Fundamental Analysis

European stocks fell as they corrected after the largest monthly growth since July 2009, as some investors again started to reluctantly buy stocks before Euro zone leaders had a chance to explain how they will pay for the expansion of the region’s rescue fund. Futures on American stock indexes and Asian shares also fell. Shares of HSBC Holdings Plc and BHP Billiton Ltd led the drop among shares of companies in the banking and commodity sectors. The Stoxx Europe 600 Index dropped 1.1% to 246.18 as of 10:32AM in London. The index closed with monthly growth of 8.8%, which is not bad considering it was the highest growth in over two years. On October 28 last week, the European stock index underwent a 0.2% correction after 3.6% growth the previous day following Euro zone leaders announcing that they intended to increase the EFSF in an attempt to put a stop to the region’s debt crisis. In total, the index shot...

In the first half of the day on Tuesday, the dollar continued its advance on its major competitors. Investor uncertainty regarding the situation in the Euro zone due to the constant lack of any kind of concrete decisions on issuing another tranche of financial aid to Greece has taken its toll: the EUR/USD pair dropped to 1.3150 and the British pound fell to 1.5350 in the GBP/USD pair. The situation began to change after 6:00PM (Moscow Time), when Federal Reserve Chairman Ben Bernanke made his address before the US Congress’s Joint Economic Committee. In the address, Bernanke announced that “the Fed is ready to take additional measures for stimulating the economy if necessary,” and also signaled that, according to the Fed’s calculations, inflation in the US has stabilized. At the same time, he cautioned Congressmen against a policy of excess savings, again pointing to the poor situation on the labor market.  Market players assessed his words as a hint that...

EURUSD: 1.3384 Medium-Term Trend: sideways Outlook: A month I favored the long side as I thought the Contracting Triangle from the 2008 top had already ended and the single European currency was in its next bull market. However for the past month or so the Medium-Term picture has changed completely and now it is clear that the Triangle from the 2008 top is still unfolding. We have two almost equally likely scenarios now: 1.) if this Triangle is a contracting one, the decline from the May 2011 top is approaching its end and then a powerful rally will develop, most likely in early 2012. OR 2.) this Triangle is an expanding one in which case a decline below 1.18 will occur. I said these two scenarios are alsmost equally likely but at the moment I slightly prefer the red-line (bullish) scenario. But even in that case we should be prepared for more weakness in the next several weeks. Only a move abv...

The risk aversion sentiment has accelerated containing the markets following the falling of June personal income to 0.1% monthly revising down the figure of May to 0.2% from 0.3% while it was expected to be 0.3% and also monthly falling of US personal consumption expenditure by 0.2% while it was expected to rise by 0.2% in June with down revision of the figure of May from 0.2% to 0.1% in July. These new dovish data about the US economy has supported the demand for the gold to reach a new all times high at 1641 per ounce recovering the falling to $1606 because of the reached deal between the republican party and the democratic party of cutting the US governmental spending by $2.1 trillions over the next 10 years for having an agreement for raising the US debt ceiling avoiding defaulting but the rising worries about the US growth outlook have come back supporting the gold following the falling of July...

Trading in America has been sinking slowly and dragging the S&P 500 Index down with it, to the lowest level in almost two months. Bonds and commodities futures collapsed, while the storm clouds of a possible impending US default are gathering. The US dollar, however, appreciated. Surprisingly, the US dollar is finding opportunities for growth even under the threat of a default.  All of the problems surrounding the dollar and American bonds are only pushing it up. One can only imagine the euphoria with which enthusiastic investors will scramble to buy American bonds when the long-awaited news is finally announced. The S&P 500 Index went down 2% for the first time since June 1, falling to 1,304.89 points as of 4PM in New York. The cost of hedging against a default on US bonds went up to the highest rate since February 2010, while yields on 10-year treasury obligations increased two basis points to 2.98%. Coffee and oil futures lost over 1.5%,...

The US dollar was trading 0.2% above its record high against the Swiss franc before the US House of Representatives voted on a plan to cut government spending in exchange for raising the country’s debt ceiling. The dollar was also 0.2% below its lowest level against the New Zealand dollar, before analysts’ predictions showed that durable goods orders in June grew at a much slower pace. The yen reached a four-month high against the dollar amid speculation that the Japanese government might have to intervene again on behalf of the national currency to prevent a strong yen from hurting exports and hindering the nation’s economic recovery. “The dollar’s tendency to weaken will still have a stronger influence on the market than strong record highs in export-oriented currencies,” says Greg Gibbs, currency strategist at the Royal Bank of Scotland Group Plc. in Sydney. “The market is clearly providing risks for a further downgrade” on the US’s credit rating. As of 8:28AM in Tokyo,...

Today, Speaker of the House John Boehner announced to legislators that, despite the danger of a veto and the fact that negotiations in Congress are at a dead-end while the August 2 deadline looms near, he favors adding a short-term increase to the country’s debt limit over President Barack Obama’s proposed solution to the US’s debt problem. During a teleconference on Sunday afternoon, Boehner told rank-and-file Republicans that they should join together as a team to block Obama’s proposed $2.4 trillion increase to the current $14.300 trillion debt ceiling limit, which also stipulates all the funds are received simultaneously without having to give any guarantees on cutting government spending. Boehner’s comments were relayed to the press by someone closely involved with the course of the discussions. The Speaker of the House also said that no one wants to see the US default on its debt, therefore he is proposing a plan of only a short-term, $1 trillion increase in the debt ceiling...

The greenback has started the week under pressure on no reached deal between the current democratic ruling party and the republicans for hiking the taxes until now can open the door for succeeding voting for raising the current debt working $14.29B limit which has been reached in the middle of last May while the markets are waiting anxiously for the way the US Government to pay its financial obligations in the second of next month and it looks that till we reach this time the markets sentiment will be possessed by the development of this ascending problem in US eyeing on next Friday release of US Q2 GDP which is expected to get down to 1.6% y/y from 1.9% in the first quarter of this year. The Swiss Frank got use of this negative business spending sentiment and continued its pressure on the US dollar despite the recent weaker than expected release of Swiss trade balance of June which came at...

Coming Up Today (all times GMT) GBP MPC Minutes (8:30) USD Existing Homes Sales (14:00) CAD BoC Policy Report (14:30) CAD BoC Press Conference (15:15)   Forex pairs responded to the global rally in equities yesterday, as the dollar and yen sold off in favor of riskier currencies. Headlining the move was the AUDUSD which rose to a high of 1.0750, nearly 200 pips above its Monday lows. The question among Forex traders today is whether yesterday’s move has legs or was it the result of bargain hunting and short covering. As such, will be watching this morning’s lows; if they hold it could lead to another round of buying momentum today. EURUSD Taking advantage of the overall fall in the dollar yesterday, the EURUSD twice traded back above 1.4200 before settling around the 1.4150 level. Looking ahead, Forex traders will be watching the 1.4200 level closely. If the pair once again trades above 1.4200 and succumbs to selling, it will reveal that traders are selling into the...

Sometimes all it takes is the removal of a single word from an interest rate statement to give the market what it wants, in this case it was the removal of the phrase “eventually” from the key sentence in the BOC statement: “To the extent that the expansion continues and the current material excess supply in the economy is gradually absorbed, some of the considerable monetary policy stimulus currently in place will be withdrawn, consistent with achieving the 2 per cent inflation target. Such reduction would need to be carefully considered.” Last meeting, the eventually phrase, used in conjunction with “carefully considered” gave the market a more dovish indication after the release, but in today’s statement, we have a more hawkish central bank, at least the way the markets see it. Other Keys from the Statement: Growth expectations are solid: “Following an anticipated slowdown in growth during the second quarter due to temporary supply chain disruptions and the impact of higher energy prices on consumption, the...