Newsletter October 6th
Colt FX newsletter Monday October 6th 2008
In this week’s issue:
Forex Review, September 29th to October 3rd
Calendar and Outlook, October 6th to 10th
Sammy’s calls: new series
Live trading session: Wednesday 8th October
Rumus2 Live support sessions
Forex Club Platinum Package
Forex Review September 29th to October 3rd
US bail-out passed as the European banking sector goes critical.
As US politicos spent the week getting their act together, various European governments were forced to intervene to shore up their troubled banking system and the US dollar saw its biggest ever weekly advance against the euro. It was a bad week for the European currency across the board, and the euro also saw its biggest weekly fall against the yen and it even lost ground to its troubled neighbor, the British pound.
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Chart 1 EUR (hourly)
The week opened in Europe with the euro (chart 1) falling to 1.43 at the news that the Belgian, Dutch and Luxemburg governments were bailing out Fortis to the tune of €11.2 B. There were further developments in this story later in the week when the Dutch government announced it was nationalizing the Dutch part of the bank. Then, when Congress shocked the world by rejecting the $700B bail-out plan, the euro rose to test 1.45. However, growing concerns about the European banking sector and Monday’s plummeting oil price ensured that the euro would fall below 1.44 once more before the day was out. The euro’s woes continued and it fell more against the dollar on Tuesday than it had done during any day since its launch. Tuesday also saw more banking grief for the Europeans as the French and Belgians stepped in with a €6.2B lifeline to Dexia, the world’s biggest lender to local governments. The euro found support at 1.40 on Tuesday afternoon, and commenced to rise. Wednesday saw a ray of hope for the euro in the form of better than expected German Retail sales. However, it was short-lived and despite a very weak US manufacturing PMI, better than expected US ADP jobs numbers and a growing confidence that the US bail-out plan would be passed, saw the greenback pushing the euro down once more. The US Senate’s vote to pass the bail-out plan brought implementation one step closer and saw EUR/USD finally break 1.40. It was downhill from there to the ECB’s interest rate announcement. The central bank held at 4.25% as widely expected, but Jean-Claude Trichet’s follow-up press conference opened the door for an ECB cut sometime fairly soon and the euro plummeted, testing 1.3750. Friday’s Non-Farm payrolls came in at -159,000, the worse in more than 5 years and much worse than expected. However, the dollar gained ground against the euro on the release of this news because it was in fact better than some sectors of the market had feared, it would also serve to ratchet up pressure on Congress to pass the bail-out and finally it was mitigated by the unemployment rate holding steady at 6.1%. There were no surprises this time round when Congress reconsidered and voted 263-171 to pass the US rescue plan. The euro gained a little to test 1.39 as there are real concerns that the plan will devalue the dollar. However, there is little happening in Europe to inspire confidence at the moment and EIUR/USD closed the week at 1.3770.
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Chart 2: GBP (hourly)
Sterling (chart 2) opened the week falling against the greenback. The weekend had seen breaking news that the British government was going to nationalize troubled UK bank, Bradford and Bingley, a major player in providing mortgages to the buy-to-let sector. This led to concern that other U.K. financial institutions would also fail. As the week progressed, disappointing UK PMI numbers across the board and more bad news out of the UK property sector increased speculation that the Bank of England would have to cut interest rates at its October 9th meeting.
Outlook and Calendar October 6th to 10th
Here are the highlights of this week’s economic calendar (chart 3). For an extensive list of the week’s economic releases and events see our economic calendar.
The economic calendar is on the light side this week. For the US we have FOMC meeting minutes on Tuesday so we’ll be able to read the discussion behind the Fed’s decision to hold on September 16th. Wednesday’s Pending Home Sales will give us the chance to see signs of a bottom in the housing market. On Friday we can keep tabs on the US Trade Balance.
On Wednesday, look out for German Industrial Production and on Thursday the ECB’s Monthly Bulletin gives the stats that the bank used when deciding to hold rates last week. There’s more housing data out of the UK on Tuesday and Tuesday’s Manufacturing Production and Thursday’s Trade Balance will give us some more insight into the UK recession. The big news out of the UK this week will be the Bank of England’s Interest Rate Announcement, with a cut of 25 bps being widely expected. The Bank of Japan and the Reserve Bank of Australia will also be making their interest rate announcements. I can’t see the Bank of Japan generating much excitement but the AUD looks like a good buy if the RBA only cuts by 25bps.
The central bank speaker agenda is jam-packed and of particular note in these fraught times. Please check our economic calendar for details.
Last week clearly illustrated how vulnerable Europe is to the current credit freeze with Bradford & Bingley, Fortis, Dexia and Iceland’s Glitnir and Kaupthing banks all being rescued in some shape or form by national governments. Meanwhile the Irish government pledged to guarantee debts and deposits to the tune of €400B in six of its key financial institutions. As I write, plans to save German mortgage giant Hypo Real Estate have fallen through when the private consortium pulled out of the rescue deal after looking through the company’s books.
On Saturday the heads of the big four European economies met in France to discuss a coordinated approach. After the summit they pledged to continue to bail out their own banks and went on to call for a global summit but stopped short of any collective action to tackle the problem at a Europe-wide level. This outcome will surely have ramifications for the week ahead and we see EUR/USD coming in for more downside pressure.
Forecast September October 6th to 10th
The European currency was unable to hold 1.40, which suggests that EUR/USD could be moving into a lower 1.35-1.40 range.
If Sterling continues to find support at 1.75, it is likely to trade in the range of 1.7500-1.8000. However a breakdown of 1.75, coupled with a 50bps rate cut on Thursday, could see the pair slump to 1.70.
USD/JPY should find downside pressure as traders deal with current uncertainty by buying the yen. We see resistance at 106.70 with support at 103.50
Sammy’s Calls
A series by trader Sammy Sampson.
A bit of a challenge this, a simple idea and hopefully a bit of fun. Four weeks of calls with limit orders. See how I’m doing as the series progresses. If anyone wants to send in their own calls, I’ll include them in this column.
A series by trader Sammy Sampson.
A bit of a challenge this, a simple idea and hopefully a bit of fun. Four weeks of calls with limit orders. See how I’m doing as the series progresses. If anyone wants to send in their own calls, I’ll include them in this column.
Calls made Monday 29 September (09:30 GMT)
For clarity we will record the results in USD and assume a position of 10000 in each case:
For clarity we will record the results in USD and assume a position of 10000 in each case:
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Feeling well bearish on cable, but I’ve missed this morning’s drop, so I’m buying at 1.7875, target 1.8135, stop-loss 1.7745. LOSER: -$130
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EUR/USD, I’m selling at 1.4460, S/L 1.4560, target 1.4235 WINNER: +$223.60
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USD/JPY, buying at 105.00, S/L 104.40, target 106.20. LOSER: -$57.47
Hmm, bit of a swings and roundabouts scenario. Still, better $36.13 up than $36.13 down.
I thought last week was tough and so is this week. Here are my calls, made Monday 6th October 09.15
I thought last week was tough and so is this week. Here are my calls, made Monday 6th October 09.15
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USD/JPY, let’s try jumping the southbound train. I want to sell at 104.60, S/L 105.20 target 102.50
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GBP/USD, still bearish on cable so this week I’m selling at 1.7820, S/L 1.7950, target 1.7500
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USD/CHF, trading against the tide a little here but I’m giving myself a fair bit of room. Selling at 1.1320, S/L 1.1420, target 1.1150.
Wish me luck and I’ll catch you next week. I understand Dennis is featuring these trades in his webinar – ah such is fame. If you’d like to make a few calls, send them into the newsletter, maybe we could have a little competition.
Live Trading Sessions
The next session will be on October 8th at 14:30 to 16:30 GMT. We will be trading the live account on two Colt FX pairs and the micro-lot ‘ten to the moon’ feature is looking at a refinement of Farid’s trading idea with a Parabolic SAR combined with volume and RSI. We will also be monitoring the Jam FX trading system.
If you’d like to join in, write to me at colt@coltfx.com.
Rumus 2 live support session
I am currently looking at the feasibility of running a series of help sessions for Rumus 2. I plan to run these as a live webinar (most probably on Tuesdays). If you are interested in learning more or you have any questions that you would like to see covered in the session, please write to me at colt@coltfx.com.
Forex Club’s Platinum Package
Forex Club is offering the Colt FX distance learning course as part of their package of incentives to open a Platinum account. You can learn more about the details of this offer at http://www.fxclub.com/platinum/. You can find out more about Colt FX in our short film What is Colt FX?
Forex Club is offering the Colt FX distance learning course as part of their package of incentives to open a Platinum account. You can learn more about the details of this offer at http://www.fxclub.com/platinum/. You can find out more about Colt FX in our short film What is Colt FX?
That wraps it up for this week. Thank you for reading this far. Have a great week and I hope to see you at www.coltfx.com
If you have any questions about this newsletter or any of our services, please drop me a line at colt@coltfx.com.
Remember that one week’s to Colt FX Module 1 is available for free at www.coltfx.com. to everyone who subscribes to this newsletter
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Disclaimer
www.coltfx.com, and any of its affiliates, will not be held responsible for the reliability or accuracy of the information available in this newsletter. The content provided is put forward in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Colt FX or its affiliates. The reader agrees not to hold Colt FX or any of its affiliates, liable for decisions that are based on information in this newsletter. We highly recommend that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.
www.coltfx.com, and any of its affiliates, will not be held responsible for the reliability or accuracy of the information available in this newsletter. The content provided is put forward in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Colt FX or its affiliates. The reader agrees not to hold Colt FX or any of its affiliates, liable for decisions that are based on information in this newsletter. We highly recommend that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.
6 October | 
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