Tag : USD

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

Mulder FX Trade Tip: USD/CAD

Posted by Byung Koo at 12:40 pm

Canadian Dollar rallied last year from 1.30 USD/CAD to 0.9950 today. Recovery in oil price, gold prices and other metal prices gives Canadian Economy a major boost. Canada benefited form the Winter Olympic as well.  The question is; is it only good news at the horizon and could the CAD rally even further against the other major currencies?

We believe the rally will hold for at least the coming weeks and CAD will weaken against the U.S. dollar over the next three months. Looking at a long term chart (last 5 years). The rally will be stop around 0.98 and our target within three months, will be 1.07 around mid July!

Reasons:
The correction on the stock markets will be beneficial for the U.S Dollar against the Canadian Dollar.
Correction in Oil prices and other Metal prices (maybe except Gold) during the Summer. We predict an oil prices at 70-75 USD for next upcoming months.
Predictions of rate hikes by the Bank of Canada are unseemly.

Right now we already have a small position and are waiting to increase it when the CAD will rally to 0.98.

Trade wise and control your own money management before trading!

US Dollar Extends its Run but How Long will Risk Aversion Hold?

Posted by Mulder Venture at 9:24 am

US Dollar Extends its Run but How Long will Risk Aversion Hold?

Fundamental Outlook for US Dollar: Bullish

-    Risk appetite takes the lead on the US dollar’s rally
-    Non-farm payrolls has a limited impact on volatility, but the fundamentals are still weak
-    Will the dollar’s drive straight through next week or are there correction in store?

Considering the extraordinary rally the dollar was able to muster this past week, and the momentum it has added to the currency’s impressive bull trend; it may seem inappropriate to start speculating on when this drive will stall. However, it is vital to always have a view on the life span of a trend. Otherwise, how would we know when to take profit or otherwise stick it out for the full breadth of a developing move? The primary fundamental drive behind the dollar’s current run is a deep source of momentum. The reversal of risk flows in the financial markets can last for some time and entail substantial shifts in underlying capital. Throughout 2009, investors were looking to reinvest their speculative capital that had been idled by the worst financial crisis in memory. From cash and other ‘risk-free’ assets, investors were looking to first put their money back to work and second to avoid excessively risky markets. This meant a large influx of capital into specific markets. Naturally, a bottleneck of liquidity would form; and asset prices would rise dramatically in response. And, though values were undoubtedly depressed when the market’s first reversed higher in the beginning of the year, they were equally overinflated by the end of the year. What we are experiencing now is a move to find an equilibrium that is supported by the potential for growth and expectations for returns. This brings us to the critical question: how much excessive premium is there left to work down?

It is a complicated task to determine when the markets are fundamentally overbought or oversold – especially in the time frame of just the forthcoming week. There has been a move to deflate risk in the capital markets for approximately three weeks now; and the progress that some benchmarks (like the Dow) have made is very modest compared to the initial buildup. For this reason alone, it is reasonable to assume that a natural retracement can develop for a considerable time. However, for the dollar, the currency has already retraced more than 50 percent of its losses against the euro since its early-December reversal. As long as the risk aversion trend maintains its momentum, the greenback will benefit; but the amplitude of the currency’s move can diminish. A market flow reason for this is that the market may be comfortable in reinvesting in safe havens other than the US dollar and Treasuries. Another factor in this move is that carry positions that were funded using the US dollar (which has the lowest three-month Libor rates among its major peers) are being unwound and capital is being repatriated to the US. In near-term, the bearing on sentiment will depend on the catalysts available and the ease in developing trends. The focus will remain on big-ticket concerns like sovereign debt risk, efforts to curb speculation and the focus on potential points of systemic risk. And, with a relatively light scheduled docket, there may be little standing of the way of such trends.

The dollar’s broader trend will be defined by the general quality and direction of risk appetite; but in the end, this will be developed through the unpredictable nature of group fear and greed rather than any definable economic indicators. Among the few definable drivers that can have a meaningful effect on the sense of risk appetite for the global markets are the first readings of 4Q GDP numbers for the European region and Fed testimony on systemic risks. Other scheduled indicators like the advanced retail sales report, University of Michigan consumer confidence survey and trade balance will likely play a reduced role with short-term volatility.

US Dollar Stumbles as Risk Appetite Perks up, 2010 Budget Deficit Balloons

Posted by Mulder Venture at 2:51 pm

• US Dollar Stumbles as Risk Appetite Perks up, 2010 Budget Deficit Balloons
• Australian Dollar Establishes a High Level of Volatility before the RBA’s Rate Decision
• British Pound Recovers Lost Ground with Manufacturing and Lending Data

US Dollar Stumbles as Risk Appetite Perks up, 2010 Budget Deficit Balloons
The Dow Jones Industrial Average and gold were putting in for hearty advances Monday; so naturally the US dollar would end the session in the red. Risk appetite improved progressively as the day wore on, aided by a round of impressive economic data and a sense of market stability that stood in contrast to the past two weeks. Stability in price action and underlying sentiment cannot be overlooked. Just like the buildup of high-yield positions through 2009 necessitated a natural correction this year; the consistent plunge in risk appetite through the second half of January would encourage a correction to put the market back on a fundamental equilibrium. However, until the case for a meaningful change in underlying sentiment can be made, the changing winds can be chalked up to a correction in a larger trend.

Looking for specific drivers for price action today, there was a round of economic data and a few unscheduled events that would work it just right so that risk appetite would be reinforced while the dollar’s appeal would be further diminished from a global perspective. From the docket, this morning’s top release was the January ISM manufacturing activity report. In the past, this indicator was the second most market-moving indicator (behind NFPs); but with the focus shifting to much larger themes, its volatility potential has certainly ebbed. However, with the US struggling to establish its recovery, the indicator’s fundamental influence has actually increased. Much like the Chinese, Australian, Euro Zone and UK factory activity indicators released earlier in the day, the US reading pointed to recovery. The 58.4 headline figure was the highest level for the series since August of 2004. Perhaps more impressive was the component data. Production rose to its highest level since April of 2004 and new orders climbed to levels not seen since August of 2004. A note of caution should be taken when interpreting what this data means for the broader economy recovery though. Many economists are concerned that the clear strength in this specific sector is founded on rebuilding depleted inventories. If that is the case, the current run is ultimately limited. The other round of top flight event risk was the personal income and spending figures for December. Income rose for a sixth consecutive month while spending grew for a third. Considering consumer spending accounts for approximately three quarters of the economy, these are encouraging numbers. Yet, without a clear recovery in nationwide employment, the pickup in wages and consumption will amount to relatively little for the broader economy.

In contrast to the economic indicators of the past 24 hours, there were a couple events falling outside the regular data feed that would exact a far greater influence on a market that is more concerned with economic and financial health between economies. US President Obama released a $3.8 trillion fiscal 2011 budget that would push the current year’s deficit to a record $1.6 trillion. While rating agencies have repeatedly assured that the world’s largest economy would not see a credit downgrade; the market is nonetheless discouraged from the deep hole that the nation is digging itself into. As for the aim of this increase in spending, the president’s primary concern is job creation. To offset some of the outlay, the proposal calls for a freeze on some domestic programs, a fee on banks that benefited from the TARP program, and letting tax breaks for the oil industry and households with over $250,000 expire. As for the 2010 forecasts: inflation is expected to average 1.9 percent; the jobless rate was bumped up to 10 percent; and the GDP outlook was raised to 2.7 percent. Another report that came with a wide-angled lens was the Fed’s Senior Loan Officer Opinion Survey for the fourth quarter. According to statistics, loan demand from businesses and households weakened; while lenders have yet to begin repeal their tightening efforts of the past two years.

Australian Dollar Establishes a High Level of Volatility before the RBA’s Rate Decision
Over the past 24 hours, the Australian dollar was responding to the most active economic docket among the majors. And, though there are far fewer releases on board over the next 24; the fundamental influence will likely be even greater. Through Monday morning, event-risk traders were offered fourth quarter readings on housing prices and wage agreements, manufacturing activity and consumer-level inflation. The factory activity report notched higher; but it was the cumulative reading on price pressures that held the greatest influence over the currency. The Reserve Bank of Australia (RBA) is scheduled to announce its decision on interest rates today. All 20 economists polled by Bloomberg have forecasted a 0.25 basis point rate hike to 4.00 percent; but overnight index swaps reveal the market is pricing in some doubt at a 78 percent probability. For background, the central bank’s decision to hike the benchmark for a third consecutive time back on December 2nd was unprecedented. Not only would a fourth increase be unheard of; but it would come during a period when the global economy is struggling to establish stability in economic activity and financial markets. Furthermore, Governor Glenn Stevens suggested in commentary that followed the actual decision that further policy adjustments would likely come at a slower clip so that the economy could adjust to previous hikes. Therefore, if the central bank does hike today; the language that follows will likely further dampen expectations of a steady clip of policy tightening.

British Pound Recovers Lost Ground with Manufacturing Data
The British pound was perhaps the biggest move on the day; but the currency’s activity wouldn’t take a straight path. The single currency’s recent alignment to risk aversion flows (though the sterling is not a likely candidate for safe harbor nor was it used to extensively to fund carry positions) proved a fundamental weight as the sentiment improved market-wide. However, risk appetite wouldn’t be the only facet to today’s price action. Well-placed economic indicators proved fruitful enough that they helped offset the correction in risk appetite. Among a slew of manufacturing figures released Monday, the United Kingdom’s January reading would stand out with a 15-year high that points to a much-needed economic boost from a significant element of growth. Moving forward, the focus on Thursday’s BoE rate decision will intensify. There is speculation that the policy body will finally bring the bond purchasing program to a close. This would be a first step towards an eventual hike.

US Dollar Forecast to Appreciate versus Euro Ahead of NFPs Data

Posted by Mulder Venture at 9:32 am

Fundamental Outlook for US Dollar: Bullish

-    US Dollar surges to 6-month highs against Euro
-    Japanese Yen and US Dollar surge on financial risk aversion
-    January effect in the S&P 500 points to US Dollar gains in 2010

The US Dollar was far and away the best-performing G10 currency on sharp losses in the US S&P 500 and broad deterioration in financial market risk sentiment. A positive surprise in highly-anticipated US Q4 GDP results likewise helped boost the low-yielding Greenback, and the currency now boasts three consecutive weeks of fairly substantial appreciation against the Euro. Given previous bearish extremes in US Dollar sentiment and positioning, we have frequently argued that the otherwise-downtrodden currency could stage a major comeback through the new year. Already we see that both the Euro/US Dollar and S&P 500 have posted significant declines on the month, and the January Effect in stocks and currencies points to further Greenback appreciation into February and beyond.

The first week of February likewise promises a great deal of economic event risk, and forex options markets have priced in considerable price moves in the days ahead. The critical question is whether the US Dollar will react positively to better-than-expected data or instead respond to cues in the S&P 500 and other measures of financial market risk sentiment. Traders will get their first clue on the results of Monday morning’s US Personal Income and Spending as well as ISM Manufacturing survey results in rapid succession. Consensus forecasts call for modest pullbacks in Income and Spending growth in December, while domestic Manufacturers are likely to report slower gains in activity for January. Substantive surprises in either release could easily force US Dollar moves, but the true fireworks may wait until later-week ADP Employment Change, ISM Services, and US Nonfarm Payrolls releases.

US Dollar traders will pay extremely close attention to surprises in NFPs results, while earlier ADP and ISM numbers will likely shape consensus estimates for the monthly employment figure change. Economists currently predict that the US labor market added a net 13,000 jobs through the month of January, but the monthly figures are notoriously difficult to predict, very volatile, and prone to major revisions. Suffice it to say, most analysts often question the flawed report’s relevance to the US Dollar and other major asset classes. Yet traders respond to the data at hand, and any significant surprises in earlier ADP Employment and ISM Services Employment Index figures could easily set the stage for similar surprises in clearly market-moving Nonfarm Payrolls numbers.

Current market conditions make it extremely difficult to predict price action a day ahead and much less a week in advance. Yet recent momentum clearly favors US Dollar appreciation, and our research on the “January Effect” for currencies and the S&P strongly suggest that the Dollar could finish the year considerably stronger against the Euro and other major counterparts. What happens between now and December, however, is anything but clear. Shorter-term traders should keep a close eye on the S&P and other risk barometers surrounding major news events out of the US and other large economies. We remain bullish the US Dollar on the Euro’s break below 1.40, but sharp Greenback gains warn that a very-short-term correction is possible.

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: USD against major currencies

Posted by Byung Koo at 3:12 am

Tomorrow biggest news event of every month. NFP(Non-Farm Payrolls), Wednesday we saw an worse drop in jobs in ADP report.

The U.S dollar trading this week in a small range against major currencies, except Australian dollar who rally since the beginning of the week. What we could expect next week for the U.S dollar?

We will see a stronger U.S dollar next week and it will start Friday after the numbers. Because it’s very unclear where the U.S economy stands, the number will be bad or good. Analysts expectations are 0k. The number implicate that they even don’t know. Two scenarios:
What’s gonna happen in U.S dollar if we get another surprise and let’s say the number is + 25k-50k. First move in the U.S dollar is down against major currencies. People believe in more risk appetite but after the news settled the U.S dollar will start to rally because the expectations in rate hike later this year will raise fast. The movement will hold and even rally more next week.

Different scenario, bad numbers like Wednesday, like -50k-100K. The same patron will follow as above but on other reasons. First move in the U.S dollar will be down, because investors/traders see a bad number about U.S economy, so last number was one surprise not more, no continuous. This movement should also be covered by a rally in dollar because the stockmarkets will going down rapidly and investors buy the dollar, investors look for safe haven currency and downgrade risk appetite. This movement will start later than first scenario, because often you will see stockmarkets will hold steady on Friday trade, but for sure next week the U.S dollar will rally more than in first scenario.

Trade with smaller lots sizes than normal, because the movement after NFP are big for sure. First important number of the year 2010, so look out and trade carefully.
For exactly levels to take position is hard to say but few examples.
EUR/USD key level to take short positions: around 1.4550 if EUR/USD in range of 1.43-1.44 before numbers. Would EUR/USD stands before numbers like 1.4450 or higher, take short position at around 1.4650. Main key level in EUR/USD and also major resistance level is 1.47. Mulder Currency Fund would trade on the short side but main key level and support level is in EUR/USD around 1.4175, break this level we will see 1.40 very rapidly.

For many investors in other major currencies against the U.S dollar the movement will be more volatile. GBP/USD trade right now around 1.60. Go short on 1.6250 and main support level is 1.5800. USD/JPY shortposition at 93.50-94 and support level at 92.

After the numbers their will be also a big movement in other currency pairs, major movement expected in GBP/JPY and EUR/JPY.
Different story, Yen is last week ultra-weak, so if the NFP are better than expected, big movement up and not with 100 pips, maybe 300 pips.
Key resistance level and Mulder Currency Fund take short position in EUR/JPY at 136.00 and for GBP/JPY 151. Sometimes I think by myself I put my order too high, no fill but for sure after few secondes after NFP numbers I happy I put that order. For all traders if you trade well and love the volatility in the currency markets, you could earn a lot of money in one hour. Sometimes the same money what you earn in the rest of the whole month.

So please trade careful!

USD/CHF still in uptrend

Posted by Byung Koo at 10:15 pm

USDCHF broke its 3 week uptrend line on Friday with the collapse of EURCHF, however I still can’t confirm a reversal in trend. This week USD still gains against CHF and first target is 1,0624(first blue line). This could be reach in very short term(1-2 weeks). Very important is in this case USD/CHF will not break 1,04 again, break the trend, otherwise we see 1,0154 like in begin December. This scenario is unlikely, first my prediction USD, the currency will rally more in first months against major currencies in 2010 and also SNB will not stands aside and let the local currency appreciate against the Euro above 1,50 and this could lead to broader CHF weakness.

The State Secretariat for Economic Affairs (SECO) raised its growth outlook or the economy(CHF) in 2010 from 0.4% to 0.7% as household spending and construction activity is expected to be stronger than previous estimates. The demand for exports was also upgraded with improvement forecasted to continue into 2011. Indeed, 3Q industrial production rose 3.4% matching the improvement from the prior period. The notable difference was the improvement in orders on hand and sales which are signs of continued growth. Meanwhile, the KoF Economic Institute projected growth of 0.6% in 2010 with similar improvements in consumption and exports.

The second blue line 1,0850 is my main target for the short term(1 month). The open positions in USD/CHF in Mulder Currency Fund will be closed at this point.

Long term resistance 1,1658

Long term support 0,9966

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.

Risk Aversion Leads Equities Lower, USD Higher

Posted by Mulder Venture at 2:37 am

A new week begins and risk aversion is the dominant driver of FX markets. The broad USD move lower began showing signs of fatigue last week, and after some disappointing US data (durable goods orders, existing/new home sales figures); the markets have reined back their longs in commodities and risky assets.

Gold is having to re-familiarize itself with three-digit prices (trading at $988 vs. highs last week around $1020), and crude oil is down over 8% from this time last week after US inventory numbers last week revealed a glut of crude and gasoline supplies. The euphoria of global recovery always felt slightly overdone and now it seems markets have snapped back to reality somewhat. P/E ratios for the S&P show equities are still expensive; trading around 19 times profit, much higher than historical averages (16.3 over the last hundred years); despite our belief the longer term trend is for appetite to return and the USD to continue lower, for now we respect this correction in the market and will look to the broader indicators of market risk sentiment (Shanghai Composite, Baltic Dry Index) to direct our FX trades.

The G20 did not precipitate any firm policy initiatives; discussion of banker pay featured on the agenda, but this topic always feels like a populist distraction from the more important issues. The communiqué reiterated commitment to continue stimulus measures which should appease any fears of premature exit strategies; it also seems the G20 are leaving themselves flexible to allow for differential withdrawal of stimulus across countries in the coming months.

There’s very little on the data calendar today, but if the previous week has taught us anything it’s to watch out for policy-maker rhetoric. After Mervyn King’s devastating effect on GBP last week and ensuing criticism from traders, the Bank of England responded over the weekend that they were not trying to deliberately talk down the currency, though this provided little  boost to GBP after the fact. Japan’s new Finance Minister Fujii is also learning the pitfalls of easily-misconstrued comments after being quoted overnight that “it would be a mistake to use FX policy to defend industry” and “recent USD/JPY moves not abnormal”. USDJPY dropped on the news, taking out stops through 89.00 before Fujii returned to say that his comments were misinterpreted and were not intended to reflect government support for a strong JPY. USDJPY pared back gains to 89.60 levels, and one can’t help but think the new Fin. Min’s credibility may also have lost some ground in the process.