The Canadian dollar continues to reflect risk taking in the Forex market place, as a high beta alternative to the US market. The Loon has continued to trade below the par level, and is poised to test the downside break down level close to .9700.
The move comes just ahead of the unveiling of the Ontario budget, with the release planned this week. Provincial Finance Minister Dwight Duncan revealed over the weekend that this year’s deficit estimate has been revised down $2 billion to $16.7 billion, which is about 2.7% of gross domestic product. Continue reading
The US markets are under a wave of calm feelings only two weeks after the nuclear crisis erupted in Japan. The US equity markets are standing firm, as the best house in a bad neighborhood. Markets in Asia continue to rattle with each headline about the Japanese nuclear crisis, but the US seems to have largely ignored the recent headlines both in Japan and the unrest in Middle East. Continue reading
The euro has been strong for three days on the back of continuing hawkish ECB talk on rate hikes and a pause in periphery concerns before the summit March 24-25. As part of the final agreement to be announced, the summit is expected to detail specifics on how the EFSF will be able to lend the full 440 billion euros and maintain AAA status. The euro broke through the 1.42 and is closing in on resistance near 1.4290.
In regional elections over the weekend, Sarkozy’s party performed poorly, a bad sign for his reelection bid, and Merkel’s CDU party looks to have won the election, helpful for the CDU in next week’s elections in Baden-Wurttemberg. Continue reading
After two days of military action in Libya, operation Odyssey Dawn appears to have been successful in at least preventing Gaddafi forces from attacking the opposition stronghold in Benghazi and enforcing a no-fly zone over the country. However, comments by Gaddafi over the weekend suggest that he will keep up the fight. Bloodshed continued in Yemen. President Saleh dismissed the government on Sunday amid growing political pressures and the resignation of high profile bureaucrats. Syria is becoming a new focal point for protests in the Arab world with thousands of protesters mobilized for the third day and 4 people reported dead.
The uncertainty in the Middle East is having a positive effect on Gold prices, which are now moving higher again edging closer to the all time high near 1441. The price of the yellow metal moved down to the 1380 area as the crisis in Japan unfolded. Now that the Japanese government has the nuclear situation under better control and have restored power to parts of the Fukushima Daiichi plant, radiation levels have been brought down and risk appetite has been restored.
Officials cautioned that many steps remain before the plant is fully under control, and the possibility of larger radiation discharges still exists. But for the first time, Japanese leaders voiced optimism that the worst of the crisis is over.
Gold prices should continue to remain high as new episodes continue to pop up in the Middle East.
A close above the 1441 level will lead to a break out of higher prices.
Asset : Gold
The trade : Binary Call Option
Expiry time : end of day
When : on a close above 1442.
Since the turmoil in Japan and the Middle East began, the market has largely ignored macro economic data as the sentiment has been driven in part by the disruption to growth from higher oil prices and a weakened Japanese economy. Short-term interest rates remain the dominant driver to currencies, the outlook in the macro backdrop is an important component in the outlook for rates.
Outside of the ECB, the BoE was one of the other central banks that many thought was on the fence for the past couple of months as the UK grappled with a slowing economy and inflation that was above the central bank’s target of 2%. But recent data reports in the UK has surprised to the downside with many now of the view that BoE is unlikely to hike at the next meeting and may hold off until the ECB fires the first. Continue reading
The fear of increasing interest rates has recently put a cap on many commodity products including precious metals, grains, petroleum and base metals. Both the ECB and the BOE have claimed that inflation was climbing at rates that were unacceptable, and despite the potential strain on growth, the central banks are following their mandates and focusing on potential rate rises in the months to come.
Silver has been a commodity that has somewhat suffered from the recent change in European and UK central banks attitude toward rates, but these issues have been countered by the recent disasters in Japan, New Zealand and Australia. The earthquakes in New Zealand and Japan, along with the floods in Australia, have put liquidity in the spot light, and the need to make money easy as opposed to fighting inflation. Continue reading
Sterling is trading on a somewhat firmer note as the BOE’s two-day monetary policy committee begins its two-day meeting. Very few traders or analyst believe that a rate hike will occur at this meeting, but the risk may be more substantial than is generally appreciated.
With inflation running persistently above target and the economy expanding after the Q4 contraction, the market anticipates a hike in the second quarter of 2011. While the ECB and Federal Reserve have taken measures to become more transparent the Bank of England has relished in surprising the market. Continue reading
It appears the foreign exchange market is being driven by one overriding consideration that the ECB is going to raise rates as early as next month. The debt crisis on the periphery has been ignored. Fitch cut the outlook for Spain before the weekend, noting that the financial sector may need another 38 billion euros and the euro bulls where unfazed. Earlier today Moody’s slashed Greece’s rating by three notches to B1 and retained a negative outlook, citing difficulty collecting revenues and implementation risk. The rating agency said that the risks of default or distressed exchange had increased since it last cut Greece’s rating near the middle of last year. Moody’s noted that 20% of the B1 rated sovereigns and companies default within five years. The euro wobbled, pulled back to near $1.3960 and then soared to new highs since November.
Despite the downgrades, the market has taken the word of Trichet that the central bank will not be beholden to the budget issues related to individual countries. The ECB is using its mandate to fight inflation as the main target to handle future rates.
The Euro has strengthen against the Yen, as the rate differential has moved into Europe’s favor. The cross has moved to the top end of the 107-115 range and is poised to break to the upside. A close above 115.68, would signal a break out.
Asset : EUR/JPY
The trade : Binary Call Option
Expiry time : End of day
When : On a daily close above 115.70.
The AUD/USD continues to edged higher as investors continue to move capital into higher yielding currencies. The AUD/USD pushed above the 1.0175 level, and is closing in on resistance near 1.0250.
In the Australian bond market, most of the focus was on Australia’s banking regulator surprising the market by outlining a specific definition of liquid securities. Under the new banking requirements, known as the Basel III Liquidity Coverage Ratio, banks across the world are required to hold a greater number of high quality, liquid assets to act as a buffer during any future crisis. This is meant to insure that banks have enough liquidity to handle any run on a bank. The development would likely see more bank bond buying, a net boost for bonds.
Australian bonds have gained, partly thanks to the change in definition of the type of securities qualifying as liquid assets in Australia under new global prudential rules. The guidelines would seemingly have banks needing to buy more government bonds than previously expected, according to analysts. This in turn would require a greater need to purchase the Australian dollar.
Technically the AUD/USD is poised to test the 1.0255 resistance level posted at the very end of 2010. A break of this level will lead to a new bull trend. Support is seen near the 50-day moving average which is hovering close to the par level.
Asset : AUD/USD
The trade : Binary Call Option
Expiry time : End of Day
When :On a daily close above 1.0255.