Why Stronger EUR Is Here To Stay

By world market pulse team on October 19,2010

Traders are likely to remain in a Euro Bullish mode despite the firming up of the US dollar amid Improved Home Builder Confidence even as EUR together with Scandinavian currencies under performed the rest of G10 at the start of the week after investors sought to take profit on their USD-short positions. EU’s Economic and Monetary Commissioner Olli Rehn has meanwhile indicated that the currencies will feature prominently on the agenda after Eurogroup’s Chairman Juncker had said that there has been too much volatility between the main global currencies.

According to analysts at CitiFx, ahead of the G20 meetings in Korea, euro area officials should continue to concentrate their efforts on promoting coordinated solution to the ‘currency wars’. In this regard we would expect to see further calls on EM economies to allow more flexibility of their currencies. At the same time there should be still fairly muted critique (if any) of the Fed plans to potentially add to its unconventional monetary policy accommodation. We think that the European officials continue to see the problems of euro area’s fiscally weak members as a far greater threat to its stability and growth outlook than the strong EUR of late.

Possible ECB Intervention: Even though the basic decision to intervene on the FX market lies with the ECOFIN, the economy and finance (and budget) ministers of the euro zone member countries, there is a possibility that the ECB could still take part in the discussions as a consultant. Analysts feel that the ECB is thus much more closer to the decision making process than say the BoJ which acts as an agent of Japan's MoF. On the flip side, the ECB has shown very little desire so far to engage in any interventionist talk or indeed into discussions about the EURUSD level.


EURUSD – Friday’s daily chart posted a significant daily reversal, which could well indicate that a period of consolidation could well now be due. This daily candle is classified as “dark cloud cover” or a weaker form of engulfing pattern and yesterday’s down move stopped short of the 1.3800 levels rebounding from 1.3830. Meanwhile according to Deutsche Bank analysts, investors had no reason to sit on any open positions after the Fed chairman Bernanke's speech on Friday until the central bank begins QE2, as they had already received confirmation and the market had already processed the information. Given that a significant amount of euro-shorts were forced out during the euro-rally last week, the weakness on Friday afternoon is transformed into bull-market exhaustion this morning. Our risk limit was undercut, leaving us with a neutral outlook. Significant corrections will be in order below 1.3850.



Euro ETFs To Watch Out For:

Rydex CurrencyShares Euro Currency Trust (FXE): The EUR/USD exchange rate is a foreign exchange spot rate that measures the relative values of two currencies, the euro and the U.S. dollar.

FXE Tracks: Euro Index. Expense Ratio: 0.40%

Short Euro ETFs

ProShares UltraShort Euro (EUO): ProShares UltraShort Euro seeks daily investment results, before fees and expenses, that correspond to twice (200%) the inverse (opposite) of the daily performance of the U.S. Dollar price of the Euro.

EUO Tracks: Euro (-200%) Index. Expense Ratio: 0.95%

Market Vectors-Double Short Euro ETN (DRR): As the Index is two-times leveraged, for every 1% weakening of the euro relative to the U.S. dollar, the level of the Index will generally increase by 2%, while for every 1% strengthening of the euro relative to the U.S. dollar, the Index will generally decrease by 2%.

DRR Tracks: Double Short Euro Index. Expense Ratio: 0.65%

Long Euro ETFs

ProShares Ultra Euro (ULE): ProShares Ultra Euro seeks daily investment results, before fees and expenses, that correspond to twice (200%) the U.S. Dollar price of the Euro.

ULE Tracks: Euro (200%) Index. Expense Ratio: 0.95%

Market Vectors-Double Long Euro ETN (URR): As the Index is two-times leveraged, for every 1% strengthening of the euro relative to the U.S. dollar, the level of the Index will generally increase by 2%, while for every 1% weakening of the euro relative to the U.S. dollar, the Index will generally decrease by 2%.

URR Tracks: Double Long Euro Index. Expense Ratio: 0.65%

For More World Market Pulse ETFs stocks futures commodities forex indicators forecast http://worldmarketpulse.com/

Analysing Us Dollar Rebound Post Bernanke's Speech

By world market pulse team on October 18,2010

The US dollar had its worst month since May 2009 against a basket of currencies. In fact for the last six weeks the US dollar has slid lower relentlessly on speculation that the Federal Reserve has no choice left but to embark on a further stimulus program to liven up the flagging US economy. Forex experts are of the opinion that Fed chairman Bernanke's speech on Friday underlined the inevitability of such a move in the near future with the US dollar index despite making new 8 month lows actually finished the day higher than when it started. Friday’s move off trend line support at 76.10 from the all-time lows in March 2008 at 70.70 in the US dollar index has provoked some short covering beyond 77.00, but it would need a break above 78.00 to really get things going.

Although most experts agree that the drop in the dollar was mainly due to the Federal Reserve’s willingness to continue quantitative easing. An excess supply of dollars obviously leads to a fall in its value. Some traders attribute the dollar’s fall to the increase in risk appetite. This analysis does not ring true as the price of gold is making new highs, which actually signals risk aversion.

The movement in the dollar index has a lot of effect on commodities and other currencies, even if it does not replicate the action of the index but the USD needs some sort of a trigger mechanism to come out of its negative sluggish cycle.

EUR-USD: Friday’s late slide in the single currency and failure to close above 1.4000 suggests that we could well see a correction lower after the gains of recent weeks. A new high at 1.4155, just shy of the 1.4195 resistance soon gave way to a sharp sell-off closing below the 1.4000 level and generating a daily dark cloud cover candlestick reversal.

Some of the other potential catalysts that can act for a positive Dollar Index are dicussed here.
Linking Economic Data Release And USD

According to BNP Economic Research, US economists tend to react quickly to data releases. When data comes in weak, expectations are scaled back lower, increasing the chance of data exceeding expectations. Hence, the surprise indicator becomes very erratic. Hence, months of positive data surprises are often followed by a months with negative data surprises. Only, when there were severe growth deteriorations as in autumn 2006, summer 2008 and the May – July period of this year will the surprise indicator run negative readings for several months. US growth expectations have been scaled down suggesting that it will not take a lot to exceed low expectations.

ETFs Investment Options include

Rydex CurrencyShares Euro Currency Trust (FXE): The EUR/USD exchange rate is a foreign exchange spot rate that measures the relative values of two currencies, the euro and the U.S. dollar.

FXE Tracks: Euro Index. Expense Ratio: 0.40%

PowerShares DB USD Index (UDN): The Index is a rules-based index composed solely of short USDX futures contracts. The USDX futures contract is designed to replicate the performance of being short the US Dollar against the following currencies: Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona and Swiss Franc.

Expense Ratio: 0.40%

iPath GBP/USD Exchange Rate ETN (GBB): The GBP/USD exchange rate is a foreign exchange spot rate that measures the relative values of two currencies, the British pound and the U.S. dollar.

Expense Ratio: 0.40%

iPath EUR/USD Exchange Rate ETN (ERO): The EUR/USD exchange rate is a foreign exchange spot rate that measures the relative values of two currencies, the euro and the U.S. dollar.

Expense Ratio: 0.40%


For More World Market Pulse ETFs stocks futures commodities forex indicators forecast http://worldmarketpulse.com/

World Market Pulse FX Update: Analyzing SEK Amid Lower Growth Forecast

By world market pulse team on October 16,2010


With the Swedish government revising its growth forecasts for 2011 lower in the budget presented Tuesday, citing the risk of slower growth developing in the eurozone as a result of fiscal austerity, there is a growing concern to see which way the Sweedish currency goes with almost 40% of Sweden’s exports heading to the eurozone is a rising concern. However, despite the prospect of slower exports to the eurozone, the government is still forecasting growth of 3.7% in 2011 and 3.4% in 2012. Although this is a downward revision from the earlier forecast of 4.0% growth for 2011, the pace of growth forecast by the Swedish government would still far outpace the anticipate growth in much of the developed world.


SEK Negatives: The Swedish government's latest budget has proposed SEK13bn of tax cuts and spending, experts feel that it they are in line with expectations and indications given ahead of the elections, but could very well prove insufficient to keep the economy on track if developments fail to meet the governments optimistic assumptions. Although Analysts at BNP Paribas feel that investors would still have to look to the emerging markets in Asia and Latin America to find a faster pace of growth as Swedish government estimates are on the optimistic side with BNP Paribas experts forecasting growth in Sweden of just 2.9% in 2011.


SEK Positives: Swedish data has been robust and better than the market had hoped for and Swedish rate expectations have risen accordingly. Despite the Fed moving towards further policy accommodation there is no concern at the Riksbank. Although there are rising concerns over the international environment and the level of the SEK, on the positive side, Riksbank’s survey of Swedish companies have revealed that that most corporations expect the economic climate to continue to improve over the next six months with a broad up turn in activity expected.

Amid all the negatives, experts continue to believe that there is still plenty of scope for the SEK to rally as Sweden continues to out perform its peers and the Riksbank looks to normalize momentary policy. Testimony to the fact is that the Swedish equity market has continued to outperform with the OMXC up 14.5% year-to-data (eurostox is currently down 6.4% year-to-date).

SEK TWI and Swedish Retail sales


Source: Reuters Ecowin Pro. The SEK is expected to extend gains as the Swedish economy is set to continue to out perform with the Riksbank maintaining its policy of normalizing monetary conditions. The SEK is still a long way from being overvalued on many measures, suggesting that concerns by some members of the Riksbank regarding the level of the SEK are unjustified.


SEK Projections: Analysts at BNP Paribas have recommended using any near-term EURSEK corrective rebound into the 9.32/9.34 area to establish renewed bearish strategies targeting the 8.90 area as NOKSEK is also set to extend the major down trend towards the 1.0970 area.


For More World Market Pulse ETFs stocks futures commodities forex indicators forecast http://worldmarketpulse.com/

World Market Pulse Forex Update: Analyzing G20 Sound Bites

World currency markets have been largely sluggish in the past week. As the November date of the FOMC draws ever nearer, there has been a wait and watch situation developing especially about the level of any stimulus especially in light of some of US Treasury Secretary Tim Geithner’s recent comments with respect to the major currency pairs.

Meanwhile the market sentiment turned out to be correct regarding the G20 finance ministers and central bankers meeting in South Korea as the meet failed to achieve anything of note apart from a few sound bites about monitoring the situation, and urging countries not to use their currencies as weapons of devaluation. Although the G20 meet made all the sound notes, analysts feel that it is unlikely to reverse the overall pressure on the US dollar as it continues to remain under pressure.

USD and Q3 GDP:

After the G20 meet failed to set any market tone, all eyes are now focussed on the coming week which can is a critical week for both the dollar as well as the pound as traders are keeping a close watch over the release of Q3 GDP figures for evidence of economic deterioration and the increased likelihood of further stimulus. Meanwhile the US dollar is continuing to show signs of a possible rebound as it continues to hold above key trend line support. The release of Q3 GDP on Friday where a figure of 2.2% is expected will in all likelihood be a key indicator of what sort of measures the Fed may embark on at the conclusion of its next meeting on November 3rd.

GBP: The pound is also set for a key week with the release on Tuesday of Q3 GDP where expectations are for a slip back to a figure of 0.4% which would be a shot in the arm for the dovish camp in the Bank of England’s monetary policy committee (MPC) for a further round of quantitative easing (QE) into the UK economy, and send the pound lower. The pound is currently trading near trend line support at 77.80 from its all-time lows on its trade weighted index at 73.05, set in early 2009. A break below this level could well target further sterling weakness in the near term. A break of this trend line could well target further sterling weakness towards this years low’s at 76.10.

World Market Pulse Euro Update: Traders are likely to remain in a euro bullish mode despite the firming up of the US dollar amid Improved Home Builder Confidence even as EUR together with Scandinavian currencies under performed the rest of G10 at the start of the week after investors sought to take profit on their USD-short positions. EU’s Economic and Monetary Commissioner Olli Rehn has meanwhile indicated that the currencies will feature prominently on the agenda after Eurogroup’s Chairman Juncker had said that there has been too much volatility between the main global currencies.