Newsletter October 20th
Colt FX newsletter Evening Edition - October 20th 2008
In this week’s issue:
Forex Review, October 13th to 17th
Calendar and Outlook, October 20th to 24th
Monday 20th Update
Live trading session: Wednesday 22nd October
Sammy’s calls: Week 3 calls
Forex Club Platinum Package
Forex Review October 13th to 17th
A game of two halves
The week opened with the greenback losing ground to the Europeans as central banks promised unlimited dollars to aid liquidity. Mid-week saw mounting fears of a global recession and the dollar strengthened in the flight to safety. At the end of the week we saw positive signs that the credit freeze is on the thaw.
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Chart 1 EUR (hourly)
EUR/USD opened the week by gapping up 150 pips in response to news out of the euro zone summit which agreed to offer hundreds of billions of euros in guarantees for new, medium-term bank debt. As the euro zone package was rolled out, Germany pledged €500B, France €350B and Spain €100B and headlines reported that the total for the 15-country zone was around $2.4 trillion. Monday also saw a joint announcement from the ECB, the BoE and the Swiss National Bank promising unlimited dollar funding to be made available to banks in a coordinated action with the Fed.
On Tuesday US President Bush announced a $250 billion plan for the government to directly buy shares in the nation’s leading banks, which he said would help preserve the free market.
On Tuesday US President Bush announced a $250 billion plan for the government to directly buy shares in the nation’s leading banks, which he said would help preserve the free market.
The euro hit the week’s high of 1.3768 at around Tuesday midday and then it fell to spend the rest of the week testing support at around 1.34, a level mapped out by the gap at the beginning of the week. The continuing high level of government intervention means that fundamental data is currently having little impact on the Forex market. However it is worth taking note of US numbers which came in worse than expected and support the notion that the world’s biggest economy is recession bound.
All in all, the week was a game of two halves. The promise of unlimited central bank dollars boosted the euro in the first half of the week. Then, risk aversion and signs that the stock markets are stabilizing encouraged investors to move funds into the US and brought the dollar support.
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Chart 2: GBP (hourly)
Sterling/Dollar opened with an upside gap of 50 pips and closed the week a touch over 100 pips up. The UK government’s plans to take control of its weaker banks and the Fed’s permission to use unlimited dollars to create liquidity gave sterling a deal of support. Mid-week, fears of a global recession and Ben Bernanke’s gloomy prognosis despite all the bail-outs etc saw a GBP/USD sell-off similar to the one on EUR/USD as traders flocked to the greenback in search of a ‘safe haven’. Sterling’s sell-off was not as marked, however, and it found support at 1.72. After testing this level a couple of times, the pair closed the week at 1.7280.
Outlook and Calendar October 20th to 24th
For an extensive list of the week’s economic releases and events see our economic calendar.
Last week I mentioned a number of indicators to monitor for signs of an easing of the financial crisis. The signs were positive on the whole, with the LIBOR overnight dollar rate down on Friday to 1.67%, its lowest rate since 2004; the TED spread eased 1% to 3.63% and gold had its worst week in two months, falling more than 2% to below $800 an ounce. Keep watching these signs as this week pans out.
I expect fundamental data to continue to take the back seat for the time being. However, you’d do well to look out for US initial jobless claims on Thursday and Friday’s Existing Home Sales
The euro-zone has a bit more to offer. There’s German Producer Prices on Monday. Thursday is busy with French consumer spending, and the Euro-zone current account and industrial new orders. Friday rounds out the week with a raft of European PMIs.
It’s pretty light in the UK. Sunday kicks off with house price numbers. Wednesday sees the minutes from the Bank of England’s Monetary Policy Committee meeting and these could highlight fresh weakness in the UK economy. There’s UK Retail Sales on Thursday and Friday closes out the week with the GDP report.
We’ve also got central bank interest rate announcements from the Bank of Canada on Tuesday and the Reserve Bank of New Zealand on Wednesday with both banks expected to make cuts.
Full details of the central bank speaking agenda are on our economic calendar.
Full details of the central bank speaking agenda are on our economic calendar.
Monday 20th News round-up
The week started off relatively brightly with Asian and European stock markets making gains. There was further evidence that the measures taken to ease the global credit crisis seems to be taking effect with LIBOR rates and the TED spread falling. The price of oil rose on signs that OPEC will agree to cut back on production in the face of falling prices at their meeting this Friday. Currency-wise, the dollar weakened against both the euro and the pound during the Asian session. However, once the euro had tested 1.35 and the pound 1.75, the dollar gained favour and the European currencies fell. Ben Bernanke’s told the US House of Representatives that a ‘significant’ fiscal stimulus package designed to improve access to credit for private citizens and businesses should be considered in a bid to avoid a ‘protracted slowdown’. The dollar received more support as he spoke, with EUR/USD testing support at 1.3280 and cable down to 1.71.
Forecast October 20th to 24th
EUR/USD: support at 1.3200; resistance at 1.3700.
GBP/USD: support at 1.69; resistance at 1.7600
USD/JPY: support at 98.50; resistance at 103.20
Sammy’s Calls
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 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.
This week’s calls: 17:00 GMT, Monday October 20th
- USD/JPY, I am hoping to sell at 102.50, S/L 103.20, target 100.50.
- NZD/USD, I’m selling at 0.6230, S/L 0.6350, target 0.5850.
- EUR/USD, Outside the box here, I’m buying at 1.3520, S/L 1.3440, target 1.3740.
Orders now placed, with a mini-lot on each. Currently, $188.44 up but of course that could all change as this week develops.
All the best Sammy.
Live Trading Sessions
The next session will be on October 22nd at 14:30 to 16:30 GMT. We will be trading the Colt FX pairs; recapping the Jam FX system, running a 5-minute system on the yen crosses and taking a look at theFibonacci Fan.
If you’d like to join in, 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 access 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.
20 October | 
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