Tag : Eurozone

Mulder FX Update!

Posted by Byung Koo at 8:40 am

Dear clients,

An update from the front of FX trading. This times are very volatile in FX markets. The performance changed and will be change very rapidly. Last week we get a hit in performance, main reason is development in EUR/USD. We could managed a little with some currency pairs like USD/CAD and AUD/USD. Only performance plummeted last week.

FX trading is high risk, because high leverage. So movements like last week are extremely rare but it could happen. I think everyone will agree that stories in EUR, CHF and GBP are spectacular.

Our prediction still stands, EUR will recover from here and we will move above 1.30-1.35 again. Patience is key in this and also money management. Most of the clients are around 10% margin call, so far away of the 1% and our own bottom of margin call of 3,5%.

We believe in our strategy because we had the same period last year. We were in short positions in EUR/USD at 1.45-1.51 and on November when EUR/USD reached 1.5175, we also dropped in performance. Everyone knows what happened in December till now.
On that moment everyone in the markets said 1.60 again and maybe new highs in EUR/USD. Right now everyone talks total different and someone believe a parity in EUR/USD.

We are open for all reactions and opinions. We monitor this every day but we hold on our proved strategy for the coming months.

Feel free to ask your questions.
Best regards,

Byung Koo Mulder
CEO of Mulder Venture BV, Mulder FX

Euro on the Ropes as Greece Debt Crisis Grows Contagious

Posted by Mulder Venture at 6:26 pm

Euro on the Ropes as Greece Debt Crisis Grows Contagious

Fundamental Forecast for Euro: Bearish

-    Euro hits five-month low on S&P 500 tumbles
-    Fear of Greek debt crisis spreads to Spain and Portugal, sends Euro lower
-    Forex futures and options forecast for Euro shows many fear further losses

The Euro finished the week substantially lower against the safe haven US Dollar on sharp declines in the US S&P 500 and broad deterioration in financial market risk appetite. The ongoing budget deficit crisis in Euro Zone member Greece grew beyond its borders, causing a substantial widening in sovereign bond yield spreads for countries such as Portugal and Spain. Arguably the worst crisis to threaten the stability of the European Monetary Union to date, market reactions only exacerbated losses and the Euro was especially weak against the resurgent US Dollar.

Short-term forecasts subsequently depend on the trajectory of financial market risk sentiment, how it relates to European asset classes and the continued viability of the EMU. Though the 16-member Euro zone is no stranger to turmoil, sustained budget crises threaten to shake the foundations of the union and present real danger to the euro. Markets are subsequently likely to ignore anything but the biggest surprises in upcoming economic event risk and instead pay very close attention to ongoing activity in sovereign deficit troubles. The key question rolling forward is whether or not Greece can contain its growing budget deficit and whether any problems in one country can cause contagion across the broader Euro Zone. Similar budget issues in Portugal and Spain have come to the spotlight despite their comparatively manageable fiscal shortfalls and underline risks that fiscal troubles may spread to other EMU members.

Greece is in special danger not only due to the sheer size of the fiscal deficit as a percentage of GDP, but any political efforts to institute cuts in spending and rein in the deficit have been met with fierce popular opposition. The political deadlock is especially troubling given that the Greek government will need significant funding in the months ahead as the deficit grows and interest rate payments skyrocket.  If markets are unwilling to purchase Greek debt, then it seems likely that the strongest EMU countries may need to bail-out the debt-ridden country. Hawkish rhetoric from European officials suggests that few can stomach any such action, and it will be critical to see any and all developments in what remains a volatile situation across the common currency zone.

Fundamental data in the week ahead will likely take a backseat to broader financial market activity, but it may be important to watch any surprises in upcoming Q4, 2009 Gross Domestic Product reports from individual countries and the broader Euro zone economy. Consensus forecasts call for the second consecutive quarter of Euro zone economic growth at a 0.3 percent QoQ change. Any especially sizeable surprises could have pronounced effects on domestic financial markets and—by extension—on the highly risks-sensitive Euro currency. Long-term correlations between the Euro/US Dollar exchange rate and the US S&P 500 remain near record-highs and emphasize the pair’s sensitivity to risk appetite. Suffice it to say, any strongly negative GDP data releases or continued EMU deficit struggles could have similarly dire effects on the Euro.

A Range Pound EUR/GBP presents Scalping Opportunity

Posted by Mulder Venture at 3:06 pm

Both the ECB and BoE left their benchmark rates on hold today and signaled that they will remain on hold for the foreseeable future. The European central bank cited balanced risks with inflation expected to remain near 1.0%. British policy makers are already facing inflation above their target level of 2% but expect that it will move below for a period, allowing them to focus on stimulating growth. The EUR/GBP has started to settle into a short-term range as broader risk aversion has left little support for either. Solid support and resistance levels in the area also limit potential for a breakout.

Key Technical Levels

The EUR/GBP has traded in tight 60 pip range for the past week providing solid entry and exit levels for scalpers. The 20-Day SMA at 0.8794 and rising trend line support (6/22, 8/6, 1/20 lows) near 0.8670 are converging increasing the likelihood that price action will continue to concentrate.

Quantitative Metrics

EUR/GBP with an ATR of 77 pips is very attractive for scalpers as the limited daily range minimizes potential risks. The pair’s Bollinger band width of 536 pips is one of the lowest of the most traded pairs and is beginning to narrow signaling that price action may continue to condense.

Euro: Can the ECB Make Conditions Even Worse for the Currency?

Posted by Mulder Venture at 11:32 am

Fundamental Forecast for Euro: Bearish

-    Greek debt sales show little confidence in the country’s and the Euro Zone’s future
-    German business confidence hits an 18-month high
-    Did EURUSD find a medium-term top in January?

Fundamental pressure has been building up behind the euro for quite some time; but for a long time, the strong current of capital away from the US dollar was compensating for the currency’s shortfalls. However, now that the dollar is finding its bearings, the market’s second most liquid currency will be left to its own devices (though we can’t discount the impact that a strong dollar bid can have on EURUSD and therefore the euro itself). Looking for significant threats on and off the economic docket, there is plenty to keep track of. But the greatest risk to calm markets likely comes from unexpected indicators and unpredictable events.

While there is an extraordinarily busy economic docket for the euro over the coming week, these events can be accounted and prepared for. The same cannot be said for the wavering level of confidence among international investors for the regional economy. There are many reasons to doubt the strength of the Euro Zone and its currency; but the most politicized and media-hyped peril is Greece’s burgeoning budget deficit. The Greek Finance Minister has repeatedly assured the market that the government was taking the necessary steps to reduce its budget shortfall and they were not seeking a bailout from the European Union nor trying to sell debt to capital-rich countries like China. At the same time, the EU has repeatedly warned Greek that it was not doing enough to meet its goals to bring its deficit back within the limit within their time frame. Perhaps more disconcerting is the suggestion by EU Economic and Monetary Affairs Commissioner Almunia that there is no “plan B” for Greece and that “in the euro area, default does not exist.” If the economy cannot meet the group’s strict rules and the nation’s neighbors do not provide assistance, something will have to give. Whether that means a bailout (that spreads the pain) or a defection from the euro (which throws the stability of the currency into immediate doubt); the outlook for the currency is not bright. What’s more, Greece isn’t the only troubled EU member. Ireland, Spain, Portugal, Italy and many others are feeling the pain.

Where the euro finds some reprieve from the tumultuous seas that surround the health of its individual members and whole, there will be plenty of scheduled event risk that could generate volatility or add a fundamental aspect to sentiment concerns. Looking over the calendar, the ECB rate decision is top event risk. However, there is a very low probability that the market will be able to draw enough from the event to alter the time table for an eventual return of rate hikes. This past week, ECB member Mersch remarked that the group would not likely discuss altering policy until the March meeting. Fundamentally, there is little to encourage a near-term rate hike. Inflation pressures are muted, the economic outlook is tepid and policy officials realize that raising rates too early can turn a difficult recovery for many members into an impossible one.  Other economic readings will be several steps down in terms of economic impact. Factory and service activity indicator, retail sales and trade figures are all second or third tier indicators.

Euro sinks below $1.40, first time in 6 months

Posted by Mulder Venture at 1:29 am

The euro fell below $1.40 Thursday for the first time in six months as risk-averse investors parked money in dollars following disappointing economic reports.

More worries about public finances in the eurozone also brightened the dollar’s shine.

Weaker-than-expected news on employment and durable goods orders, a looming overhaul in U.S. banking rules and fears of default on European government debt all helped drive the dollar higher Thursday, continuing its gains over the past two months.

The 16-nation euro fell as low as $1.3938, its weakest level since July 2009. In later trading Thursday in New York, it fetched $1.3978 compared with $1.4038 late Wednesday.

The British pound dropped to $1.6127 from $1.6179, while the dollar was flat at 89.90 Japanese yen.

On Thursday, the government said orders to U.S. factories for big-ticket manufactured goods rose a meager 0.3 percent in December, while a drop in the number of newly unemployed people filing for jobless benefits fell short of expectations. The disappointing reports compounded uncertainty about how strong the U.S. economy is.

Meanwhile some investors are looking ahead to when the Federal Reserve may feel ready to raise interest rates off their historic lows, which would be a positive factor for the dollar.

On Wednesday the Fed held short-term rates near zero but also said economic activity continues to strengthen. One Fed official voted against the Fed’s plege to keep rates at record lows for an “extended period.”

“The upgraded outlook, the single vote to revoke the ‘extended period’ mantra, and the continued planning to unwind credit easing are all important steps toward tightening,” said UBS currency analyst Geoffrey Yu.

Low interest rates can weigh down a currency as investors move funds to other currencies that have higher yields. The U.S. has one of the lowest official interest rates of the major economies, and many emerging-market countries have substantially higher rates.

UBS is predicting a value of $1.35 for the euro as concerns over Greece’s public finances continue. Greece’s problems are also causing anxiety about high levels of indebtedness in other European countries such as Portugal.

Forex Trading: EUR/JPY

Posted by Byung Koo at 6:21 pm

In this article we will discuss our view on the EUR/JPY , related to short term goals.

In my opinion the Yen will be the most favored funding currency in 2010. With this in the back of my mind my outlook for EUR/JPY are set to be higher on short term (see graphic). In our view we won’t see don’t a major correction in the first quarter of this year. For the rest of the year we are bearish about the stock markets.

Mulder Currency Fund has already taken a small position on 132 and we will increase our position around the level of 131. We will put a stoploss order at 129.50. Whenever the EUR/JPY breaks 130, it will plummet  down to 127-128 levels, levels we saw mid December 2009.

In this case resistance levels are at: 133.25, 133,90, 134.50 and 136,50.
Main resistance levels are at 137-138 this year.

A big indicator you could follow before you take any positions is the cost for short term borrowing in Japanese Yen. Compare the YEN Libor 3 months and USD Libor 3 months.
When the YEN Libor is below the USD Libor this could benefit long positions in EUR/JPY. The JPY will be weaker because investors will switch the carry trade from USD to Yen.
Click for the latest Libor rates

Forex Trading: EUR/USD 2010

Posted by Byung Koo at 12:01 pm

In 2009 the U.S. Dollar dropped against other major currencies. From safe-haven currency to carry trade currency. From 1,2450 in March to 1,5150 in December. Back to 1,25 in 2010 it won’t happen I guess but only way for the U.S. Dollar is up against the euro. My prediction for end 2010 EUR/USD is 1,35.
Reasons for this, the FED is no longer implementing quantitative easing. Economic growth in the United States is likely to have a positive impact. EU suffer of deficit problems in more countries in 2010. Volatility in financial markets(mostly down) will investors boost the dollar.

For long term investors in currencies:
Short levels
1,4698, 1,4845en 1,5034
Buy levels
136,54, 1,3350, en 1,3152

2010 U.S. will lose their triple-A status

Posted by Mulder Venture at 10:57 am

The Big Trend

Excessive government spending causes foreigners and even our own citizens to continue to shun the dollar, which will continue to decline through 2010. China will begin to let the yuan appreciate, probably with an informal peg to a basket of competitive exporters. The yuan’s appreciation will export inflation to the U.S., not only in the obvious end-products, but also in the form of parts that are manufactured in China and used in assembled products here in the U.S.

Most economists expect inflation to remain flat due to high unemployment. Unemployment will likely remain around 10%, but it is normally around 5%. The dollar’s further devaluation (which by definition, is inflation) coupled with China’s appreciating yuan, will cause inflation here at home, long before most believe.

The Misplaced Assumption

The general assumption for interest rates is that they will remain low throughout 2010, with the Fed raising around mid-year. I expect the Fed to keep the funds rate near 0% through the end of the year and will likely use every arrow in his quiver to keep long-term rates low, at least until the end of April when the current “first-time” home buyer tax credit expires. Upon exhausting what can be done by the Fed, I expect the yield curve to steepen, with the 10- & 30-year Treasury yields rising sharply. Expect the 30-year yield to close above 6.5%.

The Watch List

Watch gold to rise above $1,500 during 2010. Miners, food and clean-water companies will have a good year. Especially companies selling products to the Chinese government or to the growing Chinese middle-class, regardless of the company’s domicile. People who stand to have a good year will likely consist mostly of conservative candidates come next November.

The Bold Prediction

Great Britain’s government debt, followed by U.S. Treasuries, will lose their triple-A status. Heavy deficit spending by Washington will continue to drive the dollar down as more countries and investors become concerned that the U.S. will not be able to pay debts through taxation or budget surpluses. As Treasury rates begin to rise, so will the deficit, both through the government’s overspending and due to the increased interest rate expense on current debt. The expectation, first with investors and then with rating agencies, will become one where the U.S. turns on the printing press. Expect AA+ by end of year.

G20 Comments on Currency Prices

Posted by Mulder Venture at 4:13 am

In the aftermath of the G20 meeting it seems that policy makers are still clearly disturbed about the state of exchange rates. In the last few days we have heard choirs of high profile complaints against currency strength. With the EURCHF trading around the 1.5100 level, markets should be focused on the recent SNB comments, which forcefully defend action (not a “beggar-thy-neighbor” strategy) while staying committed to their current interventionist policy.In Canada, BoC Governor Carney reiterated that long term persistent strength of the CAD would be negative for the Canadian economy and prolong soft inflation figures.

While yesterday ECB’s Trichet and Nowotny both said a strong USD is “important” for the global economy. Perhaps the most interesting, while confusing, would be the comments from Japan. Overnight new Minister of Finance Hirohisa Fujii seems to be backtracking from recent comments and now has expressed some displeasure at JPY moves but also declined to commit to intervention, stating the market had twisted his earlier statements. In the last 24hr Fujii has said “We are watching FX moves closely” and “FX intervention is possible under extreme circumstances.”

On the other side, Prime Minister Hatoyama stated that the JPY rise is already hurting small companies, hinting that the new government will probably not permit the Yen to appreciate forever. Sounds like the historical goverment policy of a weak JPY is returning.

These comments have created considerable distortion in the FX markets and traders would be advised to watch out for continued verbal intervention. Wall Street was able to close on a high note and for the most part Asian regional indexes follow (lone exception Shanghai -0.21%). The rally in risk appetite feels light with only a slight rebound in risk correlated trades. Yesterday’s economic calendar was light, while today we have couple of releases, which could move the markets. The UK Q2 GDP turned out to a nonevent, printing at -5.5% y/y vs. -5.4% exp, -0.6% q/q vs -0.6% exp.

And from the Eurzone September’s increase in economic sentiment to its highest level in a year is another good sign that the domestic economy continues to recover. Economic sentiment, jumped to 82.8 from 80.8 , a touch higher than expected . From the US we’re awaiting S&P/Case-Shiller Composite-20 Y/Y Jul house price index and the consumer confidence for September.