User Name: Password:      Register - Lost password?

Forex News Blog
Back to The Headlines
Monday January 28, 2008 - 16:24:10 GMT
Forex.com - www.forex.com

Share This Story:
| | Email

Stimulus Package Weak at Worst, Uncertain at Best

Roller coaster ride set to continue

You would certainly be forgiven if you’re feeling a bit like Linda Blair in ‘The Exorcist’ after this week’s market moves. I think my head has spun around at least twice in as many days and I reckon there are a few more spins ahead at the minimum. Markets are very fluid and there are a lot of important events coming up next week, but let me first try to put some of the events of this past week in context before delving into what lies ahead.

Last Friday I wrote that investors had turned outright defensive based on deteriorating global growth expectations and a sense that a US downturn was unavoidable. This week then began with an equity market meltdown that sent other riskier assets plunging as well, most notably the JPY-crosses. On Tuesday morning, the Fed unexpectedly jumped into the fray, undoubtedly based on the turmoil in financial markets (I’ll get to the rogue French trader later), and cut the Fed funds rate ¾% to 3.50%. Stocks struggled a while longer, but eventually rebounded. The rebound came on curious news that the NY state insurance regulator had convened discussions with major banks to shore up the capital of beleaguered bond insurers. The rebound in stocks and risky assets continued on Thursday as news of a US economic stimulus package emerged, only to then sputter on Friday, casting doubt on the rebound overall.

I would suggest that the balance of risks and the deteriorating outlook favor further waves of market liquidations rather than a sudden emergence into stability, much less continuing recovery. First, judging by the initial market reaction to the Fed rate cuts—further declines—it’s clear to me that investor pessimism still runs deep and that lower interest rates alone will not fix the problem. Second, the ostensible cause of the impressive late afternoon rally—potential capital infusions for bond insurers—highlights ongoing credit market concerns that still lie at the root of the current market turmoil. It’s highly uncertain whether a capital infusion plan can be worked out to forestall downgrades to the major bond insurers, which would result in ratings downgrades to the bonds backed by the insurers, leading to an unprecedented exodus of capital from such investments. That is the biggest fear lurking in the hearts of investors everywhere.

Third, global markets moved in tandem in what was surely one of the most volatile weeks in financial market history. I take that as further evidence that the risks emanating from the US are going to have repercussions globally and that the global investment environment remains highly unsettled. That goes back to the underlying credit market concerns, which expose investors and institutions all over the world to heightened downside risks. Finally, price action in the major stock indexes, commodities and currencies all suggest that a return to normalcy is far from nigh. Attempts by stocks to extend gains failed on Friday, generating a ‘spinning top’ pattern on the weekly candles, signaling indecision, while the daily candles look set to post a ‘bearish engulfing’ line, suggesting the rebound has already ended. Adding all these elements up, I remain convinced that further market implosions remain more likely than not and this view favors selling riskier assets (JPY-crosses, stocks, gold, and oil) on strength.

All eyes on the Fed next week

The Fed surprised markets by reacting to severe equity market declines on Monday, damaging its credibility in many respects, and throwing expectations for next week’s FOMC decision into a blender. In the immediate hours following the surprise 75 bp rate cut, expectations were for a further 75 bps next week, but that was pared down to 50 bps as stocks recovered further, and fell to 25 bps as stocks peaked on Friday morning. Going into the Friday close with stocks set to close down, expectations have shifted back toward 50 bps (70%) vs. 25 bps (30%). In my mind, there also exists the very real possibility that the Fed stays on hold, having already delivered what it thinks is the ‘substantive, decisive, timely’ relief to the economy.

For the Fed to have cut rates just 8 days before a scheduled meeting suggests it was pushed by market developments, a position no central bank likes to be in. The meager recovery by financial markets since then clearly signals investors need more interest rate relief and that leaves the Fed in the awkward position of kowtowing to markets further or risking another financial market meltdown. Finally, the news that SocGen suffered a $7+ bio loss on unauthorized trading raised the scenario that the stock market sell-off was precipitated by the exiting of those failed positions, potentially leaving the Fed without a true rationale for the 75 bp cut. But the Fed has indicated it was unaware of the SocGen situation, the verity of which the market will debate for months to come. If policymakers feel they were duped by one-off market events, it argues for holding steady. But given the balance of risks, I’ll go with a 70% chance for 25 bps and a 30% chance of steady.

Obviously the market reaction to the Fed’s decision is going to be critical to the near-term trading outlook. I think it’s safe to say that a steady rate decision will see a massive sell-off, a 25 bp rate cut a heavy sell-off, and a 50 bps rate cut could go either way, but most likely up on the back of financials. If the Fed cuts 50 bps and stocks don’t rally, then the situation is going to get much worse before it gets better.

US outlook remains weak, will drag on global growth expectations

The US outlook remains extremely weak with analysts only debating the extent of the impending slowdown. As we saw two weeks ago, global markets are acutely sensitive to reductions in global demand and growth, especially with most major commodities still trading at or near all time highs. Gold has made another attempt to rally beyond the 914 level, but at the close of Friday, the rally looks to have been rejected soundly, and a doji pattern was generated on the daily candles. The doji and rejection from above recent highs further suggests that the rebound from $850 (which I targeted in last week’s report) has already ended, leaving a double-top in its wake.

ECB officials have scoffed at the market’s expectations that the ECB would cut rates in tandem with the Fed, but time is on the market’s side. Eurozone growth forecasts are continuing to be downgraded as fears of a global downturn take root. European sentiment has already plunged and it’s now left for that to translate into lower real consumption and slower growth. Several major European banks just this week have changed their forecasts for steady ECB rates throughout 2008 and are now expecting two rate cuts. European financial institutions and credit markets are still reeling from the US sub-prime meltdown and credit conditions remain tight as shown by ongoing ECB liquidity operations. Dwindling Eurozone growth and interest rate outlooks will continue to weigh on EUR keeping it a sell on strength.

Stimulus package uncertain at worst, weak at best

The US economic stimulus package announced late this week is already facing difficulties, as Senate leaders appear unhappy with many of the package’s details and may delay its passage or alter it to a point the White House finds unacceptable. The political pressure to pass a stimulus bill will be intense, so it seems likely some compromise will be reached. But even then the logistics of distributing cash to consumers represents another hurdle that may delay payments until well into 2Q, damping the near-term outlook even further. Finally, the details of the package suggest it may not have the desired effect even if it is enacted in timely fashion. The tax rebates are primarily targeted at better-off consumers, who may not immediately spend it, blunting efforts to prop up consumption. The rest of the package is tax cuts targeted at businesses to promote investment and hiring, but given the deteriorating outlook it remains to be seen whether firms will take advantage of such tax breaks. The jury will be out on the stimulus package for quite a while and that suggests it will not provide the desired impact, keeping the near-term outlook decidedly negative.

 

Forex Trading News

Forex Research

Daily Forex Market News
Forex news reports can be found on the forex research headlines page below. Here you will find real-time forex market news reports provided by respected contributors of currency trading information. Daily forex market news, weekly forex research and monthly forex news features can be found here.

Forex News
Real-time forex market news reports and features providing other currency trading information can be accessed by clicking on any of the headlines below. At the top of the forex blog page you will find the latest forex trading information. Scroll down the page if you are looking for less recent currency trading information. Scroll to the bottom of fx blog headlines and click on the link for past reports on forex. Currency world news reports from previous years can be found on the left sidebar under "FX Archives."



Elevate Your Trading With The Amazing Trader!

The Amazing Trader includes:
  • Actionable trading levels delivered to YOUR charts in real-time.
  • Live trading strategy sessions.
  • Market Updates with Trading Tools.

Register To Test Your Amazing Trader


Trading Ideas for 23 October 2017

Register for the Amazing Trader

1.

Amazing Trader EVENT RISK Calendar:

Tue 24 Oct
All Day flash PMIs
Wed 25 Oct
01:30 AU- CPI
08:00 DE- IFO Survey
08:30 GB- GDP
14:00 CA- BOC Decision
14:30 US- EIA Crude
Thu 26 Oct
11:45 EZ- ECB Decision
12:30 US- Weekly Jobless
14:00 US- Pending Homes Sales
Fri 27 Oct
12:30 US- GDP
14:00 US- final Univ of Michigan

Forex Trading Outlook


Potential Trading Opportunities


  • POTENTIAL PRICE RISK: Medium Tue-- All Day Global flash PMIs. First good look at October economic performances.



  • POTENTIAL PRICE RISK: HIGH Wed-- 01:30 GMT AU- CPI. Top Inflation indicator.

  • POTENTIAL PRICE RISK: HIGH Wed-- 08:00 GMT DE- IFO Survey. Top German indicator.


  • POTENTIAL PRICE RISK: HIGH Wed-- 14:00 GMT CA- BOC Decision. No Policy Change Expected.


  • POTENTIAL PRICE RISK: Medium Wed-- 14:30 GMT US- EIA Crude. Top Weekly WTI Statistic.



John M. Bland, MBA
co-founding Partner, Global-View.com

EXCLUSIVE: Global-View Daily Trading Chart Points Updated

EXCLUSIVE: Global-View Free Forex Database updated




TRADER ADVOCACY ARTICLES

Trader's Advocate Articles..

pic

Retail Forex Brokerage Changing!

Are you looking for your first broker or do you need of a new one? There are more critical things to consider than you might have thought.

We were trading long before there were online brokers. Global-View has been directly involved with the industry since its infancy. We've seen everything and are up-to-data with recent regulatory changes.

Our Best Brokers listing section includes:Forex Broker Reviews, Forex Broker Directory, Forex Broker Comparisons and advice on How to Choose a Forex Broker

If would like guidance, advice, or have any concerns at all ASK US. We are here to help you.

SEE Our Best Brokers List

Currency Trading Tools

  • Live rates, currency news, fx charts. 

  • Research reports and currency forecasts.

  • Foreign Exchange database and history.

  • Weekly economic calendar.

Directory of  Forex trading tools

 
Terms of Use    Disclaimer    Privacy Policy    Contact    Site Map


Forex Forum
Forex Trading Forum
Forex Forum + forex rates
Forex Forum Archives
Forex Forum RSS
Free Registration

Trading Forums
Currency Forum Guide
Forum Directory
Open Forum
Futures Forum
Political Forum
Forex Brokers
Compare Forex Brokers
Forex Broker News
Forex Broker Hotline

Online Forex Trading
Forex Trading Tools
Currency Trading Tools
Forex Database
FX Chart Points
Risk/Carry Trade Chart Points
Economic Calendar
Quicklinks to Economic Data
Currency Futures Swaps
Fibonacci Calculator
Currency Futures Calculator

Forex Education
Forex Learning Center
FX Trading Basics Course
Forex Trading Course
Forex Trading Handbook

Forex Analysis
Forex Forecasts
Interest Rate Forecasts
Central Bank Forecasts

FX Charts and Quotes
Live FX Rates
Live Global Market Quotes
Live Forex Charts
US Dollar Index Chart
Global Chart Gallery
Daily Market Tracker
Forex News
Forex Blog
Forex News
Forex Blog Archives
Forex News RSS
Forex Services
Forex Products
GVI Forex
Free Trials
FX Bookstore
FX Jobs and Careers
Jobs USA
Jobs UK
Jobs Canada

Forex Forum

The Global-View Forex Forum is the hub for currency trading on the web. Founded in 1996, it was the original forex forum and is still the place where forex traders around the globe come 24/7 looking for currency trading ideas, breaking forex news, fx trading rumors, fx flows and more. This is where you can find a full suite of forex trading tools, including a complete fx database, forex chart points, live currency rates, and live fx charts. In addition, there is a forex brokers directory where you can compare forex brokers. There is also a forex brokers hotline where you can ask for help choosing a forex broker that meets your individual fx trading needs. Interact on the same venue to discuss forex trading.

Forex News

The forex forum is where traders come to discuss the forex market. It is one of the few places where forex traders of all levels of experience, from novice to professionals, interact on the same venue to discuss forex trading. There is also the GVI Forex, which is a private subscription service where professional and experienced currency traders meet in a private forex forum. it is like a virtual forex trading room. This is open to forex traders of all levels of experience to view but only experienced currency tradingprofessionals can post.

Currency Trading

Currency trading charts are updated daily using the forex trading ranges posted in the Global-View forex database. You will also find technical indicators on the fx trading charts, e.g. moving averages for currencies such as the EURUSD. This is another forex trading tool provided by Global-View.com.

Forex Brokers

The forex database can be used to access high, low, close daily forex ranges for key currency pairs, such as the EURUSD, USDJPY, USDCHF, GBPUSD, USDCAD, AUD, NZD and major crosses, including EURJPY, EURGBP, EURCHF, GBPJPY, GBPCHF and CHFJPY. Data for these currency trading pairs dating back to January 1, 1999 can be downloaded to an Excel spreadsheet.

Forex Trading

Forex chart points are in a currency trading table that includes; latest fx tradinghigh-low-close range, Bollinger Bands, Fibonacci retracement levels, daily forex pivot points support and resistance levels, average daily forex range, MACD for the different currency trading pairs. You can look on the forex forum for updates when one of the fx trading tools is updated.

FX Trading

Global-View also offers a full fx trading chart gallery that includes fx pairs, such as the EURUSD, commodities, stocks and bonds. In a fx trading world where markets are integrated, the chart gallery is a valuable trading tool. Look for updates on the Forex Forum when the chart gallery is updated.

Forex Blog

Global-View.com also offers a forex blog, where articles of interest for currency trading are posted throughout the day. The forex blog articles come from outside sources, including forex brokers research as well as from the professionals at Global-View.com. This forex blog includes the Daily Forex View, Market Chatter and technical forex blog updates. In additional to its real time forex forum, there are also Member Forums available for more in depth forex trading discussions.

 

WARNING: FOREIGN EXCHANGE TRADING AND INVESTMENT IN DERIVATIVES CAN BE VERY SPECULATIVE AND MAY RESULT IN LOSSES AS WELL AS PROFITS. FOREIGN EXCHANGE AND DERIVATIVES TRADING IS NOT SUITABLE FOR MANY MEMBERS OF THE PUBLIC AND ONLY RISK CAPITAL SHOULD BE APPLIED. THE WEBSITE DOES NOT TAKE INTO ACCOUNT SPECIAL INVESTMENT GOALS, THE FINANCIAL SITUATION OR SPECIFIC REQUIREMENTS OF INDIVIDUAL USERS. YOU SHOULD CAREFULLY CONSIDER YOUR FINANCIAL SITUATION AND CONSULT YOUR FINANCIAL ADVISORS AS TO THE SUITABILITY TO YOUR SITUATION PRIOR TO MAKING ANY INVESTMENT OR ENTERING INTO ANY TRANSACTIONS.

Copyright ©1996-2014 Global-View. All Rights Reserved.
Hosting and Development by Blue 105