ForexTV Market Vision w/ Tim Kelly

Dollar Retraces But Future Uncertain

US Dollar got a boost as traders weighed the better-than expected earnings by Wells Fargo, higher inflation numbers and a slide in crude prices.  At 11:40 PM EDT Asian markets are following the US equities market lead and are sharply higher.  Yet, underlying uncertainty about the direction of the US economy as expressed in the FOMC minutes suggests that the growth and inflation picture is difficult at best as Bernanke and company all but reversed their assessment of inflation risks.  On the surface, the dollar strength appears to be more a retracement than reversal, and only time will tell.  According to reports published on ForexTV.com by Brewer Investment Group Euro will lead the retracement.  “Although the shift in sentiment attracted traders to the Dollar, this still only has the appearance of a retracement as no major bottoms in the EUR/USD appear to be threatened at this time. Until the Euro starts making lower tops and lower bottoms can one call the trend down. Based on the current chart pattern, look for this break to continue to at least 1.5825 to 1.5774 before stopping.  The key to this market turning bearish is going to be the secondary rally to test the 1.6038 all-time high.  If the market is topping, it will fail on this test.”(http://www.forextv.com/Forex/Commentary/ShowStory.jsp?id=15043&category=1) .

The bottom line here as I have stated previously in this segment is that we are in the midst of a secular shift in the global economy.  Traditional mechanisms of evaluating markets are confounding traders now on an intraday basis as they grasp for any semblance of the old world order.  Yet, strong oil and gold still results in lower dollar.  That has not changed.  Commodities prices will be the best barometer of long term forex price action.  In the mid-range horizon look at the options action.  Speaking to Bloomberg News, Kathy Lien of DailyFX.com said, “The risk reversal levels are very significant…It tells us that the selling in the U.S. dollar is getting overdone. Based upon the last few times that they have gotten toward these levels it tells us that we should have a reversal downward in the euro.''

Short-term the technicals are proving to yield the best indication of price movement.  Unfortunately, the gyrations in prices are so extreme and frequent that it is becoming no better than a gamble most days as traders wait for patterns to develop and then get confirmation.  Patience in this environment is a virtue.  Following is the ProSticks forex video report.

US Facing Economic Winter

FannieMae and FreddieMac aside, the U.S. financial markets are in a serious downslide and there appears to be no end to it.  Aussie and Euro are approaching historic highs, the US equities markets are retracing dangerous downside resistance levels and crude oil prices are maintaining historic levels.  Dollar is in retreat across the board and there are expectations of further downside.  The technicals are in play here more than at any other time in the recent past, as the economic calendar has no major, market-moving events in the next week or two.

Looking ahead for Asian session(from CEP News desk):

In addition to the release of the Japanese Cabinet Office's monthly economic report for July, the Bank of Japan's interest rate announcement is scheduled for Monday evening. The BOJ is expected to hold off on any rate movement this month. The bank's release of its monthly report of recent economic and financial developments is another highlight of the day.In Australia, aside from the release of the Westpac Leading Index of Economic Activity, RBA Governor Glenn Stevens is scheduled to speak on the subject of 'Challenges for Economic Policy' at an event organized by the Anika Foundation and Australian Business Economists. The Reserve Bank of Australia's July minutes will also be published.

Monday: (All times in EDT.)

21:30 AU Reserve Bank's Board July Minutes
July -14 JP BOJ Target Rate 15-July Exp: 0.5% Prior: 0.5%
July -14 JP Cabinet Office July Monthly Economic Report

Tuesday:
0:00 JP Tokyo Condominium Sales (Y/Y) June Prior: -17.7%
2:00 JP BOJ Monthly Report
19:50 JP Tertiary Industry Index (M/M) May Exp: +0.2% Prior:+ 1.8%
20:30 AU Westpac Leading Index (M/M) May Prior: +0.4%
22:30 AU Climate Minister Penny Wong Speaks in Canberra
23:05 AU Reserve Bank Governor Stevens Speaks in Sydney
14-30 July AU NAB Business Confidence Q2 Prior: -4

Looking ahead for European session(from CEP News desk):

It's a big day in the UK with the release of inflation data. Although core UK inflation is expected to remain steady, headline CPI is expected to tick higher in June. Economists expect annualized core inflation to rise 1.5% following a matching increase in May. Headline inflation is expected to rise 3.6% following the previous rise of 3.3%.Economists from Barclays Capital forecast a 0.4% rise in the CPI in June month-over-month, and a 3.5% increase year-over-year. "The key drivers of the monthly change are a 3.5% m/m rise in energy prices are linked to a 6.5% increase in petrol price and a 0.3% rise in services prices notably a 6% m/m rise in airfares, stronger than the seasonal average of recent years, reflecting the fact that some large UK carriers raised air passenger duty rates in the month," wrote the Barclays economists.

Economists from Capital Economics share the same view, putting the blame on increasing petrol prices. "The consumer prices figures have provided some nasty surprises in the last few months. Although inflation was expected to move above 3% in May - triggering only the second ever open letter from the Governor of the Bank of England to the Chancellor - the outturn of 3.3% was higher than expected. The picture is unlikely to improve in June's figures. If nothing else, petrol prices are likely to have registered another chunky increase in response to the latest surge in oil prices to close to $140 per barrel," the economists wrote.

The Centre for Economic Research (ZEW) will announce its Germany and euro zone economic sentiment indicator for July as well as the business sentiment figure for Germany on Tuesday. Economists are forecasting the ZEW German economic sentiment indicator to reflect continued pessimism regarding the economic outlook and fall to -55.0 after slipping to -52.4 in June. The German current situation indicator is also expected to decline further, going to 32.0 in July from the previous month's 37.6 level.

Economists from BNP Paribas predict that the ZEW survey will serve as a confirmation of economic deterioration. "The business sentiment index, which has generally held just below -40 since January 2008, weakened to a new threshold of-52.4 in June, the lowest level since year-end 1992. Given the size of June's decline, the July survey is expected to confirm the past deterioration, without necessarily building on it. The business sentiment index could level off temporarily or decline slightly. The current conditions index, in contrast, could drop off much more sharply after declining slightly in June, even though it still held above the historical average," wrote BNP Paribas.

Economists from Citigroup said they think that the ECB rate hike and the ongoing increase in oil prices have had a negative impact on the German economy. "The sixth consecutive fall in incoming orders will add to the downturn in business expectations. If our forecast is correct, this would be the lowest reading since late 1992, a time when Germany was in recession," wrote Citigroup.

Additionally, ISTAT will release its final estimates for the Italian consumer price index for June. No revisions to the preliminary estimates are expected.

On Tuesday, the Bank of France will report on its business sentiment indicator for June. Economists are expecting the indicator to dip further to 96 after slipping to 97 in May.

In terms of speakers, Central Bank of Ireland Governor John Hurley is expected to speak in front of the Parliamentary Committee in Dublin.

All times in EDT

2:30 FR Bank of France Business Sentiment June Exp: 96 Prior: 97

2:45 FR Current Account (EURO) May Prior: -€3.0B

4:00 GB Bank of England's Sentance Speaks at Pensions Conference

4:00 DE Germany's Glos Meets Russia's Medvedev, Putin in Moscow

4:00 IT CPI (NIC including tobacco) (M/M) June Final Exp: +0.4% Prior: +0.4%

4:00 IT CPI (NIC including tobacco) (Y/Y) June Final Exp: 3.8% Prior: 3.8%

4:00 IT CPI - EU Harmonized (M/M) June Final Exp: +0.5% Prior: +0.5%

4:00 IT CPI - EU Harmonized (Y/Y) June Final Exp: +4.0% Prior: +4.0%

4:30 GB CPI (M/M) June Exp: +0.4% Prior: +0.6%

4:30 GB CPI (Y/Y) June Exp: +3.6% Prior: +3.3%

4:30 GB Core CPI YOY June Exp: +1.5% Prior: +1.5%

4:30 GB Retail Price Index June Exp: 216.0 Prior: 215.1

4:30 GB RPI (M/M) June Exp: 0.5% Prior: 0.5%

4:30 GB RPI (Y/Y) June Exp: 4.3% Prior: 4.3%

4:30 GB RPI Ex Mortgage Interest Payments (Y/Y) June Exp: 4.4% Prior: 4.4%

5:00 DE ZEW Survey (Economic Sentiment) July Exp: -55.0 Prior: -52.4

5:00 DE ZEW Survey (Current Situation) July Exp: 32.9 Prior: 37.6

5:00 EU ZEW Survey (Economic Sentiment) July Exp: -56.0 Prior: -52.7

6:00 EU ECB Hurley speaks to Parliamentary Committee in Dublin

9:00 EU France's Lagarde speaks to EU Parliament in Brussels

July-15 IT Bank of Italy Releases Quarterly Economic Bulletin 15-July

July-15 PT ECB's Constancio Presents Summer Economic Bulletin in July

Oil, Gold trading Lower Lending to Dollar Strength

Dollar getting a boost from lower energy prices after the July 4th US Holiday week in spite of continued weakness in US economic data.  Crude prices were down over $5 a barrel to the $135 range on diminished concerns of conflict between Israel and Iran, and diminshed fears of a US landfall of Hurricane Bertha. U.S. pending home sales resumed their decline in May, falling 4.7% in the month after an upwardly revised 7.1% bounce in April, according to the National Association of Realtors. April's rebound was originally reported as a 6.3% gain, an unexpected bounce that followed an all-time low in the index in March.

Federal Reserve Chairman Ben Bernanke said the Federal Reserve may extend Wall Street's access to lending until 2009. Speaking at the FDIC's forum on mortgage lending in Arlington, Virginia, Bernanke did not speak on economic outlook or monetary policy, but he did say Congress may have to heighten its oversight of investment banks. He also said he endorses a proposal for a dealer liquidation process. The Fed Chairman said the financial turmoil that has rocked markets since August underscores the need to find ways to make the financial system more "resilient and stable."

Overseas, the G8 Summit in Hokkaido, Japan concluded, with world leaders agreeing on the need to stabilize the global financial system and on the fact that the global economy is slowing as a result of inflation from rising commodity prices.  G8 officials also expressed concerns over the high price of oil and food, urging increased refinery capacity and crude oil production.  Speaking from Hokkaido, Japan, French President Nicolas Sarkozy said that both American and European officials have expressed concerns over the weak U.S. dollar and the high value of the euro. The French president added that all would agree the gap between the Fed's and European Central Bank's interest rates is too high and that "monetary imbalances are disturbing the global economy."

Looking ahead to the second half of 2008 and into 2009 it is likely that the global economies of the world's largest countries in Europe and Asia are entering similar economic phases as experienced in the US starting almost one year ago starting with the mortgage crisis.  According to many analysts interviewed by ForexTV.com the EU is likely to experience difficult times ahead.  While it seems that world economic leaders have been idly talking about the need for a stronger dollar, the fact remains that unless dollar gets stronger, the world economy will remain under pressure.  Not to diminish the impact of inflation, look for leaders to enact policies that will lead to a stronger dollar...or try to.  More likely, the forces of global economics will lead to a strengthening dollar over the next six months.

Shortened Week Can Pack a Strong Punch.

This week, shortened by holidays in Hong Kong, Canada and the U.S. should not be taken lightly.  Already, data releases from the U.K., Japan, the U.S. and EuroZone have proven that that low volumes often translate into high volatility.  And it is not over yet!  Still to come is EuroZone PPI, Retail Sales, the ECB rate decision, Australian Trade Balance as well as Jobless Claims and Employment Situation in the U.S. on Thursday.  The big one is the ECB Rate announcement where most economists are looking for a 25 basis point cut.  While that cut is largely figured to be built-in to the current Euro price, nothing should be taken for granted in these times and the technicals on Euro and Yen presage potential, if not likely volatility in the days and weeks ahead.

Oil prices continue to weigh down the dollar despite brief gains today in the U.S. ISM manufacturing report that came in higher than expectations.  According to Michael Woolfolk, Senior FX Strategist at Bank of New York Mellon (a frequent guest on ForexTV.com) most of the manufacturing gains were "due to the building of inventories."  Woolfolk continued saying that (the ISM) was "quite a negative report." 

Crossing the wires at 6:00pm EDT Dow Jones is quoting an FX Strategist at BBH as saying there is a chance of a EURO sell-off after the ECB rate announcement if the pair does not hold the support level of 1.5720.

What is Ichimoku? Here is Ichimoku 101

With the help of our friends at ProSticks, (thank you Mr. Vincent Li and Hosada-san), I have prepared a brief video explaining the basic construct of Ichimoku charts.  In later segments, I will be covering interpretation.  To view live Ichimoku charts free visit us at Forex TV.  http://www.forextv.com/Forex/ProSticks/Forex-Charts.jsp

Markets settle after German IFO release and anticipate FOMC

EURO gave ground on sentiment that ECB may not be so quick to hike rates after German IFO reading is worst since 2005.  Oversold conditions in Yen had dollar making advances well into early in the Asian session and Sterling euphoria after retail sales has all but disappeared.  This is a choppy time in the markets ahead of FOMC on Wednesday as well as the approaching quarter end.  The Prosticks video below does not lend too much insight on direction either as the technicals on majors seems stalled accross the board.

June 20 - ProSticks & Ichimoku Update

Quiet calendar for the week end has the technicians looking for opportunities but flat market action leaves few trading opportunities.

Post G-8 The Macroeconomic Story is Inflation/Slow Growth...Can you say, STAGFLATION?

Starting back in February this year I began writing about the impending "stagflation crisis".  OK, I know we're all tired of the crisis-syndrome right now but we needed a new crisis to worry about.  After all, the housing crisis and the credit crisis are old news.  This week's data from the US and Eurozone have showed just that...slow growth and increased costs.  The energy and food price burdens can no longer be pushed aside or ingorned and it is looking like they are here to stay for a long time.  Even if the inflated price of energy comes back down to actual production, processing and shipping costs (around $80/barrel for crude) it is unlikely to change the equasion before the end of Q1 2009 on a CPI or wholesale level.

Interestingly, last week's US retail sales numbers were somewhat positive and may be a result of stimulous or just the relentless spending habits of US consumers going down swinging.  We will need at least two more readings on that to make a final judgement.

Look for currency markets to follow energy as we have moved into a sideways pattern on the majors.  Short-term highs in Aussie and Yen will likely result in some consolodation until the next major news/release cycle.  This is an ideal time to trade the technicals.  Stay tuned for tonights ProSticks and Ichimoku reports.

June 13 - Ahead of G-7 Dollar Bulls are running strong on inflation worries in the US. Midday Update w/ProSticks & Ichimoku Video Update

The hawkish tone recently adopted by US Central Bankers and Treasury Secretary Paulson was supported further this Friday morning by CPI data in the US.  While inflation is moderate the rising costs of food and energy are proving too much strain.  Fears of stagflation are very real at this point. Curing this economy has been a bitter pill to swallow thus far and I am not too convinced that the US economy is out of the woods just yet.  Consumer confidence is at historical lows and in the economy of perception, that is about as bad as it gets.  Take the Lehman situation as a prime example.  Lehman is not dead just yet but in the perception battle it is getting crushed.  Economic stimulus has help retail sales, but one question whether it could have...or should have been more.

The following is the days video for ProSticks and Ichimoku:

June 13 - ProSticks & Ichimoku Forex Update

The following are technical levels derrived from ProSticks & Ichimoku for Friday, June 13.  Please check back in two hours for the Friday video reports at approximately 9:00am EDT.

Chart is getting very bearish ahead of weekend’s G-7 meeting. Yesterday’s low was supported by previous important modal support 1.5350 (Pls refer 05/08 commentary).As commented before, taking out 1.5350, 1.5190 will be around the corner. Kumo upper band is levelling at 1.5650. This level may become historical top limit. At this level, risk to reward for being short is about 1:2. We would suggest jumping back on the bear train at or about kumo lower band 1.5520. If fill, stop at 1.5660.

 

Yesterday’s low was only 10 pips away from our projected support at 1.9440. (Pls refer to 06/11 commentary). Chart is getting very bearish and our bearish view is confirmed. If Gbp retraces for whatever reason before G-7 meeting, be short. Ichimoku fast line 1.9600 will be good level to build short position. If filled, stop at 1.9750.

Market flushed down and dipped into kumo confirmed top. Sell on rally. Ichimoku slow line 0.9470 will be good level to build short position. If filled, stop at all time high at 0.9650. Be a bear.

We were right that the bullish US undertone remain unchanged. Market tested our projected resistance at 108.10 again. Aggressive trader can stop buy at 108.20 if this level is violated for over an hour. If fill, stop at 106.70.

We were short at 866.00 level. Maintain strict stop at kumo lower band 885.00.