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The Euro Versus the Swissy – May 14, 2010

The EURCHF has also been trending down since December last year. As you can from the chart above, the pair’s movement and volatility appears to be greater during the past several days. Now if history repeats itself, it could trade flat for like a week or so before trekking lower again. In any case, if and when the pair moves past below the 1.4000 support, it could easily fall down to the 1.3800 marker.

Fundamentally, we all know that the cause of the pair’s recent volatility was due to the ongoing debt crisis in Greece and other European Union (EU) – member nations. Switzerland, on the other hand, is one of the few countries with a relatively robust economy in Europe, making Switzerland a haven of investments especially when there is fear in the market. Investors need to exchange their domestic currencies to Swissy in order to purchase Swiss investments. The demand for the Swiss franc, therefore, becomes higher as investors dump the other currencies like the euro to invest in Switzerland.

Anyway, the debt crisis in the euro zone would not be solved overnight even if the debt-stricken Greece could borrow some more funds to pay their upcoming dues. Still, they would have to pay the new money that they borrowed. They would eventually have to generate cash domestically to pay their debts from the other nations.

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What’s the 411 on the Aussie? – May 13, 2010

Earlier today, it was reported that Australian firms have added some 33,700 more jobs in April, better than the 22,600 market forecast. March’s employment change figure was also revised upward to 27,700 from 19,600. Still, the country’s unemployment rate worsened a little bit to 5.4% from 5.3% during the past two months. In any case, the latest increases in employment in March and April have sparked some speculation that the Reserve Bank of Australia could once again hike their interest rates. At present, the RBA’s interest rate is pegged at 4.50%, which is already the highest among the major currencies.

Today’s employment result, though, drew some mixed reactions from the market. Initially it gave the Aussie some support against the safer dollar and yen but it was not sustain its gains due to the investors’ still tentative views on the market. It, however, performed great against the problem child, I mean, problem currency – the euro.

My upbeat outlook on the AUDUSD and AUDJPY was tampered during last week’s bloodbath as both pairs managed to break their long term downtrend. Nonetheless, I remain somewhat bullish on the two since there are no apparent signs of technical reversal as of yet. Moreover, a potential rate hike of say 0.25% could only make the Aussie more attractive by giving the buyers additional 4.50% and 4.65% bonus in interest differentials alone for AUDUSD and AUDJPY, respectively. Then again a safer bet, in my opinion, would be to short the EURAUD since the pair is still on a downtrend. Shorting it would effectively give one 3.75% add on bonus in interest rate differential as well, assuming the RBA raises its rate to 4.75%. Not bad at all. But that’s just me.

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EURO to Take Another Blow? – May 12, 2010

Germany’s preliminary first quarter gross domestic product (GDP) growth will be on tap shortly at 6:00 am GMT. Germany is seen to post a dismal 0.0% growth during the first leg of this year. However, given the unexpected 2.4% skid in German retail sales last March, the country’s overall output could even miss the 0.0% forecast. Remember that domestic consumption makes up about 56.7% of Germany’s GDP. And as we know, the retail sales account is used as a leading indicator of the country’s production as a whole. Hence, such drop in retail could negatively reflect in the first quarter GDP.

So what does this mean for the euro?

Note first that Germany takes up about a third of the euro zone’s total GDP. A weak German number, therefore, could likewise translate in the euro zone’s broader account. If German’s GDP fails to impress, such would place the country back in contraction mode, making investments in Germany and even in the euro zone all the more less attractive. This, of course, will force a lot of investors to pull their money away from German investment vehicles, making the demand for the euro a lot lesser as well.

At present, the EURUSD is trading just below 1.2650 while the EURJPY is moving just around 117.00. A negative German GDP reading, consequently, could possibly send the EURUSD and the EURJPY lower somewhere at 1.2550 and 116.00, respectively.

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A Sigh of Relief for the Euro – May 10, 2010

The recent €750 billion ($962 billion) aid package by the EU-member nations and the IMF has temporarily given the market some confidence, causing the non-dollar currencies, particularly the euro to rebound after last week’s sharp drop. It was also reported that the European Central Bank (ECB) will also intercede in the European bond market to likewise purchase sovereign debts of those countries that are deep in debt. Ahem! Greece. Ahem!

During the first four days of last week, the euro suffered some telling blows. The EURUSD, for one, plummeted to a low of 1.2522 after opening at 1.3348 during the start of the week. That’s an 826-pip crash right there! Ouch! It was only last Friday that the EUR’s dive got halted. The recent bailout news plus the ECB’s plan to purchase sovereign debts have pushed the EUR higher as it even gapped up to start this week.

While these notions indeed calmed the global economy at the moment, a lot of things are still uncertain. Note that these new loans will just be used to finance the countries’ old debt. So the question now is: When the new debt comes due, will Greece, for example, be able to repay them on time? Or will they need a new set of bailout? The market will only be truly at ease once these credits get paid in full on time. Such will likely halt the EUR’s recent descent. If not, then another massive sell-off in the market could occur. As for me, green is better than red so I prefer the former.

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99.9% Decline of Accenture

The second-biggest technology consulting company, Accenture , opened at $41.49 on May 6, 2010 and fell more than 99 percent to a penny ($0.01) around 3pm eastern time (check the red circles on the image). Still, it was able close at $41.09 just down by 4.2%.

Imagine if you’re able to buy it at $0.01, after an hour it multiplies by more than 4,000 times!!!

Unfortunately, if you were able to buy Accenture (ACN) stocks at that price and time, it wouldn’t be valid since according to bloomberg, all trades executed below $17.74 have been canceled. Also, according to NYSE, those kinds of transactions may be voided.

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