Canada Benefits from Prospect of $100 Oil

Trading USD/CAD these days has become synonymous with trading oil. The fate of oil and USD/CAD are intermingled because the Canada is the world’s second largest holder of oil reserves and the US’ most significant oil supplier. Unbeknownst to many, the size of their oil reserves is second only to Saudi Arabia. The geographical proximity between the US and Canada as well as the growing political uncertainty in the Middle East, Africa and South America makes Canada the preferred importer of oil to the US. Canada also remains one of the few places where multinational firms can access strategically important oil reserves. As indicated by the chart below, this correlation has lasted for years.

The Impact of a US Slowdown

The latest move in the Canadian dollar has befuddled many investors because the Canadian economy has traditionally been very sensitive to US economic growth. It is estimated that Canada exports 80 percent of their goods to the US, which makes it logical to assume that a slowdown in US demand would translate into a slowdown in Canadian exports. However over the past few years, Canada has become less reliant on US demand as the country’s vast oil resources begin to attract the attention of resource hungry countries like China.
Since Canada discovered a new source of oil after the reclassification of their Alberta oil sands to the economically recoverable category, their geopolitically turmoil free status has made them a very attractive provider of oil. Also, over the next 3 years, China’s oil import needs are expected to double and match that of the US by 2030. With little oil resources of their own, China has become a major buyer of oil on the global markets. This has helped the Canadian economy become more immune to the economic stability which may be part of the reason why Canadian data has been consistently surprising to the upside while US economic data has seen nothing but back to back disappointments. In the month of August, when the subprime crisis began to unfold, IVEY PMI actually jumped from 54.6 to 58.5, indicating increased manufacturing activity. During the same month the US lost 4k jobs while Canada added 23.3k. Manufacturing shipments continue to remain strong while net foreign purchases of Canadian securities increased for the first time in 3 months. This will keep the Bank of Canada on hold for the remainder of the year, which comes in stark contrast to the US Federal Reserve who is expected to lower interest rates by as much as 75bp this year.

USD/CAD: Zoning in on Parity

The Canadian dollar has been on a tear. In the past six months, the currency has made new 30 year highs after appreciating over 12 percent against the US dollar, putting parity within reach. At the beginning of the year, an exchange rate of 1.0 for USD/CAD seemed like a far fetched target, but now it has become a realistic and very probable one. Even though sentiment has become very one-sided and technicals indicate that the currency pair is extremely oversold, there is no major support until parity. With the risk of a global slowdown, record high oil prices and a resilient economy is behind the strength of the Loonie.

Dollar Broke 1.39 vs Euro

The dollar broke the 1.39 handle against the euro on Wednesday on raising concerns about US economy and the Fed outlook. The sterling rose to as high as 2.03 versus the dollar.The market focus has shifted from general risks aversion to US-economy related risk aversion. Last Friday¡¯s unexpectedly weak non-farm payrolls added to the worries about the US economy. It is still hard to measure how much impact the subprime and credit market crunch may have on the broad economy. The Fed needs to cut interest rates to avoid economic recession. The market has fully priced in an interest rate cut by the Fed on September 18 meeting. Most in the market has a bearish sentiment over the greenback

FX Awaits Data

At 4:00 AM Germany August WPI m/m (exp n/f, prev 0.4%)Germany August WPI y/y (exp n/f, prev 2.6%)At 4:30 AM UK July Trade Balance (exp –6.4 bln stg, prev –6.3 bln stg)At 8:15 AM` Canada August Housing Starts (exp 220k units, prev 215.6k units)At 8:30 AM Canada July New Housing Price Index (exp 0.6%, prev 0.7%)US July Trade Deficit (exp $59 bln, prev 58.14 bln)Canada July Trade Surplus (exp C$5.0 bln, prev C$ 5.3 bln)The currency market remains biased for a softer dollar amid a dearth of US economic data at the start of the week – with commentary from Federal Reserve members garnering the lion’s share of traders’ attention. Ahead of the blackout period before next week’s FOMC meeting, a barrage of comments from Fed speakers revealed mixed sentiment among its members providing little insight into the coming deliberations. However, market participants are largely anticipating a 25-basis point cut in the Fed funds rate with some even calling for a preemptive 50-basis point reduction to jumpstart the economy and stave off potential recession. Earlier in the session, Fed governor Mishkin sounded a dovish tone in his commentary, saying that risks to the inflation outlook is now more balanced given the greater downside risks to growth. He added that the Fed must remain vigilant on inflation, but it also needs to be attentive to keeping demand from falling beneath supply as well. His comments echo a similar tone to Lockhart’s and Yellen’s, who both suggested that policy should incorporate the recent downturn in US economic fundamentals. Lockhart said the recent payrolls number is very important and must be taken very seriously. Moreover, he said another key piece of economic data that will play a particularly key role in policy deliberations is consumer-spending data. This week’s retail sales report on Friday will bear additional significance since it will be the last piece of key data before the Fed’s meeting. Furthermore, Fed Chairman Bernanke’s comments on Tuesday will be closely scrutinized, who is scheduled to speak at the Bundesbank at 11:00 am.

In the U.S., inflation remains a priority

In effect, in the United States, inflation remains a menace, although oil just moved away from recent highs, and productivity is slowing, but is overall strong. In the second quarter of the year, non-farm business productivity rose 1.8% annualized, up from the 0.7% gain registered in the first quarter, but below the expected 2% rise. Unit labor costs, an indicator of inflationary trends, increased instead 2.1% from April to June, following a 3% move in the first quarter, previously reported at 1.8%. In the first six months of the year, they were up 4.5% from a year ago, the strongest move since the third quarter of 2000. Compensations are nonetheless improving. Non-farm sector hourly compensation increased 3.9% in the second quarter, compared to the jumped of 3.7% shown in the first quarter, but it declined 2% when adjusted for inflation. With inflation pushing higher, the Federal Reserve decision to leave rates unchanged at 5.25% was not a surprise. In the conclusive speech, the committee anticipated a milder growth and still sees inflation as the predominant concern. Risk to the economic activity in the U.S. is increasing due to housing, financial instability and credit tightening. In a few words, the Fed has left the door open for another intervention by the end of 2007, if economic conditions will be favourable.

The Federal Reserve ready to act

In reality, the consequences of the debacle must still be fully understood, but recent 50 basis points reduction in the discount rate to 5.75% gave some breath to the markets. Expectations are now for a rate cut by the Federal Reserve in the coming meetings. Will it happen? The Fed will give a serious look at next weeks/months markets behaviour and will be ready to act, if the decline of the indexes would not moderate. But the decision is not going to be painless, considering that inflation is far from being subdue.

Markets health must still be fully sized

In reality, the financial turmoil might not be over. The decision of the Federal Reserve to cut the primary credit costs from 6.25% to 5.75% and the secondary credit from 6.75% to 6.25%, as well lengthening of the duration of funding out to thirty days, has offered some rest to the swinging markets. Nevertheless, more actions could be necessary, before investors will completely digest current unbalances and adjust to the new financial environment. Downside risks for stocks is still possible, while the thirty and ten years interest rates yields might challenge support levels.

A lower interest rates environment to sustain growth

Latest data confirmed that in the United States housing is not out of the dust yet and could inspire the Federal Reserve to cut rates by at least 25 basis points to 5.00% during the meetings of September or October. In fact, existing home sales fell a tiny 0.2% to an annualized 5.75 million units in July (5.70 million expected). However, inventories of unsold housing jumped 5.1% or 9.6 months of supply at the current sales rate and housing prices are continuing their decline. The median price is down 0.6% from the median price a year ago, which represents the twelve straight month of decline on year over year basis.

The labour market is contracting in the U.S.

The economy in the United States remains stable in some of its components, but there are signs that the labour market is contracting. In August, U.S. firms cut payrolls by 4000 units, the first decline in four years.Employment growth has been constantly shrinking in recent months, as it is testified in the non-manufacturing sector, and could help the Federal Reserve to cut rates by at least 25 basis points to 5.00% during its September or October meetings. In reality, the unemployment rate remained at 4.6%, while the hourly wages were 3.9%, higher than the year before. Construction was down 22,000 jobs and manufacturing shed off 46,000 jobs. The service sector (restaurants, banks, retailers and insurance companies) rose 60,000 units, but the government employment cut off 28,000 units on the top of July¡¦s decline of 52,000. Housing is still in trouble waters and it might take some more time before reaching a bottom. In July, pending home sales, based on contract signings that could result in actual sales within a few months, declined 12.2% (-2.2% expected) to 89.9 from June¡¦s 102.4. They were 16.1% below July of last year and the lowest level of the past six years. Finally, non-farm productivity was revised upward in the second quarter to an annualized 2.6%, above the expected 2.3% increase. Unit labour costs, on the other hand, were revised downward to 1.4%. The overall picture remains nonetheless nebulous, as productivity has been steadily declining and labour costs are increasing.

Awaiting a rate cut in the United States

The economic situation is mixed in the Unites States. In August, retail sales, which account for almost half of consumer spending, increased 0.3%, below both the expected 0.5% and July’s 0.5%. Without motor vehicles and parts, sales declined 0.4%. Considering the persistent decline of housing and the stock market instability, consumer confidence could rise only a fraction in the third quarter from the second quarter gains of 1.4%. The Federal Reserve should lower rates by 25-50 basis points during Tuesday, September 18th meeting and might cut rates again before year end. In fact, in August, industrial production increased only 0.2%, compared to July’s 0.5%, and less than the expected 0.3%. On a yearly basis, industrial production was 1.7% higher than a year before, while manufacturing increased 1.7% during the same period and declined 0.3% month over month. Industrial capacity utilization, on the other hand, stayed stable at 82.2% from 81.7%, but manufacturing capacity utilization slipped to 80.7% from July’s 81.0%.

Adsense/Adwords - make a million lose a million?

The orig version of this article can be found at: http://www.HelpmeBuilda.com/newsletters/news010505.asp - and it contains graphics.but none the less here it is:Adsense and Adwords Make a Million Lose a Million? In this months newsletter I�m going to deal with the hot topic of the moment. Everyone seems to be talking about how easy it is to make money with adsense using adwords - and it is. Now there�s probably more than a few of you out there who perhaps know what one of the two are but not both and I�m guessing that many of you don�t know how you can tie these two systems together in an attempt to make money � well don�t worry - that's what I'm going to explain today. To start at the start: Q. What is Adsense? A. Adsense is Googles name for the system that puts context sensitive ads on to your web pages (if you�ve included their script code). The idea behind this system is that if y. . .

earn-72-monthly-income-on-e-gold-deposits-stable-income

Stop wasting your life working for nothing or very little! Invest a small amount in e-gold. Deposit and let the professional investors at Foreign Fund make it happen for you. Here is a stable starter investment account! The admin at Foreign fund have years of experience in forex trading, and very lucrative offshore investments. Insured accounts are also available. Honest christian, and trustworthy administration. Why slave for years with nothing to leave you family? This is not what God intended for his people. Open your eyes today.This is very easy to use, and you don't need to know a thing about investing! It is all done for you! If you need egold, I recommend Gold-Traders.com. They sell a minimum of $25 egold for only $28.75! This is the lowest on the net and they take paypal!Make sure to use the in exhange, this deposits to your egold account. They will even match your initial $10.

Dollar Extended Loss, Eyes on Retail Sales

The dollar continues to weaken across the board on expectation that the Fed will cut interest rates by half a percentage point next week. The euro today hovers above 1.3860 and set a record high at 1.3927 versus the dollar. The sterling climbed above 2.03 to test a resistance at 2.0350 against the dollar.The main focus of the market is still on the US economy. Last Friday‘s weak US non-farm payrolls surprised the market and indicated the impact of credit crunch may spread into every aspect of the nation¡¯s economy. It is widely expected that the Fed may need to lower its benchmark rates on September 18 policy meeting to avoid recession.The dollar was little changed after US weekly jobless claims came out at 319k, slightly better than the estimate of 325k. Tomorrow will see a bunch of economic data, including Germany August CPI, euro-zone August HICP, Canada July manufacturing shipments, Canada Q2 labor production rate, US retail sales, US import and export prices, US Q2 current account balance, US industrial production, US August Capacity utilization, and University of Michigan consumer sentiment index. US retail sales are seen growing 0.4% in August, versus a 0.3% rise earlier. Excluding autos, core retail sales are expected to rise 0.2%, down from a 0.4% reading in the previous month.

Sterling Hit By Northern Rock Crisis

The sterling fell sharply after the Bank of England provide an unspecified amount of financial support to UK¡¯s fourth largest home mortgage lender, Northern Rock, which suffered losses from recent rising lending rates sparked by US subprime crunch. This unusual move reignited worries that credit market problems may hit global economy. The sterling dropped to a 10-day low at 2.0062 versus the dollar.The dollar was almost flat against the euro and yen on Friday though a soft US retail sales report reinforced speculations on a 50 basis point Fed rate cut next week. US retail sales rose 0.3% in August, below the estimate of 0.4%. Excluding autos, core retail sales dropped 0.4%, worse than the expectation of a 0.2% growth. US import prices declined 0.3% due to lower oil prices in August, while export prices rose 0.2% as expected. Current account deficit came out at 190.79 billion as expected in the second quarter. Industrial production rose 0.2% in August, below the estimate of 0.3%. University of Michigan consumer sentiment index was almost unchanged from previous month at 83.8. Business inventories were up 0.5% in July, beating the estimate of 0.3% and 0.4% a month earlier.Earlier in US session today, US Treasury Secretary Henry Paulson said in CNBC interview today that credit markets have had some modest improvement. He reiterated that a stronger dollar is in US interest, giving the dollar a knee-jerk boost.

Market Focus Shifts to FOMC

Japan’s Market Closed for HolidayAt 5:00 AM Eurozone July Trade Balance (exp 6.8 bln euros, prev 7.8 bln euros)At 8:30 AM US September NY Fed Manufacturing (exp 18.0, prev 25.06)The greenback remains mixed against the majors, mired near all-time lows versus the euro around 1.3865 but firmer against the yen and the sterling. The week will kick off to a slow start with the Japanese market closed in observance of the Respect for the Elderly Day holiday. The primary focus among traders will be the FOMC monetary policy meeting on Tuesday, in which market participants are anticipating a 25-basis point rate cut to 5.00%.While an FOMC rate cut this week is not a foregone conclusion, recent deterioration in US economic fundamentals have raised speculation that the Fed will need to preempt a potential recession by easing policy to stimulate the economy. However, board members have delivered conflicting messages, with some maintaining their mantra of keeping inflationary pressure in check. It will be interesting to see whether the Fed responds to market calls for a cut while concurrently tempering inexorable expectations for further easing over the coming months. If a 25-basis point reduction does materialize on Tuesday, Bernanke will likely perform a balancing act between quelling burgeoning recessionary fears and containing runaway expectations for a series of rate cuts – given lingering concerns from Board members about inflation.

President Bush Announces Plan That Bossts Risky Currencies

Friday is looking up for risky currencies, as President Bush will announce a plan to help US homeowners who are at risk of defaulting on their mortgage loan. This has eased the concerns of many forex traders who have been resting their money in low-yield currencies like the yen. Now, with the subprime mortgage issues being addressed by the US government, high-risk investments will resume. Reports Reuters:
"There is some reaction to Bush's plans to help out people who are in trouble with their mortgage payments and markets are also expecting some comments from Bernanke this afternoon regarding rate cuts. Both these factors are helping the carry trade," said Carsten Fritsch, currency strategist at Commerzbank Corporates & Markets in Frankfurt.

Forex

Foreign Exchange market, also referred to as the "Forex" or "FX" market is the largest financial market in the world, with a daily average turnover of US$1.9 trillion -- 30 times larger than the combined volume of all U.S. equity markets."Foreign Exchange" is the simultaneous buying of one currency and selling of another. Currencies are traded in pairs, for example Euro/US Dollar (EUR/USD) or US Dollar/Japanese Yen (USD/JPY).There are two reasons to buy and sell currencies. About 5% of daily turnover is from companies and governments that buy or sell products and services in a foreign country or must convert profits made in foreign currencies into their domestic currency. The other 95% is trading for profit, or speculation.For speculators, the best trading opportunities are with the most commonly traded (and therefore most liquid) currencies, called "the Majors." Today, more than 85% of all daily transactions involve trading of the Majors, which include the US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar.A true 24-hour market, Forex trading begins each day in Sydney, and moves around the globe as the business day begins in each financial center, first to Tokyo, London, and New York. Unlike any other financial market, investors can respond to currency fluctuations caused by economic, social and political events at the time they occur - day or night.The FX market is considered an Over The Counter (OTC) or 'interbank' market, due to the fact that transactions are conducted between two counterparts over the telephone or via an electronic network. Trading is not centralized on an exchange, as with the stock and futures markets.More informationTrading currencies on margin lets you increase your buying power. Here's a simplified example: If you have $2,000 cash in a margin account that allows 100:1 leverage, you could purchase up to $200,000 worth of currency-because you only have to post 1% of the purchase price as collateral. Another way of saying this is that you have $200,000 in buying power.Benefits of MarginWith more buying power, you can increase your total return on investment with less cash outlay. To be sure, trading on margin magnifies your profits AND your losses.Here's a hypothetical example that demonstrates the upside of trading on margin:With a US$5,000 balance in your margin account, you decide that the US Dollar (USD) is undervalued against the Swiss Franc (CHF).To execute this strategy, you must buy Dollars (simultaneously selling Francs), and then wait for the exchange rate to rise.The current bid/ask price for USD/CHF is 1.2322/1.2327 (meaning you can buy $1 US for 1.2327 Swiss Francs or sell $1 US for 1.2322 francs)Your available leverage is 100:1 or 1%. You execute the trade, buying a one lot: buying 100,000 US dollars and selling 123,270 Swiss Francs.At 100:1 leverage, your initial margin deposit for this trade is $1,000. Your account balance is now $4000.As you expected, USD/CHF rises to 1.2415/20. You can now sell $1 US for 1.2415 Francs or buy $1 US for 1.2420 Francs. Since you're long dollars (and are short francs), you must now sell dollars and buy back the francs to realize any profit.You close out the position, selling one lot (selling 100,000 US dollars and receiving 124,150 CHF) Since you originally sold (paid) 123,270 CHF, your profit is 880 CHF.To calculate your P&L in terms of US dollars, simply divide 880 by the current USD/CHF rate of 1.2415. Your profit on this trade is $708.82SUMMARYInitial Investment:$1000Profit:$708.82Return on investment:70.8%If you had executed this trade without using leverage, your return on investment would be less than 1%.Managing a Margin AccountTrading on margin can be a profitable investment strategy, but it's important that you take the time to understand the risks. You should make sure you fully understand how your margin account works. Be sure to read the margin agreement between you and your clearing firm. Talk to your account representative if you have any questions.The positions in your account could be partially or totally liquidated should the available margin in your account fall below a predetermined threshold.You may not receive a margin call before your positions are liquidated.You should monitor your margin balance on a regular basis and utilize stop-loss orders on every open position to limit downside risk. For information on managing margin in your FOREX