OctaFX.Com - Financial News and Analysis

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OctaFX.Com -EUR/USD Classical Technical Report 04.19

EUR/USD: The latest round of setbacks have stalled ahead of some key multi-week support by 1.3000 and from here we still can not rule out risks for additional consolidation above 1.3000, before considering bearish resumption. Ultimately, any rallies towards 1.3300 should be well capped, while a break and daily close back under 1.3000 would accelerate declines to the early 2012 lows at 1.2660.

Apr 19, 2012 06:26

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OctaFx -AUD/USD Classical Technical Report 04.20

AUD/USD: Our bearish outlook in this market is being reaffirmed with the latest pullback from the mid-1.0400’s and we continue to project deeper setbacks over the coming days and weeks back below parity. A fresh lower top now looks to be carving by 1.0465 but only back above 1.0640 would delay and give reason for concern. From here, look for a break and close back below 1.0300 to open the next downside extension towards 1.0000 over the coming sessions.

Apr 20, 2012 06:44

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OctaFX.Com -EUR/USD Classical Technical Report 04.20

EUR/USD: The latest round of setbacks have stalled ahead of some key multi-week support by 1.3000 and from here we still can not rule out risks for additional consolidation above 1.3000, before considering bearish resumption. Ultimately, any rallies towards 1.3300 should be well capped, while a break and daily close back under 1.3000 would accelerate declines to the early 2012 lows at 1.2660.

Apr 20, 2012 06:51

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OctaFx - Germany sees upswing amid eurozone turmoil

Ifo index of business optimism indicates Germany economy is picking up speed after slow period

FRANKFURT, Germany (AP) -- A key index of business optimism on Friday reinforced what an increasing number of economists are saying: Germany is beginning to see an upswing — even as the rest of the 17-country eurozone struggles with economic and financial turmoil over too much debt.

The Ifo institute survey of business executives published Friday edged up to 109.9 points from 109.8 the month before, beating market expectations of a slight decline. That follows an unexpected fifth straight monthly rise Wednesday in the ZEW index, which measures the outlook among investment professionals.

Both are leading indicators, suggesting where the economy might be headed in the next six months. Economists say these and other data mean Germany may now have avoided a recession and this year will easily outpacing the eurozone as a whole, which is expected to shrink 0.3 percent this year.

Leading economic institutes this week raised their forecast for 2012 to 0.9 percent from a 0.8 percent prediction last fall, and predicted 2 percent growth next year. Some economists now think the economy grew in the first quarter as well, avoiding a second straight quarter of contraction after a slight 0.2 dip in the fourth quarter of last year. Two quarters of falling output is a technical definition of recession.

Both parts of the Ifo index — estimates of current conditions and expectations for the next six months — were up. Sentiment rose among both industrial firms, which are often oriented toward exports in Germany, and retailers, which depend on domestic demand. Economists say Germany's low unemployment rate of 5.7 percent is giving workers the confidence they need to spend money in stores.

"The German economy is showing itself to be resilient," said Ifo institute head Hans-Werner Sinn.

Germany is motoring ahead even as fears worsen about the eurozone debt crisis. Spain and Italy are seeing higher costs to borrow money on bond markets and roll over their debt loads, while their economic growth is sagging. Their troubles — which could mean big losses for shaky banks if governments can't pay — hold out a threat to the European and global economies.

High borrowing costs and fears of default have already pushed Greece, Ireland and Portugal to seek bailout loans from other eurozone countries. Greece additionally had to ask creditors to write down €107 billion in debt that it could not pay.

Germany is reaping the benefits of efforts begun in the early 2000s to cut labor costs for businesses — a reform effort that has now been taken up by Spain and Italy but which may need years to bring them higher growth. It is benefiting from its traditional strengths as an exporter of cars and machinery, and growth has been boosted by the recovery in the United States and strong growth in emerging markets such as China.

Ironically, in some ways the debt crisis has given Germany some help.

Because of the country's reputation for stability, investors are willing to buy its bonds as safe places to put their money. That means rock-bottom borrowing costs for the government, in contrast to the heavy risk premiums paid by Italy and Spain to borrow — costs that threaten to undermine their budgets and create a self-fulfilling default spiral.

A two-year bond sold Wednesday cost the German treasury only 0.14 percent interest yield, and a 10-year bond issue from April 11 yielded only 1.77 percent. With inflation at 2.3 percent, Germany's creditors are accepting no return on their lending or even paying for the privilege of lending it money. Rates are also low because the European Central Bank has reduced its benchmark to a lowest-ever 1 percent.

German economists say those rock-bottom rates are helping lower borrowing costs for companies as well, spurring business investment that is helping fuel the recovery.

Additionally, the crisis has kept the euro's exchange rate weaker than it otherwise would be, boosting exports. The eight economic institutes who produce a twice-yearly forecast for the government says that means German goods are cheaper in foreign markets than they have been for 30 years.

The institutes warned however against complacency. They say their economy remains threatened by any wider disaster in the eurozone because 43 percent of its exports go to other eurozone countries — and 20 percent to the five crisis-hit countries, Spain, Italy, Greece, Ireland and Portugal.

That means a substantial 12.3 percent of Germany's economy is based on trade with the eurozone — suggesting that a financial disaster among neighbors could easily spoil Germany's improving mood.

Apr 20, 2012 14:09

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OctaFx - Australian Dollar Sold as CPI Data Confirms Expectations of RBA Rate Cut

Australian dollars flooded the market as traders unloaded positions in the currency in the face of disappointing CPI data which lent credence to beliefs that the RBA would cut its key interest rate next meeting.

THE TAKEAWAY: 1Q Australian CPI Rose 0.1% QoQ and 1.6% YoY > Price Increase Fell Short of Analyst Estimates, Sending Traders Scurrying Away from the Aussie Dollar > AUDUSD Dropped

Data released by the Australian Bureau of Statistics showed that the nation’s prices rose 0.1 percent in the first quarter of 2012 and rose 1.6 percent since the same time last year. Today’s numbers surprised traders who were anticipating larger figures. Markets expected the quarterly consumer price index (CPI) to rise 0.6 percent and the annual CPI, 2.2 percent.

Before the release, markets priced in a 94 percent probability that the Reserve Bank of Australia (RBA) would cut its key interest rate by 25 basis points to 4.00 percent. During its April meeting, the RBA noted that monetary policy easing would be possible in the face of moderating inflation, but that it would be “prudent to evaluate [price] data before considering a further policy adjustment.” In light of today’s CPI release and yesterday’s producer price index (PPI) falling short of expectations, an interest rate cut at the next RBA meeting appears very likely.

In the minutes following the release, AUDUSD dropped from 1.0317 to as low as 1.0255.

Apr 20, 2012 14:09

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OctaFx - Stronger U.S. data lift shares, dollar

OctaFx - Stronger U.S. data lift shares, dollar

NEW YORK (Reuters) - U.S. stocks and the dollar rallied on Tuesday after data showed U.S. manufacturing grew in April at the strongest pace in 10 months, soothing recent worries about the economy.

Safe-haven Treasuries prices fell, while gold retreated from two-week highs as the data dampened speculation the Federal Reserve would adopt fresh monetary easing measures to boost growth.

The S&P 500 and Nasdaq Composite indexes soared 1 percent after the Institute for Supply Management said its index of national factory activity rose to 54.8 from 53.4 in March, exceeding expectations of 53.0.

"The American economy is not as weak as some may perceive, and although it has stagnated a bit here, the American economy is doing very well," said Stephen Massocca, managing director at Wedbush Morgan in San Francisco.

"The fly in the soup is Europe. You have to keep an eye on these bond markets, and as long as Spain and Italy stay below six percent in terms of bond yields, that is a green light to buy stocks."

The Dow Jones industrial average (DJI:^DJI) was up 116.02 points, or 0.88 percent, at 13,329.65. The Standard & Poor's 500 Index (MXP:^SPX) was up 16.37 points, or 1.17 percent, at 1,414.28. The Nasdaq Composite Index (NAS:^COMP) was up 36.61 points, or 1.20 percent, at 3,082.97.

The MSCI world equity index (.MIWD00000PUS) gained 0.5 percent to 330.35. Trading was limited with many markets in Asia and Europe closed for the May Day holiday.

World stocks posted a loss of about 1.5 percent last month as worries about global growth resurfaced after data showed the U.S. economy cooled in the first quarter and the euro zone recession was deepening.

The weakness has also spread to other countries as the British manufacturing sector barely grew in April, hit by the economic slowdown in the euro zone, while Canada said its economy unexpectedly shrank in February.

Adding to bullish sentiment were signs of recovery in Chinese manufacturing. China's Purchasing Managers' Index rose to a 13-month high in April, suggesting the world's second-largest economy has found a footing and may be recovering from a first-quarter trough.

AUSSIE TUMBLES

The Australian dollar fell nearly 1 percent against its U.S. counterpart after the Reserve Bank of Australia slashed rates by a deeper-than-expected 50 basis points. Domestic government bond yields hit 60-year lows.

The dollar rose 0.5 percent to 80.18 yen, rebounding from a low of 79.62, its weakest point since February. The stronger yen hit Japan's export-related equities, sending the Nikkei index (NIK:^9452) down 1.8 percent to a 2-1/2-month closing low.

The euro slipped 0.1 percent to $1.3225, off an earlier one-month high of $1.3283.

Light volumes were expected before Thursday's European Central Bank meeting, Friday's U.S. non-farm payrolls report and weekend elections in Greece and France.

Brent crude rose 32 cents to $119.79 a barrel while U.S. crude rallied $1.10 to $105.97.

Gold inched up to a two-week high and last traded around $1,664 an ounce.

The benchmark 10-year U.S. Treasury note was down 9/32, with the yield at 1.9488 percent. Benchmark yields, however, are still hovering at their lowest levels in nearly three months.

May 01, 2012 13:57

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OctaFx - Dollar gains vs euro, yen as U.S. data allays fears

OctaFX.Com -Dollar gains vs euro, yen as U.S. data allays fears

NEW YORK (Reuters) - The dollar rebounded from a one-month low against the euro and a 2-1/2-month trough versus the yen on Tuesday after a key barometer of the U.S. manufacturing sector showed unexpected strength last month, assuaging concerns the economy was slowing.

The Institute for Supply Management's factory data bucked the trend of other recent data that suggested the economy was losing steam, prompting traders to rebuild long dollar bets that had grown stale as the economy's outlook weakened.

"The view on the economy has swung from optimism to pessimism of late and this could bring us back to the middle," said Nick Bennenbroek, head of FX strategy for North America at Wells Fargo in New York. "ISM suggests there's no real reason to get too concerned about the path of the U.S. economy at this point."

The ISM data, which showed the strongest rate of growth in 10 months, also downplayed recent speculation that the Federal Reserve will embark on a third round of bond buying to bolster the economy, lifting the appeal of the dollar.

In afternoon New York trading, the euro fell 0.2 percent against the dollar to $1.3218, retreating from a four-week high at $1.3283 hit earlier in the day.

"Once the euro rally lost momentum that led to massive interest in June euro $1.32 and $1.30 puts," said Matthew Schilling, a commodities brokers at RJO futures in Chicago.

"Those puts are showing the highest volume that I have seen in a while."

Investors who buy these puts expect the euro to fall below $1.30 or $1.32 before they expire on June 8.

Trade was thin, however, with many of Europe's trading centers closed for the May Day holiday. Light volume was expected before Thursday's European Central Bank meeting, Friday's U.S. non-farm payrolls report and weekend elections in Greece and France.

Against the yen, the dollar recovered from a more than two-month low, rising to a session high at 80.29 yen. It was last at 80.24 yen, up 0.6 percent.

Front-end volatility in dollar/yen remained under pressure despite the dollar hitting multi-month lows. On Tuesday, one- month volatility was at 8.35 percent, falling as low as 7.76.

Volatility curves in dollar/yen, however, are positively sloping, with back-month options still higher than short-dated ones - usually reflecting expectations of some stress. Ultimately, however, analysts said long-end volatility should decline as well because it has become expensive for investors to be on such a constant state of alert, given time decay.

The Australian dollar, meanwhile, was the day's biggest mover, falling sharply after the Reserve Bank of Australia slashed rates by a deeper-than-expected 50 basis points.

The Aussie fell 0.9 percent to US$1.0334 and slid to a three-month low near 82 yen.

"The RBA move means we no longer see a cut in June, but data in the coming months will be of particular focus in the wake of this rather unprecedented cut," TD Securities said in a research note.

May 01, 2012 15:09

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OctaFX.Com - Greece pressures euro, investors seek safety

LONDON (Reuters) - The euro neared a three-month low and safe-haven German bonds and the Japanese yen rose on Wednesday as political disarray in Greece and the rising costs of fixing Spain's banks fueled fears the euro zone debt crisis would take a sharp turn for the worse.

The concerns over Europe added to worries about the impact of softer growth in the U.S. on the global economy to push down European shares. Wall Street was also poised to open lower (.N), oil prices were down for a sixth straight session and the

commodity-linked Australian dollar hit new lows.

Spanish 10-year bond yields climbed back above 6 percent - a point away from levels deemed unsustainable - and investors kept a wary eye on Athens, where efforts to form a government were expected to fail, putting its bailout deal in doubt and raising the possibility of Greece being forced out of the euro.

"The sensitivity to political developments in Greece is largely a reflection that the probability of Greece exiting the euro, posing a significant threat to global financial stability, has increased," Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ said.

The euro fell 0.2 percent to $1.2970, closing in on a three-month low near $1.2955 touched on Monday below the $1.30 to $1.35 range it has traded within for most of the year.

"We still think the euro will head lower with $1.2950 the level to break in the near-term," said Lauren Rosborough, senior FX strategist at Societe Generale, who have a medium-term target of $1.2500.

The Japanese currency was a big beneficiary of the weaker euro, climbing to a two-and-a-half month high versus the dollar of 79.61 yen as investors sought safety.

The dollar itself remained supported against a basket of currencies by its own status as a safe haven, with the dollar index (.DXY) up 0.2 percent at 79.943.

Some analysts argued fears of a Greek exit from the euro were overblown.

Credit Suisse said while the probability of Greece leaving the euro had risen, the massive implications the move would have for the major nations within the 17-member currency bloc still made it unlikely.

"We now put a 15 percent probability of Greece leaving the euro, up from a previous estimate of 5 percent," the bank's equity strategists said in a note.

The key reason this probability remained low was that 70 percent of the country's debt was owned by the official sector, which includes the IMF, the European Central Bank and the EU.

"If Greece left the Euro-area, then the default on sovereign debt would be worse than that if it stayed in the euro-area."

SPANISH BANK DRAIN

Added to the fears over Greece were worries about the cost of cleaning up the Spanish banking system after financial sources told Reuters the government would demand its banks raise around a further 35 billion euros ($45.48 billion) in provisions against loans in their property portfolios.

The government and the banks in Spain are belatedly recognizing a multi-billion funding gap in the financial system linked to a 2008 property crash that has heightened fears the country may need an international bailout.

The impact of the cash demand on Spanish banks sent the main euro zone bank index (.SX7E) down 3.3 percent, dragging down the FTSE Eurofirst (.FTEU3) index of top European shares by 1 percent to 1,007.80 points.

While the escalation in concerns about the euro zone and its potential to be a further drag of global growth pushed the MSCI world equity index (.MIWD00000PUS) down 0.6 percent to 315.79 and near lows last seen in February.

GERMAN DEBT GAINS

In the debt markets the fragility of Spain's banking system saw Spanish 10-year government bond yields climb 16 basis points to 6.03 percent, and above the 6 percent mark that could see the rise in yields accelerate if the break is sustained.

The cost of insuring Spain's debt against default also rose 19 basis points to 512 basis points.

And with investors fleeing the peripheral euro zone debt markets the German debt market, already offering ultra-low yields, posted new records.

The key 10-year German government bond set a record low yield of 1.524 percent and the German Bund futures contract hit an all-time high of 142.75.

The government was able to capitalize on the safe haven demand by selling old four billion euros ($5.2 billion) of new five-year bonds with a record low coupon of 0.5 percent.

News that exports and imports rose to record monthly levels in March was another signal that Europe's largest economy is fending off the euro zone debt crisis far better than others.

In commodity markets Brent crude slipped towards $112 a barrel, on track for its longest losing streak in almost two years and U.S. crude was at $96.35, down 66 cents.

The commodity-linked Australian dollar also fell 0.5 percent to $1.0066, having touched a low of $1.0052 at one point, the lowest level in more than four months. The New Zealand dollar also touched a 4-month low at $0.7842.

The price of gold fell for a third day, touching a four-month low and all but wiping out its gains for the year.

"With deflation becoming more of a risk in some parts of the world, like Europe, and the Fed less inclined to do another round of QE3, the inflation hedge argument isn't as strong as it was a couple of months ago," said James Shugg, senior economist at Westpac. ($1 = 0.7695 euros)

May 09, 2012 10:10

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OctaFx - Euro clouded by Greece and Spain worry

LONDON (Reuters) - The euro fell close to a recent three-month low versus the dollar on Wednesday and the safe haven yen rose broadly amid worries over the impact on the euro zone stemming from political turmoil in Greece and the fragility of Spain's banking sector.

The euro remained under widespread pressure after the leader of Greece's Left Coalition party said on Tuesday that the country's commitment to a European Union/International Monetary Fund rescue deal had become null and void.

Greece's two main pro-bailout parties failed to win a majority in weekend elections, leaving questions over the country's ability to avert bankruptcy and stay in the euro.

Added to instability in Greece, French President-elect Francois Hollande has advocated an approach to tackling the debt crisis centered more on growth, which may create tensions with Germany's insistence on fiscal austerity.

Wednesday's moves suggest the political uncertainty is causing a broader retreat from risky assets. The New Zealand and Australian dollars, both sensitive to shifts in investor risk appetite, hit four-month lows versus the U.S. dollar.

"We still think the euro will head lower with $1.2950 the level to break in the near-term," said Lauren Rosborough, Senior FX strategist at Societe Generale, who have a medium-term target of $1.2500.

The euro fell 0.2 percent to $1.2980, closing in on a three-month low near $1.2955 touched on Monday. Technical analysts said the euro had found support on Monday around the 61.8 percent retracement of the it's 2012 rally at $1.2953.

The euro could fall towards $1.28-$1.29 over the next few weeks, although its drop is expected to be gradual given many investors are already short of the common currency, market players said.

Options traders said the euro may receive some support because of potential demand for euros related to option barriers at $1.2950 and below. The existence of such barriers means options traders might step in to buy the euro if the currency dips close to those levels.

Overall however the path for the euro was likely to be down. Added to the threat of a Greek exit from the euro, the bleak outlook for Spain's troubled banking sector continued to spook bond investors, pushing yields on Spanish 10-year bonds back above six percent on Wednesday. (GVD/EUR)

"In the next four weeks we should know who is controlling Greece, whether or not it runs out of money or chooses to adhere to its bailout terms and how the Spanish government plans to sort out its banking sector," said Kathleen Brooks, Research Director at FOREX.com.

"There are high levels of market risk associated with all of these events, which we believe is euro negative."

YEN IN DEMAND

A souring in investor appetite for risk gave broad support to the low-yielding yen which tends to rise when investors look to park their money in safer assets.

The euro was down 0.5 percent at 103.35 yen, while the Japanese currency climbed to a two-and-a-half month high versus the dollar of 79.61 yen on trading platform EBS.

The dollar itself remained supported against a basket of currencies by its own status as a safe haven, with the dollar index (.DXY) up 0.2 percent at 79.943.

The Australian dollar was down 0.5 percent to $1.0066, having touched a low of $1.0052 at one point, the lowest level in more than four months. The New Zealand dollar also touched a four-month low at $0.7842.

The Australian dollar fell below 80.20 yen at one point, the lowest level since January.

Implied option volatilities on Aussie/yen soared to a one-month high above 13 percent as market players scrambled to protect themselves against further declines in the Australian dollar.

May 09, 2012 11:02

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OctaFX.Com -Merkel says euro zone must stick to reform pledges

BERLIN (Reuters) - German Chancellor Angela Merkel reaffirmed on Wednesday that the euro zone must stick to previously agreed reforms on budget discipline.

Merkel is facing increased calls in the crisis-stricken euro zone to ease up on tough fiscal measures that have deepened a recession in peripheral countries such as Greece and to make reviving economic growth a bigger political priority.

"We both concur that in the euro zone we must stick to the program and the rules that have been agreed," Merkel told a joint news conference with Slovenia's Prime Minister Janez Jansa.

Echoing Merkel's tough line, Jansa said: "There is no 'either-or' when it comes to stability or economic growth. ... Such growth should not lead to higher public debts, which would not be good for future generations."

Slovenia is a member of the euro zone.

May 09, 2012 12:01

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OctaFx -Greek contagion fears send euro, shares lower

LONDON (Reuters) - Fears that a Greek exit from the euro zone will worsen the debt crisis facing other European nations gripped financial markets on Wednesday, sending shares and other riskier assets lower as investors shifted funds into safe havens like the U.S. dollar.

The euro dipped below $1.27 to a four-month low, the main index of top European shares, the FTSE Eurofirst 300 (.FTEU3), touched its lowest level for 2012, while U.S. stock futures pointed to a weak day on Wall Street.

The probability that Greece will leave the single currency rose markedly after political leaders in Athens failed on Tuesday to form a government, forcing another round of elections. Opinion polls show this is likely to be won by leftist parties opposed to the country's bailout deal.

In response, markets have moved to price in a Greek exit from the 17-member bloc, but are uncertain about the impact this will have on the rest of the region, while big investors have largely retreated to the sidelines, adding to the volatility.

"The idea that you can contain the spillover, the contagion, into the likes of Portugal, the likes of Spain, I just don't see that as being feasible," said James Ashley, senior European economist at RBC Capital Markets.

Peripheral euro zone sovereign bonds have taken the brunt of the selling pressure as some investors withdraw to safe havens like German government debt. Price moves were most pronounced in the market for insuring bonds against a potential default.

The Italian five-year Credit Default Swap (CDS) was 16 basis point (bpts) higher at 510 bpts in European morning trade, while the Spanish 5-year CDS widened 4.5 bpts to hit an all time peak of 546 bpts.

In the cash market moves were less dramatic, with 10-year Spanish bond yields easing to 6.35 percent after making big gains on Tuesday. The Italian equivalent debt was little changed at 6.01 percent.

The yield spread of all major emerging sovereign bonds over safer U.S. Treasuries however widened to be near 3-1/2-month highs of 386 basis points.

"The re-weighted probability of Greece leaving EMU has led to a sharp widening of government bond spreads, suggesting that long-term capital is leaving the periphery of Europe," Morgan Stanley said in a note to clients.

There were also signs in Athens that the prospect of a rapid devaluation of any new currency if the country leaves the euro was concerning ordinary Greeks.

Central bank head George Provopoulos told political leaders savers had withdrawn at least 700 million euros ($894 million) from the nation's banks on Monday.

The euro dropped to $1.2681 against the dollar putting it on track to test the January low of $1.2624, below which would mark the euro's lowest level since August 2010.

"The bias is still for a lower euro and a $1.26 target for mid-year looks pretty appropriate" said Jeremy Stretch, head of currency strategy at CIBC.

The dollar rose to its highest in four months against a basket of currencies (.DXY), while the euro also hit a three-month low versus the yen.

GROWTH IMPACT

The potential for a "disorderly" outcome, either directly from Greece leaving the euro or as related contagion worsens the already stagnant euro zone economy, has sent tremors through world equity and commodity markets.

Emerging market stocks as measured by the MSCIEF index (.MSCIEF) plunged 2.58 percent, with the index close to erasing all its year-to-date gains on its way to posting its biggest one-day loss in six months.

Weakness in Asian share markets sparked by the Greek crisis have already pushed MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> down 3.3 percent to a four-month low.

MSCI's global equity index <.MIWD00000PUS> was down 0.9 percent to 304.95 and is now up less than 2 percent for the year to date.

European shares were hit by a broad-based sell-off, with the FTSEurofirst 300 index (.FTEU3) down 0.7 percent to 990.54 points, having also dropped 0.7 percent on Tuesday.

Spain's IBEX 35 (.IBEX) fell 0.5 percent while Italy's FTSE MIB (.FTMIB) weakened by 1.7 percent.

Oil prices slid along with world shares and industrial commodities like copper in the general move away from riskier assets, but its fall was accentuated by a surprise build in U.S. crude inventories.

Brent crude was down $1.21 at $111.03 a barrel and U.S. oil was down $1.52 to $92.46 a barrel.

Brent crude oil fell to $110.82 cents a barrel and gold extended its losses to be down $13.34 at $1,530.76 an ounce, its weakest level since late December.

Gold gained nothing from flows into safe havens and fell for a fourth straight day to its lowest since late December as investors sold the precious metal to profit from the strength in the U.S. dollar.

Spot gold was down 0.6 percent at $1,534.54 an ounce, having dropped by nearly 3.8 percent in the last four days - its longest stretch of consecutive losses in nearly five months.

May 16, 2012 07:31

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OctaFx - Euro knocked by Greece worries, more losses likely

LONDON (Reuters) - The euro fell to a four-month low against the dollar on Wednesday and risked more losses on the prospect of prolonged political instability in Greece that could result in the country exiting the euro.

With Greece announcing fresh elections next month and investors concerned about the knock-on effects of a Greek euro exit for economies like Spain and Italy, investors fled the euro and sought the perceived safety of the dollar and the yen.

The dollar rose to its highest in four months against a basket of currencies, while the euro also hit a three-month low versus the yen.

The euro dropped to $1.2681 against the dollar on EBS trading platform, which left it on track to test the January low of $1.2624, below which would mark the euro's lowest level since August 2010.

However, it recovered to last trade at $1.2710, with traders wary of investors taking profit on hefty short euro positions which could send it temporarily higher. So far this month, the common currency has lost more than 4 percent of its value.

"There is a degree of magnetic attraction to the January low, but we may see a little squeeze higher before that," said Jeremy Stretch, head of currency strategy at CIBC.

"The bias is still for a lower euro and a $1.26 target for mid-year looks pretty appropriate".

The euro also fell to 101.904 yen before recovering to 102.18 yen.

Traders cited euro buying by hedge funds and institutional investors, but they said the broader trend for euro weakness remained intact.

Greek political leaders will meet on Wednesday to form a caretaker government to lead the country into its second election, likely in mid-June, after the failure of last-ditch negotiations to form a technocrat government.

"The uncertainty around the political situation in Greece continues to undermine risk appetite, which is affecting a range of currencies," said Paul Robson, currency strategist at RBS.

"There is uncertainty around the willingness of the euro zone paymasters to keep a country in the euro if it doesn't like fiscal austerity. It seems unlikely that Greece can back out of austerity and stay in the euro."

STERLING FALLS

Sterling underperformed other currencies after the Bank of England issued a weaker growth outlook in its quarterly inflation report while governor Mervyn King warned the turmoil in the euro zone posed a risk to the UK economy.

This helped the euro recover from a 3-1/2 year low against the UK pound, which also fell to a four-week low versus the dollar of $1.5889.

The dollar was broadly stronger as Greece worries left investors inclined to shun riskier currencies, with the dollar index (.DXY) rising to 81.573, its highest since mid-January.

It also performed well against the yen, rising to a two-week high of 80.45, roughly one yen above the 2-1/2 month low of 79.428 yen hit last week, and hit a four-month high against the Swiss franc of 0.9471 francs.

Risk aversion and worries about slowing global growth weighed on higher-yielding currencies like the Australian and New Zealand dollars, which fell to five-month lows against the U.S. dollar.

May 16, 2012 08:50

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OctaFX.Com -U.S. stocks rise on data, euro turns on Greek hope

NEW YORK (Reuters) - The euro pared losses and bond prices slid on Wednesday after comments by German Chancellor Angela Merkel bolstered hopes that Greece would remain in the euro zone, while U.S. stocks rose on encouraging U.S. economic data.

U.S. industrial production posted its fastest growth in over a year in April and a rebound in groundbreaking for new U.S. homes last month suggested a recovery in U.S. housing was gaining some traction, bolstering U.S. investor sentiment that has been heavily hit by news about Greece.

Industrial output grew 1.1 percent, the most since December 2010 and nearly twice the pace expected by analysts polled by Reuters. Housing starts increased 2.6 percent to a seasonally adjusted annual rate of 717,000 units, while March's starts were revised upward.

"Nice to see some turnaround. Ideally supply is getting more in line with demand, and low (interest) rates may be finally helping the turnaround," David Carter, chief investment officer at Lenox Wealth Advisors in New York, said about housing.

"However, this housing story is much smaller than news out of Greece and might get

easily forgotten," Carter said.

Stocks on Wall Street opened higher, while equity markets in Europe pared much of an early sell-off.

The Dow Jones industrial average (DJI:^DJI - News) was up 38.52 points, or 0.30 percent, at 12,670.52. The Standard & Poor's 500 Index (MXP:^GSPC - News) was up 6.00 points, or 0.45 percent, at 1,336.66. The Nasdaq Composite Index (NAS:^COMP) was up 10.66 points, or 0.37 percent, at 2,904.42.

The FTSEurofirst 300 index (.FTEU3) fell 0.2 percent to 997.22.

MSCI's global equity index <.MIWD00000PUS> was down 0.4 percent to 306.53.

Prices on German government Bund bond futures fell to a session low, while Spanish and Italian bond yields eased, with traders citing comments from Merkel reiterating that Germany wanted Greece to stay in the euro zone.

Bund futures fell to 143.11, and the benchmark 10-year U.S. Treasury note was down 11/32 in price to yield 1.81 percent.

Both Bunds and U.S. Treasuries have safe-haven appeal and their prices rise when investors become jittery.

The euro climbed to a session high against the dollar expectations that Germany and France will act together to keep Greece in the euro zone after Merkel met French President Francois Hollande on Tuesday. .

The euro pared losses to trade near break-even at $1.2725. The dollar (.DXY) rose 0.2 percent to 81.359 , its highest in four months against a basket of currencies.

Oil prices slid, accentuated by a surprise build in U.S. crude inventories.

May 16, 2012 13:58

OctaFX.Com News Updates

[OctaFX_Farid]

OctaFx -U.S. stocks rise on data, euro turns on Greek hope

Greek euro zone exit unlikely, say money market traders

BANGALORE (Reuters) - A slim majority of euro zone money market traders surveyed regularly by Reuters reckon Greece will still be in the euro zone at the end of 2013, a poll showed on Monday.

Fourteen of 22 euro money market traders said Greece would not abandon the euro either this year or next - an event once seen as unthinkable but is now being openly discussed as the country battles political and economic upheaval.

A summit of the G8 leading industrialized nations came down solidly in favor of a push to balance European austerity with a new dose of U.S.-style stimulus seen as vital to healing ailing euro zone economies.

The consensus among traders is in-line with a similar poll of economists taken last week, where a slim majority - 35 out of 64, said Greece would still be in the euro zone by the end of next year.

In the regular weekly survey, traders expect the European Central Bank (ECB) to allot 40 billion euros this week in its seven-day operation, a little lower than the 42.99 billion euros maturing from last week's.

May 21, 2012 13:01

OctaFX.Com News Updates

[OctaFX_Farid]

OctaFX.Com -Euro slides but may see short-term bounce

Euro slides but may see short-term bounce

NEW YORK (Reuters) - The euro weakened against the dollar on Monday, weighed down by concerns about Greece and Spain's debt problems, although key technical signals and overextended bearish positioning suggested a short-term bounce.

Speculators who had piled up a record amount of bets against the euro cut some of those positions, rising from last week's four-month low and giving the currency a respite from this month's relentless selling.

The euro has fallen in six of the last seven sessions, down nearly 4 percent so far this month.

"Euro/dollar made an important double bottom and the positioning is definitely getting stretched," said Brad Bechtel, managing director, at Faros Trading in Stamford, Connecticut.

"Many will not shake out too much on the positioning given deep imbedded gains, but it is a currency that likes its double tops and bottoms, so we could be in a for a good-sized bounce."

In early New York trading, the euro fell 0.4 percent at $1.2734, well above Friday's low of $1.2640. A break below the nearby 2012 low of $1.2624 would take the shared currency back down to levels not seen since August 2010.

Bechtel said offers on the euro are thick above $1.2880 and above $1.2950.

"I ... still think it (euro) is a sell on rallies, not just against the dollar but also the yen," said Jeremy Stretch, head of currency research at CIBC World Markets.

"That 2012 low is still the target and the euro would need a catalyst for that. That could come if the informal (EU) leaders' meeting this week offers no consensus (on tackling the euro zone debt crisis)."

French President Francois Hollande and some other euro zone leaders are expected to promote the idea of metalized European debt at an informal summit in Brussels on Wednesday, although Germany reiterated its opposition to the idea on Monday.

The euro zone crisis has escalated since inconclusive Greek elections on May 6 raised questions over whether Greece will stay in the bloc. Concerns about the fragility of the Spanish banking sector have also weighed on sentiment.

The Group of Eight leading economies over the weekend, however, backed Greece to stay in the euro zone. The G8 countries also stressed that their "imperative is to promote growth and jobs," which means far less in the way of austerity measures that have plunged some euro zone economies into recession.

The euro drew little support from those comments, with investors viewing the statements as short on detail and long on rhetoric.

Overall, the focus on growth could mean far more involvement of the European Central Bank in terms of stimulus measures, analysts said, and a weaker euro.

Chinese Premier Wen Jiabao called on Sunday for additional efforts to support growth, but concerns about the slowdown in emerging economies remained.

RECORD SHORT POSITIONS

Investors dumped the euro in recent weeks with many seeking the relative safety of the dollar, the yen and even sterling.

The euro was flat against the yen at 100.96, having hit a 3-1/2 month low 100.219 yen on Friday.

The U.S. Commodity Futures Trading Commission said on Friday speculators' short euro positions climbed to 173,869 contracts, the highest on record, while their bets in favor of the dollar against other currencies also rose to a high not seen since at least mid-2008.

"The outlook for the euro is still extremely vulnerable," said Jane Foley, senior currency strategist at Rabobank.

"The market is getting a bit more optimistic ahead of the EU summit and looking for signs policymakers may announce some policies that will support the system. But they won't be able to solve the crisis in one fell swoop."

With sentiment fragile across global markets, investors preferred the safe-haven dollar, which rose 0.4 percent to 79.2 yen, well above a three-month low around 79.00 set on Friday.

May 21, 2012 13:35

OctaFX.Com News Updates

[OctaFX_Farid]

OctaFX.Com - Euro rises from 4-month low against dollar

OctaFX.Com - OctaFX.Com - Euro rises from 4-month low against dollar

Euro rises from a 4-month low vs dollar even as worries about Europe's debt crisis continue

NEW YORK (AP) -- The euro is rising against the dollar despite ongoing concerns about Europe's debt crisis.

The euro rose to $1.2782 in afternoon trading Monday from $1.2737 late Friday. The euro hit a four-month low against the dollar on Thursday.

The euro has fallen about 2.5 percent against the dollar since anti-bailout political parties made gains in elections in Greece in early May. But Greek leaders weren't able to form a new government, so Greece will hold new elections next month.

Over the weekend, leaders from eight of the world's biggest economies meeting in Washington failed to create a plan to ease Europe's debt crisis.

In other trading, the British pound fell to $1.5798 from $1.5803. The dollar rose to 79.31 Japanese yen from 79.08 yen.

May 21, 2012 17:26

OctaFX.Com News Updates

[OctaFX_Farid]

Exclusive: Eurozone tells members to make contingencies for "Grexit"

OctaFX.Com -Exclusive: Eurozone tells members to make contingencies for "Grexit"

BRUSSELS (Reuters) - Euro zone officials have told members of the currency area to prepare contingency plans in case Greece decides to quit the bloc, an eventuality which Germany's central bank said would be "manageable".

Three officials told Reuters that the instruction was agreed on Monday by a teleconference of the Eurogroup Working Group (EWG) - experts who work on behalf of the bloc's finance ministers.

"The EWG agreed that each euro zone country should prepare a contingency plan, individually, for the potential consequences of a Greek exit from the euro," said one euro zone official familiar with what was discussed.

The news comes at a highly sensitive time, just hours before EU leaders gather to try to breathe life into their struggling economies at a summit over dinner on Wednesday.

Although minds will be focused by the prospect of Greece exiting the currency area, which has earned the monicker "Grexit" and is something policymakers say they want to avoid, disagreements over a plan for mutual bond issuance and other measures to alleviate two years of debt turmoil have already been laid bare.

In its monthly report, Germany's Bundesbank said the situation in Greece was "extremely worrying" and it was jeopardizing any further financial aid by threatening not to implement reforms agreed as part of its two bailouts.

It said a euro exit would pose "considerable but manageable" challenges for its European partners, raising pressure on Athens to keep its painful economic reforms on track.

Greek officials have said that without outside funds, the country will run out of money within two months.

For the first time in more than two years of debt-crisis meetings, the leaders of France and Germany have not huddled beforehand to agree positions, marking a significant shift in the Franco-German axis which has traditionally driven European policymaking.

Instead, new French President Francois Hollande met Spanish Prime Minister Mariano Rajoy in Paris to discuss policy, before the pair travel to Brussels for the 1800 GMT summit.

Despite fears Greeks could open the exit door if they vote for anti-bailout parties at a June 17 election, Spain, where the economy is in recession and the banking system is in need of restructuring, is at the frontline of the crisis, with concerns growing that it too could need bailing out.

After meeting Hollande, Rajoy said he had no intention of seeking outside aid for Spain's banks.

Hollande's election victory has significantly changed the terms of the debate in Europe, with his call for greater emphasis on growth rather than debt-cutting now a rallying cry for other leaders.

That has set up a showdown with German Chancellor Angela Merkel, who supports growth but whose primary objective is budget austerity and structural reform.

At his first EU summit, Hollande has chosen to make a stand on euro bonds - the idea of metalizing euro zone debt - despite consistent German opposition to an idea that has been hotly debated for more than two years.

He will have support from Italian Prime Minister Mario Monti and European Commission President Jose Manuel Barroso, among others. But Merkel shows no sign of dropping her objections to the proposal, which she has said can only be discussed once there is much closer fiscal union in Europe.

The Netherlands, Finland and some smaller euro zone member states support her.

"Introducing euro bonds is the equivalent of ringing the bell for a happy hour so the inebriated can postpone their hangover indefinitely," one EU diplomat said.

NO MAJOR DECISIONS

No decisions will be made at Wednesday's summit, which is intended to promote ideas on jobs and growth ahead of another meeting at the end of June, but it is clear the debate will be intense, not just over euro bonds but over how to rescue European banks and whether to give more time to struggling euro zone countries to meet their budget deficit goals.

Officials tried to play down any prospect of a rift.

"This shouldn't be a tense discussion because it's a broad debate about propositions that are on the table. We are not there to negotiate or take decisions," a French presidential adviser said.

"Germany today is not firmly against euro bonds forever, and that's what makes a discussion possible. What is the time frame and what (budget) commitments would we require, that's what the discussion will be based on."

Having rallied on Tuesday, European stocks dropped 1.6 percent as investors priced in a lack of dramatic policy intervention. Spanish and Italian borrowing costs rose in turn.

A German two-year debt auction gave a stark illustration of how money is dashing for safe havens. Investors snapped up the 4.5 billion euros of paper on offer even though it came with a zero coupon - offering no return at all.

As well as exploring ways of resolving the sovereign debt problems that have torn the economies of Greece, Portugal and Ireland apart, the leaders will assess how to stabilize their banking systems.

Spain is a particular concern, with a number of its banks laden with bad debts from a property boom that turned to bust and still has some way to go before it touches bottom.

One proposal on the table is for the euro zone's rescue funds to be allowed to recapitalize banks directly, rather than having to lend to countries for on-lending to the banks.

But that is another idea with which Germany is uncomfortable, even though Merkel said on Tuesday a way should be found to dismantle banks across borders, a possible nod to a pan-euro-zone bank restructuring scheme.

With the euro zone registering no growth in the first quarter of the year and threatening to slip back into recession, the formal summit agenda is jobs and growth, with policymakers touting three ideas they hope will provide near-term stimulus:

- 'Project bonds' backed by the EU budget to finance infrastructure projects alongside private sector investment.

- Doubling the paid-in capital of the European Investment Bank, the EU's co-financing arm, to a little over 20 billion euros.

- Redirecting structural funds which tend to flow to poorer countries, to other areas where it might reap more immediate growth rewards.

Even if all three proposals were to be activated quickly economists and analysts say they will not provide a sufficient shot in the arm to the euro zone and wider EU economy.

"The hard truth is that there are no magic solutions to solving this crisis. We will all have to keep our spending in check, pay off our debts and swiftly introduce healthy reforms. This is what will kickstart growth," Dutch Prime Minister Mark Rutte said.

May 23, 2012 12:22

OctaFX.Com News Updates

[OctaFX_Farid]

OctaFX.Com -Australian Dollar Cross Pick 05.24.2012

We took another shot at shorting the AUDNZD as it appears to be carving out a lower top just below the 50.0% Fibonacci retracement from the 2011 high to low around 1.3050, and we’re currently short from 1.3000 as the relative strength index continues to come off of overbought territory. We’ve set our stop at 1.3060 should we see another run at the 50.0% Fib, but have left an open target as we expect to see fresh yearly lows in the exchange rate. As we remain bearish against the AUDNZD, we will look to add to our position on the way down and will take additional shorts around the 1.2900 figure.

May 24, 2012 15:05

OctaFX.Com News Updates

Edited May 24, 2012 by OctaFX_Farid

[OctaFX_Farid]

OctaFX.Com -Euro slumps vs. dollar on Greek, Spain worries

Euro slumps vs. dollar on Greek, Spain worries

NEW YORK (Reuters) - The euro tumbled to nearly two-year lows against the dollar on Friday, rattled by fears of a possible Greek exit from the euro zone and the risk other debt-plagued countries could also leave the bloc.

A plea from Spain's wealthiest autonomous region, Catalonia, for help from the central government to refinance its debt this year was the latest news to hit the euro, which was on track for its worst weekly showing in five months.

Catalonia's appeal reverberated across financial markets. Spanish and Italian bonds sold off, equities fell, and U.S. crude futures turned negative.

"The Catalonia news was a big deal because it implies that the Spanish government may have to take on more debt and it cannot afford to do so," said Richard Franulovich, senior currency strategist at Westpac Securities in New York.

"It looks like all the euros that were bought need to be resold. For now, it's all about contagion," he added.

In midday New York trading, the euro slipped 0.1 percent to $1.2525, after earlier falling to a nearly two-year low of $1.2495 on trading platform EBS, taking out a key options barrier at $1.25. That placed the euro on pace for its worst weekly performance since December.

The common currency has lost 5.5 percent against the dollar so far this month and is facing its fourth straight week of losses, raising the possibility of a test of the 2010 low of $1.1875.

Macro funds and institutional investors have ramped up euro selling after an inconclusive election in Greece left the country at risk of bankruptcy and a possible exit from the euro zone.

"I think markets are pretty complacent about a Greek exit," said Gabriel de Kock, executive director of FX research at Morgan Stanley in New York.

"Everyone says it's going to happen, but if it does, the Europeans will have to do extraordinary things to avoid contagion of the sort that could knock out Ireland, Spain and Portugal pretty quickly. So people are not ready."

Greeks vote again on June 17, with polls showing a close race between parties supporting and opposing austerity measures that are part of the terms of the country's international bailout, keeping markets on tenterhooks.

Investors are also concerned about the health of the Spanish banking sector, chances of a deep and damaging slowdown in the euro area, and the lack of any aggressive policy measures to address the escalating debt crisis.

Spanish lender Bankia (BKIA.MC), which was partly nationalized this month, was set to ask the government for a bailout of more than 15 billion euros (US$19 billion) on Friday, a financial sector source told Reuters.

Many strategists expected euro selling to continue next week, although heavy short positioning could slow the momentum.

"We have...a standoff where the market is short and the news is bad, and so we have tended to go down in stages," said Kit Juckes, currency strategist at Societe Generale.

"Although it's almost impossible to imagine a set of circumstances where we get good news, the pullbacks in this move down since the break of $1.30 have gotten really tiny."

Investor nervousness was well reflected in the options market, as euro/dollar one-month implied volatility hit 13.13 percent for a second straight day. It was last at 12.0 percent, well above its 50-day moving average.

With the euro under pressure, the dollar has been the chief beneficiary. An index that measures the dollar against a basket of major currencies edged up to 82.461 (.DXY), the highest level since September 2010.

Against the yen, the dollar was steady at 79.62 yen, supported by Tokyo importers and investors squaring positions ahead of a long holiday weekend in the United States. Sell offers around 80.00 yen were poised to cap any further gains, traders said.

The euro was flat against the Swiss franc at 1.2009 francs, having jumped to 1.20769 francs on Thursday, its highest level since mid-March on market talk the Swiss government is going to impose a tax on deposits and chatter that the Swiss central bank initiated a short squeeze in the pair.

Traders said the Swiss National Bank has been buying euros in the past few weeks to protect the floor at 1.20 francs, although some investors were still piling on bets through the options market that the peg will be breached in coming days if the euro zone crisis escalates.

May 25, 2012 14:00

OctaFX.Com News Updates

[OctaFX_Farid]

OctaFX.Com -Euro falls vs. dollar on fears debt crisis may spread

Euro falls vs. dollar on fears debt crisis may spread

NEW YORK (Reuters) - The euro slipped to near two-year lows against the dollar on Friday, rattled by fears of a possible Greek exit from the euro zone and the risk other debt-plagued countries could also leave the bloc.

A plea from Spain's wealthiest autonomous region, Catalonia, for help from the central government to refinance its debt this year was the latest news to hit the euro, which was on track for its worst weekly showing in five months.

Catalonia's appeal reverberated across financial markets. Spanish and Italian bonds sold off, equities fell, and U.S. crude oil futures turned negative.

"The Catalonia news was a big deal because it implies that the Spanish government may have to take on more debt and it cannot afford to do so," said Richard Franulovich, senior currency strategist at Westpac Securities in New York.

"It looks like all the euros that were bought need to be resold. For now, it's all about contagion," he added.

In mid-afternoon New York trading, the euro slipped 0.2 percent to $1.2511, after earlier falling to a nearly two-year low of $1.2495, using Reuters data, taking out a key options barrier at $1.25.

The common currency has lost 5.5 percent against the dollar so far this month and is facing its fourth straight week of losses, raising the possibility of a test of the 2010 low of $1.1875. It has dropped 2.1 percent this week, placing the euro on pace for its worst weekly performance since mid December.

Macro funds and institutional investors have ramped up euro selling after an inconclusive election in Greece left the country at risk of bankruptcy and a possible exit from the euro zone.

"I think markets are pretty complacent about a Greek exit," said Gabriel de Kock, executive director of FX research at Morgan Stanley in New York.

"Everyone says it's going to happen, but if it does, the Europeans will have to do extraordinary things to avoid contagion of the sort that could knock out Ireland, Spain and Portugal pretty quickly. So people are not ready."

Greeks vote again on June 17, with polls showing a close race between parties supporting and opposing the austerity measures that are part of the terms of the country's international bailout, keeping markets on tenterhooks.

Investors are also concerned about the health of the Spanish banking sector, chances of a deep and damaging slowdown in the euro area, and the lack of any aggressive policy measures to address the escalating debt crisis.

Spanish lender Bankia (BKIA.MC), which was partly nationalized this month, was set to ask the government for a bailout of more than 15 billion euros (US$19 billion) on Friday, a financial sector source told Reuters.

Many strategists expected euro selling to continue next week, although heavy short positioning could slow the momentum.

Investor nervousness was well reflected in the options market, as euro/dollar one-month implied volatility hit 13.13 percent for a second straight day. It was last at 12.2 percent, well above its 50-day simple moving average.

Brad Bechtel, managing director at Faros Trading in Stamford, Connecticut, said the uncertainty surrounding Greece is likely to keep trading volatile and unpredictable.

"By and large, people are more comfortable being short euro or long volatility, but at the same time, you get to points like right now when we're very stretched," said Bechtel. "Then, you can get very quick 2 percent to 3 percent snap-backs. It forces everyone to be day traders, speculators as opposed to investors."

Against the yen, the dollar was up 0.1 percent at 79.65 yen, supported by Tokyo importers and investors squaring positions ahead of a long holiday weekend in the United States. Sell offers around 80.00 yen were poised to cap any further gains, traders said.

U.S. markets will be closed on Monday for the Memorial Day holiday.

The euro was flat against the Swiss franc at 1.2007 francs, having jumped to 1.2075 francs on Thursday, its highest level since mid-March on market talk the Swiss government is going to impose a tax on deposits and chatter that the Swiss central bank initiated a short squeeze in the pair.

Traders said the Swiss National Bank has been buying euros in the past few weeks to protect the floor at 1.20 francs, although some investors were still piling on bets through the options market that the peg will be breached in coming days if the euro zone crisis escalates.

May 25, 2012 15:48

OctaFX.Com News Updates

[OctaFX_Farid]

OctaFx -Insight: U.S. hedge funds find ways to trade euro misery

BOSTON/NEW YORK (Reuters) - Two decades ago, George Soros rose to fame and fortune on his now-historic trade in which he took on the Bank of England and shrewdly wagered on a devaluation of the British pound.

But it's unlikely the current European monetary crisis and worries about Greece's potential exit from the euro zone will give rise to an investing legend like Soros, who made $1 billion in 1992 by betting on a decline in the price of the pound.

Instead, there are a multitude of strategies to play Europe's troubles, and many different participants, according to U.S. hedge fund managers.

"There is not room for one player to have such impact," said John Brynjolfsson, whose California-based Armored Wolf hedge fund has been betting against the euro for quite some time. "Financial markets are so much bigger today."

A spokesman for Soros, who last year converted his Soros Fund Management to a family office and stopped managing money for outside investors, could not be reached for comment.

Brynjolfsson and several other U.S. money managers who are trying to profit from Europe's misery say they expect the current crisis to produce a lot of winners.

So far this year, the euro is down 3.3 percent against the U.S. dollar.

U.S. money managers say it's hard to swing for the fences the way Soros did because institutional investors are far more squeamish about having too much money riding on any single trade. There is also heightened sensitivity from pensions and endowments to taking an investment strategy that might spark political outrage from European leaders.

Another thing working against the rise of a new Soros is that trading the euro zone, or even the fallout from a Greek exit, is a much more complicated than betting against a single currency.

Money managers are playing the euro zone crisis by trading currencies, wagering on the direction of bank stocks or using derivatives like credit default swaps to bet on potential corporate and bank failures. Greenlight Capital's David Einhorn recently said he is bullish on gold and gold miners, in part because of concern about the fallout from a euro zone meltdown.

Some managers are even going both short and long on different European sovereign debt, depending on their views of the financial stability of different countries.

Adam Fisher, manager of the $320 million Commonwealth Opportunity Capital hedge fund, noted that Soros faced a "single country, not 17 different countries, one decision maker, not 17."

Fisher's fund, which has more than 80 percent of its money invested in Europe, is taking a somewhat contrarian position by owning the European sovereign debt of Germany, the Netherlands, Italy and Spain.

Hedge fund managers point out that given the up-and-down nature of the euro zone crisis, most hedge funds have been in and out of trades or forced to adjust positions depending on the changing political winds.

Earlier this year, for instance, it looked like concern about Greece exiting the euro had passed. But with the recent results of the Greek election at odds with the austerity measures demanded by its currency partners, the risk of a Greek departure from the euro zone has risen dramatically.

Recently, Fisher said his Los Angeles-based fund had reduced the size of some of its more bullish sovereign debt trades because he believes there will be "violent" market swings this summer.

"It is going to be incredibly difficult to manage risk through that environment," said Fisher, whose fund was up 8.8 percent through April. "I don't think hedging will do anything. The way you hedge, is you sell. You don't subtract risk by adding risk."

Brynjolfsson, a former top portfolio manager for bond mutual fund firm Pacific Investment Management Co, is betting on Greece exiting the euro. He said it will be hard for European leaders to take the necessary steps to appease the Greek government without infuriating politicians in other euro zone countries.

"As the wheels began falling off the bus, we adjusted to have a short bias and that has worked out," said Brynjolfsson, whose $750 million hedge fund is up 2 percent this year, largely on its short bet against the euro.

Axel Merk, president and chief executive officer of Merk Investments, an investment advisory firm that specializes in currencies, said the growing problems with Greece and the euro zone led him recently to dump all the euros in his $517 million Merk Hard Currency Fund, which is up 2.29 percent for the year.

Merk now favors the Singapore dollar, which has climbed 1.34 percent since January.

Ray Dalio's $120 billion Bridgewater Associates gained 23 percent in 2011 in part because of profits made from a series of European bets, said a person familiar with the Westport, Conn.-based fund who declined to discuss specifics of the strategy. In a recent interview with Barron's, Dalio said European banks "are now over-leveraged and can't expand their balance sheets" and European nations "don't have enough buyers of their debt."

Dalio may be the U.S. money manager who comes closest to rivaling the Soros of two decades ago. His hedge fund is the industry's largest and he widely regarded as one of the most successful managers.

Among the ways funds are playing the European turmoil, some are betting against the fortunes of Spanish and Italian banks instead of simply focusing on sovereign debt.

John Paulson, among others, bets against European sovereign debt as way to hedge the overall portfolio of his Paulson & Co hedge fund firm.

Daniel Loeb's Third Point fund put on a long position in Portuguese sovereign bonds in the first quarter because the New York-based manager believed the nation is in better shape than others in the euro zone.

"Portugal's debt profile is more consistent with Italy's than Greece's, its banks are substantially healthier than Spain's, and its government has enacted more aggressive labor reforms and is more stable than regimes in both countries," Loeb wrote in a May 16 investors' letter seen by Reuters.

If nothing else, the European crisis is forcing managers to keep coming up with new strategies to trade. One might say it's almost become an incubator for hedge fund managers to stretch their investment acumen.

Merk said he might look again at Europe if the political and financial situation gets more clarity. But he would likely do it a bit differently.

"If there is clarity in the process again, then we will certainly look at Europe again," he said. "But not through Greek debt, but through German bills."

May 28, 2012 06:04

OctaFX.Com News Updates

[OctaFX_Farid]

OctaFX.Com -Gold firms on euro rebound; Europe worries linger

Gold firms on euro rebound; Europe worries linger

SINGAPORE (Reuters) - Gold rose on Monday, tracking a firm euro, as fears of a messy Greek exit from the euro zone receded slightly after opinion polls showed pro-bailout conservatives in the lead, but gains were checked as worries about the region were far from over.

The euro bounced back from a two-year low hit on Friday after the opinion polls triggered short-covering in the single currency, while the dollar index (.DXY) fell for the first time in five sessions, helping support commodities priced in the greenback.

"June will be a key month as investors await the Greek election," said Lynette Tan, an analyst at Phillip Futures in Singapore. "Gold will probably be rangebound between $1,530 and $1,600 per ounce if there's no major news before the election."

Bullion shed more than 1 percent last week, in tandem with the euro, equities and other commodities, as investors fretted over the impact of a potential Greek exit from the euro zone and rushed to lower-risk assets such as the dollar and U.S. Treasuries.

But investors remain worried as Spain's wealthy Catalonia region sought central government help as it was running out of options for refinancing debt this year.

Spot gold rose 0.4 percent to $1,580.42 per ounce, its highest level in nearly a week, and traded at $1,577.76 by 0627 GMT. U.S. gold was up half a percent at $1,577.30.

In the week ended May 22, speculators cut their net bullish bets on U.S. gold to the lowest level since December 2008 as the rise in short positions outpaced the uptick in longs, data from U.S. Commodity Futures Trading Commission showed.

"There is no particular reason to buy gold at this point - oil prices have slumped, the dollar is very strong and we don't see the prospect of more monetary easing from the U.S. Federal Reserve any time soon," a Hong Kong-based dealer said.

"People are just waiting for the verdict on Greece."

Further strengthening the dollar, U.S. consumer sentiment rose to the highest level in more than four years in May as Americans remained positive about the job market, while higher-income households were optimistic about wage increases, a survey released on Friday showed.

This week investors will look at U.S. non-farm payrolls and China's official purchasing managers index data to gauge the health of the world's top two economies.

May 28, 2012 07:01

OctaFX.Com News Updates

[OctaFX_Farid]

OctaFx - World stocks inch higher on Greek vote hopes

World stock markets inch higher as polls suggest Greeks prefer to stay in eurozone

MOSCOW (AP) -- European markets posted modest gains Monday morning after weekend opinion polls strengthened hopes that Greece might stick with the euro and austerity measures.

Investor sentiment remained fragile, however, with Spain's bond yields rising after the announcement of bailout plans for troubled lender Bankia. Trading volumes were also expected to remain low with Wall Street due to remain closed for the Memorial Day holiday.

The likelihood of Greece leaving the eurozone has been growing steadily since early May, when political parties opposed to the harsh terms of the country's financial rescue received unexpectedly high support in polls. The Greek exit would extend financial turmoil in the country and spread financial difficulties to other nations using the euro.

Surveys over the weekend showed that Greeks, while angry after more than two years of austerity measures that have produced lower pensions and higher taxes, still want Greece to keep the euro currency and not revert back to the drachma.

The May election results were so splintered that it left the country without a coalition government. Another election has been set for June 17.

Ric Spooner, chief market analyst at CMC Markets in Sydney, said it made sense for investors to remain subdued this far ahead of the election.

"The response has so far been very muted because these things could easily wax and wane over the course of the next two weeks," said Spooner. "One of the key drivers for investors will be trying to assess what the outcome of Greek election may be."

European stocks inched up Monday Morning. Britain's FTSE 100 and France's CAC-40 were both 0.7 percent higher, at 5,391.82 and 3,068.76 points, respectively. Germany's DAX added 0.6 percent to 6,388.88.

Moscow-based investment bank Troika Dialog warned in a morning note that "given the large number of very uncertain events on investors' watch list, any rebound will be modest."

Spanish markets declined Monday on bailout plans for troubled lender Bankia, sending its shares plummeting 21 percent. Spain's IBEX 35 was lower 0.6 percent at 6,500.7 in morning trading. Yields for Spain's 10-year bonds on the secondary markets hit 6.45 percent in morning — close to the key 7 percent rate beyond which long-term financing on the bond markets is considered unaffordable.

In Ireland, Prime Minister Enda Kenny made an appeal to voters to support the European Union's fiscal treaty in a referendum this week. Ireland's current EU-International Monetary Fund loans are due to run out by the end of next year, and only members of the treaty can access EU funds. Ireland is the only nation among 25 signatories putting the deficit-fighting treaty to a national vote. Ireland's benchmark ISE was up 0.7 percent at 3,113.34.

Wall Street will be closed Monday for Memorial Day, which typically results in subdued stock trading globally.

Asian stock markets closed modestly higher. Japan's Nikkei 225 index swung between gains and losses before settling 0.2 percent higher at 8,593.15. Hong Kong's Hang Seng added 0.5 percent to 18,800.99. Australia's S&P/ASX 200 rose 1 percent.

In mainland China, the Shanghai Composite Index climbed 1.2 percent to 2,361.37 and the smaller Shenzhen Composite Index shot up 1.4 percent to 948.42.

Later in the week, the U.S. government will release employment data for May, while China will release monthly manufacturing data. A private survey last week showed activity weakened further in May.

Benchmark oil for July delivery was up 89 cents to $91.75 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 20 cents to settle at $90.86 in New York on Friday.

In currencies, the euro rose to $1.2578 from $1.2518 late Friday in New York. The dollar fell to 79.36 yen from 79.66 yen.

May 28, 2012 11:58

OctaFX.Com News Updates

[OctaFX_Farid]

OctaFx -Euro falls near 2-year low as debt crisis widens

NEW YORK (Reuters) - The euro slumped to a near two-year low against the dollar on Wednesday with no relief in sight as Italian borrowing costs soared and concerns mounted over Spain's banking sector.

Selling accelerated after the euro broke beneath the psychologically important $1.25 level and option barrier at $1.24, opening the way for a slide toward the low $1.20 area. Real money and institutional investors stepped up selling on signs the bloc's debt crisis is spreading to larger economies.

"I think everybody was looking for an excuse to jump on the bandwagon for selling the euro," said Ravi Bharadwaj, market analyst at Western Union Business Solutions in Washington, D.C.

"The fear is that a lot of the imbalances that have been built up so far have been funded and financed by banks in Europe. As the different sovereign entities look to stabilize their financial systems, they are in effect just feeding a massive feedback loop."

Italy's funding costs rose sharply at a bond sale on Wednesday, with 10-year yields topping 6 percent for the first time since January. The Spanish equivalent neared the dangerous 7 percent level that had forced Ireland and Greece to seek bailouts.

The euro fell as low as $1.2384 on Reuters data, the lowest since July 1, 2010. It was last at $1.2402, down 0.8 percent on the day. Support now lies around $1.2150, a low touched in late June 2010, and then the 2010 low of $1.1875.

Adding to pressure on the euro were poll results showing Greece's radical leftist SYRIZA party has taken the lead over the pro-bailout conservatives. Greece is holding a national parliamentary election next month that may determine whether the debt-laden country stays in the euro zone.

The euro staged the short-lived bounce after the European Commission said the euro zone should move towards a banking union and consider eurobonds and the direct recapitalization of banks from its permanent bailout fund.

The jump in Italian and Spanish bond yields came a day after Egan-Jones Ratings cut Spain's credit rating, the agency's third downgrade of the country's sovereign rating in less than a month, citing the country's weak banks as the reason for the downgrade.

A government source told Reuters on Tuesday that Spain would likely recapitalize Bankia (BKIA.MC), which asked for 19 billion euros on Friday, by issuing new debt and possibly drawing cash from the bank restructuring fund and Treasury reserves.

"The euro is in an extremely vulnerable position and downside risks are very strong indeed," said Jane Foley, senior currency strategist at Rabobank. "The Spanish banking crisis has the potential to knock the stuffing out of the euro zone irrespective of the Greek election results."

"The issues for Spain are undoubtedly huge and most people are coming round to the idea that it will need to go outside of its borders for assistance. The longer it delays, the more the risk of a bank run."

The euro lost 1.5 percent against the safe-haven yen, taking it to a four-and-a-half month low of 97.73 yen. The dollar hit a three-and-a-half month low of 78.85 yen and was last down 0.7 percent at 78.94.

The dollar index (.DXY), which measures its value against a basket of currencies, rise to a 20-month high of 82.941.

Technical analysts said a monthly close about the 100-month average in the dollar index around 81.82 may herald a shift in the longer-term trend of the dollar and reverse a multi-year drift lower.

The dollar also rose to a 15-month high against the Swiss franc at 0.9696 francs on EBS.

The higher-yielding Australian dollar fell 1.2 percent to $0.9716, slipping towards a six-month low at $0.9690, after weaker-than-expected retail sales data underscored the case for interest rate cuts.

May 30, 2012 16:57

OctaFX.Com News Updates

[OctaFX_Farid]

It's your job to fix crisis, ECB tells governments

FRANKFURT (Reuters) - The European Central Bank on Wednesday put the onus firmly on euro zone governments to solve the bloc's debt crisis, dashing expectations it could take near-term action despite saying the currency area's economy was under increasing threat.

After the ECB left interest rates at 1 percent, President Mario Draghi said the bank was not open to trading with governments on the policy response to the crisis.

Increasingly alarmed by signs Spain's banking crisis is opening a new front in the debt crisis, some in financial markets had hoped Draghi would signal a readiness for the ECB to take fresh action if euro zone governments take bolder action.

Instead, Draghi said it was wrong for the ECB to fill a policy vacuum created by others and that there would be no quid pro quo between the central bank and governments.

"There is no sort of horse trading here," he told a news conference.

"Some of these problems in the euro area have nothing to do with monetary policy ... and I don't think it would be right for monetary policy to fill other institutions' lack of action."

The respite the ECB bought the euro zone early this year by injecting over 1 trillion euros into its banking system with twin 3-year loan operations (LTROs) has faded, with borrowing costs for troubled countries such as Spain soaring again.

Draghi played down prospects of any imminent third round of long-term money creation, saying LTROs and the ECB's dormant bond-buying program were instruments that are in place but temporary and "not infinite".

"The issue now is whether these LTROs would actually be effective," he said when asked about another round.

Draghi said the decision to leave rates unchanged was taken by "broad consensus". He said a few members, but not many, of the bank had wanted a rate cut.

The ECB has never before lowered its main refinancing rate below 1 percent. Berenberg Bank economist Holger Schmieding said it was an open question whether the ECB would cut rates in July.

"In addition, the ECB offered no hint today that it may re-activate its two most important non-standard measures, that is the 3-year long-term refinancing operations (LTROs) and the purchases of sovereign bonds," Schmieding said.

"This suggests that it would take a major further escalation of financial tensions for the ECB to go beyond a possible rate cut in July," he added.

Draghi said markets tensions had not returned to the levels of late last year, when the ECB offered the 3-year LTROs, and stressed the euro zone was far from facing a situation like the one after the collapse of Lehman Brothers in September 2008.

Although flagging the increasing threat to the currency area's economy, new ECB growth forecasts for 2012 were unchanged -- in a -0.5 to +0.3 percent range. The prediction for the following year was barely changed either.

"The economic outlook for the euro area is subject to increased downside risks relating in particular to a further increase in the tensions in several euro area financial markets and their potential spillover to the euro area real economy," Draghi said.

Markets were unsure how the ECB would react to a recent wave of weak economic data, knowing that the bank also wants to keep the pressure on euro zone leaders to tackle the crisis more effectively.

The euro was steady at $1.25 after the decision, Europe's benchmark stock market (.FTEU3) was up 2 percent after a recent steep fall.

DILEMMA

Jolted into action by Spain's banking crisis, EU leaders have started considering the form of economic union needed to make the bloc durable as well as more immediate measures to help Madrid.

But that end-game is still months or years away and in the meantime investors view the ECB as the institution with the firepower to keep the crisis in check.

"For the time being, the ECB is sitting on its hands as the bloc's economy and financial markets deteriorate further," said Nicholas Spiro, managing director of Spiro Sovereign Strategy.

"The message from today's ECB meeting is a worrying one: any mutualization of euro zone debt is a long way off yet credible interim measures to shore up confidence will not be forthcoming for the time being," Spiro added.

In the run up to Wednesday's meeting, International Monetary Find chief Christine Lagarde said the bank had room to cut rates [iD:nL5E8H50YO]. Spain and other hard hit parts of the euro zone would also like the ECB to revive its bond buying program to provide them with cover while they undertake planned repairs to their economies.

Euro zone unemployment stood at a record 11 percent in April, business confidence has slumped and surveys of manufacturing have hit three-year lows, adding to conviction that the bloc's economy is set to drop back into recession.

The bank's dilemma is that if does too much, pressure for government action falls. Yet if it does nothing, troubled sovereign debtors could find it harder and harder to finance themselves or maintain confidence in the banks that have bought much of their debt.

Draghi said the ECB would continue to supply euro zone banks with all the liquidity they ask for at least until January 15 next year. It had said in October it would give euro zone bank unlimited access to central bank funding at least until July 10.

Before the crisis, the ECB allotted a certain amount in its refinancing operations for which banks had to put in bids. Since the crisis began, the ECB has extended the maturity of such operations to as long as 3 years and has lifted funding limits.

Most ECB watchers had expected it would keep its powder dry until after June 17 Greek elections and a crunch summit of EU leaders at the end of June, which Draghi and his colleagues hope will dispel any doubts about Europe's commitment to the euro.

There are also growing signs that a decision on a bailout for Spain's debt-laden banks will have been taken by the end of the month.

Jun 06, 2012 15:26

OctaFX.Com News Updates

Edited June 6, 2012 by OctaFX_Farid