Analysis Topic: Currency Market Analysis
The analysis published under this topic are as follows.
Thursday, March 22, 2007
War with Iran, Crude Oil, Banks and the US Dollar / Currencies / Iran
By: Jim_Willie_CB
On the eve of the next war front to explode in the Persian Gulf region, some thoughts on the energy sector seem appropriate which attempt to tie some factors together. In the last two to three years, the biggest challenge to analysts is not so much identification of certain relevant effects, as it is integration of analysis on a several simultaneous patently clear crucial factors for correlation. To friends an assessment has been often used by me, “This is five dimensional chess, and at any one time, three dimensions are dominant. All are linked increasingly and with more complexity. The challenge is to finger the most important pairs of factors.” That covers it in my opinion.
The tight relationship between the crude oil price and the USDollar valuation is historically well known, firmly in place for over three decades. While the United States owns control of the world reserve currency, a delicate PetroDollar linkage factor remains in force. Since large oil purchases are conducted in US$-based transactions, entire banking systems are designed accordingly so as to handle those transactions.
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Wednesday, March 21, 2007
US Dollar Forecast - Turn to Bernanke's February Testimony for Clues / Currencies / US Dollar
By: Ashraf_Laidi
Recall that Fed Chairman Bernanke issued a less upbeat speech in last month's Congressional testimony, following a more optimistic January FOMC statement. Since the data have been markedly weaker since February, the Fed has no choice but to tone down the optimism in the phrase indicating "recent indicators have suggested somewhat firmer economic growth."
The dollar gains ground against the yen and European currencies, with the latter under pressure primarily due a surprisingly dovish release of the minutes from this week's Bank of England rate decision showing 1 vote calling for a rate cut against eight members voting for no change. Markets were pricing a 7-2 decision with the 2 members calling for a rate hike.
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Tuesday, March 13, 2007
Forex Forecast - US Retail Sales Weakness means more Unwinding in the Yen Carry Trade / Currencies / US Dollar
By: Ashraf_Laidi
Retail sales grew by less than expected at 0.1% in February after a flat showing in January, while sales ex-autos fell 0.1% from 0.2% in January. This weak report coupled with the downward revision in the January core sales should further drag on US Q1 GDP . We're not sure about the validity of claims by some economists attributing the weakness to cold weather, when February is a month known for its cold temperatures. The decline in sales was broad-based, even when excluding autos, gasoline and building materials.
The weakness in retail sales comprises an economic argument to trigger further unwinding in the yen carry trade, in which point it will extend to other dollar pairs. Unlike the carry trade unwinding of two weeks ago, which was largely market-based and only limited to low yielding currencies, today's report triggers an all round sell-off in the US dollar, lifting EURUSD above 1.3220 and GBPUSD above 1.9340.
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Tuesday, March 13, 2007
Unwinding of the Yen Carry Trade, Unravels Global Stock Markets / Currencies / Yen Carry Trade
By: Gary_Dorsch
Millions of words have been written about the heavy handed tactics of Japan’s Ministry of Finance (MoF) in manipulating the value of the Japanese yen, the Japanese bond market, and squeezing short sellers in the Nikkei-225 futures market. Manipulation of markets through the use of jawboning, re-jigging of inflation statistics, and outright intervention is a time honored tradition at the MoF.Japan’s Ministry of Finance is a political, economic, and intellectual force without parallel, and with a greater concentration of power than any branch of government amongst the major industrialized democracies. In Japan, there is no institution with more power, and it has a borrowing ceiling for foreign exchange intervention of up to 140 trillion yen ($1.2 trillion) for the upcoming fiscal year.
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Sunday, March 11, 2007
Japanese Yen Forecast - The Yen Carry Trade: Global Removal of Liquidity and Deflation / Currencies / Japanese Yen
By: Francois_Soto
How does the carry trade work?It's actually very simple. Here is a fictive example from Wikipedia depicting the process:
Bank ABC is borrowing X billions of Yen at 0.0% interest rate in Japan.
Bank ABC is converting X billions of Yen in $USD.
Bank ABC is investing the amount of $USD at 4.5% interest rate in USA with 10x leverage.
Bank ABC profit is (4.5%-0.0%) * 10 = 45.0%
Seems too good to be true! What is the catch?
If the Yen appreciates in value vs. the $USD, Bank ABC may lose a significant amount of money.
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Thursday, March 08, 2007
Currency Forecasts - USD/JPY and GBP/EUR - Short-term Dollar rally expected / Currencies / US Dollar
By: Ashraf_Laidi
Wednesdays release of a weaker than expected ADP report (forecast for private employment payrolls) showing the net creation of 57K jobs in February, suggests that Friday's release of February non-farm payrolls may come in well below consensus estimates of 100K.
The ADP report has been generally effective in predicting whether non-farm payrolls would come in above or below consensus forecasts, rather than predicting the actual figure.
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Thursday, March 08, 2007
Will Crude Oil be traded in currencies other than the US Dollar ? / Currencies / Global Financial System
By: Julian_DW_Phillips
Oil is priced in the U.S. $, which makes it one of the vital interests of the U.S. Without this backing to the $ we have no doubt the path of the $ to the global reserve currency would have been impaired and be undergoing a major attack by now. The thought of oil being priced in currencies other than the $ poses a threat to the credibility of the U.S.$ of major proportions. Any talk of a switch to pricing in other currencies [let alone an actual switch] poses a threat to the U.S. $ in its reserve currency role. This threat is now a real one and poses a considerable danger to the $ in time.Read full article... Read full article...
Tuesday, March 06, 2007
More Central Banks diversify away from the US Dollar- Forex Crises to follow / Currencies / Analysis & Strategy
By: Julian_DW_Phillips
For years now we have warned of tsunami like capital waves crossing the globe bringing financial drama with it. We have pointed to the structural problems that could give rise to the damage these waves will cause. We have warned of the Central Bank's moves away from the U.S.$. We have also warned of the damage the Trade deficit is doing to the U.S. We have also warned of global foreign exchange and rates crises.
We coined the expression "Live now, Pay later" syndrome that has been all-pervasive in the U.S.A. Add this to the "so far, so good" attitude and what happened this week in global markets has been long overdue. It signals that globalization and the free flow of capital across this globe of managed foreign exchange rates, plus the interdependency of global economies will undermine all paper currencies to some extent. This week saw that begin . Probably a group of global funds thought the time was ripe in many markets to rattle some cages and down the markets went. That they should have this ability and power is the frightening thing and the situation can only worsen as other speculators and fund powerhouses get the scent of this action.
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Sunday, March 04, 2007
British Pound (GBP/USD) Targeting a Significant Downtrend to 1.8600 / Currencies / British Pound
By: Nadeem_Walayat
The US Dollar strengthened late last week, especially against much a weaker British Pound, which ended Friday on a weak 1.9430. The Pound earlier in the week again failed to get anywhere near breaching the previous high of 1.9890.
Wednesday, February 28, 2007
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By: Sarah_Jones
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Wednesday, February 28, 2007
US Dollar Index Elliott Wave Analysis and Forecast / Currencies / Forecasts & Technical Analysis
By: David_Petch
Today's report is about analysis of the US Dollar Index. Fibonacci time extensions of two different waves are shown midway on the chart and Fib price retracements of the most recent decline from November till December shown on the right hand side. The 61.8% retracement level was strong resistance, which sent the index down to test the 38.2% retracement level. The lower 55 MA Bollinger band is rising, with the upper 55 MA BB declining.
This suggests we can expect to see the USD chopping sideways for 5-10 days before a sharp decline occurs. There is a Fib cluster around March 20 th , suggestive that a bottom in the USD looms around this date. Short-term stochastics have the %K beneath the %D, with another 3-4 weeks at a minimum before a bottom is in place.
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Tuesday, February 27, 2007
Zero Degrees of US Dollar Seperation / Currencies / US Dollar
By: Jim_Willie_CB
The last several months have provided a keen lesson in currency defense by a nation which has been written off in many circles as owning a dead and hopeless currency. Some key inter-related feedback loops have been on my radar, each vitally important and changing, which underscore in my viewpoint how major markets are inseparable, each inter-connected, and integrally important if the USDollar is to avoid a much deserved crash. A quip of mine at a conference one year ago centered on my claim that the USDollar was backed by the full force of the US Military.
While true in some respect, the actual defense day to day entails a green triangle not to be confused by the iron triangle which fortifies the Pentagon funding, namely the US Congress, the defense contractors, and the lobbyists when grease the funding wheels. Complementing this death grip which has contributed over decades to do irreparable harm to the USDollar, the green triangle consists of holding down gold in a straight jacket, and holding down crude oil in a giant clamp. Never stated is its purpose to reinforce the USDollar from its implied inverse leverage device as hedge funds run for cover. The greenback and gold shine in opposite directions. The greenback and crude oil flow in opposite directions. Goldman Sachs has been at the controls on most of the master machinery.
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Wednesday, February 14, 2007
Dollar Requires Valentines Lift from Bernanke - Currencies Analysis / Currencies / Forecasts & Technical Analysis
By: Ashraf_Laidi
The dollar selloff of the past 2 days is reaching key support levels, which would only stabilize from an upbeat testimony by Fed Chairman Ben Bernanke.
We expect Fed chairman Ben Bernanke's testimony to offer a vital dose of support for the dollar as his message should not only reiterate the upbeat tone of the last FOMC statement, but also reflect the particularly hawkish remarks from Fed officials last Friday.
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Wednesday, February 07, 2007
The US Dollar will Crash during 2007 due to $8.6 trillion debt / Currencies / US Dollar
By: Mike_Whitney
“Whatever future developments may prove to be, my best guess is that the US will continue to maintain a facade of Constitutional government and drift along until financial bankruptcy overtakes it.” Chalmers Johnson, “Empire V. Democracy: Why Nemesis is at our Door”
Every time a US Dollar is traded, a check is issued on an account that is overdrawn by $8.6 trillion. (That is the present size of the national debt) It is, without question, the biggest swindle in history. Flimsy sheets of faded-green scrip are eagerly exchanged for costly goods and services without any regard for the real value of the currency.
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Wednesday, February 07, 2007
Rising Crude Oil and G7: Yen Strength or US Dollar Weakness ? / Currencies / Forecasts & Technical Analysis
By: Ashraf_Laidi
The dollar's technical outlook has taken a turn to the worse on a combination of aggressive pre-G7 currency talk favoring yen stability and an 18% increase in oil prices over the past 3 weeks.
Oil Rebound as Fast as Past Decline
An 18% rise over a 3-week period is as significant as a 20% decrease over a 4-week period (oil's decline from mid December to mid January), but oil's rebound has not yet made it to the front pages as it is "only" at 4 week highs, which is not as "spectacular" as 18-month lows - seen in mid January. But the magnitude of the current rebound is comparable to the prior declines. The significance of the recent oil increase is such that US consumers may start to struggle in spending their way to an economic soft landing and keeping intact the Goldilocks scenario (neither too hot nor too cold). A prolonged slowdown in US housing would raise risks of a double whammy for the US economy, especially at a time, when US manufacturing deepens in a recession.
Tuesday, February 06, 2007
Market Wrap - US Dollar / Currencies / Forecasts & Technical Analysis
By: Douglas_V_Gnazzo
The US Dollar was up versus the Euro and Yen last week, supposedly based on the speculation that the Federal Reserve will not lower interest rates anytime soon, choosing instead to keep them steady and unchanged. The US Dollar index was down 0.4% for the week, closing out at 84.95. The British pound gained versus the dollar based on speculation that the Bank of England will raise interest rates to slow the economy down, which is expanding at a faster pace then the BOE feels safe with regarding inflationary pressures.
The Yen Carry Trade is alive and well, at least for the moment. The market is short yen meaning it is betting it will fall. The U.S. Commodity Futures Trading Commission reported that net shorts rose to a record 173,005 from the prior record of 164,860 the week before.
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Friday, January 26, 2007
Currency Market Forecast - Further Aussie Dollar (AUD) Unwinding Ahead due to softer Inflation / Currencies / US Dollar
By: Ashraf_Laidi
This week's softer than expected consumer inflation figures from Australia have eroded chances of a February rate hike and may have finally concluded the 4 ½ year old tightening cycle adopted by the Reserve Bank of Australia, which lifted interest rates from 4.25% to 6.25%. The headline CPI slowed to 3.3% in y/y in Q4 from 3.9% in Q3, undershooting expectations of a 3.6% reading. Although the core CPI (excluding volatile items) edged up to 2.7% from 2.6%, the seasonally adjusted weighted median CPI slipped to 3.0% from 3.2%. Markets were especially caught off guard by the 0.1% decline q/q, which was the first decrease in 8 years. The soft CPI report was clearly a result of falling energy and commodity prices, which triggered a 12.4% drop in gasoline costs and a 5.2% in fruit prices. But the report was instrumental in dampening probabilities of a February rate hike from as much as 80% to less than 15%.Read full article... Read full article...
Wednesday, January 24, 2007
Turmoil in the currency markets as US builds up crude oil stocks - foretell Iran strike ? / Currencies / Forex Trading
By: Ashraf_Laidi
Light sweet crude is down 20 cents at $54.80 per barrel, after Tuesday's $2.48 jump to $55.04 on reports that the US Dept of Energy will purchase 100K barrels of oil per day starting next spring. While the decision is part of the Bush Administration's latest commitment to reduce US dependency on imported oil, the aggressive approach on beefing up SPR may reflect heightened possibility of a US military strike against Iran as early as March or April, at a time when US navy ships are piling up in the Persian Gulf. Yesterday, markets were filled with chatter of a Kuwait-based newspaper article reporting that the US will launch a military strike on Iran before April 2007, citing "reliable sources".According to the article, the strikes will be launched from US ships with Patriot missiles guarding all oil-producing countries in the region. The attacks would be planned in April, the last month of British PM Blair in office. The immediate result of such an attack is a protracted run up in oil prices, which could reach the $70 per barrel mark in less than a week.
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Wednesday, January 17, 2007
Currency Forecasts - Effects of Supplying Oil and Military Troops / Currencies / Forecasts & Technical Analysis
By: Ashraf_Laidi
The 17% decline in oil prices so far this year has recalibrated the FX equation in so far as bolstering expectations of a US consumer-led stability to act as a stabilizer to housing's downside risks. This has considerably diminished chances of a March Fed cut and manifested itself across European and Asian currencies. The role of oil's rebound has been such that it took center stage in FX markets, shadowing a string of positive economic data from the Eurozone and the UK. Aside from freeing US consumers' wallets, falling oil prices have reduced the Sep-Nov trade deficit by over 17%, which is likely to contribute as much as 0.7% to Q4 GDP.
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Saturday, January 06, 2007
The global liquidity pyramid is stopping the US Dollar from collapsing / Currencies / Analysis & Strategy
By: Adrian_Ash
What's stopping the US Dollar from doing what it must – and collapsing...?
"Global demand for the Dollar is now driven by the explosion in Dollar-denominated assets," writes Dan Denning from Melbourne, "almost completely out of the control of central banks."
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