Forex Crunch Forex Articles for the New Year

Forex Crunch Forex Articles for the New Year

Forex Articles for the New Year

Posted: 31 Dec 2010 04:22 AM PST

After a weird week of thin volume, in which many stayed off the markets, we’re expecting a very busy week at the beginning of the year. But before the markets open, it’s time for some long term forex articles, some discussing the new year. Enjoy! Sophia Todorova, on Casey’s site, makes new forex resolutions for [...]

EUR/USD End of Year Elliott Wave Analysis

Posted: 30 Dec 2010 08:59 PM PST

Hello traders! Eur/Usd ride is like a roller coaster for the last few days if not weeks, ups and downs with 200 pips and more. From a technical Elliott Wave perspective that's all normal if you consider a triangle formation. Triangles are structured by five legs, A-B-C-D and E, and as such, we anticipate even [...]

[Video] EUR/USD, GBP/USD, AUD/USD Before Year’s End

Posted: 30 Dec 2010 12:10 PM PST

In an interview just before year’s end on Forex TV, I spoke with Julie Sinha about technical levels of EUR/USD, GBP/USD and AUD/USD, and what’s behind those moves. We also took a peek into 2011. Enjoy! While the Aussie had all the reasons to rise during the all the year and also into the next [...]

Impressing Drop in Jobless Claims – Positive Sign for 2011?

Posted: 30 Dec 2010 06:15 AM PST

US unemployment claims dropped to 388k. This impressive figure provides a nice ending to the year and hopes for 2011, but fails to impress the thin markets, that are acting strangely throughout the week, as expected in times of low volume. Not only is this far better than expected, it’s also the lowest level since [...]

FXStreet New Year Resolutions

Posted: 30 Dec 2010 03:11 AM PST

Maud Gilson, at FXStreet, aggregated new year resolutions from 15 contributors, including yours truly. Among the resolutions, you can find a pledge to execute the trading plan consistently, take one trade at a time, know the risk, diversify the trading pairs and lots more trading related topics that are useful for forex traders. In addition, [...]
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Brazilian Real Supported By Fundamentals, but Obstacles Remain

Posted: 30 Dec 2010 06:31 PM PST

Despite all of the talk of currency war (a term first introduced by Brazili's Finance Minister) and volatility in forex markets, the Brazilian Real is on pace to finish 2010 only slightly higher from where it began the year. While fundamentals would seem to support a further rise, Brazil's government and Central Bank have made it clear that they will do everything in their combined power to prevent such an outcome. In short, the outlook for the Real in 2011 is incredibly uncertain.

There are two (somewhat contradictory) trends that have played a role in driving the Real to its current level. The first is the resurgence of the carry trade, whereby investors shift capital from low-risk, low-yield investments to higher-yield, higher-risk alternatives. With interest rates that are among the highest in the world – and certainly the highest among stable currencies – Brazil has been one of the prime recipients of carry trade funds. Since 2009, when concerns over the credit crisis began to ebb, the Real has risen a whopping 40%!

Moreover, the Central Bank might have no choice but to hike its benchmark Selic rate further over the next couple years. Inflation, at 5.5%, has already breached the Bank's 4.5% target, and is projected to remain at an elevated level throughout 2011. According to futures prices, investors expect the bank to lift the Selic rate (currently at 10.75%) by 1.5% over the next twelve months, including a 50 basis point hike at its scheduled meeting in January. When you factor in low rates in the rest of the world, this would lift the yield spread between the Brazilian Real and most other comparable currencies to astronomical levels.

Alas, this first trend started to abate in the second half of 2010, due primarily to the EU sovereign debt crisis. Fortunately, the consequent move towards risk aversion hasn't hurt the Real much. To be sure, Brazil is still an emerging-market economy, and is still perceived as being fraught with risk. However, when you consider that (certain) commodities prices (sugar, cotton) are at record highs and that the Brazilian economy barely dipped during the credit crisis, there are certainly riskier locales to park capital. Besides, many investors have determined that the interest rate premium that they receive from investing in Brazil is more than enough to compensate them for any added risk.

All else being equal, then, the Brazilian Real would probably continue rising at a measured pace in 2011. As I said, however, all else is not equal, since Brazil has pledged to do everything in their power to hold down the Real. According to the WSJ, "Earlier this year Brazil raised the IOF tax on foreign investment in fixed-income securities to 6% from 2% and also raised the tax for guarantees on derivatives investments." Meanwhile, the Central Bank has intervened regularly in the spot market to purchase Dollars. The Bank's newly appointed President, Alexandre Tombini, has voiced concerns over the Real's rise: "We can’t let the economic policies of other countries determine the direction of foreign exchange." On the day that he testified before the Senate’s Economic Affairs Committee, the Real fell by a substantial margin, suggesting that investors take his warnings seriously.

The Central Bank will also work closely with the new Brazilian administration to combat inflation, in a way that doesn't cause the Real to appreciate. Rather than raise interest rates – which invites speculative capital inflows – the Bank will probably put pressure on the government to rein in spending and tighten access to credit. Over the long-term, this should allow it to lower rates to more sustainable levels, and prevent an expensive Rea from eroding the competitiveness of its export sector before it is too late.

Over the short-term, however, the immediate focus is to bring down inflation, most likely through rate hikes. That means that the Ministry of Finance will have to resort to more conventional weapons – such as taxes and intervention – to stem the Real's rise. It managed to hold the Real to a 3% rise in 2010, but it remains to be seen whether it can repeat this feat in 2011.

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Brazilian Real Supported By Fundamentals, but Obstacles Remain

Dec 31, 2:31AM

Despite all of the talk of currency war (a term first introduced by Brazili's Finance Minister) and volatility in forex markets, the Brazilian Real is on pace to finish 2010 only slightly higher from where it began the year. While fundamentals would seem to support a further rise, Brazil's government and Central Bank have made [...]

Swiss Franc Surges to Record High(s)

Dec 29, 7:20AM

In the last two weeks, the Swiss Franc rose to record highs against not one, not two, but three major currencies: the US Dollar, Euro, and British Pound. The Franc is now entrenched well above parity against the Dollar, and is closing in on the magical level of 1:1 against the Euro. With market uncertainty [...]

Forex Volatility Remains Abnormally High

Dec 26, 5:41AM

If you look at a chart of currency volatility over the last five years, two major spikes immediately jump out. The first took place in the wake of the collapse of Lehman Brothers in late 2008, while the second occurred earlier this year during the height of the EU sovereign debt crisis. While volatility has [...]

Interview with Boris Schlossberg: "Risk control is EVERYTHING"

Dec 23, 12:43PM

Today, we bring you an interview with Boris Schlossberg, director of currency research at GFT Forex, co-founder of BK Forex Advisors, and co-contributor to FX360. He is also a weekly contributor to CNBC’s Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted and appears in numerous newspapers [...]

IPOs Raise Questions about the Future of Retail Forex

Dec 21, 11:38PM

It has been said before, but now I think it’s official: retail forex has entered the mainstream. In the month of December, two retail forex brokerages – Forex Capital Markets (FXCM) and Gain Capital Holdings (GCAP) – went public on the New York stock exchange. Combined with some juicy information revealed in their regulatory filings, [...]

Chinese Yuan: Appreciation or Inflation?

Dec 19, 11:02AM

Based on nominal exchange rates, the Chinese Yuan has appreciated by a modest 2% against the US Dollar since the month of September (when the People’s Bank of China (PBOC) adjusted the currency peg for the first time in nearly two years). If you take inflation into account, however, the Chinese Yuan has risen by [...]

Japanese Yen Down on Risk Aversion

Dec 15, 3:09PM

It seems the gods of the forex market read my previous post on the Japanese Yen, in which I puzzled over the currency’s appreciation in the face of contradictory economic and financial factors. Since then, the Yen’s 6-month, 15% appreciation (against the US Dollar) has arrested. It has retreated from the brink of record highs, [...]

Canadian Dollar: Parity Vs Reality

Dec 13, 9:56AM

After a stellar 2009, the Canadian Dollar (“Loonie”) has had a relatively lackluster 2010 against the Dollar, rising by only 3-4%. As the Loonie has inched (back) towards parity, it has encountered significant resistance. I think there is reason to believe that the currency has reached its limit, and that there are little prospects for [...]

Russian Ruble Undervalued According to Central Bank

Dec 09, 9:09PM

In the midst of the currency war controversy, there is one emerging market country that continues to insist that its currency is undervalued: Russia. While being a member of the illustrious group of BRIC (Brazil / Russia / India / China) countries would seem to guarantee an appreciating currency, there are strong forces weighing on [...]

Risk Aversion (Still) Positive for USD

Dec 07, 2:33PM

As one strategist recently put it, we seem to be witnessing Deja Vu in the forex markets. The US Dollar in general, and the USD/EUR currency pair in particular, are behaving exactly the same as one year ago: “The greenback rose back then…on a combination of strong U.S. November jobs numbers…and the triple downgrades of [...]

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Forex Crunch Forex Daily Outlook – December 30 2010

Forex Crunch Forex Daily Outlook – December 30 2010

Forex Daily Outlook – December 30 2010

Posted: 30 Dec 2010 03:54 AM PST

Unemployment Claims in the US and Nationwide HPI in the UK are some of the exiting news that awaits us today.  In the US, Unemployment Claims, individuals who filed for unemployment insurance for the first time during the past week; is about to decrease  by 4K.an important signal of overall economic health because consumer spending [...]

AUD/USD Dec. 30 – Relaxing After Breaking Record

Posted: 30 Dec 2010 02:21 AM PST

AUD/USD reached new float-era highs but then retreated back, still in the high range. With a few interesting releases, a strong finish is expected to this year.  Here's a quick update on technicals, fundamentals and community trends. AUD to USD back in range AUD/USD Technicals Previous sessions:  AUD/USD made a fresh multi-year high, almost at [...]

EUR/USD Dec. 30 – Back to Higher Range

Posted: 29 Dec 2010 11:40 PM PST

EUR/USD made a move higher and enjoys a higher range now once again. We have some important US events today to rock currencies. How will it end th year? Here's a quick update on technicals, fundamentals and community trends. Euro/Dollar now in higher range. EUR/USD Technicals Asian session:  Quiet session with the pair stabilizing higher. [...]

How to Use Channels In Elliott Wave Theory

Posted: 29 Dec 2010 07:03 AM PST

In this time of the year, a lot of traders are away from their trading desks as markets can be very tricky and hard to predict. As such, we at www.ew-forecast.com decided to record an educational video which may help to a lot of traders, especially those who are using an Elliott Wave Principle. Guest [...]
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