"The market will bottom once everyone stops guessing where the bottom will be"

It's a nice quote that I came across a few days ago. I think it makes perfect sense. This market will not bottom if everyone is trying to catch the bottom. That explains the all time high volatility levels in the stock market.

...It has been a long time since I last updated my blog, primarily because I still have been trying to accumulate capital in a bid to start trading the FX market.

...Here are my quick thoughts on banks

I have been thinking about the banks lately. It is clear that the market hates the investment banks. It's amazing to see GS trade at 10 year lows given that the firm is filled with amazing talent. The fact that we see that stock trade at such low valuations is because the market is just uncomfortable with the fact that the government is taking stakes in the banks. In fact, all the banks who participate in the TARP program are liable to the government and have to be accountable to their stakeholder - the US Treasury. It's obvious that the market is trying to get used to the numerous interventions by the government in the market. And they hate it. Look, the Fed cuts interest rates, stocks fall, the Fed takes up equity in the banks, stocks fall. They flood the system with money, and stocks also fall. They establish swap lines with other central banks and stocks also fall.

The US banks are now quasi-government. If the stock keeps falling everyday, it is inevitable that the banks become nationalized. Actually, there is nothing wrong with a quasi-government bank. Some markets are comfortable with a quasi-government bank - like the Singapore market. Singaporeans have been all along aware that Temasek has a stake in DBS and all through the years the bank was traded on the exchange as one of top local bank on SGX.

Local investors were perfectly comfortable with the government taking a stake in the bank. The stock continued to rise through time and investors are still looking to buy more DBS stock as it drops further. This goes to show that it is really a matter of perception and confidence that investors have in the company. In order to shore up their stock price, the banks have to win the public's confidence. Maybe cut salaries, shore up risk management, tone down leverage..

...On capital market expectations

I think we might see lower oil and gold prices in future. Yes, I think it is better to short the rally than to buy them on dips. Same for Corn

I think equities might head higher, but I am still cautious on them.

30 Years are neutral, would wait before shorting them. 10 Years might continue to see a strong rally. 2 Years are neutral, would also wait to short them.

The Euro is oversold, the Aussie might be supported. The pound might slide further. The yen might surge if the equity market breaks down. And the Canadian dollar also might slide. The Franc might depreciate a bit, which means that the dollar might weaken

I had stopped trading as the portfolio had a margin call due to the recent market volatility. I had left the long USD/JPY position open, the yen surged on tremendous selling pressure by investors and the rest is history. The portfolio had a margin call which I did not see coming. It is times like these I learn to pay more attention to risk management. I had never expected the market to turn lower so quickly. What I felt was cheap in the equity market seemed to have gotten cheaper - I clearly overlooked how volatile the market could be.

I would have to spend some time 'raising capital' so that I can have enough deep pockets for the next round. I would need to build sufficient capital as well as my confidence once again.

I feel that the equity market is nearing a bottom soon, but not until we see another round of bears versus bulls. I suspect volatility might remain high. There have been large price moves in the Asian markets. Volumes are low but price movements are clearly high and biased to the upside. I think this is the "new president" effect. Obama's victory seems to signal that the a new dawn is approaching and the market likes it. The market is behaving now as if we are going to see a recovery in the next two quarters. I am still waiting for more bouts of volatility before I touch equities.

Commodities on the other hand, look more attractive than equities. It seems that they appear to have more holding power. Prices are still sticky and judging from the past seasons, commodity companies are the only ones that are reporting profits. The rest are just taking the heat from a slowing economy. SIA profits are down in double digits, DBS also down and cutting jobs, OCBC down, UOB almost unscathed. There are two things moving forward, either the market is comfortable with the current commodity price level and we move forward from here, or we see another round of slaughtering and commodity prices fall lower.

The US Dollar is moving in a range, looking for a direction. On the one hand, we see paired currencies weakening with generous cuts from central banks; The US dollar strength is hurting some of the Asian company reportings as we have been so comfortble being exporting countries and reliant on Western domestic demand. Now, the US dollar is stronger and it seems that our exports are looking cheaper to the West but they are not consuming because they are slowing down. What I think needs to happen is that Asian countries unify together and build the base and lead the global economy to the next chapter. Asian currencies have to appreciate, Asian domesitc demand has to be built and more manufacturing jobs have to be exported to the Western allies. But this will take a long while to be established.

Trade Recommendation : Long EUR/USD for the short term

aPortfolio Performance : +57.82%

US Dollar Barometer stands at +2

Trade Recommendation : Long USD/JPY

Bottomline : US Dollar is bouncing back strongly, yes this is strange even though we have the bailout package which might cause more burden on the US fiscal system. There is so much fear in the markets now. Face it - the media is blaring all the bad news about the economy, the TV is causing the negativity to seep into our brains, it is some kind of brainwash and all that propaganda. Look here, the equity market is at a bottom - if you want to make money, no one sells at the bottom. I almost cannot believe it when Goldman Sachs placed a sell call on one of the equity counters - Comfort Delgro (I dont own this by the way). I mean the analyst should realise that he is placing a sell call when the equity market is at the bottom. No one places a sell call at the bottom of the market - it is equivalent to placing a buy call at the peak of the market. I had really thought better of the calibre by Goldman's analyst. Anyway, the report by Goldman was just one page long - too superficial and definitely not enough reasonable basis for a recommendation. I think the equity market is at a bottom soon, I feel really sorry for the people who are thinking about selling stocks now. "Don't be so caught up by the fear in the market."

In "Did the Asset Price Bubble Matter for Japanese Banking Crisis in the 1990s?" by Monzur Hossain (2004)

The failure of a large number of Japanese banks during the 1990s following the burst of the asset bubble in the early 1990 synthesizes a vast literature. Two stylized facts have emerged in explaining the crisis - 1. the transition from highly regulated main bank system through slow and undirected financial deregulations caused problems for the banks to adjust with the new environment; and that's why their speculative behavior during the asset price bubble to increase short term profit made them vulnerable after the burst of the bubble. 2. The other focuss on monetary policy. The view holds that in the era of protracted monetary easing during the mid 1980s, banks expanded their business aggressively to the SME market, real estate businesses as they lost their big customers of main bank arrangements, which created the problem of moral hazard and asymmetry of information. Since their loan was secured by collateral assets (land), the continuing plunge of land prices made the loan uncollectible and a huge burden of non-performing loan occured that ultimately contributed to banking failures.

The author argues that beside the two causes for the bubble, he says that declining profitability of the Japanese banks had caused them to resort to such speculative practices. He said that the declining trends in 1970-1980 caused the speculative builtup in the 1980s to cause a burst of a bubble in 1990. The diagram below illustrates


In the post-war banking system, Japanese banks were heavily dependant on BoJ subsidies and borrowings of enterprise groups. The characteristics of Japanese model of financial system during post-war economic growth included high debt/equity ratios, greater reliance on bank loans than securities markets, closer relationship between bank and borrowers, extensive corporate cross-shareholding, greater guidance from the government in credit allocation etc. The system was known as the "main banking system"

The structural changes in the financial system started from the mid 1970s in the form of financial dergulation. The main features of the deregulation were interest rate dergulation, relaxation of regulation to raise funds in the securities and investment market by firms, initiation of freely floating exchange rate and allowing banks and firms to participate in the capital market etc to increase the ability of the Japanese banking system to meet international competition.

Since the failure in 1990s, the number of Japanese bank failures continued to 2003.

The prospect of failure of banks can be expalined by analyzing the 1. asset risk, 2. capital adequacy 3. liquidity 4. management and operating efficiency 5. earnings

Asset quality is important for determining the current and future profitability of the bank; it deteriorates with the significant increase of non-performing loan. On the other hand, capital adequacy can reduce risk of failure and absorb losses. Capital acts as buffer against loan losses, it may prevent the failure whose customers default on their loans. According to Nelson (1977) the probability of failure is a fuction of current level of capital, and the estimated mean and variance of earnings and charge-offs.

Portfolio Performance : +57.80%

US Dollar Barometer stands at +4

Trade Recommendation : Long USD/CHF

Bottomline : US Dollar strength is apparent in the markets. Did some shorts on Gold, which helped the portfolio. Commodities are still negative. Bonds are still to tire, while the market still thinks the Fed is going to cut interest rates soon. Equity Market are in a mixed, but overall more bullish than usual

Portfolio Performance : +56.16%

US Dollar Barometer stands at +4

Trade Recommendation : Long USD/CHF

Bottomline : US Dollar strength is back with a vengence. Did some shorts on Gold, which helped the portfolio. The best things to trade now are probably bonds. Commodity volumes have declined while currencies are having big moves in anticipation of a global economic slowdown. Equities, I feel will not be fantastic, equity market participants might feel a bit jaded after the big drop on Monday.

Portfolio Performance : +54.76%

US Dollar Barometer stands at +3

Trade Recommendation : Long USD/CHF

Bottomline : Equity market rebounded in Asian trade. I am not taking any trades even though my gut feeling is telling me that things might turn better for the equity market. Yesterday's near death experience for the equity market twisted a bit of the market's expectation. Yes, it is clear that the markets want the US to take on the bailout package. The 777 point drop on the Dow had already taken away over 1 trillion in market cap in the equity market. I dont know how much more it will cause if they delay it.

Portfolio Performance : +54.76%

Actions : Closed my long USD/CHF on profit taking, which helped the performance of the portfolio. Systemic risk has spread and the contagion has appeared to affect Europe. Pressure is on the equity market. Commodities have slid, as expected.

I have sidetracked a bit to focus a paper on equity price movements instead of foreign exchange.

In "Fundamental information and share prices in Japan: evidence from earnings surprises and management predictions" by Robert M.Conroy, Robert S.Harris and Young S.Park 1998

The paper investigates whether corporate fundamentals, as captured by corporate earnings and especially management forecasts of such earnings, provide significant insights into Japanese stock prices.

All in all, the results from their paper show an important and changing role for earnings information in Japanes market pricing. Three clear empirical patterns stand out. Japanese stock prices react significantly to innnovations in information about company-specific earnings fundamentals. Price reactions are much more pronounced to management forecasts of future earnings than to announcements of current earnings. Finally, the pattern of price reactions to earnings news changes over time. The patterns of change are broadly consistent with the view that the alleged bubble period of the 1980's did see a smaller role for fundamental information about corporate performance. Moreover, reactions to bad news became particularly more pronounced after the bubble period ended.

They found that current stock price depends on expectations of both near term and long term earnings. As a result, share price rise if current earnings give investors new information about future performance. One would expect management forecasts of next year's earnings to elicit even stronger price responses. Also, in a bubble, when attenuated price responses to earnings fundamentals in this period are due to a speculative bubble or to investor's rational choices not to revise expectations of future earnings may ultimately be a matter of semantics. What is clear is that pricing effects appear to change with general market conditions. Apparently when market conditions have turned sour, specific company announcements result in more severe price changes. In more buoyant markets, such news may be given less weight as all boats are viewed a s rising.

Portfolio Performance : +34.78%

US Dollar Barometer stands at +3

Trade Recommendation : Long USD/JPY

Bottomline : I am still in my long USD/CHF trade. The US Dollar retreated from the sharp spike a few days ago on anticipation that the bailout plan would not reach a consensus, but overall the US dollar is not dead. I think there are a lot of people out there who think that the US dollar would be doom. I continue to believe that commodities are in for a slide, including gold.

In "Can fluctuations in the consumption-wealth ratio help to predict exchange rates?" by Jorge Selaive and Vicente Tuesta, 2006

the authors have found that the consunption wealth ratio to be fairly accurate in predicting the nominal exchange rate.

The difficulty in predicting exchange rates using macro fundamentals has been a challenge in international macroeconomics since the seminal paper by Meese and Rogoff (1983). Mnay found that none of the proposed models were able to outperform a simple random walk.

In their paper Lettau and ledvigson (2001) attribute a key role of fluctuations in the aggregate consumption-wealth ratio for predicting stock returns over short and intermediate horizons. When excess returns are expected to be higher in the future, forward looking investors will react by increasing consumption out of current asset wealth and labour income. According to guo (2003), if Americans invest in foreign currencies, the returns of the portfolios will finally be a function, among other fatcors, of the relative depreciations or appreciations of the foreign currencies. This suggests a role for the consumption-wealth ratio to predict the nominal exchange rate.

The diagram below shows the consumption-wealth ratio as well as the exchange rate of the Canadian dollar.




The diagram shows that there is some relationship on the deviaiton of the consumption-wealth ratio and the future exchange rate.

The author argues that because the consumption-wealth ratio are strong predictors of asset returns, the consumption-wealth ratio may provide an excellent predictor of exchange rates. However, he found that the fluctuations in the consumption-wealth ratio does have a significant impact on FX forecasting and does help to a certain extent on forecasting FX abilities. He proposed further research to be done on how international macro-variables might affect FX rates, especially on bilateral net foreign asset position among countries, as Kilian and Taylor have previously found a significant relationship on the variables.

Portfolio Performance : +34.45%

US Dollar Barometer stands at +1

Trade Recommendation : Short EUR/USD

Bottomline : I am still in my long USD/CHF trade. I continue to be bullish on the US dollar. Quiet day for equity market today, probably signals that the market is tired. There is a swamp of bad news, the latest victim of the credit crisis is Washington Mutual. I am beginning to think that gold is turning into a massive speculative bubble soon, neutral on bonds, more positive on equities.

Portfolio Performance : +31.05%

Trade Recommendation : Long USD/CHF

US Dollar Barometer stands at +4.5!

Bottomline : Strong day for the US Dollar, we might continue to see a rally for equities. Commodities are cracking, which is going to put some pressure on gold. There is a lot of flight to bonds, as credit is freezing up, but the bailout package will unwind a bit of nerves moving forward.

Portfolio Performance : +30.60%

US Dollar Barometer stands at +3.5

Bottomline : I continue to think that the equity market is bottoming out but we might see a rally only if the commodity market stops presurring the stock prices. The US Dollar has strengthened which might pressure gold and oil a bit.

In "Growth of China's foreign exchange reserve" by Zhang Shuguang and Zhang Bin, 2007

the authors examine the growth of the foreign exchange reserve impact on the balance of the Chinese central bank.

While the Chinese economy has been hailed for its success in maintaining high growth and low inflation over the past decade, structural problems, notably the excessive accumulation of the foreign exchange reserves have cast a shadow in the outlook for the country. China's foreign exchange reserves increased to $853.7 billion in February 2006, surpassing Japan to become the largest reserve holding in the world. The reservese exceeded $1 trillion at the end of 2006. At this rate, the Chinese reserves is expcted to hit $2 trillion by 2010.

Foreign exchange reserves are influenced by many factors, such as domestic economic structure, government policies and changes in the international economic climate. The effect of increasing the Chinese foreign exchange reserves on the national economy and monetary policy can be examined using the central bank's balance sheet. As demonstrated by the Balance Sheet of the Monetary Authority, the accumulation of foreign exchange reserves on the one hand increases the foreign exchange assets of the central bank, while on the other hand increases the base money and other reserves on the liability side. The additional base money is transmitted into the increase of money supply through the operation of the banking system and the money multiplier effects.

On the asset side of the equation, the bank's accumulation of foreign exchange reserves increases the proportion of foreign assets - with these growing rapidly, the bank has to limit the growth of domestic assets to stabilize the money supply and prices. Therefore, it is assumed that the central bank may keep the domestic asset level at the same level from 2005 to 2010.

Holding all other factors constant, the massive growth of foreign exchange reserves may lead to an increased supply of money in the market. To offset the money creation effect of the foreign exchange reserves, the Chinese central bank has started issuing trillion worths of bonds in 2003. Which means that the issuance of bonds is likely to increase in future. This will in return affect the structure and function of the domestic bond market in china. To attract commercial banks to buy up China's treasury bonds in future, they would have to increase interest rates, which will likely increase the cost of issuance of these bonds. If china allows the RMB to appreciate too much, it will have a dimishing effect on the FX reserves.

Another way to manage the growth rate of the reserves would be to compute the cost benefits of putting the capital to domestic use for the national welfare of the nation. Afterall, china has been lending resources to foreign countries for many years at the loss to the nation. That said, we measure the benefits of purchasing the US Treasury bonds and other bonds and deposits in foreign banks to the rate of return on domestic capital. Given that the US Treasuries have only given about 3-4% recently, it is more profitable for the bank to invest domestically. That said, the excessive accumulation of foreign exchange reserves is likely to incur substantial welfare losses on the chinese economy.

Portfolio Performance : +30.09%

US Dollar Barometer stands at -2

Trade Recommendation : Short USD/CAD

Bottomline : Although the equity market wants to bottom, I think the commodity market might continue to pressure it lower first. I think once the US Congress agrees to buy those illiquid debts, the market will bounce but the ones who will benefit are those outside the US, namely China and perhaps Europe.

In What macro-innovation risks really are priced in Japan? by Chikashi Tsuji, 2007

The author examines the macroeconomic variables priced in japan. Asset prices generally react sensitively to unanticipated changes in the state of the macroeconomy. Standard finance theory concludes that an additional component of long run returns is required and acquired whenever a particular asset is influenced by systematic innovations in a variable and that no compensation can be earned by taking diversifiable risk.

Chen (1986) found that significantly priced factors in the US include industrial production, inflation risk premiums and the slope of the yield curve, which has spurred many other research on the area. However, the japanese stock market has its own unique history and characteristics. Hence priced macro-innovation risks naturally differ from those of the US.

Working from chen's model, the author found that of the five fatcors in Chen's model, only unanticipated changes in risk premium appear to have a significant effect on the Japanese stock market. Second, oil price changes are not priced in Japan although much differently in the US. Third, exchange rate related variables such as variability of trade and unanticipated changes in the exchange rate are not priced in Japan. Last and most significant, innovations in money supply and in gold and foreign exchange reserves are strongly priced in Japan.

In conclusion, the author argues that the domestic macro-innovation risks are not particularly important in Japan. The international factors mentioned above play a more significant role in the Japanese stock market than do domestic factors.

Portfolio Performance : +29.51%

US Dollar stands at -0.5

Trade Recommendation : Long AUD/USD

Bottomline : I am beginning to think that equities are hitting a bottom very soon. Commodities are also starting to crack. The US dollar appeared to be very weak until the Fed came up with the bailout plan for the markets - that totally reversed things.

Portfolio Performance : +29.49%

US Dollar stands at -1

Trade Recommendation : Long GBP/USD

Bottomline : Huge move in the market overnight. A key reversal of events, the government is stepping in to stop the short selling and doing everything to stop the failure of the system. US dollar is weakening now despite the rally in equities. Commodities to trend higher, Gold turning into a bubble. Equities have a little upside. I can't imagine what would happen once the SEC rule on short selling financials would stop.

Portfolio Performance : +29.29%

US Dollar Barometer stands at -3

Trade Recommendation : Sell USD/CHF

Bottomline : sold the dollar against the franc but it triggered my stop loss. Still early to call for a bottom for equities, but we are approaching one. Markets now questioning the value of the US dollar.

In When is money neutral under flexible exhange rates? by pekka Ahtiala, 2008 - the author studies the neutrality of money under flexible exchange rates in an extended Mundell Felming model.

The extended Mundell Fleming model is alive and well and continues to serve as a forecasting tool for most central banks and governments because it works empirically. The model suggests that under perfect capital mobility, monetary expansion is expansionary under flexible exchange rates, under the assumption of fixed prices. Under the extended Mundell Fleming model, it was shown that montary expansion is typically expansionary in the long run after being contractionary in the short run both for net creditors and net debtors.

Portfolio Performance : +30.04%

US Dollar Barometer stands at +1

Trade Recommendation :Sell AUD/USD

Bottomline : Equities having a tough market. Gold has surged, as expected. The US dollar bulls are fighting, but I think the longer US dollar outlook is negative. The recent Bond rally might weaken a bit on higher yields. Commodities might stay supoorted but the longer term outlook for the asset is negative

Today, I wish to highlight work on "Exchange Rate Regimes : Middling Through" by Ashima Goyal (2006)

In the paper, Goyal says that most emerging markets are moving towards a regime that has higher exchange rate volatility and lower interest rate volatility. In his study of emerging markets, he noted that many countries have adopted a limited flexibility and managed float exchange rate regime. (see below) Independant float regimes have actually fallen



In looking at interest rate and FX volatility of various countries, he noted that a desirable characteristic of intermediate regimes would be to have low FX and interest rate volatility. Interest rate volatility should be lower than FX and be allowed to respond to domestic cycles, as their smoothing would minimize banking crisis, facilitate smooth working of the financial system and lower the burden of government debt. (Maybe Bernanke should have read his paper)

Portfolio Performance : +30.03%

US Dollar stands at +1.5

Trade Recommendation : Long USD/JPY

Bottomline : What a weekend, big move in the markets after Lehman Bankruptcy. The Barclays vultures are now taking what is left of Lehman. AIG is next on the list. Citigroup maybe next (Check out the Chapter 11 listing for Lehman). Markets await the Fed decision rate. Consensus looking for a cut in interest rates, which could spur another commodity rally. This is going to be tough for the consumer and depressing for businesses. This is absolutely a tough environment for equities.

Portfolio Performance : +25.73%

US Dollar Barometer stands at -3

Trade Recommendation : Long EUR/USD

Bottomline : Tough market for equities. The media is focusing on Lehman over the weekend, shorts are looking at Merrill and AIG next. Commodities might rebound, I think it is good to put some short term tactical long positions in Gold. US dollar strength has weakened!

In A comparison of the accuracy of short term foreign exchange forecasting methods, Nigel Meade, 2002

The author made an attempt to examine the short term forecasts methods from linear and non-linear processes. In his tests, the measurement of point accuracy was achieved using a range of summary statistics coupled with tests of significance. The significance of directional accuracy was measured using Peseran and Timmerman's test and the associated theoretical profit assessed by simple trading rules.

Here are the results of the error measures. The MAE showed showed some evidence of greater accuracy for three series (2 hourly and 1 hourly). RMSE and Peseran and Timmerman test showed accuracy increasing with the frequency of observation. RMSE showed significantly greater accuracy than the no-change forecast for two-hourly, one-hourly and half-hourly data: in addition this greater accuracy persisted for multi-period horizons. The Peseran and Timmerman test showed significant predictive performance for four-hourly and more frequent data. This predictive performance persisted for multi-period horizons, at least ten periods for most half-hourly data sets for most methods. The application of the trading rule confirmed the existence of potentially profitable trading opportunities.

Portfolio Performance : +25.73%

Actions : I exited my short USD/CHF position, helping the portfolio to recover its performance

US Dollar Barometer stands at +1.5

Trade Recommendation : Long USD / CHF

Bottomline : I think equities are set for a near term bounce. Commodities are also taking a pause from their decline. Market might trend range bound. Signs of fatigue is appearing.

Christelle Lecourt and Helene Raymond in Central Bank Interventions in Industrialized countries : A characterization based on survey results, 2006 did an interesting work on central bank interventions

Central Bank Interventions (CBI) seem to have negative effectiveness from empirical research. The main findings are that FX volatility have increased rather than been reduced, where the FX interventions frequently move in the wrong direction. Interventions done in coordination with other central banks have a larger impact than unilateral interventions conducted by a single bank. Several studies have also shown that the Central Bank statements - accompanied or not by actual interventions - can have a stabilizing effect on the exchange rate.

In theory, there are 3 channels through which interventions can act on the exchange rate : the monetary channel, the portfolio-adjustment channel and the signalling channel

1. The monetary channel involves non-sterilized of foreign exchange interventions, which is basically involving the changing the foreign exchange policy which leads to a change in the monetary policy and a change in the monetary base

2. The portfolio balance channel predicts that selling foreign foreign currency reserves will appreciate the domestic currency, whereas increasing reserves should depreciate the domestic currrency. Obstfeld (1982) has shown that however that in a Ricardian world, sterilized interventions can be ineffective even in the short term : it does not change the net wealth level of the private sector, nor its perceived composition. Empirical studies find no evidence that interventions alters exchange rate levels through a portfolio-balance channel - the main reason is that intervention amounts, although appear paramount are rather small when compared to the total daily activity in the foreign exchange market.

3. According to the signalling theory, central bank's interventions can recover some efficiency through the signal they convey on future policy. In the signalling theory, exchange rate levels are likely to be disturbed in the short term only if the information received by traders is strictly non-anticipated. When a central bank intervenes in the FX market, it conveys a signal, which indicates for instance a change in future monetary policy. If this signal is expected by the market, the information given by the signal is already incorporated in the previous day's spot quote. By contrast, if the signal is "new", it will immediately change the current FX value.

According to the authors, through their survey of central banks, the signalling effect is clearly put forward as the main channel through which intervention should work. Other characteristics found in the survey was that central banks choose large size interventions and stress on international communication and concerted interventions as means of ensuring effectiveness. Second, they prefer domestic banks as counterparts to help maximize their announcement efforts. Third, most central banks do not use secret interventions.

Portfolio Performance : -4.73%

US Dollar Barometer stands at 0

Trade Recommendation : Long GBP/USD

Bottomline : I am still short on USD/CHF, even though the portfolio is bleeding heavily. It is quite likely that the trade might wipe out the entire equity, but I am keeping my fingers crossed. A revenge trade? I guess it is, if this does not work out, I might might to raise more capital

Gold had a big move today. Commodities and equities still under pressure. The bond market is still the place to be.

Chun I Lee, Ike Mathur and Kimberly C Gleason in "The Tick/Volatility Ration as a Determinant of the Compass Ross Pattern"

According to the study, there is evidence that the compass ross pattern is absent in the spot and futures forex markets but present in the intraday returns, especially so for the holding periods of less than an hour. A Monte Carlo investigation of the tick/volatility ratio provides evidence that the pattern appears only if the tick/volatility ratio is above some threshold value. The fact that the daily patterns do not exhibit this pattern is because the ratio is smaller than the threshold value.

In other words, to have a high tick/volatility ratio, we must have either a big spike in prices or a sharp drop in volatility. Once this happens, the paper suggests that the price actions in forex move almost completely randomly in the longer time charts but more predictable in the shorter term charts (i.e. less than an hour)

The picture of the compasss rose pattern is shown above

Portfolio Performance : +20.95%

US Dollar Barometer : -2

Trade Recommendation : Short USD/CHF

Bottomline : Equities continue to struggle with momentum, Commodities might take a short term trend higher from here. Bond Rally might take a breather. Greenspan raised an interesting point yesterday on TV, he said that the fact that we have two US government sponsered enterprises functioning as public companies is a failure itself. He is right, the administration who came up with the idea of GSEs as listed companies failed to consider the extreme consequence of a company failure and its impact on shareholders. We can draw an analogy to Temasek owning stakes in listed companies on the Singapore exchange. As we know, Temasek has bought into a number of companies, even foreign banks that operate in Singapore. It is a well known fact that, on the basis that Temasek owns a portion of the company, the likelihood of the company failing in future is not probable unless Temasek runs out of capital (because Temasek will defend her investments). This is the "Temasek" premium built into the share prices of companies listed on SGX. The US Government, on the other hand, not until recently does not own stakes in Fannie and Freddie. I wonder if the whole mess would have happen if the US Government became a stakeholder in the GSEs, maybe they would be alerted earlier about the situation and stepped in faster. Perhaps Temasek did the right thing after all, by buying up shares in Singapore operating financial institutions.

Portfolio Performance : +20.12%

Actions : My stop loss on the Short USD/JPY was triggered again early in the week shortly after the news on the bailout of Freddie and Fannie

US dollar barometer stands at +3

Trade Recommendation for the day: Long USD / CAD

Bottomline : Equities are taking a pause to figure which direction they want to go, but I think the market has more room to trend lower than higher. The US dollar strength in the market is still there, I dont understand why this is so - afterall, the Treasury just used money to bail Freddie and Fannie but US dollar bulls still like going long on the dollar. Commodities might take a pause after falling so much, I think crude will flirt around the $100 - $107 per barrel level, I don't see any tremendous selling pressure from the energy market yet moving forward. Bonds are still the market to be in.

Portfolio Performance : +25.34%

US Dollar Barometer stands at 0, down from the +2 in my last update

Trade Recommendation : Sell USD/JPY

Bottomline : The equity market is set to deteriorate further, commodities might slide a bit but not that much. I dont expect the market to falter in the beginning of the week, the weakness might start toward the middle of the week.

I would like to highlight some research on forex markets by Peiter Van Foreest, from The Forex Regime and EMU Expansion, 2003.

In that paper, Foreest found that the choice of the foreign exchange regime is not of first order importance for achieving high real (economic) growth. Empirical evidence showed that production growth was unrelated to the amount of forex volatility and choice of currency arrangement. Rather, the volatility of the currency was determined by the current and the (market's) anticipation of monetary and fiscal policy. Therefore, a flexible forex system can be very stable if the monetary and fiscal policies are coherent with the market's forex rate valuation. Conversely, a managed float or fixed forex arrangement can be quite unstable.

I beg to differ, I think a managed FX system is dependant on the country's financial system vulnerability to external shocks. I think larger countries can afford to adopt flexible target interest rate policies, while smaller countries like Singapore should continue to lean against the wind.

The other thing he said in his paper, was that the stability of the currency would happen if it was coherent with the market's forex rate valuation. I think this should be applied by central banks in their monetary policy. Perhaps one of the reasons why we had such volatile movements in currencies is because the central banks surprise us! We never expected the Fed to cut rates so aggressively, so we had such big moves in the currencies and commodity markets. I think central banks should continue to voice their expectation for interest rates continually with the markets. The financial system is deteriorating. Enough of surprises and shocks, we need something credible and steadfast to hold on for support.

Portfolio Performance : +25.36%

Actions: The USD/CHF had reversed course to trigger my stop loss, causing a dent in performance

Recommendation for the day : Sell AUD/USD

US Dollar barometer : +2

Bottomline : The US dollar strength is still in the market, but the weakness in equities might still linger, the bond market is having a great time, commodities still look weak to me. I think we can short gold on the rallies moving forward

Portfolio Performance : +31.17%

US dollar barometer stands at -0.5

Trade Recommendation for today : Short USD/CHF

Bottomline : I missed the big move on the AUD/USD pair as I was busy with personal matters. Moving forward, I might blog less as I wish to focus on my other personal goals. Overall, I think the equity market movement might trend lower, I think the bubble for crude is only starting to burst. The bond market is having and will have a strong rally in my opinion.

Portfolio Performance : +31.17%

Recommendation : Short AUD/USD

US Dollar barometer stands at +2

Bottomline : US equity market ended in the red, however I dont feel that equities will drop a lot on Monday. I continue to see a big slide for commodities (maybe except for Agriculture).

Portfolio Performance : +31.17%

Actions : Did some intraday trading on the USD/CAD

US Barometer stands at -1.5

Recommended trade : Sell USD/JPY

Bottomline : US dollar strength deterioration is becoming apparent. US equities might weaken a little, I see some signs of fear coming up, I continue to think that the rally in crude will not last, but I am keeping my fingers crossed that equities will not break down in the short term

Portfolio Performance : +28.89%

US dollar barometer at +0.5

Recommended trade : Long USD/CAD

Bottomline : US dollar still in the gain, stocks to rally and commodity gains to be suppressed. I think crude might increase at a declining pace moving forward.

Portfolio Performance : +28.89%

US Dollar Barometer at 4.5!

Recommendation : Long USD/CAD

Bottomline : I expect a strong US dollar rally. In the medium term, I expect Equities to rebound and it seems to me that commodities is turning into a bubble soon.

Portfolio Performance : +28.89%

US Dollar barometer stands at -0.5

Recommended trade : Short USD/CHF

Bottomline : Commodities still on a bear trend, might see some rebound or range bound trading. Equities might also see some support, US dollar is looking for a bottom, struggling to be bullish

Portfolio Performance : +28.89%

US Dollar barometer stands at +0.5

Bottomline : Commdities Sell Off! I am quite convinced that the commodity rally is due for a big downslide moving forward. I might consider shorting the USD/CAD on rallies. This might bid well for equities.

Portfolio Performance : +28.87%

US Dollar barometer stands at 0

Headline News

1. Japan's merchandise trade surplus tumbled 86.6% to 91.15 billion Yen in July from a year earlier as surging prices of crude oil and other commodities lifted imports
2. Japan trade deficit with China lower by 63.3%, with Taiwan lower by 6.2% and with Malaysia down 0.7%
3. Consumer confidence in Singapore registered its first drop after rising in every survey since its inception in 2005
4. Vietnam has proposed to more than double the export tariff ceiling on crude oil and coal to save more for domestic consumption
5. Singapore second quarter domestic wholesale trade higher by 25.4% from a year ago, slower than the 26.5% gain in the first quarter
6. British retail sales unexpectedly rose in July as prices rose at their fastest rate in a decade
7. US weekly jobless claims lower by 13 000 to 432 000 vs 448 000 expected
8. US continuing claims lower by 17 000 to 3.362M
9. US Philly Fed Business index -12.7 vs -16.3 in July
10. US Philly Fed Employment Index -1.1 in August vs -7.3 in July


Bottomline : Commodities are higher, boosting the Australian and Canadian dollar strongly. I think the strength in the US dollar and weak commodity prices in the previous month has helped the US economy

Portfolio Performance : +28.86%

Actions : Did some intra-day trading on the EUR/USD pair, which helped the performance of the portfolio

US Dollar Barometer stands at -3

Headline News

1. Energy pits filled with rumors that Irving Oil has been buying as much as 1 million barrels of gasoline on the open market over the past two days, leading to speculation that there is a problem at Canada's largest oil refinery
2. Electricity-starved Nigeria signed a preliminary agreement on Tuesday with Germany to help boost power supply in Africa's top oil producer in the next 11 years
3. US ABC Consumer Comfort index -49 versus last week of -50
4. Japan June all-industries index lower by 0.9% from May
5. Australia's index of skilled job vacancies fell 4.3% seasonally adjusted in August from the previous month and was 14.4% lower from a year ago
6. India allows the export of rice, corn seeds
7. Vietnam central bank has raised its overnight loan rate to 15%
8. China July wholesale price higher by 9.4% year on year vs 9.5% year on year in June, according to the central bank
9. Taiwan Balance of Payment surplus 4.59 billion USD versus 1.89 billion deficit
10. British manufacturers expect to cut output at the fastest rate in nearly seven years, according to a survey published on Wednesday by the Confederation of British Industry
11. India's ministry of commerce and industry said that foreign investors must cut their stake in Indian commodities exchanges to 5% by June 30, 2009
12. The PWC quarterly measure of optimism said only 24% of CEOs in the US have a positive outlook for the economy in Q2 08, a new record low. 26% were positive in Q1 08

Bottomline : The US dollar is starting to lose its strength against the pairs, I suspect that we might continue to see a dislocation between the US dollar and commodities moving forward. The equity market might see some trouble ahead while commodities might bounce back

Portfolio Performance : +14.99%

Headline News

The USD barometer remains at -0.5

Headline News

1. The World Bank President Robert Zoellick called for a revived talks of last month's proposal for a safeguard to help poor farmers in poor countries withstand a flood of imports
2. US NAHB Housing Index unchanged at 16 in August, unchanged from July
3. The sharp fall in UK house prices recorded in the recent months lifted the number of properties going for rent, as it has become more profitable
4. RBA Minutes shows that less restrictive monetary policy may be needed in the months ahead
5. Bank of Japan downgrades the monthly economic outlook, Bank of Japan leaves target rate unchanged as expected
6. The Philippines recorded a balance of payment surplus of $142 million in July, against a deficit of $248 million in June
7. German PPI higher by 8.9% year on year
8. The ZEW research institute said its economic expectation index for Germany improved to -55.5 in August, from -63.9 points in July
9. US inflation at the wholesale level rose at the fastest annual pace in three decades, core inflation posted the largest annual gain in almost two decades

Bottomline : Things are not looking good for the equity market as earnings growth slows. The US dollar is starting to weaken. The EUR/USD pair is looking interesting, I might go long on it depending on the market performance

Portfolio Performance : +17.35%

Actions : Did some intraday trading on the USD/CAD pair

US dollar barometer stays at -0.5

Headline News

1. Spain's economic minister says that unemployment rate in the country could end the year above the 10.4% forecast.
2. South Africa countries have launched a regional trade zone at a summit on Sunday that aims to eliminate import tariffs, with plans for a common currency by 2018
3. Analysts see no end to falling prices or a recovery in the sector before 2009
4. Activity in the NZ service sector improved from a record low in July, the index rose to 48.9 from 45.6 in June
5. The South Korean Won hit its weakest in six weeks against the US dollar on Monday
6. South Korean President Lee Myung bak predicted that the economy would recover around the end of next year, but said that inflation would be the main challenge facing the country
7. China's property climate index was at 102.36, down by 0.72 points from June and lower by 1.64 points from a year earlier.
8. Malaysia's manufacturing sales in June rose 17.8 percent from a year earlier, on higher demand for refined petroleum, iron and steel products
9. Singapore non oil exports unexpectedly fell in July dropping 2.2% after seasonal adjustments from June, providing new evidence that a global economic slowdown is weighing on Asian imports. This was in contrast to a 3.4% rise from the market
10. Japan July Department Store Sales lower by 2.5% year on year
11. Swiss Retail Sales higher by 0.7% in June
12. Unemployment in Hong Kong rose 3.2% for the May-July period, better than the market expectation for a 3.4% rise.

Portfolio Performance : +14.99%

US dollar strength barometer reads at -0.5

Bottomline : The US dollar is starting to see some weakness, I have placed a limit order to long CAD/USD. I think we might see a bounce in commodities, which is negative for equity market

Portfolio Performance : +14.99%

My expectation for the US crosses

1. EUR : Neutral
2. AUD : Positive
3. GBP : Negative
4. CAD : Midly Positive
5. JPY : Neutral
6. CHF : Neutral

Bottomline : The US dollar is depleting, bears are coming out and it looks like the future is not too bright for the equity market

Portfolio Performance : +14.99%

Headline News

1. Singapore Minister Mentor Lee said that Singapore GDP will fall between 3-5% if the US and Europe falls into a recession
2. Japan Tetiary Index lower by 0.8% from May
3. China's industrial output higher by 16.1% from a year ago, forecast was for a 15.9% increase
4. Tokyo July Condominium Sales lower by 44.5% year on year, Osaka sales down 29.5% (wow, this is powerful)
5. Swiss Consumer Sentiment index -17 vs -5 forecast
6. German's GDP declines 0.5% from the first quarter, consensus looking for a 0.9% decline. It's first in four years
7. Indonesia's annual economic growth accelerated to 6.39% in the second quarter despite a rise in borrowing costs and higher fuel prices
8. Dutch GDP highger by 2.8% from a year ago
9. Euro Zone July HICP higher by 4% year on year
10. Euro Zone Q2 GDP higher by 1.5% year on year from 2.1% YoY in Q1
11. US Jobless Claims lower by 10 000 to 450 000 vs 440 000 expected

My expectation for the US crosses

1. EUR : Midly Negative
2. AUD : Neutral
3. GBP : Neutral
4. CAD : Negative
5. JPY : Midly Negative
6. CHF : Neutral

Bottomline : The US dollar strength is back in the market, the bears who turned up at the equity market have lost interest in shorting the market. I think the market is getting to so much bad news, but the bulls have also gone tired of buying.

Portfolio Performance : +14.98%

Headline News

1. US oil demand during the first half of 2008 fell by an average 800 000 barrels a day compared to the same period a year ago, the biggest volume decline in 26 years
2. Chairman of the "Wisemen" that advise the German government on economic issues, Bert Ruerup noted in an interview on the Frankfurter Allgemeine Zeitung, a preview of an article in tomorrow's paper, that " I can't rule out a recession, but I certainly don't see one; but I do see noticeable weakness"
3. The US Treasury budget deficit grew to $102.22 billion in July, a 182% hike from the $36.45 billion a year ago
4. US ABC/Washington Post Consumer Comfort Index -50 vs -49 the previous week
5. Japan Q2 Real GDP fell by 0.6% from Q1.
6. Japan June Current Account Surplus 493.9 billion Yen vs 1.52 Trillion Yen
7. The Westpac Melbourne Institute consumer sentiment index climbed 9.1% to 86.2 in August
8. China July Retail Sales Higher by 23.3% year on year
9. Spain final July Core Inflation 3.5% year on year vs 3.3% year on year
10. UK July Claimant Count higher by 20 100 biggest rise since Dec 1992
11. Euro Zone June Industrial Output unchanged vs May
12. China End July M2 Money Supply higher by 16.35% year on year
13. Indonesia Current Account Surplus unexpectedly narrowed slightly in the second quarter of 2008, providing support for the rupiah and underlining the importance of commodities exports to the economy
14. US July retail sales fell in July for the first time in five months as falling sales at auto dealers offset in most other major retail sectors
15. Thought struggling automakers managed to reduce their inventories in June, total business inventories rose more than expected and at their fastest annual pace in more than a year.

My expectations for the US crosses

1. EUR : Midly Positive
2. AUD : Midly Positive
3. GBP : Neutral
4. CAD : Positive
5. JPY : Midly Positive
6. CHF : Neutral

Bottomline : The commodity market is back to its feet once again, causing a depreciation of the US dollar. I feel the equity market might in for a spin soon

Portfolio Performance : +9.4%

Actions : Long EUR/USD

Headline News

1. Alocoa lead Dow industrial decliners yesterday, on track for lowest close in 7 months
2. A substantial portion of banks say they have tightened lending standards for commercial and industrial loans, residential real estatem and consumer loans over the last three months, but fewer banks expect to tighten lending standards on these loans over the next year, according to a July Federal survey of Senior Loan Officers
3. Japan's July corporate goods price index higher by 7.1% year on year
4. A key measure of Australian business conditions hit its lowest level in seven years in July as firms reported falling sales and profitability, adding to the case for an urgent cut in official rates
5. China CPI higher by 6.3% year on year
6. Citigroup says that slower economic growth and higher product prices are expected to cut into Chinese oil demand in the second half of the year
7. Japan's revised June industrial output lower by 2.2%
8. Japan's July consumer confidence index down at 31.4 from 32.6 in June
9. New Zealand house prices were flat in July, while the number of sales bounced off 16 year lows, a survey showed on Tuesday. Sales is higher by 4.3% from June but lower by 32.6% from a year ago
10. Indonesian consumer confidence rose in July after falling for eight straight months, indicating that less respondents expressed pessimism about current economic conditions and the economic outlook for Indonesia
11. Russia's central bank said that the military conflict with Georgia over South Ossentia will lead to short term capital outflow from Russia, but should not have a big economic impact (is he kidding?)
12. French current account deficit -4.4 billion Euros vs Revised -2.8 Billion Euros
13. The South Korean won fell against the dollar on Tuesday as the US currency rose on mounting worries about a slowing global economy and was further pressured by importer's dollar demand for settlements
14. Russia says that they will reduce thier investments in US agency debt, driven by political pressure and the holdings may further be reduced
15. IEA says that Georgia conflict threatens energy hub, but the agency warned that it was too soon to say that the tide of the recent long surge of oil prices had finally turned, signalling that the softer conditions were likely to last into 2009 (I dont think so)
16. Saudi BinLaden Group to invest in Indonesia
17. The US trade deficit in June unexpectedly improved as US goods and services exports increased faster than imports, according to the US Commerce Department

My expectation for the US crosses

1. EUR : Positive
2. AUD : Negative
3. GBP : Negative
4. CAD : Positive
5. JPY : Negative
6. CHF : Neutral

Bottomline : The US dollar strength has decreased, but I continue to think that the equity market is still bullish which might put the US dollar in a positive light still

Portfolio Performance : +8.634%

Headline News

1. Singapore Prime Minister reduces GDP growth estimate to 4-5% from 4-6% and said that the country faced a tough year ahead as it was beginning to feel the impact of a US slowdown
2. Australian central bank said that the economy looked to be slowing enough to significantly reduce inflation over time, providing growing scope to east interest rates from 12 year highs
3. Short Term Aussie Bonds fall as the RBA gave little clues as to whether they would reduce interest rates in future
4. Malaysia says that slowing economic growth in Malaysia will reduce inflationary pressure
5. Malaysia's June annual factory output growth fell to a 10 month low as manufacturing and mining sectors cooled in tandem with slowing global demand
6. Azerbaijan halts oil exports from 2 Georgian ports
7. China trade surplus was 25.28 billion USD in July, higher from the 21.35 USD billion in June
8. German July wholesale price index higher by 1.4% from June, higher by 9.9% year on year
9. The world's leading developed economies are set to slow more sharply in the months ahead, according to the Organization for Economic Cooperation and Development indicators of future activity. The OECD said that its composite leading indicators fell to 96.8 from 97.4 in May and was down 5 points from June 2007
10. UK July input prices higher by 0.4% from June, higher by 10.2% year on year
11. India's gold imports in July declined 56% as high prices curbed consumption and investment demand from the world's largest bullion consumer

My expectation for the US dollar crosses

1. EUR : Negative
2. AUD : Negative
3. GBP : Negative
4. CAD : Positive
5. JPY : Negative
6. CHF : Negative

Bottomline : The US dollar is coming back strong. This should continue to support the equity market moving forward

Portfolio Performance : +8.59%

Headline News

1. Three Indian States finalised the sites for setting up ultra mega power plants.
2. South Korea's largest business lobby group warned on Tuesday that an interest rate hike was more likely to hurt the economy than help contain consumer inflation.
3. Philippine consumer prices climbed to a near 17 year high of 12.2% in July from a year earlier
4. New Vehicle Sales in Australia fell 6.3% in July
5. RBA keeps interest rates unchanged at 7.25%
6. RBA says door open for easing
7. Alan Greespan said that more banks and financial institutions could end up being bailed out by governments before the credit crisis is over.
8. Greenspan cautions that a heavy handed regulatory response to the crisis would do more harm than good because it would depress global stock prices.
9. Euro Zone July Service PMI 48.3, lowest since 2003
10. Euro Zone Composite PMI 47.8, lowest since Nov 2001
11. Consumer price Index in July in Taiwan rose 5.92% year on year from 4.97% in June
12. Bank of China rumored to be studying German Bank for stake
13. UK service sector shrinks for the third straight month in July
14. US July ISM non-manufacturing composite 49.5 verses 48.2 in June

My expectation for the USD crosses

1. EUR : Slightly Positive
2. AUD : Negative
3. GBP : Negative
4. CAD : Neutral
5. JPY : Slightly Negative
6. CHF : Neutral

Bottomline : US Dollar strength is still apparent in the market. The equity market might still trend higher.

Portfolio Performance : +8.57%

Expectation for the USD crosses

1. EUR : Negative
2. AUD : Negative
3. GBP : Neutral
4. CAD : Postive
5. JPY : Neutral
6. CHF : Negative

Bottomline : Did some intraday trades on the EUR/USD. The US dollar strength in the market is becoming apparent, which should help support the US market

Portfolio Performance : +8.08%

Headline News

1. Treasury Under Secretary for International Affairs David McCormick said that the effects of speculation or currency depreciation on oil prices are "relatively minor in comparison" to supply and demand fundamentals that have been building for more than a decade
2. Spain permits issued for building new houses fall 57% in the year to May from a year earlier, according to the College of Architects
3. Rio Tinto, the world's third largest miner said that it will spend $2.15 billion on expanding its Corumba iron ore mine in Brazil
4. Japan June industrial output down 2% from May
5. Australia's housing industry looks set to weaken further as building approvals declined another 0.7% in June, approvals are now 7.8% lower from a year earlier
6. Japan's auto makers rose 4.5% to 1.03 million vehicles from a year earlier
7. Germany's June new machinery falls 5% year on year
8. Euro Zone Economic Sentiment Indicator 89.5 vs 94.8 in June
9. The number of three to five star hotels and resorts in Vietnam shot up by almost half in 3 years.
10. US ADP Private Payrolls was higher by 9000, vs market expectation of a drop of 60000
11. Crude oil stocks -0.1M to 295.2M barrels
12. Gasoline stocks -3.5M to 213.6M barrels

My expectation for the USD crosses

1. EUR : Negative
2. AUD : Neutral
3. GBP : Neutral
4. CAD : Neutral
5. JPY : Negative
6. CHF : Neutral

Bottomline : I expect the US dollar to gain some strength, the US dollar bears have somehow taken centerstage once again.

Portfolio Performance : + 7.95%

Actions : Did some intra-day trading on the EUR/USD

Headline News

1. MISHKIN says FOMC should extend economic projections to five years
2. Fed Mishkin says FOMC should only change inflation consensus only when economy changes
3. Miskin says that an announced inflation goal would help foreign investors
4. The Bush Adminstration on Monday cut its budget deficit forecast for the current year but expanded it to a record $482 billion for 2009 as the weakening US economy slows revenues and spending remains high
5. The US Treasury Department announced today that it expects to borrow billions of dollars more in marketable debt this quarter than originally forecasted, in part due to increased outlays like the $150 billion fiscal stimulus program
6. Japan's June unemployment rate 4.1%, higher from May by 0.4%
7. Japan's June household spending lower by 1.8% year on year
8. Singapore State investor Temasek Holdings said on Tuesday it had increased its investments in Merrill Lynch as part of the US broker's latest fund-raising effort
9. Australia's quarterly survey measure of overall business conditions fell 7 points in the second quarter to 6 points, the lowest reading since 2001
10. Taiwan index of leading indicator was unchanged in June vs May
11. The Philippine central bank said on Tuesday it expected annual inflation to come in a range of 11.2-12%
12. German wages among employees and workers have increased an average of 3.5% in April compared with the same month last year
13. Dutch July Consumer Confidence falls to plus 2.4 from plus 5.3 in June
14. The Russian Central Bank injected 192.2 billion roubles of one-day funds into the banking system at a rate of 7.02% in its first auction of the day today
15. UK Mortgage approvals slump to 36,000, the lowest since the series began in 1993
16. The National Development and Reform Commission, China's top planning agency has published broad guidelines for economic reform - the government will study and speed up reforms to property tax and study and begin to levy an environmental preservation tax, speed up restructuring of the Agricultural Bank of China and China Development Bank, push for the establishment of a growth enterprise market where smaller companies can list and expand the issuance of corporate bonds and more
16. Bank of China said that its British subsidiary had bought 30% stake in Switzerland's Heritage Fund Management for 9 million Swiss Francs
17. German july preliminary CPI higher by 0.6% from June
18. US May S&P/Case Shiller Home Price index down 16.9% year on year
19. US July consumer confidence rises to 51.9 vs 50 expected

My expectation for the USD crosses

1. EUR : Negative
2. AUD : Negative
3. GBP : Negative
4. CAD : Negative
5. JPY : Positive
6. CHF : Negative

Bottomline : I expect a very strong rebound in the US dollar, the equity market is expected to head higher.

Portfolio Performance : +7.09%

Headline News

1. Approximately $17.7 billion in primary credit was outstanding as of Wednesday.
2. Net portfolio holdings of Maiden Lane LLC, the company formed to facilitate JP Morgan Chose acquisition of Bear Stearns totaled $29.1 billion, higher from $29 billion in the previous Wednesday
3. South Korea expanded 0.8% in the June quarter, the same pace as March and as expected by the market
4. Japan core CPI higher by 1.9% year on year, overall CPI higher by 2%
5. Singapore june factory output higher by 2.5% year on year, less than estimates
6. German import prices higher by 1.5% from May, higher by 8.9% year on year
7. Euro Zone June M3 higher by 9.9% year on year from 10.1% in March-May
8. Taiwan M2 money supply higher by 1.7% year on year
9. According to China, it is facing increasing challenges in maintaining fast and stable economic growth amid growing international uncertainties and domestic economic difficulties
10. US Durable goods orders rose unexpectedly in June as autos posted their largest monthly gain in almost a year
11. US late Michigan consumer sentiment rises to 61.2 vs 56.4 expected
12. New home sales fell to 0.6% to a seasonally adjusted annual rate of 530 000 units, the lowest level since March.


My expectation for the USD crosses

1. EUR : Negative
2. AUD : Neutral
3. GBP : Positive
4. CAD : Neutral
5. JPY : Neutral
6. CHF : Neutral

Bottomline : Another quiet day for the market, I expect the market to trade the US dollar sideways.

Portfolio Performance : +6.76%

Headline News

1. Fed Beige Book said that pace of economic activity slowed since last report
2. Beige Book sees elevated or increasing price pressures in all Fed districts
3. The Reserve Bank Governor Bollard said "Provided that the outlook for inflation continues to improve and there is no excessive exchange rate depreciation, we would expect to lower interest rates further" - this is the first rate cut since July 2003
4. Japan June Surplus 138.6B Yen vs 1.24 Trillion Yen a year earlier, on a 88.9% drop in exports (this is huge)
5. Vietnam's inflation in July estimated to hit an annual rate of 27.04%
6. Korean won rose as foreigners bought Korean stocks after a 33 day selling streak
7. OECD says Indonesia needs to improve the business environment and make better use of labour inputs to put the economy on a higher growth trajectory
8. Thailand central bank reiterated on Thursday its policy priority at the moment was maintaining monetary stability rather than economic growth
9. French July Business Climate Indicator 98 vs 101 in June
10. French Provisional July Service PMI 47 vs 50.1 in June
11. Spanish Q2 unemployment hits 3 year high of 10.4%
12. German July Provisional Service PMI 53.3 vs consensus of 51.4
13. Euro Zone May Current Account Deficit 7.3 billion Euros vs Surplus 1.5 Billion in April
14. German IFO Business assessment index 105.7 vs 108.3 in June
15. Euro Zone July manufacturing PMI falls to 46.9 from 49.6 in June
16. IFO says that july index results suggest Economic upswing coming to an end
17. Hong Kong June exports lower by 0.6% year on year vs higher by 10.3% in May
18. UK retail sales higher by 2.2%, the lowest since Feb 2006
19. US jobless claims +34K to 406K, 375K expected
20. US June existing home sales lower by 2.6% to 4.86 million

My expectation for the US dollar crosses

1. EUR : Negative
2. GBP : Positive
3. CAD : Neutral
4. JPY : Neutral
5. CHF : Neutral
6. AUD : Negative

Bottomline : Quiet market today. I expect the US dollar to gain in strength, this comes on the weakness of commodities.

Portfolio Performance : +6.75%

Headline News

1. Fed Meeting Minutes showed that two Fed bankers favoured a rate hike in June, namely the Fed Reserve Bank of Kansas City and Dallas.
2. The minutes concluded that downside risks to the economy were outweighed by upside risks to inflation.
3. ABC Consumer Confidence Comfort Index -41 this week from -41 the previous week
4. ADB Economist Lee Jong Wha said that Singapore's appraoch to allow the SGD to appreciate is in the right direction, but should also boost fiscal spending
5. Australia Q2 Headline CPI higher by 4.5% year on year vs 4.3% consensus
6. Indonesia central bank said that inflation will remain the main concern for Indonesia over hte next 12-18 months, but a gradual and non-aggressive hike in interest rates ahead will be enought to contain inflation
7. Singapore June CPI higher by 7.5% year on year, below estimate of 8% year on year
8. French June consumption lower by 0.4% from May
9. Iran Vows no retreat in Nuclear Row
10. Spanish June Producer Price higher by 9% year on year
11. Taiwan June Exports higher by 9.27% year on year, vs 14.46% higher by May
12. Romania's consolidated budget deficit may reach 3% of GDP next year if the pension budget runs out of cash to fuel planned state pension hikes
13. UK June Mortgage Approvals slump to new all time low of 21,118
14. BOE kept interest rates unchanged
15. Euro Zone May Industrial Orders lower by 4.4% year on year
16. Malaysia CPI came in at 7.7% year on year vs expecatations of 6.8%
17. UK July Manufacturing business optimism -40 lowest since Oct 2001
18. Germany's Merkel says economic growth slowing, does not see a recession
19. Crude Inventories lower by 1.6M to 295.3M

My Expectation for the USD Crosses

1. EUR : Positive
2. GBP : Positive
3. CAD : Negative
4. JPY : Neutral
5. CHF : Neutral
6. AUD : Negative

Bottomline : Quiet trading day, I will not take any positions. Crude looks like it is cracking a little, as well as the other commodities, which might support equities.

Portfolio Performance : +6.74%

Actions: Did some intraday trading on the EUR/USD

Headline News

1. Dow Futures plummet in after hours this morning on softer earnings from equities
2. Japan May all industries index higher by 0.4% from April
3. Malaysia's former economic czar and two time finance minister Daim said that lack of strong leadership and clear politics have confused both Malaysians and foreign investors.
4. ADB warns Asia moving too slowly to fight inflation
5. Japan supermarket sales lower by 0.9% from a year earlier
6. Italy July consumer confidence 95.8 vs 99.9 in June
7. South Korea oil product exports demand fall to lowest in nearly two years in June, down 6.5% from the previous year
8. Taiwan unemployment rate 3.95% vs 3.84% in May

My expectation for the USD crosses

1. EUR : Midly Negative
2. AUD : Negative
3. GBP : Neutral
4. CAD : Positive
5. JPY : Midly Positive
6. CHF : Midly Positive

Bottomline : I expect the market to be slightly bearish on the US dollar, which means that commodities might be supported. I expect to see bearishness in the equity market dying off.

Portfolio Performance : +5.68%

Actions : Closed my short EUR/USD position, but might continue shorting EUR/USD as the pair heads higher later

Headline News

1. China's Wen says "sense of urgency" needed in managing inflation, growth
2. Major Chinese commercial banks had an average non-performing loan ratio of 6.1% at the end of June
3. Australia Q2 Producer Price Index higher 4.7% year on year vs 5.3% consensus
4. Japanese Prime Minister Yasuo Fukuda is likely to announce a cabinet reshuffle in a bid to reverse his dwindling public support
5. European Commission plans to tighten securitized loan rules
6. Hong Kong June CPI higher 6.1% year on year from 5.7% in May
7. US June leading Index -0.1% vs -0.2% in May

Expectation for the USD crosses

1. AUD : Positive
2. GBP : Positive
3. CAD : Negative
4. JPY : Negative
5. CHF : Positive
6. EUR : Positive

Bottomline : I expect the bull run in the short term to soften, as most of the Bears take the US dollar lower

Portfolio Performance : +5.6%

Actions : Fresh Short EUR/USD

Headline News

1. Swiss Authorities have received a formal request for help from the US IRS in connection with investigations into alleged tax evasion schemes at Swiss Bank UBS
2. Trichet is determined to bring inflation down to under 2%
3. Strong Selling on NZD emerges
4. Moody's downgrade Lehman Brothers to A2, outlook negative
5. NZ CPI jumps 1.6%, fastest pace since 1990
6. Malaysia's manufacturing sales in May rose 14.8% from a year earlier, on higher demand for petroleum and iron and steel products
7. Japan June Department Same Store Sales lower by 7.6% year on year
10. German June PPI higher by 0.9% from May
11. Moody's says that inflation may lead to adverse global inflation
12. Italy May industrial sales lower by 2.7% year on year
13. UK M4 Money Supply higher by 0.2% in June from May
14. Euro Zone May trade deficit 4.6 billion versus 2.5 billion surplus in April
15. India spot sugar gained on strong domestic demand

My expectations for the USD crosses

1. AUD : Neutral
2. GBP : Negative
3. CAD : Positive
4. JPY : Positive
5. CHF : Neutral
6. EUR : Neutral

Bottomline : I feel that the market is getting less bearish, I expect the US dollar to slowly gain in strength.

Portfolio Performance : +2.57%

Actions : Did some intraday trading on the EUR/USD pair

Headline News

1. Italy June oil consumption down 6.1%
2. Spain hopes to issue up to 2.2 billion euros in 10 year bonds
3. ABC Consumer Comfort Index -41 unchanged from previous week
4. Japan's May tetiary index down 0.2% from April
5. Australia's top central banker on Wednesday said it now looked more likely that domestic demand would slow significantly as desired, and there was a good chance inflation could be brought down into its target range over time
6. Philippines June budget surplus at PHP 769 million, which brought the fiscal deficit in 1H 2008 to PHP 18 billion, down from PHP 41 billion deficit in the same period last year
7. German CPI higher by 3.3% year on year
8. European car registrations lower by 7.9% year on year
9. Russia June industry output +0.9% year on year down from +6.7% year on year in May
10. Hong Kong Government announces 11 Billion HKD inflation relief package
11. Dutch May Trade Surplus 2.9 billion Euros, higher by 0.5% year on year
12. UK June Claimant count higher by 15,500, biggest rise since Dec 1992
13. France June Large retail sales flat vs may, higher by 5.3% year on year
14. US June CPI higher by 1.1% vs 0.8% expected
15. US June CPI largest monthly rise since September 2005
16. Foreign investors were net sellers of US securities in May, failing to provide the capital inflows needed to offset the trade deficit
17. US industrial production higher by 0.5% vs no change expected

My expectation for the USD crosses

1. AUD : Positive
2. GBP : Neutral
3. CAD : Neutral
4. JPY : Neutral
5. CHF : Positive
6. EUR : Negative

Bottomline : The market is getting less bearish, probably tired of shorting counters. I expect a quiet market moving forward. Overall, the market still does not like the US dollar very much, but disliking it to a lesser degree

Portfolio Performance : +1.93%

Headline News

1. Iran top nuclear negotiator and EU foreign policy chief will discuss a "timetable" for future negatiations to break the deadlock in the atomic crisis
2. RBA Minutes shows central bank's stance on inflation
3. RBA says that monetary policy cooling demand
4. Bank of Japan sees higher inflation, slower growth
5. Singapore May retail sales higher by 4.8% year on year versus forecast of 6.5%
6. BOJ leaves rates unchanged
7. French May current account surplus 2.5 billion versus 3 billion Euros
8. Philippines overseas workers remittances higher by 15.6% in May
9. Thai PM offers tax cuts, handouts to spur economy
10. Dutch May retail sales higher by 7.8% year on year
11. UK June CPI higher by 3.8% from a year ago vs 3.6% consensus
12. German ZEW Economic expectations index -63.9 vs -52.4 in June
13. US June Core inflation matches May, fastest annual gain since 1991
14. US Fed Empire State Manufacturing -4.92 vs -8.68 in June, better than expected
15. US inventory to sales ratio at record low of 1.24

My expectation for the USD crosses

1. AUD : Positive
2. GBP : Negative
3. CAD : Neutral
4. JPY : Negative
5. CHF : Negative
6. EUR : Neutral

Bottomline : The market has got carried away with equity shorts, I still think that the market will continue not to like the US dollar

Portfolio Performance : +1.92%

Expectations for the USD Crosses

1. AUD : Positive
2. GBP : Neutral
3. CAD : Positive
4. JPY : Neutral
5. CHF : Positive
6. EUR : Neutral

Bottomline : I think that the market turmoil will continue.

Portfolio Performance : +1.91%

Actions : I have closed my GBP/USD trade after the USD weakened on a volatile equity market

Headline News

1. OPEC cuts world oil demand forecast, cites energy efficiency
2. China 1H actual Foreign Direct investment higher by 45.5% year on year
3. Malaysia May Industrial Output 2.5% versus 3.4% expected
4. Japan revised May industrial output higher by 2.8% versus 2.9% rise
5. Japan consumer confidence index at 32.6 in June from 33.9 in May
6. German June wholesale price index higher by 0.9% from May, higher by 8.9% year on year
7. Russian central bank raises interest rates by 25 basis points to 11.00%
8. OECD May Composite Leading indicator 97.2 vs 97.7 in April
9. OPEC cartel said that it might need to slow investment in its oilfield as consuming countries reduce their oil demand through conservation and increasingly turning to alternatives such as biofuels
10. US May trade deficit narrows to 59.8 Billion USD vs 62.1 Billion USD expected
11. US June non oil import prices higher by 78.6% over year, the largest increase in 5 years
12. Michigan consumer sentiment in July rose to 56.6 versus 56 expected

My expectation for the USD crosses

1. AUD : Neutral
2. GBP : Neutral
3. CAD : Positive
4. JPY : Neutral
5. CHF : Positive
6. EUR : Positive

Bottomline : Equity market volatility have contributed to a weaker US dollar, the market seems to be a bit tired of short selling stocks for the moment. I expect the market to quieten down for a while before we start another round of financial maket turmoil.

Portfolio Performance : -2.39%

Headline News

1. India's Ministry of Agriculture siad that the country's total food grain production for fiscal 2007-2008 has reached 230.67 million tonnes. Wheat production is expected to rise 3.42% year on year and rice production by 3.3%
2. Japan's June corporate goods price index higher by 5.6% year on year
3. Japan's May current account surplus -5.9% year on year
4. Singapore GDP higher by 1.9% year on year, which was below forecast (this is going to be splashed on the front page on the media tomorrow)
5. Australia June unemployment rate 4.2% versus 4.3% consensus
6. China 1H soybean imports higher by 24.4% year on year
7. China 1H oil product imports higher by 16.4% year on year
8. France May industrial output lower by 2.6% vs April
9. Dutch May industrial sales higher by 6% year on year
10. June Halifax house prices lower by 6.1% year on year (I think traders are going to sell the GBP on this)
11. Realtytrac said that US foreclosures are lower by 3% from May in June, but higher by 53% year on year
12. Bank of England leaves rates on hold at 5%
13. US jobless claims lower by 58 000 to 346 000, but continuing claims rose 91 000 to 3.202M
14. A defence analyst said that Iran had doctored photographs of missile firing and exaggerated the capabilities of the weapons


Expectation for the USD crosses

1. AUD : Neutral
2. GBP : Neutral
3. CAD : Positive
4. JPY : Positive
5. CHF : Neutral
6. EUR : Neutral

Bottomline : I am still keeping the Long GBP/USD position. I expect the equity market to soften further and the US dollar to continue to weaken

Portfolio Performance : -1.95%

Headline News

1. Fed's Lacker sees positive growth in 08, warns of unacceptable high inflation
2. Russia threatens to react with military force against US missile shield
3. American consumer credit rise $7.78 billion, mostly the use of credit cards
4. US ABC consumer confidence -41 from -43 in the previous week
5. Japan's May core private sector machinery orders higher by 10.4% from April
6. Australia consumer confidence hits 16 year low in July
7. Malaysia says that CPI may exceed 6%
8. Iran Test fires nine missiles
9. German current account surplus 7.5 billion euros vs 15.5 billion in April
10. The European Union agreed in principle yesterday to publish weekly oil stock data, in what ministers described as an attempt to inject more transparency to a market where prices are regularly reaching new highs.
11. Trichet says that Euro zone growth moderate but ongoing
12. US crude oil stocks fell to 293.9M barrels
13. Gasoline stocks gained 0.9M to 211.8M

My expectation for the USD crosses

1. AUD : Neutral
2. GBP : Positive
3. CAD : Positive
4. JPY : Negative
5. CHF : Neutral
6. EUR : Negative

Bottomline : I am still holding on to the long GBP/USD trade. The US dollar is weakening, but I think the market is still looking for a direction

Portfolio Performance : -5.16%

Headline News

1. Bank Sector Tracker hit all time low as credit concerns continue
2. The British government said on Monday that it would slow the expansion of biofuels following a report, which they said could increase greehouse gases and food prices
3. Japan June Bank Lending higher by 2% year on year
4. Singapore Sembcorp Marine wins $565 million Rig Order
5. Monster Index for Europe came in flat - jobless stable in Europe
6. Number of Japanese coporate bankruptcies rose 7.1% in June from May
7. Philippines increases transport fares as fuel costs soar
8. UK value of home loans down 44% from a year ago
9. UK May House prices higher by 3.7% year on year from 4.9% growth in April
10. Leading German think tank said that the European construction sector is headed for a sharp slowdown
11. US May Wholesale inventories higher by 0.8% vs 0.7% expected
12. US May pending home sales index fall 4.7% to 84.7 vs 86.4 expected

Expectation for the USD crosses

1. AUD : Neutral
2. GBP : Neutral
3. CAD : Negative
4. JPY : Negative
5. CHF : Neutral
6. EUR : Negative

Bottomline : The equity market is set to rally, which builds the case for a stronger USD. Commodities might be pressure in the short term but I will read too much into a selloff yet. I am still holding on to my long GBP /USD trade

Portfolio Performance : -0.6%

Headline News

1. Fed's Miskin said that high commodity prices could take a toll on the economy
2. Spanish PM sees "serious difficulties for economy, no recession"
3. Bosnian national airline seeks strategic investors
4. The UK Times reported that "shock" figures from Marks and Spencer that sales have fallen by 5% in the past three months has fueled fears that the consumer slump will develop into a "severe consumer slump"
5. Swiss consumer price index +2.9% versus June forecast of 3.1%
6. Paulson says that biggest focus is economic downturn
7. Spain June services index is lowest recorded for any Euro Zone PM (this is serious)
8. Spain Service PMI in June is lowest in 9 year history
9. Dutch Q1 revised GDP higher by 3.3%
10. French June PMI at 50.1 lowest since 2003
11. Euro Zone Service PMI for June revised lower to 49.1 from 49.5
12. Hong Kong Retail Sales higher by 12.9% YoY
13.UK CIPS June Services PMI 47.1, lowest since Oct 2001
14. BOE survey shows that credit terms worsened for both households and corporates in Q2
15. Euro Zone Retail sales higher by 1.2% ver April in May, higher by 2% YoY
16. US nonfarm payroll -62000 vs -60000 expected in June


Bottomline : I am still long on the GBP, the ECB hike interest rates to 4.25%, but Trichet was more dovish than expected.

Portfolio Performance : +14.17%

Actions : I bought GBP at 1.9922

Headline News

1. Denmark in recession after first quarter contraction
2. China questions Australia on Investment Curbs
3. The Reserve bank of Australia index of commodity prices jumped 7.9 percent in June on a huge increase in coal and ore prices
4. Japan monetary base higher by 0.4% from a year earlier
5. China May consumer confidence rises to 94.3 vs 94 in April
6. Indonesia fuel subsidy expected to exceed $21.7 billion if oil averages $140 this year
7. Philippine Central Bank sees inflation peaking in Q3, softening in 09
8. Spain jobless rises by 37 000 vs 15 000 in May
9. Germany new machinery plant orders down 12 percent year on year
10. UK June construction PMI 38.8 vs 43.9 in May
11. Euro Zone May PPI higher by 1.2 percent, higher by 7.1% year on year
12. OECD says that unemployment starting to rise as growth slows
13. US Challenger June Layoff intentions 81 755 vs May 103 522
14. Singapore PMI reverted to growth with orders from the domestic market rising
15. US May Factory Orders higher by 0.6% - highest level on record

My expectations for the USD crosses

1. AUD : Neutral
2. GBP : Positive
3. CAD : Positive
4. JPY : Positive
5. CHF : Positive
6. EUR : Positive

Bottomline : Market volatility has picked up, I expect the USD to depreciate and bought the GBP

Portfolio Performance : + 13.98

Actions : The CAD trade helped the performance of the portfolio, the trade closed at the profit target of 31 PIPs

Headline News

1. Paulson is on a five day trip through Europe, working with European leaders and Russian leaders on how policy makers need to re think on how to deal with failed firms. (I have to admire this guy, he really has fire in his belly and is very persistant at getting deals done. Great spirit from an ex IB)
2. Morgan Stanley Places Lehman Brothers at Overweight
3. Bank of Korea says that GDP will grow by 4.6% in 2008
4. Bank of Korea says that CPI will rise by 4.8% in 2008
5. Manufacturing activity in Australia continued to slow in June as production and new orders felt the impact of higher interest rates and easing global conditions
6. Japan Tankan declined but better than expected
7. China Manufacturing PMI 52 vs 53.3
8. New Home Sales fall 5% in May
9. Singapore Q2 private residential prices higher by 0.4 percent from Q1
10. RBA leaves interest rate unchanged at 7.25%
11. Japan June new vehicle sales lower by 3.6% from a year earlier
12. Ducth PMI 51.1 vs 51.5 in May
13. German May retail sales higher by 1.3% from April
14. UK House prices lower by 0.9% in June from May
15. Indonesia June CPI higher by 2.46% from May, higher by 11.03% year on year
16. Indonesia May exports higher by 17.5% from April
17. German adjusted jobless lower by 38 000 from May
18. Euro Zone May unemployment 7.2% unchanged from April
19. US June ISM Manufacturing index rise to 50.2 vs 48.7 expected

My Expectations for the USD Crosses

1. AUD : Neutral
2. GBP : Positive
3. CAD : Negative
4. JPY : Positive
5. CHF : Neutral
6. EUR : Positive

Bottomline : I think the market is getting a bit tired of selling the USD, I expect the market to pause and volatility to decrease

Portfolio Performance : +5.75%

Actions : Long USD/CAD at 1.01845

Headline News

1. Germany sees 2009 federal budget deficit 10.5 billion euros vs 11.9 billion in 2008
2. Israel approves prisoner swap with Hezbollah, reopens crossing for goods to Gaza
3. WSJ highlighes Taiwan as investment opportunity
4. Japanese PM Fukuda approval rating higher by 2 points to 26 percent
5. Domestic exporters buying AUD/USD
6. Indonesian President Susilo Bambang Yudhoyono popularity ratings have fallen because of the recent fuel price increase
7. Singapore May commercial bank loans S$256.91 billion vs S$203.80 billion
8. Singapore M3 S$323.81 billion versus S$296.95 billion a year ago
9. Malaysia may tweak its budget deficit for 2008
10. South Korea industrial production down 0.6 percent from April
11. Japan May housing starts lower by 6.5% from a year earlier
12. Japan May orders received by 50 largest contractors down 25.2% year on year
13. German May wholesale down by 0.8% year on year
14. FT says that cracks are appearing in Chinese discretionary spending
15. UK May mortgage approvals hit new record low of 42 000 vs April 58 000, lowest since March 2001
16. Euro Zone Provisional HICP higher by 4.0% versus 3.7% in May
17. Philippines sees inflation above 11% in June
18. Malaysia Broad Money supply higher by 12.4% year on year
19. Thai Inflation could top 10% in July
20. Chicago Purchasing index 49.6 versus 49.1 in May


My expectation for the USD crosses

1. AUD : Negative
2. GBP : Positive
3. CAD : Negative
4. JPY : Positive
5. CHF : Positive
6. EUR : Positive

Bottomline : I think that the overall environment is still nervous and a lot of people are not optimistic over the USD, I am long CAD at this point

Portfolio Performance : +5.73%

Actions performed : I did some intraday trades, trading the GBP/USD pair

Headline News

1. The FOMC statement was very discouraging for the USD bulls
2. UK Prime Minister Gordon Brown says that law reform needed to get nuclear stations to be built quickly to reduce the country's dependance on oil and to combat climate change
3. Foreign investors were net buyers of Japanese stocks for the sixth straight week
4. The Taiwan Ministry of Economic Affairs plans to propose a rise in the cap of Taiwanese corporates in China by the end of July
5. Singapore May factory output down by 12.8% versus average forecast growth of 1.6%
6. German import prices higher by 2.4% year on year in April
7. French June consumer confidence -45 versus -41 in May
8. Foreign investors net sellers of 4.02 billion Taiwan shares
9. Germany might introduce a EUR 5 billion tax break for commuters to shield consumers from rising petrol prices.
10. OPEC believes that it will need to produce far less oil over the next 12 years than the US has suggested, saying that new supply from regions and biofuels would reduce the need for its oil
11. Dutch consumer confidence falls to -19 from -17 in May
12. Euro Zone May M3 higher by 10.5%, unchanged from April
13. Euro May Loans higher by 10.4% versus 10.6 percent in April
14. Hong Kong Exports higher by 10.3% year on year versus 14.5% in April
15. Taiwan Central Bank will do it can to fight inflation
16. OPEC President sees $150 - $170 per barrel oil in summer
17. US jobless claims unchanged from previous week
18. US Q1 GDP Final came in at 1% as expected
19. US Conference Board Help Wanted Ad index 17 versus 18 in April
20. US May existing homes sales higher by 2% Month on Month

My expectation for the USD cross

1. CAD : Negative
2. JPY : Positive
3. CHF : Positive
4. EUR : Negative
5. AUD : Neutral
6. GBP : Neutral

Bottomline : I expect market volatility to continue, and that the USD might succumb to further weakness

Portfolio Performance : +5.15%

Headline News

1. US Paulson does not see evidence speculators driving oil price
2. Paulson says that oil price rise is mostly a result of supply and demand
3. Paulson says that there is room for improvement in the regulation of the energy futures market
4. Japan May Corporate Price Service Index higher by 0.6% YoY
5. Japan May Trade Surplus 365.61 billion Yen vs 395.55 Billion Yen from a year earlier
6. Financial Times says that Australian resources in demand as never before
7. Taiwan would talk with China on direct shipping and oil exploration in the second half of this year
8. China Q2 banking prosperity index falls to 68.3 percent versus 69.7 percent in Q1
9. South Korean authorities sold as much as $1 USD to boost the KRW, the intervention helped supported the WON, but the currency remains among the five Asian currencies that have fallen by 7 percent or more against the USD
10. Trichet sees inflation remaining high for longer than previously thought
11. Trichet says that ECB is in state of heightened alertness
12. Euro Zone industrial orders were higher by 11.7 percent year on year
13. UK July retail sales expectations fall to -7 percent versus +6 in June
14. Trichet says that commodity prices are driven more by demand than supply
15. The Thai government says that the economy is set to grow 5.6% this year
16. US Durable Goods unchanged in May (no surprises here)
17. Saudi arrests 700 Islamists preparing "oil attacks"
18. US May New Home Sales lower by 2.5 percent to 512 000 versus 515 000 expected
19. Spainish housing slowdown to end in second half of 2009

My expectation for the USD crosses

1. AUD : Positive
2. GBP : Negative
3. CAD : Neutral
4. JPY : Positive
5. CHF : Negative
6. EUR : Positive

Bottomline : I think the market is against the USD, but I am not going to place my bets just yet, I will wait for Bernanke to signal his decision later first