Forex Forum Archive for 11/25/2006

austin mw 23:25 GMT November 25, 2006 Reply   
FWIW

By ANNE D'INNOCENZIO, AP Business Writer 1 hour, 10 minutes ago

NEW YORK - The nation's retailers had a strong start to the holiday shopping season, according to results announced Saturday by a national research group that tracks sales at mall-based stores. One big exception was Wal-Mart Stores Inc., which said it expects to report same-store sales in November below its already lackluster forecast.


According to ShopperTrak RCT Corp., which tracks total sales at more than 45,000 mall-based retail outlets, total sales rose 6 percent to $8.96 billion on Friday, the start of the holiday shopping season, compared to the same day a year ago.

"Although we anticipated a solid consumer turnout for Black Friday, this data shows an even larger increase than expected as consumers proved they were willing to spend," said Bill Martin, co-founder of ShopperTrak, in a statement.

Sydney ACC 21:58 GMT November 25, 2006 Reply   
There is one thing that is abudantly clear this weekened, the market as a whole, is more confused as to the direction of rates in the near term.

I found this article on another website I liked it so much I want to shre it with you all.

In the last two trading days, the EUR/USD has surged over 200 points. The currency pair is now trading above what we suspect is the European Central Bank’s comfort zone. With only 7 trading days to go before the ECB meeting, if the EUR/USD does not fall back below 1.30, the central bank has no choice but to signal to the market that the December rate hike will be their last and that 3.50 percent interest rates is the peak. Not only does the strong Euro pose a risk to growth, but it also relieves inflationary pressures, which will give the ECB a good reason to shift gears. German exporters actually attempted to downplay the move by saying that they have no problem with the Euro above 1.30, but they do want to see the ECB take action if the currency manages to rally up to 1.40. Whether German exporters like it or not, the strength of the Euro will have an impact on their businesses. Just as New Zealand reported a record trade deficit yesterday due to the strength of the kiwi, we expect the Eurozone to also begin to see deteriorating economic data, particularly as it pertains to trade. Economic data released this morning confirmed that inflationary pressures are indeed subsiding with German import prices falling for the second month in a row. French business confidence also came out softer, which is hardly a surprise given the recent trend of weaker economic data. What was surprising was the uptick in the German IFO report on Thursday. Businesses were more optimistic about the future which indicates that they expected a continued acceleration in economic activity. In the week ahead, The Eurozone is also releasing a number of key data releases such as French and German unemployment, German retail sales, Eurozone CPI as well as regional PMI surveys. Meanwhile the Swiss Franc has also staged an impressive rally today, confirming that carry trade liquidation is the main theme in the markets. EUR/CHF has sold off for seven consecutive days, which is something that we have not seen since the beginning of the year and is particularly rare for a currency that usually range trades. The week ahead also delivers a busy calendar for the tiny country, with the KoF leading indicators, CPI and GDP the most important releases

Alaska Moon 19:02 GMT November 25, 2006 Reply   
Philadelphia Caba 18:08 GMT November 25, 2006
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Yes, Caba, that seems correct. I seem to understand a little about carry trades if I think in only one pair. of course, there are a lot of carry pairs.
Just discussing it helps me...that is why this forum is so great !!
Moon

Philadelphia Caba 18:08 GMT November 25, 2006 Reply   
Alaska Moon 00:59 GMT
Actually yen has been sold against every other currency but us$, so in this scenario market has dumped JUST us$ based carry trades, right? Got your point, thnx.

Cbj Jake 16:10 GMT November 25, 2006 Reply   
Kudos To Dublin Flip! - It has been a long time since I read posts so well considered, researched, politically sophisticated, and pip-friendly. One can be anally concerned about pips and the dreamy fog between the trees but miss the move for the want of seeing a forest. Good weekend to all.

Mtl JP 15:36 GMT November 25, 2006 Reply   
Caba 14:36 / any word on how to recognize what quali(nti)fies a
- "landing turns out to be a hard one"
- "no landing at all". (Is that some kind of a hover?)
- "soft landing"

and the diff between a crash and a hard landing ?

Philadelphia Caba 14:36 GMT November 25, 2006 Reply   
quito_ecuador_valdez 21:44 GMT November 24, 2006
Chuck, this is from Jyske Markets' FX Weekly memo by Rikke Ledager :

What creates volatility?
Generally speaking, volatility reflects market participants' risk appetite. In a market which is moving sideways, as we have seen it do recently, players earn money through carry trade. It is therefore necessary to take on additional risk to obtain a higher return. Other things being equal, falling risk aversion
will cause a fall in volatility. Developments in volatility are therefore to a great extent based on expectations about the future. If market participants are uncertain about the way things are going, risk aversion will rise and hence volatility. Moreover, volatility is affected by exogenous factors such as
natural disasters and geopolitical unrest as well as endogenous factors such as price bubbles, the ability
to manage risk, the attitude to gearing, changes in asset preferences, and the possibility of selling volatility. The recent abundance of liquidity, the accumulation of reserves by Asian central banks, and the generally fewer crises in the financial markets have reduced volatility and are to some extent due to the desire to take on risk. In other words, volatility may not perform quite so wide swings in the future as it did earlier. On the other hand, we should not feel too happy-go-lucky about the current level, for in our view volatility still has some kicks left.

What will it take to make volatility increase?
In the market the main scenario is currently a soft landing. If that does not come true, and the landing turns out to be a hard one, or perhaps there is no landing at all, volatility in the FX markets will increase. If things pan out as market participants expect, and we get a soft landing, volatility may also increase, but only if market participants somehow get a surprise.
In May and June, the lack of direction in the FX market, the appetite for carry in combination with fears that global liquidity would be mopped up, and prospects of higher risk aversion caused a significant, although brief spike in volatility, even without any concrete reason for market participants to work on. The business cycle has great influence on volatility. Earlier recessions have had an adverse effect on corporate earnings and have increased unemployment, which in turn has caused uncertainty in private households. Risk tolerance usually falls during recessions. The combination of falling risk tolerance and poorer economic fundamentals tends to increase volatility across asset classes. Of course, this is
also the case during periods when the economy is booming - but in reverse. Market participants have turned increasingly concerned about economic growth in the US recently, and the latest fundamentals have certainly not been impressive. Particularly the house market is cause for concern, and many talk about a downright price bubble. Also the inverted US yield curve draws attention to the question of future growth, and the longer time that the inverted yield curve prevails, the more players will speculate, with past history in mind, whether we may be heading for recession. If the pessimists are proved right, volatility will increase, other things being equal.

Philadelphia Caba 14:00 GMT November 25, 2006 Reply   
Alaska Moon 00:59 GMT November 25, 2006
Thanks for your opinion. If I understand it right .... you mean, if they dumping let's say usd/jpy carry on the same time they building up another one, let's say e/j? Somehow I still missing something ...
anyway, have nice and restfull w/e!

Vancouver Mike 13:51 GMT November 25, 2006 Reply   
ldn jas 03:03 GMT ::: We often get screwed in the markets so Purk's comments are very appropriate ;-) Have a nice weekEND and good trades to you.

hong kong nt 08:45 GMT November 25, 2006 Reply   
AUD/USD -- triangle breakout target .81Q..fwiw..

ldn jas 03:03 GMT November 25, 2006 Reply   
The Netherlands Purk 19:21 GMT November 24, 2006
Purk - it is UN natural sex so wouldn't go boasting about it too much - also offensive. Please read the GV Policy on correct and unoffensive protocol when writing your posts.

hong kong nt 02:48 GMT November 25, 2006 Reply   
hk ab 01:25 GMT November 25, 2006
chuck, don't worry the rise of gold is still very tame relatively, thus, geopolitical stuff are not on the table yet.

agree, geopolitical stuff are not on the table until you wake up and notice gold climbs $40-50 overnight on news of blaa blaa blaa....

hk ab 01:25 GMT November 25, 2006 Reply   
chuck, don't worry the rise of gold is still very tame relatively, thus, geopolitical stuff are not on the table yet.

Alaska Moon 00:59 GMT November 25, 2006 Reply   
Philadelphia Caba 00:03 GMT November 25, 2006
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I am a long ways from being an expert on carry, but I think it helps me understand when I discuss it.
I think a lot of carry trades, including BIG accounts, are short time.
I know from my standpoint, If I have a $/Yen carry trade, If the base currency [$] is gaining in value, I make money on both ends. If it weakens, 100 pips will lose 3 months interest...in my case. So, when I see the base currency losing value, or a trend that I believe says so, I have to dump quickly to save profit.
I think yesterday's move was dumping $/Y carry trades. The reason E/J moved is because the Eur got a lot stronger, so those carry trades would be making profit on both ends..
Now, I am just learning, so if I have it all wrong, please feel free to let me know...
Good trades to you..

Philadelphia Caba 00:03 GMT November 25, 2006 Reply   
Oily man & Chuck:
So, we have chf strenght & increases volatility in the market as sign of carry trades are being dumped ... but e/j as one of the biggest carry just made today a new all time high ... it doesn't make any sense ....