ISM Services Gauge in U.S

The Institute for Supply Management’s index of U.S. non-manufacturing businesses, which covers about 90 percent of the economy, rose to 54.7 in November from the prior month’s 54.2, the Tempe, Arizona-based group said today.  ISM! Readings above 50 signal expansion, and estimates ranged from 51 to 54.7. The ISM services survey covers industries ranging from utilities and retailing to housing, health care and finance.

Daily Afternoon Report 04/12/2012 | Forex Trading Analysis

  The US dollar was broadly lower against the other major currencies as investor confidence was boosted by hopes that Greece’s plan to buy back debt will succeed. EURUSD found support after Greece launched a scheme to buy back its debt from private investors, as part of an agreement to unlock a new bailout package worth EUR44 billion. European Union finance ministers were holding talks in Brussels on Tuesday, to discuss banking supervision in the euro zone.

  The GBP remained supported after data showed that construction sector activity in the U.K. unexpectedly declined to a three month low in November.

  The yen strengthened after Monday’s weak U.S. manufacturing data and ongoing concerns over the U.S. fiscal cliff enhanced the safe haven appeal of the currency.

 Click Here! The Australian dollar turned higher earlier after the Reserve Bank of Australia cut its benchmark interest rate to 3% from 3.25% in a widely anticipated decision. RBA Governor Glenn Stevens said the Australian dollar remains “higher than might have been expected” given lower export prices and a weaker global outlook.

Daily Morning Report 04/12/2012 | Forex Trading Analysis

The Australian Dollar rallied versus the U.S. Dollar as the Reserve Bank of Australia cut the benchmark lending rate by 25 basis points to 3.00 percent which was in-line with market expectations of a 90 percent probability that the RBA would cut the cost of capital today.

Forex Bulletproof 2.0 Patented Striker Technology! The global PMI release period was off to a good start, with outperformance in Asia and mostly floundering in Europe. US failed to hold its own, with its equivalent to the PMI, the ISM Manufacturing index, falling back into contraction, to its lowest official reading of the year. Just when US economic data was turning higher, it now appears to be backpedalling.

Greece offered to buy back as much as 10-billion Euros of bonds issued in a restructuring earlier this year, as an attempt to cut its debt load. The government said they will buy back bonds in a so called Dutch auction, and the government is willing to pay an average maximum purchase price of 34.1% for bonds maturing from 2023 to 2042. 

ECB and BoE are widely expected to maintain their current policy Forex Bulletproof 2.0 Patented Striker Technology! in December, we anticipate the Governing Council to strike a more dovish tone for monetary policy as the deepening recession in the euro-area threatens price stability. ECB President Mario Draghi may show a greater willingness to ease monetary policy further. BoE appears to be slowly moving away from its easing cycle as inflation stubbornly holds above the 2% target.

Technical Levels

	EUR/USD	GBP/USD	USD/JPY	AUD/USD	USD/CAD	USD/CHF
R3:	1.3075	1.6104	82.89	1.0479	0.9957	0.9297
R2:	1.3059	1.6090	82.75	1.0467	0.9942	0.9277
R1:	1.3045	1.6076	82.54	1.0447	0.9935	0.9268
S1:	1.3015	1.6030	82.19	1.0403	0.9919	0.9258
S2:	1.2985	1.6021	82.11	1.0383	0.9912	0.9248
S3:	1.2971	1.5998	82.05	1.0362	0.9906	0.9239

Daily Afternoon Report 03/12/2012 | Forex Trading Analysis

The euro pushed higher Monday after Greece launched a scheme to buy back its debt from private investors, as part of an agreement to unlock a new bailout package worth EUR44 billion.

Euro zone finance ministers were to hold talks in Brussels later in the day to discuss the terms of the new Greek aid deal, after Germany’s parliament gave it the green light on Friday. Furthermore, euro showed little reaction after Spain formally requested a bailout worth EUR37 billion for its banking sector.

Forex Bulletproof 2.0 Patented Striker Technology! Elsewhere, data showed that the final euro zone manufacturing purchasing managers’ index remained unchanged at 46.2 in November, the highest level since March, but remaining in contraction territory for the 16th consecutive month.

In the U.K., data showed that the manufacturing PMI rose to 49.1 last month, its highest level since August, from October's downwardly revised 47.3 and beating expectations for a reading of 48.1. However, the index remained below the 50.0 level which separates contraction from expansion for the seventh successive month.

Earlier Monday, official data showed that retail sales in Switzerland rose by 2.7% in October, less than the expected 4.1% increase. A separate report showed that the SVME PMI rose to 48.5 in November, a four-month high, from a reading of 46.1 in October.

In other news, the yen remained under pressure ahead of upcoming elections on December 16 which could lead to further monetary easing by the Bank of Japan, whereas the Australian dollar remained also under pressure after official data were published showing that domestic retail sales were flat in October fuelled expectations for a rate cut by the Reserve Bank of Australia at its policy meeting on Tuesday.

In latest news, the Institute for Supply Management’s U.S. factory index fell to 49.5 in November from 51.7 a month earlier, the Tempe, Arizona-based group said today. The dividing line between expansion and contraction is 50, and economists’ estimates ranged from 49 to 53.5. 

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Daily Morning Report 03/12/2012 | Forex Trading Analysis

The Australian dollar traded lower versus the greenback as Australian business’ reported a 2.9 percent operating loss in the third quarter while inventories increased by 1.1 percent suggesting the overall economic climate appears to have slowed.

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The greenback has gained strongly versus the yen after the dissolution of parliament in Japan and the dollar yen rate has increased over 3% on the monthly basis; this scripts the largest increase since February this year.

The euro suffered a bit of a setback as the wake of Moody's downgrade of the euro zone rescue fund late last week.  China's official manufacturing purchasing managers' index rose to a 7-month high of 50.6 in November from 50.2 in October, following a preliminary private sector survey that showed factory activity reviving to a 13-month high.

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Daily Afternoon Report 29/11/2012 | Forex Trading Analysis

The U.S. dollar was broadly lower against the other major currencies on Thursday, as hopes for headway in tackling the U.S. fiscal cliff dampened safe haven demand for the greenback ahead of U.S. data on third quarter growth later in the session.

Meanwhile, the euro hit fresh session highs against the U.S. Click Here! dollar on Thursday, after official data showed that the U.S. economy grew at a faster rate than initially estimated during the third quarter of 2012, as export figures were revised up.

As the Commerce Department said, gross domestic product expanded by 2.7% in the three months to September, up from a preliminary estimate of 2.0%, but below expectations for growth of 2.8%.

Separately, the U.S. Department of Labor said the number of individuals filing for initial jobless benefits last week fell 393,000 from 416,000 the previous week, slightly less than expectations for a decline to 390,000.

Elsewhere Europe, Italy saw borrowing costs fall sharply at an auction of five and 10-year government bonds on Thursday, with the yield on 10-year bonds down to 4.45%, a two year low and the yield on five-year bonds falling to 3.23%, also a two-year low.

In addition to that, official data showed that the German unemployment rate remained unchanged at 6.9% in November as the number of unemployed people rose by 5,000, better than expectations for an increase of 15,000.

In other news, the Bank of England warned earlier that U.K. banks may not have enough capital put aside to insulate them from future financial market shocks.

Finally, the yen remained under pressure amid expectations that upcoming elections on December 16 will result in growing political pressure on the Bank of Japan to implement more aggressive monetary easing measures.

Later Thursday, German Bundesbank President is due to speak at the Christian Democratic Union Economics Council in Berlin.

Click Here!

Daily Morning Report 29/11/2012 | Forex Trading Analysis

The dollar fell against the major currencies on Thursday. President Obama told the world that “something will be done” to steer the country away from the fiscal cliff, which boosted the euro on sentiment U.S. policymakers will put politics aside and make tough tax and spending reforms needed to avoid the cliff. U.S., the Commerce Department reported earlier that new home sales fell by 0.3% to a seasonally adjusted 368,000 units in October, confounding expectations for an increase to 390,000.

Later Thursday, the U.S. is to produce revised data on third quarter gross domestic product, as well as data on pending home sales and initial jobless claims.

Daily Afternoon Report 28/11/2012 | Forex Trading Analysis

Greece bailout agreement, most of the responding chatter has already been exhausted, and we have been left in today’s European session without a major fundamental story to guide trading. Data showing U.S. consumer confidence at a four-year high also provided a modest boost for the dollar, though a looming budget crisis tempered optimism about the American economy and kept dollar gains in check.

The agreement to provide aid for Greece did not help the market sentiment. In fact, that agreement may fail as the International Monetary Fund did not accept its terms. The inability of the US politicians to find a compromise and avoid the fiscal cliff did not help traders’ confidence either.

The Australian dollar fell against the Japanese yen and the US dollar yesterday and remained soft today. Like its Canadian counterpart, the Aussie managed to strengthen versus the euro.

Daily Afternoon Report 22/11/2012

  The euro was trading close to a three-week high against the U.S. dollar on Thursday, as improved manufacturing data from China and the euro zone and hopes for a deal on an aid payment for Greece supported demand for the single currency.

  After the data of German Flash Manufacturing PMI were released the single currency found support. Germany’s manufacturing purchasing managers’ index rose to 46.8 in November, up from 46.0 in October and better than forecasts for a reading of 45.9. Germany’s services PMI came in at 48.0, below expectations for a reading of 48.5. The euro zone’s manufacturing PMI rose to 46.2 this month from 45.4 in October, above expectations for a reading of 45.6. The euro zone’s services PMI declined to 45.7, from 46.0 in October, compared to expectations for a reading of 46.1.

  The euro was also supported after German Chancellor Angela Merkel said an agreement to unlock a delayed bailout installment for Greece was still possible when euro zone finance ministers resume talks on Monday. Today Spain successful auctioned EUR3.38 billion of three and five-year bonds at lower yields than previously, easing pressure on Madrid to seek a bailout.

The data came after a report earlier showed that China’s preliminary HSBC manufacturing PMI rose to 50.4 in November, up from a final reading of 49.5 in October. The data eased concerns over a slowdown in the world’s largest economy.

  Trade volumes are expected to remain low on Thursday, with US markets closed for the Thanksgiving holiday.

Daily Morning Report 31/10/2012

The dollar softened against most major currencies on Wednesday as investors sold safe-haven dollars they acquired before Sandy, a hurricane that morphed into a post-tropical giant, and continues to dump snow and rain over the northeastern U.S.

While the country continues to assess the damage, investors sold safe-harbor USD and prepped to take up other positions to play clean up and recovery. Markets were closed in the U.S. earlier for a second day, though investors who bought dollars prior to the storm's landfall began to loosen up by Asian trading on Wednesday, selling
their dollars to play recovery, which weakened the USD against its Japanese counterpart.

Elsewhere, Australian building approvals have risen for a second consecutive month in September, putting the chances of an interest rate cut from the Reserve Bank of Australia next week further in doubt. According to the Australian Bureau of Statistics total dwelling units approved increased 7.8 per cent in September, following a 6.4 per cent jump in August. That is a modest recovery from precipitous falls in July, when approvals fell 17.3 per cent. The approvals data is a leading indicator of future construction work, suggesting a return of confidence in the interest-rate sensitive housing sector.

Later Wednesday in the U.S., payroll processing firm ADP is to release a report on nonfarm payrolls, a leading indicator of private-sector job creation while the Canadian Bureau of Statistics is to announce GDP data.

Daily Forex Brief London: Thursday 31st May 2012

Dollars, yen and G4 bonds smell of roses

More blood on the streets of financial markets yesterday and overnight, with risk assets reversing still further and safe haven currencies and bonds smelling like roses. Interestingly, while the dollar remained very much in favour and money poured into US treasuries, it was actually the Japanese yen that shone even more brightly. Indeed, USD/JPY is now below 79, which no doubt will both alarm and disappoint Tokyo in equal measure. Although bond yields for Europe's fiscal miscreants soared, the price action in the single currency was more measured, as it drifted gradually down below 1.24, a fresh 2yr low. High-beta currencies such as the Aussie fared worse –it fell below the 0.97 level overnight. In general, May has been a dreadful month for emerging currencies – for instance, the likes of the Russian ruble and the Polish zloty have suffered a 10% decline thus far, while the Indian rupee has dropped to a record low. Likewise, commodities have been hard hit – Brent crude fell to USD 103.34 overnight, down more than 3% over the past 24 hours, while the copper price lost another 2.5%.

Daily Forex Brief London: Wednesday 30th May 2012

Stay away in May

Assets prices were not unlike a volcano yesterday – all quiet on top, but a bubbling cauldron of fire and friction underneath. Although most now accept that the end is nigh for Greece in terms of continuing participation in the eurozone, events in Spain are moving so incredibly quickly that the centre of global systemic risk has now shifted indelibly to Madrid. Yesterday's news that retail sales in Spain collapsed by 16% in real terms in the year to April confirmed that this is another European economy in freefall. Almost everywhere you look in southern Europe the news is disturbing. Unsurprisingly, confidence in the single currency continues to ebb away; the euro dropped to a new 2yr low of 1.2457 overnight. In the month of May alone, the euro has fallen by almost 6%. Once more it is the dollar and the yen that are winning the forex popularity contest, while G4 bonds continue to set new record lows in yield. Gold is still really struggling (see below for a more detailed discussion) – it fell to USD 1,545 overnight. Oil prices are still plunging, providing further evidence that global demand has waned markedly in the current quarter. Brent crude fell below USD 107 last night, a fall of almost USD 20 in less than two months. That old investment adage 'sell in May and go away' has once again been remarkably prescient.

Daily Forex Brief London: Monday 28th May 2012

Glimmers of hope

The weekend polls in Greece have shown the pro-bailout parties gaining ground, with two showing that they could receive enough of the votes to form a viable coalition. This has given the euro a modest lift in Asia trade, allowing a break above the 1.26 level, up from the 1.2496 year low carved out last week. Still, it's another three weeks until we will have the election results, so the road ahead remains fairly daunting for the single currency. We also have the Irish referendum on Thursday of this week on the European Fiscal Treaty. Meanwhile, as the Spanish government moves to inject fresh capital into Bankia, there are also moves to greatly enhance the deposit guarantee scheme protection offered to savers in European banks. These modestly encouraging developments, together with the fact that last week was the worst of the year for the single currency, increase the risk of some short-covering rallies this week, but there can be little arguing that underlying sentiment remains decidedly fragile.

Daily Forex Brief London: Friday 25th May 2012

The euro bails out

Markets approach the end of what has been a pretty difficult week. The single currency has made news lows for the year (vs. the USD) and markets have no more faith in the ability of eurozone leaders to quell speculation around a Greek exit as anti-bailout parties retain their lead in the Greek election opinion polls. We've also seen the capitulation of the single currency, something which we talked about earlier this month, where the euro has been the weakest currency in a period of dollar strength, rather than the more traditional high-beta currencies, such as the Aussie. The price action on the single currency this week means that we run the risk of short-covering activity into the weekend. Also, the Swiss franc is worth keeping a small eye on after yesterday's volatility (at least compared to recent activity), which was mostly on the back of - so far - denied rumours of further measures to quell currency strength.

Daily Forex Brief London: Thursday 24th May 2012

Europe's impossible dream

Probably not by accident, yesterday's Brussels dinner party of EU leaders ended too late for the European press to pass judgement. There was a weight of expectations, which was largely misplaced given this was an informal meeting to pave the way for the main summit of leaders at the end of next month. The same differences remain on common bonds and the financial transaction tax (UK opposing) and more subtle differences on the growth agenda. Of course, everyone would like more growth but delivering it alongside a program of continued austerity is naturally a different matter and, for now, it remains the impossible dream for European leaders and a balance which Europe (and indeed others) has yet to achieve. In the FX markets, after the push lower through the 1.26 level into the European close yesterday, EUR/USD has held steady overnight, but activity elsewhere shows that dollar-dominance remains the underlying theme.

Daily Forex Brief London: Tuesday 22nd May 2012

All about positioning

The price action seen on both Friday and also yesterday reflects the fact that, it's all about positioning in the FX markets for the moment. This has been most evident on the euro, not only in the weekly CFTC data which is reflecting a record amount of speculative shorts, but also in the price action. The single currency has pulled away from a threatened break of the year's low, not that surprising after a run which saw EUR/USD up on only two of the last fourteen trading days. The Aussie has also corrected from the recent lows, partially reversing a downtrend of similar style as seen in EUR/USD. Even though the relationship between the two has broken down a little of late, stocks also look set for a second day of gains after the recent down-run. The underlying themes remain in place, namely continued concerns surrounding Greece and the other peripheral eurozone nations, so the current correction should not be aligned with a perception that things are improving underneath, because they are not.

Daily Forex Brief London: Monday 21st May 2012

Here we go again

It's Monday and the shifting sands of the European mindset are moving (not for the first time) towards the issuance of common bonds as a means of overcoming the sovereign crisis. This is one of the changes in momentum that has emerged from the weekend's meeting of G8 leaders, together with giving the EFSF the ability to re-capitalise banks. It's a sign that there is stronger desire to see an alternative to the hard-line German stance of austerity, with few after-thoughts. Furthermore, the German Chancellor will find it increasingly difficult to resist this shift, especially when it is being endorsed at the international level. The wider issue is that at no point have European leaders really seized the initiative on the crisis, compromising by doing just as much as they believe necessary to stop things getting worse, rather than going all in to turn things around. Imagine where we would be if Greece had restructured its debt back in May 2010, a decent firewall was set-up and a shift towards common bonds was put into train. Most likely, we'd be in a better place than we are now. The single currency recovered on Friday, despite the weaker tone to stocks. This is partly a function of the extent of the short-positioning that has built up in the single currency, which could mean that a push below the year's low at 1.2724 could prove a little tougher than some expect.

Daily Forex Brief London: Thursday 17th May 2012

Europe must decide urgently

Nearly five years into the global credit crunch, you get a feeling for when something has reached the point of no return, when no amount of reassurance, promises or policies will fight the tide of markets. This is not to define markets as pure 'speculators', rather rational individuals and entities that are removing deposits from Greek banks, reducing their exposures to all types of market risk and doing their best not to be crushed by a moving train that is Greece. As well as reports of large-scale withdrawals from Greek banks, we have had (unconfirmed and then denied) reports that the ECB is also refusing liquidity requests from Greek banks, pushing them to the Greek central bank because of the lack of recapitalisation undertaken. We've seen sharp increases in forward Libor-OIS spreads, the measure of interbank liquidity risk that was so watched during the early days of the crisis. From being taboo in official circles, a Greek exit is now more openly discussed rather than dismissed outright. At the same time, after two years of fire-fighting the Greek and wider sovereign crises, there are no policy responses that can credibly stem the tide. We've had two large scale EU/IMF rescue packages, a tortuous 'voluntary' private sector-restructuring and vast lending form the ECB (with ever lower collateral standards applied). The more credible response now from the authorities would be measures to stem contagion elsewhere, particularly with respect to bank deposits in other eurozone countries now that permitted cross-border lending between deposit-guarantee schemes will not be workable. Contagion remains the biggest single risk, given that a Greek exit will mean that what was previously presented as irreversible and unthinkable will have become reality. This is where efforts now need to be focused otherwise the single currency will be left horribly exposed by a Greek exit. Furthermore, all efforts to 'save' Greece from here on in will have been wasted and at the cost of failing to deal with the contagion issue. Policy-makers face a critical choice over coming days. Let's hope they choose the right track.

Daily Forex Brief London: Tuesday 15th May 2012

Another bad hair day

Yet another bad hair day for risk assets yesterday amidst continuing concerns over a myriad of issues, including the unstable political situation in Greece and ongoing question marks around whether it will remain in the eurozone, the dire state of Spanish banking and sovereign finances, and a sense that the losses registered by the CIO unit at JPMorgan could turn out to be much greater than already disclosed. Also contributing to the uncertain mood was Moody's announcement that it was downgrading 26 Italian banks and worries over whether Greece will pay the holders of a EUR 436m floating rate note which matures today. Gold, a traditional safe-haven in times of distress, has lost its lustre, falling to its lowest level for the year at USD 1.550 an ounce (more on gold below). Instead, it is the greenback that is the preferred destination of those fleeing risk, with the dollar index already up by 2% so far this month. For the dollar bulls, should we see a sustained break of the mid-January high of 81.50 (in the dollar index) then this would provide further encouragement. Indeed, it could justifiably be argued that, against the backdrop of dreadful financial and economic conditions in large parts of Europe, and with China in the midst of a very bumpy landing, the dollar really ought to be performing better than it has done. Another currency that continues to attract buying interest is the pound, with cable steadfast at around the 1.61 level and EUR/GBP now comfortably under 0.80. The single currency fell to 1.2815 overnight, but it has been a remarkably measured sell-off rather than blind panic. Even for the Aussie, which has been under sustained fire all month, the decline through parity was not one of capitulation, notwithstanding the evident determination over recent weeks of traders to eliminate their long positions.