Sunday, June 26, 2011

Market Rollercoaster!

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By Mike Conlon | June 24, 2011

Wow, what a wild ride yesterday was in the global market place! We had a bit of everything: gloom and doom, government manipulation, weakening economic data, crisis resolution, fear, anger, and hope. Where else can you get this type of excitement?Here’s a quick recap of what happened over the past few days: Dollar was strengthening after the FOMC said that QE2 would end, taking down global stocks and commodities. The EIA then said that the US would release 30 million barrels of oil from our strategic reserve, driving oil prices lower and sending correlated markets such as stocks lower. Later in the day it was announced that Greece had accepted a 5-year austerity plan and will be receiving money form the EU and IMF as part of a new bailout (though the actual vote is next week), so the markets rebounded only to finish slightly lower.

Frankly, I am outraged by the oil thing but not surprised. While yes I am in favor of lower oil (gasoline) prices, I am not in favor of achieving them by weakening our emergency reserves. What happens if a situation arises where we need that oil? It’s like raiding your emergency savings account to go on vacation. Politics at its worse.

Meanwhile in the Euro zone, it looks like the Greece austerity deal will go through next week, despite the protestations of nearly 75% of Greek citizens polled.

Here in the US, durable goods orders came in better than expected, posting a gain of 1.9% vs. an expectation of 1.5%, which is a welcome better-than-expected data point.

So the markets are starting the day in mild risk taking mode with stocks set to open higher, though oil prices are lower.

In the forex market:

Aussie (AUD): The Aussie is higher across the board after Asian stocks were higher overnight on risk taking after yesterday’s comeback in US stocks.

Kiwi (NZD): The Kiwi is strengthening as risk trades are being re-established after the Greek debt crisis announcement.

Loonie (CAD): The Loonie is mixed as risk appetite and lower oil prices fight to see which aspect will dominate trading today.

Euro (EUR): The Euro is off of its previous highs and has pulled back some as they are not out of the woods yet. While yesterday’s news of the agreement is extremely positive, the vote hasn’t actually taken place yet. German IFO expectations figures came in better than expected. (Click chart to enlarge)


Pound (GBP): The Pound is mostly lower as rate expectations for the UK have been lowered and there is considerable concern about the exposure that UK banks have to the Euro zone.

Swissie (CHF): The franc is stronger across the board today despite the mild risk taking in the markets to start the day. The safe haven aspects of the Swissie may still be desirable until after the Greek austerity plan is officially voted on and accepted. (Click chart to enlarge)


Dollar (USD): The Dollar is weakening on slight risk appetite after US durable goods orders came in better than expected. It will be interesting to see if the Dollar will continue to weaken without the aid of the Fed, or if it can co-exist in higher stock market environment if the correlations break down.

Yen (JPY): The Yen is showing some surprising strength despite the higher Asian stock market returns overnight. While there is still risk in the marketplace that appears to be coming from the EU and UK specifically, cautious buying persists.

Wild market action indeed! Whether you agree with what is going on in the marketplace or not is of no consequence. What is important is that you have a plan to protect yourself from unexpected events that can cause major volatility.

If summer volume decreases, then volatility could definitely pick up. This is exciting for forex traders because volatility equals potential. There are still many different global events that will carry trading well into the next few months, and there is still great risk and opportunity.

However, this doesn’t change this mess that is known as the US economy. It appears as though election cycle politics are in full-effect so it is doubtful that anything meaningful will get done. The debate over the US debt ceiling may come into play as ideology gets left behind in favor of pragmatism, but don’t expect wholesale changes overnight.

The business climate is still an abomination, with the new healthcare bill, regulations, potential for tax increases, and a reluctance to reduce the size of government and debt all factoring in to keep businesses from hiring. The fact that there is actually debate over the fact that the current path we are on is disastrous is both scary and sad.

So invest your money in countries on the right path, and stay away form those destined for doom. The best way I know of to do this is through the forex market!

To learn more about how you can take advantage of world events through the currency market, be sure to check out our currency trading courses!

To follow these events live with a free, real-time practice account, click here! Don’t miss out on the world’s fastest growing market!

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