Week in FX Europe – Another Last Minute Houdini Act from The ECB? | OANDA Forex Blog


 

Despite concerns about Cyprus and an unexpected drop in this month’s German business confidence numbers, the 17-member single currency is rounding off the week trading higher against most of its major trading partners. Many participants still expect the ECB to perform another one of its Houdini acts. Capital Markets remain composed; most likely due to the fact that investors have gotten used to the last minute Euro-solutions. They are clinging onto hope that Cyprus will get a deal done over the next three-days.

In a worst-case scenario – Cyprus having to leave the Euro-zone – some investors are holding on to the belief that the ‘buck’ stops with the island country and no widespread contagion will actually occur. While traders are taking profit on the short EUR positions ahead of the weekend they are also selling their long winning dollar positions accumulated during this quarter. If by Monday and things do actually go “pear-shaped” for the market, any EUR weakness may only be brief as the ECB will be quick to react to calm the markets through their OMT or the ELA programs.



WEEK AHEAD

* USD Fed’s Bernanke Speech
* USD Durable Goods Orders
* USD Consumer Confidence
* GBP Gross Domestic Product
* CAD Bank of Canada Consumer Price Index Core
* EUR Unemployment Change
* USD Gross Domestic Product
* USD Reuters/Michigan Consumer Sentiment Index

Week in FX Europe – Another Last Minute Houdini Act from The ECB? | OANDA Forex Blog

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Week in FX Asia – Is Future Yen Weakness A Myth? | OANDA Forex Blog


 

Certainly a concern to the lemming bear Yen trades out there is that USD/JPY price action has very much disappointed after the BoJ leadership sailed through Japan’s parliament. Buying USD/JPY has been the “no brainer trade” to date, fueled by better than anticipated US fundamental data and supported by the expected reflation BoJ efforts next month. Even this week’s US Retail Sales and claims headline is supporting the dollar, more so now that US yields are on the move. One risk is that US yields could eventually undermine the “long-tooth” equity rally. Rumors of an unscheduled easing measure right after Kuroda takes office has taken the Yen in the direction Japanese PM Abe has pointed all along. Abe’s aide talk about 98-100.0 being “fair-value” levels should become self-fulfilling.

The Bank of Japan will be under new management from March 20th, which is widely expected to lead to the implementation of more aggressive monetary policy, perhaps as soon as April. It looks like this market wants to sit on their hands until then. There are market suggestions that an unscheduled Bank of Japan policy meeting may take place immediately after the new BoJ governor takes office on March 20th. This move would obviously allow time for BoJ staff to study “the practicalities of any new easing proposals before a final decision can be made at the scheduled meeting on April 3-4.” Until then USD/JPY can only do one thing and that’s stay relatively bid. One wonders now how much longer other Asian central banks can go without reacting to the weak Yen threat?

The loudest section of the forex market is trying to bully the masses into believing that holding the dollar is the best chance of a winning hand. More analysts are now expecting the ‘mighty’ buck to sharply outperform GBY, JPY and AUD and some of the other noted G10 members, thanks to higher US yields and an improved US balance sheet. But, where is domestic Japan? The Yen weakness started in September and gathered momentum mid-November when the full dollar bullish breakout above 81.0 occurred. Risk appetite was strong back in September due to Draghi’s OMT and also QE3 announcement and by November Shinzo Abe arrived on the scene and Abenomics began. To date this has been predominately an offshore currency move. Where is domestic Japan? The Japanese housewife has yet to be sold on the weak yen story. They are needed to fulfill PM Abe’s dream.



WEEK AHEAD

* AUD RBA Policy Meeting Minutes
* GBP Consumer Price Index
* EUR German ZEW Survey (Economic Sentiment)
* GBP U.K. Chancellor Osborne Presents 2013 Budget to Parliament
* EUR German Producer Prices
* GBP Bank of England Minutes
* GBP Jobless Claims Change
* USD Federal Open Market Committee Rate Decision
* NZD Gross Domestic Product

Week in FX Asia – Is Future Yen Weakness A Myth? | OANDA Forex Blog

Week in FX Europe – Is Sterling’s Magnetic Option Ride Over? Maybe Next Wednesday | OANDA Forex Blog


 

Sterling’s wild magnetic ‘option’ strike ride (1.4950,1.5150) over the last two-trading sessions has managed to knocked many weak short cable positions out. Governor King himself provided added fuel – “the recovery is in sight”- the only thing in sight is his impending retirement. His comments that sterling had probably weakened far enough prolonged the painful short-squeeze. This market may have misinterpreted his comments. Why would he be talking up the pound?

Sterling’s fall from such lofty heights has been swift, so much so that it had become a market congested with only sellers. Any ‘reversal-of-fortune’ would of course be rapid and costly – exactly what investors have been exposed to since Thursday. In truth, this market has become too fixated on a straight pound move.

At the same time, the 17-member single currency has managed to have its way with the “mighty dollar,” which would suggest more of a dollar move rather than a pound fixation. The dollars strength has come a long way and its only natural to witness a partial retracement. US data this week confirms that their economy is the best performer amongst the G4 major currency regions, whilst the UK entertains a triple-dip recession scenario.

If you believe in King, then his remarks this week will likely have watered down expectations for more QE next month. The techies will love it; an excuse to signpost that the low is in and that 1.50 is the new base. However, all the good work could come undone by next Wednesday’s annual UK Budget report when Treasury could change the inflation-targeting remit of the BoE.



WEEK AHEAD

* AUD RBA Policy Meeting Minutes
* GBP Consumer Price Index
* EUR German ZEW Survey (Economic Sentiment)
* GBP U.K. Chancellor Osborne Presents 2013 Budget to Parliament
* EUR German Producer Prices
* GBP Bank of England Minutes
* GBP Jobless Claims Change
* USD Federal Open Market Committee Rate Decision
* NZD Gross Domestic Product

Week in FX Europe – Is Sterling’s Magnetic Option Ride Over? Maybe Next Wednesday | OANDA Forex Blog

‘Abenomics’ Is Going to Fail: Mr. Yen


 

Bloomberg | Getty Images

“Abenomics” will not be able to achieve the two percent inflation target in Japan, Eisuke Sakakibara, former vice finance minister of Japan told CNBC on Friday, referring to Prime Minister Shinzo Abe’s combination of ultra-loose monetary policy and fiscal stimulus.

“In terms of two percent inflation, it [‘Abenomics’] will fail. Deflation is structural. Even at the time, when Japan was in the upward [growth] swing between 2002 and 2007, prices went down. It will be extremely difficult to get out of deflation,” said Sakakibara, also known as “Mr. Yen” for his efforts to influence the currency’s exchange rate through verbal and official intervention in the forex markets in the late 1990s.

Following significant pressure from Abe for bolder action, the Bank of Japan in January doubled its inflation target to 2 percent and made an open-ended commitment to buy assets from 2014. The central bank’s new governor Haruhiko Kuroda, who won parliament’s approval on Friday, has vowed to do “whatever it takes” to achieve the inflation goal in two years.

(Read More: Japan Parliament Approves Kuroda as BOJ Governor)

But according to Sakakibara structural deflation in the world’s third largest economy is largely a result of the integration between the Japanese and Chinese economies and hence near impossible to move away from.

“Cheap Chinese goods come into Japan and push down the prices. And a lot of Japanese companies go to China to manufacture goods — so it’s not going to change,” said Sakakibara, who is currently a professor at Aoyama-Gakuin University in Tokyo.

Sakakibara, however, is more positive on the prospects for Abe’s policies to lift growth in the economy.

“We may able to get something like a 2 to 2.5 percent growth rate in real GDP [gross domestic product], this would be the year of recovery,” he added. The economy expanded 0.2 percent in the final three months of 2012, after contracting for two consecutive quarters from April through September.

Yen Warning

Sakakibara sounded a word of caution on continued depreciation in the yen — which has weakened almost 11 percent against the U.S. dollar since the start of the year.

He noted that if dollar-yen breaks 100, the next stop for the currency pair could be 130, adding that this would be “risky” for the Japanese economy.

“I remember in 1998, 1999 — it [dollar-yen] did go to 150 — I was at that time in the government, I was terrified,” he said.

(Read More: Is the Yen Going Into a Free-Fall?)

Weakness in the yen is a doubled edged sword for the economy, while it boosts the competitiveness of Japanese exporters, it also increases the cost of the country’s fuel imports. Japan’s dependence on fuel imports has increased after the Fukushima nuclear disaster in March 2011, which led to the closure of most of the country’s reactors.

According to Sakakibara, dollar-yen between 90 and 95 would be most favorable for the economy. Dollar-yen was trading around 96 on Friday.

‘Abenomics’ Is Going to Fail: Mr. Yen

Week in FX Americas – Is the Loonie and ‘Big’ Dollar Move for Real? | OANDA Forex Blog


 

No one was close to reporting the North America jobs numbers. Canada and the US headlines blew all forecasts out of the water, and for the time being have convinced the market that they need to buy North America.

Both countries’ released improved unemployment rates. The downtick to the US unemployment rate to +7.7% from +7.9% can partly be attributed to Americans dropping out of the workforce. Analysts note that the participation rate fell to +63.5% last month from +65.6%, which is now officially the lowest rate in 33-years. This is probably the only obvious knock against this months NFP release. On the surface, it’s not a very healthy way to achieve a jobless rate decline and it will be used as fodder for the pro-stimulus members at the Fed.

The +51k busting print for February from the Canadians is very much a showstopper. However, it’s worth noting that their job survey is usually very volatile because of the much smaller sample. The fulltime print of +33k new jobs has the loonie ‘strutting’ on the crosses with very little been given up.

CAD is dominant in EUR/CAD, CAD/JPY and against its commodity cousin the AUD. Along with the stateside job numbers, the release provides a good bullish argument to want to own the loonie now that the rate dealers have priced out any chance of a Central Bank rate cut this year after the BoC meet in mid-week. Now we have to wait and see if momentum is carried over into next week.



WEEK AHEAD

* JPY Japanese Parliament Vote on BoJ Governor Nominations
* EUR German Consumer Price Index
* USD Advance Retail Sales
* NZD Reserve Bank of New Zealand Rate Decision
* AUD Employment Change
* CHF Swiss National Bank Rate Decision
* USD Producer Price Index
* EUR Euro-Zone Consumer Price Index
* USD Consumer Price Index

Week in FX Americas – Is the Loonie and ‘Big’ Dollar Move for Real? | OANDA Forex Blog

March 2, 2013


The contest “01 – Y2013 Contest (MG-PT)” completed over four weeks.
This month my performance has improved slightly.
Since the account I am using is a “managed fxTrade Practice accounts”, that bas been discontinued, is now deprecated and for this reason, I can not add or remove funds from Them. The goal that was initially designed: “For 2013, the main goal is to work only with capital generated (Realized P&L) by business “, will be slightly adapted and will no longer use this account.
I’ll open a new account with a balance equal to the Realized P&L (≈1 Billion) of this deprecated account and continue only with the money made ​​in the business.

See details below.
——————————————–

Portfolio Return (MG-PT account):

PRSep2008To20130302

MG-PT

20130302MG-PT

 P&L

RealSep2008to20130302

01 – Y2013 Contest (MG-PT)

Statistics reflect account status as of March-02-2013 00:00

20130302Contest01-Y2013

Week In Review February 24th to March 1st


 

Week in FX Europe – EURO Wallowing In No-Man Land
The EUR received only temporary support from a surprise uptick in Spanish manufacturing data early Friday. The 17-member currency hastily lost it all when other Euro-zone activity headlines began to disappoint. For now, the dollar is back in demand despite the US sequester cloud that kicks in with automatic spending cuts later today. The overall tone in Europe’s financial markets remains subdued ever since it was announced that Euro-zone banks would sharply scale back their early repayment of funds from the ECB’s three-year lending operations next week. In total +EUR12.5b is to be repaid, a sharp drop from last week’s +EUR62.8b. Negative news flow continues to have an impact on Euro regional funding markets.
EUROPE Week in FX

Week in FX Americas – Loonie Split Personality
The CAD currently possesses some untameable traits. Just when you think the “big”; dollar has safe haven dominance across the board, long CAD trades are back in vogue despite the negative economic headlines. It is thought that too many short CAD positions were trying to call the shots on Friday early, eventually allowing the USD to back down from its weekly highs. For a brief period, Canadian tepid economic growth and potential worries about the US sequester dragging on US growth, strengthened demand for safe-haven Canadian government bonds. However, it seems that investors extracted signs of economic resilience in the otherwise lackluster Q4 gross domestic product report and embraced the fact that the data was not any poorer, had the loonie rallying.
AMERICAS Week in FX

Week in FX Asia – Kuroda Nominated to BoJ Governor
Japanese Prime Minister Shinzo Abe nominated Asian Development Bank President Haruhiko Kuroda to lead the Bank of Japan. Kuroda has previously stated when he was in the running for the nomination that the 2 percent inflation target set by Abe was realistic and could be achieved in a 2 year timespan. Kuroda is a proponent of aggressive monetary easing, and will likely be an important ally of Prime Minister Abe in his attempts to kick-start the anemic Japanese economy Kikuo Iwata, a professor at Tokyo’s Gakushuin University and BOJ Executive Director Hiroshi Nakaso were nominated for the two deputy governor positions. Current Governor Masaaki Shirakawa and his deputies will step down on March 19.
ASIA Week in FX


WEEK AHEAD

  • EUR Euro-Zone Producer Price Index
  • AUD Reserve Bank of Australia Rate Decision
  • EUR Euro-Zone Retail Sales
  • AUD Gross Domestic Product
  • EUR Euro-Zone Gross Domestic Product
  • CHF Gross Domestic Product
  • CAD Bank of Canada Rate Decision
  • JPY Bank of Japan Rate Decision
  • GBP Bank of England Rate Decision
  • CNY Manufacturing PMI
  • GBP BOE Asset Purchase Target
  • EUR European Central Bank Rate Decision
  • JPY Gross Domestic Product
  • EUR European Central Bank Rate Decision
  • USD Change in Non-farm Payrolls
  • CAD Unemployment Rate

Click here for more details on the week’s activity