was at CHF 1.1594, up from CHF 1.1530 last night.

When risk appetite is low investors tend to buy the US dollar because it is the reserve currency of the world. With most commodities actually priced in US dollars, especially oil, the greenback gets a kick when these assets are sold off during periods of high uncertainty.

Also, weakness in the €uro is now afoot due to the weak data from Eurozone this morning.  The European Union’s official statistics agency, Eurostat, said that the annual rate of inflation in the euro zone fell to 1.1% in January, down from 1.6% in December, which is near a 10-year low.  This was well below economist expectations. It was also reported that the euro zone’s unemployment rate rose to a 2-year high of 8.0% in December, up a smidge from NOvember’s figure of 7.9%. This rising due to more companies shedding staff as the whole of Europe fights to survive the new recession.

Have a good weekend.

It was a fairly lack-lustre morning this morning, but we still got 4 intra-day trades on.

London Session

- No Live Room trade call today.
- 4 Intra-day trade calls; 2 wins, 1 breakeven, 1 trade still open.

Intra-day trades

EUR/USD - Short trade closed (+39 pips)

Opened Short: EUR/USD @ 1.3101
Stop level: 1.3220
Target level: 1.2870
Closed: 1.3062 (+39 pips)

GBP/USD - Short trade closed (+0 pips)

Opened Short: GBP/USD @ 1.4150
Stop level: 1.4240
Target level: 1.3905
Closed: 1.4150 (+0 pips)

GBP/USD - Long trade opened (+143 pips)

Opened Long: GBP/USD @ 1.4231
Stop level: 1.4135
Target level: 1.4480
Closed: 1.4374 (+143 pips)
The Pound made a high of 1.4414 and the trade was closed on retracement to the 1.4374, original resistant level.

USD/JPY - Short trade still open

Opened Short: USD/JPY @ 89.80
Stop level: 90.85
Target level: 88.00
Break of first support level, refer to Morning Call.

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The FTSE was down nearly 1% early doors today.  The miners and metals fell back, as did the banks, with some profit taking after 3 days of gains.

Onto FOREX, where the main news was the the Canadian bail-out plan, err, sorry, we mean stimulous package, won’t be helping the Canadian economy as much as hoped.  the larger than expected package may be hoped to help, but analysts feel that the heavy reliant on commodities will cause the CAD to remain unloved for the moment.  Canadian Prime Minister Stephen Harper is hoping that the CAD$85 bln 5-year package will also help save his under pressure government, and that the CAD will gain some strength and become more attractive. We expect some weakness moving forward. Maybe the USD/CAD 1.30 level, up from the ~1.22 level now.

Continued weakness in metal and commodity prices will actually pressurtise the Loonie (CAD) even more, we feel, as global risk aversion is becoming more important. Canada hasn’t felt as much of the credit crunch as the rest of us. Even Eastern Europe will be getting some of it.  we think they’ve been wondering what all the fuss is about up ’til now.

Despite these continued efforts by the US Fed Res and other governments to stimulate their economies, there seems to be very little hard evidence that current credit conditions are actually easing sufficiently.  Nor is anyone seeing anything like a recovery in their national property markets, which would be seen as positive. Instead of this, we see unemployment levels rising steadily, which will have repercussions such as global demand continuing to shrink.  This will put weight on the Canadian Loonie Dollar, for sure.

On to the black stuff, where a small rally over the last week seems to have given some hope to OPEC, the outlook for demand continues to deteriorate. This will also add pressure on to commodity prices.  Which gives more stress to the Loonie CAD…

This morning the US dollar moved up to just shy of CAD 1.22, up from CAD 1.2151 last night.

The US dollar was higher against most other majors after the Fed Reserve decided to leave interest rates unchanged (!! 0 to 0.25%), but did pledge to to take all steps necessary to ease monetary conditions. There was some more good feeling on news that the US Treasury may even remove ‘toxic assets’ from some bank balance sheets, which went down well. the Dow Jones liked the news, anyway.

The €uro fell against the USD to $1.3087, down from $1.3144.

The USD fell back a little against the Japanese Yen to JPY 90.15, down about 15 pips from JPY 90.30.

The €uro was also down against the Yen at JPY 117.91, down from  JPY 118.74.

Euro gains against the US Dollar & JPY

The €uro gained against the US dollar and the JPY this morning as the recent risk aversion moved to the back of priorities.  News later of the conclusion of a meeting of the US Federal Reserve interest rate team is also eagerly awaited.

The European stock markets were up about 1 to 1.5%, with the banks seeing some buyers.  The European currencies, namely the €uro & STG were boosted, turning up after the recent ignoring and risk aversion trading they have been subjected to.  This all followed a positive day on Wall street last night, as encouraging earnings news from the likes of American Express and Texas Instruments helped to offset the weaker than expected US consumer confidence data.

The US Fed Reserve concludes a 2-day policy meeting later today, and, what with the benchmark interest rate already at zero to 0.25%, the market will be looking for any announcement of new policy measures, possibly like purchasing long-dated Treasuries, for example.

Analysts think the markets will also be looking out for any updated forecasts from the Fed on the economic outlook. This meeting will show a decent reaction to the Forex pairs, we are sure of that.

This morning by about 9.30am, €uro was up about 1% against the US dollar to $1.3294, and even higher against the JPY at 118.51 yen. The US dollar also gained 0.3% against the JPY at 89.11 yen.

The £STG was still looking bullish, depsite what looked like a pull-back early doors, and was recoevring nicely from its 23=year low that it hit last week. It was up to $1.4299, up 1% on the week.

Against the €uro the £STG was fairly flat.

With invetsors looking to be a little more settled on the glovbal economy overall, with hopes of some recovery, some of the risk aversion investing in to the USD & JPY is showing to be weakening.

Later today we will see investors focusing on what the Fed will be announcing, with the rather blunt fact that there is no more cuts in interest rates available. 

News from Japan was that it had pledged some US$16.7 bln to small and medium sized companies.  They are also feeling the credit crunch.

Nes from Canada’s government was that it had proposed a 2-year $32 bln stimulus package, so to boost their economy.

Here in the UK we had the news of the car industry getting an injection as well.  The UK car industry employs some 1m people, so the government won’t be anting that to fail.

In the US, new US president Barack Obama went in to opposition lawmakers to drum up support for his US$815 bln stimulus proposal. There is still some concern, and sentiment on financial markets remains uncertain. Things still look bleak.

News out of Australia overnight showed consumer prices fell by their biggest amount for 10 years during Q4, prompting calls for further interest rate cuts. The Aussie dollar initially fell after the news, but then recovered as their stock market picked up and the higher yields from the AUD became influential in trading, with the Aussie dollar up nearly 1% against the USD at $0.6676.

£STG gains some strength.

The Pound was helped today by the UK government’s car (auto) sector bail-out package, whilst the UK banking stocks picked up after Barclays painted a more rosy picture (at least for themselves) and the UK retail sales survery was better than expected.

The Pound actually gained across the board, reaching a one-week high of $1.4241 against the US dollar, up over 7 cents since its 23-year low of about $1.35 hit last week.

It wasn’t a runaway day, though, as some caution remained as concern over the bleak UK economic outlook, coupled with the prospect of more Bank of England rate cuts. 

There was news today that the UK government will guarantee up to £2.3 bln in loans to the UK car industry, which did help push the pound higher. Further good news came from the Confederation of British Industry, whose survey showed UK retail sales fell much less than expected in January.

The pound was up about 1.4% against the US dollar at $1.4158 as we approached 4pm London time, whilst the €uro was down 1.5% against STG to 92.85p.

£STG also rose nearly 1% against the JPY to 125.60 JPY, having earlier hit a one-week high of 127.65 JPY.

News from the UK confirmed that the global downturn has further to run, with the Conference Board’s consumer confidence measure falling further than expected to a record low 37.7 in January.

Thyere is the prospect of even further cuts in UK interest rates by the BoE, though, which would cause pressure on £STG.  The BoE is trying to lift the struggling economy, and could be looking at the interest rate levels of the US as a guide to assist any kick-start.  UK rates currently stand at 1.5%, falling towards the massive zero level, which will raise the prospect of the BoE deploying some unorthodox measures to boost UK money supply.

During the London session we saw some risk taking returning to the front.  News that Barclays Bank was doing well saw Cable becomne a little more popular and the safe haven of the US Dollar become secondary for now.

EUR/USD was up over +100 pips, sitting near the 1.30 as New York was approaching.

GBP/USD rallied some +230 pips to the 1.3870 level.

The Yen pairs were up as well, with USD/JPY up about +55 pips to 89.20/30, this depsite the dollar weakening. EUR/JPY was up some +170 pips to the 116.00/10 level.

News from New York was Trading had a major US machinery manufacturer reporting worse than expected Q4 earnings, which caused the markets to take a check, and pul back, with realism settling in again. The global recession is only really kicking off, and is far from over. There will be the US home sales announced shortly, with poor data expected. We could see some volatitlity during the session, with the EUR and the JPY crosses seeing some action.

Happy Trading.

This is the part others cannot copy.  They may like our market summaries, like our format, but they can’t claim to call trades.  We don’t sit on the fence.  We are REAL pro traders with years of experience.  Don’t listen to others who have little or no experience, or only heard of Forex last March.  Yes, they are out there, writing blogs, and using our format.  BUT - they wait for the room to tell them when they trade, they don’t call the trades. Sorry to sound like a corny sales pitch, but it can get frustrating.

Anyway…  this morning’s action…

Live Room Roundup

London Session

- 2 Live Room trade calls today; 2 wins (2 others also taken by members - both winners, up to +53 pips on Cable, and +18 Swissy)
- 2 Intra-day calls; 2 wins

GBP/USD – Short Call - (+21)

- Live Room Call: Entry on the break of 1.3687
- Trade: Break of support level
- 1st Level: 1.3666, +21 (full position)
- Stop: 1.3712
- (Allow few pips for slippage on entry/exit levels)

EUR/JPY – Short Call - (+25)

- Live Room Call: Entry on the break of 113.70
- Trade: Break of support level
- 1st Level: 113.45, +25 (full position)
- Stop: 114.20
- (Allow few pips for slippage on entry/exit levels)

Intra-day trades

GBP/USD - Short trade closed (+37 pips)

Open Short: GBP/USD @ 1.3741
Stop level: 1.3860
Target level: 1.3560
Closed: 1.3704 (+37 pips)

AUD/USD - Short trade closed (+35 pips)

Open Long: AUD/USD @ 0.6488
Stop level: 0.6580
Target level: 0.6320
Closed: 0.6453 (+35 pips)

Market Update

During the London session it seemed like risk aversion was popular again, with £STG getting a bit of a pasting after news that the UK was definitely in recession, with a minus -1.5% shrinking of the economy last month. GDP for Q4 was actually at -1.8%, which was worse than expected, down from a +0.3% annual run rate. One almost abnormality was a better than expected retail sales figure for December, which was up , far better than the -0.7% decline that was expected, even though it was the Xmas season. The figures may not sound so bad here, but the reality is that the UK’s economic problems are only just bedding in and are far from over.

GBP/USD fell more than -150 pips and was sitting near 1.3560/70 by the time New York was kicking off.

Euro zone news was weak, with the January PMI composite a rather disappointing 38.5, which was slightly better than expected. But, despite this the index remains at the lowest levels since the survey began back in 1998.

EUR/USD lost about -60 pips during the London session to move around the 1.2800/10 area.  The pair has actually consolidated between 1.2850/1.2750 over the last few hours, but there is a break one way or the other expected.

This afternoon the New York session has no major news or events, so there will be some focus back towards what Wall Street gets up to, with the ongoing Q4 earnings being reported tending to all be disappointing.

We expect EUR, GBP, and the JPY crosses will fall back as the markets fall, but if there is a surprise rally into the weekend, we would could see a weaker green back as the risk averse turn away from the safe haven of the US dollar at the moment.

STG Pound Recovers From 23-Year Low Against US Dollar

The £STG fell to its lowest level against the dollar in more than 23 years yesterday, but regained its footing very late in the day and turned it round fairly modestly.

The pound has actually come under intense selling pressure since the start of the week, down some down 9.3% from Monday’s intra-day high.  This is blamed on the UK government’s latest bailout bucket was dismissed as too little, too late.  The UK economy won’t recover just because some more cash is printed and the troubled banks get some more balance sheet propping.  Barclays Bank share price was down under 60p, and that is one of the better banks.  RBS at 12p.  The pressure on Cable increased after that big expiry of Japanese Yen options, whcih caused knock-on effects on several currencies.

The pound actually fell to $1.3630, its lowest mark since September 1985.  That’s nearly 23 years.

However, today it did a bit better as US stocks had a small rally, and a report from Reuters said that an anonymous G7 source had said that the STG pound will be discussed at the upcoming Group of Seven meeting on 14 Feb. This source added that the overall situation in currency markets does not require verbal intervention at this point.

The STG pound could extend its recovery from the lows touched yesterday as markets discount the negative developments in Britain, some analysts said. A floor seems to have been rerached, said some, as most bad news is now built in to the price. £1 = £1.30 seems to be a low, just as $2 was rather toppy.

The €uro also recovered from a 6-week low. Yesterday afternoon during the New York session the Euro was at $1.3020, up from $1.2900 the evening before.

The US dollar was at JPY 89.43, down from JPY 89.71.

The Euro was at JPY 116.45, up from JPY 115.72.

The £STG was at $1.3969, up from $1.3932.

The US dollar was at CHF 1.1546, up from CHF1.1470 late on Tuesday.

The Japanese Yen gained to a 7-year high against the Euro and over a 13-year high against the US dollar on Wednesday after the expiration of a large options contract priced at JPY 90. This massive deal reverberated through the Forex market, adding to the early downward pressure on the £STG and Euro against the US dollar as well.

Yesterday the dollar fell to JPY 87.10, which was its lowest level since July 1995, whilst the Euro fell to JPY 112.08, its lowest level since March 2002. There is typically a lot of hedging around such over-the-counter (OTC) options, and with currency markets currently tarding on thinner volume than in normal economic conditions, these large option trades actually represent a massive portion of trading in a particular currency pair.

The Euro fell back yesterday to a fresh 6-week low of $1.2825. This is really on the back of poor economic data from Eurozone, and after ratings downgrades by Standard & Poor’s downgrade for Spain, Greece and Portugal. Germany also announced its economy will see its worst performance in six decades this year due to a slump in exports and capital investment.

The dollar is now considered a safe-haven because it is the world’s reserve currency, whilst the JPY benefits due to Japan’s large foreign-exchange reserves and current account surplus.

Euro Loses Earlier Gains Vs Dollar
 
The euro weakened against the US dollar today, and actually hit a 7-year low against the JPY. 

On Wall Street the DJI was up early doors, but pulled back after the initial rise. Investors and traders are moving back in to the dollar as it is now seen as safer, and the ‘Obama factor’ is also helping.  The JPY is also seen as safe at the present time.

With the dollar seen as the world’s reserve currency, it is being bought as considered a safe-haven. The JPY is also seen as safe due to the massive foreign-exchange reserves it has, together with its current account surplus. When stock markets fall these currencies usually gain.

The euro actually fell as low as $1.2880, still off the fresh 6-week low of $1.2845 that it hit overnight, and to its lowest level against the JPY since March 2002, JPY 112.92.  It is currently seen as that any more dollar dips are actually an opportunity to top up on the US green back.

The euro has been declining on low global stock markets, worsened by the banking sector troubles across Europe, coupled with broad economic concerns. Germany announced its economy will see its worst performance in six decades this year due to a slump in exports and capital investment.  Germany has always been seen as strong.

This morning the euro was at $1.2880, down from $1.2900 last night, whilst the US dollar was at JPY 88.04, down from JPY 89.71.

The euro was at JPY 113.39, down from Y115.72.

The £STG was at $1.3765, down from $1.3932.

And the dollar was at CHF 1.1484, up slightly from CHF 1.1470 last night.

The US dollar fell back against the JPY earlier to a 5-week low of JPY 87.90. The Japanese Yen is considered relatively safer. But these losses came before any significant move in the stock market.  There had been large option expiry at 10am New York time for a JPY90.00 strike that looks like it was taken.  There is usually alot of hedging going on when there are such large OTC options in play.  These hedges were then unwound afterwards.