Google News: Greece swears in unity cabinet and PM Lucas Papademos

Greece swears in unity cabinet and PM Lucas Papademos BBC News - ‎23 minutes ago‎ Greece's new coalition cabinet and PM Lucas Papademos have been sworn in after a week of political turmoil. The new government's most pressing task is to approve Greece's recent EU bailout package and avoid bankruptcy. Interim Greek gov't aims to quell economic woes CBS News BusinessWeek - Reuters - CNN International - Washington Post more »

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Fundamental Analysis

Along your travels, you've undoubtedly come across Gulliver, Frodo, and the topic of fundamental analysis.

Wait a minute...

We've already given you a teaser about fundamental analysis during Kindergarten! Now let's get to the nitty-gritty!

What is it exactly and will I need to use it? Well, fundamental analysis is the study of fundamentals! That was easy, wasn't it? Ha! Gotcha!

There's really more to it than that. Soooo much more.

Whenever you hear people mention fundamentals, they're really talking about the economic fundamentals of a currency's host country or economy.

Economic fundamentals cover a vast collection of information - whether in the form of economic, political or environmental reports, data, announcements or events.

Even a credit rating downgrade qualifies as fundamental data and you should see how Pipcrawler turned this news into a winning short EUR/USD trade.

Fundamental analysis is the use and study of these factors to forecast future price movements of currencies.

It is the study of what's going on in the world and around us, economically and financially speaking, and it tends to focus on how macroeconomic elements (such as the growth of the economy, inflation, unemployment) affect whatever we're trading.

Fundamental Data and Its Many Forms

In particular, fundamental analysis provides insight into how price action "should" or may react to a certain economic event.

Fundamental data takes shape in many different forms.

It can appear as a report released by the Fed on U.S. existing home sales. It can also exist in the possibility that the European Central Bank will change its monetary policy.

The release of this data to the public often changes the economic landscape (or better yet, the economic mindset), creating a reaction from investors and speculators.

There are even instances when no specific report has been released, but the anticipation of such a report happening is another example of fundamentals.

Speculations of interest rate hikes can be "priced in" hours or even days before the actual interest rate statement.

In fact, currency pairs have been known to sometimes move 100 pips just moments before major economic news, making for a profitable time to trade for the brave.

That's why many traders are often on their toes prior to certain economic releases and you should be too!

Generally, economic indicators make up a large portion of data used in fundamental analysis. Like a fire alarm sounding when it detects smoke or feels heat, economic indicators provide some insight into how well a country's economy is doing.

While it's important to know the numerical value of an indicator, equally as important is the market's anticipation and prediction of that value.

Understanding the resulting impact of the actual figure in relation to the forecasted figure is the most important part. These factors all need consideration when deciding to trade.

Phew!

Don't worry. It's simpler than it sounds and you won't need to know rocket science to figure it all out.

I suggest you visit Pip Diddy's daily economic roundup every day so that you can stay in the loop with the upcoming economic releases.

Europe Needs a Bazooka

Remember Hank Paulson’s bazooka? Well, it turned out that the Paulson bazooka was more like the Bernanke/Paulson bazooka. The combination of monetary policy and fiscal policy during the credit crisis was highly effective in ending the solvency concerns that were unfolding in 2008. QE1 “worked” in that it shored up markets when it was needed. Combining this with the stimulus act was a potent mix. And though I believe they were not our best options at the time (I was in favor of a Swedish approach to the US banking system and a stimulus that was more focused on helping Main Street) they proved to stop the contagion. Europe must stop the contagion.

Although not entirely analogous to the American credit crisis (which was really a household debt crisis), the Euro crisis is similar. And I think it’s going to require an equally large bazooka. The only problem is that Jean Claude Trichet doesn’t have his Hank Paulson (no central Treasury in Europe). This recent piece in the FT laid out the problem superbly:

“Stopping Europe’s current crisis requires fundamental overhaul of the eurozone’s institutions. But the most important part of that overhaul is to ensure that the ECB takes on full responsibility as a lender of last resort in the government bond markets of the eurozone. Without this, the markets cannot be stabilised and crises will remain endemic.

At the same time, further steps towards political unification must be taken, without which control on national government deficits and debts cannot be implemented. Some steps in that direction were taken recently when the European Council strengthened control of national budgetary processes and on national macroeconomic policies. These decisions, however, are insufficient, and more fundamental changes in the governance of the eurozone are needed. These should be such that the ECB can trust that its lender of last resort responsibilities in the government bond markets will not lead to a never-ending dynamic of debt creation.”

I am still having trouble seeing a scenario in which Europe isn’t forced into greater unification, a Euro bond and a central treasury. The only question is whether they will wait for the entire union to collapse before trying to put it back together again or if they will be proactive?

T

FOREX-Yen down on Japan intervention but not likely to last

* Yen tumbles as Japan intervenes to sell yen vs dollar

* Analysts say safe-haven yen to keep gaining

* ECB keeps rates steady, Trichet says bond buying ongoing

(Updates prices, adds quotes)

By Julie Haviv

NEW YORK, Aug 4 (Reuters) - The yen slid on Thursday after Japan intervened to curb its strength to support the country's export-led economy, a move that should have a fleeting impact as global economic concerns keep demand for the safe-haven currency high.

Japan's intervention came one day after the Swiss National Bank unexpectedly cut interest rates to cap a soaring Swiss franc. While the yen tumbled during the Asian and European session, losses were later pared as risk-aversion reigned.

Constant yen selling versus the dollar by Japanese authorities during the European session briefly pushed the dollar above the psychologically key 80 yen level, traders said. Tokyo had been steady yen sellers in the Asian market.

"Japan and Switzerland can do all they want to slow appreciation, but they will not be able to stop it," said Peter Schiff, CEO of Euro Pacific Capital, based in Westport, Connecticut.

"Japan and Switzerland should not intervene because economic growth and a strong currency go hand-in-hand and history shows that," he said. "When America was a mighty industrial power, it also had the strongest currency in the world."

Euro Pacific Capital has $3 billion in client assets under advisement.

A voracious appetite for safety ensued as investors fret about sluggish global growth and peripheral debt woes, causing European and U.S. stocks to plunge and U.S. Treasuries to soar.

"It is a stupid thing when policymakers try to weaken their currency," Schiff said.

Japan's move had pushed the U.S. currency roughly 4 percent higher to a three-week high of 80.25 yen, according to electronic trading platform EBS. Gains were later sharply pared and it last traded at 78.98 yen, up 2.5 percent.

On Monday, the dollar hit a four-month low of 76.29 yen, close to its record trough of 76.25 yen hit in March after the earthquake.

Euro gains were also curbed and last traded at 111.74 yen, up 1.3 percent. Yen selling had earlier sent the euro zone single currency more than 3 percent higher against the yen.

Japan sold one trillion yen, or $12.5 billion. For more see [ID:nL3E7J41YW]. Finance Minister Yoshihiko Noda confirmed Tokyo had intervened, saying Japan had acted alone but was communicating with other countries on the move. [ID:nT9E7IP021]

"Japan is being very aggressive in their intervention and the process has been more aggressive than usual," said Brad Bechtel, managing director and head of sales at Faros Trading in Stamford, Connecticut.

"Japan was not only looking at the pace of appreciation of the dollar/yen, but also the cross rates with China and Korea as they are their biggest competitors."

The BOJ conducts intervention on behalf of the Ministry of Finance, which is in charge of currency policy.

Japan's intervention was its first since March 18 when the BOJ and other major central banks jointly intervened after the yen surged to a record high versus the greenback.

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Meanwhile, European Central Bank President Jean-Claude Trichet said that the bank's bond-buying program is continuing. [ID:nFAT007235] Trichet's comments followed the ECB's announcement it was keeping interest rates steady [ID:nL6E7J411S]

After a brief bounce, the euro fell below $1.42 against the dollar after trading above it as markets were disappointed that the ECB bought smaller amounts of peripheral bonds. It last traded at $1.4154, down 1.2 percent.

European traders had earlier said the ECB was in the market buying Portuguese and Irish sovereign debt. (Additional reporting by Naomi Tajitsu and Anirban Nag in London; Editing by Kenneth Barry)

Forex - Dollar higher vs. euro but trims gains against yen

The U.S. dollar extended gains against the euro on Thursday, following remarks by European Central Bank President Jean-Claude Trichet, but trimmed gains against the yen as a dollar rally sparked by Japan’s currency market intervention fizzled.

During U.S. morning trade, the greenback was sharply higher against the euro, with EUR/USD tumbling 1.27% to hit 1.4140.

Earlier in the day, ECB head Jean-Claude Trichet said the bank will conduct more cash operations to provide liquidity to banks over the next six months as the region’s debt crisis deepens.

The central bank kept its benchmark interest rate unchanged at 1.5% in a widely anticipated decision, with Trichet saying that rates are still “accommodative” and inflation risks “remain on the upside.” 

The greenback was also down against the pound, with GBP/USD shedding 0.64% to hit 1.6321.

Earlier in the day, the Bank of England said it was maintaining the benchmark interest rate at 0.50%, as expected.

Elsewhere, the greenback trimmed gains against the yen and dipped against the Swiss franc, withUSD/JPY up 2.35% to hit 78.86 and USD/CHF slipping 0.13% to hit 0.7692.

Earlier in the day, Japanese officials intervened in currency markets for the first time since March to curb the yen’s gains and support the country’s largely export-led economy, sending the yen sharply lower against all major currencies. 

The Japanese intervention came one day after the Swiss National Bank cut its key lending rate to a narrower range calling the Swiss franc “massively overvalued.”

In addition, the greenback was higher against its Canadian, Australian and New Zealand counterparts, with USD/CAD rallying 1.19% to hit 0.9734, AUD/USD tumbling 1.63% to hit 1.0579 and NZD/USD dropping 1.25% to hit 0.8526.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, jumped 1.33% to hit 75.18.

Also Thursday, official data showed that the number of people who filed for unemployment assistance in the U.S. last week fell unexpectedly.

The Labor Department said the number of individuals filing for initial jobless benefits in the week ending July 29 fell by 1,000 to a seasonally adjusted 400,000, confounding expectations for an increase to 406,000.

Dollar strengthening

The U.S. dollar gained momentum during the day against the major currencies to ascend the throne of currencies, in the light of the state of anxiety felt by investors on various topics, primarily related to statements that the European Central Bank is the presence of inflationary risks in the European region, which may impede the functioning of the economy toward recovery.

Moreover the investors in the United States are concerns about the situation in the country, especially after the data coming in from key sectors in the U.S. economy, this with the knowledge that Moody's credit rating has modified the outlook for the U.S. economy to a negative view, giving rise to feelings of pessimism in markets so far.

With reference to the dollar index - which measures the performance of the dollar against six major currencies including the euro and the Japanese yen and the pound sterling - has risen on the chart for one day, currently trading at levels of 75.02, with the highest level during the day at 75.12 since the opening levels, which amounted to 74.41 and achieving a minimum level of him during the day at 74.36.

While the prices of gold are trading at levels 1679.19 U.S. $ per troy ounce, having made higher price has historically been the day at 1682.15 dollars per ounce compared with the levels of the opening, which amounted to 1659.71 dollars an ounce, while U.S. crude oil prices fell to trading currently at levels of 90.17 U.S. dollars a barrel, compared to with the opening levels, which amounted to U.S. $ 92.30 a barrel.

Pointing out that the husband of the euro against the U.S. dollar fell on the chart for one day of trading at levels of 1.4155 dollars, which exceeded the husband barrier support at 1.4165 dollars to become the levels of resistance to targeted levels of new support at 1.4125 dollars, and the pair achieved a higher level to him during the day at 1.4368 dollars and achieving a minimum level during the day at 1.4111 dollars.

As for the pair of sterling against the U.S. dollar has fallen on the chart for one day of trading at levels of 1.6313 dollars, stuck between the levels of support as 1.6250 dollars, levels of resistance at 1.6365 dollars, and the pair achieved the highest levels during the day at 1.6439 dollars, has recorded its lowest level in the day at 1.6286 dollars.

Finally, the higher the pair the U.S. dollar against the Japanese yen to trade at levels of 79.02 yen, confined between the levels of support at 78.60 yen, and the levels of resistance at 80.50 yen, with the knowledge that the husband was able to achieve the highest levels during the day at 80.23 yen, its lowest level during the day at 77.00 yen.

REFILE-GLOBAL MARKETS-Stocks sink in global sell-off, bonds soar

(Repeats to more subscribers)

* MSCI world stocks fall to fresh 2011 low

* Dow falls 300 points, S&P 500 down 2.7 pct

* Yen slides after Tokyo intervenes

* ECB in the market buying bonds - traders (Updates to afternoon)

By Edward Krudy and Rodrigo Campos

NEW YORK, Aug 4 (Reuters) - World stocks plunged to new lows for the year on Thursday with a sell-off in markets accelerating sharply as investors fretted about the outlook for the global economy and piled into safe-haven bonds.

European stocks tumbled to a level not seen since after the financial crisis in mid-2009, with Italy's equity market firmly in bear market territory, down nearly 30 percent since February, as investors fretted the euro-zone debt crisis was spreading.

Italy's blue-chip FTSE MIB index <.FTMIB> was suspended about 30 minutes before the close. The index tumbled slightly more than 5 percent.

With investors seemingly caught in a perfect storm, officials around the world moved to calm markets and ease volatility. The boldest step came from Tokyo, where the government spent an estimated 1 trillion yen ($13 billion) to stem the strength of its currency.

The intervention comes a day after an unexpected cut in interest rates by Switzerland to weaken the franc, which has spiked in recent days as investors search for safe havens. The currency edged slightly higher in New York trade on Thursday.

Even gold, which has raced to a series of new highs near $1,700 an ounce amid the gathering uncertainty, tumbled as deepening losses on Wall Street prompted investors to sell the metal and cover losses amid increasing margin calls outside of the commodity sector.

"When you get outside markets down significantly, some investors liquidate their winning positions in the gold and silver market longs to raise margins and support their losing trades," Phillip Streible, senior market strategist with Chicago-based futures broker MF Global.

The selling "is across market segments in terms of institutions, individuals, and traders," said Peter Kenny, managing director at Knight Capital in Jersey City, New Jersey. "Everyone is leaning into it. It's a classic capitulation."

The exodus from stocks pushed the broad Standard & Poor's 500 Index <.SPX> down as much as 3.5 percent, while the clamor for safe-haven investments drove the yield of the 10-year U.S. Treasury note below 2.5 percent, the lowest since early November 2010.

The Dow Jones industrial average <.DJI> dropped 300.69 points, or 2.53 percent, to 11,595.75. The Standard & Poor's 500 Index <.SPX> fell 34.46 points, or 2.73 percent, to 1,225,88. The Nasdaq Composite Index <.IXIC> dropped 72.90 points, or 2.71 percent, to 2,620.17.

The MSCI world equity index <.MIWD00000PUS> was down 3.2 percent for the day, its largest daily fall in a year, and hit a fresh 2011 low.

European stocks <.FTEU3> lost 3.3 percent.

Safe-haven assets like the Swiss franc, the yen and gold have spiked this week as investors fret that governments around the world are planning spending cuts at a time of slowing global economic growth. Government moves are seen as just temporarily reversing the trend.

The latest spate of economic data points to slowing demand in the United States, while the euro zone grapples with the spread of its debt crisis to Spain and Italy, where borrowing costs have increased sharply.

The Dow Jones industrial average <.DJI> dropped 277.01 points, or 2.33 percent, to 11,619.43. The Standard & Poor's 500 Index <.SPX> fell 31.74 points, or 2.52 percent, to 1,228.60. The Nasdaq Composite Index <.IXIC> dropped 68.32 points, or 2.54 percent, to 2,624.75.

The MSCI world equity index <.MIWD00000PUS> was down 3.2 percent Fon the day, its largest daily fall in a year, and hit a fresh 2011 low.

European stocks <.FTEU3> lost 3.3 percent.

The benchmark 10-year U.S. Treasury note rose a little more than a full point to yield 2.50 percent, a level not seen since early November 2010.

The European Central Bank kept interest rates unchanged on Thursday, but traders said the central bank has been buying bonds of peripheral euro-zone countries in an effort to keep rates lower.

German Bunds gained, while Italian and Spanish government bond yields rose in volatile trade on Thursday, after a euro- zone monetary source said the European Central Bank was only planning to buy Portuguese and Irish bonds. For more see [ID:nR1E7IF024].

Markets were unconvinced the ECB bond buying will be effective in stopping contagion and some were disappointed that Italian and Spanish bonds, whose yields climbed above 6 percent recently, were not the target of the purchases.

"It wasn't a unanimous decision to (buy bonds). (ECB President Jean-Claude) Trichet looked really uncomfortable saying it," one trader said.

"The market, obviously, dismissed it pretty rapidly," another trader said.

Brent fell more than 3 percent and U.S. crude lost 4.8 percent, or $4.51 to $87.42 a barrel. Copper prices dropped 1.8 percent. (Additional reporting by Julie Haviv, Marius Zaharia and Emelia Sithole-Matarise; Editing by Jan Paschal)

Dollar Soars as Global Equities Tumble- Yen Heavy on MoF Intervention

The greenback advanced against all its major counter parts an hour into US trade as global equities continued to sell-off, with the Swiss franc topping the performance charts with a loss of just 0.19% against the dollar. The USD/CHF pair tested the 23.6% short-term Fibonacci extension taken from the July 31st and August 1st crests at the 0.78-handle, before finding solace around the 61.8% extension at 77.15. The swissie is likely to remain well supported however as remarks made by ECB President Jean-Claude Trichet saw European investors once again seeking refuge in the swissie. A downside break here sees interim support at the 76.4% extension at 76.80 backed by the 76.50 level and the 76-figure. Topside resistance holds at the 78-handle, with subsequent ceilings seen at 78.50, 79, and the 79.50 level. Overnight traders will be eyeing data out of Switzerland with July CPI data on tap. Inflation is expected to remain subdued with consensus estimates calling for a print of -0.6% m/m and 0.7% y/y, well below its European neighbors where the risk to inflation remains to the upside, as cited today by President Trichet.