Forex Blog

Following the day of not so good (rather bad) economical news from U.S. yesterday, markets were surprised by some very optimistic indicators presented today. A reaction on both stocks and Forex markets was supportive with the stocks bulls, EUR and GBP to gain and the bears with JPY and USD to lose somewhat.
Personal income and spendings number for July came out at 0.5% and o.4% growth that is higher than 0.3% expected (for both). While the core PCE inflation came a little worse than expected - 0.1% against 0.2%.
Chicago PMI - the major manufacturing sentiment index came out 53.8 level increasing from 53.4 and above the expected 53.0.
July factory orders were the main surprise - 3.7% from the 1.0% previous month and 3.0% from the expected number for July.
Michigan sentiment index reached 83.4 number - which is higher than both previous and expected numbers and is a historically high value for this index.
Overall, almost every indicator came out surprisingly high and probably gave some fuel for the future Fed’s interest rates decision.

U.S. macroeconomical data releases get a little less overoptimistic while the subprime lending crisis takes its toll and the carry trade is uncertain. This is the second week after a major carry trade crisis when the major indicators of carry trade, like GBP/JPY and EUR/JPY, are trading flat without any signs of the future for this type of financial trading. But worser U.S. economical indicators hint for some major change in the global financial kitchen.
Global domestic product for the second quarter of the 2007 showed a big increase compared to first quarter (which has been a big disappointment) but still 0.1% lower of 4.1% expected.
Initial jobless claims for the previous week came out to be 334,000. Not only it is 14k higher than experts have been expecting, but it is also a record high number since the April of this year. This may lead to the lower August non-farm payrolls report and higher unemployment rate for that month.

Boston Trading and Research is a very new Forex broker which site was opened just this year. They offer reasonable trading conditions including MetaTrader 4 platform, PayPal account funding and $500 minimum account size. BTRFX also seems a reliable company, but their quite enigmatic website may turn off some traders. Boston Trading and Research is not registered with NFA, but some interested traders already made an electronic petition for BTRFX to join NFA as soon as possible:

…We therefore petition BTRFX of Boston ie (http://www.btrfx.com/contact.php and sales@btrfx.com) to do the right thing and apply for registration with the NFA! And if and when they do so, then and only then will we, the undersigned, will happily arrange to set up and open our Managed Forex Accounts with Boston Trading and Research, LLC in Boston, MA with their phenomenal forex trader!

Overall, it’s good broker for MT4 traders interested in PayPal deposit/withdraw option.

EUR/USD trend: sell.
GBP/USD trend: sell.
USD/JPY trend: sell.
EUR/JPY trend: sell.

Global stocks markets calmed by central banks’ generous currency interventions last week are doing quite well so far. EUR/USD and other currency pairs influenced by carry trade and subprime lending crisis chain reaction (mostly EUR/JPY and GBP/JPY) also don’t jump madly through and out the support and resistance levels anymore. But what will happen next? Will the markets just soak up the liquidity, thrown in by Fed and other countries’ financial authorities, and crisis will go on? Or will the carry trade trade go on, feeding credit sector with cheap JPY money and pushing EUR/USD, EUR/JPY and GBP/JPY to the new historical maximums?

Current situation doesn’t hint in favor of any possible outcome - both stock markets and currency pairs are slow. In my opinion, the best way to understand the next movement is to look on the Japanese Nikkei market index. So far (today and yesterday), it has been increasing slightly, signaling the normalization of market situation. A sharp fall or rise on Nikkei can mean a faster crisis unveiling (in case of fall) or a return to carry trade dominance markets (in case of rise, not necessarily sharp, strong and long growth signals that too).

Other good method is a GBP/JPY pair, which stabilized in 220-230 range. Breaking this range at 220 level will most probably signalize a continuous bearish trend in EUR/USD, EUR/JPY, GBP/JPY and global stock markets too. Breaking the 230 level can be a sign of the return to bullish trend on those currencies and other financial markets.

EUR/USD - sell.
GBP/USD - sell.
USD/JPY - sell.
EUR/JPY - sell.

Federal Reserve of the United States of America lowered its primary credit rate (at which money to the banks are borrowed) from 6.25% to 5.75% to add liquidity to financial and lending markets. Federal Reserve (as the today’s FOMC statement says) is concerned with the current situation of the economy growth and the crisis in the credit sector. FOMC also approved that there risks of growth slowing increased appreciably. Here is the Federal Reserve’s press release concerning the bank rates:

To promote the restoration of orderly conditions in financial markets, the Federal Reserve Board approved temporary changes to its primary credit discount window facility. The Board approved a 50 basis point reduction in the primary credit rate to 5-3/4 percent, to narrow the spread between the primary credit rate and the Federal Open Market Committee’s target federal funds rate to 50 basis points. The Board is also announcing a change to the Reserve Banks’ usual practices to allow the provision of term financing for as long as 30 days, renewable by the borrower. These changes will remain in place until the Federal Reserve determines that market liquidity has improved materially. These changes are designed to provide depositories with greater assurance about the cost and availability of funding. The Federal Reserve will continue to accept a broad range of collateral for discount window loans, including home mortgages and related assets. Existing collateral margins will be maintained. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of New York and San Francisco.

This suggests some more cautiousness to Forex traders, especially long-term ones. While the short-term traders may reap some profits from the fast moving markets, long-term traders might need to revise their recent strategies.

Today, I’ve been contacted by Neuimex representative and he told me that the company which is under bankruptcy process Neuimex Asset Management AG (Switzerland) and the Forex broker company Neuimex Direct Dealing (NDD) S.A. (British Virgin Islands) are completely different companies. Thus, Neuimex broker continues its operation as normal and doesn’t have any bankruptcy problems. So, you can disregard my recent post about it. Here is exactly what Neuimex representative said:

Dear Blogwriter,

we have to tell you that your message is absolutely misunderstanding and wrong in facts.

http://www.earnforex.com/blog/labels/neuimex.html

The bankruptcy case affects only the following company:

Neuimex Asset Management AG, Switzerland . There is a lot of discussion in financial locations in Switzerland about these “facts” and the whole story will be a case for a basic lawsuit. And regarding the news from Neuimex AG: only the lawyer from SFBC Mr. Spaniol is responsible for any publications. Neuimex management is by law not allowed to send any message or publish any message to customers. There is nothing to add. Anyone can ask the lawyer there for details.

But different from this there is another company:

Neuimex Direct Dealing (NDD) S.A. registered on British Virgin Islands. NDD has no business connection with Neuimex Asset Management AG - the name is leased from AG for some time as they use the same platform. Neuimex Direct Dealing is a Forex Broker and is working fine and no problems occur. Accounts start from 300USD and mini and standard accounts are available. NDD is offshore registered as written and published on their website.

Some words to regulations: Many if not most of the Forex Brokers are registered offshore. But a lot of them make a secret out of this fact. Here is some explanation http://en.wikipedia.org/wiki/Offshore and details http://en.wikipedia.org/wiki/Offshore_Financial_Centre#List_of_main_offshore_financial_centres .

So before talking about offshore, regulations and more - information is the key. And carefully read websites. Offshore does not mean illegal - it means beeing part of more than 50% of the business of this world.

Once again, sorry for any inconvenience caused. That just shows how really different naming helps in business.

Update: Altered the original Neuimex message to me, removing some of the profane language and mentioning of the competitors.

EUR/USD reached its two month minimum and almost broker out of its long-term bullish trend today. World stocks markets continue to fall with the main reason lying in panic caused by the crisis in subprime lending U.S. sector. Cashing out of stocks papers causes also carry trade retreating with a huge buying back of JPY and USD (in a lesser dimension) for other currencies - thus the rally of JPY and USD. Even bad economical news from U.S. don’t stop from buying it for Euro.
Weekly employment data showed a little increase of the initial jobless claims - 322k from 316k previous week, while analysts expected a small decrease.
Housing data continue to come out worse and worse - housing starts came out to be 1381,000, while building permits - at 1373k, which is approximately 25k lesser than the market was expecting.

Neuimex Forex broker, which offered Metatrader 4 trading with e-gold support since 2005 is now bankrupt and is in process of liquidation. The process began in March this year, but many of its clients are still unaware of this because of a lack of any news from Neuimex.

The Swiss Federal Banking Commission (SFBC) opened bankruptcy proceedings against Neuimex Asset Management AG with effect as of March 30, 2007, 8:00 a.m. The opening of bankruptcy proceedings together with the call to creditors were published on the webpage of the SFBC (see http://www.ebk.admin.ch/e/) on April 10, 2007 and will be published in the Swiss Official Gazette of Commerce on April 18, 2007.

This is a very worrying news for the Forex traders and it once again warns anyone of problems connected with using brokers without a proper historical background or regulation.