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[FXCM-PR Rep]

Canadian Employment Jumps 93.2K, Unemployment Rate Falls to 7.9%

Employment in Canada unexpectedly jumped 93.2K during the month of June from 24.7K the previous month, exceeding economists forecast for a rise of 20.0K. At the same time, the unemployment rate fell to 7.9 percent from 8.1 percent in May.Immediately following the improved data, the USD/CAD slipped below the 200-day SMA and now looks poised to test the 100-day moving average / 23.6 percent Fibonacci retracement on the 5/25, 6/21 downswing.

Fundamental Headlines
• Mass Data Leak Rattles Swiss Banking – Wall Street Journal
• Greece Sets Austerity Plan Amid Outcry – Wall Street Journal
• Trichet Plays Down Euro zone Gloom - Financial Times
• Hedge Funds “Frozen in Headlights” Scale Bank Trading in Perilous Markets - Bloomberg
• IMF Raises 2010 Growth Estimate to 4.6% From 4.2%, Sees Risks to Recovery- Bloomberg

GBP/USD: The trade deficit in the U.K. widened more than expected for the month of June as imports rose 2.4 percent to 29.5 billion pounds, while exports advanced a mere 0.2 percent to 21.5 billion pounds. Today’s figures comes on the back of a weak euro which has reduced the costs of imports in Britain from its neighboring euro zone. Going forward, the trade deficit in the U.K. will likely remain under water for the rest of the year as governments in the 16 member euro area scale back stimulus measures to fight their ballooning budget deficits. In turn, the euro zone may face a mild downturn, which may increase imports in Britain as the European Union is a key trading partner for the U.K. This fact also weighs on British exports as European imports is likely to remain subdued until the end of the year. It is also worth noting that the demand of imports faces major headwinds in the second half of the year as consumers scale back spending amid uncertainty in the labor market paired with tight credit conditions. To discuss this and other topics, please visit the GBP/USD forum.


USD/CAD: Employment in Canada unexpectedly jumped 93.2K during the month of June from 24.7K the previous month, exceeding economists forecast for a rise of 20.0K. At the same time, the unemployment rate fell to 7.9 percent from 8.1 percent in May. As similar to the labor force figures in May, most of the jobs created were in the private sector. Indeed, Canada has been producing jobs for the sixth consecutive month. Immediately following the improved data, the USD/CAD slipped below the 200-day SMA and now looks poised to test the 100-day moving average / 23.6 percent Fibonacci retracement on the 5/25, 6/21 downswing. Ahead of the release, the pair was at the crossroads of 1.04 as this level stood to be the 38.2 percent Fibonacci retracement and the 200 day SMA. All in all, today’s figures provide an improved outlook for the region as business confidence seems to continue its northern journey. To discuss this and other topics, please visit the USD/CAD forum.

 

[FXCM-PR Rep]

Forex Weekly Trading Forecast - 07.12.10

US Dollar Pulls Back as S&P 500 Posts Largest Gains Since October

Euro to Extend Gains as Yield Spreads Narrow, Shorts Unwind

Japanese Yen Poised to Weaken Ahead of BoJ Rate Decision

British Pound To Face Slower Price Growth, Drop In Jobless Claims

Canadian Dollar Could Suffer Without Fundamental Catalyst

Australian Dollar Faces Key Test at Multi-Month Highs

New Zealand Dollar Rally Could Falter As Earnings Season Lies Ahead

Gold Selloff to Resume as US Earnings Season Begins

 

[FXCM-PR Rep]

Moody’s Downgrades Portugal Debt to A1 from AA2

During the European Session, Moody’s cut Portugal’s credit rating by two notches to A1 from AA2 but maintained a stable outlook. The ratings agency said that the indebted country may need to impose further austerity measures in conjunction to those already announced. The agency also cited the fiscal position of the EMU member as likely to deteriorate over the medium-term which could depress growth prospects. Meanwhile, Fitch’s Brian Coulton affirmed the “negative outlook” for Portugal, and went onto add that the big challenge for the county remains economic growth.

Another concern of note was Moody’s anticipation of only moderate effectiveness of structural reforms over the medium to long term which will also dampen economic activity. After the downgrade, the lead analyst at Moody’s, Anthony Thomas said that no further action is anticipated on Portugal’s rating this year and he went onto add that he expects the nation to take further steps to combat the fiscal crisis by 2011. All in all, we may see the euro remain under pressure going into the North American trade as today’s announcement by Moody’s paired with the disappointing investor confidence figures will likely weigh on sentiment.

Market Reaction

Taking a look at the daily chart, the EURUSD has extended its two day decline and now looks poised to break below the 10-day SMA after the pair neared overbought territory late last week. Going forward, investors will keep a close out on the 100-day SMA, which coincides with the lower bounds of the rising trend line. A break below this channel may expose the yearly low.

 

[FXCM-PR Rep]

British Pound Extends Advance on BoE Comments, Euro Holds Tight Range

The British pound extended the rally from the previous day and advanced to a high of 1.5290 during the European trade as policy makers in the U.K. held a hawkish outlook for future policy, and increased speculation for a rate hike later this year may continue to push the GBP/USD higher over the near-term as the central bank sees scope to normalize monetary policy in the second-half of the year.

Talking Points

• Japanese Yen: Rebound Against Most Currencies
• Pound: Jobless Claims Fall For Fifth Month
• Euro: CPI Reading Fails to Impress
• U.S. Dollar: Retail Sales, FOMC Minutes on Tap

Bank of England board member Andrew Sentance said economic conditions are “a lot better than where they were a year ago” according to an interview with the Reading Post, and argued that the MPC should “start a process” of gradually lifting the benchmark interest off the record-low as “inflation hasn’t turned out to be as low as expected.”

As Mr. Sentance shifts his focus to the stickiness in price growth and looks to curb the risks for inflation, we are likely to see him dissent against the majority for the second-month and push for a 25bp rate hike in the BoE meeting minutes, which are due out on July 21, and the central bank may turn increasingly hawkish going forward as price growth holds above the 3% target for the fifth time this year. Nevertheless, the economic docket showed claims for unemployment benefits in the U.K. slipped 20.8K in June after contracting a revised 31.1K in the previous month, with the claimant count rate falling back to 4.5% from 4.6%, which was largely in-line with forecasts, while the gauge for unemployment utilizing the International Labor Organization’s system unexpectedly weakened to 7.8% during the three-months through May to mark the lowest reading since January. However, average weekly earnings including bonuses fell back to 2.7% during the same period from a revised 4.1% in March, and the drop in personal incomes reinforces a dour outlook for private spending as households continue to face tightening credit conditions paired with the ongoing weakness in the labor market. As a result, the BoE may hold a dovish outlook for monetary policy and look to support the real economy over the coming months as the new coalition in the U.K. plans to withdraw fiscal support and reduce the budget deficit.

The Euro held a narrow range through the overnight trade, with the exchange rate floating around the 1.2700 level, and the single-currency may continue to trend sideways going into the U.S. session as investors weigh the outlook for future policy. Consumer prices in the Euro-Zone held flat in June, with the annualized rate falling back to 1.4% from 1.6% in May, while the core rate of inflation bounced back to 0.9% from 0.8% in the previous month. At the same time, industrial outputs in the euro-region increased 0.9% in May, which fell short of expectations for a 1.2% rise, while production rose 9.4% from the previous year versus forecasts for an 11.4% expansion. As price growth remains subdued, with the economy struggling to brush off the recession, the European Central Bank is widely expected to maintain a loose policy stance and support the region going forward as the governments operating under the fixed-exchange rate system plan to tighten fiscal policy and balance their public finances.

The greenback bounced back against most of its major counterparts, while the USD/JPY slipped to a low of 88.50 following a shift in market sentiment, but equity futures are foreshadowing a higher open for the U.S. market, which could lead to a reversal in the major currencies. However, the economic docket is expected to show retail spending in the U.S. contract 0.3% in June after unexpectedly falling 1.2% in the previous month and the drop in household spending could weigh on the outlook for future growth and feed the rise in risk aversion. At the same time, import prices in the world’s largest economy are projected to fall 0.4% during the same period after weakening 0.6%, while the Fed is likely to hold a dovish outlook for future policy in its policy meeting minutes, which is scheduled to cross the wires at 18:00 GMT.

How Will The European Bank Stress Test Affect The Exchange Rate? Join us in the Forum

Related Articles:

Forex Weekly Trading Forecast - 07.12.10

To discuss this report contact David Song, Currency Analyst: [email protected]

 

[FXCM-PR Rep]

FXCM Programming Services Now Available at Fixed Prices

Customize Your Automated Trading Needs with FXCM

FOR IMMEDIATE RELEASE
New York, July 14, 2010—FXCM Holdings LLC, (www.fxcm.com), a global leader in online forex and CFD trading,* is now offering Programming Services at fixed prices.

• Simple MT4 indicator coding is $300.

• Advanced MT4 strategy and indicator coding is $600.

Programming Services, which FXCM introduced last year, is a unique, in-house resource that builds automated trading strategies and technical indicators to client specifications. If a client can describe what they want their strategy or indicator to do, FXCM Programming Services can code it. And now, with this new pricing adjustment, it’s more convenient than ever for clients to implement their own customized trading strategies and indicators.

Leveraging over a decade of forex market experience and expertise, FXCM Programming Services codes custom strategies and indicators for clients in multiple programming languages, across several trading platforms and signal packages, including MetaTrader 4,† Strategy Runner, Ninja Trader, MCFX, and FXTrek. Moreover, with the upcoming release of FXCM Strategy Trader, FXCM’s first proprietary automated trading platform, Programming Services will program all automated systems for Strategy Trader at no extra charge.

At its core, FXCM Programming Service was developed to not only enhance automated trading throughout the retail trading industry, but to also eliminate the frequently contentious distance between programmers and brokers.

“Often, when traders have an issue with their automated strategy, they are stuck between their programmers, who blame broker execution, and their brokers, who blame the programmers’ code,” says Luke Quinn, FXCM Programming Specialist. “With the advent of FXCM Programming Services, clients can now use programmers that know execution. We ensure our work is able to execute to the strategy specified by the client.”

FXCM Programming Services also offers high-quality technical support and strategy consulting. Available for free half-hour consultations and capable of back testing any customized strategies and signals, FXCM programming experts are committed to delivering to clients an optimum automated trading experience.

To begin benefitting from FXCM Programming Services at our new fixed prices, fill out this simple request form.


FXCM Holdings LLC Facts

Forex Capital Markets (FXCM) is a leading global forex broker that caters to both retail and institutional markets. Founded in 1999, FXCM is one of the largest brokers, regulated by several of the world’s most respected financial authorities.

At the heart of FXCM’s client offering is No Dealing Desk** forex trading. Clients have Direct Market Access to some of the world's largest forex liquidity providers, enabling FXCM to offer clients spreads as low as 1 pip on major crosses. Clients also have the benefits of mobile trading, one-click order execution, and trading from real-time charts. FXCM’s CFD product offers no re-quote trading and allows traders to trade oil, gold, silver, and stock indices, along with forex on one platform. In addition to currency and CFD trading, FXCM offers educational courses on forex trading, and provides free news and research through DailyFX.com.

* Please be advised that CFD accounts are not available to residents of the U.S. or its territories. Additionally, FXCM LTD offers spread betting exclusively to UK residents. Residents of other countries are NOT eligible.

†MetaTrader 4 accounts are available through FXCM LTD.

**Please note, FXCM Micro, in its discretion, may or may not offset individual transactions unlike transactions in most FXCM standard accounts. For additional information, click here.

Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before you decide to trade the foreign exchange products offered by Forex Capital Markets LLC, Forex Capital Markets Limited, inclusive of all EU branches, FXCM Asia Limited, or FXCM Australia Limited, any affiliates of aforementioned firms, or other firms under the FXCM group of companies (collectively “FXCM Group”) you should carefully consider your objectives, financial situation, needs and level of experience. If you decide to trade foreign exchange products offered by FXCM Australia Limited you must read and understand the Financial Services Guide and the Product Disclosure Statement. FXCM Group may provide general market information and commentary which is not intended to be investment advice and the content of this email must not be construed as personal advice. By trading, you could sustain a total loss of your deposited funds and, therefore, you should not speculate with capital that you cannot afford to lose. You should be aware of all the risks associated with trading in foreign exchange products. Foreign exchange products are only suitable for those customers who fully understand the market risk. FXCM recommends you seek advice from a separate financial advisor.

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Phone: (646) 432-2122

 

[FXCM-PR Rep]

Dollar Offers Little Appeal as Risk Advances, FOMC Swears off Hikes

After a brief reprieve, the dollar continued its month-long decline this past week. The selling pressure behind the world’s most liquid currency is a coming from both speculative and fundamental sources.

The Economy and the Credit Market

After a brief reprieve, the dollar continued its month-long decline this past week. The selling pressure behind the world’s most liquid currency is a coming from both speculative and fundamental sources. What is interesting is that the mix for influence is starting to even out and perhaps even tip in favor of the later dynamic. Up until a few weeks ago, the greenback was running on sentiment alone. Through April and May, the dollar was performing particularly well thanks to a drop in speculative interests and assets across the board – though it is worth noting that the currency had advanced since December on this particular element, it just so happened that the not every major pair was responding to the subtle shift early in the year. Today, sentiment has eased off as a prominent driver; and market participants have actually jumped on the balance in forecasts for the global markets to force a rebound to work off some of the bearish premium built up over the first six months of the year. Naturally, this ‘climb in optimism’ diminishes the value of a safe haven that is prized for liquidity and stability rather than return. A much greater burden for the dollar now and going forward is the deteriorating growth and interest rate forecast for the US. Expectations of a cooler pace of expansion and a deferred return to a hawkish policy regime were already priced in. However, with today’s FOMC minutes lowering the official GDP forecasts and warning of a possibility for deflation, the weak outlook is turning bleak.

A Closer Look at Financial and Consumer Conditions

It is important to make the connections between economic health and financial stability. Even in the best of times, when output cools, credit and investment trends decline. What happens then when growth eases when the system is already strained? We may soon find out. We have seen a clear deterioration in timely economic data these past weeks as a global effort to withdrawal stimulus has been accelerated by the adoption of austerity measures as concern swings from growth to sovereign credit health. The most palpable risk to the world’s financial markets is still the Euro region. Portugal has been downgraded and Spanish banks are being forced to borrow liquidity massive amounts of liquidity from the ECB. Next to give will most likely be China’s overdrawn lending.

The economic outlook for the world’s largest economy is less than impressive. While the general consensus among policy makers and economists for the medium term has generally pointed to moderation; it was rather clear that speculative interests were aiming much higher. With each disappointing economic release; reality further sets in. This past week, the country’s trade deficit ballooned to an 18-month high, retail sales fell a greater-than-expected 0.5 percent and the NFIB Small Business Optimism survey for June retreated from a 20-month high. This may seem a random assortment of data, but it covers vital areas of the economy. Confirming that activity is indeed slowing, the Fed’s minutes lowered its 2010 and 2011 GDP projections (to 3.0 to 3.5 percent and 3.5 to 4.2 percent respectively).

The Financial and Capital Markets

Despite the clear projection for economic activity to cool over the coming months and the threat of financial instability through European default or sovereign downgrades, the capital markets continue to climb. Is this a sign of risk appetite? Yes and no. There is an obvious investment in growth-based assets as evidenced by the appreciation in the market’s benchmarks. On the other hand, there is a difference between trading and investment capital. The former is looking for a momentum behind capital appreciation to make a quick profit. The more stable and lasting flows come from investment sources looking to make yield over time. Given the lack of fundamental support behind the climb in price, it is reasonable to expect that there is a heavy speculative interest in this drive that could withdrawal its support just as quickly as it was added. As the markets continue their climb, it is worth nothing that traditional volatility gauges (measuring implied volatility) have dropped off. This is a precarious situation as it reflects a sort of blissful ignorance whereby the resulting reversal sparks a sharp response. With a clear sensitivity to the trends in global finances and economic activity, the continued rise grows increasingly risky. The Chinese GDP reading this week and EU Stress Test due on the 23rd could realign speculation to reality in the near future.

 

[FXCM-PR Rep]

US Dollar May Fall Further on Forex Crowd Sentiment

EURUSD – Euro Forecast Strongly Bullish Against US Dollar
GBPUSD – British Pound Likely to Rally Further
USDJPY – Japanese Yen Outlook Positive Amidst Sentiment Shift
USDCHF – Swiss Franc May Strengthen against Dollar
USDCAD – Canadian Dollar Forecast Unclear Against Greenback
GBPJPY – British Pound Forecast to Decline Against Yen

View individual currency SSI charts in our FX Sentiment section

Interested in building your own SSI-based strategy? Request SSI data on our forex forum.

A sharp shift towards crowd US Dollar suggests that the USD may continue to slide against the Euro, British Pound, and Japanese Yen. The number of traders long the US Dollar against the British pound has surged 31 percent in the past week of trade, and such one-sided positioning often leads to further continuation in price. As the Greenback slips further the risk of short-term corrections rises, but current sentiment readings give us a firmly bearish US Dollar forecast through short-term trade.

 

[FXCM-PR Rep]

The Speculative Run in Capital Markets Starts to Flag on the Absence of Fundamentals

Price action is often deceiving. While there is little arguing that the market defines what is fair value for an asset or underlying risk premium itself; this is an assessment that is valid for only that particular point in time. While speculative interests are prevalent in the capital markets, their influence is biased and highly reactive.

• The Speculative Run in Capital Markets Starts to Flag on the Absence of Fundamentals
• Both the Euro and Dollar Seems to be Diverging from their Normal Roles on the Risk Spectrum
• US Earnings and EU Stress Test Results Threaten to Revive Sentiment – For Better or Worse

Price action is often deceiving. While there is little arguing that the market defines what is fair value for an asset or underlying risk premium itself; this is an assessment that is valid for only that particular point in time. While speculative interests are prevalent in the capital markets, their influence is biased and highly reactive. This is why there are periods of remarkable volatility and aggressive trends. It is important to keep this truism in mind when evaluating the performance of the market’s this past week. It would seem that investor sentiment has improved markedly over this period. Indeed, the Dow Jones Industrial Average, the S&P 500, Europe’s benchmark indexes and others climbed for six consecutive days (a trend broken today). Looking at other risk and growth-sensitive markets, the same advance in yield and increased tolerance for risk was noted. Furthermore, the statistics that are derived from this underlying price action would offer self-fulfilling support. For example, the risk premium priced into volatility indicators and other derivative readings similarly point to a reduction in the threat of future losses.

It should be clear to those traders that have survived the market swings of the past couple of years that trends are not permanently set and that speculative interests can turn rather quickly. If we were to trust what price action is telling us now, we could find the evidence for why this progress is able to develop. One of the most readily available explanations for strength is that the fear of an imminent collapse of the European Union’s financial ties and currency are on the verge of collapse has dissipated. A correction under these bearings is not unusual. In fact, it is a strong sign that speculators were overzealous in pricing in a disaster for the euro; when the full breadth of the problem would not be realized for many months and through many governmental efforts to redefine the rules of the game. This natural correction therefore can be taken as a sign that risk appetite is recovering in earnest across the board; when in fact, it is a reversal of positioning that is natural for capital flows. On the other hand, that does not mean that the capital markets are returning to a structural bull trends. Instead, this can be termed a correction in a larger trend until fundamentals and investor commitment confirms otherwise. We can see this argument in price action itself. Setting the upswing of the past week into context, we can see with both the Dow and DailyFX Carry Trade Index that we could still easily establish another lower peak.

If we are to see a cap to the current drive in risk appetite and a resumption of speculative fund withdrawal and an increase in bets against growth and yield expansion; it would likely come through the true fundamental trends underlying the market. There is no lack of kindling for igniting fear where uncertainty currently exists. Just as easily as it is interpreted as a catalyst for confidence, the developments in Europe can be labeled a sign for future troubles. While a number of European Governments have found they are able to access the capital markets for funds in debt auctions (Germany, Spain, Italy, Portugal and Greece), the rates they are drawing cannot be endured for long. What’s more, there have been numerous signs of deterioration that have been ignored. Included in this list is a downgrade for Portugal and news that private Spanish banks have had to take 126 billion euros worth of loans this past June. Clearly conditions are not very conducive to growth and investment in this region. And, the deterioration doesn’t stop there. Readings of economic activity have slowed across the board (most notably so far in China’s 2Q GDP reading). Stimulus is being pulled from those nation’s with the biggest contributions to expansion. What’s more, the threat of a new crisis is always present with China, the emerging market sector or even sovereign credit risk. The fundamentals are there; but speculators will determine the timing of swings.

Definitions:

What is the DailyFX Volatility Index:

The DailyFX Volatility Index measures the general level of volatility in the currency market. The index is a composite of the implied volatility in options underlying a basket of currencies. Our basket is equally weighed and composed of some of the most liquid currency pairs in the Foreign exchange market.

In reading this graph, whenever the DailyFX Volatility Index rises, it suggests traders expect the currency market to be more active in the coming days and weeks. Since carry trades underperform when volatility is high (due to the threat of capital losses that may overwhelm carry income), a rise in volatility is unfavorable for the strategy.

What are Risk Reversals:


Risk reversals are the difference in volatility between similar (in expiration and relative strike levels) FX calls and put options. The measurement is calculated by finding the difference between the implied volatility of a call with a 25 Delta and a put with a 25 Delta. When Risk Reversals are skewed to the downside, it suggests volatility and therefore demand is greater for puts than for calls and traders are expecting the pair to fall; and vice versa.

We use risk reversals on USDJPY as global interest are bottoming after having fallen substantially over the past year or more. Both the US and Japanese benchmark lending rates are near zero and expected to remain there until at least the middle of 2010. This attributes level of stability to this pair's options that better allows it to follow investment trends. When Risk Reversals move to a negative extreme, it typically reflects a demand for safety of funds - an unfavorable condition for carry.

How are Rate Expectations calculated:

Forecasting rate decisions is notoriously speculative, yet the market is typically very efficient at predicting rate movements (and many economists and analysts even believe market prices influence policy decisions). To take advantage of the collective wisdom of the market in forecasting rate decisions, we will use a combination of long and short-term, risk-free interest rate assets to determine the cumulative movement the Reserve Bank of Australia (RBA) will make over the coming 12 months. We have chosen the RBA as the Australian dollar is one of few currencies, still considered a high yielders.

To read this chart, any positive number represents an expected firming in the Australian benchmark lending rate over the coming year with each point representing one basis point change. When rate expectations rise, the carry differential is expected to increase and carry trades return improves.

 

[FXCM-PR Rep]

University of Michigan Confidence Tumbles to the Lowest Level Since August 2009

The U.S. University of Michigan consumer sentiment index for the month of July plunged to 66.5 from 76.0 in June to exceed economists’ expectations of 74.0. The breakdown of the report showed that the economic outlook fell to 60.6 from 69.8 the month prior, while economic conditions tumbled to 75.5 from 85.6 in June. Immediately following the disappointing data, the Japanese yen continued to gain ground against all major currencies, and was up the most against the New Zealand dollar, climbing 3.73 percent.

Today’s decline in consumer confidence may be attributed to a stubbornly high unemployment rate in the United States that has investors questioning the health of the world’s largest economy. Private Payroll growth remains weak as shown by statistics surrounding the Non-Farm Payrolls report earlier this month (83K vs. 113K expected). Additionally, the fall in the U.S. stock market may serve as another catalyst for the massive decrease. All in all, consumers remain fearful of policy changes, while weak housing prices, high unemployment, and tight credit conditions continue to weigh on sentiment.

Market Reaction

The USD/JPY looks to have extended its overnight decline and now looks poised to take out resistance of 86.00. Today’s southern journey began with the Bank of Japan raising their growth forecast, while holding their key overnight lending rate at the record low. Investors should caution holding onto their short positions going into next week as daily studies indicate that the pair is oversold.

All major currencies pushed lower against the Japanese Yen and extended their decline following the disappointing U. of Michigan confidence report. The strength in Japanese yen is of particular note as broader risk aversion will likely offset euro optimism.

 

[FXCM-PR Rep]

Forex Weekly Trading Forecast - 07.19.10

Forex Weekly Trading Forecast - 07.19.10

US Dollar Struggles to Keep its Safe Haven Roots as Fundamentals Dim

Euro Strength at Risk Ahead of Stress Tests, Dow Jones Reversal

Japanese Yen May Strengthen Further As Risk Sentiment Falters

British Pound Looks to Improved Demand and Growth for Support

Canadian Dollar Looks to BoC Rate Decision, Inflation for Next Moves

Australian Dollar Momentum Turns Down, Risks of Further Declines

New Zealand Dollar At Risk As Pessimism Grows

Gold Traders Look to the EU Stress Test to Gauge Market’s Health