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Thread: Fundamental analysis
  1. #11
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    Crude Oil Daily Fundamental Analysis

    Crude oil prices fell below $100 a barrel on Thursday amid the pessimism that dominated financial markets after the worse than expected economic data from the United States, where data from the housing and manufacturing sectors signaled activities were slowing down, which overshadowed the better than expected drop in the jobless claims earlier on Thursday.
    We still maintain our bearish short term outlook for crude oil prices, since jitters continue in markets amid the uncertainty over global growth, in addition to the recent data from the United States, which signaled economic weakness persisted through the second quarter of this year, and that will put further pressure on crude oil prices.
    Friday 11:00, Canada will release the consumer price index will be released for April, where CPI is expected to have continued to rise amid rising food and energy prices, as the report is expected to show that headline CPI increased by 0.5% on monthly basis, and by 3.4% on yearly basis, while core CPI is expected to increase by 0.1% on monthly basis, and 1.6% on yearly basis.
    Friday 12:30, Canada will release the retail sales index for the month of March, where retail sales rose in February by 0.4% and expectations suggest that retail sales increased in March by 0.9%, while retail sales excluding autos probably increased by 0.8% in March after rising by 0.7% in February.

    http://www.fxstreet.com/fundamental/...ok/2011/05/20/

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  3. #12
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    Fundamental Forecast for Canadian Dollar: Bearish

    The Canadian dollar continued to weaken against its U.S. counterpart, with the USD/CAD rallying to a fresh monthly high of 0.9792, and loonie may depreciate further in the week ahead as interest rate expectations falter. As the headline reading for inflation holds steady at an annualized 3.3%, the Bank of Canada will certainly keep the benchmark interest rate at 1.00% in May, and Governor Mark Carney is likely to reiterate his pledge to ‘carefully consider’ future rate hikes given the substantial margin of slack within the real economy.

    Although the BoC sees price growth holding above 3% in the second-quarter, Mr. Carney argued that the recent developments “supported the Bank’s near-term outlook,” and said inflation will fall back towards 2% by the middle of 2012 while delivering a speech earlier this week. At the same time, the central bank head warned exports could be dampened “for some time” given the slow recovery in the U.S., Canada’s largest trading partner, and saw a risk for a further appreciation in the local currency, which would add additional downward pressures on the real economy. The recent comments made by Governor Carey suggest that the BoC will carry its wait-and-see approach into the second-half of the year, and the Canadian dollar may face additional headwinds over the near-term as interest rate expectations deteriorate. According to Credit Suisse overnight index swaps, investors now see borrowing costs in Canada increasing by nearly 75bp over the next 12-months, which compares with projections for a 100bp rise at the beginning of May, and the central bank may look to support the real economy throughout the third-quarter as the fundamental outlook for the global economy remains clouded with high uncertainty.

    As the near-term rebound in the USD/CAD gradually gathers pace, with the exchange rate pushing above the 100-Day moving average for the first time since November, there’s certainly a risk that the pair could approach the 78.6% Fibonacci retracement from the 2007 low to the 2009 high around 0.9900 in the week ahead as currency traders scale back their appetite for risk. Beyond the 78.6% Fib, we will need to see a test of the 200-Day SMA (0.9989) to confirm a bullish trend in the USD/CAD, and the dollar-loonie may threaten the downward trending channel that was carried over from back in 2009 as it appears to have carved out a bottom in May.

    http://www.dailyfx.com/forex/fundame...y_Levels_.html

  4. #13
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    British Pound To Face Range-Bound Price Action On Mixed Data

    Fundamental Forecast for British Pound: Neutral
    The British Pound slipped to a fresh monthly low of 1.6110 following the slew of disappointing developments coming out of the U.K., but the sterling may regain its footing over the following week as the economic docket is expected to encourage an improved outlook for growth and inflation. The Bank of England policy meeting minutes weighed on the exchange rate as the Monetary Policy Committee voted 6-3 to keep the benchmark interest rate at 0.50% in May, and the majority may uphold a wait-and-see approach over the coming in order to encourage a sustainable recovery in Britain.

    BoE board member Charles Bean continued to endorse a neutral outlook for monetary policy this week and warned that targeting the 2% target for inflation would dampen economic activity as private sector consumption remains subdued. Although Mr. Bean expects to see a gradually expansion in growth, he said the BoE preferred above-target inflation over stagnant growth, and expects consumer prices to remain elevated this year, which has the potential of fueling higher wage demands. Indeed, the balanced tone held by the central bank has dampened speculation for a rate hike in the third-quarter, and the MPC may continue to defy calls to stem the risk for inflation given the ongoing weakness within the real economy.

    Nevertheless, investors are still pricing the benchmark interest rate to increase by at least 25bp over the next 12-months according to Credit Suisse overnight index swaps, and the GBP/USD may face range-bound price action over the near-term as market participants weigh the outlook for future policy. However, there could be a growing shift within the MPC as the headline reading for inflation approaches 5%, and the committee may show an increased willingness to start normalizing monetary policy later this year given the stickiness in price growth. As preliminary 1Q GDP report is expected to confirm a 0.5.% expansion in the growth rate, the rebound in private sector activity should help to prop up the sterling, , which could lead the GBP/USD to work its way back towards 1.6400. However, another dismal consumer confidence report could bear down on the exchange rate as household consumption remains one of the leading drivers of growth, and a sharp decline in the pound-dollar could expose former resistance around 1.6000 as the pair searches for support.

    http://www.dailyfx.com/forex/fundame...ixed_Data.html

  5. #14
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    Mon, May 23 2011, 07:10 GMT

    Chinese PMI declines

    EURUSD – bears are back
    On a previous Monday we wrote that the market was up for some corrective up-tick but was likely to be back in a bearish mode in a medium term. Indeed was saw an upside correction on the EURUSD that lasted for a bit longer than 4 days and on Friday bears returned convincingly showing their intentions.

    Among triggers of another selling wave on the pair were:
    - Downgrades: Fitch cut Greek rating from BB+ to B+ and S&P lowered outlook for Italian A+ to negative from stable; Italian rating is actually a major concerns here as it fans contagion concerns
    - worries that local elections in Spain may unveil some hidden debt
    - worries what will happen if the ECB stops accepting Greek bonds as a collateral (in the event of restructuring; even the soft one…)
    - macroeconomic data do not help either – soft-patch worries are related to the US economy but for as long as they increase risk aversion euro is exposed

    Technically, a selling signal on the EURUSD came as the pair brought through a lower limit of an upward wedge formation (typical formation in a corrective phase) after being unable to move above a key 1,4340 level. The pair was quick to move towards multi-week lows and is about to test 1,40 with target supports (for a possible wave c) at 1,3870 and 1,3745.
    The euro isn’t loosing merely versus the dollar. We saw some major moves against the franc, pound and yen as well, with EURCHF searching for all-time lows.
    If the last year offers any lesson, euro may fall until some bold decisions on Greece are not taken and those still seem to be some few weeks away.

    Chinese PMI declines

    The week didn’t start well with the Chinese flash PMI declining from 51,8 to 51,1 pts. This is yet another decline in activity in China and may rise concerns how Chinese economy will respond to tightening measures – those already introduced and those yet to come. Chinese officials made it clear that the inflation was a priority and comparing to 2007 they are still behind the curve. That means the Chinese economy is likely to face the impact of a significant tightening and a consensus that the GDP growth will remain broadly unaffected might be too optimistic. In context of weaker US data and renewed concerns in Europe this news is definitely negative for industrial commodities and equities.

    Events to watch – flash PMIs

    The week will bring some relevant data from the US (durable orders, preliminary GDP, new home sales) and some intangibles from Europe (mostly regarding Greece). European flash PMIs will be released today (3.58 ET, 9.58 CET; industrial PMI is expected at 57,5 pts. and services PMI at 56,5 pts.).

    http://www.fxstreet.com/fundamental/...ot/2011/05/23/

  6. #15
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    Euro hammered as European debt crisis comes in the spotlights again

    Mon, May 23 2011, 07:48 GMT
    On Friday, EUR/USD traders experienced a nervous trading session, even as there were hardly any data with market moving potential. At the end of the day, the negative news flow on the EMU debt crisis had again become the focal point for trading and this made EUR/USD returning (more than) Thursday’s gains.

    European equities had still some catching up to do on the late session rebound in the US on Thursday evening and traded accordingly. So, at the start of the session, it looked that sentiment on risk would stay positive at the end of the week. EUR/USD reached a minor new high in the 1.4345 area. However, the positive momentum could not be maintained and both equities and EUR/USD turned south. The move probably developed in rather thin market conditions as there were no important data on the calendar. Nevertheless, the market talk soon returned to the institutional problems in Europe that have come the surface as European policy makers try to find a new solution for Greece. Amongst others, the harsh standpoint of the ECB that any restructuring of the Greek debt is inacceptable was a source of hefty debate. The ECB warning that it might stop accepting Greek government bonds as collateral in case of any restructuring has surprised a lot of observers. It looks as if the ECB is on collision course with a lot of other EMU policy makers which are involved in the process. An open rift between two major players in search for a solution of a difficult crisis is not a nice story. This rift caused negative fall-out on the euro, too. So, EUR/USD started a gradual decline that lasted into the US trading session. Uncertainty on the outcome of the Spanish local elections was another reason/excuse to scale back euro long exposure going into the weekend. It was not the first time that the euro was in the defensive ahead of the weekend. At the end of the European trading session, rating agency Fitch downgraded the credit rating of Greece to B+. This was of course also no help for the single currency. EUR/USD closed the session at 1.4161, compared to 1.4309. This is quite a significant loss for a day with no important news on the agenda.

    During the weekend the bad news show continued as rating agency S&P revised the outlook on the Italian A+ credit rating from stable to negative. So, one might expect that the European debt crisis will stay in focus today. Regarding the data, the calendar in the US is again very thin. In Europe, we look out for the advance reading of the EMU PMI’s. A stabilisation/moderate decline is expected. The impact of the release on markets should be limited. In the current market sentiment, the risk is for somewhat of an asymmetrical reaction: a weaker than expected figure has some more potential to cause a market reaction while a better than expected figure will probably be ignored. There are again a lot of public appearances from ECB members and meetings of other EU policy makers, including a meeting of Germany’s Merkel with EU’s Juncker. Markets will take a close look whether they will yield any new hints on how the EU will address the next stage in the sovereign debt crisis. Whatever the outcome of any of those meetings, European politics will remain in the spotlights today. Amongst others, the result of the Spanish regional elections and the protests in the country will get ample coverage in the media. Some might even mention the eruption of the Grimsvotn volcano on Iceland as a potential negative for Europe and its economy. So, one might expect investors to be very reluctant to take (European) risk at the start of this new trading week. This will weigh on the EUR/USD cross rate. In this respect, EUR/CHF is already setting new lows below the 1.24 mark this morning.

    We had a LT bullish strategy for the EUR/USD cross rate based on the different policy approach between the ECB and the Fed. However, extreme euro long positioning made the cross rate vulnerable to a short-term correction. The recent correction started as the ECB didn’t signal a rate hike in June as markets expected. Renewed uncertainty on Greece and the commodity correction reinforced the repositioning in EUR/USD, too. Last week, we reinstalled a cautious buy-on-dips approach as the pair showed some tentative signs of bottom out off from Monday’s low at 1.4048, even as the rebound was far from spectacular. The pair reached a minor new high at 1.4345 on Friday, but from there, a sharp profit taking move kicked in and brought the pair again within striking distance of the 1.4048 correction low. At least in a short-term perspective, the political and institutional uncertainty is becoming more important as a factor for EUR/USD trading. A drop below 1.4048/00 area would be an indication that the bottoming out process failed and that a new down-leg might be in store. We think there is quite a high probability for this scenario to materialize. So, we start the new week with a negative bias for EUR/USD. Tight stop-loss protection on EUR/USD longs looks highly warranted. Short-term players can even look to join the move in case of a drop below 1.4048.

    On Friday, the focus for currency trading was on the euro side of the story. The USD/JPY cross rate showed some intraday swings, but after all the pair developed a sideways trading pattern in a tight range roughly between 81.50 and 81.85. As was already the case of late, the yen didn’t profit much from the deterioration in global sentiment on risk going into the weekend. USD/JPY closed the session at 81.70, not that much changed from the 891.61 close on Thursday.

    This morning, negative sentiment on risk is pressuring most Asian equity indices; However, once again, the yen fails to profit from it against the dollar. USD/JPY is even trading higher this morning.

    Over the previous month, USD/JPY developed an almost uninterrupted decline off from the early April correction high at 85.53. The move was a correction on the sharp decline of the yen early last month, but also mirrored underlying global dollar weakness. We looked to pick up the USD/JPY cross rate in 80/81 area. This target area has been reached. So, a tactical USD/JPY long position could be considered. The story on USD/JPY remains ambiguous, but the constructive sentiment on risk has given the pair downside protection of late. Last week, sentiment on risk turned less positive but USD/JPY was/is holding up reasonably well. We maintain a cautious positive bias for this cross rate. Stop-loss protection to defend return action below 80 remains warranted.

    On Friday, EUR/GBP more or less copied the prices swings in the headline EUR/USD cross rate. The pair reached an intraday high just below Thursday’s correction high (0.8846). From there, the broader correction of the euro also pushed EUR/GBP lower. The pair showed an almost uninterrupted decline that lasted till the end of trading in the US. The move was in the first place euro driven. There were no eco data on the calendar in the UK. EUR/GBP closed the session at 0.8725, compared to 0.8814 on Thursday.

    Today, calendar of eco data in the UK is again empty. So, global sentiment on the euro and technical considerations will set the tone for trading in this cross rate. Looking at the news headlines and the market performance this morning, the euro is still fighting and uphill battle. BoE’s Dale in a press article pleads for a rate hike, but his point of view was already known.

    In line with EUR/USD, we have a LT EUR/GBP bullish view. The ECB’s firmness to rein in inflation contrasts with the BoE MPC’s attitude of postponing a rate hike despite ongoing sky-high inflation readings. The EUR-GBP interest rate differential increased accordingly and pushed the pair beyond the 0.90 mark early May.

    Early May, we indicated that we hoped for a (technical) correction in a market that was positioned overly long euro to give us a chance to (re)enter the market at lower levels e.g. in the 0.8715 to 0.8654 area (previous lows). Until the May 05 ECB press conference, these levels looked very far away, but the post-ECB sell-off made them again more realistic. We reached our target the last week. We reinstalled a cautious buy-on-dips approach. A cautious rebound started, but after Friday’s sell-off, we are again close to the 0.8674/54 support area. A drop below this level would signal that the correction of the euro has also further to go for this cross rate (ST stop loss). Such a scenario is becoming ever more likely. In a LT perspective, we think that the downside risks in EUR/GBP are less compared to EUR/USD. Nevertheless, in a dayto- day perspective, the risks for a drop below the 0.8654 area are rising quickly.

    http://www.fxstreet.com/fundamental/...es/2011/05/23/

  7. #16
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    Mon, May 23 2011, 07:58 GMT

    Fundamental News & Analysis
    Japanese Yen Strength is Illogical, but Does it Matter?

    On a correlation-weighted basis, the Japanese Yen has been one of the world’s weakest performing currencies in 2011. Alas, while this information is interesting for theoretical purposes, it is of little concern to traders, who focus instead on individual pairs. Against the dollar (USDJPY), the Japanese yen is still quite strong, having recovered most of the losses inflicted upon it by the coordinated G7 intervention in March. Does the yen deserve such a lofty valuation? No. Will it continue to remain strong as the dollar? Well, that is a different question altogether.
    As a fundamental analyst, I am inclined to look at the data before making a determination on whether a particular currency will rise or fall. In this case, the fundamentals underlying the yen are beyond abysmal. The recent release of Q1 GDP showed a 3.7% contraction in GDP. Thanks to an interminable streak of weak growth combined with deflation, Japan’s nominal GDP is incredibly the same as it was in 1996! Based on industrial production, consumption, and other economic indicators – all of which were negatively impacted by the earthquake/tsunami – this trend will undoubtedly continue.
    The only force that is keeping Japan’s economy afloat is government spending. While this was a necessary response to anemic growth and natural disaster, it is clearly a double-edged sword. The government’s own (inherently optimistic) forecasts show a budget deficit of 5% in 2015, which doesn’t even include the costs of rebuilding the earthquake region. This will necessitate tax hikes, which will further erode growth, requiring ever more government spending. It seems self-evident that Japan’s national debt will remain the highest in the G7 for the foreseeable future.
    From a macro standpoint, there is very little to be gained from investing in Japan. The stock market continues to tank, and bond yields are the lowest in the world. To be fair, years of deflation have made the yen an excellent store of value, but this is hardly of interest to speculator, whose time horizons are usually measured in weeks and months, rather than years and decades.
    If not for the yen’s safe haven status, it would and does make an excellent funding currency for the carry trade. Short-term rates are around 0%, and the Bank of Japan (BOJ) has made it clear that this will remain the case at least into 2013. As you can see from the chart above (which mimics a strategy designed to take advantage of interest rate differentials), the carry trade is alive and well. Granted, it has suffered a bit since 2010, due to increased fiscal and financial uncertainty. However, given that the rate gap between high-yielding emerging market currencies and low-yield G7 currencies continues to widen, this strategy should remain viable.
    And yet, the Yen continues to rise against the US dollar. It has receded in the last couple weeks, but remains close to the magic level of 80, and it’s not hard to find bullish analysts that expect it to keep rising. They argue that Japanese investors are eschewing risky asset, and that the yen remains an attractive safe haven currency. Not to mention that volatility (aka uncertainty) serves as an effective deterrent to those thinking about shorting it and/or using it as a funding currency for carry trades.
    Personally, I’m not so sure that this is the case. If you look at the way the yen has performed against the Swiss Franc, for example, the picture is completely reversed. The Franc has risen 20% against the Yen over the last twelve months, which shows that heads-up, the Yen is hardly the world’s go-to safe haven currency. In addition, you can see from the chart below that on a composite basis, the yen peaked during the height of the financial crisis in 2009, and has since fallen by more than 10%. This shows that its performance in 2011 should be seen as much as dollar weakness as yen strength. Since I’ve spent countless previous posts explaining why I think dollar bearishness is overblown, I won’t revisit that topic here.
    In the end, the majority of traders don’t care about this nuance – that the Yen has conformed to fundamental logic and depreciated in the wake of the natural disasters against a basket of currencies – and want to know only whether the yen will rise or fall against the dollar. Even though, I think that shorting the Yen remains an attractive (and as I argued yesterday, comparatively riskless) proposition. Given that the dollar also remains weak, however, traders would be wise to short it against other currencies.

    http://www.fxstreet.com/fundamental/...is/2011/05/23/

  8. #17
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    Gold Daily Fundamental Analysis

    Gold continues to be pressured by the volatile market sentiment and the shaky conditions across commodities markets, which accordingly is holding gold a prisoner to the dollar.
    On Friday, gold marginally moved higher of the day to only surrender the losses on a strong dollar comeback and amid the lack of data, where investors turned pessimistic over the state of the global recovery, fueled by Budesbank’s monthly report that saw Germany’s growth slowing into the coming quarters after a strong start.
    The German projections for slowing expansion was the last straw, where the nation has been enjoying a steady recovery and is leading the expansion in the euro area as well, and shall the economy slow, it is an added downbeat signal on a slowing global recovery.
    Fears over the outlook continue to provide the dollar with the bullish momentum which surged strongly on Friday on the back of intensified risk aversion amid the bleak outlook. Gold is still trading under a dollar realm and although the fundamentals are more supportive for haven demand on the metal its vulnerability to the dollar and liquidations on the heavy selling are pressuring the metal.
    The sentiment with the start of the week on Monday will be still concentrated on growth especially with Germany and the United States to release the second estimate for the first quarter GDP.

    Mon, May 23 2011, 08:37 GMT
    http://www.fxstreet.com/fundamental/...ok/2011/05/23/

  9. #18
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    The President will be arriving in Europe in the midst of a maelstrom of confusion
    Mon, May 23 2011, 08:42 GMT

    FX Market Overview

    I don’t know why we didn’t make the connection before but if you put an apostrophe in Obama it changes it to O’Bama and there you go; an Irish President. It’s obvious really! Anyway, fresh from entertaining Her Majesty the Queen, Ireland gets to host a visit from the US President. He is coming to see us in the UK and will visit the Eurozone as well along with 1,500 of his closest friends, flunkies and assistants. That’s an entourage to make Mariah Carey jealous.
    The President will be arriving in Europe in the midst of a maelstrom of confusion. There was a period of Euro weakness on Friday as traders and investors feared for the Eurozone and sought the safety of the US Dollar. Credit ratings agency Fitch, downgraded Greece’s sovereign rating and warned that they would consider any extension to debt repayment terms as a default. Extending the payment terms; ‘re-profiling’ as it is being dubbed, is precisely what Greece is suggesting it may do and it does appear that the rest of the Eurozone is starting to accept that this is inevitable. However, there is growing discontent as symbolised by Norway’s decision to withhold €42 million in aid to Greece. They are saying what we all know; that Greece hasn’t met it obligations under the original loan arrangements and that Norway is not happy to continue to support them until they do. It’s a piffling amount compared to the overall level of IMF and EU support but it may start a ball rolling. Finland is highly likely to follow suit and others may too. I am sure if you asked the population rather than the politicians of some of the other EZ countries, the answer would be similar from most. The lack of data today may allow the Euro to continue to drift to lower levels.
    Sterling had a reasonable Friday after falling in value in the early part of the week. It has been slightly flattered by the weakness in the Euro and this week’s release of data showing government debt levels will be crucial in its next moves. Wednesday also brings the 2nd estimate of Quarter 1 economic growth data. This is calculated using all available data and has the potential to show a slight improvement on the 1st guess. The Pound could have another good week against the Euro but US Dollar strength is likely to persist as investors seek to protect themselves whilst the Eurozone debacle continues to rumble on. There remains a debate about when UK interest rates are likely to rise and we have had views espoused by various members of the Bank of England’s monetary policy committee. The BOE’s Chief Economist Spencer Dale says the bank should start raising interest rates soon and that view is helping the Pound. It is hard to argue against it with inflation running at 4.5% against a BOE target of just 2% but higher interest rates would damage growth and that is precariously fragile right now.
    For its part, The US Dollar is benefitting from inward funds flows for all the wrong reasons and US data is too mixed for us to assume the US Dollar demand is pro-USA rather just anti everywhere else. This week’s data diary is fairly full up and there are a few potentially market moving items to watch. Durable goods, 2nd estimate of economic growth and the personal income and expenditure figures are the most likely to move the US Dollar but a drop in share prices helped the USD and the highly volatile commodity markets will have a direct impact.
    The Australasian Dollars had rather a good week last week; both the Australian and New Zealand Dollars strengthened against the Pound and US Dollar as it became clearer that both economies are doing rather better than expected and the lure of high interest rates is sufficiently strong to keep funds flowing into both countries.
    And finally, quite why we listen to one dotty octogenarian rather than another is open to debate but the fact that this particular 89 year old predicted the end of the world wrongly....twice, does make you kind of think that maybe we were all wasting our time. I wonder if Harold Camping is checking his calculations again today because, unless I am very much mistaken, other than an Icelandic volcano, the earthquake, death and destruction didn’t happen...did they?

    GBP/Australian Dollar

    The Sterling - Australian Dollar exchange rate has fallen consistently from mid 2008 to date. Each embryonic rally has been snuffed out by wave after wave of AUD buyers and each time the Pound has fallen, it has found a new depth to explore. The short term target is A$1.5050 as shown on the chart above. We tested that level back in early May and the threat of higher Australian interest rate plus the strong - albeit marginally weakened - Chinese demand for Australian exports is keeping up demand for the Australian Dollar. The scary version of the future sees the Pound fall back to the January 1985 low of A$ 1.36; almost exactly 10% below the known support. The upbeat hopeful rose tainted view is that A$ 1.50 holds and we see a rosy bounce to the top of the current range at A$1.53. Thankfully, it is very easy and better still, it is cost free to protect against the worst the market has to offer whilst being able to take advantage if the best case scenario occurs. Call your consultant and tell them David sent you. They will be happy to explain. For those selling Aussie Dollars; firstly can I just say ‘You lucky beggars’ and secondly, you too could protect against risk by guarding against Australian Dollar weakness. Just let us know your plans and we will outline the options open to you.

    GBP/Canadian Dollar

    Strength in commodity markets has added strength to the Canadian dollar in recent weeks but because Canada ships three quarters of its export good to America, the weakness in the US Dollar was always going to keep the CAD from becoming overbought. However, today’s flat retail sales data and only a 0.3% rise in inflation on the month was enough to make the ‘loonie’, as the Canadian dollar is know, weaken across the board. This may well be the best opportunity that Canadian Dollar buyers will have to take advantage of Canada’s currency because this current mid C$1.57 levels against the Pound marks the top of the recent trading range and there is a strong chance that this exchange rate will fall to the bottom of the range in the coming days. Sterling’s general weakness and the almost unrelenting rise in commodity prices should see to that.

    GBP/New Zealand Dollar

    Technically speaking, it is very rare that you encounter a support level in an exchange rate as flat and clear as the one in the chart above. NZ$2.04 is as odd a number as you are likely to see but there are clearly plenty of traders happy to sell NZD and buy Sterling at that level which is why on the last 3 or 4 visits to this level. Sterling has been bought and the exchange rate has rallied. Those needing to get as many NZ Dollars for their Pounds as possible should be very wary of this level. The Kiwi dollar hasn’t weakened significantly in spite of the Christchurch earthquake and warnings over what that has done to NZ economic growth, despite plans for a continued slowdown in China; reducing NZ export demand and in spite of a 50 basis point interest rate cut from the Reserve Bank of New Zealand. What that means is that the NZD is far more resilient than it has been in the past and a break of NZ$2.04 is a real possibility. As you can see, when that happened in December 2010, we visited NZ$ 1.98 to the Pound before any kind of recovery. If that level doesn’t hold, then there is no discernable support for the Pound until we get to NZ$ 1.78. As with so many things in life, looking after the risk is the 1st step to taking advantage of an opportunity and I would urge everyone selling sterling to buy NZ Dollars to discuss the risks with your Halo Financial Consultant.

    GBP/US Dollar

    The weakness of the Pound in other exchange rates confirms that the rise in the Sterling - US Dollar rate has a lot more to do with US Dollar weakness than it does with Sterling strength. The rise in this pair since May 2010 is largely one way traffic and that line of resistance at $1.67 is in line with a 50% retracement of the fall from early 2008 to early 2009. At that time, the US Dollar was THE safe haven currency which the financial markets melted down and Sterling was seen as a massive risk because of London’s reliance on financial markets for its very survival. As economies have started to recover, investors have ventured back out from the US assets and back into other markets, so the US Dollar has given up half of its gains. Sterling finds buyers at or around $1.61 and the USD finds buyers at or around 1.67. This is the known range. In spite of all that is happening in the US economy, in the UK economy or elsewhere, these are the target levels that traders are aiming at so whether you are a buyer or seller of either currency, it is easy to see where you should be targeting as well.

    http://www.fxstreet.com/fundamental/...ht/2011/05/23/

  10. #19
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    New highs in Treasuries?

    Option expiration in Treasuries and equities likely contributed to today's trade. Although, it is difficult to say whether it capped what could have potentially been a much larger rally in bonds and notes, or it actually held prices stable. Our gut tells us that it is the former.
    Gold and silver rallied sharply as flight to quality buyers scrambled to react to a free falling Euro and Middle East protests. Although the traditional relationship suggests that gold and the Euro would move together, new debt realizations triggered safe-haven buying. I guess some have already forgotten that the purchase of metals is speculative and might turn a nice profit, but it is in no way a safety play. Nonetheless, people are creatures of habit.
    It was a painfully quiet news day. There weren't any releases during the session and there won't be anything of substance to chew on (from a data stand point) until Wednesday of next week. In the meantime, it feels like trade will be dominated by overseas development (specifically the Euro zone debt debacle) and currency trade (although the two are related).
    We aren't putting too much credence into Friday's trade due to the fact that it is the end of the trading week and option expiration. So we will rely on Thursday's price action for guidance...accordingly, it seems as though the Treasury correction (although a bit more shallow than we had expected) might quickly have run its course. The odds look to be favoring another run at new highs.
    Our target lows of 123'14 and 121'20 weren't quite met, but were within the vicinity. Therefore, clients of ours were recommended to offset short Bond calls yesterday morning on the large dip to lock in a profit. We hope to have an opportunity to resell them at a better price in the coming week or so. Fills were coming back near 11 ticks. Depending on entry this yielded a profit of anywhere from $280 per contract before transaction costs to about $200.

    If we are right about the Treasury rebound, the rally could see 126'09 in the June Bond futures and 123'16 in the June note.
    * Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does. Charts provided by Track 'n Trade, Gecko software.
    * Seasonality is already factored into current prices, any references to such does not indicate future market action.

    Treasury Bond and Note Option and Futures Trading Recommendations
    * There is unlimited risk in naked option selling.
    5-5-2011 - Clients were advised to sell the July 128 calls for 24 ticks or better.
    5-19-2011 - Our target lows of 123'14 and 121'20 weren't quite met, but were within the vicinity. Therefore, clients of ours were recommended to offset short Bond calls yesterday morning on the large dip to lock in a profit. We hope to have an opportunity to resell them at a better price in the coming week or so. Fills were coming back near 11 ticks. Depending on entry this yielded a profit of anywhere from $280 per contract before transaction costs to about $200.

    Mon, May 23 2011, 09:48 GMT
    http://www.fxstreet.com/fundamental/...in/2011/05/23/

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  12. #20
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    I think the fundamentals is acting against the euro. One medium profile news was released to day and i did not favor the euro. This made the pair to break a very important support at 1.4000. This is a true confirmation of a change in trend.

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