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Wednesday September 22, 2010 - 20:22:15 GMT
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Daily GVI Forex Forex View- Adjusting to Fed

 

The Daily Forex View

Forex Analysis


Adjusting to Fed

20:00 GMT (Global-View.com) Sep 22- On Wednesday forex traders had to pick up the pieces following the FOMC policy statement on Tuesday. While the central bank did not ease policy, it opened the door to future quantitative ease (QE2) if the economy does not improve. We doubt it was their intention to drive the USD lower, but the net impact of their message was to drive the U.S. currency down against Europe (EUR, GBP and CHF). Dealers immediately saw the prospect of an easier monetary policy in the future as a USD negative and a positive for equities. This comes at a time when Japan has been trying to drive the JPY lower.

In other words, it looks like Europe will be forced to bear the brunt of the weak currency policies of Japan and the U.S.  Politicians in Europe and ECB members are unlikely to find this prospect as benign. On the other hand, equities saw the developments as positive, A popular trade on Wall Street is to long stocks and short the USD.  Today, the BOE policy board meeting minutes had a somewhat dovish tone.

The weaker USD has been a weight on the USDJPY, but the BOJ has not responded to penetration of the 85.00 line, although Japanese PM Kan has protested. Kan is scheduled to meet with President Obama in Washington Thursday. At this meeting Kan will be able to explain the need for forex intervention to the U.S. administration first hand. Presumably he will blame the  undervalued CNY. Tokyo is unlikely to stir the waters before the meeting.  In the minds of most, its not a question of if, its a question only of when, the BOJ resurfaces with yet another round of intervention. Japan is closed Thursday for the Autumnal Equinox, the first official day of fall.

CALENDAR

UPCOMING DATA HIGHLIGHTS  The Far East will see a Japanese holiday. In Europe , EZ flash PMI data for September will be released. In North America, the U.S. will see weekly jobless claims, which will be closely watched. Also existing homes sales are due along with weekly natural gas inventories.

CHARTS: Forex pairs vs 2-yr note spreads

 

  

Forex   #REF!     GBP vs. 20:01
EUR 1.3391 149 JPY 113.19 54 JPY 132.41 -42
GBP 1.5664 50 GBP 85.49 68 CHF 154.49 -112
CHF 0.9863 -103 CHF 1.3208 11 CHF vs.    
JPY 84.53 -54       JPY 85.70 34

The EURUSD is up on the day and the GBPUSD is higher. The EURGBP cross is up. Traders are still watching the European sovereign debt situation In the GBPmarkets are keeping an eye on the U.K. economy.

The USDCHF is down and EURCHF is steady. The SNB strong stand in supporting the EUR against the CHF has waned after massive FX losses. Flows out of the EUR into the CHF remain an issue for the SNB.

The USDJPY is lower and the EURJPY cross is higher. While Japanese public finances are a mess, analysts point out that most JGBs are owned by Japanese, so Japan is not dependent on foreign investment. The government has been pressed the BOJ to promote growth and favors a lower exchange rate.

Some traders focus intently on the Japan vs. U.S. 2-yr note spread (only the U.S. 2-yr moves much).

COMMODITIES and Commodity Currencies


Click on Chart to Enlarge

  

Commodity         20:01
CAD 1.0296 29 AUD 0.9551 8 Gold 1291 3.40
CNY 6.7045 -24 NZD 0.7376 38 WTI 74.68 1.16

The risk trade continues to be turned on and off almost daily. As for the commodity currencies (CAD, AUD and NZD), they are mixed vs. the USD. The Bank of Canada recently has been sending mixed policy signals. A strong CAD eases the pressure on the Bank of Canada to tighten. In Australia, the RBA is likely to tighten in October. The RBNZ is now in a reduced tightening mode. Oil and gold are up. Gold is still favored as a refuge from paper money. 

EQUITIES & INTEREST RATES

Equities and Bonds are also risk trades. Far East equities closed mixed. European bourses were weaker. U.S. equities are down. The U.S. 10-yr was last 2.56%, -3 bps.

Bonds are a counter to risk trades because risk investments must be financed. When the cost of money moves up (higher interest rates), the return and allure of risk trades such as equities falls. 

  

Equities           20:01
NIK 9566 -36 DAX 6208 -68 DJIA 10740 -18
HSI 22048 45 FTSE 5552 -24 S&P 1135 -5
SSEC 2592 3 SMI 6345 0 NAS 2332 -14
ASX 4625 8       TSE 12169 -66

See ECONOMIC CALENDAR for a complete list of future forex market events and consensus data estimates. Go to the forex forum for up-to-date market developments and technical trading ideas.


John M. Bland is an author and co-founder and partner of Global-View.com. Prior to Global-View.com, he was a forex trader and a private-label forex analyst for a top Fed watching service in NYC. He has been a corporate forex advisor and also worked in international liability management for a major N.Y. money center bank. John holds an MBA from the University of California at Berkeley and a B.A. in International Economics from that school.


 

Forex Trading News

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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.

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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."



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Amazing Trader EVENT RISK Calendar:

Fri 20 Oct
12:30 CA- Retail Sales & CPI
14:00 US- Existing Homes Sales


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

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  • POTENTIAL PRICE RISK: High Fri-- 12:30 GMT CA- Retail Sales and CPI. Top economic indicators.


  • POTENTIAL PRICE RISK: HIGH Fri-- 14:00 GMT US- Existing Homes Sales. Top Housing statistic.



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

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