The markets are likely to focus on the aftermath of the unilateral Bank of Japan intervention which unlike the moves by the SNB did not target a specific level. The timing of the policy makers was orchestrated quite well by catching the market off guard and stealing headlines at the beginning of a very busy week which culminates with the G20 Summit. Market sources suggest policy makers have sold nearly ¥3 trillion worth of yen although these initial estimates could be wrong. Investors will have to wait a few days until the transactions are recorded on the BoJ’s balance sheet. Above all, what really matter is not ultimately the size but rather the fact of the interventions itself. Continue reading
The specifics of an agreement over bank capitalization, Greek haircuts and a broadening of the ESFS have now been dampened by investors given leeks that have come out of the EU summit. Although hopes are that officials will step up and create a grand plan, expectations have been muted.
The general outline at this point is for EFSF to act as insurer for new Italian and Spanish issuance, around EUR100 billion in European bank recapitalization by the middle of next year, and a special purpose vehicle set up that will hopefully see outside investors.
The IMF may offer precautionary lines of credit to Italy and Spain. Deeper “voluntary” haircuts toward 50% or more on Greek exposure will be sought. The ECB’s independence will likely be preserved and will not be forced to be involved with the EFSF schemes. Euro remains firm, but upside seems to be capped near resistance as an underwhelming plan seems likely. The risk seems to the upside and a plan that incorporates more than the market expects could propel the Euro above the 1.40 level.
A close above the 1.40 level, will prove to be the technical impetous that moves the currency pair higher.
The Trade: Purchase a daily binary option call on the EUR/USD on a daily close above 1.4005, with a cap at 1.4150.
Asset : EUR/USD
The trade : Binary Call Option
Expiry time : End of day
When : On a daily close between 1.4005 and 1.4150.
Even as most investors continue to eye Europe as officials negotiate a package that will handle recapitalization of banks, investor haircuts and the size of the ESFS bailout fund, earnings in the US continue to impress.
Additionally, manufacturing and housing in the US are starting to show better than expected results as the drain from supply disruptions after the Japanese natural and nuclear disasters is staring to subside. Continue reading
Fear in the market place continues to weigh on investor sentiment but riskier assets have bounced back over the past couple of week putting pressure on the dollar and generating lack of demand for gold. Gold in-fact has not been able to bounce significant after falling dramatically in early September. Continue reading
One of the greatest inovators in US history passed away during the past month. Steve Jobs lead Apple Computer from its beginning, and despite a brief respite (11 years), he pushed the company forward creating an computer/entertainment company that spanned most demographics. Continue reading
The relief rally in the US markets has taken the Nasdaq to resistance levels on the heals of a better than expected US employment numbers and belief that earnings will come in better than the despressed expectations baked into the markets.
Technology stocks have been the outperformings during the past 5 trading session, but the current range between 2300 and 2050 has held since the beginning of August. A new impetous will need to be created for the equity markets to break to the upside. Continue reading
Friday’s better than expected employment report are givening analysts hope that the US economy has seen its bottom of the recent growth cycle. The ADP report, released last week on Wednesday showed an increase of 91,000 private payroll jobs, which was backed up by the government report which showed and increased of 103,000 jobs, which included a decreased of 30,000 government jobs. Continue reading
Following the federal election in May, the Conservatives now have a majority in parliament. The government’s new-found majority status should lead to a more stable political environment and an easier passage of legislation. The general government balance will remain in deficit, but the public finances are healthier than in other large economies. The Bank of Canada (the BOC, the central bank) will not resume monetary tightening until the outlook for the global economy is clearer. Weak demand from the US, which is by far Canada’s largest trade partner, will hold back growth in 2011-12. The Canadian dollar is currently supported by high oil prices, but is vulnerable to a change in global risk appetite. Continue reading
Although Japanese officials and corporate Japan would prefer a weaker yen, given the concerns about the impact of the success of the SNB in blocking hot flow entering Switzerland, the stability of the yen must be partly welcome.
The weekly MOF data indicates that Japanese investors stepped up their acquisition of foreign financial assets in September. In fact the weekly time series suggests Japanese investors bought about JPY2.73 trillion of foreign bonds, stocks and money market instruments in September, the most during this calendar year. This is noteworthy also because in September, the end of the Japanese fiscal half year, many expect repatriation not new purchases, and surely not such strong outflows. Continue reading