EurAnalysis

FOMC Preview: Watch Out for ‘Fed Fakes’

By Steven Russolillo

http://s.wsj.net/public/resources/im...0416163855.jpg
Fed Chairman Ben Bernanke

To QE or not to QE?

That is the question constantly on investors’ minds these days as they grapple with markets whipsawed by the every new bit of jawboning among Fed officials. For every Fed official who thinks there are plenty of reasons to implement QE3, there are others who equally think now is the time to tighten monetary policy.

Heading into the two-day FOMC meeting starting today, investors will closely scrutinize whatever may come from the Fed’s latest gathering.

As WSJ’s Jon Hilsenrath points out, “the outlook doesn’t look like it’s shifting in a way that would support new initiatives to boost economic growth.”

While few major fireworks are expected at this meeting, there’s a growing sense that the Fed could hint at what could be in store for monetary policy. Economists at Bank of America Merrill Lynch are nervous, however, that investors could misinterpret the tea leaves.

“We worry that the market could misread a hawkish intent into the information the FOMC will release on Wednesday,” write economists at Bank of America. “We thus caution investors to be wary of another such ‘Fed fake.’”

BofA predicts the Fed statement will retain the commitment to keep rates exceptionally low through at least late 2014.

Those that are hoping for additional QE may be heartened by the fact that economic data lately haven’t exactly inspired images of a booming economy. Jobless claims keep trickling up, the housing market’s rebound has hit a rough patch, and regional manufacturing reports are exhibiting slowing growth.

But the Fed has remained extremely cautious about its economic assessments anyway. Fed chairman Ben Bernanke didn’t gotten too optimistic when the data were improving and he also hasn’t swung too far the other way now.

Expect him and the rest of the Fed to remain status quo. From WSJ:

Taken altogether, the economy doesn’t seem to be breaking in a way right now that would cause the Fed to shift the stance it laid out in January. Investors expecting a signal of an early rise in rates are likely to be disappointed. And those expecting a new bond buying program are likely to be disappointed too. The Fed is on hold until its forecast shifts more clearly.

Tomorrow...Our Uncle Ben Would Screaming.....I Told you guys....No QE Many times Liaw...Why you guys didnt believe my words...Lolz

A chart says more than...

Ha ha ... Nice one!

I know I'm not a regular in this thread but I just have a quick question. As pertains to the EUR/USD, anyone else just witness this? It happened in the matter of a second or two and the tick chart went wild. The result is the highest volume bar plotted on my chart for well over 3 weeks. Odd thing is, the range on the bar (in this image, 15 min) is minuscule with no big change. The bar ended up closing down but only by a couple points. Any ideas? Maybe a data brain fart?

hahahahahahhahahaa

max till 1.3300...above that we should revise our analysis again...but if euro below this level...we should take oppurtunity to sell it back..heheheh

I usually don't track volume, but one of my data feeds is the same as yours (FXCM) so I decided to check. (The other doesn't provide volume as a study.)

I see it also -- in fact I see two very large volume spikes, at 18:35 (EST/EDT) and 18:41.

Could just be a data error. It would be interesting to see if the spikes show up in other feeds as well.

According to an article in the Wall Street Journal that came out very late in the US session - EU officials have started discussing ways to changing some of the deficit goals that are currently enshrined in EU rules. The political discontent caused by the imposition of the EU stability pact - at a time when the Eurozone economy is shrinking - has spread to the core. Some EU officials are deeply concerned that the political upheaval could worsen, but fear the reaction in the financial markets if they change the 2013 deficit to GDP targets. Officials fear the Eurozone would lose some or all of the credibility attained when they hammered together the Stability Pact at the end of last year and raise fears over the future of the system. The article opines that Germany is likely to oppose any changes - but an unnamed official from Eurozone national government is quoted in the article as saying: "We will have to, one way or another, adjust the trajectory of the budget-cutting path." Despite the relative strength in the EUR over the past 24 hours, the political uncertainty in the Eurozone should limit gains and a trend lower should resume once the position adjustments are complete.

I use Awesome Indicator as a kinda volume indicator. I also use FXCM Market Scope Charts. Try that indicator and let me know. We welcome your input as a regular.

Hey folks! In reference to the huge volume spike; I also use FXCM's data feed on their MT4 platform. However, I use Trade Interceptor on the iPad (watching 1M charts helps me sleep lol ) with which I also use FXCM's data feed. Interestingly enough, the huge volume spike doesn't show up on Trade Interceptor even though it's the same data feed on a different platform. Curious..

It was more than likely just an MT4 brain fart, lol.

*Edit* Glad to be aboard! Kno, I typically use the volumes indicator that comes with MT4. I'm a student of VSA and Market Profiling and use a combination of both for entry/exit signals, broader sentiment and risk management. When combined with FXCM's Speculative Sentiment Index, OANDA's Open Position ratios, and weekly COT data (plotted on my weekly charts) it all comes together in a neat little package. Crummy thing is, thanks to this huge volume spike, the perspective of the data is skewed - all of my volumes history looks tiny now - which will make monitoring volume a little tough for a day, haha.

Same here, FXCM MT4 22.30 GMT huge volume spike with little price movement.

This is the view but no using EW, well some to know where is the correction wave, but I using symmetric and fib. IMO, the pair will go higher until 1.3285 then BIG SHORT...

1. We have a uptrend channel
2. We still correction and we need to go some higher
3. FIB 1.618 is 1.3285
4. Symmetric, first resistance 1.3485, second, 1.3385 and now 1.3285...



AH! We need to break 1.323 first.

We cant find a correct level on 4H TL mate,try switch to Daily or Weekly if wanna look the valid TL...more accurate

Weekly US Dollar

Possible Scenario

If youre talking about the triangle, I like it if it is a bullish triangle, but I need to see more...

Jim Sinclair’s Commentary
We shall hear from him tomorrow.
http://www.jsmineset.com/wp-content/...004_thumb6.jpg

Europe's terrible blunder can be rectified. Remember 1931
The euro was a blood sacrifice to the Eurocrats' fanaticism. But Europe's democracy may save us from Europe's single currency

Simon Jenkins
guardian.co.uk, Tuesday 24 April 2012 21.30 BST

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A Spanish riot squad officer confronts 'indignant' protesters in Madrid. 'Half of Spain's youth are unemployed. The Eurocrats do not care.' Photograph: Dani Pozo/AFP/Getty Images

I write from America, where those who care about Europe ask one question only. What the hell is going on? What is this "euro crisis" that never seems to end? What has happened to Greece, Portugal, Italy, Spain, Holland and now France? Have we all gone insane?

The economist Paul Krugman has one answer. He suggests that Europe is now replicating the 1930s "in ever more faithful detail". Governments, he says, are "committing economic suicide". When every economic tenet cries for treasuries to restore growth, spend, stimulate, inflate and rebuild confidence, they are advocating ever more austerity and balanced budgets, forcing their economies towards recession. They are doing so not because they believe austerity will generate growth. They are doing it because they are imprisoned in a defunct dogma, the propping up of the euro.

Nothing is more eerie than to read accounts of Europe's economy between the world wars, notably the idealistic "Locarno spirit" year of 1925. It was then that the chancellor of the exchequer, Winston Churchill, returned Britain to the gold standard. Wages would be forced down to compete with America, and Europe's prewar economic stability would recover. Keynes pleaded that this was madness. The pound was 10% overvalued against the dollar and the outcome would be "crippled exports, unemployment and strikes".

Churchill was wrong and Keynes was right. Six years later, a minority Labour government hit financial collapse and failed. In the summer of 1931, with capital fleeing the country and bankers wailing for austerity, a coalition national government was formed and abruptly came off the gold standard. The pound slid from $4.85 to $3.40. Despite forecasts of catastrophe, Charles Mowat's classic history of the period records that "hardly a leaf stirred". There was no revolution in the streets, and devaluation aroused no more interest "than that of a passing sneeze". Within four years British industrial production had risen 25%, while unemployment fell from 3 million to 2 million.

History rarely repeats itself, but its lessons do. The Bank of England and Treasury are trapped in similar orthodoxy to that of their prewar forebears. They hold that inflation is the greatest curse that can afflict the British economy, even as they mastermind the greatest collapse in demand that Britain has suffered since the war. When they do agree to print new money as quantitative easing, they dare not let it leak into consumption for fear of inflation. They do not flinch even when a quarter of high street shops close. They are like doctors laying the sick in the snow to see who will survive. Yet they hurl cash at friendly bankers and watch it vanish into the maws of directors and offshore speculators. And they dole out billions to prop up a euro of which they are not even members.

Keynes was right in 1925 – and proved right in 1931. Flexible exchange rates are a more painless way of forcing down labour costs and promoting trade than government austerity. Inflation is a better way of easing debt. The remedy for depressed demand is increased demand, simple as that. The risk of inflation in Britain at present is trivial compared with that of deflation and recession. And at least Britain's currency can float. Imagine if it were part of the euro and trade had to cope with a pound probably 20% higher in value than now.

Hardly a month passes without another euro crisis and more imposed austerity. It is as if Keynes had never lived. Yet water still refuses to flow uphill. Heavily indebted countries certainly need to restructure their public sectors in the long term – and have plausible plans to do so – but they cannot repay debt, short or long term, when they are in recession. Increasing unemployment and suppressing demand impedes growth and is no use to anyone.

Worse, Europe's drawn-out austerity is undermining the very authority required to enforce it. When governments fall, no package can be enforced. Greece was forced last month into de facto default. Who would now buy a Spanish bond? What is the value of a Dutch finance minister? What price Nicolas Sarkozy's signature on a bailout deal? As long as the euro shackles the continental economy in austerity it will never achieve political stability or a return to growth.

The euro was a Locarno dream. It was the last cry of the 20th century, envisaging a brave new order in which bankers and businessmen, workers and peasants, would stand arm in arm, singing Ode to Joy. All labour costs would become equal. There would be fiscal and regulatory integration across the entire continent. The euro would unlock the door of a united states of Europe. Ireland and Greece would be to Germany what Nevada is to New York. The euro would squeeze and stretch the peoples of Europe until they were one.

This concept of union must rank among the great mistakes of history. Like other pan-continental visions, it has proved no match for the crooked timber of European mankind. Its acolytes cannot bear revisionism or tolerate dissent. They have driven Greece into chaos and Spain into severe depression, with half its youth now unemployed. The Eurocrats do not care. Their incomes are secure. They dance only round the euro and claim its blood sacrifice. They will do anything but admit they were wrong.

The one salvation on the horizon is democracy. Last week the French electorate said no to more austerity and the Dutch government fell for the same reason. Spain faces a similar crisis, and the streets of Athens hold untold dangers. Even in Britain polls suggest an electorate unconvinced by the longevity of what by any standards is mild austerity. The peoples of Europe have had enough. The prospect of imposing on its nations the budgetary disciplines required for more German bailouts is unthinkable.

Europe needs a simple, overnight, collective reordering of debts, defaults and currencies, along the lines of the postwar Bretton Woods deal. Euroland must shrink drastically, and floating currencies be restored. The slate must be wiped clean. A terrible mistake was made, but it can be corrected as in 1931. As then the pundits will predict disaster, but I would bet the opposite. After the adjustment, "not a leaf would stir … no more than a sneeze". We would then return to sanity.

DJ FOREX FOCUS: Look Outside, Not Inside, The Euro Zone
Posted on 25 April 2012 1:45 | Dow Jones Newswires--EUR remains resilient despite political, economic tensions

--At some point, falling German yields will be unattractive
--Falling yields elsewhere supporting EUR for now
By Nicholas Hastings

A DOW JONES NEWSWIRES COLUMN
LONDON (Dow Jones)--Events outside the euro zone will dictate the euro's performance now.

For weeks, the single currency has looked set to collapse back under $1.30. Rising political tensions in peripheral countries, higher funding costs, evidence that even the German economy is slowing and fears that the fiscal pact will have to be abandoned have all had minimal impact.
Even news this week that the Dutch government of Prime Minister Mark Rutte had collapsed over fiscal austerity negotiations failed to take the wind out of the euro's sails. In fact, the euro continued to find fairly good support, trading up close to $1.32.

The reason for this is that investors remain confident in Germany and continue to put their money in German government bonds, where yields have been pushed to new record lows with the 10-year bund offering only 1.56%.

Of course, at some point such low yields will start to lose their attraction, especially if the German economy itself starts to head for recession or if the government of Angela Merkel appears too isolated.

For the moment, though, German yields, German government bonds, and by proxy the euro, don't look so bad.

The problem is that most of the alternatives don't have much more to offer. A combination of slower global growth, along with the euro zone's debt problems, are taking their toll across the world.

Let's start with the U.S. The dollar may have briefly looked like a good alternative to the euro earlier this year when the U.S. recovery looked strong and the Fed appeared to be turning more hawkish.

But all that has changed. U.S. growth is proving disappointing and there's speculation that the Fed could announce a preemptive easing in monetary policy as early as this week.

Elsewhere, the pound and the Swedish krona have been doing quite well against the euro but both these currencies appear poised to go into reverse, the former on fears that the U.K. budget deficit isn't shrinking as quickly as expected, and the latter because of Sweden's large exposure to the euro zone's swiftly shrinking economy.

Even the Australian dollar has lost its luster. The currency had long been supported by the strength of the Australian economy and the high level of Australian interest rates. But it's now under selling pressure as inflation subsides much faster than expected while slow growth in China has made the Reserve Bank of Australia a lot more dovish. In other words, Australian yields are on their way down too.

The only currency that appears to be providing stiff competition for the euro is the yen.

Like many other central banks, the Bank of Japan is also contemplating further monetary easing, with markets looking for the bank to extend its asset purchase program as early as this Friday. But this probably won't hurt the yen because Japan is suffering from deflation.

As Bank of Tokyo-Mitsubishi points out: "The continued convergence of global yields towards low yields on offer in Japan remains supportive for the yen with deflation in Japan resulting in real yield pick unlike in most other major economies where real yields remain deep in negative territory."
So the euro may remain less attractive against the yen for now but there is little immediate indication that it is going to become less popular against most other majors.

As the surprisingly good results of Tuesday's Dutch bond auction suggest, investors are happy to support core euro zone markets for the time being regardless of just how high the political and economic risks have become.
Bloomberg TNI FRX POV
Reuters USD/DJ
Thomson P/1066 or P/1074

(Nicholas Hastings is a Senior Correspondent in London for Dow Jones Newswires who has written about foreign exchange for more than 20 years. He previously covered a variety of markets, including equities, fixed income, commodities and energy.

Kno's Comments: I just wanted to share an experienced analyst's Point Of View. Please Make Your Own Decisions. Market Events Overtake Opinions Most Of The Time.