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Archive for the ‘Economics’ Category

Monday 04/14/08

  • Currency trading end of last week into this week is like the Abbet and Costello “Who is on first and what’s on second” bit, confusing and violent.
  • G7 Language was purposefully vague not referencing China’s currency but general currency fluctuations- market tried to anticipate intervention action which caused more violent price action overnight and through today’s trading sessions.
  • Sunday Asian and European markets took the time to reduce risk led by Fridays’ GE news and US equities had potential and going into today to sell off dramatically – WAMU posts poor earnings prompting dollar selling and JPY holding steady while SKF rises. While US markets holding up steady as well – By commodity stocks and a weak dollar
  • Commodities rally while the currencies struggle??? Re-iterate the strong correlation between $ and Commodities. Highlighted by NY trading session.
  • Promptly discount US retail sales – housing later on this week could be a catalyst
  • UK housing tonight watch for a drag on the good news overnight of PPI input
  • NZD might be showing some weakness on Retail overnight and then CPI tonight may put a drag on the bear flag on the AUD/USD 4 hr chart
  • What are pro CTA’s doing YTD: 2.5% to crack top 10, 27% to be par with #1 ytd leaders managing over a mil and under 10 mil

Audio Commentary Link

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A slew of information and action happening this week and last, the boys give a good run-down of the action in there Commentaries.

  • Don’t Be fooled by the Commodity Rally….. Watch the price action to confirm a breakout. Is it possible to see the dollar and ‘Stuff’ go up long term?
  • Uptick in Jobles Claims – what is up with that bro?
  • ISM is better than expected but still below 50 – which is bearish
  • Commdity Bull very, very Short term – cautious because $CRX.X, no GLD or SLV or KIWI buyers stepping in because of non-farms
  • Equities Trader are no dummies – Buying commodity stocks as a hedg for tomorrow
  • Timing of trades today seems curious
  • The TAX payer is going to be left holding the bag through inflation – Jimmie what did Countrywide tell you
  • Sara – Get back to SnR – is what you are doing repeatable, maybe it is analysis of entry setup, reuce the pip count and keep practicing, focus on few pairs.
  • George – We didn’t know – near term downtrend, RBA looking to lower rates and commodities cooling off

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Fed BunnyIt has been a week now since the Bear Stearns collapse and the Federal Reserve decision to bail them out and lower rates by 75 basis points. Now what??? We see that Oil is starting to head back up and that the rally that we had in the markets were short and sweet. The dollar seems to be getting crushed again and may end up retesting the highs of 1.5900 again. I would like to know your thoughts on the Fed matters. Please fill out the poll so we can get your opinion on what the Fed is doing. Who knows, maybe the Fed will listen this time.

~ G

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293homealone121107.jpgWell, maybe while you were getting ready for bed. The Federal Reserve Bank decided to make an emergency move this evening and cut the bank lending rate to 3.25 percent from the 3.50 percent it was at earlier. This move made by the Fed was meant to “try” and create some stability in the financial markets. Also, at the same time, Bear Stearns (BSC) is being bought out by JP Morgan (JPM) at a steal of a price. This last minute buyout and the move by the Fed (who also approved this buy out by guaranteeing the deal with $30 billion) had an immediate effect on the overseas market and crushed the dollar. The EUR/USD hit a high of 1.5905 and the YEN hit 12 year low against the dollar at 95.74. Gold also was trading (at time of posting) around 1,026 an ounce. (I guess there goes the gold teeth I was considering!)

One way to help you against the falling value of your dollar is to hedge against it with the other currencies like going long the Euro or even long the Yen. Any trading against the dollar seems to be the most logical move. When asked what should be done about the financial crisis in the US, Federal Reserve chairman Ben Bernanke said “I don’t know!” No wonder the dollar is crashing and the basic carry trade is dead.

Well, hedge your bet for now or wait and see if the fed moves some more on Tuesday with another cut of 75 basis point. Bernankes strategy seems to be trying to keep the economy supported and worry about inflation later. We may see on the EUR/USD 1.6000 before Tuesday if the market sees even more weakness. Also, the USD/JPY may see an even lower level below 95.00 as weakness in the dollar continues. Tomorrow is a new day.

~ G

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The Federal Reserve moved today to add liquidity to the markets by announcing a series of actions with other central banks to help improve liquidity and lending for the markets. The Fed are taking this coordinated action without cutting interest rates due in part of rising inflation. US markets showed instant gratification in pre-market trading. and the Dollar rose in strength. The EUR/USD reversed an earlier move 150 pip run up right after the announcement. The USD/JPY ran up 120 pips after the announcements. With all this good news, the bulls may be back for the dollar.

This coordinated effort with the other central banks is being excepted very well with the ECB because it falls in line with what they are trying to achieve. Time will tell if it is a good move for the US markets and other markets around the world.

~G

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The Group of Seven (G7) nations – France, Germany, Italy, Canada, Japan, United Kingdom, United States of America – met this weekend. The finance ministers of these countries meet a few times a year to discuss their own, and the global, economy.

Sometimes this is a bigger event than other times. For example, many months ago when the carry trade was out of control the G7 meeting was watched with baited breath, because if the G7 focused on the carry trade it could spoil everyone’s fun (if they hint at intervening and messing with the currencies involved in the carry trade, then many traders would exit these trades causing prices to fall).

Not much happened Saturday. But this is interesting from a “big picture” fundamentals perspective. The nuts and bolts:

 

  • About the U.S.: In the United States, output and employment growth have slowed considerably and risks have become more skewed to the downside, but long-term fundamentals remain sound and we expect growth to continue in 2008. We note that downside risks still persist, which include further deterioration of the U.S. residential housing markets; tighter credit conditions from prolonged difficulties in the financial markets; high oil and commodity prices; and heightened inflation expectations in some countries.
  • Outside the meeting, the ECB said that lowering rates is not on the agenda – good for the euro.
  • Outside the meeting, the BoC said that lowering rates is on the agenda – bad for the loonie.
  • Downside to the global economy is continuing to “slow somewhat in the short-term” – bad for most currencies except the yen and franc.
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Their statement is here. Takes about 5 minutes to read, if you’re into economics. Keeping up on things like this can help you have a “posture” regarding a currency beyond what the charts show, and give you a bit of an edge. Just keep reading things like this and it gradually sinks in …

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