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The United States dollar is one of the world’s leading currencies in the world. Some though believe that the ... http://p.ost.im/p/etkbyw

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What Does the Future Hold for the US Dollar?

[caption id="attachment_722" align="alignnone" width="300" caption="What Does the Future Hold for the US Dollar?"][/caption]

The United States dollar is one of the world’s leading currencies in the world. Some though believe that the viability of the dollar is being threatened by various obstacles, economic, social, political, and otherwise. Some economists even predict that it could become completely obsolete in the not-so-distant future. What has made some of the world’s most trusted experts come to this conclusion about a currency that, in the past, has been a symbol of stability and steadfast dependability? What does this mean for the American economy and for the rest of the world?

  Is the US Dollar “strong” enough?

First, we need to understand what it means to say that a currency is strong. When a particular currency is strong, it essentially means that people trust it and are willing to leave their assets in the form of that currency. If the United States dollar is strong, it means that people believe it will more or less maintain its value relative to the other currencies around the globe.

People are willing to hold dollars for long periods of time, because they are not afraid of them losing their value. Usually, this is measured quantitatively by looking at exchange rates with other countries. If it costs a lot of Euros (or a lot of any other currency) to buy one dollar, it can be said that the dollar is strong.

But how are exchange rates determined? The Forex market works like any other market; that is, prices (or in the case of money – exchange rates) are based on where supply and demand meet. Since the “supply” of most currencies is determined by the central banks who print the money, the dominant factor is demand for the currency.

When there are many investors who want to do business in one currency, they exchange their own currency for the desired one. This drives demand upward, and the price, or exchange rate, for the desirable currency increases. In this way, the strength of a currency is intimately tied to the strength of the economy.

Is it worth to leave your assets in USD?

When talking about the US dollar, the biggest cause for concern is that foreign investors are becoming less and less willing to leave their assets in the form of dollars. Sometimes, there are entire countries, as is the case with China that leaves portions of their assets in dollars.

When it appears that the United States economy is not doing well (the United States entered a severe recession in 2008, the consequences of which are still being felt), investors know that the currency is unstable and look forward to exchanging their dollars for other currencies. Thus, the demand for the dollar is in danger of taking a plunge when no investors want to deal in it.

Making matters far worse is the fact that the United States government is at an unprecedented level of national debt. If the United States comes to the point that it will no longer be able to pay back its debts to other countries, it will be the domino that sets the destruction of the dollar in motion.

The dollar’s value in the foreign exchange market will tank, and the buying power of the dollar will be virtually zero. Some economists fear that the dollar has already started down this path, and that to fund its debts the United States Federal Reserve is simply printing more money. The problem with that – it can be a short-term remedy. It increases the supply of dollars in the foreign exchange market, driving the exchange rate of the dollar down further, leading to a downward spiral that leads to nowhere except deeper debt.

In this case, even if the US actually could pay back its debts, it wouldn’t matter. As long as investors don’t see the dollar as valuable, the game is over because the dollar has lost its value. Soaring gold prices are evidence that even many average people are sceptical about the dollar’s value and want to hold their assets in another form.

The future of the US dollar will depend on how responsible the government is in attempting to get out of debt and on whether or not the US economy will continue to grow and thrive. If not, many Americans and anyone who still holds his assets in dollars will be in a world of trouble.

Original Article

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With only enough cash on hand to keep the country afloat for just another month or so, the noose is tightening ... http://p.ost.im/p/etuhjY

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Officials Talk Openly of Greek Euro Exit

[caption id="attachment_720" align="alignnone" width="300" caption="Officials Talk Openly of Greek Euro Exit"][/caption]

With only enough cash on hand to keep the country afloat for just another month or so, the noose is tightening on Greece. The next aid installment – approximately 30 billion euros – is desperately needed to meet upcoming debt obligations, but is contingent upon Greece first implementing a further 11 percent in spending cuts.

Meanwhile, the results of the election earlier this month failed to result in a clear winner leaving the country absent an effective government when a strong voice is most urgently needed. With new elections not scheduled until June 17th, the likelihood of Greece meeting the spending cut target in time to ensure the next tranche of emergency funding is doubtful. Should this result in a significant delay or outright withdrawal of support, Greece will be unable to meet its next round of debt repayment obligations thereby forcing the country into an uncontrolled sovereign default.

Given the measures Eurozone officials have already undertaken to protect against a Greek default, it is difficult to understand why now, after having already committed billions to the effort, Greece would be permitted to fail. Certainly, in public, politicians continue to pledge their support to keeping Greece within the fold; but, for the first time, highly-placed officials are daring to suggest that Greece’s continued participation within the Eurozone may not be guaranteed.

Last weekend, a policymaker with the European Central Bank, Irish Central Bank member Patrick Honohan, stated that while a collapse in Greece would have an immediate impact on the Eurozone, the damage could be contained. This is significant as it is the clearest instance yet of an ECB member acknowledging that a Greek exit from the region is a potential outcome.

“Technically, it (a Greek exit) can be managed. It would be a knock to the confidence for the euro area as a whole, so it would add to the complexity of the operation until things settle down again”, Honohan noted in an address to an audience in the Estonian capital of Tallinn. “It is not necessarily fatal, but it is not attractive,” he said.

On Wednesday, ECB President Mario Draghi told reporters in Frankfurt that, on the question of Greece leaving the euro, it was not for the ECB’s Governing Council to determine if Greece should or should not remain. According to Draghi, the ECB executive will “continue to comply with the mandate of keeping price stability over the medium term in line with treaty provisions and preserving the integrity of our balance sheet.”

Drahgi noted that the original agreement that created the Eurozone did not have a provision for a member nation leaving the union. Therefore, Draghi said the question of Greece’s continued participation within the Eurozone “is not a matter for the Governing Council to decide”.

Nevertheless, this apparent shift in tone is very telling and signals that there is a growing acceptance that efforts to save Greece have failed. Reading even more into the latest comments, it seems that there is even an acceptance of the inevitability of a Greek default.

As a result, the message has morphed to one of containment; yes, the repercussions of a Greek failure are significant, but are still manageable according to the ECB. What is key now is to prevent a “chain reaction” contagion should Greece return to the drachma.

After all, if Greece fails, what is to prevent the much larger, but equally challenged economies of Spain or even Italy from falling to a similar fate? And while it may very well be true that the Eurozone could survive the exit of Greece, to lose one of the larger economies would surely spell the end of the euro.

Original Article

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US Retail Sales rose in April at the slowest pace of the year, showing unseasonably mild weather and pre-Easter ... http://p.ost.im/p/etApf3

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US Consumer Holding UP

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US Retail Sales rose in April at the slowest pace of the year, showing unseasonably mild weather and pre-Easter shopping may have pulled consumers to stores the prior month.

The 0.1 percent gain followed a 0.7 percent increase in March, Commerce Department figures showed today in Washington. Economists projected an advance of 0.1 percent, according to the median forecast in a Bloomberg News survey.

Categories like building materials, clothing and department stores dropped in April as the weather-induced gains of the first three months of 2012, the warmest on record, faded. Weaker employment growth will probably also make it more difficult for households to match last quarter’s pace of spending, which was the fastest in more than a year.

“The consumer is holding up,” said Neil Dutta , an economist at Bank of America Corp. in New York who correctly forecast the sales gain. “The key thing here is to determine to what extent the weather had an effect, and it’s pretty clear if you look at the components there was some weather impact.”

The cost of living was little changed in April as fuel prices dropped, and manufacturing in the New York region expanded this month at a faster pace than projected, other reports showed.

Original Article

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There is a very old saying in the stock market that goes “Sell in May, and Go Away.” This pertains to the n ... http://p.ost.im/p/etCcDS

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Does Sell in May, Go Away Apply to EUR?

[caption id="attachment_715" align="alignnone" width="130" caption="Does Sell in May, Go Away Apply to EUR?"][/caption]

There is a very old saying in the stock market that goes “Sell in May, and Go Away.” This pertains to the notion that investors should cash in on their investments this month and take the summer off because June, July, August and September have traditionally been some of the worst months in the equity market.

Over the past decade, this adage has held true. If you were to sell the S&P 500 at the end of May, you would have avoided an loss over the past 10 years. For the EUR/USD however you would have lost out on a gain but selling USD/JPY in May would have been a great idea because the currency pair fell steeply between June and September.

Looking beneath the hood however, the decision to sell in May and go away for the summer is not so easy for currency traders because if you did so in 2009 and 2010, you would have missed out on big gains in the EUR/USD. Between June and September of 2009, the EUR/USD appreciated more than 3 percent and in 2010 it rose nearly 11 percent.

This year, there is a reasonable chance that stocks could continue to fall, leading to more risk aversion in currencies because US data has been mixed and central banks are returning to easier monetary policies. However following seasonality without following stories blindly would be a big mistake.

Original Article

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Euro rallies met with very solid offers above 1.2800Risk correlated assets back under pressure in European ses ... http://p.ost.im/p/etMkk2

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Risk Correlated Assets Well Offered on Rallies in European Session

[caption id="attachment_713" align="alignnone" width="300" caption="Risk Correlated Assets Well Offered on Rallies in European Session"][/caption]

Euro rallies met with very solid offers above 1.2800

Risk correlated assets back under pressure in European session

Fitch downgrades Japan ratings; Yen sells off

OECD and IMF out with some downbeat global comments

UK inflation softer than expected

Early rally attempts in risk correlated assets on Tuesday were met with solid resistance in the European session. Market participants shrugged off upbeat news that Germany and France would make strong efforts to keep Greece in the EMU, and the reports that Greek banks would receive a Eur18B recapitalization down payment on Friday. Instead, focus remained on a Fitch downgrade to Japan, and downgraded Chinese growth forecasts from the OECD.

Relative performance versus the USD Tuesday (as of 10:45GMT)

CAD -0.10%

GBP -0.42%

AUD -0.43%

JPY -0.50%

CHF -0.53%

EUR -0.55%

AUD -0.59%

The IMF also came out with some downbeat comments, adding to an intense intraday pullback in the Euro from levels above 1.2800 down into the mid-1.2700’s. From here, it will be interesting to see how things play out into North American trade, but with US equity futures already pointing lower, things are not looking pretty. Still, market conditions are quite choppy right now and we continue to recommend staying on the sidelines.

  ECONOMIC CALENDAR

TECHNICAL OUTLOOK

EUR/USD: The market remains under intense pressure and the focus for now is squarely on a retest of the 2012 lows from January at 1.2625. While we would not rule out a possibility of a test of this level over the coming sessions, short-term technical studies are correcting from oversold and are showing a need for some form of a corrective bounce from where a fresh lower top is sought out. Ultimately however, any rallies should now be very well capped by previous support turned resistance at 1.3000 in favor of additional weakness over the medium-term that projects deeper setbacks into the lower 1.2000′s.

USD/JPY: The market continues to consolidate around 80.00 and is in the process of looking for a medium-term higher low ahead of the next major upside extension back above the yearly highs at 84.20 and towards 90.00 further up. However, for the time being it remains in question whether the market will still head lower towards the 200-Day SMA by 78.50 before ultimately reversing higher. The key level to watch above comes in by 80.60, and a break and close above this level will officially alleviate downside pressures and suggest that a higher low has now been carved in the 79.00′s.

GBP/USD: The market remains under intense pressure since breaking back below 1.6000 and setbacks could now extend towards next key support in he 1.5600 area over the coming sessions. Still, daily studies are now stretched and we would prefer looking to sell into rallies towards 1.6000 where a fresh lower top is sought out.

USD/CHF: Overall the structure remains highly constructive and we continue to project additional upside over the coming months back above parity. For now, the latest break and close above 0.9335 is expected to accelerate gains for a retest of the yearly highs by 0.9600, while any intraday pullbacks should be very well supported ahead of 0.9200. Ultimately, only back under 0.9000 would negate outlook and give reason for pause.

Original Article

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Gold and silver continued their downward trend as the Euro and other currencies also tumbled down. The U.S ex ... http://p.ost.im/p/et4fGh

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Guest Commentary: Gold & Silver Daily Outlook 05.23.2012

[caption id="attachment_708" align="alignnone" width="300" caption="Guest Commentary: Gold & Silver Daily Outlook 05.23.2012"][/caption]

Gold and silver continued their downward trend as the Euro and other currencies also tumbled down. The U.S existing home sales rose in April. European Leaders will convene today in order to talk about the EU debt crisis; they claims they will do all that is possible to keep Greece in the EU. BOJ will announce later in the day on its monetary policy decision. On today's agenda: U.S New Home Sales, China's manufacturing PMI (flash report), the Minutes of the recent MPC Meeting, and Canada's Retails Sales report.

  Gold price declined again on Tuesday by 0.76% to $1,576.6; silver also fell by 0.5% to $28.18. During the month gold declined by 5.26% and silver by 9.15%.

  As indicated in the chart below the linear correlation of the two metal daily percent changes is still strong and robust. During May the linear correlation of their daily percent changes is the highest in 2012 so far, which means the two metals' relation has tighten in the past weeks.

    U.S. Existing Home Sales Increased In April

According to the recent U.S existing home sales report for April the number of homes sold rose by 3.4% to a seasonally adjusted annual rate of 4.62 million home sales; this is a positive report that shows some slow paced progress in the U.S housing market.

This news might have been among the factors to drag down metals rates.

  On Today's Agenda

U.S. New Home Sales: This report will present the developments in new home sales April 2012; in the previous monthly update (for March 2012), the sales of new homes declined to an annual rate of 328,000 – a 7.1% decrease (month over month); if the number of home sales will continue to decline, it may further indicate a slowdown in the U.S real estate market which may also affect the strength of the USD

Original Article

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Trading the News: Canada Retail Sales What’s Expected:Time of release: 05/23/2012 12:30 GMT, 8: ... http://p.ost.im/p/etHwxD

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USDCAD: Trading Canada’s Retail Sales Report

[caption id="attachment_705" align="alignnone" width="300" caption="USDCAD: Trading Canada’s Retail Sales Report"][/caption]

Trading the News: Canada Retail Sales

  What’s Expected:

Time of release: 05/23/2012 12:30 GMT, 8:30 EDT

Primary Pair Impact: USDCAD

Expected: 0.3%

Previous: -0.2%

DailyFX Forecast: 0.2% to 0.5%

  Why Is This Event Important:

  Retail spending is expected to increase 0.3% after unexpectedly contracting 0.2% in February and the rebound in household consumption may prop up the Canadian dollar as it heightens the scope for a rate hike. According to Credit Suisse overnight index swaps, market participants see the Bank of Canada raising the benchmark interest rate over the next 12-months as the central bank drops its dovish tone for monetary policy, and we may see a short-term reversal in the USDCAD as Governor Mark Carney talks up speculation for higher borrowing costs. However, as Mr. Carney continues to highlight the record-rise in household indebtedness, we should see the BoC refrain from a series of rate hikes, and a potential rise in the interest rate may be a one-time deal as the central bank aims to address the risks surrounding the region.

  Recent Economic Developments

  The Upside

Release Expected Actual Wholesale Sales (MoM) (MAR) 0.3% 0.4% Manufacturing Sales (MoM) (MAR) 0.4% 1.9% Net Change in Employment (APR) 10.0K 58.2K

  The Downside

Release Expected Actual Consumer Price Index (YoY) (APR) 1.9% 2.1% Industrial Product Price (MoM) (MAR) 0.0% 0.2% Gross Domestic Product (FEB) 0.2% -0.2%

  The rise in private sector consumption paired with the ongoing improvement in the labor market certainly bodes well for retail sales, and a marked rebound in household spending may ultimately trigger a short-term correction in the exchange rate as market participants increase bets for a rate hike. However, as Canadians continue to face sticky inflation, ongoing price pressures may drag on consumption, and we may see the BoC carry its wait-and-see approach into the second-half of the year should the data foster a weakened outlook for the region. In turn, we may see the dollar-loonie continue to retrace the decline from earlier this year, but we will be keeping a close eye on the relative strength index as it continues to flirt with overbought territory.

  Potential Price Targets For The Release

    As the relative strength index fails to maintain the upward trend from the end of April, the USDCAD looks poised for a short-term correction, and a rebound in Canadian retail sales may spark a move back towards former resistance around 1.0050, which should act as new support. However, as the moving averages start to break away from one another, the bullish breakout in the dollar-loonie may gather pace over the near-term, and we may see the pair come up against the 2012 high (1.0318) should the data fall short of market expectations.

  How To Trade This Event Risk

  Trading the given event risk certainly instills a bullish outlook for the loonie as market participants expect to see a rebound in household consumption, and a positive print may pave the way for a long Canadian dollar trade as it fuels speculation for a rate hike. Therefore, if sales increases 0.3% or more in March, we will need a red, five-minute candle following the release to generate a sell entry on two-lots of USDCAD. Once these conditions are met, we will set the initial stop at the nearby swing low or a reasonable distance from the entry, and this risk will establish our first target. The second objective will be based on discretion, and we will move the stop on the second lot to cost once the first trade hits its mark in order to lock-in our profits.

  However, the rise in household debt paired with sticky inflation may drag on discretionary spending, and a dismal consumption report could spark a run at the 2012 high as it dampens the scope for higher borrowing costs. As a result, if the print falls short of market forecast, we will implement the same setup for a long dollar-loonie trade as the short position laid out above, just in reserve.

  Impact that the Canada Retail Sales report has had on CAD during the last month

  Period Data Released Estimate Actual Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

FEB 2011 04/24/2012 12:30 GMT 0.1% -0.2% 0 -23

  February 2012 Canada Retail Sales

    Household spending unexpectedly weakened for the first time in seven-months as demands for motor vehicles and parts slipped 2.4% from the previous month, while the reading for January showed a 0.2% advance amid an initial forecast for a 0.5% rise. Indeed, the USDCAD pushed back above the 0.9900 figure following the report, but the market reaction was short-lived as the pair ended the day at 0.9869.

Original Article

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Talking Points Crude Oil, Copper Sink with Stocks Before EU Leaders’ SummitGold and Silver Down as ... http://p.ost.im/p/etxhGt

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Commodities Tumble Along with Stocks Before EU Leaders Summit

[caption id="attachment_703" align="alignnone" width="300" caption="Commodities Tumble Along with Stocks Before EU Leaders Summit"][/caption]

Talking Points

  Crude Oil, Copper Sink with Stocks Before EU Leaders’ Summit

Gold and Silver Down as Safe-Haven Flows Buoy the US Dollar

  Commodities are sinking in early European hours as risk appetite evaporates ahead of today’s EU leaders’ summit. Traders are pondering an endgame to the latest debt crisis flare-up that may include Greece’s exit from the Eurozone, an unprecedented outcome with no clear-cut benchmark for its implications for the financial markets. Sentiment-driven crude oil and copper prices are following shares lower while gold andsilver face de-facto selling pressure as the rout stokes safe-haven inflows into the US Dollar.

  The EU sit-down is being billed as an “informal” working dinner. German officials were busy taking to the wires yesterday to pour cold water on expectations for what may emerge at its conclusion. A statement on Greece, the issuance of joint Eurobonds or any specific policy decisions in general are – according to German sources cited across the spectrum of newswires – not to be. That has left traders understandably jittery about what will in fact be accomplished.

  If the German public line is taken at face value, the conversation will center on the European Investment Bank (EIB) and how it can be used more effectively to boost growth, presumably without compromising deficit-reduction efforts. If that is indeed the case, disappointed selling seems likely to descend upon the spectrum of risky assets.S&P 500 stock index futures are pointing decidedly lower, hinting current trends have scope to carry forward, though the weighty event risk ahead means things can change very rapidly in the coming hours.

    WTI Crude Oil (NY Close): $91.85 // -1.01 // -1.09%

  Follow-through failed to materialize after prices completed a Bullish Engulfing candlestick pattern yesterday and took out resistance at 92.51, a former support marked by the December 16 low. Crude has now slipped back below that level, exposing horizontal pivot support at 90.49 once again. Still, the Bullish Engulfing remains valid absent a daily close beneath its low at 90.90, leaving the door open for a rebound. A break back through 92.51 targets the February 2 low at 95.41.

  Daily Chart - Created Using FXCM Marketscope 2.0

      Spot Gold (NY Close): $1568.50 // -24.57 // -1.54%

  Prices recoiled from resistance marked by the 1600/oz figure as well as the 50% Fibonacci retracement level at 1599.17, taking out support at 1582.10 marked by the 38.2% level and exposing the next downside objective at 1560.98. A break below this boundary exposes the 1522.50-1532.45 area. The 1582.10 level is once again acting as resistance.

  Daily Chart - Created Using FXCM Marketscope 2.0

      Spot Silver (NY Close): $28.18 // -0.29 // -1.00%

  Prices are reversing lower from resistance at 28.70, with sellers once again aiming to challenge support at support at 27.06. A break lower exposes the 26.05-15 area. Alternatively, a reversal back through resistance on a daily closing basis targets the next upside barrier at 28.70.

  Daily Chart - Created Using FXCM Marketscope 2.0

      COMEX E-Mini Copper (NY Close): $3.488 // -0.014 // -0.40%

  Prices are testing through support at 3.438, the 100%Fibonacci expansion, with a break below that exposing the 123.6% level at 3.327. Near-term resistance lines up at 3.537, the 76.4% expansion level.

  Original Article

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Talking PointsEuro: EU Summit To Generate Little Support, ECB To Come Under PressureBritish Pound: BoE Vote ... http://p.ost.im/p/etPTCV