Mike Kulej

There is still no word from Athens about the austerity vote. Perhaps it will not be a “done deal” as easily as everybody hoped for. Following yesterday’s encouraging news from France, about French banks’ willingness to rollover the loans, additional conditions emerged today. This proposed arrangement will only take place if rating companies do not cut Greece’s rating any lower (is it even possible?), or declare the debt as “defaulted” when the restructure takes place. So, now there will be a lot of pressure on the rating companies to leave Greece alone. Myself, I am trading only very short-term strategies for Wednesday, don not want to be caught in too many trades when it eventually happens. More than anything, though, I am watching the developments. Mike K.

Currencies are bound to remain sensitive to developments in Europe, at least early in the week or until something bigger grabs the headlines. Again, focus is on Greece. Newly appointed finance minister, Evangelos Venizelos is due to attend talks with other European Union finance ministers in Luxembourg for a two-day meeting on Europe’s economic outlook. It is almost guaranteed that the meeting will produce some kind of agreement; however, the devil will be in details. This will create uncertain trading conditions and currencies are likely to respond in an unpredictable manner. On a related note, over the weekend reports emerged about UK banks pulling out from the Eurozone interbank lending market. Large institutions like Barclay and Standard Chartered are cutting their exposure to the PIIGS countries. To date these banks have pulled hundreds of millions, perhaps even several billions of Pounds from the continent. If more banks follow, this may severely restrict liquidity when it is needed most – the next time bad...

Those of you who read these pages (thank you!) must have noticed that most of the charts I post are generated using the Meta Trader 4 trading platform. While I have several trading accounts with different brokers, the core of trades I find suitable for the blog are executed with the broker offering MT 4. This is the most widely used charting software in the Forex industry, one could even call it a “standard”, so most readers are familiar with how to use it. For all its flexibility, the platform is not the simplest to use, especially for beginners. The manual accessible through the “Help” tab is rather cumbersome to navigate and is located outside the platform – user must open another window and go through often-difficult process of locating the topic of interest to find the answer. Most brokers offer own manuals, which greatly simplify this process. The problem is that those instructions are typically located on the provider’s main website, not...

Interesting trend currencies have been setting lately – volatile Fridays are followed by very quiet Mondays. Markets seem to be slow coming back to life after weekends and today was no exception. Very small moves in most currency pairs, prices formed tight short-term congestion zones. Under most circumstances, one could expect previous trends, from last week, to continue, for a day or two. However, central banks may have something to say about it. There are 4 interest rates meetings by central banks this weeks, starting with the RBA in just a few hours. Later on in the week it will be time for the RBNZ, followed by the Bank of England and the ECB. No changes from current levels are expected, but reactions after the announcements are often surprising. Also, they tend to set the tone for the rest of the day, both in direction and volatility. My guess is that major market participants expect a busy week ahead and were cautious...

The Canadian Dollar has been the weakest one of the commodity currencies for some time. It also lost ground against the USD, which rallied to above 0.9800 for the first time since late March. With this in a background, today’s interest rate decision by the Bank of Canada was highly anticipated. While the market participants did not expect a hike, yet, everybody wanted to hear what the central bank is going to say about possible future actions, especially since economic indicators from Canada have been mixed and hard to interpret. Turned out that the forecast was correct – the BoC left interest rates unchanged at 1%. However, the Governor Mark Carney said that the economic recovery was proceeding as expected, and promised a raise “eventually”. That is a very vague term, revealing, well, nothing, but markets took it to heart and the Canadian Dollar rallied. Now we need to see a continuation tomorrow, otherwise today’s action is only a correction within...

Fitch Rating Services cut its outlook on Japan’s sovereign debt rating from stable to negative. In doing so the company followed in steps of the S&P. The difference is that Fitch only issued a warning, while the S&P actually cut its rating on Japan’s debt by one notch to AA- from AA. In spite of Fitch’s fine expression that the country’s “credit worthiness is under negative pressure from rising government indebtedness”, an outlook cut is not much in real steps and markets barely responded. In fact, by the end of the day, the Yen was significantly stronger than the Dollar at 80.77. Perhaps the USD was not the best measuring yardstick, since the Dollar lost a lot of ground. It dropped to yet another all time low against the Swiss Franc, at 84.61 in a sharp move during the last hour of trading. However, most of the daily moves happened very early on, during the Asian session. The AUD-USD rallied over 100...

In spite of bold predictions the world did not end on Saturday. Not much of a surprise – the prognosticator has a history of false predictions, which is not a bad thing. What is harder to understand, however, is the time given to this nonsense by the mainstream media. To one degree or another, all main outlets devoted either commentaries or interviews to cover this “event”. When a tabloid quality “story” somehow manages to get the spotlight, it only gives it more legitimacy, opening doors for more fanatics to come forward with similar predictions. I was perfectly willing to make a wager against it. After all, it was one of those true can’t lose situations which come along very infrequently. In the event of these predictions materializing, a losing bet would not have mattered anyways. Unfortunately, I could not find anybody willing to underwrite it. Even the “true believers” proved to be of little faith and were not in a hurry to put money...

It certainly has not surprised anyone, but on Monday the United States reached its $14.3 trillion limit on federal borrowing. That means, that legally, the government cannot borrow any more money and should stop functioning. Of course, that will not happen. Our enterprising Treasury Secretary Timothy Geithner announced that with “unexpected revenue and bookkeeping maneuvers” (creative accounting) he can keep the government running for another 11 weeks. After that, the game is up, although it is virtually certain that congress will agree to raise the debt ceiling. Also on Monday, the Treasury released figures detailing foreign holdings in treasuries for March. It seems that global appetite for these securities diminished, with China trimming exposure to Dollar.  Chinese holdings dropped by about $9 billion from February, and not, that is not the wholesale dumping of the USD that some people are predicting. But what Treasury statistics do not show,  is that while Chinese holdings of treasuries remained relatively stable, they have been getting smaller in terms of percentages...

Even more problems for Greece – just couple of days after rumors of that country leaving the Euro began to circulate, one of the major rating agencies decided to downgrade Greek sovereign debt. Again. Just in March Standard & Poor’s lowered the rating to a “speculative” (junk) level and now assigned a “highly speculative” (super junk?) rating. This move came European politicians publicly commented that the current bailout might not be enough and additional funds will be needed. As always, the Greek finance ministry said the latest downgrade – especially so soon after the previous one – was “not justified”. Possibly, but according to the S&P, increasing the amount of the bailout package and extending maturities on the debt, amounts to a “selective default”. The agency claim that sooner of later private creditors will be forced to make similar accommodations, including lowered interest rates. That part of restructuring is believed to inflict massive losses on those who currently hold Greek debt. We shall...

As if there was not enough mess in Washington, with the latest budget battles, plus all the usual wrangling, our capital will host one more event on Friday. The Group of 20 finance ministers meet there for a conference to discuss the latest global developments. It will be interesting to see what they have to say about “progress” achieved since the meeting in Pittsburgh in 2009, when they agreed to “rebalancing of global demand”. That means that countries like China were supposed to boost consumer spending and import more goods, while the USA was expected to reduce its trade deficit by exporting more. We know that changes in those areas have been at best symbolic, if any, but it will be interesting to read the official version. The conference might produce announcements throughout the day which could an impact on currencies, although it should not be anything major. As a matter of fact Asian trading session, just getting under way, could me more eventful....