EURUSD: Is it Oversold?
The ECB (European Central Bank) introduced a
huge package of measures to inspire economic growth. EURUSD stays under
pressure in the medium term, but could rebound to 1.37 short-term.
ECB: Timing the economy
months of expectation, the European Central Bank has presented a huge
package of measures aimed at boosting the anemic economic growth of the
Eurozone and increasing inflation. The ECB cut interest rates to its
lowest level ever to 0.15% and introduced a negative deposit rate of
-0.10%. In addition, it will end the so called “sterilization tender,”
which should increase money market liquidity by more than 150 billion
euros. The ECB will also provide banks with any liquidity needed against
collateral until the end of 2016. Finally, it might soon announce the
purchase of ABS (asset-backed securities). It appears clear that Mr.
Draghi considers the current time to be crucial. He does not, however,
disregard the introduction of quantitative easing in the
future—particularly if inflation were to decline during the summer. The
news eased sovereign debt yields in Italy and Spain with the Italian
hitting an historical low of 2.75%. EURUSD could stay under pressure
over the medium term; however, in the short term, it might rebound to
1.37. The market is oversold. Funds are extremely short for EURUSD, and
seasonal conditions support a rebound in the second half of the year.
US: The economy is still trending
week, the ISM Index confirmed the US economy is still performing well.
The Production Index showed the widest movement reaching 61 (+5.3) and
attesting that the winter weakness was only temporary. In fact, new
orders rose to almost 57, and deliveries face challenges meeting the
strong demand. The employment component, on the other hand, fell to
52.8. However, this increased in the manufacturing survey. Overall, US
employment has performed nicely, but job creations fell to 217,000 in
May. On an annual basis, the number is 281,000 versus 264,000 in 2013.
The unemployment rate remained stable at 6.3%, but there is still a
large number of part-time workers wanting to work fulltime. This
represents 46% of the labor force as compared to 20% in the first half
of 2000 for those not able to find work. The Job Openings and Labor
Turnover Survey data for April offered a brighter picture and showed
there were more than 4 million job openings, which is not too far from
the peak of 4.6 million registered before the housing slump.
Nonetheless, hiring improved only mildly, increasing by 2,000 people
from the previous month. On the contrary, layoffs are at their lowest
level since the index was created in 2000. The study of cycles still
anticipates unemployment numbers to bottom out sometime in 2014/15 and
then increase again for the last wave.
2014-06-16 12:30 GMT (or 14:30 MQ MT5 time) | [CAD - Foreign Securities Purchases]
if actual > forecast = good for currency (for CAD in our case)
[CAD - Foreign Securities Purchases] = total value of domestic stocks, bonds, and money-market assets purchased by foreigners during the reported month. Demand for domestic securities and currency demand are directly linked
because foreigners must buy the domestic currency to purchase the
Canadian foreign securities purchases increase more-than-expected
Foreign investors’ acquisitions of Canadian securities increased more-than-expected in April, official data showed on Monday.
In a report, Statistics Canada said that foreign investment increased
by a seasonally adjusted C$10.13 billion in April, above expectations
for purchases of C$4.27 billion.
Foreign investors sold C$1.41 billion worth of Canadian securities in March.
At the same time, Canadian investment in foreign securities slowed to C$2.5 billion.
Following the release of the data, the Canadian dollar was lower against its U.S. counterpart, with USD/CAD rising 0.15% to trade at 1.0873.
Can the 2014 World Cup Affect the Forex Market?
Could the 2014 FIFA World Cup opening in Brazil this week affect the
global Forex market? It might seem a crazy idea on a par with traders using moon cycles to try to forecast market movements, but don’t dismiss the idea out of hand.
A recent study by Goldman Sachs
has concluded that the stock index of the winning country has on
average outperformed global equity indices by 3.5% during the first
month after the final, before underperforming the same measure by 4%
over the following year! These are statistically significant numbers
that should not be ignored. The concept is logical: a short-lived phase
of football-related euphoria followed by a comedown. If such an effect
has been observed in equity markets, there should also be an impact for
Forex trading in the Forex market.
If you “get” football (as an Englishman, I would rather die than call it
soccer), you probably won’t find this unreasonable. If you don’t,
consider the well-known weekend effect that has been observed to warp
stock market prices between Friday and Monday. Even today, these human
factors can still affect market prices, at least over the short-term. I
do not need any persuading, as I lived through two occasions where the
English team failed narrowly to reach the finals of major football
tournaments, once in the World Cup of 1990 and then again in the
European Championship of 1996, going out to arch-rivals Germany on
penalties both times.
The sense of building euphoria as the team progressed further was
palpable and had a visible effect in offices as well as in bars: people
were happy, agreeable, and less skeptical than usual. Conversely, when
the knockout blows came, a mood of depression and lethargy prevailed for
several days. Of course, as the sport is more popular among men, the
effect was more pronounced among the male half of the population:
consider that despite the advances toward gender equality made over
recent years, the financial services industry is still very
male-dominated almost everywhere.
The Effect of the 2014 World Cup on Forex Trading
So, how might you profit in Forex trading from the results of the 2014
World Cup? My experiences as a trader and as a football fan lead me to
suggest the following plan of action.
Before the Round of 16 games,
pay attention only to results of individual matches where there is a
major upset which significantly changes the prospect of at least one
team’s likely progression to the next round. Then during the knockout
stages, pay more and more attention to each game with each progressive
Teams that get a boost are places where you can look for longs when
their national market opens after the match, shorting teams which are
being eliminated. Each round will become more and more significant,
giving better and better trading prospects. Of course, the best
potential trade is likely to be long the winner of the final and short
To be sure, there are a couple of flies in the ointment when it comes to
Forex and the 2014 World Cup. Firstly, the fact that nine of the teams,
among them many of the best teams, all have the same currency (the
Euro) might mean there is no practical trade you can take as a reaction
to the performances by these teams. Either a match will be played
between two Euro teams, or if a Euro team wins or loses against a
non-Euro team, you cannot really assume the Euro will be impacted: it is
bigger than one member nation, even a large one. The second problem is
that your broker may not offer a trade in the exotic currencies of some
of the non-European teams that are likely to do well, such as the
Brazilian Real or the Argentinian Peso.
The best outcome to hope for in Forex terms would be an unexpected and
dramatic victory by any of Australia, England, Japan, Korea and Mexico.
They each have their own individual currencies, all of which (except for
the Korean Won) are readily available at most Forex brokers, although
the Mexican Peso carries a relatively high spread. The remaining
currencies all have quite low spreads. The best bet of all would be a
dramatic victory by England, which not only dominates the volatile GBP
but is a truly football-crazy country. The GBP tends to start moving at
around 7am London time so if England produce a shock, be ready to buy
the GBP the next morning. But as an Englishman, conveniently, I’ll be
hoping for that anyway!
AUDIO - The New Depression with Richard Duncan
Economist and author of several books, Richard Duncan joins John O’Donnell and Merlin Rothfeld
for a look at what he feels is the New Depression. A cycle of debt
expansion that is leading to a nearly inevitable collapse, that not even
a gold standard can safe. The trio discuss this and several other
topics while Mr. Duncan offers a radical solution to it all. A solution
that would put America back on top, and get us out from all this debt.
Hungary Court Says Banks Should Be More Transparent With Forex Loans
Hungary's top court ruled Monday that
exposing retail customers to foreign-exchange risk wasn't unfair,
boosting the stock exchange and reducing risks for the country's banking
sector that in the precrisis years sold hundreds of thousands of loans
to clients who are now demanding a revision of their contracts.
court ruled that while the exchange-rate risk itself wasn't unfair to
clients, banks should have offered sufficient information about the risk
when selling foreign-currency loans.
mortgages and consumer loans were popular in Hungary before the 2008
financial crisis because they were cheaper than local-currency loans.
The Hungarian forint's depreciation against the Swiss franc, the
currency to which most of the loans are tied, has made the loans
expensive, leading to lawsuits against banks.
the end of March, foreign-exchange mortgage and home-equity loans
combined amounted to 3.423 trillion forints ($15.09 billion), or 53% of
all retail lending, according to Wall Street Journal calculations based
on Hungarian central bank data.
court also said it was unfair of banks to use a different exchange rate
for loan disbursements and repayments, ruling instead that loan
contracts should be redrafted to use the central bank's midrate.
addition, the court said it was unfair of banks to raise interest rates
unilaterally under the contracts without informing customers
With the rulings, the
supreme court has kicked the ball back to the government's court to find
a way to rid households of their expensive foreign-exchange loans,
which have been holding back domestic consumption and boosting Hungary's
foreign-currency loans was one of the election promises of the governing
Fidesz party, which won a two-thirds majority in parliament in general
elections in April.
"Hurdles are now
gone for the lawmakers to take action. Now it is up to them to tackle
the issue," said Gyorgy Wellmann, head of the court's decision-making
body, at a news conference.
He said the decision isn't retroactive but instead serves as guideline for courts in lawsuits currently pending.
ruling has opened the way for Fidesz to use its legislative power to
ensure banks repay unfair gains they made on foreign-currency retail
lending, a top party official said.
ruling unquestionably states that banks took people's money in an
unfair way, and empowers the government to serve justice," said Antal
Rogan, head of Fidesz's group of parliamentary representatives.
will consult all parties involved in forex loans and submit a draft
bill on the issue to parliament in the autumn, Mr. Rogan said. The bill
will apply to both foreign-exchange mortgages and home-equity loans, he
The costs of phasing out such
mortgages could amount to several hundreds of billions of forints, Mr.
Rogan said. He declined to comment on whether the costs would be shared
among banks, borrowers and the government, or borne solely by banks.
are ready for talks and are bracing for a solution that will be
"socially fair and equitable for the banks," said Levente Kovacs, head
of the Hungarian Banking Association.
latest ruling will put additional burdens on the already heavily taxed
banking sector, said ING Bank. ING economist Andras Balatoni estimated
the one-time drop in banks' profitability at 350 billion forints in
The market welcomed the ruling,
which initially pushed shares in Hungary's OTP Bank almost 1.8% higher
during the day. The bank closed 0.8% higher.
Trading the News: U.K. Consumer Price Index (based on dailyfx article)
A marked slowdown in the U.K.’s Consumer Price Index (CPI) may generate a
larger pullback in the GBP/USD as it limits Bank of England (BoE) scope
to normalize monetary policy sooner rather than later.
Why Is This Event Important:
Nevertheless, the BoE Minutes due out later this week may reveal a
growing dissent within the Monetary Policy Committee (MPC) as U.K.
officials see a stronger recovery in 2014, and the market reaction to
the U.K. CPI print could be short-lived should we see a growing number
of central bank officials adopt a more hawkish tone for monetary policy.U.K. firms may offer discounted prices amid weak wage growth paired with
the slowdown in private sector credit, and a weak inflation print may
undermine the near-term outlook for the GBP/USD as it drags on interest
Nevertheless, the resilience in private sector consumption along with
the ongoing improvement in the labor market may limit the downside risk
for price growth, and a stronger-than-expected CPI print may heighten
the bullish sentiment surrounding the sterling as it fuels bets for a
How To Trade This Event Risk
Bearish GBP Trade: U.K. CPI Slips to 1.7% or Lower
GBPUSD M5 : 34 pips price movement by GBPUSD - CPI news event:
U.K. consumer prices increased an annualized 1.8% in April after
expanding 1.6% the month prior, while the core rate of inflation climbed
2.0% to mark the fastest pace of growth since September. Despite the
stronger-than-expected CPI print, the GBP/USD slipped below the 1.6825
region following the release, but the British Pound pared the decline
during the North American trade to close at 1.6836.
MetaTrader Trading Platform Screenshots
GBPUSD, M5, 2014.06.17
MetaQuotes Software Corp., MetaTrader 5, Demo
GBPUSD M5 : 38 pips price movement by GBP - CPI news event
Gold (XAU/USD) Retreats to Challenge June’s Trendline Support
In June so far, gold (xau/usd) has found support at 1240.50. After
putting in a price bottom, traders bought gold up to 1285 today before
XAU/USD 4H chart 6/16Trendline, bearish continuation: As gold rallied this month, it
approached the apex of a previously broken triangle, which would be in
the 1290-1300 area. At 1285, traders also saw a trendline resistance
extending from a previous triangle. The decline looks just as strong as
the bullish price action it is going against, but overall price action
is still bullish as gold trades above June’s rising trendline. A clean
break below 1270 could clear this trendline, and signal bearish
continuation at least toward 1250, 1240.
If price is supported above 1270, there could still be some upside risk
toward the 1290-1300 area, but for short-term traders this would be very
little potential reward unless they believe gold has turned bullish. I
think a break above 1300 could give the bullish outlook some weight, but
for now, the short to medium term mode is still bearish. Therefore,
with a bearish outlook, a trader can wait for a price closer to 1300 to
fade, or if price breaks below 1270, the trader can either trade into
the bearish breakout, or wait for a pullback and short at a price below
the 1285 high.
When you look at the daily chart, you do not see any clear direction.
While 2014 was bullish going roughly from*1183*to 1388, the 2013 gold
market was bearish, with price falling from 1700 to below 1200.
XAU/USD daily chart 6/16
Price is now right in the middle of the 2014 range, and one has to
question whether 2014 price action is a new primary move or just a
secondary move to the prevailing primary bearish move. I would side on
the bearish outlook until the market shows ability to push above 1300.
In the bearish outlook, the 1182.35 low on the year would be in sight,
but let’s limit it first to 1200.
2014-06-17 01:30 GMT (or 03:30 MQ MT5 time) | [AUD - RBA Meeting Minutes]
[AUD - RBA Meeting Minutes] = It's a detailed record of the RBA Reserve Bank Board's most recent
meeting, providing in-depth insights into the economic conditions that
influenced their decision on where to set interest rates.
RBA Minutes: Policy Stance Continues To Be Appropriate
Members of the monetary policy board of the Reserve Bank of
Australia felt that the current level of stimulus in the Australian economy continues to be appropriate, minutes from the central bank's June 3 meeting revealed on Tuesday.
board members also said that economic growth is expected to remain
slightly below trend, while inflation figures to remain within the
target range of 2 to 3 percent.
"Global and domestic economic
conditions overall were little changed from the previous meeting. Growth
of Australia's major trading partners remained consistent with the
earlier outlook, with growth early in 2014 around its long-run average,"
the minutes said.
At the meeting, the board kept the nation's
benchmark interest rate unchanged at 2.50 percent, in line with
expectations; the rate has been unchanged since last August.
RBA has reduced the cash rate by a cumulative 225 basis points since
November 2011 to help the economy sustain the economic growth in view of
fading support from the mining boom.
"The expectation of
substantial falls in mining investment, below-average growth of public
demand and non-mining investment remaining subdued for a time implied
that the pace of growth was likely to be a little below trend over the
rest of this year and into the next, before gradually increasing," the
The government estimates real GDP to continue
growing below trend at 2.5 percent in 2014-15, before accelerating to
near-trend growth of 3 percent in 2015-16.
The board said
continued accommodative monetary policy should provide support to
demand, and help growth to strengthen over time.
In the board's
judgment, monetary policy is appropriately configured to foster
sustainable growth in demand and inflation outcomes consistent with the
the currency, the bank said the exchange rate remains high by
historical standards, particularly given the further decline in
"Given this outlook for the economy and the
significant degree of monetary stimulus already in place to support
economic activity, the Board judged that the current accommodative
stance of policy was likely to be appropriate for some time yet," the
Also on Tuesday, the Australian Bureau of Statistics
said that the total number of new motor vehicle sales in Australia was
up a seasonally adjusted 0.3 percent on month in May, standing at
92,410. That follows the flat reading in April.
By category, sales
of other vehicles climbed 3.4 percent on month and sales of sports
utility vehicles jumped 1.8 percent, while sales of passenger vehicles
fell 2.0 percent.
By region, Victoria saw the largest increase
(3.5 percent) followed by South Australia (1.3 percent) and the
Australian Capital Territory (0.8 percent). The Northern Territory had
the largest decline in sales (19.2 percent) followed by Queensland and
Tasmania with 2.1 percent each.
On a yearly basis, sales declined 2.0 percent after falling 1.9 percent in the previous month.
Trading Video: Are Breakouts, Reversals Possible Ahead of the Fed?
EURUSD looks ripe for a break from a tight range and GBPUSD is standing
at the threshold of major 1.7000-resistance. Yet, with the Fed ahead,
strategy is imparative. Tentative breakouts or reversals from
stimulus-sensitive capital markets or dollar-based majors are not
unlikely in these trading conditions. But follow through and conviction
with such a prominent uncertainty directly ahead is very unlikely. We
look at the genuine appeal of different setups in today's Trading Video.
Experts Cut Swiss 2014, 2015 Growth Forecasts: SECO
The Swiss government's expert panel lowered the growth forecasts for the
economy for this year and next, citing sluggish recovery in exports,
the State Secretariat for Economic Affairs SECO said Tuesday.
The growth outlook for this year was cut to 2 percent from 2.2 percent
and the projection for next year was reduced to 2.6 percent from 2.7
percent. In 2013, the Swiss economy expanded 2 percent. In the first
quarter of this year, the alpine economy grew 0.5 percent sequentially.
The economic upturn in Switzerland is likely to further strengthen in
2015, but the pace of improvement may be slower than expected given the
sluggish recovery in exports, the experts' panel said.
Experts also expect the recovery in the labor market to progress
gradually and lead to a modest decline in unemployment. The
unemployment rate forecasts for this year and next were left unchanged
at 3.1 percent and 2.8 percent, respectively.
The inflation projections for 2014 and 2015 were also maintained at 0.1 percent and 0.4 percent, respectively.