Thursday, June 25, 2009


According to the analysts’ announcement on Saturday bearish trend prevailed the Karachi Stock Market during the outgoing week. Actually it happened because of selling pressure as corporate finance, banking and risk management Moody’s downgraded Pakistan bank’s ratings, degradation of law and order situation in the country, and lastly because of refusal in foreign exchange reserves and economic instability.

There are some other key factors that affected the market negatively. Firstly it's investors’ indecision over the outcome of Karachi Stock Exchange board of directors conference on the floor mechanism on stocks. Secondly, developments on share buybacks and induction of 20 billion rupees liquidity in capital markets by State Bank.

KSE 100-share index decreased 16 points or 0.2 % as to close at 9,184.15 points if compare with previous week’s 9,201 points.

As far as the average turnover is concerned it descended to 2.477 million shares in comparison with 4.33 million shares traded last week. Overall volume of the market on the final trading day of the week was at a 142-month (11.7-year) low, a miserable of 2.47 million shares.

Forex Update

Treasury Bond Daily Commentary for 4.2.09
The rally in the 30 Year T-Bond futures faded yesterday after the U.S. released better than expected housing and manufacturing data, sending equities higher and treasury futures lower.

However, the 30 Year futures are recovering Thursday after the U.S. released more negative unemployment data. Hence, with the U.S. taking care of the excess supply of treasuries via quantitative easing, the 30 Year futures are falling in line with their ordinary negative correlation with the S&P futures. The futures are struggling with the concept of retesting March highs. There’s certainly a wide range the 30 Year futures have to deal with to the upside. Therefore, the futures have their work cut out for them.

S&P Daily Commentary for 4.2.09
The S&P futures brushed aside negative unemployment data, piecing together an impressive rally on the back of better than expected existing home sales and manufacturing data. The economic crisis began with the collapse of America’s housing market, so stabilization in housing gives investors hope the worst of the economic crisis may be behind us.

EUR/USD Daily Commentary for 4.2.09
The EUR/USD has pushed through March 30 highs, rallying before the ECB announces its monetary policy decision. While the 50 basis point cut analyst expect is likely, investors will be more interested in what Claude Trichet has to say about the ECB's potential use of quantitative easing.

Trichet will likely say the ECB doesn't need to cut the benchmark rate further. However, this is what the ECB has said after each of their other rate reductions.

As a result of investor apprehension, the EUR/USD is showing limited gains as compared to other major Dollar pairs such as the GBP/USD and AUD/USD. Nevertheless, the EUR/USD will likely follow its positive correlation with U. S. equities.

GBP/USD Daily Commentary for 4.2.09
The GBP/USD catapulted after rising above our 2nd tier uptrend line, surging well beyond the psychological 1.45 barrier. In fact, the Cable peaked past our 3rd tier trend line before retreating as investors take profits before challenging March highs.

Britain continues to receive good economic data including yesterdays Manufacturing PMI and today's Construction PMI and Nationwide HPI numbers.

In other words, the manufacturing and construction industries are looking up in Britain while home prices are actually on the rise.

EURO USD Forex Trading Tips and Analysis for Day Traders
Rate holds point of indecision so far today; late break fails to attract more bids but still solid above the 100 day MA. Traders note strong offers above the 1.3330 area but bids are absorbing those for now with a foothold over the 1.3300 handle to signal a short-squeeze.

Rate has two-way action suggesting a try for stops above. Rate likely has stops building in both directions but shorts have taken minor control of the market as the rate gives back gains over the 1.3400 area last week late. Action remains two-way; any move lower is likely supported on dips.

Gold & Forex Update

I have been on a hiatus of sorts over the past month and I apologize to my regular readers who got no warning of such a break. I have of course continued to follow the markets, although trading activity has been choppy and inconsistent. Switching between long and short positions on a daily basis doesn’t allow me to post my outlook. This article is intended to be a summary of my thoughts on the money markets.

As competitive currency devaluation looms, the USD may gain on a relative basis. The black swan remains the possibility of a loss of confidence in the U.S. dollar.
1) The Euro is being tested - The idea of a unified currency has always troubled me, it seemed to be more of an experiment than a logical conclusion. To be more specific it is not the idea of a unified currency that is troubling, but rather the idea that countries with independent fiscal policies are all tied to the same monetary system. It was only a matter of time until disparities emerged in the various member countries with respect to inflation expectations and output trends. The unified currency reduces options for struggling economies who are forced to stimulate ONLY through the fiscal approach. That means that deficits balloon, but with a 3% of GDP limit imposed on member nations, fighting between members may quickly emerge. With more than €1 trillion in Euro-zone debt issuance expected this year, the EU is not far off from the numbers being reported out of the U.S.

2) Exporting nations currencies are feeling the pinch. This was highlighted by Gregory Weldon of Weldon Financial in a report out yesterday. He specifically mentioned the bearish outlook for the following export reliant currencies: Korean Won, Indian Rupee, Polish Zloty, Hungarian Forint, Czech Koruna, Canadian Dollar, Chilean Peso, and the Mexican Peso. The trend over the past few years has been for the U.S. to import an ever increasing dollar amount of goods and services. That resulted in selling pressure on dollars and buying pressure on exporting currencies to purchase the local goods for export. With the sharp decrease in U.S. imports over the past few months, export reliant currencies have felt the sharp decrease in demand. Added to that pressure, the sharp drop in the price of crude has led to a double hit on currencies such as the Canadian dollar.
Is pressure easing on these export nations? It doesn’t look like it. In fact, if we use the Baltic Dry Index as a leading indicator of global trade, the outlook is pretty dire. Consider that this Index was sitting higher than 11000 less than a year ago. Although the index appears to be stabilizing, global shipping prices are still extremely cheap, highlighting the lack of demand.
Browse > Home / Charts, Forex, Metals / Gold & Forex Update
Gold & Forex Update