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| World political leaders remain very busy. Last weekend the G-20 group held a meeting in Scotland. Now it is turn for the Asia-Pacific Economic Cooperation, or APEC. Leaders of these nations are meeting in Singapore, to talk even more, mostly about the same issues as before. High on the agenda seems to be protectionism, which all members rejected, even though every country has own measures to that effect. One of APEC goals is the creation of a free-trade area covering all 21 APEC economies, which clearly is years away. For now new growth strategies are called for, without providing much of details. Most of the week leading to summit, there was a lot of speculation about Chinese Yuan being high on the agenda. It is generally expected that the currency will be allowed to appreciate, if only fractionally, at least it was the tone of comments made by Chinese officials. Anybody who waited for something along these lines must be rather disappointed, because nothing came of it. For now at least. At the same time China’s top bank regulator said Sunday the weakening U.S. dollar and low interest rates are spurring speculation in stocks and property, distorting global asset prices and threatening the global economic recovery. This was released just hours before president’s Obama visit to China. Currencies should be discussed more prominently there.
APEC summit. | | |
| One of the more popular, or better known, trading strategies in Forex circles is “Big Ben” method. This strategy is named after the famed London landmark for two reasons- it is specifically targeting British Pound, in the GBP-USD pair, and is designed to be used after London opens for business. It is a day trading technique and entirely technical, disregarding any fundamental input. Cornerstone of the strategy is in a fact that trading volume in GBP-USD expends dramatically after London opening, typically causing relatively large move, by comparison to preceding swings. Many variants of the Big Ben strategy have been developed, but the core is something like this: initial moves when after Frankfurt opens (an hour before London) establishes daily opening range for GBP-USD. Within next hour, as the volume grows, real first move of the day starts, going through high/low of the Frankfurt swing. Purists of the method would look for a move in opposite direction, reversal, using mostly 5M charts. Stops are typically tight and relative to the returns sought. For example, some variations of the technique suggest targeting 20 pips, while others would make it dependent on the total range of previous hourly range. Many combinations are possible, but once chosen, specific one should be traded for some time (50,100, more?) trades in a disciplined, systematic manner.
Big Ben and Canadian Dollar. | | |
| Trade numbers for September have been released today. The Commerce Department said that the trade deficit jumped 18.2 percent in September to $36.5 billion. That was the largest deficit since January and more than the $31.7 billion imbalance economists had expected. So far this year, the trade deficit is running at an annual rate of $366 billion, about half of last year’s $695.9 billion deficit. But this trend is not expected to continue. The deficit with China, which had been falling, jumped 9.2 percent to $22.1 billion in September, the highest imbalance in 10 months. For the year, the deficit with China is down 15.9 percent although the gap is still the largest the U.S. has with any country. Response of currencies to these figures shows that trade balance doesn’t rank as the most important of economic data. It gets considerable attention today, but this is mostly due to president’s visit to Far East, where trade, and the imbalance, will certainly be discussed. Moves of the Dollar pairs have not been huge by any standards. For example, EUR-USD has had a range of about 60 pips so far today. Damaging trade balance report and growth in Eurozone, it’s emergence from recession, as announced today, should have far bigger impact on this pair. For now, nothing extraordinary is happening. But we still have few hours of trading left, so who knows.
Trade deficit. | | |
| Interesting news from China today. On the eve of US president’s visit to this country, People’s Bank of China issued a monetary policy report which outlined possible release Yuan from US Dollar peg.The exact wording was “Following the principles of initiative, controllability and gradualism, with reference to international capital flows and changes in major currencies, we will improve the yuan exchange rate formation mechanism,”. OK, so in reality it is a big maybe, kind of like saying “There is a sliver of a chance for possible un-pegging of Yuan, sometime in the future, as measured by cosmic time unit, if you are lucky”. But it is a start, of sorts and something what US counterparts want to hear. Delighted US officials responded by saying what the Chinese wanted to hear. During his stop over in Japan, U.S. Treasury Secretary Timothy Geithner said during news conference “I believe deeply that it’s very important to the United States, that we maintain a strong dollar.” And, since US deficit is under international scrutiny, he added ““we’re going to bring our fiscal position back to a sustainable balance.” I guess if you say something often enough you start believing in it, irrespective of evidence to the contrary. Now, since the visit already accomplished what it intended to do (win some concessions) does it even has to happen? We can just be telling each other these grossly exaggerated half truths and smile nicely, without spending money on silly meetings.
Yuan to appreciate finally? | | |
| British pound came under pressure last night, after a credit rating agency, Fitch Rating , issued a warning. It stated that UK is at risk of loosing its AAA rating status, more than any other top-rated nation. It has to do with widening budgetary gap and seemingly lack of credible plan to restore fiscal stability. It wouldn’t be the first time that negative comments of this sort were made. In May S&P lowered outlook for UK from stable to negative, move that was largely symbolic, not effecting credit rating. By contrast, though, Moody’s opinion is that ” UK is among resilient Aaa rated countries”, as stated in November. Go figure. This lack of consensus should be no surprise coming from industry that lost any credibility at the beginning the financial crisis. These are the same people who were rubber stamping highest ratings on securities defaulting just weeks later. Either complete incompetence, or fraud- take your pick, one is as bad as the other. I find it amazing that all three of these agencies were not disbanded by authorities and industry rebuilt from scratch. As is, people are paying attention to them, even though they still have no congruity. For example, if shortfall in UK budget is so disturbing, how should US or Japan rate? In case of America we are talking about trillions of dollars over next decade. No warnings about that?
British credit rating at risk. | | |
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