Tuesday, October 6, 2009

Daily Morning Forex Commentary - 10.06.09

A rather significant move on the hourly chart. It seems that the EURO equities are feeding of the US equities from yesterday. With such dollar weakness today I'm expecting another strong day in the US domestic equities (will energy and financial sectors lead or will the consumer sectors?).


Hourly Chart:

The EUR has already pierced its upper 2nd BB as we speak and is poised to retrace back to its lower 2nd SD BB. Its seems as the EUR is range bound at 30-40 pips, as I drew out via support and resistance levels. This is more confirmation that a big move is on the way, especially with the light volume we have been seeing across all markets.

The 6-month Daily chart is equally impressive, it is reminiscent of the EUR moving a few days earlier than the previous BOE Quantitative Easing Announcement back during summer.

Other Major Pairs:

3/4 the four major pairs I'm following confirm the price squeeze seen in the EUR leading to dollar weakness. The major pairs confirming this being: GBP, CAD, and EUR.

The only pair that contradicts this is the AUD

AUD and Asia Pacific Events:

"BIG NEWS" <-- Click Here>

MR. Stevens of the RBA (Reserve Bank of Australia) today decided surprise everyone with a interest rate smack in the face of a 25 basis point increase. He must be bragging about how well his economy is doing. But, on a more serious note, this maybe reflecting some fundamentals in the Asia region: Strong consumer demand in the East, commodities strength (confirmed via dollar trend weakness), and possibly hinting at inflation worries.

What I'm interested in is if this move is significant enough to affect the JPY and maybe reignite carry trade fundamental plays in the currency arena.

I'm also aware that southeast Asian equities have been performing quite well compared to two summers ago when equity markets were dieing along with hyper inflation in some countries (eg, Sri Lanka and Vietnam).

All these circumstances makes me think HSBC management knows something everyone else doesn't, as they are selling off assets in more developed countries and focusing on more growth oriented countries.

"HSBC NEWS <-- Click Here">

But then again, HSBC has always been oriented this way, its banking model is conducive on focusing on top priority countries with highest growth rates and rotating best performing managers to new developing regions. In a sense this is kind of a managerial meritocracy. This model has certainly thrived in the HF industry and maybe points to why HSBC has survived "relatively" better than its peers.

As I pointed in my last blog Stephen Green, predicted that the recovery will be Asian led last summer. Based on HSBC's strategic moves, its possible they don't believe the recovery has begun in full force yet.

I will end with a quote from an EX Deputy CEO of Corporate Banking HSBC who I used to work for in Vietnam.

"China certainly will certainly can keep us busy for the next decade or more."

Such a thought is definitely worth thinking about when one orients their strategy in a constantly evolving financial landscape. The point should also extend to all emerging markets, just not Asia alone...

Anyway... Off to class!


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