Forex Daily Analysis - Thursday, Aug 30th

Another Bout of Carry Reduction

The ongoing theme in the markets is still biased towards a reduction of risk across the board, giving fixed income an upside swing. USD rallied after the FOMC minutes despite the outlook is dovish...

Overnight News Bullets

  • German GfK Consumer Confidence (Sep) out at 7.6 vs. 8.5 expected.
  • Swedish Manufacturing Confidence (Aug) out at 5 vs. 8 expected.
  • Swedish Consumer Confidence (Aug) out at 19.7 vs. 19.9 expected.
  • Swedish Economic Tendency Survey (Aug) out at 112.3 vs. 116.6 prior.
  • Swiss KOF Leading Indicator (Aug) out at 2.06 vs. 2.15 expected.
  • US MBA Mortgage Applications (out at -4.0% vs. -5.5% prior.
  • NZ Building Permits (Jul) out at -15.5% vs. 15.8% prior.
  • Japanese Large Retailer’s Sales (Jul) out at -3.8% vs. -3.0% expected.
  • Japanese Retail Trade YoY (Jul) out at -2.2% vs. -0.8% expected.
  • Australian Capital Expenditure (2Q) out at 6.3% vs. 2.0% expected.
  • Australian Current Account Balance (2Q) out at -16B vs. -15.7B expected.
  • NZ NBNZ Business Confidence (Aug) out at -33.8 vs. -38.5 prior.
  • Japanese Small Business Confidence (Aug) out at 47.5 vs. 48.4 prior.

Market

  • FX: Carry Trades rebounding strongly yesterday, but JPY strenghtened o/n.

O/N Data Heat map:

EU US JP UK SZ AU CA NZ NO SE FR
- - - + + +


Calendar

Today's Highlights:

Time (GMT) Region Release Consensus
07:55 GE Unemployment Rate sa (Aug) 8.9%
08:00 NO Retail Sales vol. sa. MoM (Jul) -1.9%
08:00 NO Unemployment Rate (Aug) 2.0%
08:00 IT Retail Sales YoY (Jun) 1.0%
08:30 UK Net Consumer Credit (Jul) 0.8B
12:30 CA Current Account BOP (2Q) $8.1B
12:30 CA Industrial Product Price Index MoM (Jul) -0.5%
12:30 CA Raw Material Price Index MoM (Jul) 0.5%
12:30 US GDP Annualized (2Q P) 4.1%
12:30 US Personal Consumption (2Q P) 2.7%
12:30 US Core PCE QoQ (2Q P) 1.4%
12:30 US Initial Jobless Claims 320K
12:30 US Continuing Claims 2575K
14:00 US Help Wanted Index 25
14:00 US House Price Index QoQ (2Q) 0.3%
14:30 US EIA Natural Gas Storage Change 43
17:00 FR Unemployment Rate (Jul) 8.0%
23:30 JP A lot of Japanese figures (Jobless Rate, Job-To-Applicant Ratio, CPI, Household Spending, Industrial Production, Nomura/JMMA Manufacturing PMI)

This and Next Week’s Highlights:

Date Region Release
31 Aug SZ CPI
31 Aug GE Retail Sales
31 Aug NO Credit Indicator Growth
31 Aug UK GfK Consumer Confidence Survey
31 Aug US Personal Income, Personal Spending, PCE Deflator, PCE, Chigago Purchasing Manager, Factory Orders, University of Michigan Confidence, NAPM-Milwaukee, Baker Hughes U.S. Rig Count, Bernanke speaks at FED symposium.
31 Aug AU Retail Sales, Trade Balance, Private Sector Credit, Exports, Imports,
31 Aug JN Vehicle Production, Housing Starts, Annualized Housing Starts, Construction Orders
31 Aug CA GDP
3 Sep AU AiG Performance of Manufacturing, TD Securities Inflation, Building Approvals, Inventories, ANZ Job Advertisement, Company Operating Profit.
3 Sep JP Capital Spending, Labor Cash Earnings, Overtime Earnings, Vehicle Sales.
3 Sep E-Z A streak of PMI Manufacturing figures.


What's going on?

  • A strong rebound in markets yesterday, but we remain bearish, as there are still too many subprime problems on the balance sheets of financial companies.
  • Bernanke will be speaking tomorrow at the Fed Symposium in Jackson Hole. It’s difficult to see how he can save the markets.


FX

EURUSD to break higher, despite liquidity-need-flow supporting USD?

http://www.saxobank.com/__DotNet/Site/Analysis/GetImage.aspx?ResUID=34fe5c0b-99e6-4721-8f6c-73249e506c22

EUR USD JPY GBP CHF AUD CAD NZD NOK SEK PLN
- + - + - -

FX Trading Strategies

Pair Supp. Resis. Comments
EURUSD 1.3563 1.3685

The need for liquidity in US financials is supporting the USD, but

if 1.3685 is broken, we will see a move towards 1.3800.

Watch additional USDJPY selling as a precursor for EURUSD strength.

Risk warning : ForexWebTrader shall not be responsible for any loss arising from any investment based on any recommendation, forecast or other information herein contained. The contents of this publication should not be construed as an express or implied promise, guarantee or implication by Forexwebtrader that clients will profit from the strategies herein or that losses in connection therewith can or will be limited. Trades in accordance with the recommendations in an analysis, especially leveraged investments such as foreign exchange trading and investment in derivatives, can be very speculative and may result in losses as well as profits, in particular if the conditions mentioned in the analysis do not occur as anticipated.

Posted by izone.net

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FOREX : Foreign Exchange Market

FOREX is a word play on the term Foreign Exchange Market. It is a market for buying and selling of currencies from all over the world. Certainly, such transactions are bound to be voluminous. It is just an estimate that there are about transactions of $1.5 trillion USD on a daily basis in the FOREX. Now just compare this with the paltry $300 billion USD a day transactions for the US Treasury Bond and the $100 billion a day transactions for the US Stock Exchange.

The FOREX came into existence in 1971 when the fixed currency exchanges were abolished. Currencies no longer had fixed values after that; on the contrary, their rates (mostly taken in comparison with the USD) were fluctuating, and changed on a daily basis. Throughout the seventies and the eighties the FOREX grew steadily, showing more advancement in the later years. The market has stupendously grown from $70 billion USD a day to the staggering amount that it transacts today on a daily basis.

There are actually about five thousand trading institutions in the FOREX. These include international banks, central government banks such as the US Federal Reserve, and commercial companies and brokers for all types of foreign currency exchange. The best thing that shows the unbiased nature of the FOREX market is that it has no fixed headquarters anywhere – it operates primarily from all major cities like New York, Tokyo, London, Hong Kong, Singapore, Paris, Frankfurt, etc. One can even use the telephone or the internet to make the transactions. The major businesses at the FOREX are the buying and selling of products in other countries. Several transactions are also conducted from the currency brokers or traders who stand to make small profits with the daily fluctuations in the market.

Most of the FOREX business is centered on big banks and financial institutions, but it doesn’t mean that the FOREX is inaccessible to small investors. The recent changes in the financial regulations have effectuated this accessibility. Earlier, a minimum transaction size was required to conduct business with the FOREX. But the current rules have made it possible to break large inter-bank units into smaller bits. Each bit is worth as less as $100,000. This makes it possible to each individual investor through loans that are extended for trading, known as leverage. The ratio to control the lots is 100:1. This means, every $1000 USD will allow one to control $100,000 on the FOREX.

The benefits of trading with the FOREX are mentioned below:-

(1) Liquidity of Investments – As the FOREX is a huge market, the funds have a very high degree of liquidity. This is because of the presence of the international banks who provide their bids and carry out a large number of transactions on a daily basis. Therefore, there is always a buyer or seller for any type of currency.

(2) Highest Degree of Accessibility – The FOREX is open 24 hours a day for 5 days a week. Every Monday morning the exchange opens at Australian Standard Time and closes on Friday afternoon at New York time. Greater accessibility is provided because the transactions can be conducted from the person’s home or office.

(3) Open Market – At the FOREX, there are no secrets. All the fluctuations that occur in the market are made accessible to everyone at the same time. There is no insider trading in the FOREX.

(4) No Commission – There is no hassle of paying commission to the brokers in the FOREX. Here the brokers earn by setting up a difference between the buying price and the selling price of a currency, which is known as a spread.

It must be understood by now that for the FOREX to work effectively, the currencies must always be traded in pairs. For instance, the Japanese yen must be traded against the euro. When one kind of currency is sold, there should be another to be bought in its stead.

The profit happens because there is always mobility between the different currencies. Even if there is a miniscule change in the exchange rate, then it could mean substantial changes in the profits due to the large amount of money involved in the transactions. People are thronging to the FOREX and not any other institution due to the trust that they have in it. To add to the advantage, the market is absolutely well-advanced and uses sophisticated software for dealing out its transactions.

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