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Husar

Last Updated: 11/18/2009

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Gender: Male
Status: Single
Age: 42
Sign: Scorpio

Country: US
Signup Date: 8/6/2006

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Tuesday, December 15, 2009

Slow markets.
Category: Jobs, Work, Careers

So far this week very little of interest happened in financial markets, currencies being no exceptions. Not much movement and if there is any it lacks conviction and/or follow through. This is happening in spite developments which, in theory, should create more than a yawn. There is some talk about Austria becoming second Greece and on verge of having its ratings cut. Hypo Alpe Adria Bank has been nationalized in rapid move, preventing the bank form falling into bankruptcy. Oesterreichische Volksbanken AG, the country’s fourth largest bank, was placed “under surveillance” by financial regulators. Banks failures in Austria would have a domino effect in other countries of Central Europe, yet markets seem unconcerned.

On a similar note, Moody’s Investors Service issued a statement that Aaa rated countries will probably have to start cutting their budget deficits before economic recovery is guaranteed as borrowing costs rise. This sounds like a very sound general opinion, something just about everybody shares, but it could mean something else. Vague warning to countries like U.K. and U.S. that public debt levels might warrant lowering of ratings for them. Very significant development under normal conditions, but once again markets were quiet. Probably December effect in its incomprehensible ways, as well as waiting for the event of the week - FED policy announcement tomorrow.
Slack markets.

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Monday, December 14, 2009

Dubai Effect.
Category: Jobs, Work, Careers

After weeks of speculations, uncertainty and all out panic, some of Dubai received a lifeline, which could help it save Dubai World, real estate conglomerate which was destined to end up under auctioneer’s hammer. Dubai officials were unwilling, or not able to, stand behind company’s debt, which created fears around the world about possible default on obligations. This spread far and wide, putting finances of other smaller countries in question. Today, Abu Dhabi, the largest of United Arab Emirates, provided $10 Billion in financing for its indebted smaller brother, which is expected to put Dubai on more sound financial footing. Question is - will it work?

This is not the first time bailout was provided by Abu Dhabi. So far this year emirate poured total of $25 Billion into Dubai, which is believed to owe about $100 Billion, more that its total economic output. A lot of this debt will have to be refinanced over next few years. Many of the projects Dubai world was involved in were structured using short term obligations, rather than longer term loans more suitable for large real estate deals. Unless investment fever strikes again, and soon, value of their holdings will continue to fall, making refinancing difficult. What will happen then? Another bailout? Or will this entire enterprise wash away, like, say, sand islands in the sea? I think we will hear more bad news from that corner of the world.
Dubai rescued. For now.

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Friday, December 11, 2009

Sovereign debt.
Category: Jobs, Work, Careers

Ratings lowered grade for Greece to BBB+. While not a junk status, it is also not the sterling status every government seek. It puts a question mark on stability and responsibility of that countries fiscal policies. One shouldn’t have been surprised by the move, because the proverbial writing was on the wall, but it increases likelihood of the same happening to other countries. Most often mentioned candidates to see their ratings downgraded are the Baltic states, Romania, Dubai and others. But frankly everybody wants to know if their is any danger to bigger, more established economies.

Today Moody’s Investors Service provided some answers. Company said it has no current plans to lower its top debt ratings on the U.S. and the U.K. The outlook is stable even if public finances in the U.S. and the U.K. are worsening in the wake of the global financial crisis and they may test the Aaa boundaries. Apparently these two countries have a “resilient” triple A ratings. By comparison Canada and Germany have “resistant” triple A ratings. Moody’s considers the later better than former, without creating new grade level. Interesting. They managed to single out both U.K. and U.S. for increased risk, but without fear of political fallout and pressure, which surely would follow official change in ratings. On a personal note, I’d like to come across opinion on Japan, the most heavily indebted country in the world, after Zimbabwe. What should the grade be for Japanese bonds? Or is it a taboo subject? Seems to me different rules apply to different countries.
Sovereign debt rating.

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Friday, December 11, 2009

NZD in spotlight.

Today Forex news were dominated by central banks, and that’s what drove currency trading. Swiss National Bank said it will stop purchases of corporate bonds as it joins other countries in starting to withdraw emergency measures. At the same time SNB left its benchmark 3-month target rate unchanged at 0.25%. Chairman Roth said the Swiss Franc has stayed “stable” against the euro since the SNB began intervening and that the central bank’s monetary policy since March “has been effective.” That’s debatable, the effectiveness part, but a matter for other time. At any rate, this was largely expected, no surprises.

Bank of England held its own policy meeting today. British officials also kept interest rates at record low of o.50%. But in contrast to their Swiss colleagues, they left other quantitative easing policies in place. Most recent bond repurchase program was left unchanged at 200 Billion Pounds. It is inconclusive when BoE will start its own liquidity withdrawal program. Signals are mixed with weak economy on one hand and some inflationary signs on the other. For now status qua is maintained, in line with pre-decision expectations.
Day for central banks.

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Wednesday, December 09, 2009

First Dubai, now Greece...
Category: Jobs, Work, Careers

Couple of weeks after Dubai scare, concerns over credit worthiness of other small countries are spreading. Greece, which had been on a hot seat for some time over its fiscal policies, just had its sovereign credit downgraded. The rating on countries government bonds was cut by Fitch Ratings to BBB+ and the two other major ratings companies are threatening to follow suit. It is after Greek government raised its 2009 budget-deficit estimate to 12.7% of gross domestic product after Oct. 4 elections, three times higher than an earlier forecast and more than four times the 3% allowed under the European Union’s Stability and Growth Pact. This could have long term implications on economy, raising costs of borrowing and slowing down recovery.

Greece has about a year to get its fiscal state in better shape or its banks will have hard time getting new capital. European Central Bank currently accepts bonds rated BBB- as collateral for loans after relaxing its rules in response to the financial crisis last year. At the end of 2010, it is due to revert to the old rules, under which A- is the minimum required rating. As of right now Greek bonds still meet the standards, but that not might be the case next year at this time. In reality, though, it is very unlikely that ECB would turn its back on one of the member states, as long as situation doesn’t repeat with other countries across the continent.
Clouds over Greece.

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Tuesday, December 08, 2009

Another stimulus.
Category: Jobs, Work, Careers

After enduring its worst recession since World War II, Japan’s economy grew for the second straight quarter in the July-September period, expanding at an annualized pace of 4.8 percent. It was the strongest growth in more than two years thanks to previous stimulus measures and improvement in global demand. However, with consumer prices falling for the eighth month in October, the government has grown increasingly concerned about prolonged deflation. In order to combat this threat, Tokyo unveiled new stimulus package, worth about $81 billion. New measures intend to bolster employment, extend consumer incentives to buy eco-friendly products and provide support for small and medium-size firms hurt by the strong yen.

Decision about this new stimulus comes at time when other central banks are starting to put an end to excessive liquidity policies. European Central Bank has a plan in place, while others, like RBA, started to increase rates already. This new government spending will push public debt to new record levels and will surpass revenue for the first time since 1946. Japan has the largest level of debt among industrialized countries. Just this fiscal year tax revenue is expected to be 36.9 trillion yen ($412.9 billion), while government bond issuance is at a record 53.5 trillion. Unenviable situation, worse than US. Long term Yen prospects are dire.
New stimulus package.

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Monday, December 07, 2009

Currency volume.
Category: Jobs, Work, Careers

Very interesting figures were published today. CLS Bank International, which is the largest clearinghouse of Foreign Exchange transactions in the world, reported a drop of settlement instructions by 2.7% in November. Average daily value of FX transactions was $3.66 trillion per day. While this is a small monthly drop, numbers represent about 12% increase over last year. Data provided by CLS Bank is as close as one can get to reliable information on the subject- total of 6,400 participants are currently using this settlement service. Included in this total are 444 banks, corporates and non-bank financial institutions and a further 5,956 investment funds. Well over half of global volume is handled by CLS.

It has very little practical value for an average retail trader, only represent just how liquid currencies are. However, these kind of numbers are twisted and misused by unscrupulous promoters of questionable services and sellers of useless programs, or “robot”. I have seen statements like “$ 3 Trillion dollars are made in Forex every day- are you ready to claim your share?” among others. Absolute nonsense. Volume numbers have little effect on how much money is made, and lost, by an individual. But I guess large figures can impress people and sway them to buy newest and “hottest” product. Incidentally, most of them are so “hot” that should be treated like a hot potato….
Daily Forex volume.

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Monday, December 07, 2009

Year end trading
Category: Jobs, Work, Careers

Currency markets have seen increased daily volatility of late. This was particularly demonstrated on Friday after unemployment numbers were released. Not only did we see sharp, directional moves, but most of them came on trend changes. Everybody must have noticed strength in US Dollar, it had best day in some time, but many other currency crosses turned, too. For example, EUR-GBP as well as most Euro pairs. Market observers credit surprising NFP report for these moves. However, one shouldn’t forget this type of behavior is typical in December.

More often than not, month of December is regarded as difficult to trade by market participants. Not that it is ever really easy, but last month of the year presents even more challenges. At least that is prevailing market “wisdom”. I tend to agree with it, even though it is hard to prove what exactly is so different here. Conditions become similar to Summer slowdown. This means that days like we had on Friday are often followed by ranging, non-eventful sessions, just when one would expect additional movement. Volume tends to be on average lower than during other periods. Many people tend to take extended time off, especially during later part of the month. Some trading decisions are made based on tax considerations. All said, more often than not December has different “feel”, even it is difficult to quantify what this means.
December trading.

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Saturday, December 05, 2009

The gold market.
Category: Jobs, Work, Careers

One of the markets which receives constant attention is gold. Along with oil it is a market normally reported as opposite to Dollar. By that I mean it is blamed for USD weakness, or a reason behind any gains the green buck might show. Especially over last few months, virtually nobody in the media looks at, or discusses, fundamentals of gold. It is always covered in relation to movements of Dollar, as if there was nothing else moving the market. On top of that, XAU-USD relationship has taken on the chicken and egg dilemma- impossible to tell which market is the leader and which the follower. Not any different from how oil-dollar are treated by the media.

I don’t trade commodities very often, and this blog covers even fewer of these trades. Couple of months ago I closed a longer term gold-silver trade with good results. Perhaps time is right to consider another trade in this commodity. Unlike the previous occasion, when bases for entering the market were in favorable gold-silver ratio, this time around it is longer term chart and nothing else. And no, I’m not taking any XAU-USD relationship into account, other than the simple fact that the metal is priced in Dollars.

In early October gold completed very large consolidation pattern, which started in February 2008. Weekly chart is used for analysis, hence the extended time scale. Finally, market closed the formation by breaking above 1030 level. From there market proceeded higher without much hesitation. Last week price reached almost 1230 level, and reversed sharply, closing the period at about 1160, sizable correction on smaller time frames. Combined with all time price high, this behavior has possibility of creating a blow out top.
Possible gold top.

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Friday, December 04, 2009

Better news?
Category: Jobs, Work, Careers

After a long time of rising unemployment, today’s NFP data provided better news. For the first time in about two years unemployment rate unexpectedly fell to 10% in November as employers cut the smallest number of jobs since the recession began. This is an improvement from 10.2% a month ago, although other numbers suggest improvement to be marginal, if at all. For example, the economy shed 11,000 jobs last month. So, if jobs are still getting lost, how come overall unemployment figure is getting better? Couple of possibilities. One is that benefits ran out for many, and they no longer show on this statistic. Another one is influx of seasonal jobs, related to the holidays. However, even if improvement is temporary, it still exceeded expectations. Let’s just hope things don’t turn around next month.

Currencies had been very subdued in hours leading to NFP release, only to explode on the news. US Dollar gained significantly, as if in response to the wishfull thinking of our financial authorities, and others around the world. What I find most interesting in USD behavior today, is the fact that it moved strongly against JPY. Perhaps time has arrived that these two currencies have decoupled finally. If this is the case, we might see currencies reacting differently to news from now on. Not a sure thing yet, this situation must repeat again, before we can be more certain that a fundamental shift took place, but something to pay attention to going forward.
NFP-real improvement?

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Thursday, December 03, 2009

Strong dollar, again.
Category: Jobs, Work, Careers

European Central Bank held its policy making meeting today. The governing council left official Eurozone interest rates unchanged at 1%, much as expected. Short term later ECB announced it will start withdrawing excess liquidity from the system over next 12 months, something they have been talking about for some time now. No surprise there, and neither were later remarks by ECB President, Jean- Claude Trichet, who said that a strong dollar is “very important” for the euro-area economy.

Seems like everybody wants that, stronger dollar, that is. China has been very vocal about, as well as the remaining BRIC countries. Oil exporting states have long been complaining about USD. Canada is unhappy with current level of USD-CAD. Doesn’t matter where you look, strong Dollar is desired. Let’s not forget our own financial authorities. FED chairman Ben Bernanke believes in the strong USD, and so does Treasury Secretary Timothy Geithner. Now with Trichet on board, this should be a done deal, right? I mean, these guys have great influence over the markets and could decide direction with few comments and similar policies. Or could they? Or are the markets simply too big and not even central banks can make meaningful trend changes? For now we know that everybody wants strong Dollar.
Trichet wants strong dollar, too.

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Thursday, December 03, 2009

Yen's next move.
Category: Jobs, Work, Careers

Few days ago I brought up a subject of Japanese financial officials changing their view about the Yen. Indeed, that’s what happened, and more. Bank of Japan held an unscheduled policy meeting recently, even if it didn’t accomplish all that much. But this demonstrates just how big of a change of heart there is about JPY now. Until last week foreign exchange movements had been seen as “orderly” and “not-worrisome”. This week, however, both BoJ and other authorities are using every opportunity to talk the Yen down. Even Japanese Prime Minister Yukio Hatoyama was cited by the Nikkei newspaper as saying the currency’s strength can’t be left as it is.

I had been following this thread for a few days now, so might as well continue and see what comes out of it. Besides, trading Japanese Yen is a big part of my activities and I have to keep up with these developments. After great run JPY had last week, some weakness was expected, regardless of BoJ stance on the issue. This is happening right now, with pace of Yen decline slowing down. Probably market participants are realising that for right now it is only talk, not real action coming from Japan and they are trying to avoid intervention for as long as possible. Interventions are expensive, create additional volatility in the markets and are not guaranteed to work. I doubt we will see direct market involvement by BoJ, unless Yen makes new highs, has another round of strength.
The Yen - which way now?

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Tuesday, December 01, 2009

Bank of Japan

After a period of time during which everybody was "comfortable" with Japanese Yen, the currency is becoming center of attention. Recently Bank of Japan became vocal about strength of JPY, and not in positive terms. Probably to prove their resolve, BoJ called an emergency, or unscheduled, monetary policy meeting earlier today. What came out of it was less than compelling. Preferable tool to use would be cutting interest rates, but those are already near zero and pushing them down farther would be largely symbolic. Rates were left unchanged and central bank provided some additional short term liquidity. Most see it as a mixed message and not likely to have any lasting effect. I'd expect intervention rhetoric to heat up soon.

No such inconclusiveness in Australia. The Reserve Bank of Australia raised interest rates again, for the third time in as many meetings. It currently stands at 3.75%, after a quarter point bump. Australian Dollar appreciated somewhat, but not in the way as before, after previous increases. For right now, AUD rally looks very orderly and more like a correction to the sell off from last week. Next 2-3 days will decide if this is up move is sustainable, or will reverse and resume down trend.
Hot topic.

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Monday, November 30, 2009

Japanese Yen
Category: Jobs, Work, Careers

After prolonged time of silence and “comfort”, Japanese officials went on a verbal offensive against strong Yen. Funny, just yesterday in the post After the sell off, I mentioned high probability of that happening. Prime Minister Yukio Hatoyama said on Monday that he was ready to respond swiftly to rises in the yen and that the government should make it clear that it will take appropriate measures to end it. Respond swiftly? They are few weeks or maybe months late for that. Another official, Minister Naoto Kan said the government has agreed to try to stop the yen’s appreciation, although he did not specify what specific steps it would take.

We know what steps can be taken, though. First, talk and threats of intervention should be expected, something we heard from Bank of Canada for some time now. Difference is, that while BoC limited itself to threats, Bank of Japan has been known to do it, intervene in the open markets in order to weaken the Yen. Just like Swiss National Bank has done this year. Many market participants have been surprised by BoJ inaction to date, something that could change now. It doesn’t mean today or tomorrow, although one never knows for sure. The “scare campaign” should last for some time (days, weeks?), before any action is taken. Most likely any new high in the Yen would be a reason to step in.
Yen too strong now.

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Sunday, November 29, 2009

More NZD-JPY
Category: Jobs, Work, Careers

Business and financial news are still heavily dominated by the Dubai credit problems. However, as the time was passing on Friday, currencies and other financial markets stabilized, as if the news was not really such a great shock as it originally had appeared. And it shouldn’t have been. After all, Dubai World, state owned company in charge of real estate development, had already been bailed out once before. That happened in late February, early March this year. Evidently that was not enough. It is possible that they will have to sell some of their assets, in order to meet debt obligations. This option has already been floated, and rejected, before. Perhaps now it will become a more viable alternative. One should expect the Dubai related news to be on hot seat for some time now, with currencies being responsive to them.

For the time being, though, slow down could be in order. Parties involved will be seeking a resolution there with many proposals about what to do flying back and forth. It will take days, even weeks before more clear picture emerges. But this whole situation demonstrates that the so called global “recovery” is not as complete, or solid, as many would like us to believe. For what we know, there are more borrowers like Dubai, which will not be able to meet their obligations. I’m sure that markets will remain responsive to these type of announcements even if financial officials are downplaying, or ignoring, their importance.

Commodity currencies proved to be particularly vulnerable to this development, something that is likely to continue. All their crosses had sharp adverse moves, which were correcting on Friday. Over last few weeks I used NZD-JPY as an example of these pairs, looking for a move down. Price fell hard through 63.00 support, but bounced strongly from 60.00 level.
After the sell off.

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