Home
FAQ
Gallery
Search
Register
Log inI Smell Panic - and So Does the Fed
forexgreenland - Forex forum,Forex training, Forex signals, Forex mgt accts :: Your first category :: Forex News ( Fundamentals)
Page 1 of 1•
I Smell Panic - and So Does the Fed
by Stalion on Wed Jan 23, 2008 12:49 pm
Today's commentary is by Sean Hyman, Currency Director and editor of The Money Trader.
Good Day Currency Traders!
Monday night, the Nikkei 225 fell over 750 points (over 10%) at one point. The German DAX also dropped over 10% at one point. The S&P stock futures slipped 5% which caused the stock market to drop below 20% from its highs and propelled the S&P 500 into "bear market" territory. And Bank of America just announced a 95% drop on their earnings and Wachovia 98% on their profits. Ouch!
This means that the Dow very well could blow through the 12,000 support zone and head for the next level at 11,500-11,600. If it blows through there, then look to see 11,000.
The New King of the Currency Hill
With investor panic setting in, you're really going to see some action in the euro vs. the yen (EUR/JPY) and the British pound vs. the yen (GBP/JPY). If stocks continue their slide as they are indicating, then you'll see these two pairs crumble too. So that means that the Japanese yen will be "king of the hill" once again.
The S&P futures haven't dropped this low since 2001. If you're a stock investor, you know that 2001 was a horrible year for stocks. Buckle up your seatbelt because it could get ugly very quickly.
Japan's Finance Minister Says They'll Stay Out of It
Overnight, we got comments out of Japan that stated:
"Japan's government has no intention of resuming large-scale interventions in the currency market, Finance Minister Fukushiro Nukaga said.
So this shows that they may let the present move continue on. So the yen could increase further in value without Japan stepping into the market and selling the yen to hold it down.
The yen is so grossly undervalued that they ought to let it be "bought up."
Yesterday's Fed Market Shocker
The one shocker...the Fed couldn't wait eight more days. Ben Bernanke and his men had to act yesterday and cut interest rates by 75 basis points. No mistaking this now: We're in desperate times. If the Fed feels they can't wait eight days to cut rates, then you know we're in trouble - and not just in the United States.
So they cut rates to 3.50% and stated that "risks to growth remain." Boy, are they insightful. I could have told him this a long time ago. Like I've stated before, the Fed is always late to the ballgame. Yesterday was no exception.
Look for a wild and hairy week in the markets
. We'll all have to wait and see if the Fed's rate cut causes the markets to recover. Or if traders just take a rate cut as a sign that the Fed is panicking. I told you Ben Bernanke was counting the days until the Fed meeting. Well, Bernanke decided he "couldn't wait" a second longer to cut rates.
Look for a very bumpy week ahead which will make the carry-trades very volatile over the coming days to weeks.
Sean Hyman, Currency Director
--------------------------------------------------------------------------------
Making 'Cents' of the Headlines
The Bank of Canada and the Fed Slashed Rates!
From our Currency Director: Sean Hyman
What Happened
Yesterday, the Bank of Canada cut its interest rates by 25 basis points as expected. On the same day, the Fed "shocked" the markets by cutting U.S. interest rates by 75 basis points-- just eight days before their scheduled meeting.
The Bank of Canada stated that in the second half of 2007, their economy grew broadly in line with expectations. The BOC announced that Canada's economy continues to operate above production capacity.
However, they claimed that the level of the Canadian dollar has affected the retail sector. So they pointed out that this is one of the reasons for a lower CPI (Consumer Price Index) number.
Since their CPI is lower and their financial markets have deteriorated (along with markets around the globe), they were able to cut interest rates.
What I Say
The U.S. Fed rate cuts will eventually help the Canadian economy also. So when the U.S. does finally recover, Canada will get a boost too.
However, in the meantime, the Canadian policymakers know that a "slower U.S." means slowing exports for them. So they will probably need to cut rates further over time to see their economy recover.
The Buck Fights Back, Breaking Downtrend line on USD/CAD
The Bank of Canada projects that things will strengthen in 2009, which will then "bring things back into balance" by 2010.
The bottom line is that the U.S. dollar is continuing to recover from the recent weakening of the Canadian dollar. I believe you'll see this trend continue.
Good Day Currency Traders!
Monday night, the Nikkei 225 fell over 750 points (over 10%) at one point. The German DAX also dropped over 10% at one point. The S&P stock futures slipped 5% which caused the stock market to drop below 20% from its highs and propelled the S&P 500 into "bear market" territory. And Bank of America just announced a 95% drop on their earnings and Wachovia 98% on their profits. Ouch!
This means that the Dow very well could blow through the 12,000 support zone and head for the next level at 11,500-11,600. If it blows through there, then look to see 11,000.
The New King of the Currency Hill
With investor panic setting in, you're really going to see some action in the euro vs. the yen (EUR/JPY) and the British pound vs. the yen (GBP/JPY). If stocks continue their slide as they are indicating, then you'll see these two pairs crumble too. So that means that the Japanese yen will be "king of the hill" once again.
The S&P futures haven't dropped this low since 2001. If you're a stock investor, you know that 2001 was a horrible year for stocks. Buckle up your seatbelt because it could get ugly very quickly.
Japan's Finance Minister Says They'll Stay Out of It
Overnight, we got comments out of Japan that stated:
"Japan's government has no intention of resuming large-scale interventions in the currency market, Finance Minister Fukushiro Nukaga said.
So this shows that they may let the present move continue on. So the yen could increase further in value without Japan stepping into the market and selling the yen to hold it down.
The yen is so grossly undervalued that they ought to let it be "bought up."
Yesterday's Fed Market Shocker
The one shocker...the Fed couldn't wait eight more days. Ben Bernanke and his men had to act yesterday and cut interest rates by 75 basis points. No mistaking this now: We're in desperate times. If the Fed feels they can't wait eight days to cut rates, then you know we're in trouble - and not just in the United States.
So they cut rates to 3.50% and stated that "risks to growth remain." Boy, are they insightful. I could have told him this a long time ago. Like I've stated before, the Fed is always late to the ballgame. Yesterday was no exception.
Look for a wild and hairy week in the markets
. We'll all have to wait and see if the Fed's rate cut causes the markets to recover. Or if traders just take a rate cut as a sign that the Fed is panicking. I told you Ben Bernanke was counting the days until the Fed meeting. Well, Bernanke decided he "couldn't wait" a second longer to cut rates. Look for a very bumpy week ahead which will make the carry-trades very volatile over the coming days to weeks.
Sean Hyman, Currency Director
--------------------------------------------------------------------------------
Making 'Cents' of the Headlines
The Bank of Canada and the Fed Slashed Rates!
From our Currency Director: Sean Hyman
What Happened
Yesterday, the Bank of Canada cut its interest rates by 25 basis points as expected. On the same day, the Fed "shocked" the markets by cutting U.S. interest rates by 75 basis points-- just eight days before their scheduled meeting.
The Bank of Canada stated that in the second half of 2007, their economy grew broadly in line with expectations. The BOC announced that Canada's economy continues to operate above production capacity.
However, they claimed that the level of the Canadian dollar has affected the retail sector. So they pointed out that this is one of the reasons for a lower CPI (Consumer Price Index) number.
Since their CPI is lower and their financial markets have deteriorated (along with markets around the globe), they were able to cut interest rates.
What I Say
The U.S. Fed rate cuts will eventually help the Canadian economy also. So when the U.S. does finally recover, Canada will get a boost too.
However, in the meantime, the Canadian policymakers know that a "slower U.S." means slowing exports for them. So they will probably need to cut rates further over time to see their economy recover.
The Buck Fights Back, Breaking Downtrend line on USD/CAD
The Bank of Canada projects that things will strengthen in 2009, which will then "bring things back into balance" by 2010.
The bottom line is that the U.S. dollar is continuing to recover from the recent weakening of the Canadian dollar. I believe you'll see this trend continue.
