• Home ::
• Fundamental ::
• Market View

• Send
• Print
• Add To
• Rss

Global News and Fundamentals

This report has been deactivated

Non−Farm Payrolls and the GBP/USD

Thu, Oct 1 2009, 20:33 GMT
by Andrei Pehar

fxKnight.com

 

It’s the first Friday of a brand new month, which means new Non-Farm Payroll numbers soon to be announced.

This report continues to be interesting barometer of the recession in the US.   Analysts are predicting a decrease in the amount of unemployment this month (the first figure under 200K by some estimates), following a decrease also the prior month.

During NFP there is a temporary increase in market volatility, and price can move either in the direction that would seem to be indicated by the report, or it can spike and move in the complete opposite direction as well.

Ahead of the report, let’s take a look at some significant levels on the GBP/USD.  Watch for breaks (and re-tests) of these levels during the spike(s) for clues as to where price is likely to go.

During the week of Aug 2, 2009, the GBP/USD had been trending down, hit the 50% weekly retracement level at 1.6839, and began moving down again.  A new retracement level was reached at the 61.8& level at 1.6687 in mid-September, and price has since gone down to 138.2% at 1.5759 and is currently bouncing upward from there.

Therefore, significant levels to watch in the coming week to the upside (assuming NFP pushes us above the 1.6043 level and we find some support there) include 1.6113,  1.6332, 1.6468, and perhaps eventually 1.6578.

The present longer-term downside target remains the 161.8% level at 1.5539.  However there are several levels to watch along the way, including 1.6043, 1.5946, 1.5863, and 1.5759.

 

Published on  Thu, Oct 1 2009, 20:33 GMT

US Housing and EU Manufacturing

Tue, Jun 23 2009, 15:16 GMT
by Andrei Pehar

fxKnight.com

Existing Home Sales came in today at 4.77 million – less than the 4.82 million analysts had been expecting, but still a slight increase from 4.68 million the prior month.

Looking at this report between the lines, we find that by far the majority of these sales came from town houses and condominiums, rather than from single family homes.  Part of the reason for this could be the limited credit available out there, forcing families to settle for something smaller than the home of their dreams in order to take advantage of interest rates while they are still at their lowest.

The other reason is simply home valuations.  With home prices in the US dropping another 0.1% this month, owners of single family homes are understandably reluctant to let go of their properties at current prices.  The National Association of Realtors even accused appraisers of under-valuating properties, citing their use of computer modeling.  The sad reality is that your house isn’t worth what you think it’s worth, nor what you paid for it – like any other commodity, it is worth what the market is willing to pay for it.

Meanwhile, over in Europe, we got a slew of PMI numbers today.  The Purchasing Managers Index is thought to be a leading indicator on the economy – if companies are spending more, the  logic goes, then very likely they’re earning more.

Manufacturing traditionally leads services both into and out of recessions, and while the numbers we got today were still negative across the board (50 and above is considered expanding), they do point to a slowing in spending cuts, with French manufacturing coming in slightly better than expected at 45.5 (compared with 43.3 the prior month), and the overall manufacturing PMI for the European Union meeting analyst expectations at 42.4 (an increase from 40.7 the prior month).

What does this mean for the future direction of the EUR/USD?

We are currently watching two critical support levels, one at 1.3736 and the other at 1.3967

If the Euro can mange to hold 1.3967 as support against the US Dollar, then we could see price eventually climb as high as 1.4528, with resistance on the way at 1.4082 and 1.4225

If, on the other hand, price falls below 1.3736 (and re-tests that level as resistance), then the Euro could fall as deep as 1.3247 against the US Dollar, with additional support along the way at 1.3549 and 1.3434

Published on  Tue, Jun 23 2009, 15:16 GMT

US Posts Lowest Consumer Confidence on Record

Tue, Feb 24 2009, 15:28 GMT
by Andrei Pehar

fxKnight.com

 
The US just released a Consumer Confidence reading of 25, the lowest on record (the report has been released since 1967).  This marks a sharp decline from January's reading of 37.4
 
The Consumer Confidence Index is thought to be a leading indicator of consumer spending, with current attitudes understandably negative in light of rising unemployment, large corporate lay-offs, and the difficulty of finding new jobs.
  
The one light at the end of the tunnel is that the Housing Price Index showed an increase to 0.1% (up from a recently revised figure of -2.2%).  It is hoped that stabilization in housing prices would lure buyers waiting in the sidelines.
  
What does this mean for the US Dollar against other major currencies such as the Euro?  The USD has shown amazing strength in recent weeks, though much of that could be coming from increased demand as securities and other assets are sold off, and as we moved to test prior key technical levels.
  
The key level to watch on the EUR/USD pair remains 1.2550 - a break below this support (with a re-test as resistance) would indicate 1.1727 comes into view as a long-term target (with a potential secondary target at 1.0395 if the first fails to hold as support).
  
If, on the other hand, we manage to find some E/U bulls at these levels, then 1.2550 completes our double-bottom pattern, forming since September 2008.  A break above 1.3059 would confirm this, if that level can continue to hold as our new support.  Under such a scenario targets such as 1.3300, 1.3494, and eventually 1.3882 may become viable.

Published on  Tue, Feb 24 2009, 15:28 GMT

Obama Names Next Treasury Secretary

Fri, Nov 21 2008, 21:24 GMT
by Andrei Pehar

fxKnight.com

Timothy F. Geithner has just been tapped by President-Elect Barack Obama to replace Henry Paulson as the next US Treasury Secretary.  This announcement comes right on the heels of his appointment of his former rival, Senator Hillary Clinton, to be the next Secretary of State.

Mr. Geithner is the 9th president of the New York Fed and Vice Chairman of the FOMC.  He is a Senior Fellow in the international economics department of the Council on Foreign Relations, and has previously served as the Director of policy development for the IMF.

Published on  Fri, Nov 21 2008, 21:24 GMT

Industry, Consumers Feel Pinch as Dow Slips Further

Thu, Oct 16 2008, 20:32 GMT
by Andrei Pehar

fxKnight.com

Last week the Dow broke below the key 9924 support level, re-tested it as resistance, and continued its downward slide - currently consolidating into a range between 8487 and 9376.

The effects of the market turmoil are reflecting in fundamental economic reports.  US retail sales dropped by 1.2% and the Philly Fed Manufacturing Index came in at -37.5, a decline nearly 4 times greater than analyst estimates.  This confirms an earlier figure from the Empire State Manufacturing Index, which came in at -24.6, also a drop more than double what analysts had been expecting  Overall US industrial production declined by 2.8% this month.

What's next for the Dow?

It is difficult to say with any degree of certainty.  Very likely more volatility.  If 9376 holds as resistance, then we could well see another move down to test 8487.  A break below that level could well send us as low as 7050, a drop of over 50% since last summer's high.  If instead we can get above 9376, and find some support there, then the worst might be over - at least for now.  The next looming threat is one of credit card and auto loan defaults, if the economy continues to lose jobs.  More money is tied up here than was in the mortgage markets.

The US Dollar, meanwhile, has remained strong against other currencies - due in large part to the ongoing liquidity crisis.  The rules of supply and demand still apply, and the LIBOR and Fed Funds rates are indicators of the current demand for cash.  The on-going commodity sell-offs are another.

Published on  Thu, Oct 16 2008, 20:32 GMT

US Senate Passes Bailout Bill − Markets Unimpressed

Thu, Oct 2 2008, 03:55 GMT
by Andrei Pehar

fxKnight.com

The United States Senate today approved the revised and expanded $700 billion dollar bailout bill with a vote of 74 to 25.  Now the bill returns to the House of Representatives for a re-vote on Friday, before heading to President Bush to be signed into law.

The bill includes tax breaks for corporations, as well as certain individuals in special situations such as disaster victims and mental health patients.  No doubt it will soon be sold to the public (which previously phoned the offices of elected offices with a 30-to-1 disapproval ratio) as a tax relief package for the average worker hit by the turbulent economy.
 
Will it work?

That remains to be seen - and will most likely take several months, if not years.  Certainly, there will likely be a rally lasting a couple days, but whether it can be sustained in the face of the 9th straight month of job losses in a row or threats of failure from additional banks, and even super-corporations such as GE.

Underneath, many of the fundamental factors behind this crisis - falling home prices, the need for credit as wages rise slower than living expenses, a lack of liquidity, the threat of inflation, a national deficit which will only increase as a result of this bill's passage - still remain.  One wonders whether the outcome of today's vote was more in response to the 777.68 point drop of the Dow following Monday's rejection of the first draft of this bailout package.

In Asia, the NIKKEI rose slightly in anticipation of the vote, then slid slowly by more than 112 points following the announcement of the results.  The Hang Seng followed it down, dropping 80 points and confirming that the initial market reaction is one of skepticism.

Back in the US, Dow futures are currently trading below resistance at 10848, suggesting a re-test of support at 10547 if it can hold.  A break below that brings one a step closer to 9912.  If price can manage to get back above 10848, then the next resistance is at 11091.

Most likely, the larger movements will take place on Friday - when we get the non-farm payroll numbers (widely expected to post a loss of 100,000 jobs) and the results of the re-vote in the House.

Published on  Thu, Oct 2 2008, 03:55 GMT

Critical Day Today for U.S.: A Survival Guide

Fri, Sep 26 2008, 10:04 GMT
by Andrei Pehar

fxKnight.com

Markets are bracing for what could well turn out to be THE most dramatic day ever seen.  Yes, perhaps even more so than the fireworks of last week.

Several situations are brewing all at once:

Washington Mutual has been seized by the FDIC (Federal Deposit Insurance Corporation), and its client accounts are in the process of being taken over by JP Morgan.  Account holders are being assured that they will have access to their funds; however this is – officially – the biggest bank failure ever in history.

Fortis is under fire from the media and from shareholders.  They maintain that they are solvent and have adequate access to liquidity lines (which they say they cannot reveal due to non-disclosure agreements they have signed), however as we've seen with other giants recently, public opinion and shareholder confidence may well hold more importance than balance sheets, no matter how sound.

Which bank is safe?  I hate to be an alarmist, but these days the Bank of UTM (under the mattress) seems like a worry-free alternative, as does gold and silver.  Those options aside, I would look to the larger, more populist banks.  Stay away from private, corporate or investment banks - the ones which serve millions of depositors are the ones least likely to fail (unless there's a run on them), and also the most likely to be bailed out in an emergency.  Bank of America, Deutsche Bank, Credit Suisse, Barclays, HSBC, etc.  Oh, and JP Morgan Chase of course - being founding members of the Fed I suspect they'll do alright (this is now the second “acquisition” that the government has helped them do).

Like most of the market action this month, there is a danger that emotions may take the day.  Certainly, we are no closer to a bail-out deal from the US Congress.  However it is important to be clear on the facts here.  Congress is doing a GOOD thing.  I have listened to over 12 hours of testimony these past 3 days, and I like the questions being raised and the suggestions being made.  Secretary Paulson has requested $700 billion with no conditions, no measure of success, to be given over to the very people who created this mess in the first place.  Where every prior bail-out has failed to turn things around.  Instead they have somehow been absorbed in 12 million dollar executive salaries, rewards for failure (results can command any salary the market is wiling to pay, but I fail to see why taxpayers should reward failure - their livelihoods are being jeopardized, not assisted as a result).

Paulson would have the taxpayer absorb all of the risk, and share in none of the potential rewards.  The people who caused the mess would profit from it.  The questions congress is asking are good ones, the safeguards and regulations they are proposing much-needed.  I believe what is needed is a bail-out of Main St., not Wall St. – let’s make sure people’s mortgages are paid and their jobs are safe - and it should be done under conditions closer to those Warren Buffet negotiated when taking his recent $5 billion stake in Goldman Sachs.  And if it takes a little extra time to make that deal one worth the taxpayers investing their hard-earned money in, then it should be taken.

And at the risk of this degrading into a political rant, I think that Republicans need to stop playing school yard games and come back to the negotiating table.  Debate is HOW good deals are made, so come back and bring in some good ideas.  "My way or the highway" is not the mindset to employ in a time of crisis when your nation needs you.

Most of this mess is a direct result of the Securities Modernization Act of 1999, which stripped away protections put in place after the Great Depression in order to prevent a similar event from ever happening again.  The architect of this piece of legislation was Phil Gramm, a darling of investment bank lobbyists.  He is John McCain's top economic advisor, and a likely candidate to be the next Secretary of the Treasury.

Someone once said that "America's capitalist markets will survive, so long as the government is willing to employ a bit of socialism from time to time to bail them out."

But as I've already said, a crisis is a time for solutions not politics.  I am merely sharing facts.  And Obama has yet to produce alternative ideas either.  But I will suggest that we have a track record, and walking further down the same path gets more and more dangerous every day.  What America needs is a diplomat, not another war - for I suspect in order to get through this crisis, America will need friends and help from abroad.  Friends much alienated by the past 8 years.

What does all this chaos mean for the Dow?

10828 remains a critical key level to watch.  If further news of the deal stalling hits the markets, we could see a sharp fall - and if 10828 fails to hold as support (and especially if it re-tests as resistance), then we could well see the Dow enter 4-digit territory and work its way down to 9948 in the weeks ahead.

If instead an agreement can be reached, and quickly put into action, we might see a rally take us up to 11371.  But before we can all breathe a collective sigh of relief, however, we would need to see prices above 11708, and showing signs of finding some support there.  Coming up with a plan and seeing it actually work are two different things, after all - and the latter will likely need 6 to 12 months.  At least.

The US Dollar's movements are at this time hard to predict.  There may be panic sellers, influenced by the Dow and by murmurings of decoupling from the currency by Saudi Arabia and the UAE.  The shakier America's ground gets, the more foreign investors will likely pull out and governments look to other reserve currencies like gold, the Euro (if it can conquer its own problems) or the Swiss Franc.  On the other hand, we DO find ourselves in a crisis of liquidity.  That means cash.  And the rules of supply and demand still apply.

To help lighten the mood as we head into the weekend, have a peek at this:  http://www.youtube.com/watch?v=ipJTqCbETog

Published on  Fri, Sep 26 2008, 10:04 GMT

Will a Ban on Short−Selling Help the Dow?

Fri, Sep 19 2008, 09:58 GMT
by Andrei Pehar

fxKnight.com

The SEC just released a list of 799 financial firms on which they have forbid short-selling, mirroring a similar move made yesterday by the UK's FSA.

The complete list can be found here: http://www.sec.gov/rules/other/2008/34-58592.pdf

But will such a move really help the markets?  In the short-term, we can see it already has.  People with little understanding of the markets are already rushing back in, thinking that somehow everything is more "safe" as result.  In reality, most of the recent drops we've seen in the share prices of financial firms were due to regular shareholders sensing danger and getting out, not short-sellers (and for every seller there is a buyer, don't forget).

Longer-term, quite the opposite is true.  Short-sellers (ie, hedge funds) provide much-needed liquidity for the markets, especially at a time like this.  Also, with price no longer representing fair value, the potential for even greater vacuums and bubbles is created.  We may have postponed a "crash" (technically, October 19th of 1987 received that label for a move over 500 points on the Dow - and we've already exceeded that), but are we increasing the chances of an even larger one down the line?  And, perhaps more importantly, are these the first signs of a move away from free and fair markets?

The effect of this move by the SEC on the Dow was swift and sudden.  However, prior to it, two key support levels (at 11362 and 10813) had been broken.  What remains to be seen in today's session (and perhaps throughout the following week) is whether 11362 will now act as resistance or not.  If so, we may move back down to test 10813 once more as support.  If that gives way, a target at 9924 comes into view.

Markets are also eagerly awaiting the details of Secretary Paulson's plan to repurchase the remaining bad mortgage debt out there, which will likely lend further support to the markets.  If we an get above 11362 (and stay there), then perhaps our worries are over.  For now.

Published on  Fri, Sep 19 2008, 09:58 GMT

Disappointing Retail Sales Help Euro Rebound Against the US Dollar

Fri, Sep 12 2008, 16:58 GMT
by Andrei Pehar

fxKnight.com

Retail sales dropped by 0.3%, the second straight month of declines in a row, confirming that the consumer is feeling the pinch of the tighter economy.  Excluding autos, the drop was closer to 0.7%

This comes against news of Lehman Brothers being put up for sale (with Bank of America and HSBC among the list of potentially interested parties), and further sights of trouble at Washington Mutual - so soon on the heels of the bailout of Freddie Mac and Fannie Mae.

The combination put a stop to the US Dollar rally of past weeks, and caused the Euro to regain some ground.  The current move up in the EUR/USD is expected to cap at somewhere 1.4222 to 1.4227 at close of trading today, eventually perhaps going to 1.4351

If 1.4351 fails to hold as resistance next week, the next likely upside target would be 1.4986.  If the US Dollar finds its footing and the EUR/USD resumes its downward progression, breaking below support at 1.3837, then 1.3323 becomes a likely target.

Published on  Fri, Sep 12 2008, 16:58 GMT

Negative US News Causes Further Carry Unwind

Thu, Sep 4 2008, 22:41 GMT
by Andrei Pehar

fxKnight.com

Several negative reports out of the US today triggered another sell-off in the GBP/JPY pair.  Unemployment claims rose by 15,000 to 444,000, and the ADP non-farm employment change fell by 33,000.  Crude oil inventories in the US fell by 1.9 million barrels.

This combination of news caused a 344.65 point sell-off in the Dow, pushing it below a key support level at 11363.  The NASDAQ saw a loss of 74.69 points, and the S&P saw a 38.15 point drop, the largest since January.  The GBP/JPY pair fell 721 pips, breaking a key support at 192.57, and also falling below its monthly 200 moving average.

All eyes now turn to the non-farm payroll numbers, which analysts expect to come in at -73,000, a decrease of 22,000 from the prior month.  If the news fails to push us back above 192.57, which is now acting as resistance, then the door opens to further drops, which could potentially take us as low as 170.22, with support in the way at 182.04 and 176.77

Published on  Thu, Sep 4 2008, 22:41 GMT

Positive GDP Numbers Calm Recession Fears

Thu, Aug 28 2008, 13:24 GMT
by Andrei Pehar

fxKnight.com

US preliminary GDP came in at 3.3% today, for the moment calming fears of a full-blown recession among investors.  Analysts had been projecting a figure of 2.6%, and the prior quarter was also revised up to 1.9%.

Adding to the bullish mood on Wall St. today was the drop of 7000 unemployment claims since last month to 425,000; however according to the US Department of Labor any figure above 400K is still considered to indicate a contracting economy.

While we've seen some Dollar strength both today and in the days leading up to it, on the EUR/USD pair specifically we find ourselves at a rather critical level - and which side of 1.4772 we end up trading on may well help determine future direction.

Initially, there should be a break to the downside, taking us down to test support at 1.4725, and if that breaks then 1.4695

A bounce back up will likely see us test the prior high at 1.4808, and if price manages to get above that level then targets at 1.4826, 1.4849, and perhaps ultimately 1.4896 come into view.

A big key to which direction the Dollar moves next will come from how oil prices react to hurricane Gustav, which is expected to hit the Gulf of Mexico late Monday or early Tuesday morning, with winds of at least 131 miles per hour.

Published on  Thu, Aug 28 2008, 13:24 GMT

The Markets Wait

Mon, Aug 18 2008, 15:10 GMT
by Andrei Pehar

fxKnight.com

Not a whole lot to report today.  Choppy, rangy markets - so be careful out there.  Draw your trendlines, and trade inside of them - until price gives you a break followed by a successful re-test (support becomes resistance, and vice versa).

All eyes will be on consumers this week, as many US retailers report their Q2 earnings and overall sales for the first half of 2008.  We will also get Canadian retail sales on Wednesday and UK retail sales on Thursday.

Oil is still obeying resistance at 115.60, and gold continues to trade below 795.26.  Musharraf has agreed to step down in Pakistan, and Georgia and Russia have signed an agreement (however Russia has not yet shown any signs of pulling out).  The markets are currently waiting for a direction to emerge.

Published on  Mon, Aug 18 2008, 15:10 GMT

Dollar, Dow Gain − Despite Negative News

Thu, Aug 14 2008, 20:00 GMT
by Andrei Pehar

fxKnight.com

The consumer price index came in at 0.8% today, rising at the fastest pace in 17 years.  Analysts had been forecasting an increase of 0.4%.  The largest increase came in food and energy, with the core CPI (which excludes those elements) posting an increase of 0.3%, compared to estimates of 0.2%

In addition, existing home sales fell by 16%, with the median price dropping by 7.6%, falling to a 10-year low.  Worse still, forecasters are saying there is room for further drops, as the US economy tightens by an estimated 1.8% this quarter.

Surprisingly, despite the news, the Dow posted a moderate gain today, closing up by 82.97 points at 11,615.93 - likely due to oil backing off from yesterday's high slightly (and trading below key resistance level at 115.75), as well as gold coming back down towards the 800 mark.  The US Dollar also won ground against the Euro today, at one point testing the 1.4777 level.

Published on  Thu, Aug 14 2008, 20:00 GMT

Market Uncertainty

Mon, Aug 4 2008, 12:08 GMT
by Andrei Pehar

fxKnight.com

European session has been fairly choppy and rangy thus far, and I expect more of the same going into the US session as well - there is still lots of uncertainty out there in the markets.  HSBC just announced a profit decline of 29% for the first half of 2008, Deutsche Bank had its credit rating lowered after a $3.6 billion write-down, and Fortis saw a drop of nearly 49% for the 2nd quarter.

The United States this weekend saw the closure of the 8th bank since the start of the credit crisis, and the ultimate fate of Freddie Mac and Fannie Mae (at $12 trillion collectively accounting for roughly half of the entire US mortgage market) still remains very much in the air, as the rate of forecloses doubled in the 2nd quarter.

GM again posted record losses, meanwhile Sharper Image, Delphi, NexStore, Sheraton Hotel Miami, and the Carlyle Group's only hedge fund all filed for bankruptcy.  The only "positive" news out has been coming from BP, Shell, and ExxonMobil, all of whom have once again posted record profits.

Today is a great day to trade using trendlines and ranges - just make sure the range is wide enough to be worthwhile and note any likely support/resistance in the way before jumping in.

Major players will most likely remain reluctant to takes sides until we get the Federal Reserve's rate announcement on Tuesday, and the Bank of England and the European Central bank announce theirs on Thursday.  With so much uncertainty out there, the most likely outcome is that all three will remain unchanged, however the comments accompanying the releases will be watched closely.

Published on  Mon, Aug 4 2008, 12:08 GMT

Can the Dow Sustain Its Gains?

Thu, Jul 17 2008, 10:37 GMT
by Andrei Pehar

fxKnight.com

Next report will be published on Thursday, August 7th

Both US and Asian markets had strong rallies yesterday, with the Dow closing up 276.74 points, the Nikkei up 127.15, and Hang Seng up by 511.22  Oil continuing its move down certainly helped these rallies.  It is currently at 134.13, and in pre-market trading futures are currently down by 47 cents.

The big question today will be whether the Dow can hold in to its gains, or perhaps even post a higher high - thus far every recent gain has been quickly given back.  Key to this, I think, will once again be oil, as well as some of the earnings reports we get today.  Companies scheduled to report include Coca-Cola and JP Morgan; with the latter it will be interesting to see how the buy-out of Bear Sterns has affected their overall balance sheets - and whether what they have to say helps push up or drag down the rest of the financials.

Overall I'm expecting a fairly choppy European session, with perhaps a bit more Dollar bearishness than bullishness.  If oil drops further this situation may reverse.  Then at 12:30 GMT all eyes will be on the US reports, as we have building permits, housing starts, and unemployment claims all coming out at the same time.  The tone of these reports will likely set the mood for the US session, with the Philly Fed manufacturing index to follow at 14:00 GMT.  Kroszner will be speaking at 13:10 GMT, so be sure to tighten in your stops if in a trade at that time.

Canada has some important news due out today as well - we get foreign securities purchases at 12:30 GMT, and the Bank of Canada will also be releasing their monetary policy report at 14:30 GMT.  BoC governor Carney will be speaking shortly after that at 15:15 GMT, with his speech expected to have a fairly big impact on the CAD cross pairs as he outlines the central bank's future plans and concerns.  BoC voted on Tuesday to leave their key interest rate unchanged at 3.00%.

Published on  Thu, Jul 17 2008, 10:37 GMT

Dollar Troubles

Tue, Jul 15 2008, 12:23 GMT
by Andrei Pehar

fxKnight.com

The Dollar is taking quite a beating today - with more uncertainty over the long-term future of Freddie Mac and Fannie Mae.  Both the Nikkei and the Hang Seng index dropped severely in overnight trading, when it came out how heavily some leading Asian banks had been vested in US mortgages.  The Bank of Japan left their key overnight rate unchanged at 0.50%.

The UK consumer price index came in larger than expected (3.8% vs. 3.3% last month, 1.6% vs. 1.5% for the core) - officially giving us the worst inflation on record.  ZEW economic sentiment came in worse than expected for both Germany (-63.9 vs. -55.5) and for the EU as a whole (-63.7 vs. -56.0).  Currently Most European indexes are down by 100 points or more, with Italy's MIB (-724) and Spain's IBEX (-354) taking the worst hits.

All eyes now turn to the US news due out at 12:30 GMT.  We will be getting the producer price index (forecast at 1.3%, 0.3% for the core), retail sales (forecast at 0.4%, 0.9% for the core), and the Empire State manufacturing index (forecast at -7.7) all at the same time.  More US news will follow at 14:00 GMT.  Prior to open, Dow futures are currently at -122, well below the 11,000 mark.  Both Bernanke and Paulson will be testifying on Capitol Hill today.

In addition, Canada will be announcing new motor vehicle sales at 12:30 GMT, and the Bank of Canada will announce their new overnight rate at 13:00 GMT (widely expected to remain unchanged at 3.00%).

Published on  Tue, Jul 15 2008, 12:23 GMT

Mae & Mac: Too Big to Fail

Mon, Jul 14 2008, 13:55 GMT
by Andrei Pehar

fxKnight.com

Over the weekend, Henry Paulson pledged that the US Treasury will stand behind Freddie Mac and Fannie Mae, citing that "these institutions are simply too big to fail".  I expect US markets to rally at open on this news - currently Dow futures are at +117, +15.70 for the S&P, and +20.50 for NASDAQ.

Any rallies are likely to be short-lived, however, as long as oil stays above $140 and continues to test $150.  US bank IndyMac is the latest to crumble in the spreading mortgage crisis, with other banks currently cited on a "danger list".  Market nervousness led to an extremely choppy European session, yielding few trades (with close targets), and I would expect more of the same into the US session as well.  The GBP/USD is probably trending the best, as the FTSE - which gained over 102 points so far today - leads the European indexes.

This week will be all about inflation figures.  UK PPI, which measures producer costs, came in lower than expected this morning for the month, however we are still on track for the highest annual figure on record.  And later in the week we will get CPI figures measuring the cost increases to consumers in EU, UK and US.  We also get retail sales data for the US tomorrow.

So if the consumer is the backbone expected hold up the world economy, we'll know much better by the end of the week what state they currently find themselves in.

Published on  Mon, Jul 14 2008, 13:55 GMT

Australia Posts Positive Employment Data

Thu, Jul 10 2008, 11:37 GMT
by Andrei Pehar

fxKnight.com

29,800 new jobs were created Down Under last month, a number nearly three times the amount analysts had been expecting.  25,600 were lost during the previous month.  The overall unemployment rate dropped slightly from 4.3% to 4.2%.

The employment news brings some light to an otherwise fairly negative week for the continent, which saw consumer sentiment drop by another 6.7% (it dropped  5.6% the prior month),  and home loans drop by 7.9%, nearly double past month's decline of  4.2% (a figure which already includes a revision to the downside).  Business confidence came it at -9, compared with -4 the month before.

Published on  Thu, Jul 10 2008, 11:37 GMT

Negative Employment Data − Dollar Rallies Anyway

Thu, Jul 3 2008, 19:13 GMT
by Andrei Pehar

fxKnight.com

According to Non-Farm Payroll figures published today, 62,000 jobs were lost in the US this month, slightly more than analysts expected.  This would have been a sharp decline from the prior month, except for the fact that several hours after the report's release last month's figures were revised down to -62K as well (reduced by 52K).  This is the 6th straight month of job losses, bringing the 2008 total to a loss of 438,000 jobs.

Average hourly earnings remained steady at 0.3%, which translates roughly to a 6-cent raise for the average American worker, with the unemployment rate holding steady at 5.5%, though May’s figure was the largest unemployment rate increase in over 20 years.  404,000 unemployment claims were filed this week - an increase of 16K over last week.

Surprisingly, the US dollar rallied strongly against most other currencies - leading many to assume the markets had been expecting much worse.

Published on  Thu, Jul 3 2008, 19:13 GMT

Oil Weighs Again on Dollar, Dow

Thu, Jun 26 2008, 20:17 GMT
by Andrei Pehar

fxKnight.com

The Dollar fell sharply today against most other currencies, mostly in response to oil closing at $139.75 per barrel.  It reached 1.5755 against the Euro, 1.9891 against the British Pound, 106.60 against the Japanese Yen, and1.0228 against the Swiss Franc.  The Dow fell 358 points as well, ending the day at 11,453.42

Yesterday the Federal Reserve announced they were leaving the key interest rate unchanged at 2.00%, citing continued however reduced concern over recession (despite the worst consumer confidence number in 16 years), and continued concern over inflation, especially in the food and energy sectors.  Bernanke also mentioned that while inflation remains a concern, he expects the worst of it to be over by the end of 2008.

Meanwhile Trichet, his counterpart at the European Central Bank, just one day prior announced that the threat of inflation seems to be expanding, and that he does not expect any meaningful turn-around until mid-2009.

Published on  Thu, Jun 26 2008, 20:17 GMT

USD: Good Retail Sales, But Oil Concerns Linger

Fri, Jun 13 2008, 01:20 GMT
by Andrei Pehar

fxKnight.com

Next fundamental news will be commented on 26th June

Retail sales came in better than expected today, posting an increase of 1.0% - double the figure analysts were expecting, and a 0.6% increase over the prior month.  Core retail sales (which excludes autos) came in at 1.2%, with the prior month being revised up to 1.0%; analysts had been expecting only a slight gain of 0.7%.

The positive news caused a momentary Dollar rally, causing the EUR/USD to drop by nearly 40 pips.  The optimism was short-lived, however, and the EUR/USD resumed its climb just minutes later.  Oil remains the primary concern... currently at $136.56 and just below its all-time high, with fear of further supply disruptions in the Nigerian delta and declining US crude oil inventories, dropping by 4.6 million barrels for the second month in a row.

Published on  Fri, Jun 13 2008, 01:20 GMT

EU Inflation, US Unemployment

Fri, Jun 6 2008, 16:38 GMT
by Andrei Pehar

fxKnight.com

If you are wondering what is driving the recent EUR/USD rally, here are a few fundamental factors to keep in mind:

While both the Bank of England and the European Central Bank voted to hold rates steady this week (5.0% for the UK, 4.0% for the EU), the ECB's President Jean-Claude Trichet definitely had some hawkish overtones to his speech yesterday, hinting at growing concern over inflation in the Eurozone and possible future rate hikes, perhaps even as soon as next month.

Ben Bernanke, Trichet's counterpart in the US Federal Reserve, also hinted at inflationary concerns in speeches this week, however the US Dollar is currently being hit with rising oil prices, a dropping Dow, and unemployment which grew by half a percentage point (largest gain since the early 1970's) to 5.5%.

Published on  Fri, Jun 6 2008, 16:38 GMT

US Economy Grows, Despite Oil Fears

Thu, May 29 2008, 18:59 GMT
by Andrei Pehar

fxKnight.com

Both the US Dollar and the Dow showed remarkable resilience despite more scary figures out today from the oil sector.  Besides setting a new high above $136 last week, today's inventory numbers showed yet another drop, this time by 8.8 million barrels (the previous month saw a decline of 5.4 million).

The GDP price index held steady at 2.6% for the quarter, meanwhile the preliminary GDP for the same period rose to 0.9%, up from 0.6% the prior quarter.  While many signs still point to a poor rate of growth for the overall US economy this year, there are also indications that the concern may slowly begin to shift from recession to inflation, as we've already seen in other parts of the world.

Where the danger comes in is that if consumers accept these prices, without changing their driving habits, then oil prices (as well as prices for other commodities) could well find support in their current drop and seek to find even higher highs in the not-too-distant future.

Published on  Thu, May 29 2008, 18:59 GMT

The Health of the Consumer

Thu, May 22 2008, 22:56 GMT
by Andrei Pehar

fxKnight.com

This week saw a slew of consumer data hitting the markets.

In Australia consumer sentiment grew 2.7%, nearly twice as much as expected.  The prior month had seen a decline 1.3%.  Meanwhile credit card spending in New Zealand rose by 8.3% this year (compared with an increase of 3.3% the previous year), mirroring a trend also seen in the United States.

Retail sales in Italy dropped by 0.5% this month, and the prior month's numbers were revised down to only a slight gain of 0.2%.  Retail sales in the UK declined by 0.2%, at a rate consistent with last month's figures.  Analysts had been expecting a slightly larger decline of 0.5%.

Canada's retail sales showed a slight gain of 0.1%, but not quite the 0.3% which analysts were expecting.  Excluding autos, which make up 25% of the figure, the numbers remain unchanged from last month vs. analyst estimates for 0.4% growth.  Last week, the US saw their retail sales decline by 0.2%.

Germany, Switzerland, and the United States all saw an increase in their PPI data this week, and Canada posted a slight increase in their CPI, suggesting inflation remains a worldwide cause for concern.  (The UK also saw a sharp increase in their own CPI just the week before).

The US also saw a decline in unemployment claims, with 365,000 filing this month compared with 374,000 the previous month.

Published on  Thu, May 22 2008, 22:56 GMT

Status of the European Economy

Thu, May 15 2008, 21:39 GMT
by Andrei Pehar

fxKnight.com

The European Union posted surprisingly strong economic growth this month, lending further credence to the "de-coupling" theory of whether other economies will follow the US into recession, if there is one.  Some may, but it looks as though others may have the resilience to withstand it.

The latest figures suggest that the European Central Bank was spot on in it's concern over inflation and its refusal to lower interest rates, even as the US Federal Reserve and the Bank of England have done so.

The growth was led by Germany and France, with Germany posting the largest growth in 12 years.  Meanwhile other countries experienced slowdowns, namely Italy and Spain, with Spain still posting slight growth however the slowest it has seen in 8 years.

Published on  Thu, May 15 2008, 21:39 GMT

EU & UK Economies Slow, US Consumers Take On More Debt

Thu, May 8 2008, 19:40 GMT
by Andrei Pehar

fxKnight.com

The European Union and United Kingdom both saw figures pointing to a slowing in their economies this week.  In the UK we saw a decline in the services purchasing manager’s index, consumer confidence, industrial production, and manufacturing production.  On the EU mainland, the declines were felt primarily in investor confidence, as well as a slight drop both in German factory orders and industrial production, and a widening negative trade balance in France.  Both the Bank of England and the European Central Bank have left their key interest rates unchanged.

Meanwhile, across the Atlantic in the United States, we saw a large increase in crude oil inventories and even sharper increase in the total amount of outstanding consumer credit ($15.3 billion compared with 6.5 billion the prior month).  Last week’s figures also showed a decline in personal income and at the same time an increase in personal spending. Retailers benefiting the most seem to be ones carrying basic necessities of life.  Pending home sales also declined slightly for another month, but only half as much as the prior month.

Published on  Thu, May 8 2008, 19:40 GMT

Mixed News Out of US

Fri, May 2 2008, 01:23 GMT
by Andrei Pehar

fxKnight.com

The ISM Manufacturing Index held steady at 48.6, while the actual manufacturing prices rose slightly from 83.5 to 84.5   The core PCE price index also rose by 0.2% month-over-month, compared with 0.1% the prior month.  GDP is also holding steady at 0.6% for the quarter.

Unemployment claims rose to 380,000 – 35,000 more than last month.  Personal income declined from 0.5% to 0.3%, meanwhile personal spending rose from 0.1% to 0.4% (indicating perhaps that Americans are relying even more on credit).  Job cuts rose drastically from 9.4% to 27.4%, according to placement firm Challenger, Gray, & Christmas. 

The Fed cut its fund rate by 25 basis points to 2.00%, however in its issued statement it did not indicate that this was to be the last cut in the series, as was widely anticipated.  In fact, they cited growing concern over recession, leaving the door open to further cuts in the future.  Adding to these fears, construction spending dropped sharply this month, from 0.4% to -1.1%.

All eyes now turn to the non-farm payroll numbers due out later today, widely expected to post another loss of 80,000 jobs.

Published on  Fri, May 2 2008, 01:23 GMT

Critical News This Week from US

Sun, Apr 27 2008, 23:10 GMT
by Andrei Pehar

fxKnight.com

Last week in the United States saw an increase in durable good orders and a decrease in unemployment claims, however further signs of trouble in the housing market due to a slump in new home sales and overall home values.

The reports due out this week will be key for determining the future direction of the US Dollar against some of the other currencies.  It has made somewhat of a comeback the prior week, but it will need strong numbers in order to maintain it.

On Tuesday we have consumer confidence, which is expected to drop from 64.5 to 61.5.  On Wednesday the FOMC is announce its fed funds rate decision, where most analysts are anticipating another 25 point cut to 2.0%.  On Thursday we get personal spending, jobless claims, and ISM manufacturing, and on Friday comes the month's biggest report, the non-farm payrolls, which is widely expected to come in the same as the previous month, a decline of approximately 80,000 jobs.

Published on  Sun, Apr 27 2008, 23:10 GMT

Europe & US: Further Signs of Economic Trouble

Thu, Apr 3 2008, 13:37 GMT
by Andrei Pehar

fxKnight.com

Another round of economic reports were released today, none of them really offering much encouragement for the economies of Europe, the UK, or the United States.

The trading day started with Services PMI numbers coming out of both Europe and the UK.  The EU experienced a slight drop from 51.7 to 51.6, meanwhile the effect was more severe in the UK, where the drop was from 54.0 to 52.1 (analysts had been expecting a smaller drop to 53.3).

What really turned the markets is when European Retail Sales came in at -0.5%, a sharp decline from the prior month which was revised up to 0.5%.  Analysts here were expecting a slight decline to 0.2%, but still a positive number.  This, combined with recent Dollar strength, caused additional downward pressure on the EUR/USD, pushing it as low as 1.5510

Then the United States announced a sharp rise in unemployment claims - 407,000 versus 369,000 the previous month.  This caused a temporary rally in the EUR/USD which took it up to 1.5622

The day ended with at least one bit of positive news, when the ISM Non-Manufacturing Composite Index came in at 49.6, compared with 49.3 the prior month (analysts were actually expecting a slight decline to 48.5).  The logic is that purchasing managers are slowly increasing their spending, and their spending habits are often dictated by internal company financials not yet released.

The downward move of the EUR/USD resumed on this news, and we currently find ourselves below both the daily and weekly central pivots, as well as both the 50 and 200 moving averages.  This suggests that more lows may be in store for the EUR/USD in the coming days, bringing much-needed relief to European manufacturers and exporters.

All eyes are of course on the US Non-Farm Payroll numbers – due out tomorrow with a decline of 50,000 jobs expected.  A positive surprise would likely continue the decline of the EUR/USD pair into next week, meanwhile an even worse number might kick-start another rally.

Published on  Thu, Apr 3 2008, 13:37 GMT

Dollar Rally Ends With More Disappointing News Out of the US

Thu, Mar 27 2008, 19:50 GMT
by Andrei Pehar

fxKnight.com

Let's start with the good news.  Unemployment claims in the US dropped from 375K down to 366K.  GDP growth remained constant at 0.6%, and the Deflator (a GDP-based inflationary measure) shrank from 2.7% to 2.4%

However looking back at the week, we also saw core Durable Goods orders drop from -1.0% to-2.6%.  New Home Sales also fell from 601K to 590K and the national Home Price Index dropped by 10.7% for the year.  Existing home sales rose slightly from 4.89M up to 5.03M, likely influenced by the lower prices and speculative rather than residential buying.

But the big news story this week was US Consumer Confidence, which came in at 64.5 - signaling the biggest decline since the 1973 oil embargo.  Oil over $100 per barrel, OPEC threatening to reduce production, and ongoing conflicts in the Middle East are not helping the situation.

Fears that the US will slip into recession are growing, and the Dollar - after a brief rally before Easter - has resumed its decline.  The European Central Bank and the Bank of Japan have held meetings regarding ways to "protect" the Euro from going beyond 1.60 and the Yen from dropping below 95.00, however it is yet unclear as to what form this intervention may take.   

Economic reports coming out of both Europe and the UK suggest that - so far - those economies are remaining resilient.  Asian markets, however, seem to be reflecting the Dow's movements on concerns that the economies are still very much dependent upon one another.

Published on  Thu, Mar 27 2008, 19:50 GMT

Disappointing Retail Sales Figures Add to US Worries

Thu, Mar 13 2008, 15:56 GMT
by Andrei Pehar

fxKnight.com

The markets stand directionless as everyone looks around and asks "what's next?"

The retail sales numbers out of the US were a disappointment, coming in at -0.6% m/m (-0.2% core), both numbers a decline from analyst expectations as well as the prior month.  Declines were seen in all sectors, including groceries and for the first time in gas consumption (showing rising oil prices are finally having an effect on consumer spending and driving habits).  Unemployment claims remained unchanged at 353K and business inventories rose slightly to 0.8%

All of this is more bad news for the worsening US economic situation, and is adding increased downward pressure on the US Dollar.  Only days after the Fed's latest injection of liquidity, the Dow finds itself struggling once again, ready to post either a second consecutive day of losses, or a small marginal gain at best.

Currencies like the Euro, Japanese Yen, and the Swiss Franc already find themselves at record levels against the Dollar, leaving everyone to wonder just how far it could all go.

Published on  Thu, Mar 13 2008, 15:56 GMT

Canada: US Slowdown Will Be Worse Than Projected

Tue, Mar 4 2008, 15:33 GMT
by Andrei Pehar

fxKnight.com

The Bank of Canada lowered its overnight target rate by 1/2 of a percentage point to 3.50%

What was interesting was not only the drop itself (which was double what was forecast by analysts), but the statement which accompanied it.  Besides citing reports from the prior weeks and an overall economic picture in line with bank expectations, the report also states that "there are clear signs that the US economy is likely to experience a deeper and more prolonged slowdown than had been projected in January".

So what does this mean for the USD/CAD pair?

Presently, the pair has settled near a Fibonacci level at 0.9895 Most likely, it will rise to meet its 21 exponential moving average at or near the next key Fib level at 0.9953  A break above that would find its next resistance at 1.0011, then 1.0093

If price breaks below 0.9895, then it should find support at 0.9824, then 0.9709 - the latter is the key level to watch.  Pricing at levels below this would signify that the USD/CAD has finally broken out out of the range it has been in since November, and may be poised to set new record lows, especially if we keep getting more negative news out of the US.

Published on  Tue, Mar 4 2008, 15:33 GMT

Euro Looks Poised to Test Record

Tue, Feb 26 2008, 18:43 GMT
by Andrei Pehar

fxKnight.com

Today was a decisive day for the Euro against the Dollar.  First we had positive news coming out of the Eurozone in the form of the of the German Ifo Business Climate Index, which came in at 104.1 compared with 103.4 the previous month.  The Business Expectations Index was lowered slightly from 99.0 the previous month to 98.2 this month.

Then, later in the day, we had a string of negative news out of the US.  First we had the Producer Price Index come in at 1.0% vs. -0.3% last month (0.4% vs. 0.2% on the Core PPI number), indicating that inflation is on the rise (though not yet over that critical 2% mark).   Next we saw a drop in the Housing Price Index from 0.3% the previous month to -1.3% this month.  No sign of relief there.  And the consumer, who thus far seemed resilient in their spending compared to all other reports the past months showed the first signs of being affected by the downturn in the economy, as Consumer Confidence slipped sharply from 87.3 (a figure already revised downwards) to 75.0 

All of these news releases made for great trading on the EUR/USD pair to the upside throughout the day, finally pushing us over a critical resistance level at 1.4856, breaking a trendline which has been in place since mid-November.

Next price is expected to keep moving up to test the key 1.5000 level, after which time it will most likely cool again and re-test the 1.4856 level again as support.  These are important levels to watch, as a Euro which can maintain levels above 1.50 against the Dollar stands to shift some major paradigms in the market.  At the minimum, we appear to be nearing the end of a consolidation period which has lasted over 4 months.

Published on  Tue, Feb 26 2008, 18:43 GMT

Canadian CPI Data Clears the Way for USD/CAD Move

Tue, Feb 19 2008, 14:27 GMT
by Andrei Pehar

fxKnight.com

The Consumer Price Index actually came in a bit better than expected today (-0.2% vs. -0.1% forecast, 0.1% for the Core), suggesting that inflation is on the decline in Canada.  Normally this would have sent the USD/CAD pair down, as less Canadian Dollars would be needed to buy each US Dollar.

Instead we saw a brief spike down to 1.0020, which quickly retraced to close the candle back within the established trading range for the day, between the S1 pivot at 1.0034 and the day's central pivot and the 200 moving average at 1.0066

This move left behind it a chart pattern known as the "kangaroo tail", and most of the time kangaroos jump in the direction opposite of their tails.  This was no exception - price continued to rise, and once it broke outside the day's established range, assisted by Wholesale Sales coming in lower than expected (-2.9% vs. -0.6% forecast), there was no stopping it.

The rally finally came to an end at 1.0116, completing the move from the S2 to the R2 pivot.

Longer-term, if 1.0116 breaks as resistance, price could go on to test the 38.2% Fib. at 1.0133 next.  A break below 1.0100 would suggest the Loonie is on its way to test the 1.0066 level once again as support, with additional support on the way down at 1.0084

Published on  Tue, Feb 19 2008, 14:27 GMT

Buffet Boosts US Markets

Tue, Feb 12 2008, 16:38 GMT
by Andrei Pehar

fxKnight.com

Markets got a strong boost today by none other than Warren Buffet.  The Billionaire investor has offered to re-insure over $800 Billion in municipal bonds.

How is it that the most the US Congress can muster is $168 Billion?

Now the question remains whether he will be able to do what the Fed failed to, even with a 1.25% rate cut inside of 2 weeks.  All eyes are on the US markets... the Dow is slightly up on the news, but still dangerously close to key 12,200 support.

Will this (finally) be an indication of a bottom forming, or will the new-found euphoria be short-lived?  The reality is that injections and assistance of any kind will still take time to work there way through the economy.  No fix is likely to produce instant or overnight results, and in the end it will take the combination - plus that magic extra ingredient: time.

According to the most recent housing numbers and other economic data, it seems that the US is still on track for a bear market - at least until we near the end of Q2 of 2008.

Published on  Tue, Feb 12 2008, 16:38 GMT

ISM Leaked Early − Looks Bad for US!

Wed, Feb 6 2008, 14:29 GMT
by Andrei Pehar

fxKnight.com

ISM was just leaked early, ahead of its scheduled 10:00 EST release later today. Looks bad for the US economy - our first official recessionary indicator. Now it's for real. And it's in services, America's largest sector. As anticipated, this is going to be a consumer-led recession (the worst sort - like the great depression), as people get squeezed more and more, lose their homes (or home value) and are now beginning to spend less on services (generally affected after homes and more expensive durable goods).

.	Actual	Consensus	Prior
Index	41.9	53.0	54.4
Composite	44.6	52.4	53.2
Prices	70.7	69.8	71.5

Published on  Wed, Feb 6 2008, 14:29 GMT

The Fallout from Friday's Jobs Numbers

Wed, Feb 6 2008, 14:28 GMT
by Andrei Pehar

fxKnight.com

The Non-Farm Payroll came in at -17K last week, far below expectations - posting the first reduction in the amount of new jobs in the US in over 4 years. This was despite the largest Fed intervention since 1984 (not even the crash of 1987 warranted such extreme measures), and the first rate change outside of a regular FOMC meeting since September 17th, 2001, the first trading day following the terrorist attacks.

The overall picture for the US economy is still not very good. Several major indexes including the S&P and the NASDAQ have crossed below major moving averages, officially showing signs of a bear market. Bear markets still have up days, as we've seen, but typically investors short the tops of those rallies. There's really been no hard confirmation of a bottom yet, especially not in the banking sectors. The underlying situation has not changed, with America still living far beyond its means, racking up Trillions in foreign debt, waging costly wars, and facing the retirement of baby boomers (whose investments are primarily in mutual funds, who in turn invest in the companies which make up the major indexes). All of this potentially points to more bearish moves ahead for the US Dollar.

Figures to watch closely remain the US housing numbers, some of which will start to come towards the end of this week, and more so the week after. Interesting also will be Canada's housing numbers on Friday, which will give an indication of whether the crisis is spreading north of the border or not. All eyes thus far are on the UK and Europe, to see the extent to which the credit crisis will spread overseas. We also have the Labor Cost Index coming out of New Zealand, plus Retail Sales and an interest rate decision coming from Australia later on today.

Published on  Wed, Feb 6 2008, 14:28 GMT