Thu, Oct 1 2009, 20:33 GMT
by Andrei Pehar
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
Tue, Jun 23 2009, 15:16 GMT
by Andrei Pehar
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
Tue, Feb 24 2009, 15:28 GMT
by Andrei Pehar
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
Fri, Nov 21 2008, 21:24 GMT
by Andrei Pehar
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
Thu, Oct 16 2008, 20:32 GMT
by Andrei Pehar

Published on Thu, Oct 16 2008, 20:32 GMT
Thu, Oct 2 2008, 03:55 GMT
by Andrei Pehar
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
Fri, Sep 26 2008, 10:04 GMT
by Andrei Pehar
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
Fri, Sep 19 2008, 09:58 GMT
by Andrei Pehar

Published on Fri, Sep 19 2008, 09:58 GMT
Fri, Sep 12 2008, 16:58 GMT
by Andrei Pehar

Published on Fri, Sep 12 2008, 16:58 GMT
Thu, Sep 4 2008, 22:41 GMT
by Andrei Pehar

Published on Thu, Sep 4 2008, 22:41 GMT
Thu, Aug 28 2008, 13:24 GMT
by Andrei Pehar
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
Mon, Aug 18 2008, 15:10 GMT
by Andrei Pehar
Published on Mon, Aug 18 2008, 15:10 GMT
Thu, Aug 14 2008, 20:00 GMT
by Andrei Pehar
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
Mon, Aug 4 2008, 12:08 GMT
by Andrei Pehar

Published on Mon, Aug 4 2008, 12:08 GMT
Thu, Jul 17 2008, 10:37 GMT
by Andrei Pehar
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.Published on Thu, Jul 17 2008, 10:37 GMT
Tue, Jul 15 2008, 12:23 GMT
by Andrei Pehar
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.
Published on Tue, Jul 15 2008, 12:23 GMT
Mon, Jul 14 2008, 13:55 GMT
by Andrei Pehar
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
Thu, Jul 10 2008, 11:37 GMT
by Andrei Pehar
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
Thu, Jul 3 2008, 19:13 GMT
by Andrei Pehar
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
Thu, Jun 26 2008, 20:17 GMT
by Andrei Pehar
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
Fri, Jun 13 2008, 01:20 GMT
by Andrei Pehar
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
Fri, Jun 6 2008, 16:38 GMT
by Andrei Pehar
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
Thu, May 29 2008, 18:59 GMT
by Andrei Pehar
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
Thu, May 22 2008, 22:56 GMT
by Andrei Pehar
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
Thu, May 15 2008, 21:39 GMT
by Andrei Pehar
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
Thu, May 8 2008, 19:40 GMT
by Andrei Pehar
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
Fri, May 2 2008, 01:23 GMT
by Andrei Pehar
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
Sun, Apr 27 2008, 23:10 GMT
by Andrei Pehar

Published on Sun, Apr 27 2008, 23:10 GMT
Thu, Apr 3 2008, 13:37 GMT
by Andrei Pehar
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
Thu, Mar 27 2008, 19:50 GMT
by Andrei Pehar
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
Thu, Mar 13 2008, 15:56 GMT
by Andrei Pehar
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
Tue, Mar 4 2008, 15:33 GMT
by Andrei Pehar

Published on Tue, Mar 4 2008, 15:33 GMT
Tue, Feb 26 2008, 18:43 GMT
by Andrei Pehar
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
Tue, Feb 19 2008, 14:27 GMT
by Andrei Pehar
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
Tue, Feb 12 2008, 16:38 GMT
by Andrei Pehar
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.

Published on Tue, Feb 12 2008, 16:38 GMT
Wed, Feb 6 2008, 14:29 GMT
by Andrei Pehar
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
Wed, Feb 6 2008, 14:28 GMT
by Andrei Pehar
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
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