European Stocks Follow Wall Street Lower

2:21 PM / Posted by E-pr0 / comments (4)

European stocks opened lower Wednesday, as investors take their lead from overnight losses on Wall Street amid concerns about the strength of the global economic recovery.

The pan-European Dow Jones Stoxx 600 shed 0.3%. The U.K. FTSE 100 also lost 0.3%, while the French CAC-40 declined 0.6% and Germany's DAX slipped 0.1%.

"Equity markets could be set for another grueling session after the Dow Jones Industrial Average posted a triple-digit loss last night and Asian markets have followed suit," said Matt Buckland, a dealer at CMC Markets.

On Tuesday, the Dow Jones Industrial Average fell 161.27 points, or 1.9%, to 8163.60. The Standard & Poor's 500-stock index lost 17.69, or 2.0%, to 881.03. The Nasdaq Composite Index lost 41.23, or 2.3%, to 1746.17.

"Commodity prices remain under pressure, which is clearly weighing on the resource stocks, whilst the downbeat economic outlook is hardly doing anything to impress the banks either," Mr. Buckland added.

Attention will turn to the start of the second-quarter corporate earnings season in the U.S., with numbers from Alcoa leading things off.

Elsewhere, Asian stock markets were lower Wednesday, dragged down by ongoing weakness in oil and metal prices.

"The market's in a holding pattern," said Macquarie Equities broker Brad Gordon in Auckland. "There's all the talk of green shoots yet there are also lagging indicators of job losses."

NetResearch Asia chairman Kevin Scully warned the risk of further correction was high if the upcoming earnings season were to disappoint. "We might see some of the quick recovery premiums being given back, especially if and when the reporting season delivers or gives guidance that is lower than the forecasts."

Japan's Nikkei 225 closed down 2.4% at 9420.75, closing below 9500 for the first time since May 28. South Korea's Kospi Composite closed 0.2% lower, while Hong Kong's Hang Seng Index was last seen down 1.4%.

In the currency markets, the dollar gained against the euro Tuesday as risk appetite eroded with falling U.S. stocks ahead of the earnings season.

The dollar also found some favor after world leaders dismissed previous reports that a new world reserve currency to replace the dollar would be on the Group of Eight leading nations' meeting agenda. The gathering of heads of state begins Wednesday in L'Aquila, Italy.

The yen, which benefits from safe-haven flows as well, advanced against both the euro and dollar. The euro recently traded at $1.3872, and the dollar at 94.20 yen.

"A disappointing earnings season could push equities lower, and we expect further negative surprises to push the euro to test the downside of its recent $1.3750-$1.4350 summer range," said Ashley Davies at UBS.

Crude-oil futures have continued to weaken as doubts over the prospect of an economic revival continue to plague the market.

The August crude contract on Globex stood at $62.04 per barrel, down 89 cents, having settled Tuesday at $62.93 per barrel on the New York Mercantile Exchange.

European government bond markets opened firmer, benefiting from a flight to quality as money leaves the equity markets. The September bund contract stood at 122.18, 0.43 higher.

Alpha Aims to Take 40% of Canadian Stock Trading, Schmitt Says

2:19 PM / Posted by E-pr0 / comments (2)

July 7 (Bloomberg) -- Alpha Trading Systems, an equity platform owned by Canada’s biggest banks, aims to have as much as 40 percent of the Canadian market for stock trading “in a couple of years,” Chief Executive Officer Jos Schmitt said.

Alpha has gained market share from TMX Group Inc.’s Toronto Stock Exchange and TSX Venture Exchange since it started eight months ago. The firm captured 2.9 percent of equities trading in the first quarter, according to the Investment Industry Regulatory Organization of Canada. Schmitt has forecast that his Toronto-based company would have a 20 percent share within the first year.

“We are developing a clear roadmap to further growing that towards what I think should be 30 to 40 percent,” Schmitt said in an interview today.

TMX Group’s share of Canadian stock trading slipped below 90 percent in May after Alpha and rivals including Pure Trading, Chi-X Canada and Omega ATS gained, according to Kevan Cowan, head of equities at Toronto-based TMX Group.

“The market is going to be spread between a number of venues and I don’t think anyone will be above 50 percent, and the largest ones will be probably be around 40 percent,” Schmitt said. “That is where we’d love to be in a couple of years.”

Alpha said yesterday it will offer free trades at the market open and will also remove a premium for odd-lot trades on TSX Venture Exchange, starting Aug. 1. The company will also cut fees by 29 percent for stocks trading under C$1 ($0.86) and boost rebates by 7 percent for putting shares worth at least C$1 onto Alpha.

“This was very focused on trading fees, where I think the costs are indeed getting out of control,” Schmitt, 46, said.

Alpha may drop fees further in the future, Schmitt said.

“When we clearly see that activity continues to grow and rise at Alpha, we will continue to look at ways to make the market more attractive,” he said.

Yuan Deposes Dollar on China Border in Sign of Future

2:17 PM / Posted by E-pr0 / comments (0)

Huang Xinyuan, who sells mining equipment and pesticides to customers across China’s border with Vietnam, says he no longer wants payment in U.S. dollars and prefers the yuan.

Oil Falls a Sixth Day as Equities Drop, Gasoline Supply Gains

2:17 PM / Posted by E-pr0 / comments (0)

July 8 (Bloomberg) -- Crude oil fell, poised for the longest losing streak since December, as equities slumped and an industry report showed an increase in U.S. fuel inventories.

Oil declined for a sixth day after the American Petroleum Institute said gasoline supplies rose 767,000 barrels to 212.4 million last week. European and U.S. stock futures retreated and Asian shares tumbled on concern that second-quarter earnings reports will show the first global recession since World War II is far from over.

“The drop in equities is showing that people were over- optimistic on the economy,” said Clarence Chu, a trader with options dealers Hudson Energy Capital in Singapore. “Usually for this time of year we should be getting a draw in gasoline so if it’s building that’s a bad sign.”

Crude oil for August delivery fell as much as $1.06, or 1.7 percent, to $61.87 a barrel on the New York Mercantile Exchange, the lowest intraday price since May 26. Oil was at $62.19 a barrel at 2:51 p.m. Singapore time.

Oil in New York has declined 15 percent from an eight-month intraday high of $73.38 reached June 30 as higher U.S. unemployment raised concern that the economy of the world’s biggest energy-consuming country will be slow to recover.

“Given the data from the U.S., the market has become cautious on the outlook for an economic recovery and that’s tempered the oil price,” David Moore, a commodity strategist with Commonwealth Bank of Australia Ltd., said in an interview with Bloomberg Television.

Stocks Decline

The MSCI Asia-Pacific Index dropped 1.5 percent, falling for a sixth day. Futures on the Dow Jones Euro Stoxx 50 Index slipped 0.6 percent to 2,297 at 7:10 a.m. in London. The U.K.’s FTSE 100 Index may open 21 points lower, according to CMC Markets.

“A negative earnings outlook for the second quarter swept over the equities markets, helping to push oil lower,” said Mike Sander, an investment adviser with Sander Capital in Seattle. “The market is experiencing a push to go lower with a combination of over supply and negative economic sentiment.”

Machinery orders in Japan, the world’s third-largest oil consumer, fell unexpectedly for a third month in May, dropping 3 percent from April, the Cabinet Office said today. The decline is adding to signs that the recession isn’t moderating for the second-largest economy.

Crude oil inventories dropped 1.4 million barrels to 348.3 million, according to the API report. Stockpiles of distillate fuel, a category that includes heating oil and diesel, climbed 3.42 million barrels to 158 million, the highest since 1985.

Gasoline Supplies

The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.

Gasoline inventories probably rose 900,000 barrels last week, according to a Bloomberg News survey conducted before today’s Energy Department report. The department is scheduled to release its weekly report at 10:30 a.m. in Washington.

“If it is the middle of July and the U.S. consumer has excess supply of gasoline, then expect prices to start heading lower,” Sander said.

Gasoline for August delivery declined as much as 2.78 cents, or 1.6 percent, to $1.7050 a gallon. Yesterday, it fell 0.76 cent, or 0.4 percent, to end the session at $1.7328.

Oil also fell as the dollar advanced against the euro, reducing the appeal of commodities as an inflation hedge. The euro traded at $1.3892 to the U.S. currency at 2:50 p.m. Singapore time from $1.3924 yesterday and $1.4142 on July 1.

Brent crude for August settlement declined as much as 93 cents, or 1.5 percent, to $62.30 a barrel on London’s ICE Futures Europe exchange. It was at $62.57 a barrel at 2:50 p.m. Singapore time. Yesterday, the contract fell 1.3 percent to $63.23, the lowest settlement price since May 27.

Stocks in Europe, Asia Retreat; MSCI World Falls for Fifth Day

2:16 PM / Posted by E-pr0 / comments (0)

July 8 (Bloomberg) -- Stocks in Europe and Asia declined, sending the MSCI World Index lower for a fifth straight day, on concern that second-quarter earnings reports will show the first global recession since World War II is far from over.

Holcim Ltd. slipped 2 percent after the world’s second- biggest cement maker said it expects a “difficult” 2009. Amada Co. fell to a three-month low in Tokyo after an unexpected drop in Japanese machinery orders.

The MSCI World Index decreased 0.5 percent to 925.04 at 8:05 a.m. in London, the lowest level since May 15. Alcoa Inc. will kick off the earnings season today as the first company in the Dow Jones Industrial Average to report results. Analysts estimate profits fell an average 34 percent at Standard & Poor’s 500 Index companies in the second quarter, according to data compiled by Bloomberg.

“I am a bit concerned about the earnings season,” said Andreas Utermann, chief investment officer at Allianz Global Investor’s RCM unit. “I think the market is going to be disappointed somewhat. I am not certain we are not going to see further softness.”

S&P 500 futures added 0.2 percent after the gauge slid to the lowest level since May 1 yesterday. Europe’s Dow Jones Stoxx 600 Index sank 0.3 percent today, while the MSCI Asia Pacific Index declined 1.3 percent, falling for a sixth day.

France’s Correction

The Stoxx 600 has decreased 7.1 percent since June 11 on speculation share prices have outpaced the outlook for the economy after a three-month rally pushed valuations to the highest level since 2004. France’s CAC 40 Index today extended its drop from its June 1 high to 10 percent, the common definition of a “correction.”

Holcim slumped 2 percent to 57.3 Swiss francs. The company said it expects a “difficult” 2009 as the underlying economic developments haven’t shown an improvement through May.

The cement maker is also offering shareholders 50.3 million new shares at 42 Swiss francs apiece in a rights offer aimed at raising 2.1 billion francs ($1.9 billion) to finance the takeover of Cemex Australia.

Alcoa added 3 cents to $9.44 in Germany. The largest U.S. aluminum producer may report its third consecutive quarterly loss as lower demand from automakers and the construction industry keeps the metal at about half of last year’s prices.

Amada, a maker of metalworking machinery, retreated 4.1 percent to 556 yen in Tokyo as Japanese machinery orders unexpectedly fell 3 percent in May.

Honda Motor Co., which makes almost half its sales in North America, lost 4 percent to 2,390 yen after the Japanese currency strengthened against the dollar to a six-week high.

A stronger yen reduces income when overseas revenue is converted into local currency.

Infineon Technologies AG rose 7.3 percent to 2.64 euros. Europe’s second-largest chipmaker agreed to sell its Wireline Communications business to an affiliate of Golden Gate Capital Corp. for 250 million euros ($347 million).

Japan Stocks Fall Sixth Day as Yen Gains, Machine Orders Slow

2:15 PM / Posted by E-pr0 / comments (0)

July 8 (Bloomberg) -- Japanese stocks slumped for a sixth day as the yen strengthened, bank lending slowed and weaker- than-expected machinery orders fanned concern that recent gains have outpaced profit prospects.

Honda Motor Co., which makes almost half its sales in North America, lost 5.5 percent after Japan’s currency climbed to a six-week high versus the dollar. Mitsubishi UFJ Financial Group Inc., the country’s biggest bank by value, slid 3.4 percent as the nation’s bank lending growth slowed for a sixth month. Amada Co., a maker of metalworking equipment, tumbled 4.1 percent, as machinery orders unexpectedly fell 3 percent in May.

“The market is finally returning its focus to the present, rather than looking for an eventual recovery,” said Masaru Hamasaki, a Tokyo-based senior strategist at Toyota Asset Management Co., which oversees $14 billion. “The economic rebound won’t be rapid. It will take time, and share prices are beginning to reflect that.”

The Nikkei 225 Stock Average lost 227.04, or 2.4 percent, to 9,420.75 in Tokyo, the lowest close since May 26. The broader Topix index slumped 2.3 percent, the steepest fall in three weeks, to 888.54.

In New York, the Standard & Poor’s 500 Index dropped 2 percent to the lowest level since May 1, led by energy and technology companies.

The Topix soared as much as 36 percent from a quarter- century low reached in March on rising confidence government stimulus steps would succeed in reviving growth. Worse-than- expected U.S. unemployment data on July 2 fanned concern the recovery won’t materialize and has helped send the gauge lower for six straight days, its longest losing streak since July 2008.

Loans, Machinery Orders

Honda lost 5.5 percent to 2,390 yen after the yen climbed to as much as 94.14 against the dollar, a level not seen since May 22. Toshiba Corp., the world’s second-biggest maker of flash memory chips, lost 3.2 percent to 329 yen. A stronger yen reduces income when overseas revenue is converted into local currency.

Mitsubishi UFJ retreated 3.4 percent to 569 yen. Bank of Yokohama Ltd., one of the country’s biggest regional lenders, slumped 5.3 percent to 503 yen.

Lending at the nation’s non-trust banks rose 2.5 percent in June from the previous year, the Bank of Japan said today, compared with a 3.3 percent increase the previous month. It was the sixth consecutive month of slowing expansion.

Amada tumbled 4.1 percent to 556 yen. Makita Corp., the nation’s largest maker of power tools, fell 3 percent to 2,165 yen. Sojitz Corp., a trading house that derives almost half its profit from machinery dealing, lost 5 percent to 189 yen.

Semiconductor Equipment

Bookings for machinery, an indicator of capital investment intentions, dropped 3 percent in May from the previous month, the Cabinet Office said today. Economists had forecast a 2 percent increase. The data followed reports from the U.S. last week showing the unemployment rate rose to 9.5 percent in June and employers cut more jobs than forecast.

“The June employment data threw some very cold water on the overheated market,” said Yuuki Sakurai, president of Fukoku Capital Management Inc., which oversees about $10 billion in Tokyo. “The Japanese economy is going to revive through the comeback of the world economy, not just China or India, and we know that’s going to take some time.”

Additionally, Credit Suisse Group AG lowered its stance on Japan’s semiconductor production equipment industry to “market weight” from “overweight,” citing a weaker outlook for capital spending.

Aeon, Mixi

Dainippon Screen Manufacturing Co., a chip-equipment maker that was cut to “underperform” by the brokerage, plunged 8.7 percent to 263 yen. Tokyo Electron Ltd., which was also lowered to “underperform,” fell 5.2 percent to 4,340 yen.

Aeon Co. slumped 3.6 percent to 846 yen. Japan’s second- largest retailer posted a 2.49 billion yen ($26.1 million) loss for the latest quarter, its fourth deficit in the last five quarters.

Mixi Inc., operator of Japan’s largest social networking site, soared 17 percent to 687,000 yen, the biggest rally since October, after Morgan Stanley lifted the shares to “overweight” because the company should benefit from growing use of its services on mobile devices.

WORLD FOREX:Dlr, Euro Fall To 7-Week Low Vs Yen On Stk Slide

2:12 PM / Posted by E-pr0 / comments (3)

TOKYO (Dow Jones)--The dollar and euro fell to seven-week lows against the yen in Asia Wednesday as regional share markets slid, prompting players to take refuge in the safe-haven Japanese unit.

Short-term investors also got on board to sell other higher-yielding currencies such as the Australian dollar and British pound, which they consider riskier assets, for the yen, dealers said.

The selling of these currencies also pressured down the dollar against the yen, with the U.S. unit dropping to Y94.15, its lowest level since May 22. The euro also dropped to its lowest level since that day, falling to Y130.96.

Dealers said the falls were tracking drops in Asian share markets, led by Japan's benchmark Nikkei 225 Stock Average, which was down 2.4% in early afternoon trade.

"This is stock driven," said Yuji Saito, head of the foreign exchange group at Societe Generale. If share markets continue sliding, the dollar could later in the day fall to Y93.85, while the euro could drop to Y130.00, "after it already fell through earlier support at 131.20," Saito said.

Further falls in oil, with Nymex crude futures dropping to $62.31 a barrel, were also hurting higher-yielding, commodity-linked units like the Australian dollar against the yen, dealers said. The Aussie fell to Y73.94, its lowest since May 28.

"This is not just oil, but commodities like metals that are also falling," prompting more skepticism over a near-term global economic recovery, said Satoshi Tate, senior vice president of foreign exchange at Mizuho Corporate Bank.

Whether the yen continues to gain at other currencies expense in the coming weeks depends on how long it takes to close "the gap between recent excessive (global economic) optimism and reality," said Mizuho's Tate.

Meanwhile, the news that Chinese President Hu Jintao had scrapped his plan to attend the summit of the Group of Eight industrial nations and emerging economies and was returning early from Italy due to continued unrest in China's Xinjiang Uighur Autonomous Region had no direct effect on the currency markets, dealers said.

Most players already expected that the G8 will not formally take up proposals, some of which have come from China, for debate on creation of a new global reserve currency to replace the dollar, they said.

But the worsening situation in western China, highlighted by Hu's sudden cancellation, "was a negative factor for the Chinese share markets earlier," said Mizuho's Tate. If the unrest gets worse, dragging Chinese share prices lower, that could exacerbate the growing pessimism over the global economy, which may bolster yen strength, he added.

Interbank Foreign Exchange Rates At 00:50 EDT / 0450 GMT
Latest Previous %Chg Daily Daily %Chg
Dollar Rates 2150 GMT High Low 12/31
USD/JPY Yen 94.20-25 94.81-86 -0.64 94.86 94.17 +3.97
EUR/USD Euro 1.3917-18 1.3926-30 -0.06 1.3921 1.3882 -0.44
GBP/USD Sterling 1.6093-97 1.6141-45 -0.30 1.6132 1.6062 +10.03
USD/CHF Swiss Franc 1.0888-94 1.0882-88 +0.06 1.0914 1.0887 +2.05
USD/CAD Canadian Dlr 1.1627-31 1.1654-59 -0.23 1.1682 1.1629 -4.42
AUD/USD Australian Dlr 0.7863-65 0.7894-99 -0.39 0.7897 0.7853 +11.17
NZD/USD New Zealand Dlr 0.6274-84 0.6291-98 -0.27 0.6300 0.6269 +7.52
EUR/JPY Yen 131.11-15 132.04-09 -0.70 132.01 130.97 +3.53

Canadian Dollar To Weaken Further As Labor Market Falters

2:58 PM / Posted by E-pr0 / comments (0)

Fundamental Forecast for Canadian Dollar: Bearish

- Canadian GDP Contracts in April, Factory Prices Tumble Lower in May
- USD/CAD Sentiment Mixed

The Canadian dollar weakened against the greenback following the drop in risk appetite, and the loonie may continue to face increased selling pressures over the following week as the economic calendar foreshadows a weakening outlook for the world’s eighth largest economy. As a result, fears of a protracted recession could lead the Bank of Canada to take additional steps this month in an effort to stem the downside risks for growth and inflation, and speculation for further easing could weigh on the exchange rate over the near-term.

At the same time, the BoC saw a risk for a prolonged recession, stating that the appreciation in the USD/CAD could ‘fully offset’ the recent improvements in the real economy, and the board is likely to hold a dovish policy stance over the medium-term as they pledge to hold the benchmark interest rate at the record-low into the following year. However, as researchers at the central bank see high uncertainties tied to ‘quantitative easing,’ the board may continue to hold a neutral policy stance going forward, and long-term expectations for higher interest rates could drive the Canadian dollar higher throughout the second half of the year.

The economic docket for the week ahead is expected to show a rise in business spending, with economists forecasting the Ivey purchasing managers index to increase to 50.3 from 48.4 in May, while housing starts are projected to increase for the third consecutive month in June. A rise in business activity paired with a rebound in home construction could raise the outlook for the region as the government takes unprecedented steps to stimulate the ailing economy, and speculation for a global recovery could drive the Canadian dollar higher as market sentiment improved. Nevertheless, the labor market is widely expected to weaken further in June, with market participants expecting the annual rate of unemployment to reach an 11-year high of 8.7%, while the trade deficit is projected to widen in May on the back of falling exports. As firms face fading demands from home and abroad, businesses may continue to scale back on production and employment, and the data is likely to encourage a weakening outlook for the economy as central bank forecasts economic activity to contract at an annual pace of 3.0% this year, which would be the biggest decline since 1933. - DS

Japanese Yen To Strengthen As Risk Appetite Wanes

2:55 PM / Posted by E-pr0 / comments (0)

Fundamental Outlook for Japanese Yen: Bullish

- Japanese Consumer Price Tumble Lower in May, Raising Risks for Deflation
- Manufacturing Confidence Rebounds From Record Low
- Japanese Trade Surplus Widens as Imports Falter


The Japanese Yen may continue to strengthen against its major counterparts over the following week as market participants curb their appetite for higher risk/reward investments, and the low-yielding currency should benefit from safe-haven flows as investors weigh the outlook for a global recovery. The World Bank lowered its growth forecast from March and projects the world economy to contract at an annual pace of 2.9% this year amid an initial forecast for a 1.7% drop in global growth, and the dour outlook held by the bank suggests rising energy costs paired with deteriorating trade conditions are likely to hamper the prospects for future growth. At the same time, the Organization for Economic Cooperation and Development predicts the global recovery to be ‘slow and fragile,’ with the economic downturn expected to have a lasting impact on the world economy as the group anticipates a permanent increase in the cost of capital. The comments foreshadow a weakening outlook for future growth as businesses face rising input costs paired with fading demands from home and abroad, and fears of a protracted recession could lead the Yen higher as investors turn risk adverse.

As a result, the USD/JPY may continue to trend lower as risk trends continue to drive price action in the foreign exchange market, and the pair may make an attempt to test the May lows in the week ahead as pair continues to retrace the advance from earlier this month. On the other hand, the economic calendar is expected reinforce an improved outlook for future growth as economists forecast industrial outputs to jump 7.0% in May, which would be the biggest rise in over half a century, while manufacturing activity is anticipated to fall at a slower pace in the second quarter. Market participants project the Tankan manufacturing index to rebound from a record-low of -51 to -43 in the second quarter, while the gauge for business expectations is anticipated to increase to -34 from -51, and the data could encourage an improved outlook for global growth as the Bank of Japan forecasts economic activity in the world’s second-largest economy to recover in the second half of the year. Meanwhile, retail spending is expected to contract for the ninth consecutive month in May, with the unemployment rate projected to increase to 5.2% during the same period, which would be the highest since 2003, and the data could foster a weakening outlook for the world economy as the downside risks for growth and inflation intensify. - DS

Euro Volatility Likely as Central Bank Delivers Interest Rate Decision

2:53 PM / Posted by E-pr0 / comments (0)

Fundamental Forecast for Euro: Bearish

- European Central Bank leaves rates unchanged despite high unemployment
- German Retail Sales report boosts optimism on domestic consumption
- Yet
Euro Zone Industrial data points to weakness in demand

A busy week of economic event risk left the Euro almost exactly unchanged against the US Dollar, and it seems markets remain incapable of breaking the EURUSD from its multi-month range. Forex options markets showed that volatility expectations remained high ahead of the European Central Bank interest rate decision and the US Nonfarm Payrolls report, but sharp post-NFP moves were incapable of pushing the EURUSD below the key 1.4000 mark. Illiquid late-week trading invited a brief foray below the psychologically significant 4000 level, but a quick bounce signaled that few were willing to force a larger breakdown in the key currency pair. If the combination of an ECB rate decision and a US NFP release were not enough to break the Euro from its range, we see relatively little scope for big moves in the week ahead. Indeed, short-term volatility expectations have fallen substantially ahead of what may be yet another week of range trading.

Euro Zone economic event risk will likely take a backseat to broader financial market flows as the Euro/US Dollar pair remains tightly correlated to key risky asset classes. The rolling correlation between the EURUSD and Reuters CRB commodity index is once again near record-highs. It is subsequently unsurprising to note that Gold, Oil, and the US S&P 500 remain in similarly choppy price ranges prices through the past month of trading. The end-of-week tumble in the S&P index leaves it at risk for continued declines, but we will have to see a noteworthy break before calling for similar moves in the EURUSD.

Traders should keep an eye out for financial market reactions to the US ISM Services report and surprises from final revisions to Euro Zone Q1 GDP results. The former will shed light on the all-important US Services sector and has historically produced big moves in the S&P 500 and US Dollar. Markets remain on edge following a worse-than-expected NFP result, and we will need to see promising signs for US economic conditions to bolster investor confidence. A sharp drop in domestic equities could easily lead to similar moves in the US Dollar—potentially sending the EURUSD below key support. Later-week GDP figures could likewise provide impetus for Euro volatility. Recent revisions to Q1 UK GDP results sent the British Pound substantially lower against major counterparts. Although admittedly unlikely, similar changes to Eurostat’s estimates for domestic economic growth could send the Euro lower versus major counterparts.

EURUSD volatility expectations remain muted, but we cannot rule out flare-ups in financial market tensions. It will be critical to watch whether many many key asset classes can break out of their month-long trading ranges—potentially sending the EURUSD beyond range-lows at 1.4000 or highs near the 1.4200 mark. – DR

US Dollar Still Range Bound, But Risk Aversion Creates Bullish Potential

2:49 PM / Posted by E-pr0 / comments (0)

Fundamental Outlook for US Dollar: Neutral

- US consumer confidence unexpectedly fell during June as signs of growth fail to materialize
- ISM manufacturing rose in June, but held below 50, signaling contraction for the 17th straight month
- US non-farm payrolls were disappointing, indicating that the pace of job losses accelerated in June

The US dollar ended the past week as the strongest of the majors, but it certainly wasn’t due to fundamental reasons. Instead, risk aversion reared its head once again following disappointing US news, triggering sharp declines in the US stock markets and FX carry trades, as well as increased demand for low-yielding currencies like the US dollar and Japanese yen. Using the DJIA as a barometer, there is potential for “risky” assets to fall again in the near term as the daily charts reflect a maturing head and shoulders pattern.

The data the recent moves came from the US non-farm payrolls report, which showed that the pace of job losses had accelerated, rather than slowed, during June at a rate of 467,000. Meanwhile, the unemployment rate rose to 9.5 percent from 9.4 percent and average hourly earnings growth stagnated during the month, bringing the annual rate down to a nearly 4-year low of 2.7 percent from 3.0 percent. All told, the continued deterioration in the labor markets that has led to more job losses and falling wages does not bode well for consumption growth, which composes roughly 70 percent of US GDP, through the rest of the year.

Looking ahead to Monday, data may show that conditions in US non-manufacturing sector - which accounts for approximately 70 percent of total economic activity in the country and includes retail, services, and finance - improved somewhat in June as the Institute for Supply Management index is estimated to rise to 46.0 from 44.0. However, consumer confidence has shown emerging pessimism, primarily on the economic outlook, as the Conference Board’s measure surprisingly fell to 49.3 in June from 54.8. Since risk trends have proven to be the greater driver of price action in the forex markets, a weaker than expected result could trigger flight-to-quality and thus, gains for the US dollar.

On Thursday, wholesale inventories are expected to fall negative for the ninth straight month and could register a 1 percent drop for the month of May. That said, this is a very lagging indicator and may simply continue to signal that businesses are cutting back on supplies in anticipation of weaker demand down the road. On Friday, the trade deficit may widen for the third straight month in May to $30 billion as exports continue to dive. Finally, the preliminary reading of the University of Michigan’s consumer confidence index for July is projected to fall very slightly to 70.6 from 70.8. However, there is downside potential in light of the sharp drop we saw in the Conference Board’s surprise drop in consumer confidence during June.

For more timely FX market analysis, visit our newly-launched Forex Stream Service.

US Dollar Range to Yield to Bullish Momentum Against Major Currencies

2:48 PM / Posted by E-pr0 / comments (0)

The US Dollar has been consolidating in narrow ranges against the major currencies, but positioning is favoring a stronger greenback as the breakout materializes. We maintain our short exposure against the Euro, British Pound and Australian Dollar, adding a new trade selling the New Zealand Dollar against its US counterpart.

CandlleStick 1

Foreign Exchange Markets: A Practical Guide

2:46 PM / Posted by E-pr0 / comments (0)

This online guide aims at creating a coherent understanding of the foreign exchange market, by tying in real life market scenarios with the relevant theories of international finance and the classic schools of technical and quantitative analysis. Although there is a vast amount of literature on international finance, technical analysis and chartism, there is a scarcity of instructional materials incorporating actual market events such as interest rate decisions, interventions and geopolitical events.
Another area largely overlooked by currency guides is the integration of fundamental and technical analysis for making decisions. The distinctiveness between the two types of approaches dissuades many from factoring them together. But knowing how to combine them can be highly advantageous in unraveling the trend and timing of currency moves.

This material focuses on teaching how to think for yourself in understanding global currency markets, rather than depending on a pre-set trading system which recommends decisions without providing input on the whys of making right and wrong decisions. Rather than rehashing the classic theories driving currency analysis, this guide will offer investors, researchers and students an innovative approach, paramount in grasping and anticipating the moves in the major currency pairs.

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