Tuesday May 12, 2009 - 12:37:01 GMT
Share This Story
Black Swan Capital - www.blackswantrading.com
â€˘ Swan Pushes Australia's Budget Deficit to Record Amid a Global Recession (Bloomberg)
â€˘ Asian stocks fell, dragging the MSCI Asia Pacific Index from a seven-month high, as investors sold shares trading at their most expensive valuations in five years. (Bloomberg)
â€˘ The U.S. trade deficit probably widened in March from a nine-year low as higher oil prices boosted the import tab, economists said before a report today.
â€˘ China's Fixed-Asset Investment Surges 30.5% on Stimulus as Exports Slump (Bloomberg)
Key Reports Due (WSJ):
â€śI have not failed. Iâ€™ve just found 10,000 ways that donâ€™t work.â€ť
FX Trading â€“ Seems Obvious
Jack noted it yesterday: the consensus anticipated a sell-off in stocks. I certainly didnâ€™t disagree with all the headlines â€“ indeed, over the last two weeks Iâ€™ve been harping on the potential (read: need) for stocks to sell off. But I do agree with Jackâ€™s point that itâ€™s not always a good thing when you find yourself in the same predictive position as mainstream analysis.
Either way, the market talked about the potential for a sell-off yesterday and thatâ€™s exactly what we got. Not surprisingly the risk dynamic remained in play â€“ the commodity-dollars sunk; the European currencies forfeited ground to the buck; the Japanese yen took solace in the risk-averse money flow.
With the exception of some backing and filling, currencies still look a little heavy here ...
The British pound and the euro, though, have successfully erased yesterdayâ€™s losses already. Perhaps itâ€™s a bit of stop-hunting happening here ahead of the US session as some of the less-sure shorts are shaken out:
EURUSD hourly: testing yesterdayâ€™s highs.
(Chart unavailable in text format.)
GBPUSD hourly: also testing yesterdayâ€™s highs as UK data out today exceeded expectations.
(Chart unavailable in text format.)
Focus will turn to US trade data out later this morning to see if euro and pound can keep trucking higher. Rising oil prices are seen as the primary driver of a larger deficit than seen in the prior month. While the import side of the equation makes a difference, little is expected from the export side. Should the US trade data lack any surprises, we could see the European currencies drag the others higher on a confirmed breakout of yesterdayâ€™s highs.
But of course, youâ€™ve got to keep your eye on stocks ...
As the market starts weighing the nine-week rally, precisely whether the fundamentals can justify the price action (which I find hard to believe they can), currencies will hang in the balance.
What happens in the nearer-term, I think, will be at least a consolidation of the S&Pâ€™s 30%-plus gains since March. Whether that consolidation process began yesterday â€¦ or whether it doesnâ€™t begin till investors stop expecting it ... remains to be seen. But considering key technical levels are coming into play, now would seem a logical stopping point.
[P.S. Yesterday, our members of Currency Strategist were able to close out and profit nicely on an options recommendation we made to play for Australian dollar strength. This is one of the ways to invest in the nearer-term price action while waiting for the longer-term trends to play out. You can read more about Currency Strategist if youâ€™re interested in our clear-cut trading recommendations.]
Over the longer-term, we believe unemployment and its impact on income and spending will be an inconvenience in the hopeful path toward full recovery. It could be this realization that really changes the perspective of global market players ... at which case the dependence on the US will again take center stage.
The overall definition and understanding of â€śrecoveryâ€ť will be crucial going forward. So far less-dramatic contraction constitutes signs of recovery. But what happens when investors start expecting more than â€śless-badâ€ť? What happens when they start expecting circa-2006 type growth? Based on the overall appetite for spending and the renewed necessity of paying down debt, recovery isnâ€™t going to bring back the bubblicious trends we came to [irresponsibly] believe characterized economic prosperity.
John Ross Crooks, III
Black Swan Capital LLC
Forex Trading News
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
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."