Thursday, June 25, 2009

Forex Crunch

Forex Crunch

Central Banks Intervention - Great Trade Opportunity

Posted: 25 Jun 2009 02:27 AM PDT

In the forex market, huge volume makes even big interventions very hard. The SNB’s intervention had a short lived effect last time, and this time is no different - the correction will come. Such cases are great trade opportunities.

The Swiss National Bank intervened in the forex market on March 12th in order to weaken the Swiss Franc. A weaker currency makes Switzerland’s export driven economy stronger. At first it worked: the Swissy plunged against the US dollar and against the Euro quite fast. Technical barriers were breached.

But this effect was short lived. A few days later, the Swissy became strong again. The market corrected itself. In a $4.5 trillion daily market, such interventions, even from very strong and influential institutions as the SNB, can’t last for a long time. This is one of the basic characteristics of the forex market. Influence and foul play - not in forex. The high volume in forex makes it impossible.

On Wednesday, June 24th at about 10:40 AM GMT, the SNB did it again. They intervened in the forex market, and sent USD/CHF from 1.0630 to 1.0980 at 11:40 GMT. Yes, it leaped 350 pips in one hour.

Since then, the pair strengthened a little and then weakened. At the time of writing, USD/CHF trades at 1.0940. Still high, and there’s enough room to go down.

I’m not saying it’ll dive back to 1.0630, but it sure does have lots of room to fall. A great trade opportunity indeed.

Such interventions will happen in the future. Remember that they are short lived, and that a correction is imminent.

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Forex Daily Outlook - June 25th 2009

Posted: 24 Jun 2009 10:49 PM PDT

After yesterday’s FOMC Statement, the markets start the day with a stronger dollar. American figures continue to dominate the scene today, with Unemployment Claims. A speech by Ben Bernanke can clarify yesterday’s cautious statement.

Australia’s CB Leading Index rose by 0.7%, and last month’s fiugre was revised upwards. The Australian economy is doing better than the currency…

European Industrial New Orders are expected to be left unchanged after falling last month. The EUR/USD is flirting with the 1.40 line.

Unemployment Claims are predicted to get slightly better, but still remain above 600K. Obama said that the unemployment rate will pass the 10%. No big surprises are expected here.

Final GDP for the first quarter of 2009 is predicted to remain at the same level as the initial release: a contraction of 5.7%. The economy did very bad in the first quarter…

At 14:00 GMT, Ben Bernanke will begin his testament in Washington DC. Will he shed new light on the situation?

It isn’t over yet. GDP in New Zealand is published at 22:45. Gross Domestic Product is predicted to fall by 0.7% in the land of the kiwi. This continues a long recession. A surprise will shake the NZD/USD.

And the last notable indicator for today comes from Japan: Tokyo Core CPI will show the strength of deflation in the land of the rising sun. t’s expected to fall by 1%.

That’s it for today. Happy forex trading!
Posted by Abdelrahman Ellithy at 5:29 AM

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