COMMENTARY

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  Will GBP/AUD Resume Downtrend at 1.6759?
  Written by Bradley Gareiss
  Last updated 3/17/2010 7:01:59 PM ET
  A bearish Gartley/double top is forming on the GBP/AUD.
  2 comments
• U.S. Dollar: Dip in Inflation Should Be Temporary
  Written by Kathy Lien
  Last updated 3/17/2010 5:07:10 PM ET
  As we have seen from the price action in the forex markets today, what is good for U.S. equities is not necessarily good for the U.S. dollar. The Dow Jones Industrial Average climbed to a 17 year high intraday while the S&P 500 climbed to an 18th month high. Yet the dollar either remained unchanged or weakened against every major currency except for the euro. Currencies and equities behaved very differently because of the nature of the catalyst. The steeper than expected fall in producer prices help to explain why the Federal Reserve decided to keep rates at extremely low levels for an “extended period” of time. Low interest rates are good for stocks because it limits the cost of borrowing but it is bad for the dollar because it reduces the attractiveness of the greenback from a yield perspective. With that in mind however, the market’s reaction to the PPI report is still relatively modest.
  2 comments
• Trade Update: GBP/JPY Stops To Break Even
  Written by Roger Stojsic
  Last updated 3/17/2010 10:26:18 AM ET
  Last week's emerging short at 139.12 has now come to fruition...
  0 comments
• U.S. PPI and BoJ Provide Signal Upside Potential in USD/JPY
  Written by Kathy Lien
  Last updated 3/17/2010 9:02:10 AM ET
  If you are wondering why the Fed did not remove the pledge to keep interest rates at an extremely low level for an "extended period" of time yesterday, just take a look at this morning's producer price figures.
  4 comments
• Pound Shorts Squeezed With No Mercy
  Written by Boris Schlossberg
  Last updated 3/17/2010 6:02:45 AM ET
  Dollar tumbled against the pound and remained on the back foot against all majors with the exception of the yen in the aftermath of yesterday’s FOMC announcement that kept the “extended period” language in the communiqué. Fed’s insistence on maintaining a dovish stance knocked wind out of the dollar bulls who had been hoping for a move to a more neutral posture given the improvement in the US economy. However, it is now clear that the Fed will not even consider the possibility of tightening until it sees tangible proof of sustainable job growth, preferring for the time being to err on the side of caution.
  2 comments
• Why Does The BOJ Continue Easing?
  Written by Boris Schlossberg
  Last updated 3/17/2010 3:12:59 AM ET
  As expected the BOJ left its benchmark rates unchanged at 0.1% but the central bank increased its quantitative easing program from 10 Trillion yen to 20 Trillion yen as it bowed to government pressure to ease deflation. The move however, was not unanimous with the board splitting a 5-2 vote as policymakers grappled with the decision.
  5 comments
• NZD/CAD to Resume Downtrend at 0.7320?
  Written by Bradley Gareiss
  Last updated 3/16/2010 7:26:23 PM ET
  A bearish Gartley pattern is forming on the NZD/CAD.
  2 comments
• U.S. Dollar: Nothing Wrong With Being Predictable
  Written by Kathy Lien
  Last updated 3/16/2010 5:00:27 PM ET
  There was quite a bit of volatility in the forex market following the FOMC announcement even though there were no major surprises from the Federal Reserve. The Fed kept interest rates unchanged at 0.25 percent, continued to unwind their emergency measures and reminded the market that they are not ready to raise interest rates. This is the same message that Fed officials have been delivering at every opportunity but given the improvements in the labor market and consumer spending, market expectations got ahead of themselves. Traders temporarily forgot that we are dealing with a very cautious central bank that has come under a lot of fire. Unless there are clear signs of a strong recovery, the Fed will hesitate to telegraph something that could renege on in the future. When it comes to being a central bank, there is nothing wrong with being predictable and we believe that is the sentiment the Fed shares. In our FOMC Instant Insight, we have thoroughly dissected the FOMC Statement and the key takeaway is that the economy is doing better but there could be problems in the housing market that extend beyond the weather related depression of housing starts in February.
  1 comment
• Fed Leaves in Extended Period Language, but Lots of Upgrades
  Written by Kathy Lien
  Last updated 3/16/2010 3:04:37 PM ET
  The Federal Reserve left interest rates unchanged at 0.25 percent and included the words “extended period” into their FOMC statement. Going into the Fed meeting, traders were looking for 2 things – the inclusion of “extended period” and the number of dissenters. Once forex traders saw the words reappear in the statement and saw that Hoenig was the only dissenter, they bailed out of dollars. However when they took the opportunity to actually read the FOMC statement, they quickly realized that tone was not nearly as dovish as the headlines suggest. Not only were there a number of upgrades in the language used to describe the U.S. economy, but the Fed will be completing their asset purchase programs this month and shutting down its final special liquidity facility at the end of June. Although the Fed stopped short of talking about tightening monetary policy, they also failed to mention additional easing.
  7 comments
• Attractive GBP/NZD Short Brewing...
  Written by Roger Stojsic
  Last updated 3/16/2010 2:13:14 PM ET
  We have an attractive GBP/NZD selling opportunity should prices rally to...
  0 comments
• Housing Numbers Will Not Discourage the Fed
  Written by Kathy Lien
  Last updated 3/16/2010 8:59:38 AM ET
  Forex traders were completely unfazed by the mild disappointments in this morning's U.S. economic data. Since today is FOMC day, the only thing the market is worried about is the outcome of the Fed meeting and whether the Fed will underwhelm.
  3 comments
• Pound Turnaround on Short Squeeze
  Written by Boris Schlossberg
  Last updated 3/16/2010 7:02:09 AM ET
  The pound staged a massive short covering rally in morning London trade piercing the 1.5100 figure after tumbling to 1.4980 a few hours earlier. The fall was triggered by critical comments from the European Commission which stated that, “"The overall conclusion is that the fiscal strategy in the convergence programme is not sufficiently ambitious and needs to be significantly reinforced. A credible timeframe for restoring public finances to a sustainable position requires additional fiscal tightening measures beyond those currently planned.”
  8 comments
• RBA Minutes Suggest A Pause
  Written by Boris Schlossberg
  Last updated 3/16/2010 2:22:21 AM ET
  The RBA released its minutes of the March meeting at 20:30 GMT today and the overall tone of the report suggested that Australian monetary authorities will proceed cautiously with any further rate hikes in the near term. The RBA policy officials noted that economic conditions continued to improve, stating , “Domestically, most economic indicators continued to point to a strengthening in economic activity. Staff estimates suggested that the national accounts, to be released the next day, would show economic growth of ¾–1 per cent in the December quarter. January data suggested that the labour market had continued to firm, consumption spending had held up reasonably well overall and a pick-up in dwelling activity was under way.”
  1 comment
• Will EUR/GBP Resume Downtrend at 0.9195?
  Written by Bradley Gareiss
  Last updated 3/15/2010 7:20:39 PM ET
  A bearish butterfly pattern is forming on the EUR/GBP.
  0 comments
• U.S. Dollar: How to Trade Fed Meeting
  Written by Kathy Lien
  Last updated 3/15/2010 5:09:58 PM ET
  The U.S. dollar traded higher against every major currency ahead of the Federal Reserve’s monetary policy meeting. There are a few reasons why forex traders should be nervous today, but we believe that the rally in the U.S. dollar is a reflection of the market’s hope that the Fed will come through tomorrow by growing more hawkish and optimistic. Equities are hovering near their yearly highs along with 2 year bond yields which indicate that the sell-off was not primarily induced by risk aversion. With some Wall Street economists calling for job growth well in excess of 150k, the Federal Reserve is under pressure to act sooner rather than later. However Fed officials do not easily buckle under pressure because they know that once something is telegraphed, it cannot be readily retracted without triggering sharp volatility across the financial markets. The Federal Reserve has not raised interest rates since 2008, but they are in the process of gradually implementing their exit strategy. In our FOMC Preview, we wrote at length about how traders will be paying particular attention to the inclusion or deletion of the phrase “extended period” and to the number of dissenters.
  4 comments