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84 Posts by Anonymous "stationdealer":
Plus I do agree CHFYEn pair positively will maintain its course and Swissie being considered as safe haven which it's been for a very long time vs the stocks. But the Yen story, what I am still unsure about really, is this what you would consider as Yen weakness or strength, in light of Japanese economy.
Now I've long being a student of plight of Japan's economic deflation and I realise some individuals in Japan express satisfaction with deflation, since they have seen falling prices for goods and services while their own incomes have held up. That is undoubtedly the case for someespecially academics and government officials with secure jobs and no pay cuts.
In Japan, blame for deflation is often placed on cheap imports from China. However, those imports are only 10 percent of total imports, and total imports are only 10 of GDP. Therefore, imports into Japan represent no more than one percent of GDP. The decline in prices is much too widespread to be accounted for by the impact of rising imports from China.
Deflation makes fixed debt harder to repay out of shrinking revenue or income. The corporate sector entered this period of deflation with excess capacity, low profit rates, and high debt levels, implying that even modest deflation could put them in trouble.
Nevertheless, the ratio of debt to GDP cannot rise indefinitely, which leaves economists wondering when and how the government can reduce its annual deficits. Doing so is dependent on recovery in the economy, which has yet to materialize. Economic recovery would also include a return of low but positive inflation rates, which will help erode the ratio of debt to GDP.
Since nominal interest rates cannot be forced much lower, conventional monetary policy (meaning policy focused on manipulation of interest rates) has reached its limit. This has led to a consideration of unconventional monetary policy
Deflation, even if mild, is proving stubbornly persistent, and has exacerbated the ability of debtors to repay their debts. Households initially liked the idea of falling prices, but they are experiencing falling incomes that offset the gains. Banks still have huge non-performing loans, and more loans continue to go sour. The government fiscal debt is not a problem now, but it is rapidly moving to levels never before seen in advanced industrial nations.
Meanwhile, the policies followed by the Japanese government over the past decade to rectify these problems have not inspired much confidence among economists. The government, for example, has moved forward with policies to deal with non-performing loans, beginning with the jusen crisis in 1995, but the piecemeal process has not been very aggressive given the large amount of non-performing loans still on the books as well as the incomplete resolution of many of the loans listed as written off. As a result, many economists believe that a financial crisis is a real possibility
My question being, in the longer run, can a fiscal crisis be possibility, if when bond markets finally balk at absorbing large volumes of new issues of bonds at low interest rates. The high level of private sector savings has enabled the financing of bond issues so far, but is there fiscal crisis is conceivable now or again in another decade. Since the government can print money, there is no risk of outright default on government debt, right?. But are there any worrying signs for investors that the very high level of debt will lead to inflation, at which point they will stop purchasing more bonds unless interest rates are moved higher. If that were to happen, then would the government be forced to monetize its debt, bringing about the inflation that the market feared and maybe for once continue raising rates. As was the case in the late 1940s, the level of inflation could be very high, with all the detrimental economic consequences that entails (such as wiping out the value of savings accounts).
Reuters:
"Any increase or decrease in our holdings of U.S. Treasuries is a normal investment operation," SAFE, the arm of the central bank that manages China's official currency reserves, said.
It said it constantly adjusts its portfolio to maximize returns, and any changes to its U.S. Treasury portfolio should be seen in that light and not interpreted politically.
"The U.S. Treasury market is the world's largest government bond market, and U.S. Treasury bonds deliver fair good security, liquidity and market depth with low transaction costs.
"The U.S. Treasury market is a very important market for China," the agency said.
China held $900.2 billion in U.S. Treasuries at the end of April, according to U.S. Treasury data released on June 15.
Bankers say China's total holdings of dollar-denominated assets are much greater, accounting for perhaps two-thirds of its reserves.
"We must recognize that any depreciation of the dollar is relative to other countries, and other countries or regions also have this or that problem," SAFE said.
SAFE is an easy target for domestic critics who question why China has amassed a mountain of reserves instead of investing more at home. The elucidations on its website appear primarily aimed at disarming those critics.
"SAFE will never be a speculator. It mainly seeks to protect the safety of China's FX reserves and ensure a stable investment return," it said.
The agency said it was a financial investor and did not seek management control when it made equity investments.
SAFE also gave a qualified vote of confidence to the dollar.
The agency acknowledged that financial markets were very concerned at one point that massive U.S. government borrowing would drive the U.S. currency lower.
But it said economic conditions elsewhere were also a factor in determining the dollar's trend. The euro zone, for instance, was struggling with high government debt levels.
"We must recognize that any depreciation of the dollar is relative to other countries, and other countries or regions also have this or that problem," SAFE said.
One of the prime concerns of Chinese Internet commentators is that a long-term decline in the dollar or euro will erode the value of SAFE's portfolio.
To that end, SAFE called on the United States and other major countries to take "responsible measures" to maintain the value of their currencies. This meant withdrawing monetary stimulus in a reasonable manner and relying less on deficit spending.
Speaking of Chinese equity investments, whatever happened to those demands for extra funding after Chinese investments in US equities had suffered a dramatic loss in the past few months, and someone somewhere over in Beijing was scrambling to prevent a court martial. Surely, this is yet another indication of just how much China "trusts" the US.
targets 0.8765 and then 0.8695
After we profited from May's sell off in EURCAD we went long again at 1.2485 &1.2505 which we orignally targeted for 127 and ended up taking profits 128 and then went long again at 1.2735 and 1.2796 pair now sits at 1.3355 which was the March to April's low and from where it made a significant S&R and then rebounded to 1.3750. 1.3750 is our next target as we believe the trend is still bullish.
EURAUD we also sold from 1.4308 & 1.4293 and were looking for a break of 1.3935 but soon became strikingly aware of Aussie's weakness. Took profits same day at 1.4360 and went long from there, that was liquidated today at 1.4985. And now again we look to short from 1.5005.
USDTRY upon recommendation we sold at 1.5820 and then at 1.5930 with target 1.5260 and 1.4970. I strongly feel that we will see more down side in this pair possibily even below to 1.4740.
Technically speaking, last week's developments were significant. DOW's close below the medium term rising trend line confirmed that whole medium term rally from 2009 low of 6470 has completed at 11258 already. The correction from there should extend to 38.2% retracement of 9428 next with prospect of reaching 61.8% retracement level of 8299 eventually. In any case, we shouldn't see DOW back above 11000 any time soon.
The sharp fall in crude oil suggests that medium term rise from 33.2 has completed at 87.15, ahead of fibonacci level at 90.24. Break of 69.50 support is still needed to confirm, though. In that case, we should see crude oil drops even deeper than stocks. 50% retracement level at around 60 should be a minimum target.
Dollar index's rally extended last week to as high as 85.25 before closing at 84.47. The acceleration affirmed our view that rise from 74.19 is resuming the long term up trend from 2008 low of 70.70. We'll stay bullish as long as 80.04 support holds and expect an eventual break of 2009 high of 89.62. The timing will depend on how fast the selling in stocks and crud oil intensifies.
Im going out for now trades will stay one sided US will rally, will be back in few hours.
Facing the crisis with soaring yields in PIIGS government bonds and rising CDS, EU officials are meeting this weekend to work out details of a financial support mechanism, which include an emergency fund, to preview spreading of Greece's debt problem to other Eurozone members including the closely watched Portugal and Spain. EC President Jose Barroso expressed EU's determination to "defend the euro, whatever it takes." But he will not push the independent ECB to buy government bonds. EU is expected to finish the details within the weekend and make an announcement on Sunday. The announcement will be the signal most important events to watch for and markets' reactions on Monday will be crucial to decide the direction going forward, risk seeking or risk averse.
Another key developments to watch will be political negotiations in UK. The general election was inconclusive, as widely expected, with Conservative Party getting the largest number of seats but short of a majority. Nevertheless, sterling managed to have a mild bounce towards the end of the week on news of a coalition offer from Conservatives to Liberal Democrats and the two parties are set to meet on Sunday. Nevertheless, markets are still concerned that the hung government will limit UK's speed and decisiveness in cutting its huge deficits. And the picture would need to be cleared before rating agencies finally run out of patience and downgrade UK's credit ratings.
AUD/JPY Breaks Below Short Term Support At 73.50. The break below the bottom of the consolidation pattern at 73.50 opens the way for a move towards 72.65. The sharp fall from the big Fibo at 88.00 stalled initially at 71.90 from where it bounced in a 3-wave retracement. With the 100 and 200-day MAs providing a ceiling of sorts and with the shorter term MAs now turning lower, the risk would certainly seem to be to the downside.
The weekly USD/CHF chart shows a 5-wave rally off the .9915 low which is now retracing off the 1.1720 high. The 50% retracement was at 1.0820 which is approximately where the bullish trend line comes in, but we did not stop there either. Prior to NFP on Thursday a break below the 61.8% at 1.0610 has send the pair in a down trend. Next weekly support at 1.0470 where i will like to enter a short term reversal trade for a possible target of 1.0960.
As you no doubt are aware, I am long gold and am happy to stay that way as Im using it as a pure hedge but a quick look at the charts shows a steep upward trendline which could easily retrace to $1000/oz or below without endangering the uptrend. The major upmove began in 2005 from around $400 and the most recent upmove began in 2008 from around $700. If an interim top were to form and this last $565 up-leg were to retrace the minimum 38%, then that would take prices back towards $1050 and the up-trend would still be in total control. Thats the problem with trying to buy in a market which is already totally overbought, although I still managed to hold two position from above 1250. Im not at all tempted to try and pick a top but will stick with my buy-big-dips strategy. Still I have decided to sell in some lots for long term from 1228 and above as at the moment I'm targeting 1228-29.
We are getting back toward the 1.07/1.08 area where China has been a CAD buyer on past rallies, for what its worthI currently hold USDCAD from 1.0189, 1.0287, and from 1.0325 & 1.0444. I seek targets at 1.0730 and 1.0850.
USDJPY is where we continue to take some losses most buying done around 89 level we are now hedged from our stop level around 88.60. But for a short I continue to look bearish at this pair. There's no need to rush your trades as yet, as a reversal in Yen will give excellent opportunity in crosses. CADJPY is another good one to watch.
AUDCAD reversing fast today in the Asian session as if it was on a mission to
It seems that traders of both ilks, bulls and bears, are lacking commitment to the cause and are unwilling to sit on positions for any length of time. This is typical of the type of trading we usually get in July and August. The falls of this morning have been reversed and both the EUR/USD and the AUD/USD are putting in session highs as we approah the London open. Almost an exact carbon copy of yesterdays trade.
But short term there some down side, lets see if it break 150 barrier.
S&P Case Shiller home price index rises 3.8% y/y as US subsidy comes to an end
US consumer confidence plunges to 52.9 in June from 62.7 in May
Obama, Bernanke meet on economy; Bernanke said only Its important for us to take that global perspective as we discuss the economy. Obama puts on brave face
BOEs Fisher warns of premature tightening; deflation risk not dead
ECBs Nowotny: Low inflation gives ECB room for maneuver on monetary policy; hint of willingness to ease from member of hard-euro block?
Obama presses for carbon tax despite economic weakness
S&P closes at 2010 low of 1041, down 3.1%; US 10 year notes close at 2.95%, lowest in 14 months
Oil falls 2.70 to $75.55; CRM falls 2.75%
China growth jitters, European funding concerns and growing evidence of a US double-dip sent risk into a tailspin today.
EUR/USD fell as low as 1.2150 before central bank and real money buying slowed the slide. After a false break out Friday a test of 1.2150 was inevitable, will it stop here? Well good question but I guess a general weakness seen for now cause for concern if any mid-term there is growing demand and on reforms-side seen some stability. Today's rebounds were limited to the 1.2210/15 area. Small stops cluster at 1.2225 with stops also below 1.2150. Remember, if you see a clear break of 1.2240 then we know that the up side has begun. Euro lead the drop after clear selling noted in the Asian session, accelerated by European session as bond spread widened on risk to European Sovereigns to default. This was evident in Euro facing all time lows vs JYP and CHF, while some recent lows across some other currencies. With the recent CB repayments I expect to gain some temporary strength.
EUR/GBP and EUR/CHF continued their declines. Dovish comments from MPC member Fisher (see above) helped cool the GBP rally. Month-end demand for the cross is likely tomorrow as the UK makes a payment to the EU. I have made clear blunder by not opening an important email concerning EURCHF on 15th when I went long but I had recieved a recommendation for sell. It went something like...that a high-profile US hedge fund advisory firm that the market pays such attention to opined that the the SNB would tolerate a CHF as strong as 1.30 Shortly there after the SNB announced they were halting their failed intervention strategy and EUR/CHF went into freefall.We are now about 1 trading day from the 1.300 level at the present pace. Will the SNB show its hand? Inquiring minds want to know.. What do you think? Despite EUR/CHF slipped to 1.3167 as dip buyers continue to be laid to waste.
USD/JPY fell to 88.29 on risk aversion and ends at 88.53. Low US yields contributed to the JPY rally.Can expect some side way movement to diminsh the momentum. Japanese banks were peddling 88/98 DNTs a few weeks ago. We would not be surprised if they were doing that in response to interest from China in the same structure. Using that thesis, Is imagine there will be some protective buying on the approach of 88.00 along with some heavy sales from market making banks trying to knock-out the structures so they can pocket the premium without any longer having any risk..USD/JPY trades at 88.35, the lowest levels since the flash crash in early May. The low that day was 87.95. My personal recommendation this is a easy trade to buy from 88 level and hold till 94.
AUD and CAD were shed throughout the session as global growth fears reached new depths today after the US consumer confidence data. A plunge of that magnitude was eye-opening for the market and suggests consumers will put their wallets away in the months ahead, slowing the already tenuous US recovery. AUD fell to 0.8475 and USD/CAD reached 1.0574. Monday's double-digit losses in gold showed little in the way of reversal signs early this morning as news that [revised] Conference Board calculations indicate a possible slowdown underway in the economy of the now largest exporter globally: China. The corrected leading Chinese economic index figure showed an April gain of just 0.3% as compared to the previously reported 1.7% rise. The news undermined speculative appetite and dented a number of stock indices, commodities, and boosted the Japanese yen. That just the one that got away. That said with rising uncertainty and lack clearer reforms from gov's I expect to hold both Oil and Gold for further gains and maybe new yearly highs.
The sharp fall from the big Fibo at 88.00 stalled initially at 71.90 from where it bounced in a 3-wave retracement. With the 100 and 200-day MAs providing a ceiling of sorts and with the shorter term MAs now turning lower, the risk would certainly seem to be to the downside.
GBPAUD was my clear winner today clearing 400 points above last weeks top. Just under 100 points short of posting monthly highs from lows seen around
The biggest surge in the value of the U.S. dollar since 2005 appears to be waning, as traders retreat from bets against the euro and other currencies.
Futures traders at the Chicago Mercantile Exchange are in the process of unwinding record bets that the dollar will rally against other currencies.http://noir.bloomberg.com/apps/news?pid=20601087&sid=ag2SUrPc8mGc&pos=3
The number of contracts hedge funds and other large speculators hold betting on a rise in the dollar versus other currencies declined by 70% to 49,335 in the week ended June 22 from a June 8 peak of 163,085, according to an analysis of Commodity Futures Trading Commission data conducted by Bloomberg News.
With concern that Europes fiscal crisis will cause a nation to default easing, the Dollar Index - which measures the currency against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona - is down 3.5% since June 7.
Money Morning Chief Financial Strategist Keith Fitz-Gerald thinks there may be an opportunity to cash in on the dollars recent weakness in view of the increasing flows of capital into Asian markets.
The money has now shifted across the Atlantic, headed through the U.S. economy, and headed straight for Asia. As a result, instead of shorting the euro, Im now inclined to short the dollar, while being generally long on the Hong Kong dollar, the Australian dollar and even the Chinese yuan, Fitz-Gerald wrote in a recent article.http://moneymorning.com/2010/06/26/u.s.-dollar-2/
John Taylor, chairman of FX Concepts LLC, the worlds largest hedge fund dedicated to currencies, correctly predicted in March that the dollar would appreciate to $1.20 per euro from about $1.35 at the time.
The euro traded as low as $1.1877 against the greenback on June 7 from $1.4321 at the end of December. Of the most-traded currencies tracked by Bloomberg, the only ones that have risen against the dollar this year are those of Japan, Mexico, Canada and Singapore.
But Taylor now says the greenback may be due for a breather after the index surged 9.57% since January - its best start to a year since 2005. Taylor is one of a growing number of traders who wants to wait and see how the European Unions (EU) nearly $1 trillion bailout plan works out before putting more bets on Americas currency.
We are scary, scary owners of euros, said Taylor, whose firm manages $7.5 billion. We are keeping our fingers crossed that maybe the euros appreciation lasts through July and into August. But then the euro is just going to get crushed as its an impossible situation in Europe.
An agreement by EU leaders to disclose how banks perform on stress tests and a successful bond sale by Spain have eased concerns that European nations will have difficulty raising funds. Spain sold $3.7 billion (3 billion euros) of 10-year debt on June 17 yielding 4.864%, below the 5.04% that the bonds traded at before the sale. Demand for the sale was almost twice the quantity of bonds Spain offered.
The European Central Bank (ECB) on June 10 raised its euro-region growth forecast for this year to 1%, from a previous estimate of 0.8%. Eurozone economies will grow about 1.2% in 2011, the ECB predicted.
But billionaire investor George Soros said European banks werent properly cleansed after the credit crisis because they havent marked the value of their holdings to market prices.
Bad assets havent been marked to market, but are being held to maturity, Soros said in remarks prepared for a speech in Berlin on June 23.
http://moneymorning.com/2010/06/24/george-soros-3/
The collapse of the financial system as we know it is real, and the crisis is far from over, he told a conference in Vienna late last week. Indeed, we have just entered Act II of the drama, when financial markets started losing confidence in the credibility of sovereign debt.
In February, Soros called the euros viability into question, and the currency plunged roughly 17% in the next three months.
JPMorgan Chase & Co. (JPM: 37.06 -1.48 -3.84%) on June 25 released the results of a second-quarter survey of clients that showed companies in the United States, Europe and Japan expect the euro will remain depressed versus the dollar for the remainder of 2010.
More than 90% of the 141 respondents, which have a total market capitalization of $2 trillion, say the euro will remain below $1.30 for the rest of the year. The average forecast, weighted by the size of the companies, fell to $1.22, from $1.34 in the March survey.
The banks analysts forecast the dollar will end the year at $1.20 per euro, according to data compiled by Bloomberg.
Both Fitz-Gerald and Soros recommend gold as a favored holding against fluctuating currency markets.
According to his funds latest filings with the Securities and Exchange C
USDCAD we are putting in more buys at 1.0325 with stops at 1.0275
Added heavy buys on 89.33 and 89.83 with USDJPY with stops below 88.90
Gone short on Glorious Gold at 1255 and 1253
Cut some losses and short covering in USDCHF New positions place 1.0927 1.0865 1.0848
Sell order at 86.75 for CADJPY
Shorted EURAUD at 1.4308 & 1.4293 looking for a break of 1.3935.
After a short term break just above 0.9070, orders entered at 0.9095 0.9125 target 0.8765 and then 0.8695 for AUDCAD
We have received big sell recommendation USDTRY, we sold some Friday afternoon at 1.5820 target 1.5260 and then 1.4970