InvestMacro FX

By CountingPips.com

The latest Commitments of Traders (COT) report, released on Friday by the Commodity Futures Trading Commission (CFTC), showed that large futures speculators decreased their overall US dollar long positions last week while Japanese yen positions fell sharply for a fourth consecutive week and declined to their lowest level since May 2011.

Non-commercial futures traders, including hedge funds and large speculators, increased their total US dollar long positions to $12.98 billion on February 28th from a total long position of $17.25 billion on February 21st, according to the CFTC COT data and calculations by Reuters which calculates the dollar positions against the euro, British pound, Japanese yen, Australian dollar, Canadian dollar and the Swiss franc.

Individual Currencies:

EuroFX: Currency speculators sharply decreased their Euro short positions as sentiment for the euro currency improved for a second consecutive week last week. Euro net short positions decreased to 109,674 contracts against the currency on February 28th from the previous week’s total of 142,159 net short contracts.

The COT report is published every Friday by the Commodity Futures Trading Commission (CFTC) and shows futures positions as of the previous Tuesday. It can be a useful tool for traders to gauge investor sentiment and to look for potential changes in the direction of a currency or commodity. Each currency contract is a quote for that currency directly against the U.S. dollar, where as a net short amount of contracts means that more speculators are betting that currency to fall against the dollar and net long position expect that currency to rise versus the dollar. The graphs overlay the forex spot closing price of each Tuesday when COT trader positions are reported for each corresponding spot currency pair.

GBP: British pound sterling positions improved for a second consecutive week to see their best position since September, according to the data as of February 28th. British pound positions saw a total of 23,235 net short positions on February 28th following a total of 31,350 net short positions registered on February 21st. British pound sterling positions are now their best level since September 6th when positions equaled 13,220 short contracts.

JPY: The Japanese yen speculative contracts continued to decline last week to fall for a fourth consecutive week and dropped over to a total short positions for the first time since May 2011, according to the data on February 28th. Yen  positions dropped to a total of 1,203 net short contracts reported on February 28th following a total of 17,257 net long contracts on February 21st. Yen speculative positions, now in short territory, are at their lowest level since May 31st when positions totaled 1,648 short contracts.

CHF: Swiss franc speculator positions improved just slightly from the previous week. Speculator positions for the Swiss currency futures registered a total of 19,391 net short contracts on February 28th following a total of 19,846 net short contracts as of February 21st.

CAD: Canadian dollar positions rose higher for a fourth consecutive week and continue to be at their highest level since August. Canadian dollar positions rose to a total of 22,480 net long contracts as of February 28th following a total of 14,112 long contracts that were reported for February 21st. CAD positions are now at their highest position since August 7th 2011 when long contracts equaled 23,704.

AUD: The Australian dollar long positions rose slightly for the second consecutive week. Australian dollar positions increased to a total net amount of 78,201 long contracts on February 28th after totaling 74,700 net long contracts reported as of February 21st. The AUD speculative positions are now at their highest level since Australian dollar long positions totaled 81,438 on July 26th 2011.

NZD: New Zealand dollar futures speculator positions decreased after they had risen for nine consecutive weeks through February 21st. NZD contracts fell to a total of 22,114 net long contracts as of February 28th following a total of 24,211  net long contracts on February 21st. NZD contracts on February 21st had passed the previous 12-month high level recorded on August 2nd when net long contracts totaled 24,126.

MXN: Mexican peso speculative contracts improved for an eighth straight week and continued to be at the best position since August 2nd. Peso long positions numbered a total of 60,750 net long speculative positions as of February 28th following a total of 49,425 long contracts that were reported for February 21st.

COT Currency Data Summary as of February 28, 2012
Large Speculators Net Positions vs. the US Dollar

EUR -109674
GBP -23235
JPY -1203
CHF -19391
CAD +22480
AUD +78201
NZD +22114
MXN +60750

Other COT Trading Resources:

Trading Forex Using the COT Report

This is your opportunity to learn the method that has stood the test of time

By Elliott Wave International

In the 1930s, Ralph N. Elliott discovered that stock market prices tend to move in recurring patterns. He defined these patterns (or “waves”) and explained how they combine to create larger versions of themselves. He called his discovery the Wave Principle.

After much research into R.N. Elliott’s work, A.J. Frost and Robert Prechter published the 1978 text Elliott Wave Principle. This lesson captures a flavor of Elliott’s fascinating approach to market analysis.

The first step in Elliott wave analysis is identifying patterns in market prices. At their core, wave patterns are simple; there are only two of them: “motive waves,” and “corrective waves.” Motive waves are composed of five sub-waves and move in the same direction as the trend of the next larger size. A corrective wave follows, composed of three sub-waves, and it moves against the trend of the next larger size. As the picture below shows, these two patterns form similar structures of larger sizes, or “degrees,” as R.N. Elliott, the discoverer of the Wave Principle, called them.

The above pattern begins with waves 1, 2, 3, 4 and 5 that together form wave (1) — a five-wave, motive structure that tells us that the trend at the next larger degree is also upward. If you were reading this in real-time, and the rest of the pattern was not visible, it would also warn you to watch for a three-wave correction.

Corrective wave (2) in the chart above is followed by waves (3), (4), and (5), to complete an impulsive sequence one degree larger � labeled 1 (circled). This is followed by a three-wave correction of the same degree: wave 2 (circled) with subwaves (A)-(B)-(C). One way to think about corrective waves is that, because they move against the next larger trend, they lack the strength to unfold into a full five-wave move.

Learn the Elliott Wave Principle — Free If you’re interested in learning Elliott wave analysis, but haven’t yet gotten a copy of the book Elliott Wave Principle: Key to Market Behavior, check out EWI’s online edition. Even if you already have the book, the online edition is a handy way to look something up when you don’t have your book nearby. Learn the method that successful investors have used for decades.

With the U.K. base interest rate at a record low of 0.5%, many mortgage payers have given up chasing special deals and have reverted to their lenders’ standard variable rates (SVR). However, the Halifax is raising the cap on its SVR from April 2012. Does this signal the beginning of a move by other lenders to raise their SVRs?

The Halifax will increase the cap on its SVR from 3% above base rate to 3.75% above base rate from April 2012, although the actual SVR will remain unchanged. Currently, only 40,000 borrowers are affected by the change. But, with an estimated 1 million Halifax borrowers currently on its SVR, it can only be a matter of time before further changes are made.

The Halifax differs from most major lenders because its terms and condition allow it to change its SVR cap simply by giving borrowers one month’s notice of the change. Affected borrowers can repay their mortgage within 3 months without incurring early redemption penalties. Other major lenders with capped SVRs, Lloyds TSB/C&G and Nationwide, have no clause in their contracts allowing a similar change. A large number of their existing borrowers are enjoying a capped SVR of 2.5%, although new borrowers and those who have transferred to a new product have a new “revert to” rate of 3.99%.

Halifax recently brought in a new Homeowner Variable Rate of 3.99% for new mortgages. It seems likely that, over the coming months, it will bring its SVR in to line with this new rate. It is highly unlikely that the Halifax would risk the adverse publicity from the change in the capped rate simply to leave rates unchanged or to raise the SVR for a relatively low number of borrowers.

Impact on Borrowers:

The weak economy, combined with lenders reluctance to extend credit, means that borrowers affected by a change in the Halifax SVR may struggle to find an alternative source of finance. They could be stuck with higher monthly payments. On a £150,000 interest-only mortgage, a rise from 3.5% to 3.99% would equate to an additional £735 per year in mortgage payments. The knock-on effect is that affected borrowers would, at the very least, have less disposable income. Some borrowers, already under pressure in the current economy, may struggle to maintain their mortgage payments, leading to a potential increase in repossessions.

Impact on Other Lenders:

When considering whether the Halifax is leading the charge for other lenders to raise their SVRs, it is worth noting that most other mortgage companies do not have the flexibility to make such a change, due to the terms of their mortgage contracts. In addition, most major lenders currently have an SVR lying between 3.89% and 4.24%. It is likely that the Halifax’s increase in its SVR cap will simply allow it to bring its SVR in to line with other lenders’ current rates. This makes it unlikely that we will see a surge in SVRs until the base rate begins to increase. Financial analysts predict that the base rate will remain low for at least another 2 years.

The borrowers most at risk of SVR rises are those whose lenders are no longer lending to new customers or whose mortgages are sold to another company. This is exemplified by the Bank of Scotland’s move to an SVR of 4.95%. Bank of Scotland is now part of the Lloyds Banking Group and no new mortgages are being issued under this brand.

In Summary:

While the Halifax’s increase in its SVR cap is potentially bad news for its current borrowers, it is unlikely to signify a trend across the board.

Guest post contributed by freelance finance writer Elizabeth Goldman on behalf of Everest FX where you can learn forex and read about different forex strategies. The views and opinions expressed are of the writer and do not necessarily represent those held by Everest FX or Countingpips.com

Dollar Index Technical Update

• The USD-X has attempted to break beneath the pevious swing low and subsequently gained support at the confluence 78.20 area which has 38.2 ret and a FE61.8 expansions aligned with structure.
• The bullish engulfing candle which followed, after a failure to sustain the break lower, gave good follow through after an initial hesitation doji day.
• EURUSD price action is pointing towards further potential downside if the  1.3171 area can be broken below on a daily basis.  This would see associated upside on the index.
• This move higher has us looking towards potential resistance with price now close to the 38.2% retrace of the major swing lower around 79.50.  This wave began mid January through to early this week and has price pivot zone interaction.
• A failure to hold below the above technical resistance level would see the 80.00 psychological round number and the 50% retrace of the aforementioned wave come into play.

The Bulgarian National Bank announced on the 29th of February that its base interest rate would be reduced by 3 basis points to 0.15% as of 1 March 2012, compared to the previous rate of 0.18% set for February, and 0.22%, set in December for January.  The March rate of 0.15% compares to 0.18% in March 2011, 0.18% in March 2010, and 3.49% in March 2009.  Bulgaria reported inflation of 2.8% in December last year.  The Bulgarian economy was unchanged in 3Q11 (0.3% in 2Q11), placing annual GDP growth at 1.3% (2.0% in 2Q11).  Bulgaria's currency, the Bulgarian Lev (BGN), is pegged at 1.95 against the Euro; the USDBGN exchange rate last traded around 1.49.

Following is a list of all the headlines on Central Bank News during the month of February. The most notable developments during the month included the ECB’s second LTRO, China’s RRR cut, further quantitative easing from the Bank of Japan and Bank of England, and a number of releases from Central Bank News on the new monetary policy rate indexes.

Yelp began trading today on the New York Stock Exchange. The San Francisco based company sold 7.15m shares in the IPO that was priced last night at $15 per share, that makes the total amount raised to $107M. Like the several tech companies went public at the end of last year, Yelp isn’t profitable yet and has high operating costs. It had a loss of $1.10 per share in 2011 on revenue of $83.3M, and 64c loss per share in 2010 on revenue of $47.7M. 70% of Yelp’s revenue come from local advertising and another 21% come from national advertising.But if history is any guide, none of the concerns stopped the recent tech IPO’s from popping chart on the first day of trading. Yelp’s indirect competitor Groupon received lots of criticisms from investors but still jumped 31% in its November 2011 debut, and Yelp opened today above $24, which is more than 60% above the IPO price.

AT&T announced it will start slowing speed for mobile users who exceed 3GB/month, citing rising mobile traffic has been limiting its network capacity. The wireless carrier received piles of customer complaints about slowing data speed and hopes this announcement will offer clarity. CEO Randall Stephenson said the company expected the T-Mobile acquisition would add network capacity, but the regulatory opposition to the deal left AT&T with less time for network expansion.All national carriers are facing the network squeeze. Verizon Wireless ended the unlimited data offering last July and took away the long running New Every Two discount on phones. T-Mobile canceled the unlimited data plan in April 2011. Sprint remains the only one with unlimited data available for new customers.

25 out of 27 European Union leaders signed the fiscal treaty in Brussels today. The treaty aims to monitor budget discipline by imposing automatic corrections of deficits that fall away from agenda and will start to take effect on Jan 1, 2013.The EU leaders’ effort to coordinate came in the day after Eurozone reported another record high jobless rate. Among the 17 countries using the euro, jobless rate climbed to 10.7% in Jan followed a slight upward revision in Dec to 10.6%. Spain continues to hold the highest unemployment rate in the Eurozone at 23.3%. Austria sits the lowest on the spectrum at only 4%. Italy, which is going through the second recession in four years, has its unemployment rate rose to 9.2% in Jan from 8.9% in Dec.

Insight into this Molydenum company’s Q4 2011 earnings and business outlook from Chief Executive Officer Kevin Loughrey.