Credit Crunch Fears Shake The Global Markets

Yen gained against the dollar on fears about the credit crunch and housing market decline. Investors cut bets in the carry trades as the worlds stock markets took a tumble today. Carry trades are considered hi risk investment. Naturally in a time of crises, the investors orient themselfs toward lower risk assests.

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Here's how the currency pairs look at the moment I'm typing this. The usd/jpy is at 103.23 down over 100 pips since yesterday. The dollar is at a week low against the yen. The aud/jpy is at 99.10 50 pips down from yesterday's low, same as the nzd/jpy which is down to 79.95.

The yen remained almost unchanged against the euro and the pound, primarely on good news coming from europe. Wolfgang Franz, president of the ZEW Center for European Economic Research and economic adviser to the German government, said the European Central Bank may have to ignore the economy's weakness and increase interest rates to curb inflation. The gbp/jpy stands at 203.18 and eur/jpy at 161.75.

World stock markets took a tumble today with dow jones leading the fall losing over 200 points today or 1,53%. The FTSE lost 2,5%, and all the major worlds stock markets are down today.

It will the interesting to see the minutes of the fed meeting that are coming out tommorow. Tommorow we also have the minutes from the Bank of England. These two events will help us see how the central banks plan to act in the future. For now lets see how far the fears about the credit crunch will take the market this time. this thing isn't over yet!

I plan to do this kind of market analysis on a regular basis, so please bookmark my blog.

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Forex Trading - FOMC Unimous About Keeping Rates Unchanged

Forex Trading - FOMC Unimous About Keeping Rates Unchanged. In forex trading yesterday, the Fed was torn between the inflation issue and housing. In the end they decided to keep rates unchanged.

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According to the minutes of their metting held on May 9, the Fed officials expect the economy to improve this year and they eye inflation as their main concern. They also list the the risk that the housing recession may ``weigh heavily'' on growth. The also said the risks of a slowdown have ``diminished slightly.''

``Recent developments were seen as supporting the Committee's view that maintaining the current target rate was likely to foster moderate economic growth and a gradual ebbing in core inflation,'' the minutes said.

The minutes of the Fed meeting on may 9 was the event that was widely expected by the forex markets yesterday, but it hardly move the market. The pound was up just 16 pips 1 hour after the report, and the euro was up just 10 pips.

Forex News - US economy weakest in four years

Forex News for May 31 - The US economy grew at a pace of 0.6% in the first three months of 2007, its weakest rate in more than four years. This figure was a downward revision on the initial 1.3% estimate, and was also worse than market expectations of 0.8%.

It was the slowest rate of growth since the final three months of 2002.

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Significant reason for the weak numbers was the fall in the housing market, which posted a 15.4% reduction in new home building during the quarter.

Consumer spending remained resilient, adding 4.4%, and business investment was better than earlier estimates, growing 2.9%, revised up from 2%.

Some comments of the analysts incuded:

"It's quite obvious the economy bottomed in the first quarter and this leaves us with a better base from which to bounce back."

"I think we'll see second-quarter growth above 3% and 2.5% for all of 2007," said Lehman Brothers senior economist Drew Matus."

Forex Trading Update - G7 pressures China to Make Currency More Flexible

Forex Trading Update - China came under renewed pressure today by G7 nations to make it's currency more flexible. Source: Bloomberg. Canadian Finance Minister Jim Flaherty yesterday said: ``We need to see more flexibility in the Asian currencies''.

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An official said the group will issue a statement later today which repeats exchange rate flexibility in China would be ``desirable.''

G7 Meetings and statements have been closely watched by forex traders since the 1985 Plaza Accord in New York, where ministers of the largest economies called for a weaker dollar, stronger yen and higher deutsche mark. Those words sparked a three-year slide in the U.S. currency, which the group tried to halt in 1987 when they met at the Louvre in Paris.

We all saw what happened in April when a call for the yuan to appreciate sent the dollar tumbling, even after officials explained that that statement wasn't a call to sell the dollar. Asian forex trading currencies rose after the April G7 meeting.

Here is what some analysts are saying ahead of the meeting:

``They have to be careful what they say after the last meeting,'' said Steve Pearson, a currency strategist in London at HBOS Plc, Britain's biggest mortgage lender. ``The message is be careful what you say because there could be unintended consequences.''

``I'm not expecting any great moves out of this G-7 in general, but people will be following the nuances,'' said David Malpass, chief economist at Bear Stearns Cos. in New York.

Unnamed G7 official: The statement will not mention the Japanese yen

The statement will not mention the Japanese yen, an unnamed G-7 official said. Ahead of the talks, French and German officials criticized the currency's 6 percent decline against the euro this year out of concern it will hurt European exports. French Finance Minister Thierry Breton repeated yesterday the euro is ``fully valued,'' indicating he doesn't want to see it rise further.

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It would be interesting to see what happens this weekend. Definitely we will see some moves after the G7 meeting. It will be a fun Monday morning for forex trading.

Forex News Trading Strategy

Forex News Trading Strategy - I haven't traded the news before, but after finding this forex news trading strategy, I may reconsider. The strategy was posted by a guy called Ricky, under the handle of NWRK. Here's the new thread for this forex news trading strategy. Rick closed the original thread and started a site of his own forex news trader. I haven't used his payed service, so I can't comment on it, I'm just testing his forex news trading strategy.

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Here are the rules for this forex news trading strategy ( this is Rick's original post):

Forex News Trading Strategy

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Hello, I am new to this forum, but not to Forex. I would like to share a way of trading the news with a high rate of w/l trades. This strategy is for high volatile moves. No indicators are needed. No RSI, No MACD, no nothing! Just the pair you are interested in on a 1 minute time frame! Here is how it works! If this has been posted on this forum before, I am sorry, but I came up with this last year, and have been trading it sense.

Set-Up I trade the following news events: NFP, FOMC, Trade Balance, interest rate statements, consumer price index, and gross domestic products. These seam to move the best for this strategy.

The country, and pairs are usd, jpy, uk, BOC, E-12.
NOTE: the wicks, or shadows do not count!

UP-TREND
How it works! You have points (A), and (B). retrace then enter.
Point (A)=open of first candle.
point (B)=the close of the candle, before the fisrt down (bear) candle. If there is 3 candles up, then a pull back (bear) candle, the close of the 3rd candle is the (B) point!
NOTE:the first candle can have both (A) and (B) points!

Entry:UP-DATE ON ENTRY PLEASE READ The first candle to close above, or below, OR BREACH point (A), or (B) is where you enter the trade. If it closes , or breaches above point (B), then you go long. If it closes below, or breaches point (A), then you go short.
NOTE:After the retracement the candle must close, or breach above, or below point (A), or (B)! do not enter until then!

EXIT:The distance between point (A), and point (B), is the minimum target you should try for!

Stop:What ever point you get in at, the other point is your stop! if you get in at point (A), then point (B) is your stop. If you get in at point (B), then point (A) is your stop. Myself, if I get in a trade other then the NFP, and I see profit at any point, I do not let it go against me. I will try for the spread, or even!

Same thing for down trend. open of first candle is point (A), price goes down, then pulls back, at that point you have point (B). Price goes up. When a candle closes on the other side of (A), or below (B), then enter the trade that way with a target of the distance between (A), and (B)!

The other news releases don't always move the market the way the NFP DOES! My target for those is 75% of the distance from point (A), to point(B). If it only moves a little and you make say 10 pips, and you exit the trade...if price goes up and closes on the other side of the other point, then enter the trade that way also, with the same target!

It is that easy! I have lost 1 trade sense I have been trading this strategy. I hope it does for you, what it has done for me! Happy trading...

WARNING:ANY STRATEGY COMES WITH RISK THE RESULTS I HAVE HAD WITH THIS STRATEGY, MAY NOT BE YOUR RESULTS KEEP TO THE RULES, AND YOU (SHOULD) HAVE GOOD RESULTS!!!

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Regarding the entry, Rick suggested in a later post on the SB forum thread ( I posted the link above) that after considering a breach of the candle for entry, he got back to his original idea a close of the candle - After the retracement the candle must close above, or below point (A) or (B).

That's all.

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Please visit SB forum thread to inform yourself about updates to the strategy, post questions, and share with other people that use this forex news trading strategy. Hope to see you there! Here's the link again: forex news trading strategy

Bank of Japan raises rates for the first time in six years

Bank of Japan raises rates for the first time in six years - The BOJ raised rates yesterday, the first such move in six years. The overnight call rate was raised from zero to 0.25 per cent, in line with expectations, but the discount or Lombard rate, at which the BoJ lends directly to financial institutions, was only raised by 30 basis points to 0.4 per cent, less than the forecast 40-basis point rise.

Tony Norfield, global head of FX policy at ABN Amro said: "A 50 basis point rate would have given the yen support; 40 basis points leaves it vulnerable to further weakness"

BOJ Governor Toshihiko Fukui said 3 of 9 board members advocated raising the discount rate, to 0.5 percent. They were outvoted by the majority who favored lifting it by 30 basis points to 0.4 percent, less than some analysts had forecast. Fukui told reporters after the decision the bank doesn't plan to raise rates consecutively.

Dispite the rate rises, the dovish statement contributed to wide yen selling. The yen fell against all major currencies after the news. It closed at 116.12 against the usd, gbp / jpy closed at 213.45, and eur / jpy closed at 146.87.

You can find the Bank of Japan statements here BOJ Announcement of Decisions

Thanks for reading this article. Later I will post how I traded the Bank of Japan news release.

FOMC June Meeting Decision and Aftermath

FOMC June Meeting Decision and Aftermath - The Fed raised its fed funds rate by 25 bps to 5.25% on it's last two day meeting ending June 29. A move expected my most analysts but the surprise was the statement issued after the meeting.

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The FED maintained its description of inflation expectations as "remain contained" while the impact of resource utilization and rising energy prices to continue to only "have the potential to sustain inflation pressures".

However, the FED changed the part of the statement regarding economic growth. FOMC gave this assessment of the US economy in it's June 29 statement: indicators suggest that economic growth is moderating from its quite strong pace earlier this year, partly reflecting a gradual cooling of the housing market and the lagged effects of increases in interest rates and energy prices.

In it's May 10 Meeting, regarding economic growth the FED said: "The Committee sees growth as likely to moderate to a more sustainable pace".

Regarding future decisions, the FED said: "The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information. In any event, the Committee will respond to changes in economic prospects as needed to support the attainment of its objectives".

The FED maintained the decision will depend on the data attitude, not giving any clues about it's future moves. This should cause additional activities like we've seen in the past months, the traders interpreting every data release as more significant, and adding more weight to it, which in turn could lead to choppy trading ahead.

You can find the text of the statement here: FOMC June Meeting Statement

Still the statement is dollar negative and dovish. The FED issued a more certain note towards moderating economic activity, while making no upgrade in its inflation vigilance.

The dollar feel against all major currencies as a result of the statement. It lost 130 pips against the euro after the FOMC June Meeting Decision, and closed at 1.2666. Against the pound, the dollar lost 170 pips and closed at 1.8274.

In yesterday's trading we saw the effect of the the decision will depend on the data attitude when the dollar got hammered badly on a set of bad news. The dollar fell for a second day yesterday, losing 124 pips against the euro, and 206 pips against cable. It closed the week at 1.2791 versus the euro, and at 1.8482 against the pound.

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All questions and comments are welcomed as usual. Thanks for reading FOMC June Meeting Decision and Aftermath analysis.

FOMC June 2006 meeting - More US rate rises

FOMC June 2006 meeting - More US rate rises seem almost a done deal. As I concluded in my analysis back on June 14 Forex Online Trading June 14 - Another Rate Hike in June the move for the Federal Open Market Committee on the June 28 and June 29 2-Day Meeting will almost certanly be a quarter point increase to 5.25 per cent.

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On the last meeting Ben Bernanke and CO said the decision will depend on incoming data, and the data came out strong. Consumer Price Index reports:

Data released showed consumer inflation running at a faster-than-expected pace of 0.4 percent in May, pushed up by a steep increase in energy. Core inflation, which strips out volatile energy and food prices, advanced 0.3 percent in the month and stands 2.4 percent higher year-on-year.

However, there is a reason for concern as stated in my June 13 report Higher Interest Rates Hurts the Global Markets Over 2 Trillion . The markets around the world got hurt badly by the recent events. Besides the US a number of countries are rising or preparing to raise rates. The FED should be really careful about it's future steps, and choose the right balance between the need to fight inflation and the possibility for causing a global economic slowdown.

FOMC June 2006 decision to increase rates by 25 points to 5.25 % maybe a done deal, but the future remains uncertain. Most analysts predict a move in June and maybe one more in august, but an increasing number start to raise their forecasts.

On Thursday, Barclays became the first primary dealer bank to predict 6 per cent rates before the year end. We have become less convinced that the FOMC will be comfortable keeping rates at 5.5 per cent in August as growth remains strong and core inflation continues to move higher, the banks economists said.

Fed funds futures, a gauge of the market’s interest rate expectations, have swung sharply this month. August contracts price in an 80 per cent probability of a quarter-point rate rise in that month, in addition to the quarter-point expected next week.

We think that there is a notable chance of a 50 basis point rate hike at an upcoming meeting, said Barclays. The FED had raised rates in quarter-point increments a rise next week would be the 17th in a row. Source: Financial Times.

The list of prominent names that expect the FED to go near 6 % include : Lehman Brothers with a forecast of 5.75 per cent, JPMorgan and Credit Suisse, with a 6 per cent peak but both expect that rate some time next year.

The FOMC June 2006 meeting starts on June 28 and the FED decision will be announced on June 29 at 14:15 EST time. The consensus is for a 25 points increase to 5.25 %. Comments, questions and suggestion are welcomed.

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Thanks for reading FOMC June 2006 meeting analysis.