Asian Stocks Decline on Lower Oil Price

Asian stocks were lower as US oil traded under $45 per barrel while bonds moved forward. The kiwi dollar was close to a low in four years as FOMC policy makers showed a bit of indecision regarding interest rates.

MSCI Asia Pacific slipped 0.5 percent in Tokyo trading as the Japanese gauge slumped 0.8 percent. Energy producers lost 0.8 percent as crude was near a six-year trough. Futures at Dow Jones Industrial Average gained 0.3 percent while 10-year yields on Aussie bonds went down to a record low. Meanwhile, NZ rates dropped 15 basis points.

Chinese index futures waned 1.8 percent during recent trading in Singapore trading due to concerns over regulatory examination of margin loans.

WTI crude plunged nearly four percent as showed that US supply is at the highest in over three decades. Again, this aggravated concerns of oversupply in world markets.

The Federal Reserve recognized global hazards in its policy statement emphasizing it will consider reports on global developments while contemplating on the matter of keeping rates close to zero.

Rates on the debt of the Aussie government dropped to 13 basis points or a low of 2.47 percent while maturity yields in New Zealand fell 3.17 percent.

Greece PM on Stock and Bond Markets Decline

Greek stocks and bonds continued to drop and reached lows that were never seen since the height of the nation’s debt crisis several years ago.

Even then, Prime Minister Alexis Tsipras vowed that his government will do everything to stay away from a disastrous conflict with international creditors and EU neighbors.

Profit on three-year Greek notes increased (275 basis points) to 16.77 percent in New York markets. This was up from 10.08 percent last week before the snap polls elections brought the Syriza government to power.

Standard & Poor’s 500 Index on futures went up 0.3 percent while the Index on NASDAQ 100 futures scaled up one percent. Meanwhile, STOXX Europe 600 put in less than 0.1 percent. The standard general Index in Athens plunged 8.5 percent to the lowest level since two years ago. An indicator of Greek lenders plummeted to its lowest level since 1995 with the National Bank of Greece and other banks declining by a maximum of 23 percent.

During the inaugural meet of the new cabinet, Tsipiras promised to renegotiate conditions of the country’s bailout.

He appointed a new cabinet composed of a foreign minister who questioned EU sanctions versus Moscow as well as a finance minister who described the bailout as a trap.

The Federal Republic of Germany cautioned Greece against walking away from previous commitments on financial assistance after economic analysts claimed that pitting Greece against its European peers can hasten its departure from the EU.

Observers said that the situation remains negative while everyone is waiting if the leftist government will reach an agreement with lenders.

Tsipras said his government is prepared to negotiate with other euro region governments.

AUD/USD

Tumbling down 300 points last week, the Aussie and green bucks closed beneath the 0.80 line, so far thelowest level since July of 2009. Highlighting this week are the Business Confidence of NAB, the CPI and thePPI.

An outlook on the major players of the market and a recent technical analysis for AUD/USD presented the currency markets in chaos as it was shattered by the shocker from SNB and the QE announcement of ECB. It led minor currencies like the Aussie to make sharp losses last week. Due to the very highly anticipation of ECB decision on QE, it is now past and Draghi certainly delivered: (1) a purchasing program for 60 billion euros everyper month to be ended September of 2016; and (2) a 20% risk sharing of 12% for such EIB. Since the program might be long-termed, Draghi is not concerned about risk sharing as there was a wide agreement made on the main points.

U.S. dollar tidal wave was not enough to dampen solid consumer spending and confidence numbers. But the key data from U.S. was a disappointment. The claims of unemployment was higher than forecast, while sales of Existing Home failed to hit expectations. A bounce in the Chinese GDP was only adequate to keep the Aussie up for the meantime.

Austria’s Position on Swiss Currency

The finance minister of Austria (Hans Jorg Schelling) says that Switzerland should not permit the Swiss franc to remain at its present potent levels versus the EU currency over the long-term. This can be detrimental for the national economy.

Swiss currency loans are popular in some parts of Europe due to reduced interest rates. The franc’s sudden increase has become a problem for borrowers in countries like Croatia and Poland. Austria (member of the EU since 1995) banned numerous FOREX loans in 2008.

It has been least affected by the Swiss currency crisis. However, removal of this ceiling results in expensive debt servicing for roughly 151,000 Austrian households with 29 billion euro worth of denominated loans in Swiss francs.

All these translate to a maximum of 25 percent additional debt for consumers, according to media reports. If the franc remains in this position, the economy will be affected because tourism will decline and exports will become high-priced. The franc closed at 0.987 before the week ended.

Dukascopy Offering Traders of EUR/CHF 1% margin

Dukascopy plans to offer traders a margin of 1% margin on the turbulent EUR/CHF Forex cross. Similar to its counterparts, the bank changed margins on the currency as markets were floating tough ground. As one of the initial leading brokerages,

Dukascopy reinstated usual conditions as markets continuously recover from the 5th of January complications in the domains of the SNB.

The announcement came from its website with the firm describing the state of the Swiss franc and its position on the matter. The announcement stated the path taken by Dukascopy is the opposite way for it welcomes EUR/CHF back to the family by straightening its extra requirements with the other leading currency. 

The implementation of the revision will start on the 25th of January, 2015. Being one of the original providers, the firm changed authority on the 12th of October when bank executed new powerful rules that lift margins to 10%.

Dukascopy stated that the marketers have been cautious of a Swissie revolt in October and added that a possible break of the 1.2000 stand of EUR/CHF may provide important price gaps and bring pessimistic equity on the account of clients

Swiss Shock Hurts New Zealand

The Swiss currency caper more than two weeks ago has also affected private FOREX dealers in New Zealand.

Market experts say the Swiss currency franc typically moves below 30 "pips" which is the measure of changes in exchange rates for currency pairs in a single day. When the cp was removed, this climbed to 1,500 pips in less than one minute.

This can be disastrous. Global FOREX dealer CMC Markets maintains there a small number of investors in New Zealand trading the Swiss currency compared to Europe. These traders lost money. Some dealers refunded affected clients' accounts instead of expecting them to pay. Said investors still lost all the money in their respective accounts although they were not left with a huge debt. Even private traders without any interests on the Swiss franc could have lost funds if the firm they traded with was affected.

New Zealand’s Global Brokers (trading as Excel Markets) was one of these companies. Investors were lucky enough that it was under regulation by the Financial Markets Authority so client money is separated from the firm's finances. However, not all dealers in New Zealand do that. Certain FOREX dealers impose restrictions on traders. CMC Markets have layered margins. This means that the higher the risk, the more funds you should invest. This protects both the brokerage and individual investors. After the Swiss crisis, these traders will feel relieved their investments have been tiered.

OPEC Predicts Recovery

The secretary general of the Organization of Petroleum Exporting Countries (OPEC) said prices will recover instead of going down to $20 per barrel.

Abdalla El-Badri told media that the decline since June of 2014 is not warranted by international supply and demand.

 Producers, who do not belong to OPEC, must lead the reduction of output because of the glut that shoved crude lower than $50 per barrel. Iraq, one of the principal members of OPEC, said it has to bolster output as compensation for profits affected by the price collapse. Meanwhile, Brent crude was down by 16 cents (0.3 percent) to $48.87 for every barrel on the ICE Futures European exchange. On the other hand, West Texas Intermediate gave up more than 30 cents to $47.45.

The OPEC secretary general insisted that non-member countries with prices of $100 per barrel to keep up output must withdraw production which has expanded during the last 10 years while OPEC prices remained steady.

Iraq has already lost close to 50 percent of earnings due to this slump and needs to reinforce output.

It is necessary for the OPEC and other producers to invest in new supplies notwithstanding this price fall. Oil prices can move above $100 per barrel devoid of adequate spending in supplementary capability within the next five years. The crude yield of OPEC increased by around 80,000 barrels each day last December (2014) to 30.48 million. More oil from Iraqi fields made up for the downfall in Libyan production. This was cited in the recent market report of the International Energy Agency.

Before ECB Meeting, Euro Bounced Back On Short Covering

According to two-euro area central bank officials, to revive inflation in the euro area, ECB President Mario Draghi supported by the Executive Board proposed an asset purchase of 50 billion euros per month to end December 2016. After this report came out from Bloomberg news, the euro underwent a turbulent session in New York on Wednesday.

Although euro rebounded during the day from 1.1542 against the U.S. dollar at the Asian opening, it went up 1.1588 before European open; however, price returned to 1.1547 in the morning in Europe before intensifying over 1.1641 in the morning of New York. Later, euro downed to 1.1565 following the announcement of the purchase plan of ECB. It then bounced to a fresh session high at 1.1680 prior to declining to 1.1562 in the afternoon of New York.   The

European Central Bank was prepared on Thursday to declare that it will purchase government bonds for the first time. Officials worldwide are fortifying or augmenting their pledges to keep loses its monetary policy. The price pressure at the back of increasing dovishness are dwindling with the IMF curtailing this week its prediction of inflation in advanced nations.

Effects of SNB Decision on Global FOREX Sector

FOREX brokers in many parts of the globe reported huge financial losses because of the decision of the Swiss Central Bank to write off its currency limit against the EU’s lone currency which resounded with negative consequences on the industry.

Brokers in Europe, Wall Street London, and New Zealand issued repeated forewarnings as FXCM had to be bailed out and Alpari of the United Kingdom going into liquidation in New York. It was a nightmare for the currency industry.

On second thought, the implications of the bewildering move of the SNB that resulted into the USD/CHF and EUR/CHF posting the biggest ever one day movement in more than 20 years. The second-biggest act was also done by the SNB in September 5, 2011 when it jolted markets by originally pegging the euro against its own franc. If you try to review these years and the financial downturn during that period, these close to unparalleled decisions moved markets to the brink of disaster.

This can be called an unmistakable case of a leading central blank giving way due to market strains in the era of post Quantitative Easing. Market investors have become used to hard-line policies courtesy of the US Fed, European Central Bank, Bank of England, and other eminent financial institutions. These are allegedly made to deal with financial as well as economic issues worldwide.

The bottom line is the damage has been done and the industry blemished. Major stakeholders suffered a great deal. Yet, there were brokers that seemed to be ready for such upheavals.

Take the case of UFX.COM.

UFX.COM has resorted to automated solutions to deal with these problems. Traders working with this provider do not lose funds that are more than what they deposited to secured bank accounts.

UFX.COM never touches traders’ money to answer for loses in case similar concerns crop up.

UFX.COM Managing Director Dennis de Jong said that state of the art technology of UFX.COM covers traders the precarious state of the currency market. Investors are protected all throughout industry ups and downs.

FOREX Trading Experiences Record High due to Swiss Shock

FOREX markets witnessed the biggest volume of transactions following the decision of the Swiss National Bank to do away with the cap on the Swiss currency last week, according to various financial services firms.

The 2.26 million transactions underscore the risks in a single day of trades that brought about the fall of some brokerages and investment funds. Certain global banks also experienced losses worth millions of dollars.

Total trading volumes allegedly reached $9.2 trillion which is nearly the average proceeds in the largest financial market in the world by volume. It was also recorded as the second biggest day for FX markets according to trade volume which was surpassed only by the $10.67 trillion last

December 17 when the Russian currency was plunging substantially.

Financial managers are trying to recover from that chaotic day.

Meanwhile, countries like Croatia is planning to convert loans denominated in Swiss currency into their local tender. It says there is a need to deal with the rush of the Swiss franc’s value which affected parts of Eastern and Central Europe.
Poland was the worst affected by the SNB decision. Hence, some local banks hinted that they plan to ease interest rates on consumer loans.

Meanwhile, Switzerland’s second biggest bank (Credit Suisse) announced that it did not incur losses related to currency trading after the turnaround made by the Swiss National Bank. However, it did not cite any particular figures.

NZD/USD Pair Update

One of the currency pairs currency that has been consolidating inside a tight 400-pip of 0.7610 towards a 0.8000 range during the last four months is the NZDUSD. The range has been evenly more compacted at 250 pips as of 0.7610-0.7860 since the beginning of December.

As of the present, the kiwi slipped to test the lowest point of that below a range of 0.7700. For the meantime, the indicators utilized secondarily remained neutral, with the trading level of the MACD indicator with its signal line and the “0” level trapping the pair’s RSI within its own range of 40-55.

Although, NZD/USD trade has been slack as of late, growing increasingly is the breakdown that is likely. From the fundamental perspective, data is surfeited on tap for the rest of the week that included NZ CPI later today. As permits for US building and housing starts tomorrow, manufacturing data for NZ manufacturing and initial unemployment claims of the U.S. on Thursday with the Chinese PMI and existing U.S. home sales on Friday), not to mention the possibility of a spillover from highly-anticipated ECB meeting on Thursday.

If NZDUSD stays above a level of 0.7610, there is a favorable bounce this week, but if the key floor gives way, eyes of traders may turn down toward the key psychological .7500 level or a previous support around .7400. In either way, traders must be clarified on the way that NZDUSD is heading soon.

ECB QE Agenda

Market analysts and traders are expecting the European Central bank to go ahead with its "quantitative easing" program and use up more than 500 billion euro to acquire government bonds using the common currency.

ECB Chair Mario Draghi has been hyping all along that this plan will be instrumental in saving the very weak regional economy.

The economy is struggling. EUROSTAT disclosed that current unemployment rate has reached 11.5%. Euro zone growth in the euro zone is below one percent. On top of these, the EU is going through precarious drop in prices urging consumers to hold back on purchases and investments which bring down economic activities.

The ECB is pinning its hopes on QE which the United States used in getting out of the 2009 depression. What the Fed did was to purchase government bonds worth hundreds of billions of US currency. The ECB wants to follow the footsteps of the United States. Once it buys bonds from the private business sector, it hopes that the private sector will use these funds to take risks like getting more assets and loans.

One problem is Germany (the most dominant economy in the EU) detests the idea. It believes that governments must concentrate on debt reduction instead.

The euro area contains many structural defects that preclude healthy growth such as a currency shared by many countries. Another is the continuing campaign to trim down spending. Yet, the ECB still hopes to infuse more money into the whole system and turn things around.

Euro Bond Purchase Program to Fight Deflation

The European Central Bank is ready with a bond acquisition program worth 550 billion-euro or $635 billion.

According to economists, this is set for the week although details may not be available right away.

The ECB is decided to guide the region from deflation with quantitative easing on January 22. The median forecast beats the 500 billion euro model presented to central bank officials.

The target of the central bank’s governing council is to persuade investors that it has a plan that can strengthen the declining economy. Speculations about these plans have sent the single currency euro to an 11-year trough with fund flows possibly playing a factor in the SNB’s decision to terminate the cap on the Swiss currency.

Dropping crude oil prices tipped the inflation rate below in Europe to less than zero for the first time in over five years.

Policy makers claimed in media statements and speeches reactions especially in Germany where there has been strong criticism versus quantitative easing.

The central bank of Germany maintained that while inexpensive energy affects inflation in the short-term, this stimulates the economy as well.

Many economic analysts predicted that the ECB will declare an absolute purchase size. Monthly purchases can go on for a prearranged period or until after inflation is just below two percent. 

Consumer prices dropped to 0.2 percent (annually) in December of 2014.

The ECB chair plans to expand the central bank’s balance sheet to a maximum of three trillion euro by means of asset purchases and loans f0r banking institutions. The central bank maintains assets of 2.2 trillion euro that can dwindle in the coming weeks as 200 billion euro worth of crisis credit for banks will be maturing.

There are also plans of limited risk-sharing by compelling national central banks to acquire the debts of their respective countries, according to media sources.

EUR/JPY Pair

Seven points were added to EUR/JPY after it de-escalated this week as it traded at 135.19. The euro plunged to a record low last Thursday in a range of 1.15 prior to a bit of recovering. Taro Aso, Japan’s Minister of Finance said last Friday that he is keeping a close eye on how other countries’ central bank policies, as the decision of Switzerland to abandon its cap currency and sever interest rates, will influence the bond yields of Japan. He said that he is not giving comment on what other countries are doing but he was jolted by the decision of Swiss National Bank to abandon its currency cap that also surprised other global financial markets.

After PM Shinzo Abe’s government increased the sales tax, Japan plans a budget recorded for the coming year to reinforce an economy that is likely to fall into a period of recession. The 96.34 trillion yen or $814 billion budget proposal was approved by the government ministers as well as the ruling coalition parties that will be for 2 months to start April 1.

In the report released as of Wednesday, CB propose the inclusion of a hedge funds in the global currency market that reach over 10% of day-to-day transaction value, stating that data come from the Bank for International Settlements. The BOJ stressed the importance of monitoring the effect of hedge funds. It was observed that activity by hedge funds increased slides of the yen in middle autumn of 2012 and the 1^st half of 2013, including the summer of 2014.

The pair will make their big move next week at the meeting of ECB meeting on the 22^nd, although its stimulus program is already factors in currency prices.

NZD and USD Updates

The New Zealand currency barely moved versus the United States dollar in careful trading on Monday even as stock markets remained on edge after the Swiss National Bank made its bombshell policy decision last week.

The FOREX pair of NZD/USD touched 0.7806 during preliminary trading in the euro region which is the session high. It later consolidated at 0.7796.

The currency pair was inclined to get support at 0.7744 with resistance pegged at 0.789.

The US tender was supported after the Swiss central bank ditched its 1.20 per common currency exchange rate ceiling early last week.

On the other hand, an initial report before the week ended said the index for consumer sentiment went up to an 11-year peak of 98.2 in January (2015) from 93.6 last December of 2014 as against expectations for an increase to 94.1.

The NZ kiwi was higher against the Aussie note. The AUD/NZD scaled down 0.16 percent to 1.0540.

Meanwhile, the Bureau of Statistics in Australia disclosed that sales for new motor vehicles moved up by 3.0 percent last month after dropping 0.6% percent in November.

New Zealand will be releasing an account on business confidence for the day.