segunda-feira, 5 de maio de 2008

In Poll, Obama Survives Furor, but Fall Is the Test

ASHINGTON — A majority of American voters say that the furor over the relationship between Senator Barack Obama and his former pastor has not affected their opinion of Mr. Obama, but a substantial number say that it could influence voters this fall should he be the Democratic presidential nominee, according to the latest New York Times/CBS News Poll.
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Doug Mills/The New York Times

Senator Barack Obama courted voters on Sunday in Fort Wayne, Ind.

At the same time, an overwhelming majority of voters said candidates calling for the suspension of the federal gasoline tax this summer were acting to help themselves politically, rather than to help ordinary Americans. Mr. Obama’s rival for the Democratic nomination, Senator Hillary Rodham Clinton, has made the suspension of the gas tax a centerpiece of her campaign in recent days.

In the survey, taken in the days leading up to the primaries on Tuesday in Indiana and North Carolina, Americans were divided over the merits of the gasoline-tax suspension, which has also been backed by the presumptive Republican nominee, Senator John McCain, and condemned by Mr. Obama as political gimmickry.

Mrs. Clinton and Mr. Obama spent the final Sunday before the two primaries debating the gas-tax holiday and other issues on morning talk shows and in events across Indiana.

The poll, conducted after Mr. Obama held a news conference on Tuesday in which he renounced his former pastor, the Rev. Jeremiah A. Wright Jr., for making incendiary comments, found that most Americans said they approved of the way Mr. Obama had responded to the episode and considered his criticism of Mr. Wright appropriate.

But nearly half of the voters surveyed, and a substantial part of the Democrats, said Mr. Obama had acted mainly because he thought it would help him politically, rather than because he had serious disagreements with his former pastor. The broader effect of the controversy on Mr. Obama’s candidacy among Democratic primary voters was less clear in the poll, but enough of them expressed qualms about Mr. Obama’s relationship with Mr. Wright to suggest it could sway a relatively small but potentially important group of voters in the remaining primaries.

The relatively small number of Democrats surveyed limits the conclusions that can be drawn about the poll’s findings regarding sentiment in the party. Moreover, as a national poll, it does not necessarily reflect the thoughts of voters in Indiana and North Carolina.

Questions involving racially charged episodes have historically proved difficult to poll, particularly when it comes to asking white voters about black candidates.

Still, the survey suggested that Mr. Obama, of Illinois, had lost much or all of the once-commanding lead he had held over Mrs. Clinton, of New York, among Democratic voters on the question of which of them would be the strongest candidate against Mr. McCain, of Arizona.

In February, 59 percent called Mr. Obama the stronger candidate, compared with 28 percent who named Mrs. Clinton. In the latest survey, the two were essentially tied.

The survey of 601 registered voters was conducted between Thursday night and Saturday night. It has a margin of sampling error of plus or minus four percentage points for all voters and six points for voters who said they voted in Democratic primaries or caucuses. Mr. Obama held his news conference on Tuesday after Mr. Wright, in a series of public appearances, reiterated his suggestion that American policies had invited the attack of Sept. 11 and that the United States had created the virus that causes AIDS, and mocked the speaking style of John F. Kennedy.

For all the concern voiced by some Democrats that the party might be suffering damage from the nominating fight as it headed into the fall election, the survey found both Mrs. Clinton and Mr. Obama in a strong position against Mr. McCain in a hypothetical general election match-up. Mr. Obama would defeat Mr. McCain by 51 percent to 40 percent among all voters, the poll found, and Mrs. Clinton would defeat him 53 to 41.

The survey offered evidence of the extent to which the Wright episode had captured the public’s attention. And it turned up signs that Mr. Obama might be moving beyond the issue: 60 percent of voters said they approved of the way he had handled the issue, and a majority said the news media had spent too much time covering the story.

“Reverend Wright is not Barack Obama,” said Heather Fortner, 56, of Florida, who said she voted for Mrs. Clinton in that state’s disputed primary. “Everybody knows a lot of a people and everyone can take advice from a lot of people.”

“It’s just wrong what we’ve been doing to Mr. Obama over this,” she said.

Still, the poll raised some flags of concern for him, particularly should he win his party’s nomination.

While just 24 percent of voters said they thought the Wright issue would matter a lot or some to them in the fall, 44 percent said it would matter a lot or some to “most people you know.” And while just 9 percent of Democrats said the issue would matter a lot to them should Mr. Obama be their party’s nominee, even that small a slice of the electorate could be a problem for Mr. Obama if he won the nomination and the contest against Mr. McCain was close.

Fifty-eight percent of respondents said Mr. Obama was “tough enough to make the hard decisions a president has to make.” Seventy percent said the same of Mrs. Clinton, and 71 percent of Mr. McCain.

“The thing with Wright really did bother me,” Phyllis Julien, a Democrat from Brookline, Mo., said in an interview after she participated in the poll. “I was leaning towards Obama before this because I thought he could be a change for the American people, but now I’m leaning toward Clinton. I would have to see a little more fire in his belly to vote for him, and I just don’t see it.”

“You have to worry about how strong his convictions are when he can’t stand up to someone who’s wronged him,” Ms. Julien said.

The survey found that, notwithstanding Mr. Obama’s efforts to distance himself from Mr. Wright, the man who married him and baptized his children, many Americans consider Mr. Wright to have had at least some influence in his life. Forty-three percent said they thought Mr. Wright had a lot of or some influence on Mr. Obama’s political views.

On the gasoline tax, the survey underlined the risk Mrs. Clinton is taking in embracing a position that most Americans — including a majority of her own supporters — appear to view as political pandering. More than 60 percent of voters in the poll said that Mrs. Clinton said what people wanted to hear, rather than what she believed. Forty-three percent said that about Mr. Obama, and 41 percent about Mr. McCain.

Sixty percent of Democratic primary voters who support Mrs. Clinton favored the temporary elimination of the gasoline tax, and an equal percentage of Mr. Obama’s supporters called the proposal a bad idea. But majorities of both candidates’ supporters called the proposal a political tactic.

“Clinton is supporting the lifting of the gas tax because right now she needs more votes,” said Greg Mitchell, 38, of Blanchard, Okla. “But that’s really only one of the few things I disagree with her on. I voted for her.”

ECB’s Trichet Warns About Global Inflation Risks

The currency market has been rather quiet on Monday due to the lack of major economic releases from the US or Eurozone. The US dollar mainly erased some of last Friday’s gains post-payrolls report which wasn’t as bad as many had predicted. Traders will be looking forward to Thursday when the Bank of England and the European Central Bank are scheduled to meet and announce their rate decision.

Trichet Sounds Alarm On Global Inflation

European Central Bank president Jean-Claude Trichet said at a G10 meeting in Switzerland on Monday that central banks must be alert to inflation risks worldwide. Trichet said that “inflation risks are significant” due to rising commodity prices, which he described as “a very important phenomenon on a global level”. As for the topic of the forex markets, Trichet said that G10 members did not discuss that at the meet as G7 countries have made their position clear. Trichet sounded optimistic about global economic growth, and said, “Thanks to remarkable, confirmed resilience of a great number of emerging economies we see ongoing growth.”

Forex Trading

EUR/USD has been trading a relatively narrow range of 80 pips early today, reaching a session high of 1.5500, more than a 100 pips above Friday’s precarious low of 1.5360. 1.5510-30 will be its nearest resistance. USD/CHF’s move has been even more subdued, moving between 1.0520-70. The US dollar rallied with greater energy versus the British pound, causing GBP/USD to move lower to 1.9660. However, the buck lost footing against the Australian dollar: AUD/USD rose from 0.9340 to 0.9440, ahead of a rate announcement by the Reserve Bank of Australia on Tuesday morning at 0430 GMT. Although most people are expecting the central bank to hold the rate steady at 7.25%, which is a 12-year high, they are hoping for a hawkish post-rate statement highlighting inflation concerns in Australia.

sexta-feira, 2 de maio de 2008

Who Is Benefiting From High Commodity Prices?

onsumer spending increased 0.4% today, giving the markets cheer, although after taking inflation into account, it is only a 0.1% increase. Credit card companies like Visa (V: 82.75 -2.65 -3.10%) and Mastercard (MA: 285.04 -8.90 -3.03%) already gave us a preview to that, showing how credit card spending in the US had increased in the last quarter. Also, how many of us truly believe inflation is at only 2.6%? If it’s more than that, then inflation-adjusted consumer spending would have declined considerably. This is also what the credit card companies noticed, that spending moved to essentials such as food and gas which would explain why the US manufacturing index shrank for a third straight month.

So who is benefiting from the high commodity prices? Credit card companies definitely are, and gas companies should be. Exxon Mobil (XOM: 89.61 -0.09 -0.10%) reported a 17% increase in Q1 profit on net income of $10.9 billion, or $2.03 per share, from $9.28 billion, or $1.62 per share last Q1. Although this may seem good, it was lagging behind Shell’s 25% and BP’s 63% profit increase and almost 10 cents below what analysts had expected. It seems Exxon was unable to take full advantage of the higher oil prices due to several reasons: its oil wells produced less output, gasoline prices increased slower than crude oil, squeezing its refineries of profit margins, and foreign governments demanded a bigger share of revenue from higher oil prices.

And talking about government intervention in oil prices, it is interesting to note that a gallon of gasoline costs around $0.12 in Venezuela, $0.45 in Saudi Arabia, $3.45 in the US, and around $8 in much of Europe. Many things play a role in that, namely the taxation or subsidy level each government applies to gasoline.

You’d think farmers are also be benefiting from the higher food prices, but many of them say they are suffering from higher fuel prices and the fact that it is harder for them to hedge their food prices on the futures market as the futures price is so much higher than the cash price, and the prices don’t converge close to the futures contract expiry date as they normally would. If that’s the case, it could support arguments that a lot of the rise in food prices is due to speculation.

So yes, spending is up, but people are getting a lot less for their money, and that means “real” inflation is probably a lot higher than the 2.6% estimate. And who is benefiting from the high commodity prices? Mainly foreign governments in the Middle East and other oil producing nations like Venezuela (many who have questionable human rights records), and traders who saw this coming and were generally long commodities.

Other Forex Traders Had a Rough Month

David had a good observation in a comment post today. He says:

"This may be coincidence but you, Colin at Forexspirit, Simon from Simon Super Trader, and myself all had good Febuarys[sic]. But those same people had a pretty bad March except Simon but he did say in his blog that he had some very rough trades. Is this a coincidence or was the market acting really different?"

Colin at Forexspirit was up around 8% in the middle of March. I too was up over 6% on March 20th. He ended March down over 17%. He states in his post that he had a lot going on throughout the month and his energy level was depleted, something I can relate to. It's tough trying to become a competent forex trader when it's not your primary job. The best solution I had for this problem was to mold my trading strategies into and around my life keeping it higher up in my priorities yet not at the top. Colin's March forex trading review can be found at http://www.forexspirit.com/2008/04/01/march-2008-review/

Simon had a mixed month of trading hitting a losing streak but then recovered towards the end of month for a 180 pip gain. In his March review post, he does bring up an excellent point about blogging forex. He stated that he only had a certain amount of creative energy and a lot of it was being used at his full-time job. This was leaving less creativity for his blog. I too have had the same exact problem. My new job has been creatively demanding also and it certainly does affect my quality of writing. His March review can be found at http://simonsupertrader.blogspot.com/2008/03/march-review.html

I don't know if David has a blog so I can't give you any details on his results. I can only imply that he had a pretty bad March. I quickly scanned my charts over the previous three months and don't see any major differences in market reaction. Maybe you do. If so, please comment.

Be a Patient Forex Trader

Patience is a common trait among successful traders. Unfortunately, patience isn't inherent in many of us. My belief though is that patience can be separated into two worlds for traders. The first world consists of the patience you exhibit in your non-trading life. I'll be the first to admit that I absolutely hate to wait in lines. I don't discriminate against particular lines like waiting in line at the supermarket or waiting in line at the DMV to renew my driver's license. I hate all lines. The second world consists of the patience you display when trading. Here is where I show very good patience with intermittent lapses. What I'm trying to stress here is that just because you don't have patience in the first world doesn't mean you won't have it in the second. I don't believe they are conditional of one another. So don't assume that your won't be a patient trader if you have no patience outside of trading.

Most Popular Forex Websites

Forex On Top was updated this afternoon and there are a lot of big moves. Why visit? The most informative sites tend to bubble up to the top. With so many forex websites out there, it's tough to disseminate the good from the bad. Granted, there are a lot of broker sites in the top 50 but there are also a lot of non-broker sites mixed in that get just as much traffic. This is impressive considering they're competing without expensive advertising campaigns. Check out sites ranked 1-50, 51-100, 101-150, and more. You can also check out the forex websites that have increased their rank the most from last week at Forex Movers.

What Is More Important In Forex Than Making Money?

I haven't been able to make any progress monetarily in about a month. I'm up about 4% this month but breaking my account balance all-time high has been a struggle. I'm pretty much stuck where I was around this time last month. I'm not all that concerned and shouldn't be considering I was preaching patience a couple of days ago. It's just that everytime I open my trading platform, the account balance is just staring me in the face.

It's more important that I progress as a risk-aversed trader. For newer traders, it's very important for you to understand that learning methods to control your risk should be a priority. Making gains monetarily is obviously important but making gains and strides elsewhere are more important. When I first started trading mostly with demo accounts, I had some unbelievably profitable trades but my strategies were random and my risk and leverage too high. A lot of this is just pure luck and not going to take you to the next level. Your account balance shouldn't be used as a guage for success. Some questions to ask yourself to guage your success may be:

Have you managed to minimize your risk and maximize your reward?

Have you maintained consistency?

Have you been able to control your emotions?

Have you developed a complete trading system that you've been able to follow without deviation?

If you haven't been profitable, have you at least been able to turn those gushing drawdowns into slow bleeders?

If you're new to trading forex or have been trading for a couple of years, the #1 goal is to stay in the game as long as you can. I've talked to many traders over the years and many of them have been in and outers. They'll jump in head first, blow up multiple accounts, and jump out never to be heard from again. There are other traders I've known who couldn't consistently turn a profit and instead turned into mentors or forex marketers. Heed caution... There are also others who couldn't stand the non-regulation of forex and went back to trading futures or stocks. There are a couple traders still around since I started but I can count them on one hand. It takes years to become a trader and I can't even say that for certain. I'm still not there but I'm still around and giving myself at least 5 years. If it doesn't work out for me or you after 5 years, just think of the countless people who have gone to college and have never entered into the field of their degree.

Where Have I Been?

It's been a while; a little over two weeks in fact since my last blog post.

My last trade was 18 days ago and today was the first time I opened up a chart since then.

Am I quitting? Has the forex market taken its' toll on me?

No and no.

I started a new job about two months ago and it has been so draining mentally and physically that I just haven't had anything left for forex. Trading forex has since fallen to the bottom of my priority list next to watering my cactus. The unfortunate thing is that I took this new job because I thought it would give me more time to concentrate on forex.

I feel like my added responsibilities are started to loosen a bit though as I become more acclimated to my new full-time job. The fact that I'm finally posting something on my blog for the first time in two weeks may be evidence.

The question will be whether I jump head first back into trading forex or ease my way back in. Either way, I'll probably wait until May 1st for psychological reasons. I'm up 2% for the month and I'd rather not threaten this by trading hastily before month end.

Stay tuned. I'll be back soon. Hope everyone else is still chugging along making progress and money.

Last Updated ( Monday, April 28, 2008 )
What Do You Think Is Holding You Back?
Investing and Trading
Sunday, April 13, 2008

"You have been at this forex thing for a while now and still are not achieving the results you had originally hoped you would achieve. What do you think is holding you back?"

Simple question but nevertheless a good one that made me think.

I have been forex trading for almost three years, not a sophomore and not a senior. Three years ago I had high hopes of trading full time within one years time. These hopes faded as the reality quickly sunk in. The results I was hoping to achieve back then were just totally unrealistic. I'm a firm believer that trading takes experience so there really is no way of rushing the learning process. The more you rush, the more chance you have of getting so discouraged that you want to run as fast as you can away from the market.

After rethinking my initial goals, I limped around for quite a long time. I couldn't even put together a profitable month. During this time, I got extremely discouraged and couldn't even hope for achieving anything. I was probably two months away from quitting.

Then about six months ago, I got my motivation back and wanted to give it one more shot. A lot of things seemed to come together quickly for me and I felt good about my trading. This was the point where I felt like I could start setting realistic goals and I did. Since then, I think I've made great progress toward reaching these goals. In fact, I think I've surpassed the expectations I had six months ago.

So in response to the comment, I think I've achieved the results that I had hoped six months ago not three years ago. In response to the question, the only thing holding me back now is my renewed motivation to excel in my non-trading occupation. This was a bit unexpected but one must have a backup plan. I worked hard to get where I am and I don't want to throw it all away. Ultimately, I want to work for me and I think trading gives me the best shot at doing that.

Fed Lowers Rates

The Federal Reserve Bank recently lowered interest rates for the seventh, and perhaps final, time, bringing its benchmark federal funds rate to 2.0%. Since inflation is still hovering around the 4% mark, the Fed will probably be reluctant to lower rates further. Thus, the markets have been given all of the boost that they are likely to receive, and it is "fate" that will determine whether the economy will find its footing. (GDP growth clocked in at an anemic .6% for the last two quarters). The most recent data (including the just-released jobs data) indicate that the economy may be stabilizing, although consumption and the employment situation are still deteriorating. As a result, the National Bureau of Research has yet to officially declare the current economic downturn a "recession," since the picture remains nuanced. The New York Times reports

Would you like a side-income of thousands of dollars a month?

This is possible if you have the skills to trade forex. And you can do all this without monitoring the market constantly. With forex, you can profit whether a currency is moving up, down or sideways. It doesn’t require a lot of money to get started, you can open a forex trading account with only a few hundred dollars.

Fed Pumps More Money Into Economy

The markets are feeling happy today: First of all the US payrolls numbers were better than expected, and now the Fed has also increased the money it will be pumping into the credit markets. The Fed increased its cash-loan auctions to banks by around 50% to $75 billion and also increased its currency-swap arrangement with the ECB to $50 billion. According to the Fed, these actions were taken “in view of the persistent liquidity pressures in some term funding markets.” So there is still a liquidity problem, but it seems to be easing somewhat; after all Mars was able to obtain a significant amount of funding to purchase Wrigley (WWY: 75.93 -0.24 -0.32%), and that might signal others to look at funding similar deals.

Factory orders were also up 1.4%, thanks to stronger exports due to a weaker dollar. This beat analysts’ expectations after a 0.9% decline last month and shows that the weaker dollar is continuing to benefit US companies.

Chevron’s (CVX: 95.77 +0.83 +0.87%) profit is up 10% to $5.17 billion, or $2.48 per share in Q1, from $4.72 billion, or $2.18 per share last year’s Q1 on higher oil prices, beating analysts’ expectations of $2.41 per share. On the downside though, they said that margins were continuing to tighten for their gasoline refining business as gas prices at the pump haven’t increased as fast as crude oil prices. If Clinton and McCain have their way, oil companies could soon have even fatter profits as they enjoy the benefits of the “gas-tax holiday” which would make them pay less taxes and would make it easier for them to widen their spreads on the oil/gasoline price differential. In the long run, this probably won’t benefit the consumer much, but shareholders of these companies should be happy.

Will Euro Recover This Week?

Last week we saw the largest weekly fall in Euro against the US dollar since June 2006 - EUR/USD fell more than 400 pips on speculation a Eurozone slowdown will force the ECB to follow the Fed’s footsteps in reducing interest rates. ECB’s Trichet warned that economic uncertainties in the Eurozone are “unusually high”.

This week will bring about a heavy slate of economic data like the US retail sales, trade balance and so on, so expect a very volatile environment in the forex markets.

We could see a Euro rebound especially if US data come in weak. Also, the OPEC Secretary-General suggested the price of oil may be shifted into Euros from USD sometime in the future.

The G7 left its statement on exchange rates essentially unchanged, saying currency rates should reflect economic fundamentals and that excessive volatility is undesirable for economic growth.

Watch my forex video from New York below:

Turkish Lira Set for Decline

ppreciated 21% against the US Dollar. However, in the year-to-date, the currency has returned nearly 10% of this gain, making it the third worst performing currency in the world. Turkey generally, and the Lira specifically, are considered by investors as proxies for emerging markets. The global trend towards risk aversion, as well as skyrocketing inflation, are hurting many such currencies. In Turkey, inflation is so problematic (9.4% at last count) that the Central Bank has raised its benchmark interest rate to 15.25%. Ironically, the more the Lira depreciates, the harder it becomes for the Central Bank to control inflation, causing the Lira to slide further as part of a self-perpetuating free-fall. In addition, the country is beset by political uncertainty, as the courts determine whether the nation's current government can stay in office. Bloomberg News reports:

"The recent political developments are likely to complicate policy-making and the investment climate. The deteriorating political backdrop will in turn undermine the prospects for restoring fiscal discipline and reviving the reform agenda."

Fed Lowers Rates

The Federal Reserve Bank recently lowered interest rates for the seventh, and perhaps final, time, bringing its benchmark federal funds rate to 2.0%. Since inflation is still hovering around the 4% mark, the Fed will probably be reluctant to lower rates further. Thus, the markets have been given all of the boost that they are likely to receive, and it is "fate" that will determine whether the economy will find its footing. (GDP growth clocked in at an anemic .6% for the last two quarters). The most recent data (including the just-released jobs data) indicate that the economy may be stabilizing, although consumption and the employment situation are still deteriorating. As a result, the National Bureau of Research has yet to officially declare the current economic downturn a "recession," since the picture remains nuanced. The New York Times reports:

The recession-or-not question is now almost entirely academic, Mr. Bernstein contended, given the steady erosion of American spending power and soaring costs for food and gasoline.

Who Is Benefiting From High Commodity Prices?

Consumer spending increased 0.4% today, giving the markets cheer, although after taking inflation into account, it is only a 0.1% increase. Credit card companies like Visa (V: 82.19 -3.21 -3.76%) and Mastercard (MA: 284.29 -9.65 -3.28%) already gave us a preview to that, showing how credit card spending in the US had increased in the last quarter. Also, how many of us truly believe inflation is at only 2.6%? If it’s more than that, then inflation-adjusted consumer spending would have declined considerably. This is also what the credit card companies noticed, that spending moved to essentials such as food and gas which would explain why the US manufacturing index shrank for a third straight month.

So who is benefiting from the high commodity prices? Credit card companies definitely are, and gas companies should be. Exxon Mobil (XOM: 90.15 +0.45 +0.50%) reported a 17% increase in Q1 profit on net income of $10.9 billion, or $2.03 per share, from $9.28 billion, or $1.62 per share last Q1. Although this may seem good, it was lagging behind Shell’s 25% and BP’s 63% profit increase and almost 10 cents below what analysts had expected. It seems Exxon was unable to take full advantage of the higher oil prices due to several reasons: its oil wells produced less output, gasoline prices increased slower than crude oil, squeezing its refineries of profit margins, and foreign governments demanded a bigger share of revenue from higher oil prices.

And talking about government intervention in oil prices, it is interesting to note that a gallon of gasoline costs around $0.12 in Venezuela, $0.45 in Saudi Arabia, $3.45 in the US, and around $8 in much of Europe. Many things play a role in that, namely the taxation or subsidy level each government applies to gasoline.

You’d think farmers are also be benefiting from the higher food prices, but many of them say they are suffering from higher fuel prices and the fact that it is harder for them to hedge their food prices on the futures market as the futures price is so much higher than the cash price, and the prices don’t converge close to the futures contract expiry date as they normally would. If that’s the case, it could support arguments that a lot of the rise in food prices is due to speculation.

So yes, spending is up, but people are getting a lot less for their money, and that means “real” inflation is probably a lot higher than the 2.6% estimate. And who is benefiting from the high commodity prices? Mainly foreign governments in the Middle East and other oil producing nations like Venezuela (many who have questionable human rights records), and traders who saw this coming and were generally long commodities.

Stock Markets Optimistic Ahead of Fed’s Decision

Written By Grace Cheng

The market started the day in an optimistic tone as investors were heartened that technically the US isn’t in a recession and by better-than-expected earnings from major companies such as Procter & Gamble (PG: 66.68 -0.35 -0.52%), General Motors (GM: 22.92 -0.27 -1.16%) and Kraft (KFT: 32.00 +0.05 +0.16%). Investors are also looking forward to a Fed rate cut today.

General Motors, the US biggest car manufacturer, reported a $3.3 billion Q1 loss, which was a result of a strike at one of its major parts suppliers, the weak US market and dropping sales of its SUVs and pickups. This was a loss of $5.74 per share vs a profit of 11 cents per share for Q1 last year. Excluding one-time items, its earnings still managed to beat Wall Street’s dreary expectations and its stock rose.

Kraft, the maker of Oscar Mayer hot dogs, Oreo cookies and Maxwell House coffee reported a 13% drop in earnings to $608 million, or 40 cents per share, down from $702 million, or 43 cents per share, last Q1. However, the company reported an increase in sales and market share and says that the reason its profit declined was that it refrained from raising prices till recently despite the higher cost of food products. It also revised its revenue forecast to an increase in 5% vs the 4% it had previously forecast. So despite the lower profit, investors were optimistic and the stock moved upward.

Procter & Gamble also beat Wall Street’s expectations this time with a profit increase of 9% to $20.5 billion vs the $20.4 billion expected. It also said that it had raised prices to make up for the increasing commodity costs but that it had seen strong consumer loyalty and its sales had risen for the period. P&G also raised its full-year earnings forecast to $3.48 and $3.50 a share.

If the Fed comes through with a good rate cut, it could give the market a further boost.

Dollar At The Crossroads This Week

the Euro and Swiss franc. EUR/USD even rose to a new high of 1.5985, just 15 pips shy of the all-important 1.6000 level before bouncing all the way down towards 1.5700. But then on Friday, US dollar sentiment changed rapidly as the currency rallied following strong earnings reports by US companies such as Google and Caterpillar. Stock investors are happy with their stronger-than-expected earnings and Citigroup’s stronger revenues, and so are carry traders, who then promptly sold the Japanese yen, thus boosting yen crosses such as USD/JPY. USD/JPY rose to its highest levels in almost two months on the return of risk appetite, and last week’s gain was the strongest since 2004.

Sustained Or Temporary Rally?

The futures market is now betting that the Fed will not cut its 2.25% target lending rate by 50 bp on April 30, compared with 46% chance a week ago. It is pricing in a 98% chance of a quarter-point rate cut. The US dollar is likely to start the new trading week with a bullish tone, rubbed off by optimism in the stock markets, but if US data such as durable goods and housing fail to meet consensus, any rebound could slow down or be hampered again. The greenback will also be influenced by US companies’ earnings reports next week.

Loonie Hangs On

The Bank of Canada is scheduled to announce its rate decision on Tuesday, and many are expecting the bank to cut the rate by 50 bp to 3%.

Forex Trading

USD/CHF’s nearest resistance is around 1.0290-1.0310, then 1.0350. USD/JPY’s upside targets are around 105.00, 105.50. Watch out for EUR/USD’s reactions around 1.5660-80.

FX Thoughts for the Day

USD-CHF @ 1.0502/07.... Could test 1.0550

R: 1.0510-20 / 1.0550 / 1.0640-60
S: 1.0450 / 1.0400-390 / 1.0328

Looking at the big picture, we see that having rallied for three consecutive weeks now, from 0.9926 (14-Apr) to 1.0511 (1-May) USD-CHF is closing up on an important Resistance at 1.0550. It could possibly retrace after facing Resistance at this level. However, there is a bigger Resistance seen on the daily chart at 1.0640-60, the 50% Retracement of the fall from 1.1628 (25-Dec) to 0.9637 (17-Mar). The 21-week SMA is also at 1.0660.

The overall picture remains the same, as a big move has not been seen in the day so far. There is good Resistance at 1.0550 and at the same time a dip towards 1.0460 could attract buying interest.

A breakout of this range could decide the direction for the next week. A breakout on the upside could then possibly target 1.0641 (50% Retracement of the fall from 1.1628 to 0.9637), while a breakout on the downside would find some Support at 1.0400 and lead to a consolidation in the 1.0350-1.0450 range.

Holding:

  • Long USD 10K at 1.0497, SL 1.0460, TP 1.0520

GBP-USD @ 1.9832/37... NFP ahead

R: 1.9900-20 / 1.9978
S: 1.9800 / 1.9750 / 1.9700-9675

The Cable fell during the day, but found Support at 1.9720-00 for a rally back to 1.9900. The direction for today is now mixed and indecisive till the US NFP is released. For now the market continues to range sideways between 1.9930-9630.

Within that, the immediate Support is at 1.9800, while 1.9750-25 is the stronger Support. Resistance will be faced at 1.9900-25, which also is the Max High for the day. Stronger Resistance will be faced in the region of 1.9978, if a further rise is seen.

AUD-USD @ 0.9343/47... Support at 0.9260 held

R: 0.9360-80 / 0.9415
S: 0.9260-50 / 0.9225-00 / 0.9140

The view on Aussie has not changed much during the day. Since the Support at 0.9260 has well, it has led to a rally to 0.9330 so far, which could well target 0.9380.

A break below 0.9260 could trigger a bigger collapse in the pair and target 0.9140, if the Support at 0.9225-00 also gives way.

Market Trade (at time of writing):

  • Buy AUD 10K at current level, SL 0.9320, TP 0.9370

Today's Market Outlook

Remains in a short-term downtrend from 1.6019, 22 Apr all-time high, with loss of 1.5710/28 and 1.5511 support, triggering losses to 1.5432 on 01 May. Consolidation followed, ahead of fresh weakness clearing 1.5432 and 1.5406, to accelerate losses to 1.5361 so far. Further losses seen towards 1.5334, possibly 1.5282 on a break. Oversold hourly studies, however, warns of correction preceding downmove, with 1.5517/40 capping. Only break of the latter would improve the picture.

Res: 1.5432, 1.5482, 1.5499, 1.5517
Sup: 1.5372, 1.5361, 1.5334, 1.5282

Chart Of The Day: AUD/USD

5/02/2008 - AUD/USD - A very long-term, gradual uptrend in the AUD/USD daily chart, as shown, has currently culminated in a well-formed rising wedge consolidation (as represented on the chart by the two converging green lines). The two wedge borders have been touched by price action at least four times on each side, which would lend considerable significance to any clean breakout of this consolidation. Because wedges are most often considered continuation patterns, there is a technical bias towards an eventual upside breakout. But since price is near long-term highs, in the event of this upside breakout there is not much in the way of known resistance above the wedge. In the event of a downside breakout, on the other hand, the next major support to the downside resides around the 0.9100 region, a significant previous support/resistance level.

US: Not So Fast! Payrolls Receding More Slowly

Overview:

The April labour market report proved stronger than generally anticipated. The data revealed a job loss of 20,000 persons in April (consensus: -75,000, DB: -40,000) and a drop in the unemployment rate to 4.95% from 5.08% (consensus and DB: 5.2%). Prior months saw a mild net revision of -8,000 persons. Today's report is consistent with an economy which has come close to a standstill, but has not slid into a recession.

Market reaction:

The markets reacted significantly to the upside surprise in payrolls. The futures markets reduced bets on further reductions in the Fed funds rate during June or August to a little below 20% and now see hikes early next year. Two-year treasury yields initially jumped 20bp, while 10-year treasury jumped close to 15bp, leaving a flatter curve. The data helped the recent strong momentum in both the US dollar and US equity markets.

Details:

Despite today's more comforting data, the job momentum in the economy remains weak. That said, the current three-month average of -61,000 is more consistent with other labour market data and with actual economic activity than the unrevised three-month average of -77,00 in March. We think that today's report confirms the view that the labour market slowdown has recently been running a bit ahead of the actual slowdown in economic activity.

The details of the report show a major split in the private economy between service- and goods-producing industries. Job losses in the construction and manufacturing sector continue to pick-up speed, reaching 110,000 in April. Over the last three months, this part of the economy has shed 96,000 jobs on average per month. Contrary to this, the private service sector has continued to create jobs, again adding 81,000 payrolls in April. The momentum remains weak, albeit not disastrous, as the private service employment is up by 19,000 on average per month over the past three months.

Elsewhere the report was consistent with stagnant growth. Total private hours are down by 1% AR over the past three months, suggesting that the economy is continuing to grow, but only very slowly. One bad piece of news in the report is the continuing slowing of labour market incomes as suggested by the softening trend in average hourly earnings. With inflation at its current high levels, this leaves very little, if any, real wage gains for US households.

Assessment & Outlook:

Going forward, we expect a modest contraction in GDP of -0.5% q/q AR in Q2 GDP before the fiscal stimulus and the monetary-easing acts to revive the economy. This implies that employment growth is set to weaken a bit further - but still gradually - from here. In line with this, unemployment will continue to trend up. While there is still a lot of data ahead of us before the June monetary policy meeting, the better-than-expected state of the labour market increases the risk that the Fed will stand firm in June.

Better Than Expected NoBetter Than Expected Non Farm Payrolls in Apriln Farm Payrolls in April

  • In April, the U.S. economy lost only 20K jobs, which was much better than expected
  • The unemployment rate ticked lower to 5.0% from 5.1% in March
  • The losses were pretty widespread with the largest losses recorded in trade and transport, retail trade, construction and manufacturing

The nonfarm payrolls report surprised on the upside today with a smaller than expected loss of 20K jobs as compared to the markets' expectation for a decline of 75K. On a three month moving average basis, job losses in April amounted to 61K. The unemployment rate actually fell to 5.0% from 5.1% in March. Revisions did not play much of a role in April with only a modest 1K drop in March's number to -81K.

The composition of job losses in April exposed broadly based losses. The goods producing sector lost 110K while services remained generally strong adding 90K. Of the major declines in April, the largest was in construction, which lost 61K, followed by manufacturing, which lost 46K jobs. The losses in construction on a three month moving average are now 50K, which is more or less in line with the pace of job losses in the 1991 correction. The manufacturing sector has been unable to leverage the strong demand from overseas and keep jobs, but most employment indices for the manufacturing sector have indicated weakness, so this comes as little surprise. Following that, trade lost 36K and retail trade lost 27K. There were, however, some categories which gained modestly. These included business services which added 39K and education/health which added 52K. Leisure and hospitality added 18K and remains well supported by the influx of tourists to the U.S. who are taking advantage of the weak U.S. dollar.

In terms of earnings, there is a clear deceleration that is occurring with average hourly earnings up only 0.1% in April. More specifically total private hours of work were down 0.3% in April and in manufacturing, hours of work were down 0.7% M/M. As businesses slowly throttle back the number of hours they require workers to work, earnings will slow. This supports the general slowdown in income growth consistent with a weakening economy. Evidence of this trend is found in the diffusion index which fell again in April to 45.4 from 48.0 in March and suggests that job losses are more widespread. On balance, this report was indeed an upside surprise, but we still contend that there are more job losses in the pipeline. We do think, however, that this report will allow the Fed a temporary sigh of relief as it suggests that the labour market is not falling off a cliff and that they may be able to slow the pace of rate cuts.

Mid-Day Report: Dollar Rally Extends after Non Farm Payroll

Mid-Day Report: Dollar Rally Extends after Non Farm Payroll

Dollar is sharply higher in early US session after Non-Farm Payroll came in much better than expected. Even though a contraction of -20k in the job market is still recorded in the month of Apr, it's much lower the consensus of -75k. Prior month's contraction was just slightly revised from -80k to -81k. Unemployment rate also gives market a positive surprise by dropping from 5.1% to 5.0% instead of climbing to 5.2%. Dollar's strengthen is particular seen against yen, swissy and euro. On the other hand, Aussie and, to a lesser extend Sterling, are being supported by strength in yen crosses due to massive yen and swissy selling on further improvements in risk appetite.

Released earlier today, Germany retail sales unexpectedly dropped -0.1% mom in Mar, with yoy rate dived to -6.3%. Eurozone PMI manufacturing dropped slightly from 50.8 to 50.7 while Germany PMI manufacturing was unchanged at 53.6. UK construction PMI dipped from 57.2 to 46.1 in Apr. Australian retail sales rebounded stronger than expected by 0.5% mom in Mar.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.5545; (P) 1.5594; (R1) 1.5671; More

EUR/USD's fall from 1.6019 extends sharply lower to as low as 1.5360 in early US session touches mentioned 1.5342/66 cluster support zone. At this point, intraday bias remains on the downside as long as 1.5498 minor resistance holds. Sustained break of 1.5342/66 cluster support zone will set the stage for further decline to next short term target of 1.4966 resistance turned support. On the upside, above 1.5498 will turn intraday outlook neutral first. But another fall is still expected as long as recovery is limited below 1.5644 resistance.

In the bigger picture, as mentioned before, EUR/USD's rise from 1.4309 should have completed with a diagonal triangle pattern that started at 1.5342. Firm break of 1.5342 support, which will also have EUR/USD sustaining below 55 days EMA (now at 1.5490) too, will confirm that rise from 1.4309 has completed with bearish divergence condition in daily MACD and RSI too. In such case, deeper decline should then be seen to 1.4309 and 1.4966 support zone.

However, strong rebound from there, followed by break of 1.5644 resistance, will suggest that price actions from 1.6019 is probably just developing into another sideway consolidation. But still, risk is on the downside before sustained break of 1.6019 high.

Foreign Exchange Market Daily Update

Foreign Exchange Market Daily Update

The US dollar continued its momentum touching 2 month highs against the yen, and pushed higher across the board after employment data came in above expectations. The labor department sighted that the U.S. economy lost just 20,000 jobs in April, better than the forecast calling for a loss of 78,000 jobs. The figures helped to support the view that the economic slowdown isn't as severe as many had thought and firms analyst's views that Wednesday's Fed rate cut to 2 percent could be the last in a serious of rate cuts seen since last year.

In other news the U.S. Federal Reserve announced that it will boost liquidity by expanding its Term Auction Facility to $75 billion, as well as, its swap agreements with other central banks.

Look for the dollar to remain well supported today as the market digests the positive employment data.

The Euro continued its fall against the dollar posting 6 week lows after the release of better-than-expected employment figures out of the U.S. Also releasing out of Germany was retail sales figures, which came in below forecast at -.01 percent month/month and -6.3% year/year, while, PMI manufacturing came in 0.1 percent below the consensus for a reading of 50.7. Look for the euro to remain range bound as the market awaits next weeks ECB meeting, where expectations remain that interest rates will hold at 4 percent.

Sterling weakened against its U.S. counterpart, but managed to touch a five-week high against its European counterpart as weak UK housing data was pushed aside and a large euro/sterling sell order moved the market. Despite the release of UK house prices sighting a fall for the first time since the late 1990s, sterling remained firm due to the market pricing in the weak figures and anticipating two more interest rates cuts by year end taking the overnight rate to 4.5 percent.

The Japanese yen remained under pressure as the dollar pushed the currency pair above 105. With little data due out of Japan and holidays next Monday and Tuesday, look for USD/JPY to remain under pressure.

The Canadian dollar fell against the greenback after the strong employment report released out of the U.S. The loonie, however, managed to hold its ground on the crosses (euro, yen and sterling) with oil recovering from yesterday's lows. Look for the loonie to remain under pressure as the dollar holds on to its gains.

The Australian dollar held its ground on better-than-expected retail sales, however, the currency's gains remained limited due to lower gold prices. Australian retail sales rose 0.5 percent in March, above forecasts for a 0.3 percent rise. The retail sales figures help to support the view that the Reserve Bank of Australia may be able to hold rates steady at their current level of 7.25 percent. Look for Aussie, however, to remain under pressure as commodity prices push lower.

The New Zealand dollar held steady following its Australian counterpart. Analysts will start to look towards New Zealand jobs and wages data due next week. The labor cost index is due on Monday, while the household labor force survey will release on Thursday. Any indication of weakness in these reports will push the kiwi lower.

The Mexican peso continued to push higher against its U.S. counterpart as local stocks lifted. With the market back from the International Workers' Day holiday yesterday in Mexico, look for the peso to hold on to its current gains.

Union Bank of California
The Bank of Tokyo-Mitsubishi Group
http://www.uboc.com