GBPCAD trend & momentum 27-Jan-2015

GBP has been stronger against some major currencies, such as AUD, NZD or CAD but not USD or JPY.
 GBPCAD, the trend and momentum indicates trend reversal for a coming week while it has been upward trend for the last week. In those days, FX can be driven by unexpected events, but GBP and CAD seem be less volatile relatively for coming days.

 See upcoming events here.

EURNZD trend & momentum 23-Jan-2015

EURNZD has been volatile up and down, ranging between 1.48 - 1.54, and it stays around 1.505 at the moment.

Quantitative Easing has been announced by ECB yesterday, and rest of political risk factor is Greek election in short term.
While EUR has been weaken against most of currencies remarkably after the QE announcement, NZD has not been relatively stronger than other currencies. Market consensus in New Zealand implies that NZ reserve bank is expected to cut interest rate in this year and the rate will be reviewed in next week. NZD has been weaken against other currencies, including EUR early this week.

Slower than expected inflation data earlier this week stoked speculation New Zealand's Reserve Bank may lower interest rates this year, and traders are pricing in 9 basis points of cuts over the coming 12 months, according to the Overnight Index Swap curve. Governor Graeme Wheeler will review the 3.5 percent official cash rate next week, and is expected to keep it on hold.

Ref. NZ dollar heads for 3.5% weekly drop as US economy shines

Technical side, trend and momentum in EURNZD indicates it is expected downward trend toward middle of next week. Although market consensus probably have taken into account Greek election on Sunday, Syriza leading, unexpected result or policy would bring volatility into the ma
rket. NZ reserve bank is expected not to cut interest rate in next week, despite their probably cutting in this year. If the rate is unexpectedly cut, NZD will be weaken and EURNZD will go up.

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Policy driven market 22-Jan-2015

Last week, SNB announcement about Franc cap removal brought the hugest impact in currency market. However, certain level of surprise have seen in the market for this week.

Canadian Dollar [CAD]
Bank of Canada unexpectedly cut the overnight rate 25bp from 1.0% to 0.75%. CAD has been declined against most of major currencies after the announcement. According to the announcement, plummeting oil price weigh on Canadian economy.

GBPCAD has stayed around 1.82 - 1.83 earlier this week, and now it is around 1.86 though it is less than the peek in this week.

Ref. Bank of Canada cuts key rate to 0.75% as oil plunge takes toll on economy


Danish Krone [DKK]
Danish Krone has been weaken due to the consensus that DKK peg to EUR could be abandoned for ECB announcement. Danish Central Bank responded to ECB announcement, cutting interest rate. EURDKK stays around 7.44, which was 7.43 at the beginning of this week.

Ref. REFILE-UPDATE 2-Danish c. bank intervenes to weaken crown, cools rate cut talk


Euro [EUR]
It was not surprised that ECB announced that they will bring additional QE. However, ECB indicated the monthly purchase for 60 billion euro more than the market consensus 50 billion euro. EUR has been down after the announcement against major currencies.

Ref. 
GLOBAL MARKETS- Shares rise, euro slides as markets cheer ECB QE plan
UPDATE 4-Oil prices above $49 ahead of ECB bond buying move


Sometimes, the surprise by political matters makes financial market more volatile, but it might have been more than expected since last week. Greek election is still ahead, and it may bring further volatility into the market.

While many market events have been driven from European market, unexpected events could come from Asian Pacific market.
Australian dollar is considered as higher than RBA prefers, which the governor of RBA mentioned last month. (RBA boss Glenn Stevens says 75 US cents is ideal level for Aussie dollar)
If Chinese market indicates its slow down clearly, Chinese interest rate could be cut further and Australian economy would be slow down due to their dependence on Chinese economy.

EURGBP trend & momentum 20-Jan-2015

EUR has been declined against most major currencies for last a few weeks, due to the planned ECB decision.

The market consensus seems to imply ECB going forward to massive QE for multi billion Euros but the timing could be delayed. Even if ECB decision is taken as planned, downside of EUR could be limited.However, Greek election is being held soon, uncertainty at EUR still remains. If Greek repayment schedule would be mitigated, credit on EUR can be degraded as seen the debt partially defaulted.

EURGBP is one of the pairs under those risk, and the signal of trend and momentum indicates upward trend in a coming week.

USDCAD trend & momentum 19-Jan-2015

USDCAD stays at around 1.197, which has gone up for last two weeks.Now the trend and momentum indicates USDCAD is expected slightly downward trend for a coming week.

Some important events are planned in this week though they are European issues, such as ECB decision or Greek election.
 Market consensus will be more conservative in this period, and conservative currencies, such as JPY, might be stronger in this period.

Cross Currency Swap 18-Jan-2015

Cross Currency Swap (CCS, X Ccy Swap) is a financial instrument. It must be familiar with interest rate traders, and some of you learned in financial engineering course at the university.


This kind of swap is dealt for risk hedging purpose when banks issue their structured bond. One of the typical cases is that an European bank want be funded by Asian investors. Asian investors may invest in their local currency while the European bank want EUR or own currency. In this case, the European bank offers products in Asian local currency and hedges in cross currency swap, EUR vs JPY for example. The swap counter party could be investment banks or market brokers.

Cross currency swap provide some sense of currency exchange. Reminding CHF jump last week, traders who had USD/CHF cross currency swap must have had their Marked to Market jumped. The figure describes an example of cross currency swap in USD vs CHF. In this figure, Entity B pays CHF to Entity A up to the maturity against USD.

Size of the deal by investment banks is huge as their customers include the biggest companies in the world, and if some of them tend to have the positions like Entity B, their Marked to Market is disastrously degraded. Some of loss have not been realized yet, the positions still being held. The impact may be gradually appeared in coming months, probably capital requirement for the banks could be burden as some of them cover their losses.

Swiss Franc massive jump 17-Jan-2015

Last Thursday 15-Jan, CHF has soared in the largest scale as soon as Swiss National Bank (SNB) revealed they abandon currency ceiling on CHF. It was big surprise as seen in the market though it had been known that SNB was one of the biggest buyers for Euro bond.


Who won? Who lost?
 This is general perspective. Obviously, anybody who has asset in CHF got benefit and anybody who has debt in CHF will face heavier repayment. Export companies will have less revenues in CHF. Import companies will have more revenues in CHF unless they cut goods price. Or they could cut the price, and it would push the economy into deflation.


FX brokers
 However, things are more complicated for market players. This CHF jumping laid FX brokers in financial difficulty as they cover customers' loss. Alpari UK had entered insolvency as customer's loss exceeded their balance on the account, other brokers are looking for financial aid.

(Reuters) - The Swiss National Bank's abrupt move on Thursday to abandon its cap on the Swiss franc led to massive losses, and at least one insolvency, among retail foreign exchange brokers and trading houses across the globe.

Alpari UK

Online foreign exchange Broker Alpari UK said on Friday it had entered into insolvency after clients sustained losses on the Swiss franc. It said volatility and lack of liquidity had "resulted in the majority of clients sustaining losses which exceeded their account equity".

(http://www.reuters.com/article/2015/01/17/us-swiss-franc-brokers-factbox-idUSKBN0KP1EQ20150117)

USDCHF last 3 months

FX brokers provide spread-betting with leverage on the customers' account. The customers could enjoy profit in bigger scale by smaller deposit. Downside, they could make loss on their deposit and the loss may exceed their deposit due to the leverage. However, most of regulated brokers exercise margin-call which force positions closed before exceeding break-even point to avoid negative balance.
Basically, FX brokers hedge customer's position. When the position is closed by margin-call, it has to be traded at break-even point. However, CHF has jumped massive scale in few seconds on last Thursday, and the brokers fail to close positions at break-even point. Customers who had short positions in CHF must have gotten huge loss from the jump, and some of them were forced into margin-call at far way from break-even point.

SSMI in CHF and USD last 3 months

Stock market
Stock price has gone down after SNB made the announcement, but it could said the market is not so gloomy despite the price down in large scale. Looking at the figure, it describes SSMI stock index for last 3 months.
You see SSMI in USD did not go down after CHF jumped while SSMI in CHF massively went down. It implies objective value of the stock index has not gone down in USD.
It will probably take more time that the impact is realized in the real economy rather than immediately.


By the end of this month, the market is expected highly volatile as uncertain losses from CHF trade could be revealed in big banks, ECB makes decision of additional QE and Greek election where Syriza currently has the largest support rate.

Australian dollar attractive now? 12-Jan-2015

Australian interest rate, 2.5% in policy rate, is the highest rate in developed economic zones whose sovereign bond holds top credit rating, AAA by S&P for example.

Some of the investors are likely looking Australian bond as the attractive product in the market. (Australian bonds yields touch recordlowin investor flight to safety)
 Australian dollar has declined against some major currencies, such as USD or GBP for last 2 - 3 years, and the trend reversal might be expected.

Source: Government of Western Australia
Department of Mines and Petroleum

The most important risk factor to keep in mind is China risk. Australian economy highly relies on Chinese economy, particularly, in Australian mining industry. China is the top importer of major commodities from Australia, such as Iron ore, Gold or Heavy mineral sands.

Australian mining sector contribute for around 20% of GDP, and the top importer from the sector is China. When Chinese economy slow down and their demand for commodities is shrink, Australian economy will decline due to the high dependence on Chinese economy.

Despite those risk factors, uncertainty in global economy, particularly European economy would be riskier for the investors.

Ref. Government of Western Australia Department of Mines and Petroleum

EURCAD trend & momentum 7-Jan-2015

EURCAD, the trend and momentum indicates it is expected to be upward trend, though the short term momentum is still indicating  downward.
 Two main risk factors exist on EUR, additional quantitative easing by ECB and Greece exit from Eurozone. EURCAD could be sensitive to those factors.

EURAUD trend & momentum 5-Jan-2015

A new year's market has started with strong USD. AUD has been bullish, too, against other major currencies such as GBP, EUR or JPY by the end of 2014.
 The trend and momentum indicates EURAUD  is expected to be upward for a coming week, possibly by trend reversal against last Dec.
AUD is considered sensitive to oil prices, and it could easily jump due to the oil price jumping.

Technical issue during Boxing day

Around the Boxing day, some of app users may have experienced technical issue that they could not see the trend & momentum indicators in app.

This issue has been sorted out, and you can use app as usual now.