The Musings of Faith

Tag Results: usd

The winning design of The Dollar ReDe$ign Project. Beautiful! And just as in all successful design there is deliberate rational for every design decision made — from the vertical orientation to the imagery for each bank note.

Why these designs?

We wanted a concept behind the imagery so that the image directly relates to the value of each note. We also wanted the notes to be educational, not only for those living in America but visitors as well. Each note uses a black and white image depicting a particular aspect of American history and culture. They are then overprinted with informational graphics or a pattern relating to that particular image.

$1 – The first African American president

$5 – The five biggest native American tribes

$10 – The bill of rights, the first 10 amendments to the US Constitution

$20 – 20th Century America

$50 – The 50 States of America

$100 – The first 100 days of President Franklin Roosevelt. During this time he led the congress to pass more important legislations than most presidents pass in their entire term. This helped fight the economic crises at the time of the great depression. Ever since, every new president has been judged on how well they have done during the first 100 days of their term.

Fundamental Analysis: U.S. Retail Sales

Traders of the US anticipate the publication of the Retail Sales this Friday. The Retail Sales is a monthly measurement of all goods sold by retailers based on a sampling of retail stores of different types and sizes in the US. It is an important indicator of consumer spending and also correlated to consumer confidence and considered as a pace indicator of the US economy.

A higher than expected reading should be taken as positive/bullish for the USD, while a lower than expected reading should be taken as negative/bearish for the USD.

Analysts predict a reading of -0.10% for US core retail sales.

“Finally, it is well to remember that we are still in uncharted waters. We do not have any recent experience with financial disruptions of the breadth, persistence, and consequences of those that we have experienced over the past several years. And we have no experience with most of the sorts of actions the Federal Reserve has taken to counter the shock… We will need to be flexible and adjust as we gain experience.”

Now if the central bank of the largest economy in the world can just chalk it up to experience, so can I. Don’t be afraid to do anything.

(via FRB: Speech—Kohn, Monetary Policy in the Crisis: Past, Present, and Future—January 3, 2010)

“It’s probably a win for China on several fronts: They get to ditch the dollar without making a big geopolitical stink. China gets to play the global good guy for once — while also purchasing some political influence over the IMF.”

China’s $50bn IMF deal puts ‘redback’ on the world stage - Times Online

A really great read that outlines China’s advancement as a world superpower by stealthly assaulting the international monetary system. The above quote is from the comments. I thought it summarized the article quite nicely.

Ride The Cable Up or Down?

Cable is at a pretty precarious price level right now. Still stuck within a sideways channel that has lasted since June 1, 2009, price has finally managed to not only break the important large quarter point and major half point at 1.6500 but managing to stay above this level. This is seemingly bullish behavior BUT could thus actually be a shorting opportunity?

Technicals

The top of the channel is roughly the large quarter point (LQP) at 1.6500. So anything above that level runs into thick resistance at 1.6554, 1.6581, 1.6600, and then 1.6750. The case is therefore very high that price will fall once we reach the top of the channel until the fundamental landscape changes.

Daily chart on GBP/USD

Looking at The Quarters Theory, once completing the quarter to 1.6500, we expect price to move to the hesitation zone at 1.6575 in order for price action to remain bullish. We never got beyond 1.6554 before exhaustion hit and price fell below 1.6500. Now that we are below the LQP, we have look for price to move to the next LQP below 1.6500 at 1.6250. The first clue of bear strength is if price moves to and beyond the hesitation zone at 1.6425. If it does and it stays out, then look for price to move to at least the halfway thru point at 1.6375 on its way to 1.6250.

Now let’s look at possible support levels that we may have to deal with on our way to 1.6250. There is minor support at 1.6380 and 1.6320 levels with 1.6260/50 being major support. As a QT trader, this certainly works for my trading strategy.

Now the bottom of the channel lies at 1.6000. Whether or not price drops this far will depend on what price does at 1.6250. And it will be the fundamental landscape that influences price action at 1.6250.

Fundamentals

This is a big week for the GBP. BoE minutes are released Wednesday, retail sales on Thursday, and GDP on Friday. The US has earnings reports from different companies all week along with Bernanke’s testimony, house prices, and consumer confidence.
Equities have rallied the past month which has kept cable bid. However, despite the rallies, cable has been capped by 1.6500 which, in my opinion, is bearish.

Bernanke’s testimony strengthened the dollar as he emphasized risks to economic recovery. He also eluded to the fact that The Fed is looking to end QE but it is not going to do so until the labor markets show that the economic recovery is actually taking firm hold.

Currency markets will look at the BoE’s minutes for more clues to QE. Any hints for an end to QE as they did in their statement several weeks ago will put a bid under GBP/USD. Retail sales and GDP will paint a picture of the true health of the UK economy heading into the second half of the year. Also weighing on the pound is a Daily Telegraph article which states that both Barclays and RBS (British banks) may need more funding, as well as comments from BoE deputy governor Bean that there is not much sign of a recovery taking hold in the UK and that the central bank would not like to see the GBP at levels seen in recent years. I’m sure he’s referring to the 2.11 GBPU/USD exchange rate that we saw back in 2007. Verbal intervention is an interesting tactic coming out of the BoE that should be noted.

Game Plan

The range is playing out but right now, price has stalled on 1.6400 price level as the market waits for the release of the BoE minutes.

Hourly chart on GBP/USD

In addition, Apple released a better than expected earnings report after the bell. If the BoE minutes deliver in line with statement as expected and hints to an end of QE then we could see the top of the range again and another attempt to move beyond the 1.6500 LQP towards 1.6750 LQP. HOWEVER, UK retail sales and GDP will probably disappoint though I think that we could get a surprise in both those numbers as companies have reported better than expected earnings so far this month.

I will remain on the sidelines until the BoE minutes are released. Realizing that by then, the market may already have taken the GBP/USD to 1.6250, I will see how price behaves and enter the market appropriately. Until then, I will look to scalp 25 pips now short. I need to practice scalping. This choppy market is more appropriate for the style and I need to get better at it.

I went long on the $GBPUSD at 1.6220 as the pair retraced to 1.6180 after its quick burst from 1.6137 to a high of 1.6244 on the back of UK Hometrak numbers released that showed a smaller-than-expected drop in home sales and steady home prices. This is a busy week out of the UK and the good housing numbers may just signal a positive week for the GBP. Major spotlight events this week for cable include BoE rate decision on Thursday and US non-farm payrolls on Friday.

Technically, the pair has been rallying since the pair was able to break and then stay above 1.5000 some weeks ago. I count 3 waves in any trend as taught by @allthingsforex and am counting our entrance into a 2nd bullish wave. We had a mild correction last week when price made a low of 1.5852 but never completed the quarter to 1.5750 — a bullish development. Now price is even beyond 1.6000 whole number completing the quarter to 1.6250. This morning’s retracement held at 61.8% retracement marked at 1.6178 by 2 pips and now as I write up this analysis, price is breaking out making a new high at 1.6290. Price is now above 1.6250 moving into the hesitation zone above the 1.6250 quarter point. The next area to watch is the halfway thru point at 1.6325. It will also be interesting to see what the pair does when NY opens in 5 hours.

I remain bulllish cable. 1.6500 is my ultimate target with my limit set at 1.6420. Not too far above that is 1.6672 the high back in October 2008.

UPDATE (9:56AM PDT): My limit was hit as the pair made highs during the European session. The highs of day were made [actually are still being made as I write] during the NY session as traders digested the positive news coming out the UK including the stronger-than-expected UK manufacturing PMI numbers. We also got releases out of the US that suggest that the US consumer is saving more than its spending — which is great but not for a US economy that is supported by consumer spending. ISM came in stronger-than-expected but $GM news is trumping any good news out that may have contributed to a USD rally. Cable has posted fresh highs at 1.6475 — close enough to completing the quarter at 1.6500.

UK news tomorrow includes construction PMI, mortgage approvals, M4 money supply, and consumer confidence. US news includes pending home sales and consumer confidence. Calculating the fibonacci levels of today’s move from 1.6137 to 1.6475, I find the 38.2% fibo retracement level is at 1.6345, 50% is at 1.6308, and 61.8% lies at 1.6266. Now I don’t think that price will retrace that much because of the fundamental landscape and the strong price action today. But it is necessary to note these levels.

If price breaks above and stays above 1.6500 after expected retracement, then the up trend remains intact and I plan on riding this wave as long as it lasts being mindful of the BoE on Thursday. They may put out a statement that could be considered dovish as they did last month. If so, then a long anticipated correction in the $GBPUSD may finally materialize.

“The naira traded at 160 per dollar yesterday, compared with about 182 on May 22 [2009], when the central bank ban was lifted… The black-market rate’s appreciation brings it closer into line with the official interbank market, where the naira is trading at 148 per dollar…”

Nigerian Naira Advances on Black Market After Controls Lifted - Bloomberg.com

“Despite recent rebound in GBP against the dollar and the euro, we continue believe that the pound remains undervalued.”

GBP Remains Undervalued After Rebounding By More Than 10% (via @OFXT)

“In the short run, China has no option but to accumulate more reserves and dollar reserves. Why? Because if they stop doing that, their currency would appreciate sharply while their exports are plunging.”

Economist Nouriel Roubini: ‘I Am Dr. Realist’ | Newsweek Business | Newsweek.com

Strategy Update

At 3:40AM PDT, I tweeted bullish sentiment. Well, it is confirmed and with price now at 1.4320. When I wrote up my game plan for today, I was mixed the market sentiment. Price action had no obvious clues then.

When price creeped back into the hesitiation zone below 1.4250, I knew the GBPU/USD was bullish. At the current levels, price has not only completed the quarter to 1.4250, made a new high at 1.4340 (as of this writing), and buoys around the hesitation zone above 1.4250, I am convinced that price is on its way towards 1.45 (rather than 1.40). I have enough clues to make a sounder decision with a mind still on the event risk posed by FOMC.

I’m in the market long. Duh.