Thursday, September 23, 2010
RECOMMENDED BOOKS
 by R. Mark Rogers This handbook is geared to analysts and traders who need quick access to data relating to key U.S. economic indicators. It considers what indicators mean and how they are calculated, compiled, and reported to enhance informed financial decision making. Employment. . .Inflation. . .Consumer Spending. Each month, financial markets react to these and other important figures. The data, tables, charts, and graphs in this authoritative book explain how each indicator is determined, and how readers can effectively use this information. New sections include employment and labor figures, new GDP measures, and much more. |
 by W. Stansbury Carnes Useful for professional and individual investors, executives or business students--a unique atlas of what makes the markets move. Developed from a popular in-house pamphlet used at Shearson Lehman, this accessible and thoroughly illustrated resource makes understanding economic indicators much simpler. Charts and graphs. |
 The Trader's Guide to Interpreting Economic Indicators and Monetary Policy by Micahel P. Niemira, Gerald F. Zukowski Economic indicators and economic policy have an incredible impact on the volatile financial markets, yet it is often up to traders and investors to interpret the effects and take decisive action. Trading the Fundamentals explains the significance and market impact of all widely followed economic numbers, including the Consumer Price Index, Employment Report and other well-known indicators. Completely updated and revised to reflect today's highly computerized environment, Trading the Fundamentals provides readers with all the tools they need to analyze economic news and make appropriate investment decisions. New topics include: A new emphasis on data availability through the Internet; More detail on indicators such as layoffs and productivity; A completely overhauled discussion of Federal Reserve policy; A discussion of the phases of the business expansion part of the cycle. |
ECONOMIC INDICATORS ANALAYSIS
Economic Indicators analysis is the examination of the underlying forces that affect the interests of the economy, industrial sectors and companies. As with most analysis, the goal is to derive a forecast for the future. Learning the monthly sequence of economic releases and market reaction to each release is one of the first steps in learning to track the economy. Forex traders should be taught to compare market expectations with actual economic indicators and then evaluate market reactions. It's the difference between market expectations for an economic release and the actual release number that primarily affect market movement.
Currency prices reflect the balance of supply and demand for currencies. Two primary factors affecting supply and demand are interest rates and the overall strength of the economy. Economic indicators such as GDP, foreign investment and the trade balance reflect the general health of an economy and are therefore responsible for the underlying shifts in supply and demand for that currency. There is a tremendous amount of data released at regular intervals, some of which is more important than others. Data related to interest rates and international trade is looked at the closest.
Click to see upcoming economic events: Forex Economic Calendar
Currency prices reflect the balance of supply and demand for currencies. Two primary factors affecting supply and demand are interest rates and the overall strength of the economy. Economic indicators such as GDP, foreign investment and the trade balance reflect the general health of an economy and are therefore responsible for the underlying shifts in supply and demand for that currency. There is a tremendous amount of data released at regular intervals, some of which is more important than others. Data related to interest rates and international trade is looked at the closest.
Click to see upcoming economic events: Forex Economic Calendar
3. How to read quotes.
The rates are usually expressed as five-digit numbers. For example, USDJPY = 121.44 means that 1 US dollar is valued at 121.44 Japanese yens (i.e. they are willing to pay you that many yens for one US dollar while you are buying or selling). At the same time, GBPUSD = 1.6262 means that 1 British pound is valued at 1.6262 US dollars. Generally, if the rate XXXYYY = Z, it means that one unit of XXX is worth Z units of YYY.
When the rate has changed, for example USDJPY = 121.44 to USDJPY = 121.45 or GBPUSD = 1.6262 to 1.6263, they say that the rate has moved 1 point. As it follows from the information above, yen in this example has DEPRECIATED by 1 point, but the pound has APPRECIATED, also by 1 point.
While watching the charts, you should keep in mind that only euro (EURUSD), British pound (GBPUSD) and Australian dollar (AUDUSD) charts reflect real movements of the rates of these currencies (that is, chart going up, means increasing price), as growth (that is, charts moving up) mean decreasing rates (prices) for the other currencies.
Sometimes quotes are given as a pair, for example 121.44/49. It is a BID/ASK pair: the first number is BID, then the two last figures of ASK. Knowing that ASK is always higher than BID and that the spread is under 100 points, the full ASK real prices can always be defined. In this example ASK = 121.49.
When the rate has changed, for example USDJPY = 121.44 to USDJPY = 121.45 or GBPUSD = 1.6262 to 1.6263, they say that the rate has moved 1 point. As it follows from the information above, yen in this example has DEPRECIATED by 1 point, but the pound has APPRECIATED, also by 1 point.
While watching the charts, you should keep in mind that only euro (EURUSD), British pound (GBPUSD) and Australian dollar (AUDUSD) charts reflect real movements of the rates of these currencies (that is, chart going up, means increasing price), as growth (that is, charts moving up) mean decreasing rates (prices) for the other currencies.
Sometimes quotes are given as a pair, for example 121.44/49. It is a BID/ASK pair: the first number is BID, then the two last figures of ASK. Knowing that ASK is always higher than BID and that the spread is under 100 points, the full ASK real prices can always be defined. In this example ASK = 121.49.
2. Some codes, numbers and definitions.
2. Some codes, numbers and definitions.
Each currency is assigned a three-letter code. For example, US dollar is coded - USD (United States Dollar), euro is coded EUR (EURo), Swiss frank is coded CHF (Confederation Helvetica Franc), Japanese yen is coded JPY (JaPanese Yen), British pound is coded GBP (Great British Pound). The currency codes are defined by ISO-4217 standard. Usually they are formed as a two-letter ISO-3166 country code and the first letter of currency name. There are a few exceptions most notable being the euro (EUR).Currency rates are equal to ratios of currency units of different countries relative to each other. The rates are represented by 6-letter words composed of two three-letter currency codes. The first position is occupied, as a rule, by the code of a more expensive currency. The rates are expressed in units of the second currency per unit of the first one. For example, rates USDCHF (USD-CHF) show the number of Swiss franks in one US dollar, but rates GBPUSD (GBP-USD) show the number of US dollars having to be paid for one British pound. More detailed information on the codes of financial instruments may be found in this table.
CURRENCY TRADING
1. Purpose of trading
The purpose of trading on any market is to buy low and sell high. The foreign currency market FOREX is no exception. The goods traded on this market are rates of currencies of different countries. As any other goods the currencies have their prices.To settle transactions between businesses located in different countries, governments, speculative transactions and so forth, banks around the world execute currency trades on Forex Market. Depending on various trade, economical and other parameters, interest rates, central bank policies, time of the day, preferences and anticipations of the market players, and many other causes, the rates, that is prices, of currencies stay in ceaseless motion.
Your task as a trader is to determine the trend of the rate and buy an appreciating currency or sell a depreciating one, and then take your profits through execution of a reverse transaction.
And, at last, you will have a special trading account allowing you to buy and sell desired currencies. Despite of having US dollars in your account, you may start your trading from selling euro or japanese yens not concerning yourself with not having bought them in advance.
CFOS/FX division of Commodity, Futures, and Options Service, Inc. (CFOS)
CFOS/FX is the over-the-counter foreign currency ("forex") trading and forex brokerage division of Commodity, Futures, and Options Service, Inc. (CFOS), an Independent Introducing Broker in the cash and futures commodity markets with offices in Houston, TX, Sacramento, CA, Salt Lake City, UT, New York City, NY and Madeira Beach, FL. | ||||
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| Free demo account: | Yes | |||
| Trading Software: | ACC'T | |||
| Regulated: | NFA (USA) | |||
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| Headquarters: | CFOS/FX 2425 West Loop South, Suite 601 Houston, TX 77027 | |||
| Telephone: | 1-877-423-6739 (Toll Free U.S.) 713-622-7774 (Local) | |||
| Company URL: | www.cfosfx.com | |||
Sunday, September 19, 2010
CAD/JPY Once Again
Tim Black hosts the live trading room for the Asia trading session. His background is in computers and technology. He is addicted to charts and technical analysis and enjoys teaching and sharing his viewpoints in these areas. If you would like to trade with Tim click here.
CAD/JPY did what I expected this past week, even coming within pips of our second target with the help of the Bank of Japan. But it did it without me. If you guys followed me on Twitter this week, you’ll know I didn’t get in this trade because it sorta spooked me the way it pushed back down through the trend line. Hopefully, some of you didn’t follow my tweets and made some pips on this trade.
Well, I’m still bullish on this pair but with the move it made this week, it’s going to have to do a little retracing before I get in it. Here’s what I propose:
Just like last week, there are three nice piercing bars into the support zone. It’s also still making higher lows and now there is a nice confirmed weekly buy signal.
I’m going to look for this to retrace to the 61.8% Fibonacci level (around 81.92.) Then I’m going to WAIT until I get a confirmed 4 hour buy signal (a 4 hour candle that CLOSES higher than the prior candle) to get in long. I will place my stop below the 78.6% Fibonacci level (near 81.30) and target just below the recent high (near 84.00), the measured move (harmonic AB=CD, near 85.40) and the recent swing high near 86.20. This will give us a better than 3:1 Reward:Risk ratio.
ENTRY: Long on 4 hour buy signal near 61.8% retracement around 81.92.
STOP: Below the 78.6% retracement near 81.30.
TARGETS: 84.00, 85.40 and 86.20.
RR: Better than 3:1.
Remember to use your risk management rules in sizing your trade. And I know you’re very tired of hearing me say this WAIT, WAIT, WAIT for the proper entry. Just because I’m calling for an entry below the current level, doesn’t mean that a short to that level is a high-probability setup. What I’m saying is IF price action gets to the 81.92 level THEN a buy MIGHT be appropriate with the indicated signals.
Follow me on Twitter as I will tweet trade management for this trade.
CAD/JPY did what I expected this past week, even coming within pips of our second target with the help of the Bank of Japan. But it did it without me. If you guys followed me on Twitter this week, you’ll know I didn’t get in this trade because it sorta spooked me the way it pushed back down through the trend line. Hopefully, some of you didn’t follow my tweets and made some pips on this trade.
Well, I’m still bullish on this pair but with the move it made this week, it’s going to have to do a little retracing before I get in it. Here’s what I propose:
CAD/JPY Weekly
CAD/JPY Daily
ENTRY: Long on 4 hour buy signal near 61.8% retracement around 81.92.
STOP: Below the 78.6% retracement near 81.30.
TARGETS: 84.00, 85.40 and 86.20.
RR: Better than 3:1.
Remember to use your risk management rules in sizing your trade. And I know you’re very tired of hearing me say this WAIT, WAIT, WAIT for the proper entry. Just because I’m calling for an entry below the current level, doesn’t mean that a short to that level is a high-probability setup. What I’m saying is IF price action gets to the 81.92 level THEN a buy MIGHT be appropriate with the indicated signals.
Follow me on Twitter as I will tweet trade management for this trade.
Japan Can't Curb Yen's Gains by Acting Alone, Bank of Korea Governor Says
apan can’t resolve the difficulty of the strong yen unilaterally as currency-market intervention by a single country has limited effect, Bank of Korea Governor Kim Choong Soo said.
“Japan, alone, cannot resolve the problem of the strong yen,” Kim said at a media seminar in Incheon, southeast of Seoul, two days ago. “Japan will need policy coordination with others, including the U.S. and China. The effect is limited when one country tries to handle the issue by market intervention.”
Japan intervened on Sept. 15 for the first time since 2004 to protect its exporters, after the yen rose to a 15-year high against the dollar. The action stoked speculation that South Korea will move to counter a recent rise in the won, in an economy where overseas shipments are equivalent to about half of gross domestic product.
International trade has “significant impact on our relationship with other nations as we’re heavily dependent” on it, Kim said. His comments at the seminar were released today.
The won has risen 4.5 percent over the past three months and closed up 0.3 percent at 1,160.7 per dollar on Sept. 17. Further increases may hurt export competitiveness at firms such as Samsung Electronics Co., Asia’s biggest maker of semiconductors, flat screens and mobile phones, and Hyundai Motor Co., the country’s largest automaker.
Asked about international policy coordination on currencies, Kim said South Korea “is not in a situation to say something on the issue now and we need to see more how it affects our economy.” The yen has lost more than 3 percent of its value since Japan’s Finance Ministry sold the currency.
Interest Rate Policy
The Bank of Korea unexpectedly left its benchmark interest rate unchanged on Sept. 9, joining counterparts in Australia, Malaysia and New Zealand in pausing rate increases to assess the strength of the global recovery. A possible U.S. slowdown and persistent European fiscal problems are risks to growth, the central bank said after its decision.
Ten of 14 economists in a Bloomberg News survey projected a quarter-point increase to 2.5 percent, after Kim signaled on Aug. 25 that South Korea was alert to the risk of intensifying inflation expectations. The governor raised the benchmark by 0.25 percentage point in July from a record-low 2 percent.
The current rate of 2.25 percent “is not the most desirable,” though it will take some time to normalize as the bank must be certain of the world economic recovery, Kim said after leaving borrowing costs unchanged this month.
Asked about the central bank’s interest rate policy signals at the media seminar, Kim said “when we say we will take a right turn, then we will turn to the right -- the only matter is whether we will do it this time or next time. You should not believe that we’re not changing the direction.”
Exports fuelled a 7.6 percent expansion in South Korea in the first half, the fastest pace in a decade, and the economy will grow 5.9 percent this year, according to the central bank’s figures. The trade surplus will reach $32 billion in 2010, up from a previous forecast of $20 billion, the economy ministry said on Sept. 1.
-- Editors: Sunil Jagtiani, Paul Tighe
To contact the reporters on this story: Eunkyung Seo in Seoul at eseo3@bloomberg.net;
“Japan, alone, cannot resolve the problem of the strong yen,” Kim said at a media seminar in Incheon, southeast of Seoul, two days ago. “Japan will need policy coordination with others, including the U.S. and China. The effect is limited when one country tries to handle the issue by market intervention.”
Japan intervened on Sept. 15 for the first time since 2004 to protect its exporters, after the yen rose to a 15-year high against the dollar. The action stoked speculation that South Korea will move to counter a recent rise in the won, in an economy where overseas shipments are equivalent to about half of gross domestic product.
International trade has “significant impact on our relationship with other nations as we’re heavily dependent” on it, Kim said. His comments at the seminar were released today.
The won has risen 4.5 percent over the past three months and closed up 0.3 percent at 1,160.7 per dollar on Sept. 17. Further increases may hurt export competitiveness at firms such as Samsung Electronics Co., Asia’s biggest maker of semiconductors, flat screens and mobile phones, and Hyundai Motor Co., the country’s largest automaker.
Asked about international policy coordination on currencies, Kim said South Korea “is not in a situation to say something on the issue now and we need to see more how it affects our economy.” The yen has lost more than 3 percent of its value since Japan’s Finance Ministry sold the currency.
Interest Rate Policy
The Bank of Korea unexpectedly left its benchmark interest rate unchanged on Sept. 9, joining counterparts in Australia, Malaysia and New Zealand in pausing rate increases to assess the strength of the global recovery. A possible U.S. slowdown and persistent European fiscal problems are risks to growth, the central bank said after its decision.
Ten of 14 economists in a Bloomberg News survey projected a quarter-point increase to 2.5 percent, after Kim signaled on Aug. 25 that South Korea was alert to the risk of intensifying inflation expectations. The governor raised the benchmark by 0.25 percentage point in July from a record-low 2 percent.
The current rate of 2.25 percent “is not the most desirable,” though it will take some time to normalize as the bank must be certain of the world economic recovery, Kim said after leaving borrowing costs unchanged this month.
Asked about the central bank’s interest rate policy signals at the media seminar, Kim said “when we say we will take a right turn, then we will turn to the right -- the only matter is whether we will do it this time or next time. You should not believe that we’re not changing the direction.”
Exports fuelled a 7.6 percent expansion in South Korea in the first half, the fastest pace in a decade, and the economy will grow 5.9 percent this year, according to the central bank’s figures. The trade surplus will reach $32 billion in 2010, up from a previous forecast of $20 billion, the economy ministry said on Sept. 1.
-- Editors: Sunil Jagtiani, Paul Tighe
To contact the reporters on this story: Eunkyung Seo in Seoul at eseo3@bloomberg.net;
Queensland Opens A$7 Billion QR National Stock Sale, Largest After Telstra
Lance Hockridge, chief executive officer of QR National Ltd., speaks during a news conference announcing the company's initial public offering in Brisbane Photographer: Eric Taylor/Bloomberg
“QR National is a growth story - it is Australia’s largest rail freight company and the world’s largest rail transporter of coal from mine to port for export markets,” State Treasurer Andrew Fraser said at a pre-registration meeting for retail investors held in Brisbane today.
Queensland, the third-most-populous Australian state, is selling assets to prop up finances after the recession crimped government revenue. State Premier Anna Bligh said in December she’ll put other assets up for sale in the next two years, including a road network, a coal terminal and a port.
The government formed QR National in July when state-run rail provider QR Ltd., with assets worth A$12 billion, split its passenger train and freight operations. The sale of the non- passenger assets may fetch A$7 billion, Premier Bligh said in June last year. The Australian government sold A$15.5 billion of stock in Telstra, the nation’s largest telephone company.
QR National’s freight network is a “high-quality business” that will meet growing demand for resources in Asia, Fraser said. Public offer documents for the IPO will be available from Oct. 10, he said. QR National will “deliver value for taxpayers,” Fraser said, declining to indicate how much the government was hoping to raise.
Queensland, which is spending A$15 million on the IPO marketing campaign, will initially retain 25 percent to 40 percent of the floated entity, the state government said previously.
State Valuation
If the state keeps 25 percent of QR National and maintains Bligh’s A$7 billion valuation, the sale would be the largest stock offering in Australia since the Telstra sale.
QR National transported more than 198 million metric tons of coal during the 2009-2010 financial year and employs about 9,000 people, with a heavy-haul coal network of more than 2,300 kilometers, according to a presentation on its website.
The government in March appointed Credit Suisse Group AG, Goldman Sachs & Partners Goldman Sachs Australia Pty, Bank of America Corp.’s Merrill Lynch unit, Royal Bank of Scotland Plc and UBS AG to manage the sale.
Commonwealth Bank of Australia Ltd. and Wilson HTM Investment Group were named in July as co-lead managers and Ord Minnett Group Ltd. and Patersons Securities Ltd. were appointed co-managers.
Markets Tumble
Aston Resources Ltd., an Australian coal developer, had to cut the price of its IPO last month as markets tumbled. The reduction in Aston’s offer price follows a 5.9 percent drop this year in Australia’s benchmark S&P/ASX 200 index of stocks. Bilfinger Berger AG, Germany’s second-largest building company, pulled the IPO of Australian unit Valemus Ltd. after investors balked at the price.
Prices for coking coal, a steelmaking raw material, will peak in eight years, after which a market deficit will be plugged, Metal Bulletin Ltd. said in June. China and India, the world’s most populous nations, will account for 70 percent of coking coal demand by 2020, Metal Bulletin said in a report.
To contact the reporter on this story: Elisabeth Behrmann in Sydney at ebehrmann1@bloomberg.net
Asian Currencies Rise for a Third Week, Led by India's Rupee, on Inflows
Asian currencies strengthened for a third week, led by India’s rupee, as global investors pumped more funds into the world’s fastest-growing economies.
The Bloomberg-JPMorgan Asia Dollar Index climbed to its highest in more than two years month and the MSCI Asia Pacific Index of shares advanced as stock markets in India, South Korea and Taiwan each attracted more than $1 billion from abroad. China’s yuan had its best week since May 2008 as the U.S. called for faster appreciation and government reports showed pickups in industrial output, retail sales and inflation.
“The trend remains for Asian currencies to strengthen,” said Tohru Nishihama, economist at Dai-ichi Life Research Institute Inc. in Tokyo. “Funds will continue to flow into the region as the economic growth outlook in Asia is solid and stocks in the region have been rising.”
The rupee appreciated 1.3 percent this week to 45.845 per dollar in Mumbai, according to data compiled by Bloomberg. The yuan was 0.7 percent stronger at 6.7235, the Korean won climbed 0.4 percent to 1,160.70 and Taiwan’s dollar advanced 0.5 percent to NT$31.739. Thailand’s baht rose 0.4 percent to 30.72, a seventh straight weekly gain.
The Asia Dollar Index, which tracks the region’s 10 most used currencies excluding the yen, added 0.3 percent and the MSCI Asia Pacific Index climbed 2.2 percent. Developing economies in Asia will expand 9.2 percent in 2010, outpacing growth of 2.6 percent in advanced countries, the International Monetary Fund forecast in July.
Stock Inflows
Equity funds investing in Asia excluding Japan recorded the highest inflows in seven weeks during the period through Sept. 15, according to EPFR Global. The trend was “underpinned by renewed faith in the growth stories of the region’s heavyweights, China and India,” the research firm said.
India’s central bank this week increased interest rates for the fifth time in 2010 and Chinese Premier Wen Jiabao said his nation’s economy, the world’s second-largest, was in “good shape.” U.S. Treasury Secretary Timothy F. Geithner called for “significant” gains in the yuan, which yesterday touched the strongest level since official and market exchange rates were unified at the end of 1993.
The Philippine peso dropped 0.2 percent this week to 44.188 per dollar after central bank Governor Amando Tetangco said on Sept. 14 that policy makers were monitoring gains and signaled action may be taken to curb volatility. Japan unilaterally sold the yen on Sept. 15 in an attempt to halt appreciation after the currency climbed to a 15-year high versus the dollar.
“There’s a possibility that the rest of Asia will try to do the same to keep their exports competitive,” said Mohd Zaki Talib, a currency trader at RHB Bank Bhd. in Kuala Lumpur.
Malaysia’s ringgit rose 0.2 percent this week to 3.1020 per dollar, having reached a 13-year high of 3.0969 on Sept. 13. The Singapore dollar appreciated 0.5 percent to S$1.3340, a fifth straight weekly gain.
The Bloomberg-JPMorgan Asia Dollar Index climbed to its highest in more than two years month and the MSCI Asia Pacific Index of shares advanced as stock markets in India, South Korea and Taiwan each attracted more than $1 billion from abroad. China’s yuan had its best week since May 2008 as the U.S. called for faster appreciation and government reports showed pickups in industrial output, retail sales and inflation.
“The trend remains for Asian currencies to strengthen,” said Tohru Nishihama, economist at Dai-ichi Life Research Institute Inc. in Tokyo. “Funds will continue to flow into the region as the economic growth outlook in Asia is solid and stocks in the region have been rising.”
The rupee appreciated 1.3 percent this week to 45.845 per dollar in Mumbai, according to data compiled by Bloomberg. The yuan was 0.7 percent stronger at 6.7235, the Korean won climbed 0.4 percent to 1,160.70 and Taiwan’s dollar advanced 0.5 percent to NT$31.739. Thailand’s baht rose 0.4 percent to 30.72, a seventh straight weekly gain.
The Asia Dollar Index, which tracks the region’s 10 most used currencies excluding the yen, added 0.3 percent and the MSCI Asia Pacific Index climbed 2.2 percent. Developing economies in Asia will expand 9.2 percent in 2010, outpacing growth of 2.6 percent in advanced countries, the International Monetary Fund forecast in July.
Stock Inflows
Equity funds investing in Asia excluding Japan recorded the highest inflows in seven weeks during the period through Sept. 15, according to EPFR Global. The trend was “underpinned by renewed faith in the growth stories of the region’s heavyweights, China and India,” the research firm said.
India’s central bank this week increased interest rates for the fifth time in 2010 and Chinese Premier Wen Jiabao said his nation’s economy, the world’s second-largest, was in “good shape.” U.S. Treasury Secretary Timothy F. Geithner called for “significant” gains in the yuan, which yesterday touched the strongest level since official and market exchange rates were unified at the end of 1993.
The Philippine peso dropped 0.2 percent this week to 44.188 per dollar after central bank Governor Amando Tetangco said on Sept. 14 that policy makers were monitoring gains and signaled action may be taken to curb volatility. Japan unilaterally sold the yen on Sept. 15 in an attempt to halt appreciation after the currency climbed to a 15-year high versus the dollar.
“There’s a possibility that the rest of Asia will try to do the same to keep their exports competitive,” said Mohd Zaki Talib, a currency trader at RHB Bank Bhd. in Kuala Lumpur.
Malaysia’s ringgit rose 0.2 percent this week to 3.1020 per dollar, having reached a 13-year high of 3.0969 on Sept. 13. The Singapore dollar appreciated 0.5 percent to S$1.3340, a fifth straight weekly gain.
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