Market Overview by FXCC

**alayoua** · 09-21-2011 02:22 PM

Market Commentary 21 September

Falling on your sword is just so last century

“He’s not the messiah, he’s a very naughty boy.. – Monty Python, Life Of Brian.”

There was a time when politicians made an effort to set the moral agenda. However, given the refusal of leading politicians (in all countries) to accept any responsibility for their actions it comes as no surprise when the CEOs of major companies display the same levels of arrogance and defiance when confronted with their failure…

The harshest punishment Oswald Gruebel, chief executive officer of UBS, may face is pressure to cut the levels of risk and shrink the investment bank when the board meets in Singapore today, less than a week after a $2.3 billion loss (and ‘conveniently’ rising) from unauthorised trading.

The CEO apparently received a “scolding” yesterday from the Government of Singapore Investment Corp., the company’s biggest investor, who expressed “disappointment and concern about the lapses” and urged UBS to “take firm action to restore confidence in the bank,” according to a statement from the sovereign wealth fund after its senior management met with Gruebel yesterday.

Gruebel, was anointed with the responsibility to rebuild Zurich-based UBS after the huge bank suffered record losses on their U.S. sub-prime mortgage securities which in turn led to a state rescue. “Saint Ossie” helped to restore Credit Suisse Group AG’s profits as a consequence of the rescue and bailout.

Christian Hamann, an analyst at Hamburger Sparkasse;

“This is a black eye for Gruebel and the bank. On the other hand, he’s done a few things quite well and successfully stabilised the bank, which may have earned him some credit that he hasn’t used up yet.”

Eurobonds are being ‘pushed’ once again by the European Commission President Jose Barroso; “the commission believes we should look also at that option. We are not saying it is immediate. This is a matter that must be discussed, but we should not exclude that option either.”

The Eurobond initiative would be sold jointly by the euro area’s seventeen nations, it remains an option due to the fact that the bailouts by governments and the European Central Bank failed to alleviate solvency concerns. Barroso said in an interview with Bloomberg that the commission, (the European Union’s executive branch), will present euro-bond options very soon.

The reality of Greek Prime Minister George Papandreou’s brain-wave is beginning to hit the general populous, the new property tax, summarily dumped on the electricity bill from this month onwards, is causing anguish and despair in equal measures, could it be the straw that finally breaks the Spartans’ backs? Greek subway, tram, train, bus and trolley workers will hold a 24-hour strike in Athens tomorrow in opposition to their government’s plans to cull the public sector, according to spokespeople at the Greek Transit Workers Union.

As an example of modern day politicians not accepting responsibility for their collective actions G.Pap is Emmy award winning. However, in his and his country’s current predicament he’s snookered. If Greece wants the next tranche of bailout funds, in order to pay civil servants and to take care of the mundane office jobs, such as filling the ATMs with freshly printed Euros, then his government has to prove compliance with the previous bailout and an ability, based on incredible austerity cuts, to meet further loan obligations whilst continuing to pay loan shark rates for a few billion here and there off the ‘markets’.

As the two day Fed policy meeting comes to an end today many commentators and analysts are predicting something BIG to be announced at the culmination of the meeting. Presumably this announcement can only be positive news and indices will no doubt react accordingly.

The Federal Reserve appears likely to try to push long-term borrowing costs lower by re-balancing its $2.8 trillion portfolio of bond holdings to weight it more heavily to longer-term securities. Fed officials believe that by shifting bond holdings this will encourage mortgage refinancing and push investors into riskier assets, such as corporate bonds and stocks, without flaming consumer price inflation.

Asian markets were mixed in over-night/early morning trade, the CSI responding well to further bullish Chinese export and growth data closing up 3.02%. China is one of the few countries to be targeted for growth by the IMF. The Nikkei closed up 0.23% principally due to disappointing export figures. Japan’s exports rose in the year to August but at less than half the pace expected as the global economic slowdown, a strong currency and Europe’s sovereign debt crisis put Japan’s recovery in doubt. Weak exports are also an ominous sign as the Federal Reserve prepares for more QE, which will inevitably push the yen even higher versus the dollar directly worsening trade conditions for major Japanese exporters and employers. The Hang Seng index closed down 1% perhaps indicating that growth expectation is mainly focused on mainland China.

European bourses are mainly down in morning trade, the DAX leading the falls currently down 1.15%. The CAC is down 0.94%, the ftse is down 0.45%. the STOXX is currently down 0.74%. Cable has suffered a sharp drop and spike in morning trade as a consequence of the MPC minutes revealing that further QE is now a consideration. Sterling has fallen sharply versus Yen the Euro and the Swissy. The Euro has made significant gains versus CHF, as has the USA dollar. Gold is up $7 an ounce and Brent crude is up $21 a barrel. The SPX daily future is currently predicting a positive open up circa 0.5%.

The data publications of interest this afternoon include;

12:00 US – MBA Mortgage Applications
15:00 US – Existing Home Sales Aug
19:15 US – FOMC Policy Announcement Sept 21.

The FOMC announcement expected at 19:15 undoubtedly takes centre stage given the persistent rumours of a revised QE programme to be launched. We can expect different language, avoiding the use of “QE” to describe the fresh infusion and ‘asset’ purchase, however, the result will be the same. How long this latest twist in the Fed’s sobriety will last is the $14,737,251,228,137.12 question ( the live USA debt clock figure at 10.47am gmt).

http://blog.fxcc.com

**alayoua** · 09-21-2011 03:16 PM

Update - Daily Technical Levels from FXCC – 21 Sep 2011

EUR/USD Intraday Technical Levels:

Pivot: 1.3725
Preference: Short positions below 1.3725 with targets @ 1.3595 & 1.3555 in extension.
Alternative Scenario: Above 1.3725 look for further upside with 1.378 & 1.3835 as targets.
Comment: the RSI has broken below a rising trend line, the pair remains under pressure and is challenging its support.

USD/JPY Intraday Technical Levels:

Pivot: 76.55
Preference: Short positions below 76.55 with targets @ 76.1 & 76 in extension.
Alternative Scenario: Above 76.55 look for further upside with 76.75 & 77 as targets.
Comment: the RSI remains capped by a declining trend line, the pair stands below its resistance.

GBP/USD Intraday Technical Levels:

Pivot: 1.57
Preference: Short positions below 1.57 with targets @ 1.561 & 1.557 in extension.
Alternative Scenario: Above 1.57 look for further upside with 1.576 & 1.5825 as targets.
Comment: the pair has struck against its resistance and remains on the downside.

Daily Technical Levels from fxcc.com
Source: FX Central Clearing http://www.fxcc.com

**alayoua** · 09-22-2011 10:44 AM

Daily Technical Levels from FXCC – 22Sep 2011

EUR/USD Intraday Technical Levels:

Pivot: 1.3610.
Preference: SHORT positions @ 1.36 with targets@ 1.3495 & 1.345.
Alternative Scenario:The upside penetration of 1.361will call for 1.37 & 1.38.
Comment:the pair remains on the downside and isapproaching its previous low.

USD/JPY Intraday Technical Levels:

Pivot: 77.00.
Preference: SHORT positions @ 76.95 with 76.5 &76.25 in sight.
Alternative Scenario: The upside penetration of 77 willcall for 77.25 & 77.4.
Comment: the pair has struck against its strong resistanceand should face a weakness.

GBP/USD Intraday Technical Levels:

Pivot: 1.5520.
Preference: SHORT positions @ 1.551 with 1.5425& 1.537 as next targets.
Alternative Scenario: The upside penetration of 1.552will call for a rebound towards 1.5575 & 1.5635.
Comment: the pair stands below its new resistance(former support) and remains on the downside.

Daily Technical Levels from fxcc.com
Source: FX Central Clearing http://www.fxcc.com

**alayoua** · 09-22-2011 02:36 PM

Searching for +1, Perfect Correlation in Forex Trading

“Wow, has anyone else noticed that when the EUR/USD goes up the USD/CHF goes down?” is a ‘Eureka’ announcement often made by new traders when they first stumble upon basic correlation. In some respects it’s a good sign, it displays awareness.

However, as many forex traders will testify if it’s that easy we’d simply wait for one currency to spike and immediately take that perfect -1 negative correlation trade. It’d work for a while, then some funky algorithm at Blackrock would no doubt ‘front run’ the play taking out all our fun whilst hoovering up all the pips.

Surprisingly correlation is one of the least discussed topics on forums dedicated to forex trading and yet a thorough understanding of its mechanics and relevance should form part of any forex traders toolbox.

Correlation is a measure of the relation between two or more variables. The measurement scales used should be at least interval scales, but other correlation coefficients are available to handle other types of data. Correlation coefficients can range from -1.00 to +1.00. The value of -1.00 represents a perfect negative correlation while a value of +1.00 represents a perfect positive correlation. A value of 0.00 represents a lack of correlation.

Because currencies are priced in pairs, no single pair trades completely independent of the others. Once you are aware of these correlations and how they change, you can use them control your trading portfolio’s exposure.

The interdependence of currency pairs is straightforward to understand, here’s an example; if you trade Sterling versus yen (GBP/JPY) you are actually trading a derivative of the GBP/USD and USD/JPY pairs; therefore, GBP/JPY must be somewhat correlated to one if not both of these other currency pairs. The interdependence of currencies stems from more than the fact they are traded in pairs. Some currency pairs move in tandem, other currency pairs move in opposite directions, which is often the result of more complex forces.

Correlations change, which makes shadowing the changes in correlations important. Sentiment and global economic factors are increasingly dynamic and often change on a daily basis. Strong correlations today might not be in line with the longer-term correlation between two currency pairs. It’s therefore essential to consider the six-month trailing correlation. This provides a more focused perspective on the average six-month relationship between the two currency pairs, which tends to be more accurate. Correlations change for a variety of reasons; diverging monetary policies, a currency pair’s sensitivity to commodity prices, unique economic and political factors. Viewing correlation tables from minutes to weeks is also advisable for a comprehensive viewpoint and understanding.

How can we use correlations to manage our trading exposure, how can we use them to our advantage?

The most obvious answer is correlations can help us to avoid entering two positions that in effect cancel each other out. Knowing that EUR/USD and USD/CHF move in opposite directions nearly 100% of time (the -1 correlation) having trading positions of long EUR/USD and long USD/CHF is in some respects the same as having no position. A correlation table will illustrate that when the EUR/USD rallies, the USD/CHF will experience a sell-off.

Conversely, being long EUR/USD and long AUD/USD or NZD/USD is similar to doubling up on the same position given that the correlations are so strong. However, there may be valid reasons to hold trades of similarly correlated pairs, diversification being one.
http://blog.fxcc.com/searching-for-1-perfect-correlation-in-forex-trading

Source: FX Central Clearing Ltd. (FXCC BLOG)

**alayoua** · 09-22-2011 02:55 PM

Update - Daily Technical Levels from FXCC – 22 Sep 2011

EUR/USD Intraday Technical Levels:

Pivot: 1.3575
Preference: Short positions below 1.3575 with targets @ 1.341 & 1.332 in extension.
Alternative Scenario: Above 1.3575 look for further upside with 1.37 & 1.38 as targets.
Comment: the pair stands below its resistance and remains under pressure.

USD/JPY Intraday Technical Levels:

Pivot: 76.7
Preference: Short positions below 76.7 with targets @ 76.25 & 76.1 in extension.
Alternative Scenario: Above 76.7 look for further upside with 77 & 77.25 as targets.
Comment: the pair is under pressure and is challenging its support.

GBP/USD Intraday Technical Levels:

Pivot: 1.552
Preference: Short positions below 1.552 with targets @ 1.537 & 1.5285 in extension.
Alternative Scenario: Above 1.552 look for further upside with 1.5575 & 1.5635 as targets.
Comment: the pair is breaking below its support and remains on the downside.

Daily Technical Levels from fxcc.com
Source: FX Central Clearing http://www.fxcc.com

**freddy** · 09-22-2011 06:10 PM

Another nice place to check correlation/anti-correlation table:

Code:

http://www.forexticket.co.uk/en/tools/01-01-correlation

**alayoua** · 09-23-2011 09:50 AM

Daily Technical Levels from FXCC – 23Sep 2011

EUR/USD Intraday Technical Levels:

Pivot: 1.3575.
Preference: SHORT positions @ 1.3565 with targets@ 1.345 & 1.3385.
Alternative Scenario:The upside penetration of 1.3575will call for 1.363 & 1.37.
Comment:the pair stands below its resistance andremains under pressure.

USD/JPY Intraday Technical Levels:

Pivot: 76.55.
Preference: SHORT positions @ 76.5 with targets@ 76.1 & 75.95.
Alternative Scenario: The upside breakout of 76.55will open the way to 76.7 & 77.
Comment: the pair remains under pressure and is approachingits support

GBP/USD Intraday Technical Levels:

Pivot: 1.5450.
Preference: SHORT positions @ 1.544 with 1.5325& 1.5285 in sight.
Alternative Scenario: The upside breakout of 1.545will open the way to 1.552 & 1.5575.
Comment: the RSI is capped by a declining trend line,the pair stands below its resistance.

Daily Technical Levels from fxcc.com
Source: FX Central Clearing http://www.fxcc.com

**alayoua** · 09-23-2011 02:05 PM

Making Sure You Muse on Forex News

How economic literate are you? Some twenty years back as a bit of pre work ‘fun’, I set a small team of salesmen I was managing a pre work test. As with all our Wednesday sessions there was a prize at stake which always ensured a competitive edge to the quiz. The test had ten questions on the key economic issues of the day. One question that sticks in my mind was “what is the current interest rate?” At the time the rate was an eye watering 13-14% and despite most of us having mortgages only one or two of the eight knew the Bank of England’s base rate. It got worse, the result was that the ‘winner’ took the prize with four correct answers and the questions were not too taxing. Now what surprised me at the time was that both myself and my colleagues were selling multi unit office equipment deals, often with a large ‘ticket’ value, into the City of London. I’d expected (incorrectly) that all of us would be what I’d term “commercially aware”.

As a student of economics I’ve never lost my hunger for financial news, but I didn’t set the test at a high level, it was very basic. When walking into some of the major global financial institutions I believed that you had to have a brief understating of how they ‘worked’ even if only to strike up casual conversation away from the deal you’re there to (hopefully) take care of. For example, if selling equipment into a major bank today you should be able to comfortably hold your own in a discussion on where you believe the economy is headed.

As a consequence of my profession I have to be commercially aware, not just as a specialist forex trader, but also to offer FXCC a range of blog posts, articles and thoughts that will prove to be wide ranging, enjoyable and of worth to our clients. There’s little point in us regurgitating the same news published elsewhere, therefore we attempt to provide something slightly edgier and thought provoking, whilst still ensuring our customers eye is kept on the ball in relation to the key events and issues of the day.

http://blog.fxcc.com/making-sure-you-muse-on-forex-news/

Source: FX Central Clearing Ltd. (FXCC – BLOG)

**alayoua** · 09-23-2011 02:31 PM

Update - Daily Technical Levels from FXCC – 23 Sep 2011

EUR/USD Intraday Technical Levels:

Pivot: 1.3575
Preference: Short positions below 1.3575 with targets @ 1.3385 & 1.332 in extension.
Alternative Scenario: Above 1.3575 look for further upside with 1.363 & 1.37 as targets.
Comment: the pair is breaking below its support and should reach its previous low.

USD/JPY Intraday Technical Levels:

Pivot: 76.55
Preference: Short positions below 76.55 with targets @ 76.1 & 75.95 in extension.
Alternative Scenario: Above 76.55 look for further upside with 76.7 & 77 as targets.
Comment: the pair is under pressure and is approaching its support.

GBP/USD Intraday Technical Levels:

Pivot: 1.547
Preference: Short positions below 1.547 with targets @ 1.537 & 1.5325 in extension.
Alternative Scenario: Above 1.547 look for further upside with 1.552 & 1.5575 as targets.
Comment: the pair stands below its resistance and is shaping a bearish flag.

Daily Technical Levels from fxcc.com
Source: FX Central Clearing http://www.fxcc.com

**alayoua** · 09-26-2011 08:45 AM

Daily Technical Levels from FXCC – 26 Sep 2011

EUR/USD Intraday Technical Levels:

Pivot: 1.3475.
Preference: SHORT positions @ 1.3465 with 1.3385 & 1.332 in sight.
Alternative Scenario: The upside breakout of 1.3475 will open the way to 1.3575 & 1.363.
Comment: the pair remains under pressure and is approaching its previous low.

USD/JPY Intraday Technical Levels:

Pivot: 76.70.
Preference: SHORT positions @ 76.65 with 76.1 & 75.95 in sight.
Alternative Scenario: The upside breakout of 76.7 will open the way to 76.9 & 77.1.
Comment: the pair remains under pressure and is approaching its support.

GBP/USD Intraday Technical Levels:

Pivot: 1.5500.
Preference: SHORT positions @ 1.549 with 1.537 & 1.5325 in sight.
Alternative Scenario: The upside breakout of 1.55 will open the way to 1.5575 & 1.563.
Comment: the RSI is capped by a declining trend line, the pair stands below its resistance and should face a weakness.

Daily Technical Levels from fxcc.com
Source: FX Central Clearing http://www.fxcc.com