Friday, March 29, 2013

Strategies Sell Euro on Post-Cyprus Tumbles - Good Trades?

Article Summary: Uncertainty reigns supreme as Cypriot headlines rock the Euro. Our sentiment-based strategies have sold EURUSD on big price swings—here’s what we think about those trades.

DailyFX PLUS System Trading Signals – Uncertainty reigns supreme as the Euro surged to start the week only to break lower, and our trading bias for the US Dollar (ticker: USDOLLAR) remains fluid as we have little choice but to react to shifts in market conditions.

Our retail sentiment-based Momentum2 and volatility-friendly Breakout2 systems have both sold the recent Euro breakdown, but we’ll need to see a substantive break below December lows of $1.2880 to have real confidence in those trades.

Last week we wrote that the US Dollar actually stood to decline versus major counterparts as our proprietary positioning measures showed retail crowds were far too willing to buy. The sharp reversal in the Dollar’s fortune gives us clear reason for pause, however, and we may need to update our trading biases as conditions change.

We’ll focus on several sentiment-based Momentum2 trades on clearer trends such as the AUDUSD and GBPUSD, while we express caution at Breakout2 trades given fairly clear risk of continued choppiness in market conditions.

Japanese Yen currency pairs have previously been bright spots for our sentiment-based trading strategies, but market conditions into Japan’s fiscal year-end may make for unpredictable price moves. We may see trading opportunities to the downside—particularly for the Euro and US Dollar—but that may likewise depend on whether this is truly the start of a larger EUR breakdown.

DailyFX Forex Volatility Indices

forex_strartegy_outlook_us_dollar_long_positions_body_Picture_1.png, Strategies Sell Euro on Post-Cyprus Tumbles - Good Trades? Forex market volatility prices have fallen to start the week, but given sharp market swings on news headlines we expect choppiness and sharp intraday price swings to continue.

View the table below to see our strategy preferences broken down by currency pair.

DailyFX Individual Currency Pair Conditions and Trading Strategy Bias

forex_strartegy_outlook_us_dollar_long_positions_body_x0000_i1026.png, Strategies Sell Euro on Post-Cyprus Tumbles - Good Trades?forex_strartegy_outlook_us_dollar_long_positions_body_1a.png, Strategies Sell Euro on Post-Cyprus Tumbles - Good Trades? View how to automate the high-volatility Breakout2 Trading System via our previous article and webinar recording.

Auto trade the trend reversal-trading Momentum2system via our previous article and webinar recording.

Trade with strong trends via our Momentum1 Trading System and view an archived webinar

Use our counter-trend Range2 Trading system and view an archived webinar guide on automation

--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com

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Definitions

Volatility Percentile – The higher the number, the more likely we are to see strong movements in price. This number tells us where current implied volatility levels stand in relation to the past 90 days of trading. We have found that implied volatilities tend to remain very high or very low for extended periods of time. As such, it is helpful to know where the current implied volatility level stands in relation to its medium-term range.

Trend – This indicator measures trend intensity by telling us where price stands in relation to its 90 trading-day range. A very low number tells us that price is currently at or near 90-day lows, while a higher number tells us that we are near the highs. A value at or near 50 percent tells us that we are at the middle of the currency pair’s 90-day range.

Range High – 90-day closing high.

Range Low – 90-day closing low.

Last – Current market price.

Bias – Based on the above criteria, we assign the more likely profitable strategy for any given currency pair. A highly volatile currency pair (Volatility Percentile very high) suggests that we should look to use Breakout strategies. More moderate volatility levels and strong Trend values make Momentum trades more attractive, while the lowest Vol Percentile and Trend indicator figures make Range Trading the more attractive strategy.

HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.

ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES IS MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION.

OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS. Any opinions, news, research, analyses, prices, or other information contained on this website is provided as general market commentary, and does not constitute investment advice. The FXCM group will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance contained in the trading signals, or in any accompanying chart analyses.

http://www.dailyfx.com/forex/technical/trading_strategies/trading_strategies_explained/2013/03/05/range_trading_with_the_speculative_sentiment_index.html


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EUR/USD Above 1.2890 Needed to Alleviate Downside

240 MinuteBars

eliottWaves_eur-usd_body_eurusd.png, EUR/USD Above 1.2890 Needed to Alleviate Downside Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0

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FOREXAnalysis: Did the ‘initial resistance line’ mentioned yesterday nail the low? It’s too early to tell but the inside day is a good start. No change from yesterday - “The EURUSD diagonal count I’ve been tracking since 1.3133 is coming into sharper focus. The diagonal line crosses about 1.2665 on Friday. This is in line with the November low at 1.2660 and 61.8% retracement of the rally from the July 2012 low at 1.2679. Of note as well is the initial trendline from the high above 1.3700. That line has come into play as a pivot many times in the last several months.” It’s worth noting that next week is heavy with event risk.

FOREX Trading Strategy: Exchange markets are closed in the US and Europe on Friday and closed on Monday in Europe so don’t expect much until Monday night (Tuesday Asia) at the earliest. “In order to turn bullish, need to see price fall into 1.2660/80 and reverse or exceed 1.2890 from current levels.”

LEVELS: 1.2679 1.2500 1.2660/801.2890 1.30471.3106

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
Learn forex trading with a free practice account and trading charts from FXCM.


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Price & Time: Looking to Re-Align With Broader Trends

This publication attempts to further explore the concept that mass movements of human psychology, as represented by the financial markets, are subject to the mathematical laws of nature and through the use of various geometric, arithmetic, statistical and cyclical techniques a better understanding of markets and their corresponding movements can be achieved.

Foreign Exchange Price & Time at a Glance:

EUR/USD:

PT_Re-aligning_body_Picture_4.png, Price & Time: Looking to Re-Align With Broader Trends Charts Created using Marketscope – Prepared by Kristian Kerr

-EUR/USD broke under the 1.2785 127% extension of Monday’s reaction high to print new year-to-date lows on Wednesday

- Bias is still lower with attention now on a Fibonacci confluence near 1.2720 and the 61.8% retracement of the advance from the 2012 low just below at 1.2675

-The near-term cyclical picture is a bit muddled at the moment, but a bigger picture Gann related turn window is seen starting around the end of next week

- The 1st square root progression from Wednesday’s low near 1.2865 is immediate resistance

- However, only strength above the 61.8% retracement of the week’s range at 1.2935 would shift our bias higher.

Strategy: The decline doesn’t look done to us quite yet, but a little nervous here as currency markets have a tendency to reverse trends around big holidays. Regardless, looking to sell the euro at 1.2895 with a stop just over 1.2940. If it goes our way will book profit on half ahead of 1.2720.

AUD/USD:

PT_Re-aligning_body_Picture_3.png, Price & Time: Looking to Re-Align With Broader Trends Charts Created using Marketscope – Prepared by Kristian Kerr

- AUD/USD tested the 78.6% retracement of the year-to-date range on Tuesday before coming under pressure over the past couple of days

- Bias is still higher, but weakness below the 1.0390 1st square root progression from Tuesday’s high and the 1x1 Gann line from the year-to-date low in the 1.0390/80 area will turn us negative on the Aussie

- Recent peak came during a clear time cycle turn widow and further weakness now seen for at least a few more days

- A Gann level related to the year-to-date low in the 1.0465 area is immedate resistance

- Strength over a myriad of Gann lines and retracement levels between 1.0475 and 1.0520 is really needed, however, to signal that a more important advance is underway

Strategy: Took profit on the remainder of our long position from 1.0300 on the recent move back below 1.0410. Will look to sell on strength if 1.0380 gives way soon.

EUR/GBP:

PT_Re-aligning_body_Picture_2.png, Price & Time: Looking to Re-Align With Broader Trends Charts Created using Marketscope – Prepared by Kristian Kerr

- EUR/GBP traded to its lowest level in over two-months on Thursday before finding support at the .8415 50% retracement of the 2011 to 2012 decline

- Our bias remain lower in the cross, but weakness below a convergence of several key Fibonacci levels between .8415 and .8385 needed to signal the start of the next leg lower

- Thursday is a minor cycle turn window and some strength seems likely for a couple of days, but a more important cycle point seen around the second half of next week

- A minor Fibonacci retracement at .8490 is immediate resistance

- However, only strength over a convergence of Gann, Fibonacci, and Andrews lines between .8525 and .8540 would turn on positive on the cross

Strategy: Sold the break of .8515, but got stopped out for a 35 pip loss in the volatility surrounding Monday’s open. Looking to sell on strength over the next couple of days at .8525. Stop over .8550.

Focus Chart of the Day: GBP/USD

PT_Re-aligning_body_Picture_1.png, Price & Time: Looking to Re-Align With Broader Trends As we noted yesterday, next week looks important for several different currency pairs from a time cycle perspective. What makes this time period interesting is that several different methodologies all point to its significance. In Cable, the middle of next week will be 3-months or 90 degrees in time from the year-to-date high recorded on January 2nd. These cyclical points often prompt changes in trend. A recent example of this methodology working was in USD/JPY as the year-to-date high recorded in mid-March came 6-months or 180 degrees in time from the September low. With Cable now in a multi-week recovery, it looks like this turn window could provide an opportunity to re-align with the broader decline.

--- Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com

To contact Kristian, e-mail kkerr@fxcm.com. Follow me on Twitter @KKerrFX

Are you looking for other ways to pinpoint support and resistance levels? Take our free tutorial on using Fibonacci retracements.

Need guidance managing risk on trades? Download the free Risk Management Indicator.

To receive other reports from this author via e-mail, sign up to Kristian’s e-mail distribution list via this link.


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What if We’re Wrong About Cyprus and Jeroen Dijsselbloem?

By Christopher Vecchio, Currency Analyst 26 March 2013 22:00 GMT Let me preface this by first saying that by no means would I consider myself a Euro apologist. I think the Euro crisis has been poorly handled from the start, and that the latest period of calm is nothing short of a farce, only thanks to the European Central Bank’s efforts to do “whatever it takes” to save the Euro, back in July 2012. But an end might be in sight for the Euro-zone sovereign debt crisis – and it’s not an exit that anyone has been looking towards.

The past few days have been mired by endless speculation over the precedent the bailout of Cyprus might set for other peripheral countries. After all, the Euro project is about equality and unity; and given the progression of the crisis, we know that each step has set the precedence for the next step. That is to say, the Cypriot bailout – one which looped in depositors to take the fall for banks’ poor investing (gambling) decisions – is now considered a “template” for the rest of Europe. By now, everyone has recycled the fact first brought to light by The Economist in this week’s issue: of the 147 financial crises since 1970, none of them resulted in depositors taking losses before Cyprus, according to the IMF. This is a unique case indeed.

But is it really a unique case? Eurogroup President Jeroen Dijsselbloem seems to disagree. In a revealing joint-interview with the Financial Times/Reuters yesterday, Mr. Dijsselbloem said that:

“We should start pushing back the risks. If there is a risk in a bank, our first question should be: “Ok, what are you the bank going to do about that? What can you do to recapitalise yourself?” If the bank can’t do it, then we’ll talk to the shareholders and the bondholders. We’ll ask them to contribute in recapitalising the bank. And if necessary the uninsured deposit holders: “What can you do in order to save your own banks?”

So then Cyprus is not a unique case, it is the “blueprint” (another one of Mr. Dijsselbloem’s carefully chosen words) for future bailouts. The Euro has been hit quite hard as a result of this comment, falling from just under $1.3000 against the US Dollar into the mid-$1.2800s in a few hours on March 25. Everyone, including myself, was focusing on the latter half of the quote: those uninsured deposit holders would join their constituents as candidates to recapitalize a downtrodden bank.

I posited this morning that “The big question now: if you have over €100,000 in a country whose banking system is on life support, do you feel that your money is safe?” This was a direct reference to Italy and Spain, the two countries closest to the core affected by the debt crisis. Mainly, I would be terrified if my savings were past the €100,000 threshold – news broke today that a Swedish EU member of parliament was setting forth legislation that would put uninsured deposit holders (over the said €100,000 threshold) on the chopping block ahead of tax payers for bailout proceedings. This is a big deal in the short-term, but maybe not in the long-term.

On second glance, the main point that everyone should be taking away from Mr. Dijsselbloem’s comments is the first part of the sentence, when he said “We should start pushing back the risks.” We need to go to the root of the crisis to understand where the risks are stemming from: the strong interrelationship between banks and their sovereigns. Banks buy sovereign debt, sovereigns invest in the banks – it’s an endless loop where each party has their hand in the other’s pocket as well.

To truly end the European sovereign debt crisis, this strong interrelationship needs to be severed. A potential tax on uninsured deposit holdings is just the way to end it.

Before Cyprus, when a bank needed bailouts, they would go to their sovereign for funds. The sovereign would recapitalize the bank, and in return, the sovereign would get an investment in the bank. With the European economy in the gutter, quite frankly, many banks’ losses keep piling up, putting further strain on the sovereigns, while the banks don’t see a true penalty; moral hazard. The public debt racks up, government revenues can’t keep up the pace to pay off their own debt, and voila: the sovereign needs a bailout as well.

We’ve all been led to believe that the European Stability Mechanism (ESM) would be the facility by which these sovereigns would receive emergency funding. But the ESM is derived from tax payer money, which in effect would mean that the connection between sovereigns and banks remains. Mr. Dijsselbloem said that “We should aim at a situation where we will never need to even consider direct recap.”Now, like in Cyprus, it’s clear that tax payers won’t contribute to bailouts going forward.

Essentially, Mr. Dijsselbloem has placed deposit holders in front of the tax payers for bailouts. Risk is now diverted away from the sovereign – the severing begins. But why is levying a deposit tax, if you will, the right move?

In short, depositors are the life blood of a bank. Without depositors, the bank collapses. If a bank in a peripheral country is taking on extra risk to generate windfall profits – a quick and haphazard way of trying to cover holes in the balance sheet – it will be forced to curb its risk taking in order to shore up Tier 1 capital ratios, thereby preventing panic among its depositors. In the instance of a crisis on the sovereign level, banks with higher capital ratios could withstand the impact of sovereign debt writedowns, and the ‘Greek sovereign-Cyprus financial’ loop won’t happen again in the Euro-zone.

Of course, to get to the end of the crisis now looks like a messy road – selling of assets to raise capital, which would likely put upward pressure on peripheral bond yields. The pace of raising capital could be quick, now that Mr. Dijsselbloem has seemingly fumbled his words, with many calling him ‘inept’ in his wake. Luckily, the ECB has its OMT safety net in place – the facility that has quite literally saved Italy and Spain – and with its key rate at 0.75%, it could easily slash 50-bps to cushion the economy amid balance sheet contractions.

There may be some words lost in translation, but Mr. Dijsselbloem is no idiot – he’s the President of the Eurogroup. I still believe that this crisis is going to get a lot worse – but I’m also considering the notion that Mr. Dijsselbloem may have unlocked the door to truly “pushing back the risks,” by changing the pace and direction of the Euro-zone crisis. Now that banks have skin in the game, the game is about to change.

--- Written by Christopher Vecchio, Currency Analyst

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

To be added to Christopher’s e-mail distribution list, please fill out this form

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
Learn forex trading with a free practice account and trading charts from FXCM.

26 March 2013 22:00 GMT


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GBP/USD 1.5100 Hold is Viewed in Positive Light for Next Week

Daily Bars

eliottWaves_gbp-usd_body_gbpusd.png, GBP/USD 1.5100 Hold is Viewed in Positive Light for Next Week Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0

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FOREXAnalysis: Near term, the GBPUSD hold at 1.5100 is a positive development so there is clearly no reason to alter the bullish outlook. Resumption towards the congestion area that preceded the sharp 2/20 drop is favored. The lower part of that zone (1.5415) is also the 38.2% retracement of the decline from the January high (1.5423). IF the rally continues from above 1.5092, then the advance would consist of 2 equal legs at 1.5521, or near the top of the zone (1.5549).

FOREX Trading Strategy: Risk for traders should be moved up to 1.5090 (bias is bullish above 1.4830 though). If 1.5090 fails to hold, then 1.5045 and 1.4994 are estimated supports. Pay attention to the London open if trading GBPUSD.

LEVELS: 1.4994 1.5045 1.5092 1.5259 1.5320 1.5415

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
Learn forex trading with a free practice account and trading charts from FXCM.


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Cypriot Banks to Open, Can Euro Hold?

By Renee Mu  and  Jason Shemtob 27 March 2013 23:33 GMT The Dow Jones FXCM US Dollar Index rallied on the euro weakness in the past session. Tomorrow Cypriot banks will reopen after nearly two-week lockdown. The country’s government decides to put tight capital controls on bank accounts in order to prevent a mass flight of deposits. Yet, when the withdraw restriction is lifted in a week or longer, the money is going to leave anyway as depositors seek to reduce their holdings in banks amid fear of further loss.

Increased money demand and fixed monetary supply (Unfortunately Cyprus can’t issue more euro) will push interest rates higher to reach a new equilibrium. However, real interest rates to depositors especially who hold large accounts have been cut sharply and even turn negative because of the bail-in program. The economic imbalance will lead to a jump in inflation and decline in output, which means the sovereign debt crisis is far from over, and the euro still faces downside pressure. A good lesson to investors is to think cautiously before make any investment in such lightly-regulated countries. It is easy to lend money but it might take forever to get it back like the struggling Cypriot creditors.

On Monday, the leading Eurozone Finance Minister Dijsselbloem suggested that the Cyprus deal could be a future template in dealing with troubled banks. European officials later backtracked his comments, but also said preferred bank restructuring than using taxpayer’s fund to save banks. It therefore raises concerns in Italy, Greece and other Euro-area countries with financial problems – will their depositors suffer a similar loss one day? One possible reaction of creditors is to withdraw money from local banks and transfer to countries with more stable banking system either inside or outside the euro-zone. An increasing capital outflow will dampen the existing crisis and reduce demand for the euro.

The downside pressure for euro not only comes from Cyprus but also from the third largest economy in region. Italian Democratic Party leader Bersani said that Italy was in a “dramatic situation” and needed “a government which performs miracles”, as he had few options left after ruled out an alliance with People of Freedom. If he failed to form a functioning government, the president can tap someone else to try to create a coalition or he can call for a new election. Yet both will add more uncertainties to the market and may further drag down the euro.

Economic Calendar

Gfk Consumer Confidence Survey(Mar)

German Unemployment Change (Mar)

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
Learn forex trading with a free practice account and trading charts from FXCM.

27 March 2013 23:33 GMT


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Thursday, March 28, 2013

Will Ford Fall? Toyota Surge? Protect Your Portfolio With This Tool

Do you own these stocks? Protect your Portfolio

Trade Idea: Long US Dollar/Japanese Yen (USD/JPY) with http://www.fxcm.com/

Why is Ford Motor Company falling, and why is Toyota Motor Corporation surging? We take a look at a key factor that may continue to haunt Ford’s stock price in 2013.

Ford’s stock price has fallen by as much as 10+ percent from recent multi-year peaks, but Toyota’s stock price has moved exactly in the opposite direction and trades over 20 percent higher through the same stretch.

Ford (F) Stock Has Declined While Toyota (TM) has Surged

ford_and_toyota_stock_and_the_japanese_yen_body_Picture_5.png, Will Ford Fall? Toyota Surge? Protect Your Portfolio With This Tool The key disconnect doesn’t seem to be mere coincidence: it coincides with a substantial move in the US Dollar exchange rate versus the Japanese Yen.

The link between the US Dollar/Japanese Yen exchange rate and Ford stock has gone through several stages in recent years, and understanding the difference helps explain why the Yen is now relevant to Ford.

Stage One:The Financial Crisis was the Top Mover for Ford and the Yen

From the beginning of 2007 to the end of 2008, Ford stock’s price dropped by 64.2 percent and the US Dollar depreciated by 19.8 percent against its Japanese counterpart. The financial crisis has a particularly negative effect on any industries linked to the highly-indebted US consumer, and Ford stock fell sharply as a result. The Japanese Yen similarly benefited against the Greenback for comparable reasons.

ford_and_toyota_stock_and_the_japanese_yen_body_Picture_6.png, Will Ford Fall? Toyota Surge? Protect Your Portfolio With This Tool Stage Two: Ford Stock Tumbles and US Dollar Falls Sharply versus Japanese Yen from 2007-2012

We then saw a significant reversal in Ford stock as the S&P 500 rebounded and the US economy recovered. All the while, controversial Quantitative Easing policies by the Federal Reserve meant that the US Dollar weakened against the highly interest rate-sensitive Japanese Yen.

ford_and_toyota_stock_and_the_japanese_yen_body_Picture_7.png, Will Ford Fall? Toyota Surge? Protect Your Portfolio With This Tool Stage Three: US Dollar Strengthens versus Japanese Yen, and Ford’s Stock Price Falls

Ford stock moved higher alongside a resurgent S&P 500 as record-low interest rates fueled investments and boosted consumer spending. All the while, a resurgent US currency moved to fresh multi-year peaks against the Japanese Yen. Both Ford and the USDJPY moved consistently higher until the Yen broke the key ¥90 mark against the US Dollar.

ford_and_toyota_stock_and_the_japanese_yen_body_Picture_8.png, Will Ford Fall? Toyota Surge? Protect Your Portfolio With This Tool Why was the break above ¥90 in the USDJPY significant?

Ford competes with auto manufacturers across the world, and impressive US Dollar strength against the Japanese Yen makes its cars more expensive in Japan. A cheaper Yen means that Japanese cars become less expensive in the US. The double-whammy is enough to boost the stock price of the Toyota Motor Corporation and simultaneously sink Ford stock.

ford_and_toyota_stock_and_the_japanese_yen_body_Picture_9.png, Will Ford Fall? Toyota Surge? Protect Your Portfolio With This Tool According to Ford’s financial reporting for Q4, 2012, the pre-tax profit of Ford Motor in the Asia-Pacific segment fell to a paltry $39 million—its North American profits were nearly 50 times that amount.

But recent price action emphasizes that investors fear that further Japanese Yen depreciation (USDJPY gains) could cut into Ford’s profits as Japanese auto manufacturers gain traction.

Toyota’s stock is up over 20 percent year-to-date, while Ford is only up 2 percent.

How do we Protect Against the Key Risk to Ford Stock?

The way to protect against the exchange rate risk to Ford stock seems relatively simple: sell the Japanese Yen against the resurgent US Dollar. Using a currency trading platform, this is as simple as going long the USDJPY currency pair.

Past performance is not indicative of future results, but Ford stock saw an 11.4 percent decline in the same time that the USDJPY strengthened by 4.5 percent—implying that a 1 percent gain in the USDJPY could affect Ford by as much as 2.5 percent.

Ford’s stock may not follow the USDJPY on a tick-for-tick basis, but we do believe the Japanese Yen can have a significant impact on Ford and Toyota stock through the foreseeable future.

--- Written by David Rodriguez, Quantitative Strategist and Renee Mu, DailyFX Research Team

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Euro Unimpressed by Cyprus Deal as Capital Flight Fears Linger

The Euro has shed earlier gains and now trades little changed after Cyprus and the EU agreed to a bailout deal as capital flight fears continue to linger.

Talking Points

Euro Yields Tepid Response to Cyprus Bailout Deal as Capital Flight Fears Japanese Yen Declined as Stocks Rose in Asia, Denting Safe-Haven Demand The major currencies are little changed in overnight trade. The Japanese Yen is broadly underperforming as Asian stocks advance, sapping demand for the regional haven currency. The MSCI Asia Pacific benchmark equity index has added 0.9 percent after Cyprus and the so-called “troika” (EU/ECB/IMF) agreed to measures paving the way for launch of the country’s bailout program. The Euro spiked higher as the news of the deal emerged but the single currency has since retreated as worries about the impact of the Cyprus fiasco on depositor confidence elsewhere in single currency bloc continue to swirl.

The package of measures emerging out of the weekend’s negotiations focuses most specifically on Laiki Bank, Cyprus’ second-largest lender. The bank will be split, with unsecured deposits (all those over €100,000) transferred to a so-called “bad bank” and eventually wound up. Losses to unsecured depositors from this move are being estimated at 30-40 percent. Secured deposits and performing assets will be moved to Bank of Cyprus. This process is expected to raise €4.2 billion. The Cypriot government will further use privatization and taxation to generate additional funding to move toward unlocking €10 billion in EU aid, a process expected to conclude by mid-April.

On balance, investors’ lack of enthusiasm for the bailout seems reasonable. The critical issue remains that of precedent for larger Eurozone countries, and the way in which the Cyprus situation has been managed does not seem to inspire a great deal of confidence. Depositors in countries with similarly sickly banking sectors (notably Spain) are unlikely to be greatly encouraged by the prospect of losing close to a third of their deposits over €100k with the EU’s blessing if trouble were to arise. Cyprus’ introduction of capital controls to prevent a bank run when lending institutions reopen for business, again with approval from Brussels, is unlikely to sit well also.

This raises the most important question of all: why should a depositor in Spain or a country similarly vulnerable to a banking crisis expect to be left unscathed if a Cyprus-like calamity were to befall them. If such an expectation is deemed unreasonable in light of today’s events, the depositor in question may well opt not to keep money in the Eurozone altogether, and he/she may not be alone. This leaves the markets waiting to see if a mass exodus of capital does indeed occur as the region digests the latest news-flow, for then the worst-case scenario will be upon the Eurozone whether or not Cyprus receives its aid.

Asia Session:

Hometrack Housing Survey (MoM) (MAR)

Hometrack Housing Survey (YoY) (MAR)

Euro Session:

Italian Consumer Confidence Index (MAR)

BBA Loans for House Purchase (FEB)

Italy to Sell 2014 Bonds, 2018-23 I/L Bonds

Critical Levels:

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

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Crude Oil, Gold Sink as Eurozone Fears Spark Risk Aversion

Crude oil and gold prices are under pressure as Eurozone stability jitters drive market-wide risk aversion and encourage safe-haven flows into the US Dollar.

Talking Points

Crude Oil, Copper Lower as Eurozone Crisis Fears Drive Risk Aversion Gold and Silver Under Pressure as US Dollar Gains on Safe-Haven Flows Commodities are facing broad-based selling pressure as risk aversion grips financial markets. The catalyst for the selloff seems to be found in the Eurozone, where a sharp widening in the spreads between Italian and Spanish 10-year bond yields and their benchmark German counterparts points to swelling sovereign risk. Broadly speaking, the tense atmosphere seems to reflect unease with the implications of the Cyprus bailout deal, as expected.

Sentiment-sensitive crude oil and copper are following stocks lower. Meanwhile, gold and silver are facing de-facto selling pressure as the US Dollar finds its way higher on the back of renewed safe-haven demand. S&P 500 index futures are pointing sharply lower ahead of the opening bell on Wall Street, hinting more of the same is likely ahead. US Pending Home Sales figures headline the data docket from here, with expectations calling for a 0.3 percent month-on-month decline in February.

WTI Crude Oil (NY Close): $93.71 // +1.26 // +1.36%

Prices are testing resistance at 96.41, the 50% Fibonacci expansion. This barrier is reinforced by a falling trend line set from late January. A break above that exposes the 61.8% Fib at 98.09. Near-term support is at 94.74, the 38.2% level.

Commodities_Oil_Gold_Sink_as_Eurozone_Fears_Spark_Risk_Aversion_body_Picture_3.png, Crude Oil, Gold Sink as Eurozone Fears Spark Risk Aversion Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1608.58 // -6.30 // -0.39%

Prices are testing support at 1597.77, the 14.6% Fibonacci expansion, a barrier reinforced by a rising trend line set from late February (1594.53). A break below that exposes the 23.6% level at 1586.27. Near-term resistance is at 1616.98, the March 21 high, with a reversal above that aiming for a longer-term falling trend line at 1639.94.

Commodities_Oil_Gold_Sink_as_Eurozone_Fears_Spark_Risk_Aversion_body_Picture_4.png, Crude Oil, Gold Sink as Eurozone Fears Spark Risk Aversion Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $28.74 // -0.44 // -1.49%

Prices are testing below support at 28.46, the 23.6% Fibonacci expansion. A break below that exposes the 38.2% level at 27.86.Near-term resistance is in the 29.42-92 area, with a break higher exposing a falling trend line now at 30.13.

Commodities_Oil_Gold_Sink_as_Eurozone_Fears_Spark_Risk_Aversion_body_Picture_5.png, Crude Oil, Gold Sink as Eurozone Fears Spark Risk Aversion Daily Chart - Created Using FXCM Marketscope 2.0

COMEX E-Mini Copper (NY Close): $3.466 // +0.030 // +0.87%

Prices are testing below support at 3.447, the 14.6%Fibonacci retracement. A break downward targets the March 19 swing low at 3.388. Near-term resistance is at 3.483, the 23.6% level, with a reversal above that aiming for 38.2% Fib at 3.542.

Commodities_Oil_Gold_Sink_as_Eurozone_Fears_Spark_Risk_Aversion_body_Picture_6.png, Crude Oil, Gold Sink as Eurozone Fears Spark Risk Aversion Daily Chart - Created Using FXCM Marketscope 2.0

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

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USDOLLAR Quiet but Back Below Neckline

By Jamie Saettele, CMT, Sr. Technical Strategist 28 March 2013 21:09 GMT Daily Bars

eliottWaves_us_dollar_index_body_usdollar.png, USDOLLAR Quiet but Back Below Neckline Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0

Are you new to FX or curious about your trading IQ?

FOREXAnalysis: A short term USDOLLAR head and shoulders top was confirmed on Friday. The objective for the pattern is 10323, which happens to be the 2012 high. The 2/25 low is also of interest as support at 10365. In summary, look lower towards 10323/65 before thinking about buying a dip.

FOREX Trading Strategy: Flat

LEVELS: 10323 10365 10413 10514 10576 10611

--- Written by Jamie Saettele, CMT, Senior Technical Strategist for DailyFX.com

To contact Jamie e-mail jsaettele@dailyfx.com.  Follow me on Twitter for real time updates @JamieSaettele

Subscribe to Jamie Saettele's distribution list in order to receive actionable FX trading strategy delivered to your inbox. Jamie is the author of Sentiment in the Forex Market.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
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28 March 2013 21:09 GMT


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Big Trading Opportunity in World’s Second-Largest Economy

Article Summary: China is the world’s second-largest economy and its economic growth far outpaces major industrialized counterparts. Yet its domestic currency, the Chinese Yuan, is not a truly international currency. Here is a guide on using the USDCNH to trade the uptrend in the Chinese Yuan.

China is the second largest economy in the world, while its currency Renmnibi is not yet a truly international currency. Yet with the fast developments in China’s financial system, more Chinese currency products such as offshore futures have been and will be launched overseas. Investors are likely to be able to trade in a new global currency competing with the dollar and the euro in the near future.

Get to Know the Key Terms

Before investing in this new opportunity, traders will want to understand some key concepts first.

China ‘s currency is officially called the Renminbi, People’s Currency literately. The Yuan is the unit of account, similar to the dollar, so China’s currency also can be called as the Chinese Yuan.

Renminbi, denoted RMB is the name for the currency traded both onshore and offshore.

If the RMB is traded onshore (in mainland China), it is referred to as CNY—traded as USD/CNY.

If the RMB is traded offshore (mainly in Hong Kong), the ticker will be USD/CNH. Thus, RMB is one currency but trades at two different exchange rates depending on locations.

The offshore RMB trading (USD/CNH) started in 2010. As an important global forex broker, FXCM Inc. offers USD/CNH trading via its FXCM Asia and FXCM UK subsidiaries.

Current RMB Exchange Rate and Markets

Many investors may ignore this potential opportunity as they believe RMB is fixed to the US Dollar. It is partly true. Unlike the U.S. dollar or the Euro, the RMB is not fully-pledged simply based on market supply and demand; instead, the trading price of RMB is managed floating within a range of 0.5 percent around the central parity published by the People’s Bank of China. The central parity is determined by a basket of foreign currency including the US dollar, Euro, Japanese Yen and other currencies.

The good news for traders is that despite of controlled volatility, the intrinsic value of RMB is indeed affected by economic forces in the market. Both hedgers and speculators may take advantage of RMB trading.

In the domestic RMB market, the main players are onshore exporters, who demand CNY and sell the US dollar, and importers pay US dollar with CNY. On the other side, most speculators participate in the offshore currency market via the USDCNH in Hong Kong’s markets. As the demand for CNH usually exceeds supply, which is suppressed by government regulation, the CNH is generally trading above the value of CNY.

Regulator in Focus: People’s Bank of China

The Central Bank of China plays the most important role on formulate policy on the RMB exchange rate and also on the reforms to increase the role of Chinese Yuan on the world stage. Investors will want to keep an eye on it to gauge any clues on fundamental changes and the timing for the Chinese Yuan to become a truly global currency.

In order to keep currency volatility within the expected range, PBOC, the largest currency trader in China with over $3 trillion foreign reserves, purchases or sells the US Dollar in the open market.

Historical Chart for Offshore RMB Exchange Rate versus US Dollar (USD/CNH )

usdollar_cnh_chinese_yuan_renminbi_exchange_rate_body_Picture_5.png, Big Trading Opportunity in World's Second-Largest Economy Chart Source: FXCM’s Marketscope, FXCM Demo Account

Since the height of the global financial crisis in 2008, China has intensified efforts to promote the RMB as an international currency. Yet more important questions to potential investors are when and how the process will take place. In order to predict future, we first need to review history first in order to determine the critical timing for changes in the Chinese Yuan.

The Renminbi was first issued on December 1, 1948 and soon pegged to the US dollar with USDCNY at approximately2.46Yuan. At that time, China had little international trade so the setup of exchange system remained in in relative infancy.

As imports and exports continued to increase sharply, China adopted a double currency systemstarting in 1981: regardless of the official exchange rate, a US Dollar at 2.80 Yuan was used for trade settlement.

From 1994, the Chinese government pegged the RMB to the greenback within a narrow range from 8.27 Yuan to 8.28 Yuan. The fixed exchange rate guaranteed a relatively stable financial market and helped protect against external shocks as China’s economy expanded at a fast pace.

On July 21, 2005, the People’s Bank of China announced that it would lift the peg to the US dollar and increased flexibility of RMB exchange rate. Following the release, RMB appreciated by 2 percent to 8.11 Yuan. As the use of China’s currency expanded from trade settlement to offshore financial markets and direct investment, RMB reform and internationalization has accelerated with a market-oriented focus.

Overall, the development of China’s economy is the main driver to RMB globalization.

Learn more about the Offshore Renminbi Exchange rate via FXCM Asia Limited

What is a Currency War? Who is engaging in one right now? How is it impacting your trading? Take our free course and find out!

Written by Renee Mu, DailyFX Research Team


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New smoke alarm batteries may save lives

Jessica Huxley   |  12:01am March 29, 2013

Acting inspector Neil Dover says smoke detectors need their batteries changed at least once a year. Pic: Jessica Huxley

GOLD Coast fire fighters are urging residents to change the battery in their smoke detectors to avoid being a fool this April Fool's Day.

Acting inspector Neil Dover said in-home smoke detectors need their batteries changed at least once a year.

"Detectors with 12-vault batteries should be changed yearly and April Fools Day is a great day to remember to do it, especially heading into the winter months when more electronics are used in the home," Mr Dover said.

"Detectors and batteries should also be tested regularly using the test button to sound the alarm.

"The smoke detectors themselves have a lifespan of about 10 years before they should also be replaced."

Mr Dover said last year there were 210 residential structural fires on the coast and numerous occasions where whole families had been saved due to smoke detectors.

"They're designed to wake people and notify people as our sense of smell is altered when we're in an unconscious state," he said.

"I can remember an instance where a whole family had evacuated from their burning home at night and been waiting on the footpath for us to arrive.

"Working smoke alarms really do save lives."

Mr Dover said photoelectric smoke alarms were the best option as they sense fire in an earlier stage than previous models.

"These detectors are different in the way they work, using ionisation to detect smoke earlier," he said.

"Detectors can be bought for as little as $15 and take less than 5 minutes to change."


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USD to Look Higher on Stronger Recovery- Euro Rebound at Risk

Forex_USD_to_Look_Higher_on_Stronger_Recovery-_Euro_Rebound_at_Risk_body_ScreenShot096.png, USD to Look Higher on Stronger Recovery- Euro Rebound at Risk Chart - Created Using FXCM Marketscope 2.0

Although the Dow Jones-FXCM U.S. Dollar Index (Ticker: USDollar) is trading 0.07 percent lower from the open, we may see the greenback regain its footing during the North American trade as the economic docket is expected to highlight a rebound in demands for U.S. Durable Goods along with higher home prices. However, as a downward trending channel appears to be taking shape, we may see further correction in the dollar, which could pave the way for a break below the 10,400 region. Until the bearish trend is broke, we will keep a close eye on former trendline resistance, which could offer near-term support, but the reserve currency may regain its footing over the next 24-hours of trading should the fundamental developments coming out of the world’s largest economy highlight a more broad-based recovery.

Forex_USD_to_Look_Higher_on_Stronger_Recovery-_Euro_Rebound_at_Risk_body_ScreenShot097.png, USD to Look Higher on Stronger Recovery- Euro Rebound at Risk Although U.S. consumer confidence is expected to fall back from a three-month high, demands for large-ticket items are projected to increase 3.95 in February, while the S&P/Case-Shiller Home Price index is anticipated to show an annualized gain of 7.8 percent in January, which would mark the fastest pace of growth since June 2006. The expected 3.9 percent decline in New Home Sales may have limited impact after marking the biggest advance since 1993 during January, while the Richmond Fed Manufacturing index is projected to hold steady at 6 in March.

Nevertheless, New York Fed President William Dudley argued monetary policy should remain ‘very accommodative’ as he sees a ‘fiscal drag’ of 1.75 percentage points in 2013, and warned that the greatest risk to the economy comes from ‘fiscal restraint’ as the government struggles to get its house in order. At the same time, Fed Chairman Ben Bernanke said the easing cycle enacted by the major central banks has held the world economy as they face a slow recovery, but the FOMC may adopt a more neutral to hawkish tone in the coming months should the data continue to highlight a more broad-based recovery. We will be watching the relative strength index, with support coming in around the 41 figure, as the technical outlook points to future declines, but the dollar may continue to consolidate above the 10,400 figure amid the shift in the policy outlook.

Forex_USD_to_Look_Higher_on_Stronger_Recovery-_Euro_Rebound_at_Risk_body_ScreenShot102.png, USD to Look Higher on Stronger Recovery- Euro Rebound at Risk Two of the four components advanced against the greenback, led by a 0.19 percent rally in the Euro, but the single currency may face additional headwinds in the days ahead amid the threat of a bank run in Cyprus. As the financial turmoil in the periphery country dampens the appeal of other popular offshore banking centers, the flight to safety may further diminish demands for the single currency, and the EURUSD may continue to work its way back towards the 23.6 percent Fibonacci retracement from the 2009 high to the 2010 low around 1.2640-50 as the precedence set by the Cyprus bailout has broader implications for the region.

--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

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Euro Eyes Cyprus Banks Open, Krona May Rise on German Data

By Ilya Spivak, Currency Strategist 28 March 2013 06:53 GMT The Euro looks toward the reopening of banks in Cyprus for direction cues while the Swedish Krona may rise if German jobs data tops expectations.

Talking Points

Swedish Krona May Rise if German Jobs Report Tops Expectations Euro Looks to Reopening of Cyprus Banks for Directional Guidance Yen Rose as Aussie Dollar Underperformed on Risk Aversion in Asia German Unemployment figures headline the economic calendar in European hours. Expectations call for the economy to add 2,000 jobs in March, keeping the unemployment rate unchanged at 6.9 percent for a sixth consecutive month. The March set of German PMI figures showed resilience in hiring despite weakness in overall private-sector activity. Indeed, Markit reported the strongest improvement in employment since January 2012, saying companies it polled cited “efforts to increase capacity and long-turn expansion plans.” Currencies geared to German growth – notably the Swedish Krona – may find support if that proves to foreshadow a better-than-expected outcome on today’s report.

As for the Euro itself, the focus remains on lingering uncertainty in Cyprus and political instability in Italy. Greek newspaper Kathimerini reported that Cypriot banks will finally reopen today and traders will be closely watching to gauge the effectiveness of capital controls installed to prevent a mass exodus of capital. Restrictions include a €300/day withdrawal limit and a ban on cashing checks. Taking more than €1000 in cash across the border is likewise now prohibited. A relatively orderly reopening may boost the single currency, social unrest or reports of banks flouting the new rules stand to yield the opposite result. Meanwhile in Italy, Democratic Party Leader Pier Luigi Bersani is expected to report that he was not able to forge a coalition today, clearing the way for President Napolitano to tap another politician to attempt to form a government.

Risk aversion gripped currency markets in overnight trade. The Japanese Yen outperformed, adding as much as 0.5 percent on average against its top counterparts as Asian stocks declined, boosting safe-haven demand and encouraging an unwinding of carry trades funded cheaply in the low-yielding currency. The Australian Dollar bore the brunt of risk-off flows in the FX space, sliding as much as 0.5 percent on average against the majors.

Asia Session:

TD Securities Inflation (MoM) (MAR)

TD Securities Inflation (YoY) (MAR)

GfK Consumer Confidence Survey (MAR)

Private Sector Credit (MoM) (FEB)

Private Sector Credit (YoY) (FEB)

BOJ Governor Kuroda Speaks at Parliament

Industrial Profits YTD (YoY) (FEB)

Euro Session:

Nationwide House Prices s.a. (MoM) (MAR)

Nationwide House Prices n.s.a. (YoY) (MAR)

German Retail Sales (MoM) (FEB)

German Retail Sales (YoY) (FEB)

German Unemployment Change (MAR)

German Unemployment Rate s.a. (MAR)

Index of Services (3Mo3M) (JAN)

Critical Levels:

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
Learn forex trading with a free practice account and trading charts from FXCM.

28 March 2013 06:53 GMT


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GBP/USD Technical Analysis 03.28.2013

GBP/USD Technical Analysis - Prices put in a bearish Dark Cloud Cover candlestick on a retest of resistance marked by a falling trend line set from the January 2 swing high and the recently broken multi-year range bottom at the 1.53 figure. Near-term support is at 1.5120, the 23.6% Fibonacci expansion, with a break below that targeting the 38.2% level at 1.4873. Trend line resistance is now at 1.5222. We continue to hold short.

Forex_GBPUSD_Technical_Analysis_03.28.2013_body_Picture_5.png, GBP/USD Technical Analysis 03.28.2013 Daily Chart - Created Using FXCM Marketscope 2.0

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
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EUR/USD- Trading the U.S. Consumer Confidence Survey

By David Song, Currency Analyst 26 March 2013 09:45 GMT Trading the News: U.S. Consumer Confidence

What’s Expected:

Time of release: 03/26/2012 14:00 GMT, 10:00 EDT

Primary Pair Impact: EURUSD

Expected: 67.5

Previous: 69.6

DailyFX Forecast: 66.0 to 70.5

Why Is This Event Important:

The Conference Board’s Consumer Confidence survey is expected to fall back to 67.5 in March from a three-month high and the drop in household sentiment may drag on the U.S. dollar as it dampens the outlook for growth. As the FOMC retains a cautious outlook for the world’s largest economy, a dismal print may renew expectations for additional monetary support, but the resilience in private sector consumption may limit the central bank’s scope to expand the balance sheet further as the economy gets on a more sustainable path.

Recent Economic Developments

The Upside

Change in Non-Farm Payrolls (FEB)

The Downside

Consumer Price Index (YoY) (FEB)

Average Hourly Earnings (YoY) (FEB)

The expansion in consumer credit along with the pickup in job growth may prop up household sentiment, and we may see a growing number of Fed officials adopt a more neutral to hawkish tone for monetary policy as the economic recovery gradually gathers pace. However, the persistent weaken in wage growth paired with sticky inflation may put a dent on household sentiment, and the FOMC may retain its highly accommodative policy stance throughout 2013 in an effort to address the ongoing slack in the real economy.

Potential Price Targets For The Release

Forex_EURUSD-_Trading_the_U.S._Consumer_Confidence_Survey__body_ScreenShot103.png, EUR/USD- Trading the U.S. Consumer Confidence Survey As the EURUSD struggles to hold above the 200-Day SMA (1.2874), the pair could be poised to give back the rebound from back in November (1.2659), and the euro-dollar may steady work its way back towards 1.2640-50 – the 23.6% Fibonacci retracement from the 2009 high to the 2010 low – as it searches for support. At the same time, the EURUSD may be limited to the upside as long as the relative strength index remains capped by the 46 figure, and we may see the longer-term bearish flag pattern continue to play out amid the deviation in the policy outlook.

How To Trade This Event Risk

Expectations for a drop in sentiment casts a bearish outlook for the reserve currency, but a positive development may set the stage for a long U.S. dollar trade as it raises the prospects for future growth. Therefore, if the survey exceeds market expectations, we will need to see a red, five-minute candle following the release to generate a sell entry on two-lots of EURUSD. Once these conditions are fulfilled, we will set the initial stop at the nearby swing high or a reasonable distance from the entry, and this risk will generate 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 an effort to lock-in our gains.

On the other hand, we may see sticky prices along with the ongoing weakness in the real economy drag on household sentiment, and a dismal print may weaken the dollar as it raises the Fed’s scope to expand the balance sheet further. In turn, if the survey slips to 67.5 or lower in March, we will implement the same setup for a long euro-dollar trade as the short position laid out above, just in reverse.

Impact that the Consumer Confidence survey has had on USD during the last month

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

January 2013 U.S. Consumer Confidence

Forex_EURUSD-_Trading_the_U.S._Consumer_Confidence_Survey__body_ScreenShot099.png, EUR/USD- Trading the U.S. Consumer Confidence Survey The gauge for U.S. household sentiment jumped to 69.6 from a revised 58.4 in January to mark the biggest advance since November 2011, while inflation expectations for the next 12 months slipped to an annualized 5.5%, posting the slowest rate of growth since July. The stronger-than-expected print propped up the greenback, with the EURUSD slipping below the 1.3050 figure, but we saw the reserve currency consolidate during the North American trade as the pair ended the day at 1.3061.

--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com.

Follow me on Twitter at @DavidJSong

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26 March 2013 09:45 GMT


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Cypriot Banks Reopen, Euro Rallies; USD Steadies Ahead of GDP

ASIA/EUROPE FOREX NEWS WRAP

High beta currencies and risk-correlated assets are mixed in the pre-North American trading hours, as investors around the globe anxiously await news out of Cyprus, now that banks are reopening there for the first time since March 16. There has been much ado about the potential for a bank runs in Cyprus, but thus far, predictions have fallen short of reality. Even though it is a counterfactual argument (and thus can’t be either proved or disproved), I suggest that the capital controls in place – limiting Cypriots to withdrawals of €300/day – are the reason why we’ve seen a lack of panic; accordingly, without them, Cypriot banks would be seeing massive outflows.

Regardless, with Cypriot banks reopening today at 06:00 EST/10:00 GMT, the Euro has found some firmer footing, and has retaken $1.2800 against the US Dollar amid the lack of the bank run. Italian and Spanish yields continue to edge higher, however, as the political situation in Italy appears to be nearing the apex of its crescendo, with it increasingly clear that Pier Luigi Bersani of the centre-left party won’t be able to garner enough support to form a government. However, with Italian President Giorgio Napolitano in the last six months of his presidency (ending in May), new elections cannot be called. We are thus stuck in limbo, and it is looking like another caretaker government, albeit with limited scope for implementing any substantive new reforms, will take charge in the interim.

Looking ahead to the North American trading session, there are several key data releases at 08:30 EST/12:30 GMT that could stoke additional volatility on Thursday. I’ve discussed the implications for both of these releases in greater detail in the Top 5 Key Events column this week.

Taking a look at European credit, upward pressure on peripheral bond yields has held the Euro back on Thursday, despite constructive price action in the single currency. The Italian 2-year note yield has increased to 1.949% (+0.6-bps) while the Spanish 2-year note yield has increased to 2.437% (+1.8-bps). Similarly, the Italian 10-year note yield is unchanged at 4.766% while the Spanish 10-year note yield has increased to 5.089 % (+3.4-bps); higher yields imply lower prices.

RELATIVE PERFORMANCE (versus USD): 10:50 GMT

JPY: +0.28%

NZD: +0.16%

EUR: +0.15%

CHF:+0.10%

CAD:-0.03%

GBP:-0.07%

AUD:-0.19%

Dow Jones FXCM Dollar Index (Ticker: USDOLLAR): -0.05% (+0.05% past 5-days)

ECONOMIC CALENDAR

Cypriot_Banks_Reopen_Euro_Rallies_USD_Steadies_Ahead_of_GDP_body_Picture_7.png, Cypriot Banks Reopen, Euro Rallies; USD Steadies Ahead of GDP See the DailyFX Economic Calendar for a full list, timetable, and consensus forecasts for upcoming economic indicators.

TECHNICAL ANALYSIS OUTLOOK

Cypriot_Banks_Reopen_Euro_Rallies_USD_Steadies_Ahead_of_GDP_body_Picture_6.png, Cypriot Banks Reopen, Euro Rallies; USD Steadies Ahead of GDP EURUSD: No change: “The headlines of Cyprus’ bailout pushed the EURUSD through the descending TL off of the February 1 and March 15 highs, at 1.2990/300, to its 21-EMA at 1.3042, before failure ensued on Monday. As I do not find the bailout terms favorable to long-lasting Euro strength, the “top” after the bailout could now be in place. Fresh yearly lows were set below 1.2800 at the time of writing [on Wednesday], with a clear test of 1.2660/80 (61.8% Fibonacci retracement on July 2012 to February 2013 rally, mid-November swing lows) in focus. A bearish bias holds so long as 1.3085 holds this week.”

Cypriot_Banks_Reopen_Euro_Rallies_USD_Steadies_Ahead_of_GDP_body_Picture_5.png, Cypriot Banks Reopen, Euro Rallies; USD Steadies Ahead of GDP USDJPY: No change: “The USDJPY continues to consolidate near the lower rail of its ascending channel dating back to January, with the first test of 93.50 well-supported. Accordingly, with risk aversion afoot, the drive in the pair is likely lower given the compressing 2s10s Treasury spread. Nevertheless, BoJ policymakers are set to meet next week, in what should be the beginning of new, expansive monetary measures under the watchful eyes of Haruhiko Kuroda. A break below 93.50 could lead to a hasty sell-off towards 90.00/50.”

Cypriot_Banks_Reopen_Euro_Rallies_USD_Steadies_Ahead_of_GDP_body_Picture_4.png, Cypriot Banks Reopen, Euro Rallies; USD Steadies Ahead of GDP GBPUSD: No change: “The failed run up to the 1.5285/375 region suggests that the rally in the GBPUSD seen the past few weeks may be nothing more than short covering and asset reallocation, rather than traders taking up new positions amid an improved interest rate outlook for the UK. Price has fallen back below the 8- and 21-EMAs after a rejection at a critical RSI level of 55. A move below 1.5000 this week would necessarily bring into view the lows near 1.4800/30 going into April.” A potential Bearish Rising Wedge has developed (clearer on the 4H timeframe, which would suggest a retest of the lows near 1.4830. The pattern is valid so long as 1.5260/65 holds to the upside.

Cypriot_Banks_Reopen_Euro_Rallies_USD_Steadies_Ahead_of_GDP_body_Picture_3.png, Cypriot Banks Reopen, Euro Rallies; USD Steadies Ahead of GDP AUDUSD:No change: “The AUDUSD uptrend remains, but after rejection in the critical 1.0475/535 region, the uptrend is being tested at 1.0435. A daily close below 1.0435 brings into focus the Symmetrical Triangle breakout zone of 1.0370/95, also where the 21-EMA and 200-DMA sit. It is of note that daily RSI failed to move through 67 – a level that has capped the daily RSI on previous run ups towards 1.0600 in mid-December and mid-January.” Now that price has closed below 1.0435, a further pullback to 1.0370/95 is in scope before buying interest returns.

Cypriot_Banks_Reopen_Euro_Rallies_USD_Steadies_Ahead_of_GDP_body_Picture_2.png, Cypriot Banks Reopen, Euro Rallies; USD Steadies Ahead of GDP S&P 500: No change: “The near-term set back at 1530 took place for less than two weeks, but the break higher hasn’t been marked by high volume; no, it has been a volumeless rally, with the breakout occurring on volumes around 80% of the daily average in 2013. This is not a ‘technically strong move.’ The float higher could continue, towards the all-time high at 1576.1, but might be cut short in the 1565/70 zone, where two key Fibonacci extensions lay. I’m very skeptical up here – markets seem to be ignoring Italy and the derisive politics in the United States at the moment (this also happened in 2011 and 2012 at the beginning of those years).”

Cypriot_Banks_Reopen_Euro_Rallies_USD_Steadies_Ahead_of_GDP_body_Picture_1.png, Cypriot Banks Reopen, Euro Rallies; USD Steadies Ahead of GDP GOLD: No change: “Gold broke below trendline support off of the January 2011 and May 2012 lows at 1650 last week, prompting a sharp sell-off into 1600, where price broke out in mid-August before a rally into the post-QE3 high at 1785/1805. However, with oversold conditions persisting on the 4H and daily timeframes, a rebound should not be ruled out; each of the past two daily RSI oversold readings has produced a rally in short order. Resistance is 1625 and 1645/50. Support is 1585 and 1555/60. It should be noted that Gold has entered a major support zone from the past 18-months from 1520 to 1575.”

--- Written by Christopher Vecchio, Currency Analyst

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

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EUR/USD Technical Analysis 03.28.2013

By Ilya Spivak, Currency Strategist 28 March 2013 10:33 GMT EUR/USD Technical Analysis– Prices broke below support at 1.2843, the 23.6% Fibonacci expansion, exposing the 38.2% level at 1.2716. A further drop below that aims for the 50% Fib at 1.2614. The 1.2843 level has been recast as near-term resistance, with a move back above that eyeing a rising channel top at 1.3014.

Forex_EURUSD_Technical_Analysis_03.28.2013_body_Picture_5.png, EUR/USD Technical Analysis 03.28.2013 Daily Chart - Created Using FXCM Marketscope 2.0

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

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28 March 2013 10:33 GMT


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Data from Canada, US in Focus as European Sentiment Centers Around Cyprus

Cyprus is not a “tempest in a teapot,” as one might call it. Euro-zone leaders have been criticized for their handling of the Cypriot crisis, from the radical measure of a deposit levy set forth by core leadership, to the dismissal of pan-European discussions by the Cypriot government herself. The critiques are valid.

The decision to tax savers is important because of how the European sovereign debt crisis has flowed: each policy undertaken has set precedence for the next bailout; if Cypriot savers had to contribute to the bailout of its banks, then why wouldn’t the same measures be forced upon Italian and Spanish savers? The Troika will be forced to give the same terms at minimum in order to prevent alienating Cyprus – the Euro is about unity, anything short would paint Cyprus as a second-class citizen.

Away from the boiling Cypriot crisis, Europe is rather quite on the data front this week, so the focus is on Canada and the United States, where there are several significant pieces of data due out. The critical data will be released between Tuesday and Thursday, as the Easter holiday weekend has US markets closed on Friday, and European markets closed on Friday and Monday.

Rate Hike Probabilities / Basis-Points Expectations

Data_from_Canada_US_in_Focus_as_European_Sentiment_Centers_Around_Cyprus_body_Picture_1.png, Data from Canada, US in Focus as European Sentiment Centers Around Cyprus See the DailyFX Calendar for a full list, timetable, and consensus forecasts for upcoming economic indicators.

03/26 Tuesday // 12:30 GMT: USD Durable Goods Orders (FEB)

Durable Goods Orders are the big ticket, long-lasting (lifespans of three years or more) items that consumers vie for – automobiles, home appliances, etc. Accordingly, the report is an important indicator about the health of the US consumer: the report indicates strength when disposable income has increased in the prior periods; and the report is weak when near-term economic uncertainty is prevalent. While the January reading was quite dour, this was due to the hike in the payroll tax resulting from the fiscal cliff/slope deal; a rebound in February is expected. Given other indexes of consumer consumption is improving, I am expected a strong print that should lead to US Dollar strength.

CONSENSUS: +3.9% m/m

PRIOR: -4.9% m/m (revised from -5.2% m/m)

The key pairs to watch are EURUSD and USDJPY.

03/26 Tuesday // 14:00 GMT: USD Consumer Confidence (MAR)

Consumer confidence in the United States is a key indicator, as there is a strong relationship between spending and sentiment: the more confident consumers are about their economic futures, the more likely that they are to step up spending. Considering that consumption accounts for approximately 72% of the headline GDP figure, any significant moves in the Conference Board’s Consumer Confidence index are likely to stoke speculation about the health of the US economy. Recent private sentiment readings have slipped, suggesting that the budget sequestration has had a negative impact. I believe the disappointment over the budget sequestration will be exhibited here, leading to potential short-term US Dollar weakness.

CONSENSUS: 67.5

PRIOR: 69.6

The key pairs to watch are EURUSD and USDJPY.

03/27 Wednesday // 12:30 GMT: CAD Consumer Price Index (FEB)

The Bank of Canada has recently called a rate hike “less imminent,” (February policy statement) citing the “muted outlook for inflation” (March policy statement). Accordingly, “the considerable monetary policy stimulus currently in place will likely remain appropriate for a period of time, after which some modest withdrawal will likely be required, consistent with achieving the 2 per cent inflation target” (March policy statement). It’s evident that BoC policymakers are focused in on price pressures, raising the specter of the Canadian Consumer Price Index to the most important data impacting the Canadian Dollar. In line with consensus, I am expecting a small beat here that could uplift the Loonie.

CONSENSUS: +0.7% m/m; +0.8% y/y

PRIOR: +0.1% m/m; +0.5% y/y

The key pairs to watch are CADJPY and USDCAD.

03/28 Thursday // 12:30 GMT: CAD Gross Domestic Product (JAN)

The Canadian economy has hit a small rough patch, experiencing meager growth of under one percent on a yearly-basis, despite substantially accommodative monetary policy remaining in place. Alongside the recent bout of soft inflation figures (3Q’12 to present), the moderation in growth is a main culprit in the BoC’s shift keeping accommodative stimulus in place for “a period of time.” The good news is that growth purportedly returned, after a small contraction in January. The print should fall in line with improved Canadian data from the previous day.

CONSENSUS: +0.1% m/m; +0.9% y/y

PRIOR: -0.2% m/m; +0.8% m/m

The key pairs to watch are EURCAD and USDCAD.

03/28 Thursday // 12:30 GMT: USD Gross Domestic Product (4Q T)

US defense spending plummeted by -22% annualized in the 4Q’12, leading to an initial -0.1% reading for GDP of the world’s largest economy. But strong positive revisions to consumption figures have pushed the secondary reading up to +0.1% annualized, and now, there is scope for an even bigger improvement at the third and final adjustment. With the US budget sequestration hitting in March 2013, a strong final revision to the 4Q’12 GDP figure could go a long way towards easing discouraged sentiment over the fiscal drag.

CONSENSUS: +0.5% annualized

PRIOR: +0.1% annualized (from -0.1% annualized)

The key pairs to watch are EURUSD and USDJPY.

--- Written by Christopher Vecchio, Currency Analyst

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

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Solar-powered sound at Bluesfest

Jessica Huxley   |  12:01am March 29, 2013

Troy Schmidt with Clocks and Dice guitarist Mikel Johnson and the solar-powered sound system. Pic: Scott Fletcher

SUNLIGHT will power performances in the the exclusive Lotus Palace VIP area at Bluesfest this weekend, thanks to a green Southern Cross University initiative.

The solar-powered sound system, nicknamed The Sunflower, has a generator with 1.2kw solar panels that open up like the petals of a flower and can be tilted to follow the sun throughout the day.

Contemporary music course co-ordinator Barry Hill said the launch of the environmentally friendly system at Bluesfest was a boon for the SCU Visual Arts technicians and students who designed it.

"Music festivals are not just about music these days; music festivals are a great place to show off new creative ideas," he said.

"Across the Bluesfest weekend, the students will be assisting SCU technicians operate the solar-powered sound system and will monitor the venue's power consumption and logging the solar energy data as part of a feasibility study into alternative energy use at music festivals.

"Designing and operating this sort of cutting-edge technology gives students the opportunity to extend their industry connections, which are vital to creating a pathway into the music industry once they graduate."

Technician Troy Schmidt said everything from the sound desk to the speakers, lights and audio visual effects would be powered by the Sunflower, which had the capacity to plug into a power cable if it there was limited sunlight on the day.

"The whole reason we took on the project is to show the way sustainable design principles can be promoted within the Australian music industry, as well as promoting best practice in alternative power generation and energy-efficient audio-visual technology," he said.

University band Clocks and Dice successfully trialled the system during O-week events at the new Bilinga campus as part of the Positively Powered Tour last month.

Bluesfest is held over the Easter weekend, from March 28 to April 1, at Byron Bay.


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Euro Relief Rally Falters, Cyprus Faces Negative Consequences

By David Song, Currency Analyst 25 March 2013 13:20 GMT Talking Points

Euro: Cyprus to Shrink Banks- Moody’s Warns of ‘Negative Consequences’ British Pound: U.K. Mortgage Demands Falter, Former Support Offers Resistance U.S. Dollar: Dallas Fed Manufacturing, Fed’s Dudley on Tap Euro: Cyprus to Shrink Banks- Moody’s Warns of ‘Negative Consequences’

The Euro climbed to an overnight high of 1.3047 as Cyprus agreed to shrink its banking sector in order to obtain EUR 10.0B in emergency funding, but the lingering threat of a bank-run may present another near-term shock for the single currency as the governments operating under the monetary union struggle to get their house in order.

As Cyprus still needs to raise the EUR 5.8B required to secure the EUR 10.0B bailout, further development surrounding the rescue package may prop up the Euro over the next 24-hours of trading, and the relief rally may spark another run at the 38.2% Fibonacci retracement from the 2009 high to the 2010 low around 1.3120 as European policy makers increase their effort to avert a euro-area exit.

However, Moody’s Investor Services warned that the banking crisis in Cyprus ‘will have profound long-term negative consequences for the sovereign’ and went onto say that the region ‘will remain at risk of default and exit from the euro area for a prolonged period’ as the periphery country remains mired in a recession.

As the ongoing turmoil in the financial system diminishes the longer-term outlook for the euro-area, the weakening outlook for growth and inflation may continue to dampen the appeal of the single currency, and we may see the periphery countries become increasingly reliant on external support as European policy makers maintain a reactionary approach in addressing the risks surrounding the region.

In turn, the European Central Bank (ECB) may have little choice but to further embark on its easing cycle throughout 2013, and the EURUSD may struggle to maintain the rebound from 1.2842 as the central bank remains poised to push the benchmark interest rate to a fresh record-low.

British Pound: U.K. Mortgage Demands Falter, Former Support Offers Resistance

The British Pound failed to maintain the advance from the previous week, with the GBPUSD falling back below the 1.5200 figure, and the sterling may continue to consolidate in the coming days as the pair appears to be carving a near-term top just ahead of former support- the 50.0% Fib from the 2009 low to high around 1.5260.

Indeed, the British Pound struggled to hold its ground as a report by the British Bankers’ Association showed loans for home purchases increased 30,506 in February amid forecasts for a 33,500 print, and the sterling may struggle to maintain the rebound from the yearly low (1.4830) should the economic docket continue to a risk for a triple-dip recession in the U.K.

In turn, we may see the GBPUSD work its way back towards the 61.8% retracement around 1.4840-50, and the pair may face range-bound prices ahead of the next Bank of England (BoE) interest rate decision on April 4 as market participants weigh the outlook for monetary policy.

U.S. Dollar: Dallas Fed Manufacturing, Fed’s Dudley on Tap

The greenback firmed up on Monday, with the Dow Jones-FXCM U.S. Dollar Index (Ticker: USDOLLAR) bouncing back from a low of 10,413, and the reserve currency may continue to gain ground during the North American trade as manufacturing activity in the world’s largest economy is expected to pick up in March.

Indeed, the Dallas Fed Manufacturing index is expected to increase to 3.7 from 2.2 in February, and we may see a growing number of Fed officials adopt a more upbeat tone for the world’s largest economy as the recovery gradually gathers pace. In turn, we may see New York Fed President William Dudley adopt an improved outlook for growth and inflation, and the FOMC may start to discuss a tentative exit strategy over the coming months as the region gets on a more sustainable path.

FX Upcoming

Dallas Fed Manufacturing Activity (MAR)

Fed's William Dudley to Speak on U.S. Economy

Fed's Bernanke, BoE's King, IMF's Blanchard Speak on Crisis

Trade Balance (New Zealand dollars) (FEB)

Balance (YTD) (New Zealand dollars) (FEB)

Exports (New Zealand dollars) (FEB)

Imports (New Zealand dollars) (FEB)

--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong

To be added to David's e-mail distribution list, send an e-mail with subject line "Distribution List" to dsong@dailyfx.com.

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25 March 2013 13:20 GMT


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