For those unfamiliar with the term, Forex (FOReign EXchange market), refers to an international exchange market where currencies are bought and sold. The Foreign Exchange Market that we see today began in the 1970's, when free exchange rates and floating currencies were introduced. In such an environment only participants in the market determine the price of one currency against another, based upon supply and demand for that currency.
Forex is a somewhat unique market for a number of reasons. Firstly, it is one of the few markets in which it can be said with very few qualifications that it is free of external controls and that it cannot be manipulated. It is also the largest liquid financial market, with trade reaching between 1 and 1.5 trillion US dollars a day. With this much money moving this fast, it is clear why a single investor would find it near impossible to significantly affect the price of a major currency. Furthermore, the liquidity of the market means that unlike some rarely traded stock, traders are able to open and close positions within a few seconds as there are always willing buyers and sellers.
Another somewhat unique characteristic of the Forex money market is the variance of its participants. Investors find a number of reasons for entering the market, some as longer term hedge investors, while others utilize massive credit lines to seek large short term gains. Interestingly, unlike blue-chip stocks, which are usually most attractive only to the long term investor, the combination of rather constant but small daily fluctuations in currency prices, create an environment which attracts investors with a broad range of strategies.
How Forex Works
Transactions in foreign currencies are not centralized on an exchange, unlike say the NYSE, and thus take place all over the world via telecommunications. Trade is open 24 hours a day from Sunday afternoon until Friday afternoon (00:00 GMT on Monday to 10:00 pm GMT on Friday). In almost every time zone around the world, there are dealers who will quote all major currencies. After deciding what currency the investor would like to purchase, he or she does so via one of these dealers (some of which can be found online). It is quite common practice for investors to speculate on currency prices by getting a credit line (which are available to those with capital as small as $500), and vastly increase their potential gains and losses. This is called marginal trading.
Marginal Trading
Marginal trading is simply the term used for trading with borrowed capital. It is appealing because of the fact that in Forex investments can be made without a real money supply. This allows investors to invest much more money with fewer money transfer costs, and open bigger positions with a much smaller amount of actual capital. Thus, one can conduct relatively large transactions, very quickly and cheaply, with a small amount of initial capital. Marginal trading in an exchange market is quantified in lots. The term "lot" refers to approximately $100,000, an amount which can be obtained by putting up as little as 0.5% or $500.
EXAMPLE: You believe that signals in the market are indicating that the British Pound will go up against the US Dollar. You open 1 lot for buying the Pound with a 1% margin at the price of 1.49889 and wait for the exchange rate to climb. At some point in the future, your predictions come true and you decide to sell. You close the position at 1.5050 and earn 61 pips or about $405. Thus, on an initial capital investment of $1,000, you have made over 40% in profits. (Just as an example of how exchange rates change in the course of a day, an average daily change of the Euro (in Dollars) is about 70 to 100 pips.)
When you decide to close a position, the deposit sum that you originally made is returned to you and a calculation of your profits or losses is done. This profit or loss is then credited to your account.
Investment Strategies: Technical Analysis and Fundamental Analysis
The two fundamental strategies in investing in Forex are Technical Analysis or Fundamental Analysis. Most small and medium sized investors in financial markets use Technical Analysis. This technique stems from the assumption that all information about the market and a particular currency's future fluctuations is found in the price chain. That is to say, that all factors which have an effect on the price have already been considered by the market and are thus reflected in the price. Essentially then, what this type of investor does is base his/her investments upon three fundamental suppositions. These are: that the movement of the market considers all factors, that the movement of prices is purposeful and directly tied to these events, and that history repeats itself. Someone utilizing technical analysis looks at the highest and lowest prices of a currency, the prices of opening and closing, and the volume of transactions. This investor does not try to outsmart the market, or even predict major long term trends, but simply looks at what has happened to that currency in the recent past, and predicts that the small fluctuations will generally continue just as they have before.
A Fundamental Analysis is one which analyzes the current situations in the country of the currency, including such things as its economy, its political situation, and other related rumors. By the numbers, a country's economy depends on a number of quantifiable measurements such as its Central Bank's interest rate, the national unemployment level, tax policy and the rate of inflation. An investor can also anticipate that less quantifiable occurrences, such as political unrest or transition will also have an effect on the market. Before basing all predictions on the factors alone, however, it is important to remember that investors must also keep in mind the expectations and anticipations of market participants. For just as in any stock market, the value of a currency is also based in large part on perceptions of and anticipations about that currency, not solely on its reality.
Make Money with Currency Trading on Forex
Forex investing is one of the most potentially rewarding types of investments available. While certainly the risk is great, the ability to conduct marginal trading on Forex means that potential profits are enormous relative to initial capital investments. Another benefit of Forex is that its size prevents almost all attempts by others to influence the market for their own gain. So that when investing in foreign currency markets one can feel quite confident that the investment he or she is making has the same opportunity for profit as other investors throughout the world. While investing in Forex short term requires a certain degree of diligence, investors who utilize a technical analysis can feel relatively confident that their own ability to read the daily fluctuations of the currency market are sufficiently adequate to give them the knowledge necessary to make informed investments.
Sunday, February 3, 2008
Advantages of the Forex Market
What are the advantages of the Forex Market over other types of investments?
When thinking about various investments, there is one investment vehicle that comes to mind. The Forex or Foreign Currency Market has many advantages over other types of investments. The Forex market is open 24 hrs a day, unlike the regular stock markets. Most investments require a substantial amount of capital before you can take advantage of an investment opportunity. To trade Forex, you only need a small amount of capital. Anyone can enter the market with as little as $300 USD to trade a "mini account", which allows you to trade lots of 10,000 units. One lot of 10,000 units of currency is equal to 1 contract. Each "pip" or move up or down in the currency pair is worth a $1 gain or loss, depending on which side of the market you are on. A standard account gives you control over 100,000 units of currency and a pip is worth $10.
The Forex market is also very liquid. When trading Forex you have full control of your capital.
Many other types of investments require holding your money up for long periods of time. This is a disadvantage because if you need to use the capital it can be difficult to access to it without taking a huge loss. Also, with a small amount of money, you can control
Forex traders can be profitable in bullish or bearish market conditions. Stock market traders need stock prices to rise in order to take a profit. Forex traders can make a profit during up trends and downtrends. Forex Trading can be risky, but with having the ability to have a good system to follow, good money management skills, and possessing self discipline, Forex trading can be a relatively low risk investment.
The Forex market can be traded anytime, anywhere. As long as you have access to a computer, you have the ability to trade the Forex market. An important thing to remember is before jumping into trading currencies, is it wise to practice with "paper money", or "fake money." Most brokers have demo accounts where you can download their trading station and practice real time with fake money. While this is no guarantee of your performance with real money, practicing can give you a huge advantage to become better prepared when you trade with your real, hard earned money. There are also many Forex courses on the internet, just be careful when choosing which ones to purchase.
by Heather Redmond
When thinking about various investments, there is one investment vehicle that comes to mind. The Forex or Foreign Currency Market has many advantages over other types of investments. The Forex market is open 24 hrs a day, unlike the regular stock markets. Most investments require a substantial amount of capital before you can take advantage of an investment opportunity. To trade Forex, you only need a small amount of capital. Anyone can enter the market with as little as $300 USD to trade a "mini account", which allows you to trade lots of 10,000 units. One lot of 10,000 units of currency is equal to 1 contract. Each "pip" or move up or down in the currency pair is worth a $1 gain or loss, depending on which side of the market you are on. A standard account gives you control over 100,000 units of currency and a pip is worth $10.
The Forex market is also very liquid. When trading Forex you have full control of your capital.
Many other types of investments require holding your money up for long periods of time. This is a disadvantage because if you need to use the capital it can be difficult to access to it without taking a huge loss. Also, with a small amount of money, you can control
Forex traders can be profitable in bullish or bearish market conditions. Stock market traders need stock prices to rise in order to take a profit. Forex traders can make a profit during up trends and downtrends. Forex Trading can be risky, but with having the ability to have a good system to follow, good money management skills, and possessing self discipline, Forex trading can be a relatively low risk investment.
The Forex market can be traded anytime, anywhere. As long as you have access to a computer, you have the ability to trade the Forex market. An important thing to remember is before jumping into trading currencies, is it wise to practice with "paper money", or "fake money." Most brokers have demo accounts where you can download their trading station and practice real time with fake money. While this is no guarantee of your performance with real money, practicing can give you a huge advantage to become better prepared when you trade with your real, hard earned money. There are also many Forex courses on the internet, just be careful when choosing which ones to purchase.
by Heather Redmond
What is Forex?
FOREX - the foreign exchange market or currency market or Forex is the market where one currency is traded for another. It is one of the largest markets in the world.
Some of the participants in this market are simply seeking to exchange a foreign currency for their own, like multinational corporations which must pay wages and other expenses in different nations than they sell products in. However, a large part of the market is made up of currency traders, who speculate on movements in exchange rates, much like others would speculate on movements of stock prices. Currency traders try to take advantage of even small fluctuations in exchange rates.
In the foreign exchange market there is little or no 'inside information'. Exchange rate fluctuations are usually caused by actual monetary flows as well as anticipations on global macroeconomic conditions. Significant news is released publicly so, at least in theory, everyone in the world receives the same news at the same time.
Currencies are traded against one another. Each pair of currencies thus constitutes an individual product and is traditionally noted XXX/YYY, where YYY is the ISO 4217 international three-letter code of the currency into which the price of one unit of XXX currency is expressed. For instance, EUR/USD is the price of the euro expressed in US dollars, as in 1 euro = 1.2045 dollar.
Unlike stocks and futures exchange, foreign exchange is indeed an interbank, over-the-counter (OTC) market which means there is no single universal exchange for specific currency pair. The foreign exchange market operates 24 hours per day throughout the week between individuals with forex brokers, brokers with banks, and banks with banks. If the European session is ended the Asian session or US session will start, so all world currencies can be continually in trade. Traders can react to news when it breaks, rather than waiting for the market to open, as is the case with most other markets.
Average daily international foreign exchange trading volume was $1.9 trillion in April 2004 according to the BIS study.
Like any market there is a bid/offer spread (difference between buying price and selling price). On major currency crosses, the difference between the price at which a market maker will sell ("ask", or "offer") to a wholesale customer and the price at which the same market-maker will buy ("bid") from the same wholesale customer is minimal, usually only 1 or 2 pips. In the EUR/USD price of 1.4238 a pip would be the '8' at the end. So the bid/ask quote of EUR/USD might be 1.4238/1.4239.
This, of course, does not apply to retail customers. Most individual currency speculators will trade using a broker which will typically have a spread marked up to say 3-20 pips (so in our example 1.4237/1.4239 or 1.423/1.425). The broker will give their clients often huge amounts of margin, thereby facilitating clients spending more money on the bid/ask spread. The brokers are not regulated by the U.S. Securities and Exchange Commission (since they do not sell securities), so they are not bound by the same margin limits as stock brokerages. They do not typically charge margin interest, however since currency trades must be settled in 2 days, they will "resettle" open positions (again collecting the bid/ask spread).
Individual currency speculators can work during the day and trade in the evenings, taking advantage of the market's 24 hours long trading day.
Some of the participants in this market are simply seeking to exchange a foreign currency for their own, like multinational corporations which must pay wages and other expenses in different nations than they sell products in. However, a large part of the market is made up of currency traders, who speculate on movements in exchange rates, much like others would speculate on movements of stock prices. Currency traders try to take advantage of even small fluctuations in exchange rates.
In the foreign exchange market there is little or no 'inside information'. Exchange rate fluctuations are usually caused by actual monetary flows as well as anticipations on global macroeconomic conditions. Significant news is released publicly so, at least in theory, everyone in the world receives the same news at the same time.
Currencies are traded against one another. Each pair of currencies thus constitutes an individual product and is traditionally noted XXX/YYY, where YYY is the ISO 4217 international three-letter code of the currency into which the price of one unit of XXX currency is expressed. For instance, EUR/USD is the price of the euro expressed in US dollars, as in 1 euro = 1.2045 dollar.
Unlike stocks and futures exchange, foreign exchange is indeed an interbank, over-the-counter (OTC) market which means there is no single universal exchange for specific currency pair. The foreign exchange market operates 24 hours per day throughout the week between individuals with forex brokers, brokers with banks, and banks with banks. If the European session is ended the Asian session or US session will start, so all world currencies can be continually in trade. Traders can react to news when it breaks, rather than waiting for the market to open, as is the case with most other markets.
Average daily international foreign exchange trading volume was $1.9 trillion in April 2004 according to the BIS study.
Like any market there is a bid/offer spread (difference between buying price and selling price). On major currency crosses, the difference between the price at which a market maker will sell ("ask", or "offer") to a wholesale customer and the price at which the same market-maker will buy ("bid") from the same wholesale customer is minimal, usually only 1 or 2 pips. In the EUR/USD price of 1.4238 a pip would be the '8' at the end. So the bid/ask quote of EUR/USD might be 1.4238/1.4239.
This, of course, does not apply to retail customers. Most individual currency speculators will trade using a broker which will typically have a spread marked up to say 3-20 pips (so in our example 1.4237/1.4239 or 1.423/1.425). The broker will give their clients often huge amounts of margin, thereby facilitating clients spending more money on the bid/ask spread. The brokers are not regulated by the U.S. Securities and Exchange Commission (since they do not sell securities), so they are not bound by the same margin limits as stock brokerages. They do not typically charge margin interest, however since currency trades must be settled in 2 days, they will "resettle" open positions (again collecting the bid/ask spread).
Individual currency speculators can work during the day and trade in the evenings, taking advantage of the market's 24 hours long trading day.
Saturday, January 26, 2008
Home Based Internet Marketing Business
Internet marketing has become an effective source of supplemental income and a viable alternative to the typical career paths of the past century. With the recognized potential to create wealth at home, more people are enjoying the lifestyle of being self-employed. Becoming an internet marketer is very easy to do, which compels people from virtually every known job setting to start their own businesses or simply earn supplemental income. The leading online business opportunities provide all the tools, training and a system necessary to earn money immediately- for a nominal start-up fee. It is not necessary to create a business plan. There is no invention nor patents required. There is no research needed to discover a new or better product. The main thing a person needs to do is find a reputable and honest company that one can trust and believe in. Then, learn the products and services and get passionate about them. This process gives people the opportunity to start a home business with very low risk and very low financial commitment. One of the most attractive benefits of internet marketing is that the owners have balance in their lives. They have time for their families and themselves. Success in the field doesn't require any specialized education or sales experience. Anybody can learn to be eager to work for themselves by advertising the right business and being themselves. Most sales skills can be learned through the training provided by the company and goals can be reached by utilizing the business building tools offered by most companies. Owning an internet marketing business provides an opportunity to create substantial wealth. It eliminates many of the inherent problems of small business ownership through low startup costs, low overhead, and limited or no employee hassles. One gets the proven success of a franchise combined with the freedom of an independant contractor. There is little doubt that a home business can thrive in the midst of a change of structure in most corporate retirement plans. The online opportunities available to everyone interested in having a workplace that sets in the office within the home require more than just a glance. It would be prudent to put "start my own business" on the things-to-do list and then, actually do it.
How To Combine The Internet and Playing Games To Make Money
It is interesting when you look at all the different ways the Internet is used today. One of the most fun ways the Internet is used is to play games. This is being done from little kids, all the way up to senior citizens. One thing you may not thought out however, is it is possible to make money playing games and capitalize on this huge market. In this article we want to consider how you can make money playing games online. 1. First of all you need a business opportunity that allows you to not only play games, but to make money selling games. Because people are online 24 hours a day the Internet has made it possible to play games. How great would it be if you could make money with some of those people? 2. Another exciting enhancement in the world of Internet marketing is called blogging. Initially blogging started out where people would log their thoughts on the web. Now you're able to monetize your blog, allowing you to make money while interacting with other bloggers and your readers. 3. What has happened after websites and blogging has become known as Web 2.0. This has allowed blogging to move to the next level. Web 2.0 is when you allow your visitors to become part of the blogging process. This can be done through allowing people to make comments, to vote on polls, or to simply in this case, play games. When you blog and your visitors can be involved they will come back. This process is known as social networking. Playing games online is very easily done thanks to social networking, because you get to meet other people who want play to games as well. Social networking is really just meeting people online that have common interests as you. You are able to form communities, known as blog communities and social network communities. RSS feeds allow you to quickly keep in touch with each other. People can subscribe to your RSS feed and receive your blog updates as you post them. Another piece of all of this is internet chatting. This allows for instant contact with people almost anywhere in the world. When you start to consider the number of people playing games, the potential of blogging, social networking, RSS feeds, and combining Internet chatting, you begin to get the idea that to make money online playing games and selling a product that people will want play games is huge. So the answer is yes, you really can make money playing games online. You can make a lot of friends in the process as well. You just need to find the right opportunity to take advantage of what will offer the best profit and most fun for you.
Making Money At Home With Clickbank Elite : A Product Review
An easy way to start making money at home almost effortlessly with your online business is to set up a Clickbank website. This site would offer electronic products available through the Clickbank marketplace that you can sell as an affiliate and earn commissions from. Clickbank is probably the best way online to sell affiliate products. I wouldn't say that Clickbank is a business for making money at home in itself. Rather, it is something that allows you earn extra cash, big or small, from product sales to boost your regular online business income. In my opinion, it should be used as a supplement to your internet business, not as your only means of generating income. I say that because an online business is more than just selling products and services to make money at home. A business means you offer something of quality to customers over the long haul in hopes that they will become repeat customers because you have offered information or services that are unbeatable from a source they can trust. If you want to start making money at home quickly to supplement your business, Clickbank works like a charm, but you have to know how to use it effectively if you want to make the sales. That's where Clickbank Elite comes in. Clickbank Elite is both a manual and software that will help you choose the top-selling items at Clickbank that you want to promote on your site or blog, or other advertising means. It is updated regularly so you know what's hot and what's not. The software gives you a search screen where you can select products by keyword, categories, subcategories, commissions earned, popularity, gravity, and so on. You can further sort the data you receive with dropdown menu choices and even export it to a spreadsheet if you want. Product rankings will let you know which products will help you start making money at home. You can even track where your sales came from, find products that will soon become hot sellers, and create ads that look like Adsense ads to promote your products. Will this software really generate more sales for you and get you earning more money at home? Well I have been using Clickbank Elite for several months now, and while it is great at helping you find the best products to promote online, it has really not helped me anymore than one person's advice on a forum. If you have no idea what products to promote, or what gravity and $/sale means, then it's a good idea to get a copy of Clickbank Elite because it will help you start making money at home. But if you have a good or even basic knowledge already of what gravity means, how much you want to earn, and $/sale, then you really don't gain a lot more by ordering Clickbank Elite than you would by simply going to the Clickbank marketplace and choosing products based on gravity and $/sale. The thing to remember when making money at home with Clickbank is that if you choose products that are extremely popular sellers, then as a newbie internet marketer, you may not generate any sales because all the top dogs are using their savvy advertising skills and profits to beat you out. Therefore, making money at home for you would mean knowing how to choose what's popular, but not too popular. For someone just starting out, you might want to choose a product where gravity is about 60-100, and $/sale is more than $20.00. These numbers are listed right on the Clickbank website. Now I admit to not always being on top of the game with Clickbank and Clickbank Elite, as there are people making fortunes who are using Clickbank Elite on a regular basis, downloading the updates and new products daily. If you do this, you will have an advantage by using Clickbank Elite. However, with a solid background in internet marketing, and a knowledge of what products to choose based on the criteria mentioned above, then you will still be making money at home with Clickbank without using Clickbank Elite. Much of my income comes from here, so it's a good thing to consider!
Friday, January 25, 2008
Canadian Employment Boom Stalls, The Loonie Has A
Canadian Employment Boom Stalls, The Loonie Has A
The top market moving currency last week was without doubt the Canadian dollar. Though USDCAD didn’t see the largest percentage change among the majors (deferring that title to AUDUSD and NZDUSD), its sharp, end of the week move and the dramatic shift in fundamentals certainly won it a place of honor among volatility traders. The pair began the week with its usual chop as the first few trading days didn’t see any economic indicators, commodity markets had stalled in their respective advances and the greenback was treading water. All that changed on Wednesday though. In the past few weeks, forecasts for strong Canadian growth had already taken a serious blow when the physical trade balance contracted to its smallest positive balance since 1998 and the Ivey PMI survey reported its worst reading for business activity in six years. However, both of these shifts were more or less expected given the unfavorable exchange rates and waning demand from the US. The sharp drop in housing activity reported on Wednesday was not. According to government statistics, housing starts over the month of December plunged to an 187,500 annual pace – the lowest reading since April of 2002. Despite this shocking statistic though, the data was salvageable for Canadian dollar bulls as activity for the entire year was actually the strongest its been in 20-years. The rest of the housing data released the follow day was less dramatic, but still held a bearish tone. However, certainly concerning was the cooling in the annual reading of the New Housing Price Index for November to a 6.1 percent clip – extending a steady deceleration.
The real fireworks for last week were reserved for Friday. In the past few months, the Canadian employment report has been more market moving than the hailed US NFPs. Crossing the wires free from interference from the US payrolls report for the first time in months, the Canadian labor survey revealed the first drop in net employment in 8 months. This print was a blow to the long-term fundamental and event risk traders alike. For the latter, they were used to seeing the change marking a positive surprise that was at least three times the official forecast. And, for the fundamental traders, with their eyes on growth and the BoC, the tangible change for the consumer sector suggested all the largest sectors contributing to the Canadian economy’s impressive rise were now threatening its untimely decline. However, bullish conviction have not been fully snuffed out as we still require confirmation of a true change in labor trends, especially after wage growth accelerated to its fastest clip on record.
In the coming days, the economic train will certainly be throttled back. The first indicator of note is Thursday’s international securities transactions. Unlike the physical trade report, this indicator will struggle to command the attention of the trading masses. The same is true about the manufacturing shipments report for November – though a large shift could revive concerns over trade health. Regardless, technical traders will likely monitor the strength of 1.0250 to judge whether the USDCAD is already forming a new bull wave.– JK
Aussie Shows Few Signs of Slowing, but Much Depends on Labor Data
The Australian dollar joined other major world currencies and rallied significantly against its US namesake, with impressive Retail Sales and Building Approvals data serving to further boost the Aussie against other global counterparts. Extreme British Pound weakness forced the GBPAUD to its lowest levels in 10 years, but the Aussie dollar nonetheless underperformed against New Zealand’s buck—leaving the AUDNZD almost exactly unchanged. A broad sell-off in high-yielding currencies and risky asset classes was not nearly enough to contain the AUDUSD, however, as the Australian currency received a key fundamental boost from domestic Trade Balance, Retail Sales, and Building Approvals figures. The country’s trade deficit fell from a record A$2.86 billion in October to a better-than-forecast A$2.25 billion through the month of November. A surge in exports completely offset a smaller gain in imports, and the report generally improved outlook for Australia’s international balance of payments. In other similarly positive news, Building Approvals surged an impressive 8.9 percent in November—significantly better than economists’ forecasts for no change. A one-off 28.4 percent gain in Apartment approvals led the figure higher, but the report was otherwise generally upbeat and spoke well of housing prospects for the Asia-Pacific economy. Such housing market strength unsurprisingly coincided with robust Retail Sales results on the month, and outlook remains positive for domestic consumption trends.
Given consistently strong economic data, it seems as though the Australian Dollar may continue higher through the medium term. That said, economic outlook could potentially take a turn on key Employment Change figures due the 17th at 00:30 GMT. Markets greatly anticipate the key year-end labor report, as most are keen to watch whether or not the domestic jobs market continued its impressive growth through year-end 2007. Current consensus forecasts of a 20.0k are certainly on the optimistic side, but Aussie employers have shown little moderation in appetite for new workers. Such dynamics were easily seen through November when the economy added an incredible 52,600 new jobs. Adjusted for labor force participation, this would roughly correspond to a 700,000 jobs gain in the monthly US Non Farm Payrolls report. This is obviously a gross oversimplification, but it remains clear that Aussie labor market strength has been nothing short of impressive. Whether or not this can continue through the new year may determine outlook for consumption and housing trends, with Aussie traders to closely watch for any surprises from the highly anticipated report. – DR
New Zealand Dollar Left To Drift In Its Range
The New Zealand dollar shrugged off disappointing Trade Balance figures to finish significantly stronger against the greenback to finish the week’s currency trading. The Kiwi saw its strongest rallies against the US dollar on commentary from US Federal Reserve Chairman Ben Bernanke in which he quite plainly said that the central bank stands ready to cut rates “substantively” in the face of domestic economic slowdown. Such frank words easily allowed forex markets to pound the already-downtrodden USD, while a simultaneous rally in global risky asset classes provided a double-boost for the NZDUSD currency pair. A recent improvement in investor risk sentiment certainly bodes well for the Kiwi, and a solid NZDJPY rally proved the point. Yet it remains to be seen whether the high-yielder can hold its ground on yields alone—especially as it sees strong competition from the similarly high-yielding Australian dollar. Our technical analyst Jamie Saettele believes that the Kiwi could see major declines against the euro, with a topside breakout in the EURNZD a distinct possibility through upcoming trade. See our EURNZD Outlook for more.
Whether or not the Kiwi continues its recent run may very much depend on upcoming Consumer Price Index figures on the 16th, with Reserve Bank of New Zealand interest rate expectations hanging very much in the balance. According to some forecasts, year-over-year CPI inflation will break above the RBNZ’s 1-3 percent target range at 3.1 percent. Such a result could easily alter forecasts for domestic yields, and an above-consensus result could only bolster the case for higher New Zealand interest rates through 2008. The Kiwi already enjoys the highest official interest rate of any currency with the highest S&P Sovereign debt rating, and any rises in the record 8.25 percent rate could only further boost yield-linked demand for the NZD. That said, it will nonetheless be very important to watch the performance of global risky asset classes. Given that the high-yielding currency performs best in times of relatively low market volatility and equity market gains, it will be critical to monitor any unexpected tumbles in the Dow Jones Industrial Average or top Asian and European indices. Otherwise, Kiwi traders will watch Thursday’s Retail Sales report to gauge overall consumption strength in the small Asia-Pacific economy. – DR
The top market moving currency last week was without doubt the Canadian dollar. Though USDCAD didn’t see the largest percentage change among the majors (deferring that title to AUDUSD and NZDUSD), its sharp, end of the week move and the dramatic shift in fundamentals certainly won it a place of honor among volatility traders. The pair began the week with its usual chop as the first few trading days didn’t see any economic indicators, commodity markets had stalled in their respective advances and the greenback was treading water. All that changed on Wednesday though. In the past few weeks, forecasts for strong Canadian growth had already taken a serious blow when the physical trade balance contracted to its smallest positive balance since 1998 and the Ivey PMI survey reported its worst reading for business activity in six years. However, both of these shifts were more or less expected given the unfavorable exchange rates and waning demand from the US. The sharp drop in housing activity reported on Wednesday was not. According to government statistics, housing starts over the month of December plunged to an 187,500 annual pace – the lowest reading since April of 2002. Despite this shocking statistic though, the data was salvageable for Canadian dollar bulls as activity for the entire year was actually the strongest its been in 20-years. The rest of the housing data released the follow day was less dramatic, but still held a bearish tone. However, certainly concerning was the cooling in the annual reading of the New Housing Price Index for November to a 6.1 percent clip – extending a steady deceleration.
The real fireworks for last week were reserved for Friday. In the past few months, the Canadian employment report has been more market moving than the hailed US NFPs. Crossing the wires free from interference from the US payrolls report for the first time in months, the Canadian labor survey revealed the first drop in net employment in 8 months. This print was a blow to the long-term fundamental and event risk traders alike. For the latter, they were used to seeing the change marking a positive surprise that was at least three times the official forecast. And, for the fundamental traders, with their eyes on growth and the BoC, the tangible change for the consumer sector suggested all the largest sectors contributing to the Canadian economy’s impressive rise were now threatening its untimely decline. However, bullish conviction have not been fully snuffed out as we still require confirmation of a true change in labor trends, especially after wage growth accelerated to its fastest clip on record.
In the coming days, the economic train will certainly be throttled back. The first indicator of note is Thursday’s international securities transactions. Unlike the physical trade report, this indicator will struggle to command the attention of the trading masses. The same is true about the manufacturing shipments report for November – though a large shift could revive concerns over trade health. Regardless, technical traders will likely monitor the strength of 1.0250 to judge whether the USDCAD is already forming a new bull wave.– JK
Aussie Shows Few Signs of Slowing, but Much Depends on Labor Data
The Australian dollar joined other major world currencies and rallied significantly against its US namesake, with impressive Retail Sales and Building Approvals data serving to further boost the Aussie against other global counterparts. Extreme British Pound weakness forced the GBPAUD to its lowest levels in 10 years, but the Aussie dollar nonetheless underperformed against New Zealand’s buck—leaving the AUDNZD almost exactly unchanged. A broad sell-off in high-yielding currencies and risky asset classes was not nearly enough to contain the AUDUSD, however, as the Australian currency received a key fundamental boost from domestic Trade Balance, Retail Sales, and Building Approvals figures. The country’s trade deficit fell from a record A$2.86 billion in October to a better-than-forecast A$2.25 billion through the month of November. A surge in exports completely offset a smaller gain in imports, and the report generally improved outlook for Australia’s international balance of payments. In other similarly positive news, Building Approvals surged an impressive 8.9 percent in November—significantly better than economists’ forecasts for no change. A one-off 28.4 percent gain in Apartment approvals led the figure higher, but the report was otherwise generally upbeat and spoke well of housing prospects for the Asia-Pacific economy. Such housing market strength unsurprisingly coincided with robust Retail Sales results on the month, and outlook remains positive for domestic consumption trends.
Given consistently strong economic data, it seems as though the Australian Dollar may continue higher through the medium term. That said, economic outlook could potentially take a turn on key Employment Change figures due the 17th at 00:30 GMT. Markets greatly anticipate the key year-end labor report, as most are keen to watch whether or not the domestic jobs market continued its impressive growth through year-end 2007. Current consensus forecasts of a 20.0k are certainly on the optimistic side, but Aussie employers have shown little moderation in appetite for new workers. Such dynamics were easily seen through November when the economy added an incredible 52,600 new jobs. Adjusted for labor force participation, this would roughly correspond to a 700,000 jobs gain in the monthly US Non Farm Payrolls report. This is obviously a gross oversimplification, but it remains clear that Aussie labor market strength has been nothing short of impressive. Whether or not this can continue through the new year may determine outlook for consumption and housing trends, with Aussie traders to closely watch for any surprises from the highly anticipated report. – DR
New Zealand Dollar Left To Drift In Its Range
The New Zealand dollar shrugged off disappointing Trade Balance figures to finish significantly stronger against the greenback to finish the week’s currency trading. The Kiwi saw its strongest rallies against the US dollar on commentary from US Federal Reserve Chairman Ben Bernanke in which he quite plainly said that the central bank stands ready to cut rates “substantively” in the face of domestic economic slowdown. Such frank words easily allowed forex markets to pound the already-downtrodden USD, while a simultaneous rally in global risky asset classes provided a double-boost for the NZDUSD currency pair. A recent improvement in investor risk sentiment certainly bodes well for the Kiwi, and a solid NZDJPY rally proved the point. Yet it remains to be seen whether the high-yielder can hold its ground on yields alone—especially as it sees strong competition from the similarly high-yielding Australian dollar. Our technical analyst Jamie Saettele believes that the Kiwi could see major declines against the euro, with a topside breakout in the EURNZD a distinct possibility through upcoming trade. See our EURNZD Outlook for more.
Whether or not the Kiwi continues its recent run may very much depend on upcoming Consumer Price Index figures on the 16th, with Reserve Bank of New Zealand interest rate expectations hanging very much in the balance. According to some forecasts, year-over-year CPI inflation will break above the RBNZ’s 1-3 percent target range at 3.1 percent. Such a result could easily alter forecasts for domestic yields, and an above-consensus result could only bolster the case for higher New Zealand interest rates through 2008. The Kiwi already enjoys the highest official interest rate of any currency with the highest S&P Sovereign debt rating, and any rises in the record 8.25 percent rate could only further boost yield-linked demand for the NZD. That said, it will nonetheless be very important to watch the performance of global risky asset classes. Given that the high-yielding currency performs best in times of relatively low market volatility and equity market gains, it will be critical to monitor any unexpected tumbles in the Dow Jones Industrial Average or top Asian and European indices. Otherwise, Kiwi traders will watch Thursday’s Retail Sales report to gauge overall consumption strength in the small Asia-Pacific economy. – DR
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