Greenback Posts on Forex Blog
Euro, Pound Fall on European Pessimism
Aug 7, 2008
The Euro is off sharply against most of the majors (EURAUD is currently the only exception). FX markets are adjusting for a rapid slow down in the Eurozone. Indeed, rumors abound that Eurozone Q2 GDP will be negative when reported Thursday August 14 at 2am est. Overall, the economic calendar is laden with UK and Euro reports, which may partly account for the 200+ pips drop in the EURUSD.
For the greenback, today's rally has to be somewhat of a head scratcher. Today&39;s news would have clobbered the dollar last month. Citigroup and Merrill Lynch announced they are buying back a combined $19 billion in securities from investors. AIG earnings disappointed big time. And, their was yet another pipeline attack, this time Turkey.
That the dollar is rallying in the face of such negative news may be a sure sign of a bottom.
The dollar is certainly favored in overnight index swaps, which are pricing in cuts of 50bps for the UK and 25bps for the ECB over the next 12 months. Conversely, the index is pricing in 75bps in US rate hikes over the next year.
Technically speaking, the Euro has fallen below a significant support at 1.53. The 50% fibonacci of 1.60 comes in at 1.5175, which should provide the next significant level of support.
Greenback, Euro, EUR, Pound, USD
Oil, Bank Earnings Drive USD Higher
Jul 17, 2008
FX Traders caught up in the fears of an American financial apocalypse have relented to the change in market perceptions the last 2 days.
Most notably has been an $18 dollar drop in oil futures. Since Fed Chairman Ben Bernanke spoke before the Senate on Tuesday, oil has seen a precipitous drop. 3 factors seem to be driving the drop off:
a) a perception that a global slowdown will reduce oil demand below current forecasts b) A notable uptick in US supplies on Wednesday c) a perceived cooling in Middle East tensions as the US seeks to establish an Interest section in Iran and Israel - Hezbollah exchange prisoners.
Oddly enough, while I believe traders have over reacted to credit concerns recently, I also believe traders are over discounting Middle East problems. The Hezbollah celebrations and political spins of victory seem to increase the chance of an armed conflict. With Prime Minster Olmert stepping down in September, Israeli hawks seem destined to take the reigns of the next government.
On the credit front, the US has seen a significant rebound. US Banckcorp, Wells Fargo, and JPMorgan Chase have beat analysts expectations. And, Fannie Mae and Freddie Mac have rebounded in a big way. Undoubtedly, this was triggered by the 3 prong attack of Bernanke, Paulson, and Cox. IMO, SEC Chairman Cox's banning of naked shorts may have been the biggest impetus for the sudden reversal in the fortunes of these struggling financials.
So where to now?
Good question. For tomorrow at least, things should be Dollar bullish as German PPI plus Citigroup earnings may give a nice little bump up in the EURUSD.
OTOH, if PPI is in the least bit tame, and Citi joins Wells Fargo and JPMorgan, look for a pull back below 1.57.
In the near term, I remain as confused as just about every other financial body on this trade. But, as an old trader friend used to tell me, their is no such thing as a double top. That is, if a market tests a point twice and fails, we are almost certain to see a pull back of sorts. If that is to be the case, the EURUSD could easily fall back to the 1.53 levels.
Greenback, EUR, oil, USD
Euro Drops 200 Pips on NFP, Trichet
Jul 3, 2008
With all signs pointing to a possible EURUSD rally - the events let traders down.
After briefly hitting a high of 1.5910, the EURUSD pair has dropped to the lower end of 1.57.
In his morning conference, Trichet repeatedly stated the central bank has "no bias". However, he cautioned that the absence of phrases such as "heightened alertness" and "strong vigilance" was not significant.
In a possible sign for the upcoming G8 summit, Trichet stated "We are convinced that sharp fluctuations between major currencies could have implications for economic and financial stability".
With energy and food inflation high on the G8 agenda, and world leaders gathering next week in Hokkaido Japan, their is some chance of either a forex or energy market intervention.
Meanwhile, in the states, the Non Farm payroll report came close to expectations, losing 62k jobs. and unemployment held steady at 5.5%. Hourly wages grew 0.3% as expected, indicating wage inflation is still not a factor.
However, the ISM service sector slipped back into contraction (48.2 vs expected 52), while the April and May NFP reports were revised down.
Expect the majors to stay range bound until the G8 summit concludes.
Greenback, ECB, G8, EUR, Trichet, USD
Rally in US Dollar Index?
Jun 17, 2008
The folks at Marketclub are calling for a rally in the US Dollar Index from the current level of $74 to a somewhere around $81. That is a whopping 10% swing.
They base this belief on a) their custom triangle trading indicator b) technical analysis and c) fundamental analysis of the marketplace.
Chuck has said for awhile now that the Triangle indicator is surprisingly accurate. Generally when using their indicator, traders can look at weekly charts for trends, and daily charts for entry points. However, with the US Dollar index, it behaves a bit different. Trends are indicated on a monthly level. Their triangle signal has given the first upside signal on the US Dollar Index in 20 months!!
From a technical analysis point of view, the index has been trading generally sideways for the past 4 months. The pivot point formed in early March 08 closely resembles the pivot point formed late 2004 that lead to a 1 year rally.
From a fundamental perspective, their call absolutely makes sense. The Fed has been talking up the dollar for a good month now. Except the Euro and Aussie, moth other banks have somewhat mollified recent commentary (including the BOE today).
Currently Marketclub is giving away a 2 week free trial. This is a rare opportunity that is only offered once a year. Take a few minutes out of your day and see what they are offering, it will be well worth your time.
Watch the US Dollar Index video
Greenback, technical analysis, USD
US Inflation Higher Than Expected
Jun 13, 2008
US Inflation numbers:
Year over year: 4.2%
May Headline inflation: 0.6%
May Core inflation (minus food and energy): 0.2%
IMO, this number all but guarantees a rate hike in the near future - no later than August.
The EURUSD has broken below 1.54 to 1.5339, the USDJPY has passed through 108 to 108.21
Greenback, inflation, CPI, USD
Greenback Moves on Retail Spending, Trading Flat Ahead of CPI
Jun 12, 2008
Bush and Congress can pat themselves on the back - at least temporarily. Consumers armed with extra cash from the stimulus package and a jump in energy prices sent retail sales higher in May.
Sales rose 1%, 1.2% excluding autos. That beat expectations for +0.5% (0.7% excluding auto) rise in retail sales.
The positive retail sales combined with InBev's $46 billion bid for Anheuser-Busch and continued down playing of ECB rate hikes across Europe lead to a strong daytime rally for the Greenback. (Notably, French Finance Minister Christine Lagard again took a pro USD stance suggesting a Euro rate hike might be off the table after this weekends G8 meeting).
The EURUSD fell to €1.542, the GBPUSD to £1.9477. On the other side, the greenback rose to $107.69 against the yen.
In early hours of the Asian session (1am est) the USD appears to be trading flat. The EURUSD (-0.09% to 1.5435) and GBPUSD (-0.06% to 1.9465) are trading slightly to the down side. The Yen is flat at 107.77.
Watch the inflation numbers at 8:30am EST! Headline year-over-year should come in at 4%, while core (excluding energy and food) should come in at 2.3%.
After your done trading the inflation report - you should probably get out of the market ahead of the weekend G8 meeting. Unless you have Trichet on speed dial, in which case, your probably not reading this blog.
G8 meetings can produce massive fundamental swings 5 factors strongly suggest a major policy shift this weekend.
1. A bullhorn like proclamation from the Fed and US govt that inflation is the top priority
2. The (not so) subtle backing down of the ECB from Trichet's comments last week
3. The dual storm of economic downturn + inflation numbers in the UK (and people worry about stagflation in the US!)
4. Softening of the Aussie and Kiwi economies.
5. The Gulf Cooperation Council's affirmation that they will peg to the Dollar when they form a monetary union.
Greenback, inflation, G8, CPI, USD
USD Up Late on Retail Sales Expectations
Jun 11, 2008
After a disappointing Beige Book, forex traders look to a spike in energy and food prices is likely to lead to a bump in US retail sales
Expectations are for a rise of 0,5% (0.7% excluding auto). That number should be taken with caution, as a) the number is NOT adjusted for inflation and b) consumers have clearly cut back on discretionary spending on items such as apparel and furniture. Gas prices have gone from a nationwide average of $3.20 to $4.00 during that time.
Greenback, oil, USD
Signs of USD Rebound Over the Next Few Months Continue to Mount
Jun 5, 2008
Fed comments, improvements in services, ADP Jobs, and more Asian Oil subsidies may signal a fundamental rally in the greenback.
For the second day in a row, Fed head Ben Bernake took a hawkish stance on inflation. He indicated that long term indicators of inflation were of "significant concern" This is the 3rd time in a week (President Fisher last week) that a Fed member has made comments focusing on inflation. With Mishkin on the outs in August, the chance of a US rate hike this fall looks positive.
In addition, the US economy continues to skirt inflation. The service sector accounts for around 80% of American jobs. Well, today the ISM non-manufacturing reported a reading of 51.7, 0.7 higher than forecast. It represented a minor dip from the April reading of 52. A number above 50 represents growth.
Also, ADP numbers for private employment showed 40k new jobs, 70k over expectations. However, that ADP number needs to be taken with a grain of salt. The number has been wrong by an average of 104k since November. Q1 productivity also beat expectations slightly, with a 2.6% reading vs a forecast 2.5%. By comparison, 2007 Q1 productivity was up 1.8%.
Meanwhile, numbers in the UK and Europe continue to sour. Eurozone retail sales fell -0.6 vs an expected gain of 0.2%. And services seemed to contract for both the UK and the Europeans. The UK slipped into contraction with a PMI service reading of 49.8 vs a forecast of 50.5. The Eurozone PMI service number came in at 50.6 vs an expected flat reading of 51.1.
As expected by many traders, Asian countries have begun cutting subsidies. Indeed, Malaysia announced a whopping 40% raise in gas prices, and 67% rise in diesel prices! Malaysian consumers of gas will now pay $3.30 a gallon of gas (vs $2.32) and $3.04 for a gallon of diesel (vs $1.22). Malaysia - a net exporter of oil - becomes the 5th major Asian country to cut subsidies. Indonesia (raised prices 28.7% in late May), Taiwan (ended all price controls effective June 1), India (raised prices 11% this week), and Sri Lanka (raised prices 25%) have already acted on the skyrocketing cost of oil. It should also be noted that Egypt, the most populous Arab country, raised prices 40%.
As an aside, Chuck thinks many governments and traders underestimated the impact of Cyclone Nargis and the China earthquake. The two mega-disasters created a sudden need for diesel fuel to power generators. Economic historians will eventually recognize that disasters and ambitious speculation was the reason oil reached $135. July futures fell to $122.30 today.
The EURUSD traded in a 50 point range over 1.5425. The greenback is up 4% vs the Euro since the all time high of $1.6019 in late April.
Greenback, jobs report, Bernanke, oil, Fed
Ending Dollar Peg would Not Help Gulf States Fight Inflation
Jun 1, 2008
US Treasurer Henry Paulson met with members of the of the Gulf Cooperation Council (GCC) over the weekend. Among the topics discussed was gulf state inflation and the dollar peg. Currently, 5 members of the GCC 6 (Saudi Arabia, Qatar, Oman, Bahrain, and the UAE) peg their currencies to the dollar. Kuwait, the sixth GCC member, removed their dollar peg in May of 2007 but still faces looming inflation problems.
According to Secretary Pauslon, the GCC agrees the dollar peg does NOT drive inflation "to a significant degree". Secretary Paulson will meet with a delegation from the United Arab Emirates on Monday.
In April, both the UAE and Qatar indicated they were unlikely to remove the peg for the foreseeable future. However, On May 1st, Kuawait Finance Minister Mustafa al-Shimali indicated that some members of the GCC were considering dropping their pegs.
It is important to note the GCC buys more goods and services from Europe. As a result, a Euro peg would have actually increased inflation at a faster pace than the current Dollar peg.
Read more at CNBC
Greenback, inflation, USD
EUR Slips to $1.5547 on German Unemployment, US GDP
May 29, 2008
Perhaps the table has turned..
Last week it was the Euro looking like it had a bright future on expectations for a ECB rate hike.
The last 2 days,.a string of positives has put the greenback on a positive footing.
In the latest headlines, German unemployment rose by an unexpected 4k applicants. Expectations had been for a 25k drop. Adding to that, Eurozone consumer confidence fell to a 32 month low of -15. Expectations had been for a stable reading of -12. However, it would be a mistake to miss why the ez confidence number fell. It appears the main driver was a rise in consumer prices across the Euorzone, which rose 3.3%. This is consistent with the inflation rate of 3% reported by Germany yesterday.
On a more positive note, Eurozone Retail PMI rose to 53.1 from a reading of 41.8 in April. This is the largest year-over-year increase in 13 months. Sales rose in Germany and France, but fell in Italy.
Back here in the States, US Q1 GDP was revised up from 0.6% to 0.9%. The revision was largely driven by exports, as the annualized trade deficit fell to $480.2 billion. That is the smallest since 2002. In addition, Dallas Fed President Fisher and Minneapolis President Gary Stern came out with warnings on inflation. You can, and should, read their comments at CNBC.
In other news, Japanese retail sales fell to 0.1%, far below expectations for an 0.6% reading.
The EURUSD has fallen to $1.5533 in early hours on the West Coast. It may test the $1.550 resistance depending on comments later today from Fed Chairman Bernanke (2:30 est) and Vice Chairman Kohn (7pm est). The greenback has climbed to ¥105.164 yen, well above the 10 day moving average.
Greenback, Euro, GDP, jobs report, EUR, USD
Data Bad, But Dollar rebounds on Oil Drop
May 27, 2008
First, the good news. Oil fell $3.34 (2.5%) today to close at $128.85.
Now the bad news. The Conference Board's Consumer Confidence Index fell more than expected to 57.2. That is the lowest reading since October 1992, which is really scary when we consider that neither the dot-com bust or 9/11 was bad enough to create such negative sentiment. Market participants had expected a reading of 61. Digging deeper, business conditions fell sharply while jobs sentiment remained fairly flat.
In housing, new home sales were up 3.3% from March. However, that number obfuscates the fact that March was revised from 526k to 509k. Year over year, new US home sales are down more than 40%. Given that February to June is the typical apex in new home sales, these weak numbers look concerning. The median price rose by 1.5% to $242.5k, but that too hides the extras thrown in by homebuilders to move units. Echoing the minor improvements in price and sales, April inventory fell to a 10.6 month supply (from 11.1 in March).
The Case-Shiller index was down 14% YoY, the biggest drop since the index was created in 1988.That number can probably be taken with a grain of salt, as it only measures the 20 largest cities and the index did not exist during the late 80s housing bust.
Again, despite the pessimistic news, the Oil number seemed to matter most, as the USD was up against most of the majors Tuesday.
Greenback, housing, oil, USD
Dollar Drops on Homes, Oil
May 23, 2008
The US Dollar was down against most currencies on Friday. The usual suspects - surging energy prices and a further decline in housing - were to blame.
The National Association of Realtors reported that US Home sales slid 1% to 4.89 million units. That was better than the market expected number of 4.55 million units. However, the markets found no reason to be optimistic as supply continued to grow and prices kept dropping.
Home sales were down 17.5% YoY (5.93 million) and a whopping 30% from the peak of September 2005 (7.2 million). The lack of home buying has sent the supply up to 11.2 months - a record level. The median price for existing single family homes declined 8.5% YoY, to a little over $200k.
On the energy front - oil rose $2.67 to close at $131.65. Other futures marched along. Gas rose 6.43¢ to $3.3687, diesel was up 1.9¢ to $4.558, heating futures rose 7.11 ¢ to $3.8461, and nat gas rose 19.8¢ to $11.563.
Bring back the sanity! IMO, no way fundamentals support the energy numbers. Demand for gas is down, gas inventories stand at near all time highs, and several pipeline projects that will reduce risk premiums and make transportation more efficient. These new pipeline routes will begin to open in the next few years.
On the heels of this pessimistic data, the US Dollar finished lower against the Euro, Japanese Yen, Swiss Franc, and Australian Dollar. Notably, the USD was flat against the Pound and up slightly vs the Canadian Dollar.
Greenback, housing, oil, USD
EURUSD Hits $1.5814, Then Retreats on Data, French Finance Minister
May 22, 2008
March Eurozone industrial orders dropped 1% month-over-month (MoM), twice the expected drop of 0.5%. Orders were down a whopping 7.3 Year-over-Year (YoY). Some traders who had predicted a testing of $1.60 (*cough* me), were stunned.
French Finance Minister Christine Lagard came out in favor of the Dollar, as she called the Euro's rise against the dollar "a major misalignment". Lagarde backed ECB concern over inflation, but hinted that Trichet may be "overly focused". She went on to say that other tools - including cash, and Trichet's comments when "he opens his mouth" were also available to the ECB chief. (Read more of Lagarde's comments at CNBC
On the other hand, ECB council member Axel Weber (another German, hmm, Eich bein Fx Manipulators?) came out today re-enforcing the notion the ECB may have to raise rates later this year.
In late trading, the EURUSD was at $1.5729
Greenback, Euro, EUR, Trichet, USD
US Dollar Rises On Positive Data
May 19, 2008
An index of leading US economic indicators was up 0.1% on Monday, 0.2% better than the expected. In other good news for the greenback, housing showed a surprising rebound, as construction (+8.2%) and building permits (+4.9%) rose. In addition, Southern California, one of the largest US markets in terms of value, rose 22% from March to April. The data supports the belief of many traders that the US may avoid a recession altogether. While the recovery is slow and weak, the US has not had 2 quarters of negative growth.
The housing data should be taken with a grain of salt. Construction is being driven by new apartment complexes and Spring typically sees an upswing in home purchases In a mixed sign, much of the buying was for foreclosures. While each foreclosure came with the pain of a default, purchases help to set a bottom. I personally thought most buyers would wait a while longer. The fact that people are coming off the sidelines now is further proof the worst may be over for the US.
In late trading, EURUSD is at $1.5527, the GBPUSD is at $1.8510, and the USDJPY is at ¥104.15.
Greenback, housing, USD
A Fundamental and Technical Look at the GBPUSD
May 17, 2008
Starting in early March (right around the time Bear Stearns was bought by JP Morgan), the USD staged a comeback against the Sterling. And then negative US data last Thursday and Friday - contraction in manufacturing, weakest consumer confidence number in 28 years - combined to slam the dollar.
From one fundamental perspective, things look bad for the dollar. While the cheap dollar is definitely helping to boost exports, the trade imbalance hurdle is very high. In 2007, the deficit ran at a whopping $738.6 billion! And that is down -9% from 2006 ($811.5 billion). In addition, other major central banks remain reluctant to cut rates, as was reinforced by the May 8th BOE and ECB decisions to hold interest rates steady. Indeed, Trichet was very clear that inflation - not economic slowdowns - remained the number 1 concern.
Yet glimmers of hope remain for the greenback. Foreign inflow has risen from $56.7 billion in January to $80.4 billion in March. And futures markets show an expectation that the US Fed is done cutting rates, with a 50-50 chance of a hike by October.
It is at confusing times like these that Chuck turns to his good friend - technical analysis. Recently Chuck has became an ardent fan of MarketClub's Trading Triangle. They offer a lot of the standard stuff - a trade score based on common indicators, quotes, and tutorials. But the real meat and potatoes of their analysis suite is their trés cool charting tool. Not only does Cash find this to be a highly intuitive and easy interface (see below), but the indicators are working great. On April 1st, they put out this great video analyzing the GBPUSD pair. Using fibonacci retracements and weekly indicators, they called for a downturn to the 38% retracement level of 1.951 (from the high of 2.10) And low and behold, where did the GBPUSD hit? Just under 1.95. If you are unsatisfied with your current indicators, or just looking to try out a new set, definitely check out Market Club
Greenback, technical analysis, fundamental, GBP, USD
Weak Manufacturing Data, Jobs Sends US Dollar Down Against Commodity Currencies.
May 15, 2008
US Manufacturin data continue to show signs of contraction on Thursday. The Empire Manufacturing index and the Philly Fed showed signs of contraction for a 6th month. The Empire Manufacturing reading came in at -3.2, down from 0.6. The Philly Fed did show some signs of life, rising to -15.6 from -24.9 Overall, Industrial production was down to -0.7%, after the biggest decline since Hurricane Katrina. In addition, jobless claims rose by 6,000 to 371k.
Depsite the bevy of bad news, the dollar was little moved agasinst non commodity currencies. (Perhaps these are lagging indicators?? Hmmmm). The greenback was up against the Swiss Franc and Euro.
Tomorrow could be a bigger day - with Housing Starts and the University of Michigan Confidence Index. reporting.
Read more at Yahoo
Greenback, Euro, jobs report, Franc, USD
Greenback Up Against Swiss Franc, Yen, GBP
May 6, 2008
US Treasuries continued to gain ground against other currencies. Against the Yen, the Dollar was trading at 104.81 (+0.12). The dollar aslgo gained ground on the pound sterling (+0.15) and the Swiss franc (0.009).
Read more at CNBC
Greenback, JPY, Franc, Yen, GBP, Pound, USD
