Greek Election - Political Polls

My Take: In the most recent election, New Democracy and Pasok failed to form a coalition government by a couple of votes. It looks like they may get them this time around. Remember - the winning party gets 50 additional votes. Check it out: http://www.zerohedge.com/news/live-greek-election-poll-tracker

I've heard unsubstantiated claims from the wire that while most Greeks oppose austerity measures, most of them also want to remain in the Eurozone. I think that if European leaders present a less painful austerity option to Greece, it may help boost support for New Democracy and Pasok.

Michael Weissman



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Dollar May Gain On Possible Greek Exit, JPMorgan Says

The dollar may strengthen against all its major peers except the yen amid a possible Greek exit from the euro and economic slowdowns in China and the U.S., according to JPMorgan Chase & Co.

“Regardless of country-specific strengths outside Europe, no currency but the yen could appreciate versus the dollar during the deleveraging and volatility spike,” Kevin Hebner, a foreign-exchange strategist for JPMorgan in London, wrote to clients today. “For the second time in six months, Greece’s Economic and Monetary Union exit seems imminent.”

The New York-based bank reduced its euro forecast to $1.22 for the second quarter from a $1.34 estimate as of May 11. The 17-nation currency will trade at $1.24 by year-end, compared with a previous forecast of $1.36. It traded at $1.27 today in New York.

Greek elections are scheduled for June 17 after an inconclusive vote in May propelled an anti-bailout party to second place.

Growth-linked currencies may weaken against the dollar as an economic slowdown in China may trim commodity prices. Canada’s dollar will weaken to C$1.04 by mid-year compared with 98 cents per U.S. dollar, the report said. Australia’s dollar may fall to 96 U.S. cents versus $1.08 and New Zealand’s currency will trade at 73 U.S. cents, down from 82 U.S. cents.

The dollar may weaken to 78 yen at the end of the second quarter. It traded at 79.98 today.

http://www.bloomberg.com/news/2012-05-22/dollar-may-gain-on-possible-greek-exit-jpmorgan-says.html




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Top 10 Banks Predictions for EUR/USD

Deutsche Bank AG                           $1.30
Citigroup Inc.                                  $1.25
Barclays Plc                                     $1.20
UBS AG                                           $1.15
HSBC Holdings Plc                           $1.44
JPMorgan Chase & Co.                     $1.36
Royal Bank of Scotland Group Plc      $1.33
Credit Suisse Group AG                   $1.27
Morgan Stanley                               $1.19
Goldman Sachs Group Inc.               $1.33



As you can see, these end of the year predictions are all over the place. HSBC has the most bullish estimate at $1.44 and UBS holds the most bearish outlook at $1.15. Some of them appear to be pricing in a "Grexit" (Greek exit from the Euro) and continuing financial problems in Europe.  They also seem to be pricing in attention being drawn to the US trade deficit and national debt as the US presidential election draws closer.

http://www.bloomberg.com/news/2012-05-20/hedge-funds-rebuild-bearish-euro-bets-for-greek-exit-banks-weigh.html

Michael Weissman



BeamFX is an guaranteed introducing broker of ILQ. Join us in our free live trade room Mon. - Fri. 7:45 - 10:45 AM EST.

Facebook IPO launch problematic

Facebook's initial public offering on Friday was problematic as the NASDAQ was plagued by technical difficulties. The IPO was priced at $38.00 and trading was set to begin at 11:00 A.M. In our office we were fixated to the TV as the countdown got closer and closer to 11:00AM. By 11:05 it was apparent to us that something had gone wrong.

Now, if you're trading FX you need to realize that movement in the equity and debt markets has a direct effect on the foreign exchange market. Without getting into anything complicated, I'll make two points. First, the S&P 500 has exhibited a strong correlation to high yielding currencies such as the Aussie and Kiwi. Second, before the launch, the majority of market participants were expecting the stock to do fairly well. Expectations are important to understand because if those expectations are not met, the effect is a more volatile reaction then it would have been if price had moved in the expected direction.

Trading of Facebook stock started about half an hour late and it immediately started tanking as the technical difficulties caused the heads of major trading desks to back away. The problem was attributed to an unprecedented amount of orders. The S&P 500, which had been positive on the day, started dropping. That had a direct effect on AUD/USD and caused that to start dropping as well. The AUD/USD 11:00 A.M. candle went from .98695 to .98086, a 60 pip move. I put on a short around 10:30, but closed it out with a couple of pips in profit after seeing the initial FB trading price projected at $45. I was playing a move off of the long wicks and candlestick formation; but didn't feel comfortable holding it for several reasons. First, there were some larger players who didn't want to hold their short positions over the weekend so they were taking profit on them. Second, since I got in the office and started looking at the markets, I judged the Euro and Aussie to be in a "risk off off" corrective move. 

All and all, it was a very interesting day. Morgan Stanley had underwritten 38% of the FB IPO and vigorously defended the $38.00 mark. Later on in the day I watched from 3:45 to 3:55 as FB's price fluctuated back and forth from $38.00 and $38.01. If you're an underwriter, letting the IPO fall under the price you valued it at (on the first day) is bad for business. I can only imagine some of the underwriters made a beeline for the nearest bar after they got out of work on Friday.

My Advice: On Monday if FB stock rises and the equity markets get the bounce that they've been waiting for, we could see some dollar weakness. If we do see weakness, I favor playing it against EUR/USD or GBP/USD.

Michael Weissman



BeamFX is an guaranteed introducing broker of ILQ. Join us in our free live trade room Mon. - Fri. 7:45 - 10:45 AM EST.

FYI: We will be regularly posting on this blog now and we just fired up our twitter account! The themes for our upcoming articles include: trading mistakes, trading psychology, and fundamental trends. Stay tuned!





BeamFX is an guaranteed introducing broker of ILQ. Join us in our free live trade room Mon. - Fri. 7:45 - 10:45 AM EST.

I've been talking to a lot of traders over the past week and it never ceases to amaze me how many of them try and pick the bottom of a trend and get burned. Yes, I realize that there are some professionals out there who know exactly what market data to look for and are capable of spotting pullbacks of strong trends and profitably trading them over the long term. However, for the majority of retail traders, it's nearly impossible to do so. I realize that it's incredibly tempting to try and trade pullbacks; but you have to be careful. Picking the right entry and exit points can be incredibly tough. Just because the Euro and Aussie have been dumping since 4/30 and RSI has just hit 30 on the daily chart doesn't mean that EUR/USD and AUD/USD have to immediately begin a corrective move. In our news driven marketplace all it takes is another negative headline for the pairs to fall further.

My advice: Always trade with the trend. You may successfully trade pullbacks against strong trends some of the time; but trading is all about probabilities and long term statistics. I personally aim for high probabilities trades with good risk/reward ratios and always trade in the direction of the trend.





BeamFX is an guaranteed introducing broker of ILQ. Join us in our free live trade room Mon. - Fri. 7:45 - 10:45 AM EST.

This is a great article on the similarities between trading and poker: http://www.mercenarytrader.com/2011/02/utilizing-the-reno-process-part-i-range-equity-narrative-odds/



BeamFX is an guaranteed introducing broker of ILQ. Join us in our free live trade room Mon. - Fri. 7:45 - 10:45 AM EST.