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If you are reading my site then you're an entrepreneur. And just as a new business must capitalize upon the strengths of its founders, a career in the markets crucially hinges upon the assets—personal and monetary—of the trader. I'm a self taught trader and I'll try to focus on numbers than the grammer/ perfect language as it holds no value in market.
Think clearly. Plan accordingly. Commit completely!!!
Caution Note
My forecast updates are my plans and sometimes it may look against trend and vice-versa. Individuals must assess their account & margin before committing all my trades.
All charts presented here are patterns (are free - no marketing) - some (around 60%) patterns hit target..
(Waiting for Daily Market latest session sentiments updates)...



Ratio Strategy (non technical -liquidity based)



When the providers ratio in this table >+65 or <-65 then take the trade for reverse trend. If the value is <-65 then BUY and viceversa.

My Forecasts

13:15GMT Made some small LONGs for EURs.. made some profit on earlier SHORTs ;D very nice day...
12:00GMT News on Banks Stress - reuters predict
*** COUNTRIES IN MARKET FOCUS, ALPHABETICALLY ***

FRANCE - PASS EXPECTED

BANKS PARTICIPATING: BNP Paribas; Societe Generale; Credit Agricole; BPCE, parent of Natixis.

OFFICIAL COMMENTS: Bank of France head Christian Noyer said there was "no reason" to believe French banks would fail Europe-wide stress tests as they were regularly tested by the regulator. (Europlace business forum, July 6).

WHAT ANALYSTS SAY: Most expect all banks to pass. Some brokers using a harsher stress test than CEBS have cast doubt on Credit Agricole's capital strength.

GERMANY - 1 FAIL, 13 PASSES EXPECTED

BANKS PARTICIPATING: Deutsche Bank; Commerzbank; Hypo Real Estate; Landesbank Baden-Wuerttemberg; Bayerische Landesbank; DZ Bank; Norddeutsche Landesbank; Deutsche Postbank; WestLB; HSH Nordbank; Landesbank Hessen-Thueringen; Landesbank Berlin; Dekabank Deutsche Girozentrale; WGZ Bank

COMMENTS: With the exception of nationalised Hypo Real Estate no German bank in the test is expected to fall below the minimum capital threshold required to pass the exercise, several sources close to the banks told Reuters. Head of German banks association said that "all in all" he expected German banks to perform well.

WHAT ANALYSTS SAY: Apart from Hypo Real Estate, some analysts using different stress test assumptions have said Commerzbank would need more capital in their scenario.

GREECE - PASS EXPECTED

BANKS PARTICIPATING: National Bank of Greece; EFG Eurobank; Alpha Bank; Piraeus Bank; Agricultural Bank of Greece; TT Hellenic Postbank

OFFICIAL COMMENTS: Central bank chief George Provopoulos has said he expects Greek lenders to "smoothly pass" the tests. Bank sources told Reuters on Thursday that European bank regulators had toughened the test criteria.

WHAT ANALYSTS SAY: Citi analysts say NBG would need capital in their own stress test scenario. Credit Suisse sees all but two Greek banks - ATEbank and Piraeus - out of the recapitalization zone. ATEbank's management said in May that it was considering boosting its capital.

IRELAND - 1 PASS, 1 CONDITIONAL PASS EXPECTED

BANKS PARTICIPATING: Bank of Ireland; Allied Irish Banks

OFFICIAL COMMENTS: Finance Minister Brian Lenihan and central bank Governor Patrick Honohan both said that the two Irish banks had already passed domestic stress tests that were tougher than the EU test.

ITALY - PASS EXPECTED

BANKS PARTICIPATING: Intesa Sanpaolo, UniCredit, Banca Monte dei Paschi di Siena, UBI Banca, Banco Popolare

OFFICIAL COMMENTS: Bank of Italy Governor Mario Draghi said last week he was confident stress tests would show individual banks' capital is strong enough and that financial bases are sound.

PORTUGAL - 1-2 FAILS POSSIBLE

BANKS PARTICIPATING: Caixa Geral de Depositos, Millennium bcp, Banco Espirito Santo, Banco BPI.

OFFICIAL COMMENTS: Treasury Secretary Carlos Pina said stress tests showed a solid, well-managed banking system without capital problems and tests results would reinforce investor confidence in Portugal.

WHAT ANALYSTS SAY: Millennium bcp and Banco BPI have failed stress tests by brokers including JPMorgan, Macquarie and Keefe, Bruyette & Woods using different assumptions than CEBS.

SPAIN - SOME CAJAS EXPECTED TO FAIL

BANKS PARTICIPATING: Banco Santander; BBVA; Banco Popular Espanol; Banco de Sabadell; Bankinter; Banco Pastor; Banca March; Banco Guipuzcoano; all unlisted savings banks or "cajas."

OFFICIAL COMMENTS: The director general of the Spanish Confederation of Savings Banks (CECA) has said he did not expect nasty surprises, but did not rule out some lenders having to raise capital. Newspaper El Pais reported on Friday that several Spanish banks would be found to need new capital under the test scenarios, citing unnamed financial sources.

WHAT ANALYSTS SAY: Analysts expect no problems at the big listed banks. They expect capital shortfalls at some cajas to be covered by the Bank of Spain's restructuring fund in a process that started before the stress tests were announced.

09:25GMT If you're wondering why I keep SHORTing EURs - Its b'cus of EU banks stress test. I expect some big holes in PIIGS especially Ireland, iceland (NonEU) and for that matter Italy too ;D you can call me sadist but I make my bread & butter from these expectations.
08:20GMT 100 pips target was small ;D Now I'm making SHORTs in EURs..target 50 pips
06:00GMT Entered Longs in JPYs and now waiting; From 8AM GMT data release will start.
05:00GMT Take Longs in almost all our pairs except GBPUSD on next RSI down in 1 or 5 min TF. I'm expecting 50-100 pips UP.
02:30GMT Good Morning Friends, EURUSD, JPYs pointing DOWN. It will be small DOWN and I expect it to continue after a small hill climb. GBPUSD is neutral - mixed signal.

Technical Play

Market Rumours

2010/07/23 17:22DJ UK Osborne: Optimistic About Economy Path But Job Not Yet Done
LONDON -Friday's much stronger-than-expected growth data show it was right to start cutting the U.K.'s GBP155 billion deficit this year, Treasury chief George Osborne said Friday. Osborne noted that most of the second quarter's shock 1.1% quarterly expansion came from the private sector 'and put beyond doubt that it was right to begin acting on the deficit now.' Osborne said while he is 'cautiously optimistic about the path for the economy, the job is not yet done.' 'The priority now is to implement the budget policies which support rebalancing and to help ensure the sustained growth that the OBR forecast this year and next,' he said. The new government has laid out plans to chop GBP6.2 billion from public spending in the current financial year and has laid out a GBP113 billion fiscal consolidation plan for the next five years. The opposition Labour party has said the austerity measures could kill off the recovery and in recent weeks--after the government's June 22 austerity budget--consumer and business confidence have taken a knock. However, Friday's data sent the biggest signal so far that the country's economic recovery had gained significant momentum by the time the Conservative and Liberal Democrats coalition took office in May. The U.K. economy grew at its fastest pace in more than four years in the second quarter, the Office for National Statistics said earlier Friday, expanding 1.1% on the quarter and 1.6% on the year between April and June. Economists surveyed by Dow Jones Newswires had forecast much more modest growth rate of 0.6% on the quarter and 1.1% on the year.

2010/07/23 17:11=DJ DATA SNAP: UK Econ Grows 1.1% In 2Q, Fastest Pace In 4 Years
LONDON -The U.K. economy grew at its fastest pace in more than four years in the second quarter, the Office for National Statistics said Friday, in the strongest sign yet that the U.K. recovery has real momentum behind it. In its preliminary growth data, the ONS said the economy expanded 1.1% on the quarter and 1.6% on the year between April and June. That means the U.K. has now expanded for three straight quarters since a deep and protracted recession. In the first quarter, the economy expanded 0.3% on the quarter and declined 0.2% on the year. The last time quarterly growth matched 1.1% was in the first quarter of 2006. Quarterly growth hasn't been higher since the third quarter of 1999. Economists surveyed by Dow Jones Newswires forecast much more modest growth of 0.6% on the quarter and 1.1% on the year. The data will ease concerns that the recent troubles in the euro zone and the government's ambitious fiscal tightening plans will undercut the recovery in the period ahead. Earlier this month, Bank of England policy makers discussed easing policy further because of growth concerns. The biggest contribution to quarterly growth came from the service industry, which expanded 0.9% on the quarter--the fastest expansion in three years. That includes an assumption by the ONS that service sector will contract 0.4% on the month in June. Total production expanded 1% on the quarter, while the ONS said that construction expanded 6.6%--the biggest quarterly rise since 1963.

2010/07/23 16:59=DJ Moody's:IMF Deal Key For Hungary To Cut Market Financing Cost
BUDAPEST -Hungary has no short-term financing issues but resuming talks and securing an agreement with the International Monetary Fund would cut its financing costs longer term and save it from a credit-rating downgrade, rating agency Moody's said Friday. 'An agreement with the IMF would facilitate market access for Hungary and, obviously, improve the situation beyond short-term liquidity,' Moody's lead analyst for Hungary, Dietmar Hornung told Dow Jones Newswires after the rating agency placed Hungary's sovereign rating under review earlier Friday. The move reflects the breakdown Saturday in talks between the IMF/EU and Hungary on the availability of the remainder of the country's existing EUR20 billion credit line. Talks were suspended after Hungary's new government refused to implement further fiscal austerity measures. Rating agency website: www.moodys.com

2010/07/23 16:42=DJ DATA SNAP: Ifo Business Confidence Biggest Jump Since Unification
FRANKFURT -German business confidence made the biggest leap in July since the country's unification, contrary to expectations of a fall, Munich-based think-tank Ifo said Friday. Ifo's compound index of six-month expectations and an assessment of the current situation rose 4.4 points to 106.2. That compares with forecasts of a decline to 101.5 in a Dow Jones Newswires consensus poll of economists. 'The German economy's capacity utilization now is just somewhat lower than the long-term average,' said Ifo President Hans-Werner Sinn. Website: www.ifo.de

2010/07/23 16:04DJ Long-Term JGBs Down On Stock Upturn; Europe Stress Tests Eyed
TOKYO -Long-term Japanese government bonds fell on Friday as a sharp upturn in Tokyo shares sapped demand for safe-haven assets, but the outlook for the JGB market will be contingent on European bank stress test results due later in the global day. Analysts say the outcome of the tests, which are slated to be released 1600 GMT, may alleviate excessive concerns over the future course of the euro zone's financial system and prompt more players to start selling cash bonds, driving long-term JGB yields upward further. If there are no surprises on the test results, the market's focus could turn to whether domestic stock prices will continue rallying as hopes grow for improvements in corporate profits, said Tetsuya Miura, chief market analyst at Mizuho Securities. 'Some JGB investors believe that the 10-year JGB yield may fall below 1.0%, but they might need to keep an eye on how stock markets will develop down the road,' he added. As of 0600 GMT, the benchmark 10-year JGB yield was up one basis point at 1.065%, while lead September JGB futures closed at 141.69, down 0.18. The Nikkei Stock Average ended up 2.3% at 9,430.96. Still, some traders expect JGB yields to remain on a downward trend as the prospects of Japan's economy are increasingly uncertain. Fears linger that the yen may rise sharply and growth in the nation's exports could stall, which will discourage players from actively letting go of JGBs, they said. Indeed, superlong-dated cash bonds were bought earlier in the day, with the 20-year and 30-year yields falling 0.5 basis points to 1.790% and 1.830% respectively. 'As the U.S. economy also shows signs of slowing down, it's very unlikely that investors will rush to sell JGBs,' one trader at a Tokyo securities house said. 'Demand for longer-term JGBs could remain solid for a while, and the possibility is very low that the yields will surge soon,' he added.

2010/07/23 15:33=DJ DATA SNAP: French June Consumer Spending -1.4% On Mo, -1.9% On Yr
PARIS -French consumer spending dropped substantially in June from May, contrary to expectations, due to lower textile and leather products spending ahead of the sales season, while home equipment spending fell after a strong increase the previous month, according to data released Friday by French national statistics office Insee. French consumer spending index dropped 1.4% in June from May and fell 1.9% from a year earlier. Insee also revised May consumer spending growth down to 0.6% from a previous estimate of 0.7%, Insee said. Consumer spending was forecast to rise 0.5% on the month and increase 0.5% on the year, according to a survey of economists by Dow Jones Newswires. In June, spending on textile and leather products dropped 5% from May and was down 8.9% from a year earlier, while home equipment spending dropped 3.6% on the month, after a 6.4% monthly increase in May. On the year, however, home equipment spending was up 6.5%, Insee said. Car spending was stable on the month in June but down 8.2% on the year as a result of the gradual phasing-out of government incentives. Agency Web site: www.insee.fr

2010/07/23 14:57DJ Forex Options: Dlr/Yen Volatilities Down, But Dollar Risks Seen
TOKYO -Benchmark dollar/yen volatilities fell Friday due to a relatively stable exchange rate, but other areas of the options market suggested some investors think the greenback may fall further against its Japanese counterpart in the months ahead, although perhaps not in the coming sessions. In a sign that concern has increased slightly over possible dollar falls in the longer term, one-month 25 delta risk-reversals favoring dollar puts over yen puts edged up to 1.55%/2.05%, from 1.45%/1.95% Thursday in Tokyo. Put options profit on slides in the underlying asset, thus the higher premium for dollar puts suggests the view that the greenback could face further downside pressure against its Japanese counterpart. One market participant entered an eight-week dollar-yen bearish 25-delta risk reversal, at 2.1 volatility points in favor of dollar puts/yen calls over dollar calls/yen puts, a senior dealer at a non-Japanese brokerage in Tokyo said. Echoing the bearish dollar view, a spot foreign exchange dealer at a major Japanese bank said a drop past the U.S. unit's recent low at Y86.27 to as low as Y85.00 is possible in the coming weeks. Such falls in the dollar-yen could be triggered by further signs of weakness in the U.S. economic recovery, dealers said. Still, most investors seemed to think any sharp drops before the weekend are unlikely. One reason is that European bank stress test results, due at 1600 GMT, aren't expected to drastically undermine investor confidence in financial markets. Should the results indeed not prompt flight-to-safety flows, the dollar could rise against the safe-haven yen. Also cutting into benchmark options prices was a slightly higher trading band for the dollar. The greenback traded in a Y86.73-Y87.23 range as of 0300 GMT, up from Y86.34-Y87.22 Thursday. For these reasons, benchmark one-month dollar-yen at-the-money volatilities fell to 10.90%/11.60% from 11.25%/11.95% Thursday in New York.

2010/07/23 14:10=DJ WORLD FOREX: Euro Down Vs Yen As Exporters Sell; Stress Tests Eyed -3-
TOKYO -The euro and dollar fell against the yen in Asia Friday as Japanese exporters and Asian short-term players sold the currencies after they rose to attractive levels earlier in the day.Further declines in the euro and dollar may be short-lived before the 1600 GMT release of the much-awaited results of European stress tests, which gauge whether Europe's banking sector has sufficient capital. The outcome may determine directions of the euro as well as the dollar next week, traders said.The two currencies entered Asian trading Friday amid expectations that Tokyo shares may gain following New York stocks' overnight rise, encouraging market participants to sell the safe-haven yen.Japan's benchmark Nikkei Stock Average was up 2.3% in Tokyo's afternoon session, while share prices in South Korea, Australia and New Zealand were also higher.But the euro and dollar later retreated as Japanese exporters sold the currencies following their climb to favorable levels, prompting Asian short-term players to follow suit, traders said.As of 0450 GMT, the European unit was at Y112.02 from its intraday high of Y112.67 and its New York Thursday level of Y112.05. The greenback meanwhile exchanged hands at Y86.85 compared with its early high of Y87.23 and Y86.93 late Thursday.Some dealers said the two currencies may extend their declines if the stress tests are considered not stringent enough, or if the results come in surprisingly negative, weighing on stocks and prodding players to reduce risks.Mizuho Corporate Bank senior trader Yuichiro Harada said the euro's long-term outlook appears dim, no matter what happens following the results.'Even if the stress tests are evaluated favorably (by the market), this doesn't mean the issues over the euro's credibility will be resolved,' Harada said. Financial conditions in some euro-zone nations may remain stagnant, he added.As of 0450 GMT, the single unit was at $1.2896 compared with $1.2892 overnight. The ICE Dollar Index, which tracks the dollar against a trade-weighted basket of currencies, was at 82.565, down from 82.611.

2010/07/23 10:34=DJ MONEY TALKS: Ben Bernanke's Unenviable Balancing Act
NEW YORK -In the late 1990s, U.S. economists talked optimistically about a "Goldilocks Economy" of low inflation and healthy growth. Like Baby Bear's porridge, it was not too hot and not too cold, which seemed to justify the Federal Reserve's relatively easy monetary policy. A decade later, the Fed is grappling with the opposite dilemma. The sluggish U.S. economy with its weak job market, reluctant consumers, nervous businesses and wide output gap is like Mama Bear's porridge: too cold. Yet the Fed has already pumped so much liquidity into the banking system that many fear a rapid move into Papa Bear's "too hot" zone. That's why Fed Chairman Ben Bernanke tried to have it both ways in his comments to lawmakers these past two days. In his prepared testimony, Bernanke talked of the Fed's plans to eventually reduce its balance sheet and get ahead of inflationary pressures. But during question time, he entertained the possibility of the Fed doing more to boost liquidity if the economic recovery falters. The Fed's job is complicated by the safe haven flows that have distorted U.S. bond markets due to fears over Europe's sovereign debt crisis. According to Deutsche Bank's economics team, the "Greece Premium" explains between 60 and 100 basis points of the 10-year Treasury note's historically low yield right now. Rather than its current level around 2.93%, it would be somewhere between 3.53% and 3.93% if investors weren't fearful of a major euro-zone default. Deutsche Bank thinks the fear trade in Treasurys could disappear soon, especially if Friday's stress test results for euro-zone banks bolster confidence. Others aren't so sure. RBS Capital Markets estimates that banks outside of Greece, Spain and Portugal have EUR2 billion in loan exposure to those three debt-laden economies, a giant systemic risk that it says warrants a 10-year yield at 2.75% for quite some time. Yet even RBS thinks the euro zone will eventually pull through. When the market realizes that the sky isn't falling, Treasury yields will back up quickly. That would immediately raise costs for U.S. borrowers, undermining a key source of economic stimulus. What's more, investors are also likely to realize at the same time that, despite everything, the global economy is recovering. Stronger-than-expected purchasing manager data out of the euro zone affirmed that picture Thursday, as did healthy second-quarter earnings from marquee U.S. companies such as Caterpillar Inc. (CAT) and 3M Co. (MMM). Renewed focus on the global recovery would, despite high unemployment, immediately draw attention to the Fed's "too hot" problem: how to drain the $1.1 trillion in excess reserves it has placed in the banking system before they escape into the economy and become inflationary. That's when the Fed's battle to manage inflation expectations will begin--well before actual inflation emerges--with its key goal being to anchor long-term yields. It can't let investors conclude it has lost control over the excess reserves, otherwise 10-year yields will rise even further. Hence Bernanke's frequent reminders that he has various tools for draining those reserves when the need arises. Yet he must also be wary of putting on the brakes too quickly, for fear it could choke off the recovery. All this would be easier if everyone completely trusted the Fed's capacity to manage prices. But unfortunately Bernanke doesn't command such unwavering faith, in part because the 2008 crisis taught markets that they'd placed too much of that in his predecessor Alan Greenspan's flawed confidence in a "Goldilocks" utopia.

2010/07/23 09:32=DJ FOREX VIEW:Euro Rebound Offers Opportunities For Money Managers
NEW YORK -The euro, which has moderated its slide from late 2009 and currently is trading around $1.30, is attracting both bulls and bears.Since December, the euro has swung in a very broad range, roughly between $1.50 and $1.19, making it difficult for long-term investors to get a good handle on the future direction of the currency. Some expect it to gain modestly beyond $1.30, while others see it to ticking back down to around $1.20. Short-term traders, who might pop in and out of the common currency on a daily or weekly basis, recently have placed big bets against the euro, though those have been pared back as the euro has rebounded from its recent lows.The euro dropped to $1.1876 in early June, a more-than-four-year low, as worry over the weak fiscal positions of peripheral euro-zone countries, such as Spain, Greece and Portugal, sent shock waves through financial markets, leading investors to flee the common currency for the safety of the U.S. dollar.Even with the euro now solidly above those levels at $1.29, 'it's too early to make big forays unless you have a very, very long time horizon,' said Constantine Ponticos, managing director of investment management research in London for Pareto, which manages $47 billion in currencies. 'I don't think the market is prepared to afford the euro zone that level of credibility yet,' he said.If investors insist on a euro-specific strategy, Ponticos said, they could place positive bets on the common currency against other European currencies, such as the U.K. pound, Hungarian forint and the Swedish krona. That way, even if the euro does decline--if the euro zone goes into a double-dip recession, for instance--the peripheral currencies are likely to decline as well, he said.Late Thursday, the euro traded at $1.2890 from $1.2763 late Wednesday, according to EBS via CQG.As concerns have eased about the euro zone's ability to extricate itself from its debt crisis, investors have cast worried eyes on the slowing pace of the U.S. recovery, lending the euro some support against the dollar, money managers said.The euro could rebound to around $1.35 over the next one to three months, said Thanos Papasavvas, head of currency management in London for Investec Asset Management, which has $70 billion under management.Papasavvas said even though questions remained on how the euro zone would come through its debt crisis, the fact that the bloc's leaders have at least recognized they have a problem--and have started down the path to solve it--places the euro zone ahead of the U.S., where leaders have yet to tackle high levels of government debt. Papasavvas said he was underweight on the U.S. dollar.Geoffrey Pazzanese, co-manager of Federated's $736 million Intercontinental Fund (RIMAX), has bulked up on holdings in German companies, including Siemens and Daimler, as the country's exporters benefit from a weakened euro.As the euro has come off the $1.50 levels it hit late last year, 'that should be a very good tailwind' for euro-zone exporters, he said.'To a certain extent, euro weakness is quite welcome,' Pazzanese said. If the euro were to make a sustained bounce to the $1.30 to $1.40 area, Pazzanese said he would reassess his current investment strategy, with the common currency then not offering the same benefits to exporters. He said he expects the euro in the longer term to trade between $1.20 and $1.25, as U.S. economic fundamentals outpace those in the euro zone.'There was a time when you couldn't even mention the word 'Europe,'' said Leila Heckman, senior director of Mesirow Financial, a Chicago firm with $37 billion in assets under management. 'The fundamental issues are still there,' she said, but 'as the markets became oversold, that became somewhat of an opportunity.'The euro's slide from the $1.50 area made the common currency a bargain. Heckman's computer model determined Spain is an ideal opportunity for investors among industrialized and emerging economies. The model, which is updated monthly, takes into account the euro's so-called fair value against its biggest trading partners as well as macroeconomic data, growth indicators and measures of momentum.

2010/07/23 09:00=DJ SEC To Give Six-Month Reprieve For Ratings Firms
WASHINGTON -The U.S. Securities and Exchange Commission will give bond issuers six months to omit credit ratings from registration statements in the asset-backed market to give them time to transition to new liability standards under the financial overhaul law, the SEC announced Thursday.The announcement comes a day after the Dodd-Frank financial measure was signed into law.'This action will provide issuers, rating agencies and other market participants with a transition period in order to implement changes to comply with the new statutory requirement while still conducting registered ABS offerings,' said Meredith Cross, director of the SEC's division of corporation finance.Credit-rating agencies are complaining about a provision that eliminates a liability exemption for credit ratings quoted in sales documents of new asset-backed bonds. At least one bond deal, from Ford Motor Co.'s (F) financing arm, was scuttled due to this new provision.With the announcement from the SEC, bond deals can go forward under normal SEC procedures without quoting credit ratings in their registrations. Previously, such deals weren't given expedited approval if they excluded a rating.The SEC says the change in the law only affects deals in the asset-backed market. Rules for the more active corporate debt market won't change under the financial rewrite.'We believe that the corporate debt market has not been, and should not under current rules be, meaningfully affected by the statutory change,' Cross said.Federal Reserve Chairman Ben Bernanke weighed into the controversy earlier Thursday, saying regulators should address the new legal liability for credit-rating agencies.'It is an issue that needs to be looked at,' Bernanke said at a House Financial Services Committee hearing. 'As I understand it, it does inhibit somewhat the sale of the [asset-backed securities].'A spokesman for the financial law's co-author, House Financial Services Chairman Barney Frank, (D., Mass.), said the concerns were overblown.'The law was signed yesterday. To say this was shutting down the ABS market is ridiculous on its face,' said Steve Adamske. 'The law is perfectly clear in its intent, and that is to lower the dependence by investors and everyone else in the world on ratings agencies.'Republicans say jitters in the asset-backed market show the uncertainty created by the financial law.'How profound will the impact of rating agency liability be? And what other sleeper implications are in that bill that we will begin to see affecting markets,' said Rep. Adam Putnam (R., Fla.), in an interview. Putnam questioned Bernanke about the problem at the hearing.Advocates for new liability standard for ratings firms appear unmoved. 'I'm not sure there's any substantive reason why they [ratings firms] should not be subject to the same standard' as accountants, auditors, or investment bankers,' said Jeff Mahoney, general counsel for the Council of Institutional Investors.

2010/07/23 06:11DJ BP To Sell Stake In Pan American Energy; Seeks $9B-Source >BP
BUENOS AIRES -U.K. oil giant BP PLC (BP, BP.LN) has decided to sell its stake in Argentine unit Pan American Energy and is in talks with Argentina's Bridas Corp., a person familiar with the negotiations said Thursday.Reports have put the value of BP's 60% stake at around $9 billion and that is what BP is seeking, the person said.However, Bridas Corp. is offering $6.5 billion, the person said. Bridas already owns the other 40% of Pan American and has priority over any shares in the Argentine unit that BP should opt to sell.BP has been selling assets to raise cash to cover costs related to its massive oil spill in the Gulf of Mexico."BP doesn't know how much cash it will need for what's left of 2010 and 2011," the person said.The person, who asked to remain anonymous given the ongoing nature of the talks, said BP plans to undergo a profound reorganization and that the sale of Pan American could occur within the next two or three months.BP Press Officer David Nicholas said from London that the company wouldn't comment on any plans that it may or may not have to divest in Argentina."That's speculation," Nicholas said. "We don't comment on rumors. If and when we have announcements to make, we make them. We've informed governments in Pakistan and Vietnam that we're looking to divest in downstream assets there," he said.China National Offshore Oil Corporation Ltd., or Cnooc (CEO, 0883.HK) agreed in March to buy a 50% stake in Bridas from Argentina's Bulgheroni family.As BP's existing partner in Pan American, Bridas has considerable say over who gets to buy BP's shares in the event of a sale. If Bridas's offer under the first-refusal option isn't acceptable, BP would then draw up a short-list of potential buyers and submit it to Bridas, which could veto up to 50% of the companies on the list, according to the person.Moreover, if BP wanted to accept an offer from one of the remaining companies on the list, it would still have to give Bridas an opportunity to match the offer.Earlier this week, BP announced that it was selling some U.S.- and Canadian-based oil and gas assets to Apache Corp. (APA) for $7 billion. The deal also included selling an exploration concession in Egypt. BP also has suspended dividends and cut capital spending."BP decided to withdraw from Pan American independently from these sales," the person familiar with the negotiations said.Bridas couldn't be immediately reached for comment.

2010/07/23 06:10DJ CREDIT MARKETS: Borrowers Continue To Sell More New Debt
NEW YORK -Corporate bond issuers were active in the primary market Thursday as strong U.S. corporate earnings, better-than-expected housing data and optimism about the release of forthcoming European bank stress-tests buoyed investor confidence in risk assets.Three investment-grade issuers issued new debt, while the high-yield space continued its robust week with two major debt issues. The fifth Canadian bank this year issued covered bonds. Meanwhile, issuers of asset-backed securities are hamstrung by credit ratings agencies who aren't allowing their ratings to be used with new issues out of fear that new rules in the Dodd-Frank bill could expose them to liability.Credit markets were helped by news that U.S. existing home sales beat analysts' predictions and strong earnings from key industrial firms AT&T Inc. (T), 3M (MMM) and Caterpillar Inc. (CAT).In Europe, overnight reports showed that the euro zone's private sector expanded at a faster pace in July, while murmurs about stress tests results indicate that most European banks have little to fear.The iTraxx Europe Financials credit-default swaps index, which tracks subordinated debt from 25 banks, was 1.61 basis points improved at 211.75 basis points as of 4:25 p.m. EDT, according to Markit.'Barring a shock result on the bank stress tests tomorrow afternoon--which we don't expect--credit should see the gentle rally we've had so far in cash and synthetics extend through the summer,' said Juan Esteban Valencia, credit strategist at Societe Generale, in a commentary. Investment-GradeA mix of high-grade issuers came through and finished dollar bond deals worth over $1 billion.U.S. Bancorp (USB) sold $1 billion in five-year, 2.45% debt securities Thursday at 99.902 to yield 2.471%, or a spread of 0.78 percentage points over comparable U.S. Treasurys, compared to initial price guidance of 0.80 points. U.S. Bancorp announced Wednesday its second-quarter earnings rose 63%, or 45 cents a share, to $766 million from a year earlier, becoming the fourth financial firm this week to sell debt on the heels of an earnings release.Goldman Sachs (GS) and Morgan Stanley (MS) each sold $3 billion in debt Wednesday, while Charles Schwab (SCHW) sold $600 million in debt on Monday.The Canadian province of Quebec sold $1.5 billion in 10-year global notes at 60 basis points over mid-swaps, according to a syndicate banker familiar with the deal. The 3.5% notes priced at a discount to yield 3.547%, in line with guidance.The State Bank of India (SBKJY, 500112.BY) sold a $1 billion in five-year bonds to yield 4.566%, or 2.90 percentage points over comparable U.S. Treasurys.U.S. dollar-denominated high-grade corporate debt issuance stood at $12.6 billion, meaning that Thursday's deals pushed the weekly volume total well over 2010 weekly average issuance total of $13.28 billion.In the secondary bond market, Wednesday's debt issues by Goldman Sachs and Morgan Stanley were most actively traded, and strong demand for the $6 billion in new financial supply drove up prices and lowered yields for the freshly sold bonds, according to data from MarketAxess.The price for Morgan Stanley's 5.5% notes due July 2020 rose by around 1/16 point to yield 5.545%; the price for Goldman Sachs' 3.7% notes due August 2015 rose by 7/16 point to yield 3.629%.Trading volume in both the high-grade and high-yield space was $13.1 billion as of 4:50 p.m. EDT, better than July's $11.66 billion average. High YieldsThe high-yield market continued its solid run this week with a pair of deals pricing and other recent new issues sharing in the gains of the broader secondary market.Much of the cash bond market was up Thursday, with advances led by the technology sector in particular, as notes of NXP BV and Freescale Semiconductor picked up more than a point, while other large credits like First Data Corp. posted similar gains in active trade.In the primary market, Accuride (ACUZ) sold $310 million of 9.5% senior secured notes due 2018 at 97.3 cents on the dollar via lead underwriter Deutsche Bank to yield 10%. Entravision Communication (EVC) sold $400 million of 8.75% senior secured notes due 2017 at 98.7 cents on the dollar via Citigroup to yield 9%. Both of those deals traded higher in early secondary market trade, continuing a trend seen in deals earlier this week, such as Wynn Las Vegas and Interactive Data. 'It's the end of July, so not a lot of deals are typically brought out, but this week has seen a fair amount of issuance for late July,' said Sabur Moini, fund manager at Payden & Rygel. 'The handful of deals we've seen have all gone well.' Weekly Lipper data on high yield fund flows is not expected until later Thursday but fund managers say cash inflows appear solid, if not as spectacular as they were a week ago, when mutual funds focused on speculative-grade debt recorded an uncommonly high $1.27 billion of net inflows.***********'It feels like there's still a lot of cash coming into the market as investors continue looking for yield,' Moini said. 'As Treasurys continue to appreciate and their yields to decline, high yield looks even more attractive.'The high yield CDX derivatives index was up 0.8 point to 97, according to Markit.At 12.2%, the U.S. distressed debt ratio is virtually unchanged in July from its June level of 12.3%, according to Standard & Poor's. The ratio measures the percentage of speculative-grade securities trading at distressed levels, typically meaning risk premiums of more than 1,000 basis points over Treasuries. Asset-backed SecuritiesIssuance of asset-backed securities stands at $61.96B so far this year, compared to $73.82 billion at this time last year, according to Citigroup data. The market faces serious challenges from the financial regulation signed into law Wednesday, as a new provision calls for rating agencies to be labeled 'experts' when filing registration documents with the Securities and Exchange Commission.Not wanting to risk the extra liability, rating agencies have said they won't consent to let their ratings be used for new filings. Commercial PaperThe commercial-paper market has risen for two consecutive weeks on both a seasonally-adjusted and unadjusted basis, according to Federal Reserve data released Thursday. Such increases in this short-term market could signal improvement in the wider economy as companies tap into short-term paper to meet their day-to-day needs and for business expansion.The market added $2.4 billion on a seasonally-adjusted and $8.2 billion on an unadjusted basis. Overall, the market is now $1.1 trillion in size on a seasonally adjusted basis, half of what it was before the crisis when the market totaled $2.2 trillion in July 2007. Mortgage SecuritiesToronto Dominion Bank was in the market with a $2 billion, five-year, covered bond issue of undetermined size Thursday. With this issue, the top-five Canadian banks have sold mortgage bonds to U.S. investors this year. Total foreign covered bond issuance to U.S. investors is $11.04 billion, surpassing the peak of $10.71 billion in 2007.Covered bonds are similar to residential mortgage-backed securities but require issuers to hold the collateral on their own books rather than spin them off into special purpose vehicles. As these bonds carry the additional heft of the full bank's balance sheet, they are seen as a safer alternative to residential mortgage bonds, which were at the heart of the financial crisis.Foreign banks are the only source of these sought-after new bonds, which haven't been minted in the U.S. because of a lack of clear regulations. Last week, Bank of Nova Scotia sold a $2.5 billion, three-year covered bond at a yield of 1.498%.The Toronto Dominion Bank issue, rated triple A by Moody's and DBRS, is backed by residential loans that carry the full faith and credit of the Canadian government.Barclays, Deutsche Bank, RBS and Toronto Dominion are the book runners on the deal.Meanwhile, risk premiums on agency mortgages tightened again as investors flocked to the lower coupons in the hopes of avoiding any hit from higher prepayments as mortgage rates continue to remain at historically low levels. Risk premiums tightened 3 basis points to 129 basis points over comparable Treasury yields. TreasurysPrices of Treasury securities fell Thursday as better-than-forecast global data and strong U.S. corporate earnings spurred a strong rally in the stock market, reducing demand for safe assets.The two-year note's yield rose from the record low of 0.545% hit overnight while the benchmark 10-year note's yield bounced up off a 15-month low. Long-dated securities bore the bulk of the selling, reversing Wednesday's gains.As of 3:50 p.m. EDT, the 10-year note was down 13/32 to yield 2.930% and the 30-year bond was 1 2/32 lower to yield 3.951%. The two-year note was little changed at 0.564%. Bond yields move inversely to prices.

My Forecasts

12:30GMT Wow, the EURUSD did the DOWN first and then drop- as predicted by our technical play chart yesterday. Pattern chart shows that it may make it to 1.26ish
01:20GMT Good Morning Friends, BoE Minutes day. As per last technical play chart GBPUSD RSI was at 33 - low point; a reversal on card. But the prices are above Upper Blue line - the climb will be limited. Expectation is that players are doing SHORTs stockpile. Today morning most of our pairs are looking UP except EURUSD - looking DOWN; not drop.JPYs showed lows yesterday a good point for LONGs stockpile.

My Forecasts

15:00GMT EURUSD pattern

12:50GMT JPYs made good Lows - now its peaking for another drop based on my indicators. I guess mid-week will be the best low point so expect new lows.
00:40GMT Good Morning Friends, Expecting GBPs & JPYs "modest" UP trend, EURUSD DOWN/drop. With GBP data release on focus the GBP pairs small UP & Down trends are expected.

Market Rumours

2010/07/20 20:07DJ Fed Call: No Liquidity Operations Due; Fed Funds At 0.2050%
NEW YORK -The Federal Reserve has no liquidity operations scheduled for Tuesday. Fed funds were last quoted at 0.2050%, compared with the federal-fund target range of zero to 0.25%, according to Tullett Prebon data.

2010/07/20 19:16=DJ DATA SNAP: UK CBI Industrial Output Slows Further In July
LONDON -U.K. industrial output growth slowed for the second consecutive month in July, an indication that economic recovery is losing some momentum, a survey by the Confederation of British Industry showed Tuesday. The survey's headline industrial output balance fell to +6 from +15 in the June survey. The balance is the difference between the percentage of manufacturers reporting an increase and those reporting a decrease. The survey showed that the total orders balance improved to -16 from June's -23, its strongest level since August 2008. But the export orders balance fell to -12 in July from -2 in June. The CBI said that in the three months to July the manufacturing sector saw output rise at its fastest rate in 15 years, with demand for U.K.-made goods continuing to strengthen and firms rebuilding their stocks. The volume of output over the three months to July hit its highest since April 1995, at +24 from +1 in April. 'Looking ahead, production is expected to rise further, but at a more moderate pace,' said Ian McCafferty, chief economic adviser for the CBI. 'In our view the risk of a double-dip recession remains low and the fortunes of the manufacturing sector are continuing to slowly and steadily improve.' The survey was carried out between June 22 and July 7, with a total of 439 manufacturers responding.

2010/07/20 17:35=DJ DATA SNAP: UK PSNB Above Expected, May Borrowing Revised Higher
LONDON -The U.K. government borrowed more than expected in June, with central government tax receipts increasing at a much slower pace than in previous months. The Office for National Statistics said Tuesday that the U.K. public sector borrowed a net GBP14.5 billion in June, down from GBP14.7 billion a year earlier. Economists had expected public sector net borrowing of GBP13.5 billion. Central government tax receipts rose 4.0% on the year in June, the smallest increase since January. That included a 10.9% rise in value added tax revenue on the year--the smallest rise since December 2009. The higher June borrowing and upward revision to May's borrowing numbers wipe out some of the seeming improvement in public finances noted in recent months as the U.K. battles with a GBP155 billion budget deficit. For the financial year to date, which started in April, public sector net borrowing totaled GBP40.3 billion versus GBP40.9 billion in the same period last year. The government is expecting a PSNB total of GBP149 billion for the full financial year. June's public sector net cash requirement was GBP20.9 billion, up from GBP20.2 billion a year earlier. Public sector net debt as a proportion of gross domestic product reached 63.9% in June, up from 57.3% a year earlier. The ONS said there had been a GBP1 billion upward revision to May's public sector borrowing. That was because of an 'exceptional' GBP2.3 billion underreporting of local government borrowing due to an error by the Department of Communities and Local Government, an ONS official said. The central government's May borrowing was revised down. That took May's PSNB to GBP17.1 billion.

2010/07/20 17:15=DJ Forex Focus: Euro Crisis Rumbles On
LONDON -So, the euro-zone debt crisis is over, right? Greece demonstrated last week that it can auction short-term debt with reasonable success and at a more modest yield than it would have to pay to access emergency backstops. The euro is back up at $1.30. Even Monday's downgrade to Irish debt by Moody's failed to have a lasting impact. Panic over. Don't you believe it. Let's not forget that Greece shelved plans to auction some one-year debt last week. Hardly long-term stuff. And the euro is up mostly because the dollar is down. As for Moody's ... where has it been for the past few months? Of course Ireland has a heavy debt burden. This is old news. No, this crisis is far from over. It has calmed down, for sure. Investors are no longer in skittish mood. Greek government debt is no longer one of the top three in the world in terms of default insurance costs. A decline in the single currency to parity against the dollar or even lower within the next few months now looks a bit far-fetched. But this one is going to run and run. A hefty reminder of that came over the weekend, when the International Monetary Fund and the European Union decided to play hardball with Hungary. The emergency lenders are not satisfied with Hungary's book-balancing plans. Hungary has refused to keep slashing. So that's that. The Eastern European straggler is not getting the next instalment of its EUR20 billion credit line just yet. This could be worse; Hungary is not in terribly urgent need of the funds and the lenders have not walked away for good. Still, the country's currency and bonds have come under huge strain as investors are nervous. And it matters for the euro zone: the cost of insuring government debt from euro-member Austria against default has climbed, as its banks are so heavily exposed to the Central and Eastern European region. What's more, it's also a cautionary tale for Greece. If Greece wants to be eligible for multilateral aid not just this year but every year until this mess is over, then it has to make brutal cuts in public spending for the long haul. Protests over these cutbacks have already been violent on a number of occasions. 'Hungary said it was already in the fifth year of austerity measures and it was not possible to tighten the screws any further. That's critical because it's exactly the problem the euro zone faces; austerity measures ... are not one-offs, they are multiyear projects,' said Simon Penn, an analyst at UBS in London. 'The IMF and EU have not fudged a solution. Hungary won't play ball so the funding line is suspended,' he added. 'Remember, Greece's fiscal position is far worse than Hungary's.' In addition, investors are still nursing doubts over the sustainability of the single currency project as a whole. Monday, Alan Brown, chief investment officer at Schroders, wrote that Germany's insistence that Greece and other errant euro members must 'sit on the naughty step for a decade or more' could kill the currency entirely. Greece could well decide that the austerity measures it is forced to comply with are simply too harsh, and conclude that binning the euro 'could be the lesser of two evils,' he said. The idea, often repeated, that too much political capital has been invested in the single currency to allow it to fail, and that a Greek withdrawal from the currency would be ruinous for the country, are not necessarily true, Brown added. 'It is at least conceivable that the euro could break up by way of the strong countries rising out of the euro, leaving Portugal, Italy, Ireland, Greece and Spain with the euro,' he said. 'The revaluation effects now would be entirely benign with those economies in an unchanged position and with the countries that left the euro with assets denominated in an appreciating new currency,' he said. Sure, Germany's exports may suffer, but it needs to boost domestic demand anyway. 'It pays to remember that we have seen currency regimes come and go before,' he said, pointing to the Gold Standard and a number of currency unions that rose and fell in the past. A breakup of the euro may not happen just yet, but it is 'highly likely in the medium term,' he said. 'This tragedy [or pantomime] has many more acts to come. Stay alert,' he said. Indeed. In early European trading hours Tuesday, the dollar's downtrend was still in full swing, with the euro at $1.3012, having earlier hit $1.3029--its highest level since May, according to trading system EBS. Late in New York Monday, the euro was at $1.2945. The dollar was at Y86.96 against the yen, little changed from Y86.86, while the euro was at Y113.15 from Y112.45.

2010/07/20 15:48DJ PRECIOUS METALS: Gold Steady In Asia; Buyers On Sidelines
SINGAPORE -Gold was steady in Asia Tuesday as Asian participants digested another overnight retreat.A Singapore-based trader said dip buyers were absent as repeated sell-offs in Europe and on the Comex in New York, apparently due to the lack of safe-haven demand, damped sentiment.'They are selling every rally now,' he said.At 0635 GMT, spot gold was at $1,183.70 a troy ounce, down 40 cents since Monday's New York close.Tocom June 2011 gold was at Y3,324 a gram, down Y72 as Japanese participants played catch-up with recent losses since the exchange was closed for a holiday Monday.Technically gold looks biased towards more downside, analysts said.'True support in gold lies at $1,167 from the May 21 low, with the close in gold below last weeks low of $1,187, keeping price risk to the downside,' ScotiaMocatta said in a technical note.'Momentum has eased and triggered stops below technical levels and will continue to pull back until decent technical support is held possibly around the $1,170 level,' Triland said.However, Triland added Friday's euro zone bank stress test results could be a turning point should the results disappoint and generate some risk aversion.Other precious metals were slightly higher, in line with industrial metals.Spot silver was at $17.69/oz, up 8 cents, and spot platinum was at $1,510/oz, up $3, while palladium was at $446/oz, up $2.

2010/07/20 15:02DJ Forex Options: Yen Options Down As Spot Higher, Demand Still Strong
TOKYO -Dollar/yen options fell slightly in Asia Tuesday as a modest pick-up in the underlying exchange rate decreased the immediate risk of the greenback falling to the psychologically-key Y85 mark.That mark is being closely watched as it's the level where the Bank of Japan could possibly start considering taking additional monetary easing steps, dealers in Tokyo said.Benchmark volatilities implied by one-month at-the-money dollar/yen options declined to 11.50%/12.20% from 11.80%/12.50% in New York Monday as U.S. unit moved to around the Y87.00 level, up from the low-Y86 levels it has seen recently.Going forward, a senior dealer at a major Japanese bank said that if the greenback gets close to Y86.00 again, volatilities should rise above 13%, as many Japanese exporters are interested in buying dollar-put option contracts, a tool to protect them from sharp declines in the U.S. unit.

2010/07/20 14:25=DJ DATA SNAP: German June PPI +0.6% MM, +1.7% YY, Above Forecast
FRANKFURT -Producer prices in Germany, Europe's largest economy, rose significantly more in June than was expected by economists as intermediate goods drove prices upwards, the Federal Statistics Office, or Destatis, said Tuesday. Producer prices rose 0.6% on the month in June and increased 1.7% on the year, Destatis said. In a Dow Jones Newswires survey, economists had forecast a rise of 0.2% on the month and an increase of 1.2% on the year. In May producer prices rose 0.3% on the month and 0.9% on the year. Prices of intermediate goods, those used during the production process, rose 0.3% on the month and 5.0% on the year. Inflation in this category of goods was last higher in April 2007 when prices increased by 5.3% compared with the corresponding period of the previous year. Excluding energy prices, which can be very volatile, producer prices increased 0.3% on the month and 2.1% on the year, Destatis said. Web site: www.destatis.de

2010/07/20 12:41DJ Japan Sengoku: To Keep New JGB Issuance Below Y44.3T For FY11
TOKYO -Japan's Chief Cabinet Secretary Yoshito Sengoku reiterated Tuesday that the government will aim to keep new debt sales in the next fiscal year from topping the current year's Y44.3 trillion. Sengoku also said at a regular press conference the government will work to draft a budget plan for the year starting April 2011 while keeping a pledge to keep policy spending--including annual tax grants to municipalities--at this year's level of about Y71 trillion. Earlier in the day, Finance Minister Yoshihiko Noda said the government will try to keep new government bond issuance for the next fiscal year below this year's level.

2010/07/20 10:53=DJ ECB WATCH: ECB Temporarily Suspends Bond Purchases
FRANKFURT -The European Central Bank almost halted its bond purchases last week, ECB data showed Monday, indicating that fear of a euro-zone government defaulting on its debts is easing.The ECB and the currency area's 16 national central banks settled EUR302 million of bond purchases last week, compared with EUR797 million in the week ending July 9. At the height of the sovereign debt crisis in May, the ECB's weekly bond purchases exceeded EUR10 billion.'The overall situation is improving, risk aversion is receding and spreads are narrowing,' said Commerzbank economist Michael Schubert.The yield on 10-year Greek government bonds has fallen to about 10.4% on Monday from 12.2% on May 7.But the ECB's gradual retreat from the secondary bond markets also signals a win for the hawks at the ECB's Governing Council--especially for Bundesbank chief Axel Weber, economists said.Weber, who is also seen as a strong candidate to head the ECB after Jean-Claude Trichet retires next year, said in May that the purchases of government debt pose a risk to stability. His remarks were echoed by Juergen Stark, a fellow German economist and a member of the ECB Executive Board.But the latest data on ECB debt purchases don't come as a total surprise, after Trichet signaled at a press conference in early July: 'We have the feeling that what is needed in terms of the level of interventions from us has been progressively diminishing, but we will continue to observe this with great attention,' Trichet said then.

2010/07/20 08:45DJ Swiss Court Backs US-Swiss Pact On UBS Data; Rejects Appeal
ZURICH -A Swiss court Monday said it backed a U.S.-Swiss deal governing the handover of thousands of pages of confidential data on clients of UBS AG (UBS) to U.S. tax officials as 'binding,' rejecting an appeal by a client of the Swiss bank in a test case. The decision translates to a final stamp of approval from Swiss authorities, who ultimately clinched parliamentary approval last month for an August 2009 settlement between the U.S. and Switzerland to hand over data on roughly 4,450 alleged tax offenders with hidden Swiss offshore accounts. Switzerland's government had scrambled to honor the deal before the August deadline following a January decision by the same court, which ruled much of the data could not be handed over. In the July 15 decision made public Monday, the court wrote it 'has come to the conclusion, that the agreement approved by Swiss parliament on a legal aid procedure from the Internal Revenue Service concerning UBS is binding.' The ruling cannot be appealed. The Swiss government and U.S. officials in March elevated the agreement to a treaty between the two states, which reinforced the pact's stance before the court.

2010/07/20 05:34=DJ WORLD FOREX: Euro Rises Modestly Vs. Dollar; Stress Tests Eyed
NEW YORK - The euro rose modestly against the dollar Monday as investors anticipated that stress tests of European banks will show the region's financial system is sound.Steadily rising investor confidence over Europe's ability to right its troubled banking sector propelled the common currency above the $1.30 level for the first time in two months late last week. There is room for the euro to rise even higher, analysts said, if the stress tests go well. Nerves ahead of Federal Reserve Chairman Ben Bernanke's testimony to Congress on Wednesday also weighed on the dollar against the euro. Investors will be listening closely to Bernanke's remarks for further clues as to the pace of the U.S. economic recovery.After several weeks in which concerns about the U.S. recovery took center stage in currency markets, the initial results from stress tests, due Friday, are now dominating trading, said Julia Coronado, economist at BNP Paribas in New York.The euro rose, showing that 'on balance, people have become a bit optimistic,' about the results of the stress tests,' said Coronado.With the Japanese markets closed for a national holiday, and trading flows already light due to the summer season, movements in currency markets were tentative.Late Monday, the euro was at $1.2945 from $1.2927 late Friday, according to EBS via CQG. The dollar was at Y86.86 from Y86.61, while the euro was at Y112.45 from Y111.95. The U.K. pound was at $1.5231 from $1.5298. The dollar was at CHF1.0549 from CHF1.0519.The ICE Dollar index, which tracks the dollar against a trade-weighted basket of currencies, was at 82.591 from 82.535.To see the euro's performance against the dollar, please see:http://dowjoneswebservices.com/chart/view/4285The Committee of European Banking Supervisors is testing 91 banks to see whether they can withstand a three-percentage-point decline in gross domestic production from European Commission forecasts for 2010 and 2011. The committee will also test the banks for resilience to sovereign risk at a level beyond the market conditions experienced in early May.The ability of the stress tests to soothe investor concerns will rely on the robustness of the tests, as well as the results, said Jessica Hoversen, fixed income and foreign exchange analyst at MF Global in Chicago.Despite some uncertainty over how the tests were administered, investors remain positive about the tests, said Simon Smollet, senior foreign-exchange options strategist at Credit Agricole CIB in London.'Banks will need extra capital, but hopefully the capital will be a reasonable amount that the market can provide,' he said.The common currency's gains on Monday came despite some negative headlines out of Europe.Moody's Investors Service cut Ireland's rating Monday, to Aa2 from Aa1, with a stable outlook. The agency cited a rising debt burden, the high cost of rebuilding the country's banking system and sluggish growth as factors in the decision.In Hungary, the forint fell to its lowest levels in more than a year after negotiators for the International Monetary Fund and European Union walked away from funding talks because Hungary hadn't delivered on required austerity measures.The breakdown in talks between Hungary and the multilateral bodies has implications beyond Eastern Europe, as it offers a clear sign that international aid is tied to strict conditions.The U.K. pound gave back some recent gains on the greenback, slipping modestly on the day. But attention remained on the pound as an alternative to the dollar, euro and yen as Singapore's state investment company Temasek Financial Ltd priced its first sterling-denominated bond issue Monday, raising a total of GBP700 million.With the ICE Dollar Index strengthening slightly, Deutsche Bank's PowerShares U.S. Dollar Index Bearish exchange-traded fund was down 0.12% from late Friday, while its PowerShares U.S. Dollar Index Bullish was up 0.08%. The two exchange-traded funds are based on Deutsche Bank currency futures indexes, whose composition mirrors that of the ICE's Dollar Index.

Technical Play

My Forecasts

12:30GMT

04:20GMT Good Morning Friends, I'll try to skip forecasts today my broker IBFX changed their price patterns today. It looks like there was some sort of fault when they did it as prices went to "ZERO" today morning. Think about a world with all currencies value suddenly changes to zero ;D Technically they screwed up all indicators (including patterns) as the new lows for last 24 hrs is zero. Just to keep the tradition on forecast my instinct says that all our pairs will try small UP followed by drop. As I said the levels will be faulty for me today. On EURUSD - last week some analyst were thinking about 1.31 so my guess is that players will try it sooner.

Market Rumours

2010/07/19 17:13DJ IMF Breakdown Whacks Hungarian Forint, Pressures Region
LONDON -The Hungarian forint has lurched sharply lower, dragging other currencies in the region down with it, after Hungary failed over the weekend to reach a funding deal with the International Monetary Fund and the European Union. The euro shot almost 3% higher against the forint at the start of European trading hours to reach just over HUF290, taking the forint back down to its lowest levels in over a year, as talks broke down over Hungary's access to the remainder of its existing EUR20 billion standby credit line. Meanwhile, the Polish zloty and Czech koruna also suffered some regional contagion, though declines for these currencies were much more modest. Further losses are seen ahead for the forint, with analysts predicting that the breakdown in IMF/EU talks will hit investors' confidence in Hungary for the long term. 'The market has drawn a clear conclusion: without additional IMF and EU support, Hungary will be hard pressed not to default,' said analysts at Commerzbank in Frankfurt in a note to clients. 'In this situation, the central bank will doubtless not cut its key rates today, even though the government wants it to.' The IMF walked away from the talks as Hungary had failed to present sustainable plans to attain this year's budget deficit target of 3.8% of gross domestic product, as set in its IMF/EU agreement.

2010/07/19 16:41DJ BOJ May Consider Easing If Dollar Stays Around Y85 - Source
TOKYO -The Bank of Japan may consider taking additional easing steps to prevent the economy from worsening if the yen stays around Y85 to the U.S. dollar for a month or two, people familiar with BOJ thinking said. In recent weeks, with Europe's sovereign debt troubles still unsettling financial markets and concern growing that the global recovery is stalling, the yen has gained from about Y89 against the dollar. On Friday the greenback briefly dropped to a seven-month low of Y86.27, and stayed around Y86.65 on Monday. The BOJ's view is that as long as the yen doesn't rise much from its current levels Japan's economy should remain on the recovery track, a person familiar with the central bank's thinking told Dow Jones Newswires. 'But if the yen comes to stay around Y85 against the dollar for one or two months, that could have an adverse effect on the economy,' said the person, who declined to be identified. If that happens, the BOJ 'may do something.' Financial market participants speculate that the BOJ may act whenever the yen rises strongly, but the central bank has not indicated a clear level at which it starts considering action. This is the first time persons familiar with the BOJ's strategy have suggested a concrete level, which could become a guideline for anticipating future monetary policy changes in Japan. Just what the BOJ might do isn't clear. Japanese authorities have stayed out of the currency market since March 2004, and few observers expect actual intervention now. But the BOJ could provide the financial sector with extra funds by boosting the amount of Japanese government bonds it buys, increasing the amount of low-interest loans to the money market or lengthening the duration of such loans, BOJ watchers said. 'Recently, the yen has been on an upward trend again as the dollar and the euro are being sold due to growing fears about the outlook for the U.S. and European economies,' the person added. 'If the yen keeps rising, BOJ officials may become more concerned over whether exports will really continue to grow and prop up the economy.' There is precedent for a surging yen to prompt BOJ action. Last Nov. 27, when the dollar fell to a 14-year low of Y84.82, the BOJ conducted a rate check, which involves asking commercial banks for details of their currency transaction plans. The practice is seen by currency players as a form of verbal intervention, and is sometimes followed up by actual foreign-exchange buying. Just four days later the BOJ held an emergency meeting and announced a new Y10 trillion loan facility to increase market liquidity. The bank's willingness to act briefly helped push the dollar back to about Y91--and suggested that Y85 was a key level for monetary policy action. The renewed yen strength comes at a bad time for Japan's economy, which is struggling to solidify its recovery and claw its way out of persistent deflation. A stronger yen generally hurts exports, which account for around 15% of Japan's gross domestic product. A weaker dollar makes Japanese products more expensive in the U.S., stifling demand, and reduces the value of Japanese companies' sales revenue in yen terms. According to the BOJ's latest tankan survey, Japanese firms' profit forecasts for this fiscal year are based on an average dollar value of Y90.18. A dollar trading more than five yen below the expected rate could deal a sharp blow to corporate profits. A strong yen also would push down the import price of oil, food, metals and other commodities that Japan buys overseas, feeding deflation at home. It might also add to political pressure on the BOJ to do more to boost the economy. The BOJ hasn't changed its overnight call rate since December 2008, but in March it added another Y10 trillion to the emergency loan facility, which offers three-month loans at the overnight interest rate. That move, too, is credited with helping prevent the yen from rising further against the dollar. The BOJ also increased its JGB buying to Y1.8 trillion a month starting in March 2009 but has resisted boosting this even more, to avoid funding government deficits. Some say buying more JGBs from the market now could lower long-term yields. That could help drive the yen back down against the dollar, as markets conclude that the interest-rate gap between the U.S. and Japan would widen, analysts say.

2010/07/19 16:38=DJ DATA SNAP: Euro-Zone May Current Account Deficit Widens
FRANKFURT -The current account deficit of the euro area widened slightly in May, the European Central Bank said Monday, despite another robust rise in exports. Exports rose 5.8% from April to EUR131.6 billion, their highest level since September 2008, when the collapse of U.S. investment bank Lehman Brothers triggered the most intense phase of the financial crisis. However, the current account deficit edged wider to EUR5.8 billion from EUR5.6 billion in April, due to deficits in income and in current transfers, the ECB said. Over the 12 months through May, the cumulative current account deficit was EUR43.9 billion, or some 0.5% of euro-area gross domestic product. On the financial account, the ECB said the euro area recorded net portfolio inflows of EUR63.9 billion, due largely to inflows of EUR42 billion in debt securities, mainly from purchases of euro-area bonds by non-residents. Website: http://www.ecb.int

2010/07/19 16:37=DJ Forex Focus: Euro Set To Run Out Of Steam
LONDON -The euro's rise won't be sustained. Sure, the single currency visited $1.30 for the first time in nearly three months. In fact, given the current momentum $1.31 or more could well be possible, especially if next Friday's stress tests boost confidence in European banks as so many politicians insist they will. The problem for the longer-term euro performance, however, is the same as it has been for the last few months--the euro-zone recovery and euro-zone interest rates aren't going to rise any faster than those in the U.S. On the contrary, with euro-zone governments pursuing tighter fiscal policies while the U.S. authorities continue to spend, chances are that the U.S. recovery will eventually pull well clear of the euro zone's. Any sign of this and recent euro gains will be quickly unwound. For the moment, the single currency is still benefitting, not only from a sharp outflow of funds from U.S. markets but also from covering of previously extreme short euro positions. Disappointing U.S. employment data, signs of floundering in the manufacturing industry and confirmation from the Fed's minutes last week that further monetary easing could still be needed all encouraged a wholesale selloff in the U.S. currency. This coincided with successful auctions by several peripheral euro-zone debtors, including Greece, and endless reassurance that European banks will pass their stress tests with flying colors. Little wonder then that the euro became a popular destination as investors moved out of the U.S. China also helped, with its leaders using a Beijing visit by German Chancellor Angela Merkel to talk up the euro, insisting that the currency remains an important investment vehicle for them. But as the euro tests resistance at $1.30, the currency is no longer undervalued. It could be argued that at these levels it is overvalued and will soon start posing a risk to the euro-zone recovery by hurting exports. This is certainly not what European politicians will want to see at a time when global growth is slowing, in line with China's carefully orchestrated deceleration of its own economy, and when fiscal tightening means that domestic demand is hardly likely to take up the slack. This Friday's stress test results may well provide another reason for the euro to have at least a last hurrah. The results will no doubt be polished to a shine to ensure that the health of European banks isn't put in doubt. But, as details have shown, the tests aren't as strong as those for U.S. banks and they are unlikely to resolve the basic sovereign debt concerns that will continue to undermine the euro zone--there are still no serious sanctions that will stop another euro-zone debtor from defaulting. In time, this will take its toll on both business and consumer confidence, ensuring that while investors worry about the pace of the U.S. recovery now, they will soon return to worrying about whether the euro zone can avoid another slide back into recession. As Morgan Stanley reported last Friday, the time has come to start increasing short euro positions once again. Around 0645 GMT, the euro was on the slide after rating agency Moody's downgraded Ireland's sovereign bond rating to Aa2 from Aa1 with a stable outlook. Moody's cited weakened growth prospects as the main driver of the downgrade. The euro currently trades at $1.2875, down from $1.2927 in late U.S. trade Friday. Elsewhere, the major currencies are little changed with the pound trading at $1.5284, down a tad from $1.5298 and the dollar fetching Y86.66 from Y86.61 in late New York trade Friday. Looking ahead, a light data calendar on both sides of the Atlantic will likely see the market looking to equities for guidance, with U.S. titan IBM delivering its second-quarter results Monday.

2010/07/19 16:00*DJ Euro-Zone May Adj Current Account Deficit EUR5.8B
2010/07/19 16:00*DJ Euro-Zone Deficit Was EUR5.6B Apr

2010/07/19 15:22DJ German Economic Recovery To Continue In 2H - Finance Ministry
BERLIN -The German economy will continue to grow in the second half of the year, Finance Ministry officials said in their monthly report for July published Monday. 'In view of the upward trend in industrial demand and business optimism, the economic recovery should become more solid,' the report said. The report added further evidence to a change in the composition of growth in Europe. Export-heavy Germany, which lagged many of its partners in the years before the 2007-2008 financial crisis, has profited in two ways from the debt crisis that hit its partners earlier this year. The fall in the euro that ensued has made German exports much more attractive, while capital has flowed from higher-risk countries and into Germany, reducing interest rates for corporate borrowers. The Ministry cited momentum from a strong second quarter and said that robust growth elsewhere in the world looks likely to sustain a further rise in German exports, particularly of capital goods. At the same time, it said that neither incoming orders nor industrial output levels had reached the level seen before the crisis and that the country's productive capacity remains underused. It said private consumption, by contrast, remained weak in the second quarter but expressed optimism for the second half, based on the continuing ability of the labor market to yield positive surprises. The seasonally adjusted number of unemployed fell by over 130,000 in the spring quarter, according to data from the Federal Labor Office. The Ministry said the ongoing recovery ensured that tax revenues were ahead of year-earlier levels for the third month in a row, the combined tax take of the federal and state governments rising 2.4% from June 2009 to EUR48.4 billion. Owing to a weak first quarter, however, the overall tax take in the first half of the year was down 0.9% at EUR235.02 billion. The federal government last week published new forecasts for its budget over the next three years. It now expects to bring its budget deficit back under the threshold allowed by the EU in 2012, a year earlier than it had estimated originally. The government of Chancellor Angela Merkel has put intense pressure on its neighbors in the euro zone this year to match its own fiscal rigor, warning of a crisis in the euro if they failed to reduce their own deficits. Ministry Web site: http://www.bundesfinanzministerium.de

2010/07/19 15:22DJ Moody's Downgrades Ireland To Aa2 As Debt Level Rises
LONDON -Moody's Investor Services Inc. Monday cut Ireland's credit rating, citing a rising debt burden, a weak growth outlook and the high cost of rebuilding a shattered banking system.The ratings agency lowered Ireland's credit rating to Aa2 from Aa1, with a stable outlook, indicating that it is not likely to consider a further downgrade soon.The Irish economy was the first in the euro zone to enter a recession, from which it only emerged in the first quarter of this year. It was hit particularly hard because excessive bank lending drove a construction boom that came to an abrupt end in 2008 when the banks ran into difficulty.With tax revenues plummeting and the costs of bailing out the banks mounting, the government's debt rose to 64% of gross domestic product at the end of last year from 25% of GDP before the financial crisis.'Today's downgrade is primarily driven by the Irish government's gradual but significant loss of financial strength, as reflected by its deteriorating debt affordability,' said Dietmar Hornung, Moody's lead analyst for Ireland.The downgrade led to an immediate rise in borrowing costs, as the spread between Irish and German government bonds with a maturity of two years, rose by 8 basis points to 193 basis points.The Irish government responded earlier and more decisively to the rise in its budget deficit than other euro zone members, and that has helped limit the rise in its borrowing costs during the currency area's debt crisis.However, the Moody's downgrade comes on top of the publication last week of a negative report from the International Monetary Fund, which said the government won't be able to meet its target of cutting the budget deficit to 3% of GDP in 2014 without further spending cuts and tax hikes.

2010/07/19 14:28=DJ FED WATCH: Let Inflation Run Wild? Some Say Bring It On
YORK -Early in the last decade, now-retired St. Louis Federal Reserve President William Poole liked to say his preferred level of inflation was zero, properly measured.And so it was for most central bankers. While difficult to achieve in the real world, it was accepted that absolutely stable prices were the ideal monetary policy should aim to achieve.Then came the deflation scare of the last decade. It forced a rethink of inflation's optimal level: many central bankers came to believe the damage caused by falling prices argued for tolerating a certain amount of inflation. Policy makers wanted a buffer zone between deflation and unacceptable price gains. The sweet spot, most now believe, is an annualized change in prices, stripped of food and energy costs, of around 1.5% to 2%.Inflation is now below where policy makers want it to be. Friday's consumer price report showed the core June price index up 0.9% from a year ago. That's largely because weak growth and high levels of unemployment are together conspiring to produce very low levels of price increases.Most central bankers doubt that deflation looms. But in forecasts released this week, the Federal Reserve said its central tendency forecast sees core prices staying low for a long time. It's only in 2012 when policy makers project core prices rising between 1% to 1.5%, still a modest performance by any reckoning.The Federal Reserve itself seems to have little ability to create inflation. A massive wave of asset buying and over a year and a half of near-zero percent interest rates may have kept prices from falling outright, but that's about it.As a result, policy makers are in a pickle. Some would prefer to have short-term interest rates at higher levels if only to give them more flexibility for future contingencies. But even with both an overall balance sheet and bank reserves at near historic high levels, money supply growth is tepid. There is scant evidence inflation is fixing to break higher.The result is a rare environment in which a breakout in inflation would actually be welcome as a sign the economy is generating some heat again. It would also allow the Fed to get rates back toward a more traditional stance.Rising price pressures 'are the only game in town right now,' and the central bank would do well to let that happen, said David Blanchflower, economics professor at Dartmouth College and a former member of Bank of England's rate-setting Monetary Policy Committee.He argued that the benefit of the recent decades' low inflation rates are most likely overstated given the deep trouble of our times. What's more, officials who continue to fret about future inflation have altered the debate in the U.S. for the worse, so that 'we'll be in a long recession' because monetary policy won't be allowed to be truly stimulative.Blanchflower believes the Fed should engineer as best it can, or tolerate what would look like, a big jump in price pressures relative to what's been seen for many years. Then, the central bank could tighten policy, damping inflation while at the same time getting rate policy back to a spot where it can once again be wielded.It's hard to imagine the professor's path being followed. Central bankers have invested so much of their credibility in keeping prices as stable as possible. Perhaps the most potent path to generate a real move upward in prices is through huge Fed purchases of Treasury debt. That would be a shock to the nation's inflationary psychology and would likely drive prices up, but it would also run right into the Fed's repeated promises never to monetize government debt.That said, fresh economic troubles and a move back into recession may drive the Fed to make unprecedented choices, much as it did during the darkest days of the financial crisis.

2010/07/19 14:18=DJ WORLD FOREX: Euro Slips Vs Yen, Dollar On Bank Worries -3-
SINGAPORE -The euro fell against the U.S. dollar and the yen Monday in Asian trade, hit by some profit-taking after it rose to a two-month high Friday, amid concerns on the health of the euro-zone's bank sector ahead of the release of key stress-test results later this week. The single currency briefly rose Friday above the psychologically key $1.30 mark as the market focus switched to growing signs that the U.S. recovery could be slowing. Still, it faces significant hurdles to extend its rally from the four-year low hit last month, and analysts say the prospect of comatose economic growth and further losses for European banks should drive the euro lower again. In addition, news that negotiators for the International Monetary Fund and European Union walked away from talks with Hungary over the weekend, over differences on government budget cuts, may weigh further on the euro, as Hungary is expected to join the euro zone in coming years. 'The big question in forex markets is whether the euro can hold onto its recent gains and whether the dollar will be punished further amidst growing double-dip worries,' said Mitul Kotecha, a foreign exchange strategist with Credit Agricole. 'The bigger risk this week is to the euro.' Kotecha added the euro may come under selling pressure as the European Union authorities Friday will release test results for 91 banks--accounting for around 65% of assets in the EU banking sector--and markets will focus on the thoroughness of tests regarding issues such as the effect of possible restructuring of sovereign debt holdings. At 0457 GMT, the euro was at $1.2902 compared with $1.2927 late Friday, and at Y111.81 compared with Y111.95. Meanwhile, the dollar traded at Y86.66, up from Y86.61, but still within striking distance of a fresh seven-month low hit Friday. Japanese markets are closed Monday for Marine Day. The yen may resume its recent downtrend in coming days, said Emmanuel Ng, an economist with Singapore bank OCBC, noting low U.S. bond yields--the result of talk of quantitative easing, and the prospect of Fed rates staying very low longer than anticipated--may drag the pair further. 'We continue to expect the pair to attempt a test of our previously mentioned target of Y86.00,' Ng said. The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 82.653, up from 82.535 in New York late Friday.

2010/07/19 13:48*DJ IMF Wanted Prompt Launch Of Strict Structural Reforms-Matolcsy

2010/07/19 13:43=DJ WORLD FOREX: Euro Slips Vs Yen, Dollar On Bank Worries -2-
SINGAPORE -The euro fell against the U.S. dollar and the yen Monday in Asian trade, hit by some profit-taking after it rose to a two-month high Friday, amid concerns on the health of the euro-zone's bank sector ahead of the release of key stress-test results later this week. The single currency briefly rose Friday above the psychologically key $1.30 mark as the market focus switched to growing signs that the U.S. recovery could be slowing. Still, it faces significant hurdles to extend its rally from the four-year low hit last month, and analysts say the prospect of comatose economic growth and further losses for European banks should drive the euro lower again. In addition, news that negotiators for the International Monetary Fund and European Union walked away from talks with Hungary over the weekend, over differences on government budget cuts, may weigh further on the euro, as Hungary is expected to join the euro zone in coming years. 'The big question in forex markets is whether the euro can hold onto its recent gains and whether the dollar will be punished further amidst growing double-dip worries,' said Mitul Kotecha, a foreign exchange strategist with Credit Agricole. 'The bigger risk this week is to the euro.' Kotecha added the euro may come under selling pressure as the European Union authorities Friday will release test results for 91 banks--accounting for around 65% of assets in the EU banking sector--and markets will focus on the thoroughness of tests regarding issues such as the effect of possible restructuring of sovereign debt holdings. At 0457 GMT, the euro was at $1.2902 compared with $1.2927 late Friday, and at Y111.81 compared with Y111.95. Meanwhile, the dollar traded at Y86.66, up from Y86.61, but still within striking distance of a fresh seven-month low hit Friday. Japanese markets are closed Monday for Marine Day. The yen may resume its recent downtrend in coming days, said Emmanuel Ng, an economist with Singapore bank OCBC, noting low U.S. bond yields--the result of talk of quantitative easing, and the prospect of Fed rates staying very low longer than anticipated--may drag the pair further. 'We continue to expect the pair to attempt a test of our previously mentioned target of Y86.00,' Ng said. The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 82.653, up from 82.535 in New York late Friday.

2010/07/19 13:41=DJ WORLD FOREX: Euro Slips Vs Yen, Dollar On Bank Worries
SINGAPORE -The euro fell against the U.S. dollar and the yen Monday in Asian trade, hit by some profit-taking after it rose to a two-month high Friday, amid concerns on the health of the euro-zone's bank sector ahead of the release of key stress-test results later this week.The single currency briefly rose Friday above the psychologically key $1.30 mark as the market focus switched to growing signs that the U.S. recovery could be slowing. Still, it faces significant hurdles to extend its rally from the four-year low hit last month, and analysts say the prospect of comatose economic growth and further losses for European banks should drive the euro lower again.In addition, news that negotiators for the International Monetary Fund and European Union walked away from talks with Hungary over the weekend, over differences on government budget cuts, may weigh further on the euro, as Hungary is expected to join the euro zone in coming years.'The big question in forex markets is whether the euro can hold onto its recent gains and whether the dollar will be punished further amidst growing double-dip worries,' said Mitul Kotecha, a foreign exchange strategist with Credit Agricole. 'The bigger risk this week is to the euro.'Kotecha added the euro may come under selling pressure as the European Union authorities Friday will release test results for 91 banks--accounting for around 65% of assets in the EU banking sector--and markets will focus on the thoroughness of tests regarding issues such as the effect of possible restructuring of sovereign debt holdings.At 0457 GMT, the euro was at $1.2902 compared with $1.2927 late Friday, and at Y111.81 compared with Y111.95. Meanwhile, the dollar traded at Y86.66, up from Y86.61, but still within striking distance of a fresh seven-month low hit Friday. Japanese markets are closed Monday for Marine Day.The yen may resume its recent downtrend in coming days, said Emmanuel Ng, an economist with Singapore bank OCBC, noting low U.S. bond yields--the result of talk of quantitative easing, and the prospect of Fed rates staying very low longer than anticipated--may drag the pair further.'We continue to expect the pair to attempt a test of our previously mentioned target of Y86.00,' Ng said.The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 82.653, up from 82.535 in New York late Friday.

2010/07/19 10:03=DJ Investor Risk In Hungary Up After Talks With IMF Break Down
BUDAPEST -Investors' reaction will be negative to Hungary's failure over the weekend to reach a deal with the International Monetary Fund and the European Union that would allow it to draw on the remainder of its existing EUR20 billion IMF/EU standby credit line.When markets open Monday, the Hungarian forint is likely to weaken sharply, government bond yields will rise and the cost of insuring Hungarian debt could see record levels, investment bank economists said.A fallout in Hungarian assets could easily prove contagious and pull the Polish zloty and the Romanian leu to weaker levels."This [an unsuccessful IMF mission] is a very rare event, countries usually go out of their way to satisfy these missions...I think we now [will] see a period of strong negative risk, currency, equities, credit and rates selloff," said Peter Attard Montalto, economist at Nomura in London.The IMF walked away from the talks as Hungary had failed to present sustainable measures of a structural nature to attain this year's budget deficit target of 3.8% of gross domestic product, as set in its IMF/EU agreement.How much and in what way Hungary wants to reduce its budget shortfall to below 3% of GDP next year also remained an open issue, the IMF said.The EU, meanwhile, also warned that Hungary should adhere to EU regulations on central bank independence."The key here is that we now have proof that the supranational support for countries is softer and not unconditional. The IMF and the EU will not allow for moral hazard and free riders. You cannot diverge from the Brussels/Washington consensus and expect to get away with it," Nomura's Montalto added.The Hungarian currency could weaken versus the euro Monday, to HUF290 in the first round, the economists said. Levels above that could prompt central bank intervention and levels above HUF310-315 could even trigger interest rate hikes. The forint-euro closed Friday at HUF281.38.Treasury yields will likely increase, to above 8% on the long end of the yield curve from 7-7.5% in recent days, economist Janos Samu at Concorde Securities in Budapest said."To calm markets, the government should confirm their commitment to the targets of 3.8% of GDP budget deficit this year and the below-3% of GDP deficit in 2011," said economist David Nemeth at ING Bank in Budapest.The Hungarian government should outline its plans for reducing its debt--the structural reforms they plan, ING's Nemeth added.Hungary is one of the most vulnerable emerging market economies since it has the highest level of debt as a percentage of GDP in central and Eastern Europe.Hungary was the first EU country that secured IMF/EU help when hit by the global economic crisis due to its lax fiscal policy and high external debt.Market reaction could serve as a lesson for the new Hungarian government, which has tried to backtrack from its IMF commitments, claiming they were set by the previous administration."Ironically, a crisis could well be good for policy in the long run, bringing politicians back to the straight and narrow. However, we have a reactive, and not a proactive government here--one that drags its feet on these issues rather than the credible momentum on such issues the previous government had," Nomura's Montalto said.

2010/07/19 09:31=DJ FOREX WEEK AHEAD: Game Change Prompts Traders To Reassess Views
TORONTO -Investors are reassessing the assumptions that have driven currency trading since late December as signs increase that the U.S. economy is softening while concerns over the euro zone's debt problems ease. This reassessment has already benefited the euro, which gained more than 2.5% on the week to touch a high above the $1.30 mark on Friday. The dollar is also threatened by a possible decline below Y85.00, which would place it at levels not seen since 1995. Investors are divided over whether this trend will last or prove to be merely a temporary reprieve for the euro, resulting from covering massive bets against the common currency. In any event, it is not the summer doldrums in currency markets. The euro has already jumped about 9.5% from the four-year lows to which it fell back in May. The dollar on Friday touched its lowest level since December against the yen, after disappointing U.S. consumer sentiment data added to the parade of worse-than-expected economic indicators that have brought the pace of the U.S. recovery into question. After cutting their bets against the euro by nearly half in the week ended July 6, speculative investors continued to pare their anti-euro positions in the week ended Tuesday, according to a Scotia Capital analysis of the weekly Commitments of Traders report released Friday by the Commodity Futures Trading Commission. These bets against the euro, called shorts, represent only a tiny slice of the foreign-exchange market but express the sentiments of some of the most-active traders. Net euro shorts stood at 27,000, with a value of $4.3 billion in the week ended Tuesday. 'It is as if some sort of tectonic shift took place late May to early June,' Marc Chandler, global head of foreign exchange at Brown Brothers Harriman in New York, wrote Friday. 'The news stream from Europe become decidedly less negative and the U.S. news stream took a clear turn for the worse.' Concerns about U.S. economic growth have been in focus, with the Federal Reserve this week painting a less-than-rosy picture. Fed minutes noted a 'relatively modest' worsening in the U.S. economic outlook, and said further monetary stimulus could be needed if the economy showed more signs of slowing. 'Most people are probably going to start revising down their growth expectations for this year, which are going to be basically subpar. That's pretty evident,' said Sebastien Galy, currency strategist at BNP Paribas in New York. 'I think the market is already way ahead of what the economists are going to do.' Traders are expecting the euro to travel between $1.2800 and $1.3300 in the near term, and the dollar to range between Y85.00 and Y88.00. Late Friday, the euro was at $1.2927, up from $1.2900 late Thursday, according to EBS via CQG. The dollar was at Y86.61, down from Y87.46. Conditions that appeared strong in the U.S. now appear weak. And conditions that appeared weak in the euro zone, such as in debt auctions, now look strong. 'We very much see what is going on in the euro as a short-term correction,' said Thomas Harr, foreign exchange strategist for Standard Chartered Bank in London. He said there are no immediate plans to revise the bank's monthly forecasts, though some other banks are doing just that. Goldman Sachs on Wednesday called for the common currency to rebound to $1.35 in six months and $1.38 in 12 months, after a decline to $1.22 in the next three months. It was a significant bump from previous forecasts, issued in early June, which called for the euro to trade at $1.15 over the three- and six-month time frames and $1.25 over 12 months. 'The market will eventually move back and focus on the sovereign debt problems,' Harr said. 'That is not completely out of the way, not solved, yet.' Purchasing managers index data out of Germany next week could provide clues on the health of the broader economy in the European Union. Investors will be searching to see whether the German economy is holding better than expected, especially as it is supplying to the south of Europe. 'We'll be waiting to see if the German manufacturing engine is able to compensate the loss of demand in the southern Europe with the rise in demand in Asia,' Galy said. Also looming over the week will be the release of the results of the bank stress tests in Europe. Details on the exact nature of the tests remained scarce Friday. However, sources told Dow Jones Newswires that national regulators are likely to publish their aggregated and bank-by-bank results after local financial markets close next Friday, in order to allow the findings to be absorbed in relative calm over the weekend.

2010/07/19 09:08=DJ ASIA DAILY FOREX OUTLOOK: Predicted Ranges, Themes
USD/THB to be rangebound with risks skewed higher. May continue drifting cautiously, with focus on BOT intervention to support USD, ahead of Thailand's June external trade data due this week. But traders say drop toward recent lows remains likely; "I think most of the market is expecting a stronger baht in the near-term because pretty much all of the Asian economies are looking so strong," one says, anticipating BOT to buy pair at below 32.20. Dow Jones technical analysis shows immediate resistance at 32.300 (psychological), 32.550 (June 25 peak, start of latest downtrend). Support at 32.130 (2-month low hit July 15), then 32.000 (psychological).USD/IDR to be rangebound with risks skewed higher. Pair may remain trapped in recent 9,000-9,100 area as drivers for breach remain elusive, given Bank Indonesia''''s willingness to buy pair on dips around 9,000 and avoid significant corrections on upside. Still, reported Indonesian government move to revise debt issuance plans lower for remainder of 2010, following better-than-expected fiscal revenue, may be IDR positive - capping upside - to a market already anticipating pair to eventually drop below 9,000. Dow Jones technical analysis shows immediate resistance at 9,055 (Friday''''s high), above this at 9,200 (psychological). Support at 9,000, then 8,900 (both psychological).USD/HKD to be rangebound with risks skewed higher. Pair may push back away from recent lows as rising risk aversion dominates, likely hitting local stocks. Still, with HKD liquidity at more-or-less normal levels after last week's disappointing Agricultural Bank IPO, and narrow Hibor-Libor gap, upside should be limited for now. Dow Jones technicals analysis shows initial resistance at 7.7756 (10-day moving average), 7.7800 (psychological). Support at 7.7700 (psychological), 7.7631 (76.4% Fibonacci retracement of November-May rally).USD/SGD to consolidate. May correct after last week''''s drop toward 1.3700 mark as players should refrain from testing MAS'''' tolerance for further downside some distance away from April lows, given worsening sentiment in Asian markets; UOB reckons SGD NEER was trading well above mid-point Friday, when 2% limit for USD/SGD was at 1.3670. Dow Jones technical analysis shows USD/SGD immediate resistance at 1.3853 (20-day moving average), 1.3900 (psychological). Support at 1.3721 (Friday''''s low), 1.3640 (2-year low hit April 30). USD/PHP to be rangebound with risks skewed higher. May hover above key support level at 46.00 as global environment cooling on risk plays. But chances of significant rally slim; Goldman Sachs says strong May remittances - overall monthly number was highest on record, and on-month rise accelerated from April - reinforce forecast of annual 10% growth; "together with rapidly growing IT service exports, remittances are likely to give a push to private consumption, GDP growth and the PHP." Keeps 3-, 6- and 12-month USD/PHP targets at 44.5, 44.0 and 43.0 respectively. Dow Jones technical analysis shows immediate resistance at 46.59 (23% Fibonacci retracement, not breached since mid-June), followed by 47.00 (psychological). Support at 46.09 (38.2% Fibonacci retracement of April-May rally ), then 45.34 (1-month low hit June 22).