(As written for My Paper on 27 November 2012. Click here to enlarge)
Traders sometimes utilise currency correlations to make trading decisions. If two currency pairs are said to be highly positively correlated, it means that if one pair heads up, there’s a strong possibility that the other pair heads higher as well. Conversely, if two currency pairs are said to be highly negatively correlated, it means that if one pair heads up, there’s a strong possibility for the other pair to head down.
Over the past one year, the correlation between the EUR/USD and USD/JPY currency pairs have had no seemingly predictable pattern – achieving a score of 0.22. The result means they are positively correlated, but only slightly. However, here’s an interesting phenomenon. Over the last two weeks, the correlation between the two pairs have hit as high as 0.80. This means if EUR/USD heads up, there’s an 80 percent chance that USD/JPY heads up as well.
Indeed, over the past two weeks, both EUR/USD and USD/JPY have seen a strong uptrend. Both pairs have cleared over 300 pips, with EUR/USD hitting a one month high of 1.2990 and USD/JPY hitting a seven month high of 82.83.
(As written for My Paper on 20 November 2012. Click here to enlarge)
According to a report early this week by the Paris-based Organization for Economic Cooperation and Development (OECD), fiscal deficits in most Southeast Asian nations will narrow through 2017, leading to an improvement in public debt levels as a percentage of gross domestic product.
This is because the sovereign debt crisis in Europe and a slowdown in advanced economies have had a “limited” impact on Southeast Asian nations with most of the effect experienced through trade. The upbeat tone by the OECD is certainly endorsed by US President Barack Obama, who is currently on a leg to visit three South East Asian nations.
Obama started his trip with a visit to Thailand before heading to Myanmar to speak to President Thein Sein and democracy activist Aung San Suu Kyi. His trip culminates in the capital of Cambodia, Phnom Penh, where the 21st East Asia Summit will take place.
(As written for My Paper on 6 November 2012. Click here to enlarge)
Yesterday, the EUR/USD lost value against 16 of its major counterparts and fell to a one month low as Greek lawmakers prepared to vote this week on measures required to receive aid. Greek Prime Minister Antonis Samaras has warned that the strict wage and pension cuts in the latest austerity package will be the last and that the Greek people won’t tolerate any more.
Although important, the first parliamentary vote in Athens this week will not be centre-stage. Instead, traders will focus on the two biggest superpowers on earth: USA and China.
(As written for My Paper on 30 October 2012. Click here to enlarge)
Although the Non-Farm Payrolls (NFP) from the US is arguably the most watched news by traders worldwide, this Friday’s release will draw even more attention. This is because it is the final jobs report before America goes to the Presidential polls. A good number could grant President Obama a second term. A bad number could usher in America’s 45th President in the form of Republican Mitt Romney.
Economists are predicting a number of 120K, which isn’t too far off from last month’s figure of 114K. The prognosis looks good – especially since America’s Gross Domestic Product (GDP) for Q3 came in at 2 percent last week, up from 1.3 percent in Q2. The result topped economists’ expectation for a 1.9 percent growth.
In the report, consumer spending – which has the biggest impact on GDP, increased to 2 percent from 1.5 percent, while government spending jumped 3.7 percent, the biggest increase since mid-2009. Meanwhile, investment in housing surged 14.4 percent. However, although GDP numbers exceeded expectations, risk appetite wasn’t in full swing in the currency markets. This was due to disappointments in corporate earnings; notably from behemoths like Apple and Amazon, which reported dismal figures.
(As written for My Paper on 23 October 2012. Click here to enlarge)
Late last week, China announced a 7.4 percent growth for its GDP in the third quarter (Q3). According to the National Bureau of Statistics (NBS), the figure was the lowest in more than three years and slower from 7.6 percent in the second quarter and 8.1 percent in the first quarter of this year.
However, one of the bright spots in the announcement came in the form of China’s fixed asset investment, which rose 20.5 percent year-on-year to 25.69 trillion yuan in the first nine months. Early this week, the Shanghai Composite Index dropped to 2,118 – shedding 0.5 percent after rising 1.1 percent last week.
The rise last week, which was its fourth week of gains and the longest winning stretch since April, was due to Premier Wen Jiabao’s comments that the economy has started to stabilise as data including industrial production and retail sales exceeded expectations.