Fundamental Weekly Forecasts for US Dollar, USDCHF, USDJPY, and GOLD: SNB Shocker Fuels Highest Swiss Franc Volatility vs. Euro Since 1975,

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newdigital, 2015.01.20 08:14

Trading Video: Monetary Policy Speculation Heats EURUSD Early this Week (based on dailyfx article)

• Though the ECB rate decision is due later in the week, speculation on the Euro picked up Monday
• A WSJ news headline generated friction when the Fed's Bullard said low yields wouldn't stop a hike
• With volatility already elevated, sensitivity to key event risk will be heightened

Though the ECB rate decision is still days away and the Fed meeting is more than a week out, policy speculation is generating heavy seas in the FX market. Between the steady rise in capital market activity levels and an increase in the frequency of outlier events these past months, investors across asset classes are growing more sensitive to their exposure should sentiment suffer a more systemic collapse. Moving forward, the Euro, Dollar, risk theme and Chinese GDP are items to keep a close eye on. We discuss these tides' influence on the market in today's Trading Video.

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newdigital, 2015.01.20 09:34

Weekend Edition with John O'Donnell (based on fxstreet article)

John and Merlin go over many significant market moving topics including: FXCM, Swiss National Bank, Global Currencies, Crude Oil, Bitcoin, Fiat Currencies, Bonds and Much more! Tune in and get your fix!

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Press review

newdigital, 2015.01.20 11:20

• past data is 11.7%
• forecast data is 11.7%
• actual data is 11.9% according to the latest press release

if actual > forecast (or actual data) = good for currency (for CNY in our case)

[CNY - Retail Sales] = Change in the total value of sales at the retail level. Tends to have a muted impact because the Chinese economy is not heavily reliant on consumer spending.

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China Dec Retail Sales Growth Quickens Unexpectedly

Chinese retail sales growth quickened unexpectedly in December, figures from the National Bureau of Statistics showed Tuesday.

Retail sales rose 11.9 percent year-over-year in December following the 11.7 percent rise in November. Economists had expected sales to increase at the stable rate of 11.7 percent.

On a month-over-month basis, retail sales grew 1.01 percent in December after the 0.90 percent climb in November.

In the January to December period, sales advanced 12 percent over the corresponding period of the previous year.

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Press review

newdigital, 2015.01.21 06:51

Q & A About CHF (based on dailyforex article)

Q: What actually happened last Thursday?

A: The SNB (Swiss National Bank) made an announcement that caused the CHF (Swiss Franc) to suddenly soar in value. The extent and speed of the price rise had never happened before to a major global currency, although there were similar incidents involving the CHF in 2011 and the GBP (British Pound) in 1992. The size and speed of the change meant that most banks effectively stopped buying or selling the CHF for several minutes, which had all kinds of bad effects (more on that later).

Q. What was it exactly that the SNB announced?

A: The SNB announced that they were no longer going to support a cap of the value in the CHF against the Euro. For more than 3 years, they would intervene to make sure the CHF was worth no more than 1.2 Euros. It is relatively easy for a central bank to keep their own currency weak, but it was getting harder for them to do it, as the price kept testing 1.20 and the Euro has been weakening dramatically over several months. The SNB announcement took the market by surprise, as although there was a logical risk this could happen, as recently as a few days ago the SNB publicly declared that they had no intention of abandoning the policy, which now can be seen to be a clear lie. By the way, the SNB also announced a negative interest rate of 0.75%, meaning depositors have to pay for the privilege of holding deposits in CHF. This would usually tend to weaken a currency, at least in the short term.

Q: Why did the SNB Abandon the Cap?

A: There are different interpretations of the SNB’s action so all explanations are controversial. They said that they no longer feel the CHF is as overvalued as it was, so maybe they did not feel that they had to hold the market back so much. However they have also said that they did not expect the CHF to rise by 15% right away. A deeper explanation would be that with the recent strong fall in the value of the Euro, which is by far the currency most strongly linked by trade to the CHF, it was becoming increasingly difficult and expensive for the SNB to keep the CHF as weak as the Euro, so they acted to abandon a position that was becoming untenable. Many have speculated that the SNB were expecting the ECB (European Central Bank) to announce a program of Quantitative Easing (QE) later this week, which might well push the value of the Euro down even further, and at a rapid rate. If the cap had still been in effect, they would probably have had to have spent a lot of their reserves buying Euros with CHF.

Q: What will it mean for the price of the CHF going forward?

A: It is hard to say. Usually when the value of a currency moves strongly up or down quite quickly by this kind of amount, it continues to move in the same direction for a few more weeks or months at least. However, there is some feeling that the move has gone far enough, and that the SNB might act to cap the CHF again at the latest market price, so it may not continue to increase. In any case, it is quite likely that in the short-term, the CHF will swing up and down with high volatility.

Q: What will it mean for the prices of other currencies?

A: The move on Thursday seemed to cause some volatility in other currencies, but that has gone at the time of writing, with nothing but the CHF moving by very much. It could be argued that now that cash can flow into the CHF, it might weaken the rise of the USD a little.

Q: Why did Forex traders and brokers lose so much money?

A: Usually, currencies fluctuate in value by very small amounts, far less than stocks, for example. The Forex market is also usually extremely liquid. This means that traders can place tight stop losses and trade with high margin, in the knowledge that if their stop loss is hit, they will usually not have to pay any slippage. Unfortunately in this kind of case, the price blew right past almost every stop loss without stopping, so traders and brokers could not execute any trade exits until the price of all CHF pairs had moved by far more than 1,000 pips. This meant that instead of exiting at stop losses such as 50 pips of loss, emergency exits had to be made at more than 1,000 pips or more. With leverage, most traders in any kind of short CHF trade would have had their entire deposits wiped out. In fact, many traders suffered losses beyond that, and are now facing negative account balances, which brokers may or may not be able or willing to chase. As for brokers losing money, there are two reasons for this: some brokers hedge their clients’ trades in the real market, where they also experienced the same problems even more strongly than their own clients did, meaning they could not pass on their clients’ losses. The second reason is that anyone who was in a long CHF trade with a broker, would have made a lot of money, and the balance of these trades may not have been covered by the losses of the losers, as the losers would have mostly negative account balances.