Integrity FX Analysis
Investors vowing not to make the mistake of betting for a second time on a passing vote for the bailout bill have traded stock markets down around the globe including a close of -348.22 points on the US DJIA. Economic fears aren’t only being brought on by uncertainty about the bailout plan, though. Concern of a possible global recession is spreading due to rising unemployment claims in the US, sagging factory orders in the UK, and slowing growth in Euro-zone even turning the ultra hawkish ECB into doves. With such poor data releases becoming a daily occurrence and virtually all sectors slowing globally, the effect of the bailout even if it does get passed has traders’ pessimism on the ris
So, with yet another exciting fundamental news day including the Non-Farm Employment Change, ISM PMI, Euro credit crisis summit, and of course the bailout vote all set to hit the wires, we look to stay flat and await an indicator for next week’s direction
EURUSD – Having fallen past significant support, the EURUSD has stalled out in anticipation of the bailout vote. We expect most pairs to gain against the Dollar on a yes vote on the bailout bill, but with Euro revaluation this week bringing the EURUSD down over 800 points and a central bank that could be forced to cut interest rates soon, the Euro is primed for even more losses
USDJPY – The carry trade could come alive temporarily with a yes vote and a string of positive days following in the US. However, the fundamental outlook for more losses has and most likely will not change even if the bailout bill is passed. We will look to sell rallies next week on Yen-quoted pairs.
_________________________
John Rowa
Executive Director of Trading
+1 951 823 0686 - Tel
+1 951 823 0687 - Fax
JRowa@IntegrityFXllc.com
Equity markets globally have sold off as the reality of a crisis-level lending crunch is crippling economies around the world. With the glamour of the “bailout plan” having already worn and investors unconfident in its potential effects, investors have pulled out of any of their risk, giving extreme rises to the Yen and Dollar.
Markets like to see forward and like to have stability, but with no solution in sight, risk appetite has completely come to a halt and safe plays such as the Dollar and the Yen have benefited from the risk aversion. We expect this trend to continue and potentially continue in a big way today as US equity markets are already looking at triple digit losses to open as Futures have fallen sharply. So, as today can be viewed as one of the most important trading days in the past two decades, our eyes are fixed keenly to market reaction and will look to play the risk aversion trade.
EURUSD – Falling like a rock toward our mark at 1.34, the Euro has become one of the most unpopular currencies in recent memory. We expect 1.34 to be reached within the next 48 hours and a breach could signal an even larger sell off that has very little support to slow it down.
GBPJPY – Just about any Yen-quoted pair is primed for huge losses and after falling 540 pips since Monday’s open, the Sterling leads the way. With GBPJPY now reaching into the 180 range, calling a bottom is like catching a falling knife. The pair has plummeted to decade lows and a break into the 170’s could find the GBPJPY and other Yen pairs picking up the pace of their selling off.
_________________________
John Rowa
Executive Director of Trading
Toll Free: 1-888-355-3855
Tel: +1 951 823 0686
Fax: +1 951 823 0687
JRowa@IntegrityFX.com
Forex Trading | Forex Signals | Live Forex Training | Currency Trading
Play the celebratory music; we now have a “rescue bill”. In its infinite wisdom, the congress first rejected a $700 billion dollar bill that didn’t address the problems with the economy, only to pass the same bill wrapped in a $120 billion dollar pork barrel spending bill on Friday, October 3, 20
A few of the earmarks stuffed in the bill:
- Film and Television Productions (Sec. 502)
- Wooden Arrows designed for use by children (Sec. 503)
- 6 page package of earmarks for litigants in the 1989 Exxon Valdez incident, Alaska (Sec. 504)
Tax earmark extenders in the bailout bill.
- Virgin Island and Puerto Rican Rum (Section 308)
- American Samoa (Sec. 309)
- Mine Rescue Teams (Sec. 310)
- Mine Safety Equipment (Sec. 311)
- Domestic Production Activities in Puerto Rico (Sec. 312)
- Indian Tribes (Sec. 314, 315)
- Railroads (Sec. 316)
- Auto Racing Tracks (317)
- District of Columbia (Sec. 322)
- Wool Research (Sec. 325)
I find it interesting that within hours of the news that the “rescue bill” would be resurrected in a $120 billion dollar pork barrel spending bill, we could get nearly all of the information related to the $120 billion dollar bill. However, we still have little or no information about the rescue bill; why is that? Did we just make Secretary Paulson the largest hedge fund manager in the worl
Questions for consideration:
Will the $700 billion dollar bill address:
- the US housing crisis?
- the standards for banks to lend?
- the corruption or negligence of lending agencies?
- the concerns in the financial markets?
- the issues in the global markets? Michelle Malkin Read the Senate bailout bill herePPatterson@IntegrityFXllc.comIntegrity FX, LLCSee Us at the Middle East Money Summit in Dubai - 30-31, 2008
Fed Recap 10-07-2008
Recently, the Fed has undergone many changes that may have gone unnoticed by most people. One of the most important changes has been the Fed's ability to now pay interest on reserves. They will be paying 75 basis points below their target rate. So , with the current 2% Fed Funds rate, they will be paying 1.25% interest on the reserves that banks keep with them. What this has done is effectively put a floor on what banks can borrow for since a bank will not lend for less than what they earn for just leaving their money with the Fed. So,the Fed can pump a lot of money into the system, weakening the dollar,without lowering their target. This is important because they do not need to lower their rate to increase liquidity.
Second, they have doubled the amount they will offer in their term auction facility to a total of $900 billion. These are short term loans from the Fed to banks which are being used in an attempt to increase liquidity. Additionally, the Fed has announced that they will be purchasing commercial paper, these are essentially credit cards for large firms. They have yet to announce an amount, merely stating that they will be participating in the market.
The important thing that a trader needs to realize at this point in time is that the Fed has greatly expanded its ability to control the supply of dollars without affecting its target interest rate. Of course other interest rates will be affected and there is nothing that the Fed can do to change that. But, you are going to have to look beyond the Fed Funds rate to figure out what the fed will be doing to the supply of dollars in the economy.
__________________
David Leal
Market Analyst
951.823.0686 office
Yahoo IM: IFXleal
DLeal@IntegrityFXllc.com
Forex Trading | Forex Signals | Live Forex Training | Currency Trading
A massive global meltdown is in full effect today as stock markets around the world have suffered historical losses in trading or have even completely closed down trading all together. In Asia, shares in Japan fell almost 10%--the worst fall since 1987. In Russia, trading was down 20% at one point. In the UK, they have stepped in to place unprecedented measures to nationalize some financial institutions and still have seen over 5% losses at the lows. The fate of the Euro itself is in jeopardy as the EU fights to agree on solutions and individual members of the union continue to see huge losses. And in the US, investors cling to the hope of a global collaboration for rate cuts, but even the effect of a full point cut may be moot at this point and futures point to another triple point open in the negative.
This worldwide sell-off represents the largest “flight to safety” possibly ever seen. Investors continue to remove any risky assets from their portfolios, as is seen in USDJPY falling below 100 this morning. After being battered for years in Forex as the “carry trade” investors have removed any speculation against the highly undervalued Yen and the currency has seen steep gains against all currencies during this sell off.
Our Forex outlook continues to preach the risk aversion story and with no solution in sight, we continue to use this opportunity to short any risky assets and focus on more USD and JPY strength.
USDJPY – The sentimental 100.00 price was passed and though a break of the number has traditionally been an important indicator, we expect the 100 mark to be somewhat of a long-term pivot over the next few months. Our outlook has been for the USDJPY to range between 90.00-105.00 throughout 2008 and 2009. In the near term, we expect a fall to 96.00 to come quickly. Look to sell rallies.
EURUSD – With uncertainty about the pace of the EU’s action or if they will even take action at all, the EURUSD has closed in on a tight range over the past couple of days. The consolidation is expected as the Euro has become highly oversold, but we will look to sell any significant rally or drop as the pair is still fundamentally primed for more losses.
_________________________
John Rowa
Executive Director of Trading
Toll Free: 1-888-355-3855
Tel: +1 951 823 0686
Fax: +1 951 823 0687
JRowa@IntegrityFX.com
Forex Trading | Forex Signals | Live Forex Training | Currency Trading
Normally, I would talk about my expectations for interest rate decisions, but after today actions by the major central banks, I thought it would be better if I discussed what these cuts will do.
I will be the first to admit that I got it wrong. Looking at all the different ways that the Fed has attempted to increase liquidity in the credit markets, it seemed like the Fed had realized that its usual weapon, rate cuts, was shooting blanks. The target rate had become more of a hindrance to the Fed’s actions. But, when they received the ability to pay interest in reserves, putting a floor on the rate, it appeared as if they could focus on the newer weapons in their arsenal. However, as we saw this morning (or last night depending on where you are), this is not the case
Being the insane institution that it is, the Fed has resumed firing blanks at the market, hoping it will be scared to death, or rather life in this case, but there is no actual impact. Although, this time the insanity has spread. Hey, if one blank doesn’t work, a bunch of them will have an effect right? This entire move is symbolic, it is an attempt to return confidence into the markets. And the market knows this.
The Fed and government have already done so much in the US, but they haven’t given these actions enough time. The problem with the credit markets is not exceedingly high prices for the lenders, i.e. interest rates, it is the unwillingness of lenders to lend. This will only happen with enough time, we have barely seen the effects of the Fed’s first rate cuts, not to mention Paulson’s $700 billion bazooka, $900 billion worth of TAF lending, or any purchases of commercial paper by the Fed. Yet, officials continue to do more and more to unfreeze the markets. The problem with doing so much so fast is that the tendency is to over react. And when the markets return to normal, they do so too fast, so officials must step in and over compensate again, continuing the vicious cycle.
The bottom line is that if Paulson’s bazooka was unable to unfreeze the credit markets, certainly shooting blanks is a pointless endeavor. It looks like what the markets need now is a flame thrower, a flame thrower of confidence.
__________________
David Leal
Market Analyst
951.823.0686 office
Yahoo IM: IFXleal
DLeal@IntegrityFXllc.com
Forex Trading | Forex Signals | Live Forex Training | Currency Trading
The “Flight to Safety” continues in Forex markets as investors used Friday’s Asian and early Euro sessions buy the Dollar and Yen once again. As markets around the world seem to be setting record lows with each new passing day of trading, we will continue to trade with the risk aversion and cautiously short the carry and commoditi
AUDJPY - The AUDJPY has seen perhaps the most severe losses over the course of the past month of any of the carry trade. Dropping over 2000 pips, the slowing Aussie has fueled the carry sell off fire. The selling shows no sign of letting up and shorting any significant rally at this point could yield hundreds of pips.
EURUSD – Consolidating over the past 5 days, the EURUSD is primed for more losses as uncertainty hangs over the EU and their lack of intervention. We will look to sell a break of the bottom or a bounce of the top of the 1.3450-1.3850 rang
GBPUSD – The Sterling has again been on a steady decline over the past couple of weeks. Looking very similar to a sell-off trend that a commodity pair would normally make, GBP weakness and risk aversion will probably drive this pair passed 1.50 in 2009. In the near term, we are looking at 1.66 to be significant support (61.8% of 06/01-11/07) and will look to sell to that mark and heavily short a break
USDJPY – There are rumblings of the Japanese looking to begin to intervene as the Yen strengthens, but a move toward testing the March 16th lows at 95.73 should happen before then. Look for the weekend gap to perhaps even push past the lows if Friday sees another heavy sell-off.
_________________________
John Rowa
Executive Director of Trading
Toll Free: 1-888-355-3855
Tel: +1 951 823 0686
Fax: +1 951 823 0687
JRowa@IntegrityFX.com
Forex Trading | Forex Signals | Live Forex Training | Currency Trading
Earlier this week, the central banks around the world gathered and collectively decided to cut interest rates for their respective countries in order to slow a fast moving global financial meltdown. The initial reaction in the markets was one of surprise more than anything else. Unfortunately, the move did little or nothing to inspire confidence in the strongly risk averse markets.
Thursday, the US stock market had an afternoon selloff that sent the Dow below 9,000 for the first time in five years, falling 678.91 points. Twenty stocks fell today for each one that rose on the New York Stock Exchange.
CNBC writes: “It feels like 1997 all over again in Asia. Japan down 10 percent, Hong Kong down 8 percent and Australia down 8 percent as markets around the world are gripped by recession fears. And the selling continued this grim Friday session.”
There is so much activity right now, that it is difficult to know why markets are responding as they are. Is it liquidity injections or global interest rate cuts.
Paul Kedrosky writes: “It's impossible to know any more whether it's the illness or the medicines that are hurting things here. And even if we have jury-rigged a semi-functional banking system again, the rapid contraction of the real economy is set to feed back into the financial system, causing more credit problems. The effects will be vicious.”
It would be ideal if the G7 ministers were to make some bold moves and get out in front of what is likely to be increased short selling. The general lack of confidence in the global financial markets is at the core of this problem. No amount political trickery or interest rate shell games are going to stop this global financial crisis. We need solutions to credit issues! In order to bring stability to the markets, governments are going to have to step in and buy much of the debt. Giving the banks money they won’t lend is pointless.
Trust is the Problem, not Liquidity…
_________________________
Patrick Patterson
Vice President of Operations
IntegrityFX LLC
Toll Free: 1-888-355-3855
951.823.0686 office
951.823.0687 fax
Yahoo IM: ifxpatrick
PPatterson@IntegrityFXllc.com
Thanks...
Earlier this week, the central banks around the world gathered and collectively decided to cut interest rates for their respective countries in order to slow a fast moving global financial meltdown. The initial reaction in the markets was one of surprise more than anything else. Unfortunately, the move did little or nothing to inspire confidence in the strongly risk averse markets.
Thursday, the US stock market had an afternoon selloff that sent the Dow below 9,000 for the first time in five years, falling 678.91 points. Twenty stocks fell today for each one that rose on the New York Stock Exchange.
CNBC writes: “It feels like 1997 all over again in Asia. Japan down 10 percent, Hong Kong down 8 percent and Australia down 8 percent as markets around the world are gripped by recession fears. And the selling continued this grim Friday session
There is so much activity right now, that it is difficult to know why markets are responding as they are. Is it liquidity injections or global interest rate cuts.
Paul Kedrosky writes: “I's impossible to know any more whether it's the illness or the medicines that are hurting things here. And even if we have jury-rigged a semi-functional banking system again, the rapid contraction of the real economy is set to feed back into the financial system, causing more credit problems. The effects will be vicious.
It would be ideal if the G7 ministers were to make some bold moves and get out in front of what is likely to be increased short selling. The general lack of confidence in the global financial markets is at the core of this problem. No amount political trickery or interest rate shell games are going to stop this global financial crisis. We need solutions to credit issues! In order to bring stability to the markets, governments are going to have to step in and buy much of the debt. Giving the banks money they won’t lend is pointless.
Trust is the Problem, not Liquidity…
_________________________
Patrick Patterson
Vice President of Operations
IntegrityFX LLC
Toll Free: 1-888-355-3855
951.823.0686 office
951.823.0687 fax
Yahoo IM: ifxpatrick
PPatterson@IntegrityFXllc.com
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With every market keeping its eyes on the bailout bill, so much of the news has gone un-noticed. Especially in Australian news. We had retail sales refusing to fall as well as surprisingly, and I don’t use that word lightly, resilient trade balance. Yet, we still have th AUDUSD at two week lows. This is mainly due to the substantial risk aversion in the markets. Next week brings the RBA’s rate decision and a likely yet unexpected hold would give a nice upward push to theAUD, as it is primed both fundamentally and technically for a correction.
There was one fundamental news event that was watched, and that was the ECB interest rate statement. Surprisingly Trichet brought down his hawkish tone and acknowledged the reduction in upward price pressure, Trichet’s key word for inflation. However, don’t hedge your bets on a rate cut this year. In the UK we just heard what we already know: the situation there is getting worse. We saw sharp contractions in both the manufacturing sector and in the current account as well as the continual fall in housing prices
The US experienced the same contraction in manufacturing that the UK had. However, this did not curtail the dollar buying that we have been seeing. The consensus is still that as bad as the situation is in the US, the rest of the world will fare worse. Tomorrow’s non-farm and unemployment numbers will further highlight the slowdown, but with all eyes on the bill don’t expect anything market moving from these numbers
__________________
David Leal
Market Analyst
951.823.0686 office
Yahoo IM: IFXleal
DLeal@IntegrityFXllc.com
www.IntegrityFX.com