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Big picture G10 currency charts

thanhlangtu — Fri, 09 Sep 2011 16:19:47 +0000

The charts below are for each of the G10 currencies versus an evenly weighted basket of the remainder of their G10 peers. The charts are small (as we work on updating the blog to allow links to larger graphics), but they nonetheless do cover quite a bit of ground – 2500 data points for each in fact, which hopefully gives an interesting perspective. Each of the time series starts at indexed 100 as of early February 2002. (The start point of the index changes with every refresh of the charts on a rolling basis.)

Note that the charts were cut before the last leg of the action in the early US session after the news that Stark will resign from the ECB (rumored because of disagreements on bond buying) and on news ECB will back off on penalty rates for banks accessing emergency facilities.

USD

The US dollar has been dropping forever – note that while the dollar index crossed the 200-day moving average, the USD/G10 basket has not yet crossed this important level, though it is trading at the highest level in months and may be confirming a transition to a bullish trend after the recent basing action and loss of downside momentum.

EUR

How ironic is it that, as the EU is experiencing its worst existential crisis to date, the Euro is back close to its lowest levels in years….which are also the lowest levels since the Euro was launched amid intense skepticism over the entire idea of a single currency back in 2002.

JPY

The JPY remains resilient and relatively strong – but will likely only be so as long as rates remain absurdly low and/or the BoJ and Japanese government steal a page from the SNB’s book on the intervention front

GBP

GBP is experiencing a bit of a revival on Euro misery and as its down trend has been losing steam for a long time. Could the market be getting too complacent on further GBP weakness?

CHF

The magnitude of the run-up and the subsequent reversal is breathtaking, but leaves us, amazingly, still poised above the 200-day moving average! There’s a lot more room for franc weakness if the SNB’s intervention project succeeds.

AUD

AUD is extremely overvalued if the Asian growth story in any way derails. The focus has been intense on Europe, but many risk appetite signals are flashing around the world, which are most often associated with Aussie downside. Aussie hasn’t been garnering sufficient notice.

CAD

CAD has been a relatively low beta currency over the years relative to some of its peers. It is generally out of favor now, but could put up a fight or at least avoid broad weakness if the US economy and USD prove stronger than the market is currently expecting.

NZD

The NZD bull market has enjoyed an Indian summer, but it may fade on the potential for an Asian hiccup and if the post NZ earthquake GDP bump fades in the months ahead.

SEK

The krona is gaining favor as a safe haven from Euro turmoil. It may rally passively for a while, but historically has a hard time if its export markets are threatened.

NOK

NOK is very credible as a safe haven from a fundamental standpoint and has room to rally further, but what point does the Norges Bank begin to rattle it saber when EURNOK is already at almost decadal lows?

source from: tradingfloor

Steen’s Chronicle: Price of money rising; when is the bill due?

thanhlangtu — Fri, 01 Apr 2011 04:10:51 +0000

Stocks had a rough close Monday and, at least in the S&P E-mini, there was a key reversal. But for now, rotation continues into stocks from fixed income, as stocks are seen as a ‘tangible asset’ for many who continue to shun metals as an alternative in their portfolios.

Monday’s price action in the S&P was indeed compromising for an overall positive view on stocks. There is some risk that the move between asset classes is reaching a zenith – volumes are coming down while the fixed income market is at levels which either need to hold or break.

If a Tuesday rally doesn’t materialise (Tuesday tends to be very positive), we may need to readjust our medium-term target of 1385-00 on the S&P. But if there’s no rally, or rates do break lower, it would only pave the way to a repeat of last year’s April/May correction.

But it would be just that - a correction - because all roads still lead to QE3.

Looking at Southern Europe yields is obvious that the present levels are unsustainable over time:

Source: Bloomberg

Meanwhile, the medium- to long-term outlook in the US yields is clearly higher as seen here:

Source: Stockcharts.com

These rate expectations, combined with increased rhetoric from Fed officials on QE exit in June, have moved both yields and inflation expectations:

Source: Bloomberg

Thus, there is ample evidence, both in the market in the form of inflation expectations, and in actual moves by the Fed and ECB, to expect less accommodation going into the summer. The Fed and the ECB look set on preparing the market for normalization. In the case of the Fed, there’s ample evidence of this, including:

The announcement of the US Treasury selling its mortgage portfolio
The AIG auction – with the ensuing denial to Bank of America paying a dividend
Regional Fed governors been all over the press confusing market with almost hawkish talk (Bullard + Evans)
A new press policy from Bernanke – indicating need for more communication from Fed in lead in to higher rates

We see this as a massaging of expectations of hikes to come. But to come only if, and that’s and important if, unemployment rates start to move down, disposable incomes rise beyond the negative energy and food prices, and the stock market does holds support at 1250 on the S&P. If Bernanke is able to create an air of normality, compared to today’s crisis management, ahead of the 2012 election, he will have helped himself, his boss, and Geithner.

In the Eurozone it’s a little more straight-forward in communication terms. We have the expected rate hike from the ECB on 7 April. But this is to satisfy the German paymaster, who runs the EU with Iron Hand. There are NO other lenders of last resort left in the EU system.

In summary, central bankers are preparing the markets for normalisation. And yes there are a lot of preconditions, political and practical obstacles before an actual hike. Given the latter, we remain skeptical on policy moves, but bullish on the bond vigilantes’ ability to move longer rates higher and test the long term downtrend in rates.

2011 will truly be a battle of intentions, but we side with the theory/path of marginal cost will rise, and rise more than markets are pricing in.

source from: tradingfloor

chartist

admin — Sun, 26 Dec 2010 13:46:12 +0000

A person who attempts to predict prices by analyzing past price movements as recorded on a chart.

central bank

admin — Sun, 26 Dec 2010 13:45:51 +0000

A bank, administered by a national government, which regulates the behavior of financial institutions within its borders and carries out monetary policy.

carry [interest-rate carry]

admin — Sun, 26 Dec 2010 13:45:28 +0000

The income or cost associated with keeping a foreign exchange position overnight. This is derived when the currency pairs in the position have different interest rates for the same period of time.

candlestick chart

admin — Sun, 26 Dec 2010 13:44:48 +0000

A chart that displays the daily trading price range (open, high, low and close). A form of Japanese charting that has become popular in the West. A narrow line (shadow) shows the day’s price range. A wider body marks the area between the open and the close. If the close is above the open, the [...]

cable

admin — Sun, 26 Dec 2010 13:44:23 +0000

The British pound/US Dollar exchange rate GBP/USD.

Take Profits

admin — Sat, 09 Oct 2010 21:12:25 +0000

A limit order that is placed above the market with a long position or below the market with a short position. When the market reaches the limit price, the position is closed thereby locking in a profit. Source forexglossary

ECN broker

admin — Sat, 09 Oct 2010 21:11:37 +0000

Forex ECNs broker provide access to an electronic trading network, supplied with streaming quotes from the top tier banks in the world. By trading through an ECN broker, a currency trader generally benefits from greater price transparency, faster processing, increased liquidity and more availability in the marketplace. Source forexglossary

Band

admin — Sat, 27 Mar 2010 13:36:21 +0000

In countries where the currency is pegged, the range in which the rates are permitted to fluctuate. Source:forexglossary.com