Forex Crunch EUR/USD Jan. 31- Bouncing Off Low Support

Forex Crunch EUR/USD Jan. 31- Bouncing Off Low Support

EUR/USD Jan. 31- Bouncing Off Low Support

Posted: 31 Jan 2011 12:42 AM PST

EUR/USD starts the week lower, and is struggling to hold on to lower support, as the uprising in Egypt continues. Will stronger inflation boost the Euro ?  Here's a quick update on technicals, fundamentals and community trends. EUR/USD Technicals Asian session:  Started the week with a small Sunday gap lower. Current range – 1.3576 to 1.37. Further

Creative Default plan for Greece

Posted: 30 Jan 2011 04:11 PM PST

The creative method was probably found for a default of Greece. A so-called “Brady plan” – this plan means an offer for a  haircut to current bond holders – they’ll get the option for an “exit” on their bonds, with around 75% of the potential, but above their current price. Reuters reports about the 25%

GBP/USD Outlook – Jan. 31 – Feb 4

Posted: 30 Jan 2011 03:04 PM PST

After the shocker squeeze in the economy, the pound is up for a busy week, with fresh indicators of the economy. Here’s an outlook for the British events, and an updated technical analysis for GBP/USD. The pound was hit both by the squeeze in the economy and the Egyptian crisis, which threatens the global recovery

NZD/USD Outlook –Jan 31-Feb 4

Posted: 30 Jan 2011 02:34 PM PST

Labor Cost Index and Employment Data are the main events this week. Here’s an outlook for the events in New Zealand, and an updated technical analysis for MZD/USD. Prime Minister John Key considers selling $10 billion of key assets including state owned power companies and a stake in Air New Zealand in order to pay down

Forex Daily Outlook – January 31 2011

Posted: 30 Jan 2011 02:00 PM PST

A very busy week ahead us Chicago PMI in the US, Nationwide HPI in the UK, GDP in Canada and much more. .Let’s see what awaits us today. In the US, Chicago Purchasing Managers’ Index (PMI), Survey of purchasing managers in Chicago to rate the relative level of business conditions, indicates expansion with 65.5 points.

AUD/USD Jan.31–Aussie Closes Week Slightly Higher & Steady

Posted: 30 Jan 2011 12:24 PM PST

The Aussie ended trading Friday by rising slightly against the Greenback for the week but failing to stay above parity. The pair traded in a tight range for most of the week. The Aussie was trading at 0.9941 up 0.23%, as of Friday’s close. Here's a quick update on technicals, fundamentals and community trends. AUD/USD
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Emerging Market Dilemma: Currency Appreciation or Inflation?

Posted: 31 Jan 2011 01:33 AM PST

By now, we're all too familiar with both the so-called currency wars and its underlying cause – the inexorable appreciation of emerging market currencies. As more and more Central Banks enter the war in the form of forex intervention and capital controls, however, they are inadvertently stoking the fires of price inflation. They will all soon face a serious choice: either raise interest rates and cease trying to weaken their currencies or risk hyperinflation and concomitant economic instability.

This dilemma is fairly basic: a Central Bank cannot simultaneously control its currency and conduct an independent monetary policy. For example, if it seeks to adjust interest rates to serve domestic economic goals, it must understand that this will have unavoidable implications for demand for its currency, and vice versa. These days, that dilemma is becoming increasingly sharp. Inflation in many emerging markets is rising to dangerous levels, real interest rates or negative, and all the while, latent pressure continues to bubble under their currencies.

The problem is that investors have become so desperate for yield that they are willing to tolerate negative real interest rates in the short-term if they believe that interest rates and/or currencies will inevitably rise over the long-term. While capital controls have forced a modest decline in the carry trade, the expectation is that an inevitable tightening of monetary policy will soon make it viable once again.

Due to the ongoing (perception of) currency wars, emerging market Central Banks are trying to hold out for as long as possible, lest they make themselves into sudden targets for carry traders and currency speculators. Some have already bitten the bullet. Brazil, for example, raised its benchmark Selic rate to 11.25% recently and indicated additional rate hikes will follow. China has embarked on a similar path, but from a lower base. The majority of countries remain in firm denial, however. Last week, Turkey took the unbelievable step of lowering interest rates in a vain attempt to decrease pressure on the Lira.

Most Central Banks believe that they can enjoy the best of both worlds by cutting access to credit and raising banks' reserve requirements (in order to combat inflation) and maintaining strict capital controls (in order to limit inflation). While they should be patted on the back for creativity, such Central Banks must understand that their efforts are probably doomed to fail over the long-term. That's because currency investors understand that only a masochistic, short-sighted Central Bank would pursue a weak currency policy in spite of rising inflation for a sustained period of time. Unless economic growth slows (which is unlikely without certain policy measures) and/or inflation magically abates (due to steadying food/commodity prices, etc.), they will eventually have no choice to concede defeat. "Central banks view the level of exchange rates as the priority rather than using them to help slow inflation. Once you start targeting multiple objectives, the odds for policy mistakes increase," summarized one strategist.

The only win/win solution involves a simultaneous appreciation of all emerging market currencies. This would alleviate some inflationary pressures without altering the competitive dynamics of national export sectors and negatively impacting economic growth. According to the Financial Times, "There could be a surprise agreement to rebalance currencies at the Group of 20 this spring, although the failure of its November summit does not augur well." Besides, any agreement would probably be in the form of a reiteration of the status quo, in which emerging markets independently (rather than in concert) pursue similar economic policy objectives.

For better or worse, emerging market governments have started to refocus the blame for the currency wars away from the US and towards China. Regardless of whether the US is at fault for its quantitative easing program, emerging markets compete with China – and its allegedly undervalued currency – in matters of trade. Pressuring China to allow the Yuan to appreciate, then, would ultimately go a lot further in ending the currency war and eliminating their predicament than screaming at the Fed for flooding the world with Dollars. Due to a new President and shifting politics, Brazil is angling to force the issue.  Given that China is currently in the same boat (rising inflation with low interest rates), this might be the straw that breaks the camel's back. "China may be more sensitive to what the other major emerging market countries think about its currency. It undermines their moral high ground when it’s Brazil criticizing them instead of the U.S," observed one analyst.

In any event, barring some unforeseen crisis and a flare-up in risk aversion, emerging markets are expected to continue attracting outside capital (more than $1 Trillion in 2011 alone), and their currencies are expected to continue their steady, upward march.

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Forex Crunch EUR/USD Outlook – Jan. 31 – Feb 4

Forex Crunch EUR/USD Outlook – Jan. 31 – Feb 4

EUR/USD Outlook – Jan. 31 – Feb 4

Posted: 30 Jan 2011 02:05 AM PST

After quite an exciting week, a very eventful week expects traders – inflation, employment and the rate decision are the highlights. Here’s an outlook for the European events and an updated technical analysis for EUR/USD. The escalation in the Egyptian crisis sent EUR/USD tumbling down towards the end of the week. The situation is still

Forex Binary Options Jan. 31 – Feb. 4

Posted: 29 Jan 2011 04:30 PM PST

As the month ends and a new one begins, 22 fresh economic indicators are released, and they provide us with quite a few opportunities to trade one hour binary options on currencies. Here are the setups for this week. One hour binary options can be used to defend against false breakouts,  as an alternative to

AUD/USD Outlook – Jan. 31 – Feb 4

Posted: 29 Jan 2011 01:00 PM PST

After a choppy week, Aussie trades expect a very busy week, with no less than 13 events. The rate decision is the highlight. Here’s an outlook for these events and an updated technical analysis for AUD/USD. We’ve seen that inflation wasn’t imported from China, easing pressures for a rate hike in Australia. At least it

USD/JPY Outlook – Jan 31-Feb 4

Posted: 29 Jan 2011 09:30 AM PST

Preliminary Industrial Production and Average Cash Earnings are the main events on out menu this week. Here's an outlook for the Japanese events and an updated technical analysis for USD/JPY. Rating agency Standard & Poor’s decreased Japan’s long-term sovereign debt rating to AA minus on Jan 27 for the first time since 2002, claiming the

When Everybody’s Short, Who’s Left to Sell?

Posted: 29 Jan 2011 06:51 AM PST

Speculators increased their bets against the dollar to the highest level since the beginning of November. Remember what happened then? Are the tables about to turn in favor of the dollar and against the Euro? The weekly report by the CFTC showed that the net short positions against the greenback jumped from 15.06 to 18.2

Canadian Dollar – Jan 31 – Feb 4

Posted: 29 Jan 2011 06:24 AM PST

GDP, Employment Data and Ivey PMI are the major event this week. Here is an outlook on the Canadian market movers and an updated technical analysis for USD/CAD. Canadian Finance Minister Jim Flaherty said on Jan 26 he expects further moderate economic growth and said the government wants to make additional cuts in personal income
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