EurAnalysis

Here is the part of your question that I will focus on. On my trading platform here are the first four currencies that I watch...

EUR/USD
EUR/JPY
USD/JPY
GBP/USD

I also follow these other four.

USD/CHF
EUR/CHF
AUD/USD
USD/CAD

Your Comments...

So if all pairs are raising against the Yen, why is it that the EUR/USD does not have a similar inverse pattern (basically a straight line down like the straight line up on the xxx/JPY charts)?

This is where I am trying to figure out why you keep saying to watch the EUR/JPY and USD/JPY in relationship to the EUR/USD. By looking at the USD index, you can clearly see that the Euro is the inverse of the USD but the USD/JPY and EUR/JPY isn't.

So I guess the question is, why do you think a weakening Yen will give us a weaker Euro? The charts (to my eyes) don't support this.

Looking forward to your comments.

I perhaps caused some confusion by using EUR/JPY and USD/JPY in my correlation comments.

My experience and I think that PipTrapper had posted a chart on the correlation MOST OF THE TIME between EUR/USD and EUR/JPY.

Do a Daily Chart Of EUR/USD and EUR/JPY and it should show that they move together up and down. We now have TWO NEW FACTORS to deal with.

One: The weakness and the FEAR present in the Euro at the moment.
Two: The possibility that the move of USD/JPY from 100 to 75 might reverse and move back up to 100. That does not mean that it will happen. I just want to be aware of how it will have an effect on the other currencies if this happens.

Since both USD/JPY and the US Dollar has been used as a safe haven currency and the Yen has been used as a carry trade currency they both sometimes have the same uses.

The main way that I use EUR/JPY is to confirm and predict moves in EUR/USD as they do both move the same way most of the time.

The Euro makes up 57.6% of the US Dollar Index and it is clearly the reverse when it moves as relates to the US Dollar.

At this time because of great uncertainty certain correlations are not the same. As one example over the last 60 days or so when the Dow moves up EUR/USD does not always follow. However the reverse does when the Dow goes down then most if not all the time EUR/USD will go down.

It is all about the PERCEPTION of where the most secure place is to keep money during uncertainty.

Gold is one of these places HOWEVER because of INTERVENTION at any moment as we saw last week you need to understand Gold better than most Asset Classes if you ever trade it. I do not trade it at the moment however I use it to watch when other factors are at play. We now have another NEW factor as it relates to Geopolitical Risk and I go to Oil. Some Hedge Funds are parking money in Oil for the moment. There are many factors at play now and they all are interconnected at the moment.

I hope this has helped you understand better what I have been posting from a fundamental view with technicals to confirm my observations. As long as USD/JPY stays in the range of 75 to 85 then I see no major sea change for the moment in that currency and its effect on EUR/USD.

When they want to weaken the Yen at times there is selling of Yen and buying of Euro. Now it is more risky to do that so Yen is sold and another Asset Class is purchased.

We have ACTIVE confirmed INTERVENTION in both the Yen and the Swiss Franc. I watch to see if EUR/CHF will move back to 1.2000 from where it is now at 1.2059. We all remember the VIOLENCE of that last INTERVENTION last year when the move was 1000 PIPS or so. Then CHF was Sold and Euro was bought. Would that be done the same way today on new circumstances ?

Have a good trading week and stay alert.

His technical analytical skills are stuffed. The fib is no bloody use to man nor beast!

http://www.ekathimerini.com/4dcgi/_w...03/2012_431067


PSI expectation is rather excessive

After the haircut, the debt-to-GDP ratio will only be 2-3 percent lower this year than lasthttp://wwk.kathimerini.gr/kathnews/images/dot_clear.gif


http://sup.kathimerini.gr/kath/engs/...o_390_0403.jpg http://wwk.kathimerini.gr/kathnews/images/dot_clear.gif Oh no: The actual debt reduction appears to be smaller as Nomura analysts pointed recently.

By Dimitris Kontogiannis

Greece’s tender offer for the biggest-ever bond exchange enters the final stretch and even though a few bankers have expressed concerns about its outcome, we have no doubt Greece will be able to achieve a high participation rate at the end of the day, partly thanks to the activation of CACs (Collective Action Clauses).

However, it is rather worrisome that PSI (Private Sector Involvement) may not do away with the drachma specter, undermining efforts to stabilize the economy and making it more difficult for the main pro-euro political parties to broaden their appeal as the country heads into the next general elections.

This means that the end result of the Greek crisis may have more to do with politics and institutions and less with economics.

In its latest Greek debt sustainability analysis, the International Monetary Fund assumes that investor participation in the PSI will be at 95 percent. It is hard to imagine that participation will end up even somewhat under 95 percent, given the political and financing repercussions and therefore expect Greece to activate CAC to make the PSI terms binding for all bondholders.

However, CAC activation will likely be deemed a credit event by the relevant ISDA commission and trigger CDS (Credit Default Swap) contracts, meaning the buyers will be compensated by the writers, most likely banks and insurers. This may be a welcome development after all since it will not undermine the sovereign CDS market used by bondholders in other EU markets to hedge their risk.

Some market participants always thought a large scale “voluntary” Greek debt restructuring with no CDS triggering would have had adverse effects on Italian and Spanish bonds since buyers could not hedge their exposure via the CDS market. It is quite a change since politicians like German Chancellor Angela Merkel, French President Nicolas Sarkozy and former Greek premier George Papandreou used to blame the CDS for fostering the debt crisis.

Coming back to PSI, an important step for Greece to secure the second financing package from the EU and the IMF, calculations show the debt relief may not be as big as thought at the beginning for specific reasons.

Crude estimates put the debt reduction tied to PSI at around 105 billion euros. This is so if one takes into account the 53.5 percent haircut on the nominal amount of Greek bonds outstanding equal to around 206 billion euros.

However, the actual debt reduction appears to be smaller as Nomura analysts recently pointed out. Greece’s debt-to-GDP ratio will only be 2-3 percentage points lower in 2012 than in 2011, which stood at 164 percent at the end of last year.
This is so because the general government debt-to-GDP ratio excludes intergovernmental holdings such as bonds held by social security funds put at more than 23 billion euros while the debt is burdened by the extra recapitalization needs of the banks to 50 billion euros from 40 billion, the clearing of arrears in excess of 6 billion euros to the private sector, the primary budget deficit and others.

In the Greek domestic political debate, the leaders of the mainstream parties have stressed the significance of PSI in getting debt relief and cutting the annual interest expenses to lower the budget deficit to rally support for the second financing package. Antonis Samaras, the head of the conservative New Democracy party leading in the polls, has also used it as the main argument to justify his backing of the new economic program after coming out against the first one.

Opponents of PSI have so far focused their criticism of the deal on the fact the new Greek bonds to be exchanged for the tendered ones will be subject to English law. They claim this amounts to a loss of national sovereignty and deprives the country of a powerful negotiating tool in the event of a future Greek debt restructuring. It will be a surprise if they fail to capitalize on the smaller-than-thought debt relief once they get hold of them.

Therefore, the smaller initial debt relief from PSI will make life harder for political parties championing Greece’s position in the eurozone, increasing the country’s political risk. The latter make some market participants more skeptical of whether PSI and the second financing package constitute the endgame in the Greek debt saga.

All of them combined with a tumbling economy, which shows no sign of stabilization and recovery, do little to chase away the specter of the drachma, in turn undermining efforts to revive private investment spending and further boost exports.

In a situation like this, enlightened political leadership plays an important role in drumming up support among the country’s business community and elsewhere to get the country out of the slump and provide a clear vision for the future to the masses.

We would be lying though if we were saying the odds are good, knowing the institutional inefficiencies of the Greek state, the quality of the majority of local politicians and even the opportunistic character of many businessmen.

However, hope dies last. Even though the assumed successful completion of PSI may not provide Greece with the economic impetus many like us thought of a few weeks ago, there are competent people in politics who can go against the tide, including the public administration, to steer the economy ship into calm waters and exorcize the specter of the drachma.

ekathimerini.com , Sunday March 4, 2012 (22:53)

Kno's Comments: No Matter what happens there will be much focus and expectation here both ways so it must be kept on the radar until the deadlines pass, March 8, 2012 and March 23, 2012.

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Egon von Greyerz








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Egon von Greyerz (EvG): Founder and Managing Partner of Matterhorn Asset Management AG & GoldSwitzerland. Since the 1990s Egon von Greyerz has been actively involved with financial investment activities including Mergers and Acquisitions and Asset allocation consultancy for private family funds. This led to the creation of Matterhorn Asset Management -MAM an asset management company based on wealth preservation principles. MAM is part of the Aquila Group, Switzerland's largest independent asset management group. EvG makes regular media appearances on CNBC, BBC, etc. and publishes articles on the world economy and wealth preservation.

http://www.dailyfx.com/forex/fundame...3.05.2012.html

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Fundamental Forecast for the US Dollar

The US Dollar (ticker: USDOLLAR) tumbled, then surged and ultimately the Dow Jones FXCM Dollar Index finished at two-week highs through Friday’s close. Incredibly choppy financial market moves made it difficult to establish a consistent trading bias. Yet early evidence suggests the Greenback set an important short-term bottom against the previously high-flying Euro (EURUSD top).


The coming week promises a pickup in US and global economic event risk, and further USDOLLAR volatility seems all but guaranteed. The obvious question is whether late-week USD strength is the start of a larger reversal. Friday’s US Nonfarm Payrolls data is clearly likely to spark trader interest, but trends are typically set through early-week trading. It will be important to watch how the Greenback starts off the first full week of March trade; the beginning period of any time frame most often sets the pace for remaining price action.


What could cause a significant US Dollar breakout and further strength? Put simply, the traditional safe haven currency will do well when “risk” does poorly; if speculative investments such as stocks and commodities turn significantly lower the US Dollar would likely continue higher. Yet if the US S&P 500 resumes its march towards fresh multi-year peaks, expect the Greenback to turn lower.


Given the choice, any rational investor would look to the investment with the highest returns relative to risk. In the currency world this means seeking currencies with the highest short-term interest rates with relative safety. If traders perceive low danger of losses, they will plow into the highest yield—currently the Australian Dollar—and go against the lowest: the US Dollar.

The S&P 500 Volatility Index currently trades near its lowest levels since 2008. Cross-market correlations suggest the US Dollar should continue trading lower on broader complacency. Yet high yields have often acted as a double-edged sword; sudden turns in sentiment could send the AUDUSD sharply lower.


Any especially significant surprises in US Nonfarm Payrolls figures could dictate moves. Expectations are riding high into the closely-followed labor figure; an important downtrend in domestic unemployment and modest jobs growth has boosted forecasts for US economic performance. Yet expectation can often beget disappointments, and any significantly below-consensus numbers could alter broader market sentiment.


We had previously called for significant US Dollar losses on an important Euro/US Dollar sentiment and positioning extreme. Yet recent CFTC Commitment of Traders data shows that large speculators and commercial traders have scaled back on one-sided bets and hedges. The big pullback in US Dollar-long positions and Euro-shorts may have run its course, and indeed we see early evidence of a significant EURUSD top.


At DailyFX we always defer to market price action. Despite the best logic or justification to the contrary, financial markets will remain irrational far longer than most traders can remain solvent. The US S&P and broader ‘risk’ has continued higher despite significant danger of global economic slowdown and ongoing crises in the Euro Zone. Yet markets will eventually catch up, and we will watch closely for any clear signs of a turnaround. The past week could be the start of a broader reversal for financial markets and the USDOLLAR itself. – DR

DailyFX provides forex news on the economic reports and political events that influence the currency market.

All in all the market will be focusing on this coming week’s US NFP release, along with Mario Draghi’s ECB Press Conference…
Here’s the list of upcoming tradable releases:

1. Mon March 5, 2012 – 4:30am EST – UK Services PMI
2. Mon March 5, 2012 – 10:00am EST – US ISM Non-Manufacturing PMI
3. Mon March 5, 2012 – 10:30pm EST – AU ECB Interest Rate
4. Tue March 6, 2012 – 10:00am EST – CA Ivey PMI
5. Tue March 6, 2012 – 7:30pm EST – AU GDP q/q
6. Wed March 7, 2012 – 8:15am EST – US ADP NFP
7. Wed March 7, 2012 – 3:00pm EST – NZ RBNZ Interest Rate
8. Wed March 7, 2012 – 7:30pm EST – AU Employment Change
9. Thu March 8, 2012 – 7:00am EST – UK BOE Interest Rate
10. Thu March 8, 2012 – 7:45am EST – EU ECB Interest Rate
11. Thu March 8, 2012 – 8:30am EST – EU ECB Press Conference
12. Thu March 8, 2012 – 9:00am EST – CA BOC Interest Rate
13. Fri March 9, 2012 – 7:00am EST – CA Employment Change
14. Fri March 9, 2012 – 8:30am EST – US NFP Employmenth

knoholygrail

I suspect I am probably being a bit unreasonable in making this request, but would it be possible to give a short summary of your thoughts. You have a good handle on the fundamentals and your take on the big picture at the start of the week would be much appreciated. On the other hand, if my request is gonna time consume, ignore me.

For example, the global market has no clear direction at the moment due to the conflicting picture of intervention (Euro especially) against apparent US improvements (employment/consumer). Asia sentiment (Yen) is thus bullish due to the latter but the Euro is not following the Yen in tandem...sort of thing.

I am probably not being as sophisticated as you in my view of the fundamentals...in fact, I am damned sure you would make a better job of placing events in a nutshell.

Anyway, if achieveable, I would be most obliged. There is no one out there who quite seem to be able to do this.

After I make my supper, Chicken Wings, Honey, Corn and Tomato Soup, I will come back and post some comments.

I am a detail person so I included my supper menu as well. (Joke)

Later...

Hahaha. Thanks for your valuable time. Menu sounds delish...enjoy!

The Week Ahead
Five central banks will meet this week, including RBA, RBNZ, BoE, ECB and BoC but none of them is expected to change policy. Main focus would indeed be on firstly, reactions to US data. ISM services, ADP and NFP would be closely watched. As speculations on QE3 cooled, investors could indeed respond negatively to positive US data. We'll see if that's the developing pattern. Second, the window of Greek PSI debt swap deal would close on Friday and markets will pay close attention to news regarding this topic.

1. Monday: Swiss retail sales; Eurozone Sentix investor confidence, retail sales; UK services PMI; US ISM services, factory orders<LI style="RIGHT: auto" id=yui_3_2_0_16_13309111949794836>Tuesday: RBA rate decision; Eurozone GDP revision; Canada Ivey PMI
2. Wednesday: Australia GDP; Swiss unemployment, forex reserves; US ADP employment; Canada building permits
3. Thursday: RBNZ rate decision; Japan GDP; Australia employment; Swiss CPI; BoE rate decision; ECB rate decision; BoC rate decision; Canada housing starts; US jobless claims
4. Friday: Australia trade balance; China CPI; UK production, PPI; Canada employment; US NFP, trade balance

Fundamental Forecast for the US Dollar

The US Dollar (ticker: USDOLLAR) tumbled, then surged and ultimately the Dow Jones FXCM Dollar Index finished at two-week highs through Friday’s close. Incredibly choppy financial market moves made it difficult to establish a consistent trading bias. Yet early evidence suggests the Greenback set an important short-term bottom against the previously high-flying Euro (EURUSD top).


The coming week promises a pickup in US and global economic event risk, and further USDOLLAR volatility seems all but guaranteed. The obvious question is whether late-week USD strength is the start of a larger reversal. Friday’s US Nonfarm Payrolls data is clearly likely to spark trader interest, but trends are typically set through early-week trading. It will be important to watch how the Greenback starts off the first full week of March trade; the beginning period of any time frame most often sets the pace for remaining price action.


What could cause a significant US Dollar breakout and further strength? Put simply, the traditional safe haven currency will do well when “risk” does poorly; if speculative investments such as stocks and commodities turn significantly lower the US Dollar would likely continue higher. Yet if the US S&P 500 resumes its march towards fresh multi-year peaks, expect the Greenback to turn lower.


Given the choice, any rational investor would look to the investment with the highest returns relative to risk. In the currency world this means seeking currencies with the highest short-term interest rates with relative safety. If traders perceive low danger of losses, they will plow into the highest yield—currently the Australian Dollar—and go against the lowest: the US Dollar.

The S&P 500 Volatility Index currently trades near its lowest levels since 2008. Cross-market correlations suggest the US Dollar should continue trading lower on broader complacency. Yet high yields have often acted as a double-edged sword; sudden turns in sentiment could send the AUDUSD sharply lower.


Any especially significant surprises in US Nonfarm Payrolls figures could dictate moves. Expectations are riding high into the closely-followed labor figure; an important downtrend in domestic unemployment and modest jobs growth has boosted forecasts for US economic performance. Yet expectation can often beget disappointments, and any significantly below-consensus numbers could alter broader market sentiment.


We had previously called for significant US Dollar losses on an important Euro/US Dollar sentiment and positioning extreme. Yet recent CFTC Commitment of Traders data shows that large speculators and commercial traders have scaled back on one-sided bets and hedges. The big pullback in US Dollar-long positions and Euro-shorts may have run its course, and indeed we see early evidence of a significant EURUSD top.


At DailyFX we always defer to market price action. Despite the best logic or justification to the contrary, financial markets will remain irrational far longer than most traders can remain solvent. The US S&P and broader ‘risk’ has continued higher despite significant danger of global economic slowdown and ongoing crises in the Euro Zone. Yet markets will eventually catch up, and we will watch closely for any clear signs of a turnaround. The past week could be the start of a broader reversal for financial markets and the USDOLLAR itself. – DR

DailyFX provides forex news on the economic reports and political events that influence the currency market.

All in all the market will be focusing on this coming week’s US NFP release, along with Mario Draghi’s ECB Press Conference…
Here’s the list of upcoming tradable releases:

1. Mon March 5, 2012 – 4:30am EST – UK Services PMI
2. Mon March 5, 2012 – 10:00am EST – US ISM Non-Manufacturing PMI
3. Mon March 5, 2012 – 10:30pm EST – AU ECB Interest Rate
4. Tue March 6, 2012 – 10:00am EST – CA Ivey PMI
5. Tue March 6, 2012 – 7:30pm EST – AU GDP q/q
6. Wed March 7, 2012 – 8:15am EST – US ADP NFP
7. Wed March 7, 2012 – 3:00pm EST – NZ RBNZ Interest Rate
8. Wed March 7, 2012 – 7:30pm EST – AU Employment Change
9. Thu March 8, 2012 – 7:00am EST – UK BOE Interest Rate
10. Thu March 8, 2012 – 7:45am EST – EU ECB Interest Rate
11. Thu March 8, 2012 – 8:30am EST – EU ECB Press Conference
12. Thu March 8, 2012 – 9:00am EST – CA BOC Interest Rate
13. Fri March 9, 2012 – 7:00am EST – CA Employment Change
14. Fri March 9, 2012 – 8:30am EST – US NFP Employment

Kno's Comments:

It is IMPORTANT to know what events occur in order to be aware of how they may unfold and when they will unfold.

All the above information will cause reactions in the markets each day. The reason that it is important to read all this and be aware of it is because trading with technical indicators do not tell you what to expect. Every day there is new information that needs to be factored into the equation.

There are Risk On and Risk Off considerations. There is Market Perception based on news coming out daily that might be contrary to the realities.

There will be surprises and there will be events that change from the common view of what was expected. This is a most unusual and unique week with so many different major news due for release that just might be a game changer.

It will require a day to day review and adjustments as new facts come out. The best way to go into the week is to assume nothing, put all bias away and just let the events unfold and understand how it will cause a revaluation of all the asset classes. Money flow and what is causing it will be crucial this week. The first important events will start early in the day on Monday. I would say in the USA the Non - Manufacturing ISM might set the tone. Will the Dow go up or down ? Will there be unexpected news out of Greece ? We can only be patient and watch things unfold knowing how the movement in funds will change the values in the currencies that you trade. Technicals of course are part of the equation as it relates to Support and Resistance.

Good Trading To All and it should be a exciting and eventful week of trading... All options are open !!!

Trade safe and with Good Risk Management and A Good Trade Plan...

http://ca.mg1.mail.yahoo.com/neo/ima...ading_dark.gif

knoholygrail

An excellent and succinct explanation of the fundamentals for me and I especially liked the contrasts between the risks and highpoints. Very useful indeed and I look forward to more of these detailed yet brief explanations of an otherwise complex range of issues. Thanks

yes, especially this week.
Greek bond swaps, interest rates, options expiring etc etc
there was a news article saying this week could be one of the most volatile weeks. Should be interesting

I believe the most effective for Euro will be Greece CAC success. If they cannot get private investors to participate voluntarely take 50% losses to their investment, which are insured against default - greece will default and investors get their investment back.

or

Take 50% losses, swap bonds to new ones which maybe are success valued and take some profit after 40 years...

Hmmm. Which choice is more attractive? 50% losses, or no losses. As a trader I don't think twice.

In case you have not read this yet...

http://www.guardian.co.uk/business/e...debt-crisis-eu

Yup, I read that today already, which brings to my mind again this summit picture:

That's a masterpiece

Not sure that everyone has the bonds "insured" against default.

50% losses are necessarily not a loss. Its the reduction in nominal value.
If you bought it for 80% its less than 50% loss and if you bought it for 30% its not a loss at all its a 40% profit.

You are right - I was kind of exaggerating, but point is loss - or no loss. And all investors are not insured. They need to get anyways 75% of investors to join in order CAC to succeed. Currently it doesn't look good.

If I recall right, Kno sent last week a link to the diagram about different options in this case?