Month: January 2011

Bank of New York Mellon (BK) posted fourth quarter earnings today of $679 million, or $0.54 per share, compared to $593 million, or $0.49 per share, in the same quarter last year. Adjusted earnings of $0.55 per share fell slightly short of analyst expectations.

The US dollar remained under pressure on Tuesday’s trading session especially against the Euro and Pound Sterling on positive development on euro zone’s debt situation and increase in German investor confidence.

Strategists from RBC Capital Markets commented, “Stronger U.K. and German data were the catalysts for British pound and euro outperformance.”

The dollar index DXY which measures the US dollar’s performance versus its six major rivals declined to 78.972 as compared to 79.371 on late Monday.

The Euro advanced to 1.3388 against the greenback as compared to 1.3292 on Monday. The British Pound also gained 0.4 percent to 1.5965 versus the greenback. The US dollar also declined versus the Japanese Yen to 82.61 as compared to 82.72 on Monday’s late trading session.

UK’s inflation rate increased to 3.7 percent in the month of December as compared to 3.3 percent in November which resulted in gains for the Pound Sterling. Investors are expecting a rise in interest rates by Bank of England as the key lending rate has been keep at its record low of 0.5 percent since last one year.

Currency strategist from Citigroup commented, “We expect that accelerating inflation and inflation expectations coupled with continuing signs of recovery in the U.K. economy will continue to push the MPC’s assessment of the balance of risks towards the danger of higher inflation.”

Though the British Pound seems to be moving in a strong bullish rally due to increased inflation however would face correction if the key lending interest rate is increased by Bank of England.

About the Author

Daily forex trading news written by Rehan from DailyForexTrade.com

By Zac, CountingPips.com

Today, I am pleased to share a forex interview/commentary on this week’s major events and forex trends with the Senior Currency Strategist at DailyFx.com, John Kicklighter. John’s specializes in combining fundamental and technical analysis with money management while his analysis for DailyFx regularly includes G10 fundamental forecasts, risk sentiment analysis and carry trade analysis.

Q: This week we do not have a lot of major economic releases out of the United States. What do you feel could be the possible drivers of the major currencies this week, especially the direction of the US dollar?

A: A lack of major event risk from the US docket can actually work in favor of developing meaningful trends and volatility for the greenback. If we consider the impact that an indicator like NFPs plays, expectations heading into the release act as a distraction for the market and often sideline developing nascent breakouts and trends. What’s more, given this indicator’s Friday release time, its impact is often constrained to a few active hours.

In the absence of big ticket US event risk, the market will focus on larger themes (which offer a better platform for trend development). Discussion surrounding the stimulus efforts made by the Fed continue to have a remarkable impact on fundamental expectations; but interest in the European financial troubles will likely carry more weight (as the euro and dollar act as each others’ primary counterparts).  A more topical concern exists in the US 4Q earnings season. We have had an off and on interest in health updates; but with the market growing more skeptical of performance, the bar is being raised. Finally, we have the 4Q Chinese GDP release coming up soon. This country represents the benchmark for the global economy and the source of many investors’ hopes for return.

Q: Last week we saw the euro gain against the US dollar for its biggest weekly increase in over a year. Are we likely to see a follow through and more euro gains or should we look for a pullback for the European currency?

A: The European Union’s policymakers have been trying to put out fires for nearly a year now; and in that process have ramped up incredible support programs. Yet, inevitable outcome with each of these efforts has been the same – continued deterioration in confidence and financial conditions. With this new effort, the promises being floated by some are sizable; but traders are more skeptical of what can actually be passed by all the important players. The sheer scope of the proposals being made and initial talk of ECB interest rate concerns can contribute to a euro bid; but a lack of progress on either/both front will quickly let the euro down.

Q: Is this a potentially good opportunity to short the EUR/USD considering the sovereign debt crisis?

A: An excessive sense of ‘hope’ that European officials will be able to come to a quick solution on a problem that has proven extremely complex and fraught with contradictions suggests the market hasn’t fully accounting for the fundamental troubles ahead for the euro. What’s more, an inevitable correction in risk appetite (which could easily turn into a true reversal) would quickly undermined the unstable outlook for the shared currency. That makes EURUSD an appealing short over the medium-term. Yet, like any other trade, timing is key. We need to see a few events line up to really put this pair on a bearish track.

Q: The Australian dollar has been on the defensive since the beginning of the new year basically across-the-board against the major currencies. Do you think this was a natural pullback from its lofty levels, can we attribute this to the floods, is this a result of Chinese tightening or something else?

A: In fact, the Australian dollar’s troubles are likely a mixture of all three. Having put in for an impressive rally, the pair was by many accounts significantly overbought. The sense that it had moved beyond a reasonable measure of fair value was likely furthered by the ongoing efforts made by China to curb its explosive growth and asset price inflation. Yet, it took a tangible event like the flood (as unfortunate and devastating as it is) to finally push the currency back.

Q: Where does the Australian dollar go from here? Can we look for a pullback in the EUR/AUD and GBP/AUD which have both risen quickly since the beginning of the month?

A: Rather than a question of direction, we should look at the Australian dollar’s path from here as a factor of pace and timing. The Aussie dollar is likely to retrace further as interest rate expectations have been capped for the foreseeable future and fundamental traders are starting to take note of the fundamental hardships on the horizon. Perhaps the greatest threat to this currency though is the possibility of a significant reversal in risk appetite (seen in equities and other benchmarks) that drags down the Aussie’s carry trade appeal. A meaningful correction is needed to pull the currency back to a level where the masses can say it is ‘cheap’ for an entry to a very attractive carry.

Q: The Chinese GDP is expected to be released for the fourth quarter of 2010 on Thursday. The daily FX calendar shows an expectation of a 9.4 percent advance following a 9.6 percent rise in the third quarter. How much can we expect this release to impact the markets and/or major currencies this week in terms of risk appetite versus risk aversion?

A: The Chinese GDP figure is important in its own right; because China is seen as the wellspring of growth and return for the world (though to an extent it just represents strong emerging market performance in general). This number will compliment the US earnings season well and set a benchmark for the advanced economy GDP readings that will trickle in over the coming weeks. However, for immediate impact; there may be greater interest in the CPI figures. Inflation is proving a global scourge; and Chinese policy officials have failed to rein it in domestically.

Thank you John for taking the time for participating in this week’s forex interview. To read John’s latest currency analysis and trading strategies you can visit DailyFx.com.

By GCI Forex Research

Fundamental Outlook at 0800 GMT (EDT + 0400)

USD

The dollar fell sharply against its G10 peers during the Asia session, as global risk appetite continued to build. EURUSD traded 1.3362-1.3484, and USDJPY 82.13-82.76. The S&P 500 gained 0.14% on the day, and Asian equities were also firmer. US economic data yesterday was largely second-tier. The Empire state manufacturing survey for January rose to 11.92 from 9.89 in December. The NAHB housing market index was unchanged at 16 in January, just below the consensus of 17. TICS data showed net foreign inflows to US long-term securities rose to $85 bn in November from $29 bn in October. Today, US housing starts and building permits are due for December. However, tomorrow’s jobless claims report will be critical to the dollar’s near-term direction – a substantial fall in claims may be enough to lend the dollar some much needed support. We remain bullish on the dollar as we await further evidence that the US recovery is accelerating.
EUR

Yesterday’s meeting of EU finance ministers broke up without agreement on how to address perceived deficiencies in the European Financial Stability Facility. Belgian Finance Minister Reynders said the EFSF discussions are progressing, but German Finance Minister Schaeuble did not appear to be in any hurry to support near-term changes.
French Finance Minister Lagarde confirmed that the European banking system will undergo another round of stress tests due to begin February. She expressed the hope that these would be “extremely specific, well-documented and well communicated to be of irreproachable quality”.
Germany’s ZEW economic surveys were positive with the economic sentiment index rising to 15.40, significantly above consensus at 7.0. The Eurozone’s equivalent survey was equally impressive, rising to 25.40. However, markets continue to be mainly driven by developments over the debt crisis.
Some details emerged over the next round of bank stress tests to be conducted across Europe later this year. They are expected to be significantly more comprehensive in their nature.
GBP

Headline CPI for December beat market expectations, rising by +3.7% y/y (prev. 3.4%). Sterling rallied on the numbers, as investors now see a greater chance that the BoE may hike sooner. However, our UK economist continues to expect the first rate hike in Q3. This is consistent with public comments by MPC members recently, which reveal some concern over the strong inflation readings, but also a willingness to look through the short-term inflation strength.
Attention will now turn to today’s employment report, followed by MPC member Posen’s speech tonight. He voted to begin another round of Gilt purchases in December, and investors will be curious to see if the latest developments have caused him to reconsider his stance.
CAD

As expected, the Bank of Canada kept its target for the overnight rate unchanged at 1.00%. The policy statement reminded markets that the recovery in net exports is being restrained by the stronger CAD, and this was enough to push USDCAD a little higher. The BoC’s quarterly Monetary Policy Report is due for release later today.
AUD

Consumer confidence for January fell by -5.7% m/m, reflecting the impact of extensive flooding.

TECHNICAL OUTLOOK
USDJPY breaks 82.31 support.
EURUSD BULLISH Remains constructive below 1.3500, a move above this level would signal a strong bull trend and expose 1.3575 next. Near-term support lies at 1.3245.
USDJPY BEARISH Negative tone continues with break of 82.31 and targets 81.89/61 next. Resistance is at 83.67.
GBPUSD BULLISH Recovery eyes 1.6074/94 resistance zone. Initial support defined at 1.5878 yesterday’s low.
USDCHF BULLISH As long as 0.9542 support holds; broader focus is on the upside with initial resistance at 0.9687 ahead of 0.9784.
AUDUSD NEUTRAL Upward momentum with break of 1.0020 resistance; support is at 0.9804 while resistance is at 1.0076.
USDCAD BEARISH Tough support at 0.9820; breach of this would favor extension of bear trend towards 0.9712. Resistance is at 0.9977 reaction high.
EURCHF BULLISH Recovery found resistance at 1.2952 ahead of 1.3038; initial support at 1.2757.
EURGBP BEARISH The pair targets 0.8313 ahead of 0.8285. Resistance is at 0.8455.
EURJPY BULLISH Push above 111.12 has made the pair focus on 111.16 yesterday’s high ahead of 112.19 next. Support at 109.56 holds.

Forex Daily Market Commentary provided by GCI Financial Ltd.

GCI Financial Ltd (”GCI”) is a regulated securities and commodities trading firm, specializing in online Foreign Exchange (”Forex”) brokerage. GCI executes billions of dollars per month in foreign exchange transactions alone. In addition to Forex, GCI is a primary market maker in Contracts for Difference (”CFDs”) on shares, indices and futures, and offers one of the fastest growing online CFD trading services. GCI has over 10,000 clients worldwide, including individual traders, institutions, and money managers. GCI provides an advanced, secure, and comprehensive online trading system. Client funds are insured and held in a separate customer account. In addition, GCI Financial Ltd maintains Net Capital in excess of minimum regulatory requirements.

DISCLAIMER: GCI’s Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be U.S.ed as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.

By Anton Eljwizat

The sustained upward movement of the GBP/JPY pair doesn’t seem to be receiving much resistance lately. As I will demonstrate below, the price of GBP/JPY may very well be heading for a correction. Forex traders can take advantage of this imminent downward movement by entering short positions at an excellent entry price.

• Below is the daily chart for the GBP/JPY.

• The technical indicators that are used are the Relative Strength Index (RSI), Slow Stochastic and Williams Percent Range.

• Point 1: The Slow Stochastic indicates an impending bearish cross, which may signal a downward movement is going to occur in the near future.

• Point 2: The Relative Strength Index (RSI) indicates that the price of this cross currently floats in the overbought territory, signaling downward pressure.

• Point 3: The Williams Percent Ranges is showing that this pair is heavily over-bought and may be experiencing strong downward pressure.

GBP/JPY Daily Chart

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

By Anton Eljwizat

Platinum prices rose significantly in the last two weeks and peaked at $1845 an ounce. And now, there appears to be a recent bearish cross on the 4-hour chart’s Stochastic (slow) and MACD, highlighting significant downward momentum building on this commodity’s price. In addition, the Relative Strength Index (RSI) has the price floating in the over-bought region, suggesting that more pressure is on the way. Forex traders may want to take this opportunity to catch the downward correction on Platinum, which appears to be imminent.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

Source: ForexYard

The US dollar sold off today in favor of higher yielding currencies with the largest gains seen in the euro and Aussie dollar. The Canadian dollar was sold following a dovish monetary policy statement.

Economic News

USD – Dollar Down as Market Sentiment Shifts

Dollar weakness was prevalent today versus higher yielding currencies as market players shift out of the greenback. New Year asset allocations by big institutional investors are driving the recent declines for the dollar as larger players identify their investment strategies for the New Year which appears to be short on the dollar.

The release of the TICS Long Term Purchases showed foreigners were purchases of large quantities of American securities as investors return to US equity markets and bond markets that were shunned following the financial crisis. TICS rose to 85.1 Bn on expectations of only 43.4 Bn.

The Canadian dollar fell following a dovish monetary policy statement as the Bank of Canada held interest rates steady at 1.00%. Economists were looking for stronger rhetoric from the BOC and hopes of higher future interest rates.

At the end of the trading day, the EUR/USD finished higher at 1.3380 after opening at 1.3314. The USD/CAD traded higher at 0.9922 following an opening day price of 0.9858. The AUD/USD was stronger at 0.9970 from 0.9937. US equities were stronger which fed into the risk taking environment as the Dow Jones Industrials traded higher at 11,837.93, up 0.4%.

Traders today will be following the release of the US building permits as well as the BOC Monetary Policy Report which may see an upward revision to the Canadian economic outlook for 2011 and 2012. Support and resistance for the USD/CAD are found at the February 2010 low at 0.9710 and the October and November lows at 0.9980.

EUR – Euro Continues to Recover on Interest Rate Expectations

The euro was once again trading higher versus the majors as the EUR/USD reached its highest level against the dollar since mid-December. But the euro finished the day off its highs following a meeting of European finance ministers that failed to come up with any palpable steps to tackle the European debt crisis.

Talk of rising European interest rates has provided a boost to the euro as traders increase their expectations of a rate hike in Europe. Last week’s hawkish comments by ECB President sparked talk of inflationary pressures in the EU and the euro has rallied ever since. This may help propel the euro higher given US policy makers are not expected to begin raising interest rates until early 2012.

At the end of the day, the euro was trading higher versus the dollar at 1.3380 from 1.3314. The EUR/CHF was up sharply at 1.2896 after opening the day at 1.2790. The EUR/GBP was higher at 0.8380 from 0.8353.

Euro strength may continue as interest rate differentials grow between the US and Europe. Current account numbers will be released from Europe today with economists forecasting a widening difference between exports and imports.

EUR/CHF support and resistance levels are found at the January 5th high at 1.2725 and last week’s high of 1.2950.

JPY – Bullish Chart Pattern Hints at Future Appreciation for the USD/JPY

The yen was trading lower at the end of the day as traders shunned traditional safe haven assets such as the yen and the dollar in favor of higher yielding assets like the euro, Aussie dollar, and equities. A lack of data releases on the Japanese economic calendar left the yen susceptible to news events in Europe and the US which were yen negative.

The USD finished the day higher at 82.60 after opening the day at 82.49. The EUR/JPY was up sharply at 110.60 from 109.85.

A bullish flag pattern has taken shape on the daily chart of the USD/JPY, hinting at renewed buying of the pair. Following a rally during the first week of the year, price declines have volleyed between the declining channel lines. Estimates from the chart pattern hint at a price appreciation in the pair that targets the September high at 85.90.

Oil – Oil Unchanged Despite IEA Report

Spot crude oil prices were flat after a report from the International Energy Agency suggested more crude oil supplies will be needed from OPEC as global demand is forecasted to rise. The Paris based organization increased its monthly 2011 and 2012 estimates by 320,000 barrels a day. However, the report also warned that oil prices above $100 a barrel could stymie crude oil demand, triggered by an economic slowdown due to high energy costs.

At the end of the trading day spot crude oil was trading near its opening day price of $92.15. Prices reached as high 92.84, the highest price in over a year.

Further gains in crude oil may be booked as the price of spot crude oil has retraced 50% of its price declines from its 2008 to 2009. Traders may want to target the 61.8% Fibonacci level from the price drop which comes in at $103.75.

Technical News

EUR/USD

Momentum is shifting to the upside as the pair is testing the 1.3500 high of its consolidation pattern. A move above this level would set the stage for further gains in the pair. Resistance levels are found at 1.3785, 1.3970, followed by the November high at 1.4280.

GBP/USD

The pair has been one of the strongest performers since the New Year, moving above the trend line from the November high and is quickly approaching the 1.6090 level. The Cable’s path higher is absent of major resistance levels until the November high and technical pressures may help push the pair higher.

USD/JPY

A bullish flag pattern has taken shape on the daily chart of the USD/JPY, hinting at renewed buying of the pair. Following a rally during the first week of the year, price declines have volleyed between the declining channel lines. Estimates from the chart pattern hint at a price appreciation in the pair that targets the September high at 85.90.

USD/CHF

Yesterday the pair tested but failed to close below the 0.9550 support level. Should the pair make a close below this support we may expect further declines in the pair in-line with the long term downward trend. Support for the pair comes in at 0.9500 followed by last year’s low at 0.9300.

The Wild Card

Silver

Spot silver appears to have found support at the 28.00 level. This bounce higher may be an opportunity for forex traders to enter long on the commodity with a target at the previous rising trend line from late August that should serve as resistance which comes in today at $30.60.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

In Brief

Speculation is rife about whether the Bank of England should raise interest rates.

Figures today show that UK average earnings are failing to keep up with inflation.

EU leaders did not agree to increase the EFSF bailout fund at their recent meeting.

Chinese President Hu Jintao is meeting Barack Obama in Washington.

In Depth

UK

Good morning! Inflation in the UK hit 3.7% in December according to CPI (Consumer Price Index) data released on Tuesday. Since then discussion about whether the Bank of England should raise interest rates has dominated the headlines.

On the one hand, the present inflation rate sits high above the Coalition’s target of 2.0%, and means consumers face higher prices for essential goods. On the other hand, raising the interest rate to combat inflation could upset the economic recovery.

Either way, market analysts have predicted the Bank of England will increase interest rates three times in 2011. Hence interest rates could sit as high as 1.25% by the end of the year. These predictions caused sterling to rise on the exchange markets on Tuesday, because higher interest rates mean higher returns on investments in UK bonds.

This morning meanwhile, the statistics for average earnings in the UK in November have been released, and reveal a 2.1% increase. This is negative for sterling, both because the number sits below market expectations of a 2.2% increase, and because it means earnings in the UK are falling well below inflation.

EU

The meeting between EU finance ministers to discuss increasing the size of the EFSF rescue fund came to a close on Tuesday, with no new announcements. There are two explanations floating around that account for this:

(1) EU leaders feel the crisis has diminished following successful bond auctions by Portugal and Spain last week.

(2) EU leaders are so completely at loggerheads they can’t agree a solution.

This morning for instance there are reports circulating that Portuguese Prime Minister Jose Socrates called German Chancellor Angela Merkel in Berlin last week, and begged her to tell him how to solve his country’s crisis. He had only one proviso: he would not accept an EFSF bailout.

Merkel though did not offer any advice: she simply consulted with ECB President Jean-Claude Trichet, who told her that advising Socrates was pointless, because he would not follow any guidance he was given.

Hence there could be trouble to come in the euro zone, if these reports turn out to be true.

US

Chinese President Ho Jintao’s meeting with President Obama in Washington is dominating the US landscape this morning. The meeting could prove acrimonious: US businesses are angry that China has been manipulating its currency to make it more attractive to investors, damaging the US economy.

Depending on what transpires between the two men, the US dollar could be affected.

Coming Up

The US Housing Starts data for December is released later today, indicating the number of new homes built in the US. This tells us how the US property market is shaping up. In addition the US Construction Permits data is released too.

By Peter Lavelle with specialist currency broker Pure FX.

Paxys, Inc. or PAX in the Philippine Stock Exchange is a firm that is engaged in the business process outsourcing (BPO) industry within the Asia Pacific. It deals with a wide range of services in BPO such as contact center, data conversion, salary packaging, and software solutions. One of its better known subsidiaries at least in the Philippines is Advance Contact Solutions. Industry-wise, the Philippines’ BPO sector has been expanding on a fast pace due to the sufficient amount of quality Filipino BPO workforce. It is estimated that the country’s BPO sector has been growing by 25% a year for the past several years and is expected to grow by the same in the years to come. At present, the industry is already worth around $7.5 billion which is equivalent to about 2.5% of the country’s gross domestic product (GDP). Expansion in the industry due to further foreign cost optimization and additional investments in BPO  structures, therefore, should and would in turn benefit its players like PAX.

Apparently, the 25% growth in the industry at least for 2010 did not reflect in PAX’s shares as they just continued to skid on a downward slope after peaking back in August 2009. In fact, PAX has traded within a descending channel and below its three moving averages since February 1 of last year. It was only today, when it finally breached the resistance of the descending channel and moved above the three moving averages after breaking out from a small cup and handle pattern. The recent breakout from the descending channel and cup and handle looks to be valid given the spike in volume. Hence, if buying interest remains, PAX could aim for its upside target of PHP 2.20.

More on LaidTrades.com …

Apples (AAPL) shares are declining today in the first day of trading since founder and chief executive Steve Jobs said he is taking another medical leave of absence from the company. In a letter to employees, Jobs said he is taking the leave so he can focus on his health, and that he and his family would appreciate privacy on the matter.