Bank of Italy sees first signs of a slow economic recovery

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• High Frequency Trading algorithms are not exotically advanced machine learning techniques, they’re shockingly simple
• Japan’s PM Abe facing resistance over third arrow medical reforms from doctors’ lobby
• Jackson Hole: More from BOJ’s Kuroda
• Jacksone Hole: Fed’s Kocherlakota: Says the weak economy is to ‘be with us for some time’
• US bulls running rampant
• Tip from a billionaire: going to the bathroom wastes too much time
• Jackson Hole: Emerging countries must be able to control capital flows -study
• Italy politics: Berlusconi’s party says his removal from parliament is ‘unthinkable’
• ECB’s Asmussen: Greece must press on with reforms despite pain
• Jackson Hole: Kuroda says Bank of Japan’s policy measures are working
• Jackson Hole: Federal Reserve’s Lockhart says he is ‘comfortable’ with cautious September taper
• Jackson Hole – debate on the risks of withdrawing global liquidity
• Jackson Hole: Bank of England Deputy Governor Bean says jobless threshold should temper yield tightening
• Australia election: 2 weeks to go and polls swinging more towards the current opposition
• ForexLive Americas wrap: New home sales plunge
• CAD or NZD, which commodity currency will bottom first?
• NZD/CHF was the worst performing trade this week
• Bank of Italy sees first signs of a slow economic recovery
• Caption contest: Bernanke after finding out QE has been ineffective

High Frequency Trading algorithms are not exotically advanced machine learning techniques, they’re shockingly simple Posted: 24 Aug 2013 08:28 PM PDT Here’s an interesting little weekend item on High Frequency Trading algorithms, in which the writer says that the best HFT firms now trade in around 2 microseconds (“context: sound takes about 150ish microseconds to travel from the back of your throat to your mouth”) in signal to trade time, and that doing advanced calculation work on a computer takes a lot longer than that… and thus The strategies employed by the most advanced HFT firms are shockingly simple in terms of Maths or Stats: think exponential moving averages, with a handful of if statements and safety checks… when faced with the decision to produce a reliable, stable strategy that provides good liquidity, or simply the fastest adequate one possible, speed wins every time. More here

Japan’s PM Abe facing resistance over third arrow medical reforms from doctors’ lobby Posted: 24 Aug 2013 07:46 PM PDT Not surprisingly, the most difficult of Abe’s three arrows is proving to be reform of the Japanese economy. This time its resistance to medical sector reforms from within Abe’s constituency, in this case Japan’s doctors: The reform plans include changes to Japan’s universal health insurance system. Says Reuters: On one side of the argument is the 165,000-member JMA and health ministry officials, who say they want to protect the cherished principle of universality in a system that has been the envy of much of the developed world. Lined up against them, and pushing Abe to go further, are advocates of more radical reform who accuse the small family doctors who make up the bulk of the JMA’s membership of wanting protection from competition from larger clinics and hospitals. The JMA also worries that Abe’s push for Tokyo to join the U.S.-led Trans-Pacific Partnership (TPP) free trade pact would give impetus to such changes if Washington pushes in negotiations for market-oriented reforms to healthcare

Jackson Hole: More from BOJ’s Kuroda Posted: 24 Aug 2013 07:38 PM PDT Bank of Japan Governor Haruhiko Kuroda said monetary easing by a central bank does not necessarily lead to cross-border capital outflows from that country, saying: “Almost all base money provided through monetary policy will be accumulated in the form of deposits with a central bank” “Even if a country eases monetary conditions, this does not necessarily mean that money being provided directly ‘spills over overseas’” There is (a little) more here at Reuters. Kuroda’s comments are interesting in light of the falling markets and currencies in emerging markets, which has blamed on imminent winding-back of Federal reserve asset purchases

Jacksone Hole: Fed’s Kocherlakota: Says the weak economy is to ‘be with us for some time’ Posted: 24 Aug 2013 07:09 PM PDT Minneapolis Federal Reserve Bank President Naryana Kocherlakota said: it is “really a stretch to think” that the Fed has lowered rates too much Given the high rates of unemployment and low levels of inflation, “I think what we’re seeing is that we have not been able to lower rates as much as we’d like to” Says the Fed will need to maintain a highly stimulative monetary policy for some time to come More at MNI

US bulls running rampant Posted: 24 Aug 2013 06:59 PM PDT 4,000 people have taken part in a US version of Spain’s running of the bulls in Pamplona. Its part of a 10-city bull-running tour It cost $30 to take part in the run ($30 is really cheap to dodge the bulls, just ask all the stockmarket bears over the past 4 years ) The run is over a quarter mile dirt track More here: Four thousand run from the bulls in Virginia event

Tip from a billionaire: going to the bathroom wastes too much time Posted: 24 Aug 2013 06:53 PM PDT Michael Bloomberg has handed out some tips on his formula for success: You make your own luck The harder you work, the luckier you get Try to be the first one in in the morning and the last one to leave at night Take the fewest vacations Take the least time away from the desk to go to the bathroom or have lunch More:  Mayor Bloomberg: Bladder Control Helped Me Become A Billionaire

Jackson Hole: Emerging countries must be able to control capital flows -study Posted: 24 Aug 2013 06:49 PM PDT A paper presented at the Jackson Hole central banks symposium on August 24 2013says emerging market nations “can be adversely affected by large swings in investment, and must therefore develop tools to control credit flows or risk relinquishing any independent monetary policy”. Quite a timely paper given the fall in emerging markets and their currencies since the imminent Fed ‘taper’ has come to broad market acceptance. More here at Reuters

Italy politics: Berlusconi’s party says his removal from parliament is ‘unthinkable’ Posted: 24 Aug 2013 06:44 PM PDT Angelino Alfano, secretary of Berlusconi’s People of Freedom (PDL) warned Prime Minister Enrico Letta this week that the party could bring down the government if the center-left Democratic Party (PD) voted to throw Berlusconi out There is a vote due in September on whether to expel Berlusconi from parliament More threats and intimidation here

ECB’s Asmussen: Greece must press on with reforms despite pain Posted: 24 Aug 2013 06:40 PM PDT European Central Bank Executive Board member Joerg Asmussen has told Greek newspaper To Vima that Greece can achieve a primary budget surplus this year and growth in 2014 if it sticks to economic reforms. Asmussen was in Athens this week to meet senior government officials.

Jackson Hole: Kuroda says Bank of Japan’s policy measures are working Posted: 24 Aug 2013 06:35 PM PDT Bank of Japan Governor Haruhiko Kuroda, speaking during a panel discussion on unconventional monetary policy at Jackson Hole said: Bank of Japan’s policy measures have already started to exert their intended effects The BOJ embarked on a policy of "Quantitative and Qualitative Monetary Easing" back in early April, part of which involves buying around 7 trillion yen ($US70.9 billion) in bonds each month to expand the monetary base by 60 trillion yen to 70 trillion yen per year.

Jackson Hole: Federal Reserve’s Lockhart says he is ‘comfortable’ with cautious September taper Posted: 24 Aug 2013 06:34 PM PDT Atlanta Federal Reserve Bank President Dennis Lockhart, speaking on the sidelines of the annual monetary policy symposium in Jackson Hole said: “I can get comfortable with September, providing we don’t get any really worrisome signals out of the economy between now and the 18th of September” “The data are essentially a way of testing a basic set of assumptions. And I can get comfortable with an initial step in terms of tapering, as long as I am comfortable that we are on that basic flight path for the economy,” There’s that data-dependency talk again. The next FOMC meeting is September 17-18. Primary dealers expect the Fed to slow the pace of asset purchases by $15 billion in an announcement after this meeting.

Jackson Hole – debate on the risks of withdrawing global liquidity Posted: 24 Aug 2013 06:33 PM PDT The second day of the two-day Jackson Hole symposium was devoted to central bankers debating the threats posed by global liquidity. Reuters have an interesting article covering some of the points made, with much focus on the flood of money into emerging markets courtesy of ultra-cheap liquidity, a flood that is now receding and triggering  slides in emerging markets  their currencies.

Jackson Hole: Bank of England Deputy Governor Bean says jobless threshold should temper yield tightening Posted: 24 Aug 2013 06:32 PM PDT Plenty of comments out of Jackson Hole this weekend: Bank of England Deputy Governor Charlie Bean said a tightening in U.K. gilt yields should be restrained by its pledge not to consider raising interest rates before unemployment falls to 7 percent. Also: The knowledge that monetary policy will not be tightened until the U.K.'s fledgling recovery is secured should boost confidence The Bank of England gave forward guidance by projecting it will keep its benchmark rate at 0.5 percent until late 2016 as it waits for the jobless rate to fall from 7.8 percent. Bloomberg, and Reuters

Australia election: 2 weeks to go and polls swinging more towards the current opposition Posted: 24 Aug 2013 06:31 PM PDT Australia's opposition Liberal-National coalition has been in front for all of the campaign so far, and is widening its lead, according to  a Herald-Nielsen poll published in the Sydney Morning Herald newspaper Saturday: Support for the coalition rose to 53 percent on a two-party preferred basis (from 52 percent two weeks earlier), putting the ruling Labour party down one point to 47 percent As I’ve said before, market perceptions are that a win for the current opposition will give a sentiment boost, which should be a positive for the economy (at least in the short-term), and that the market also wants to see a clear win for a majority government. The current Australian government is a minority government, and has run a full 3 year term in government with support from a handful of independents

ForexLive Americas wrap: New home sales plunge Posted: 23 Aug 2013 12:10 PM PDT Forex headlines for August 23, 2013: Surprise 13.4% plunge in July US new home sales Canada July CPI +1.3% vs 1.4% expected Fed's Lockhart 'would be supportive' of Sept taper if data strong Fed's Bullard sees no rush to taper Fed's Williams expects 'significant' uptick in GDP later this year and in 2014 Bean says QE remains an option for Bank of England European August consumer confidence -15.6 vs -16.5 expected ‘New Normal’ downgraded Gold gains $21 to $1397 US 10 year yields down 6 bps to 2.82% AUD was the top performer while NZD lagged The US dollar puked up the new home sales headlines. Not only was the July number bad, the three previous months were revised lower. The talk is that rising mortgage rates could snuff out the housing recovery, which is the only real sign of strength in the US economy. The euro was quick to take advantage, climbing in a straight line to 1.3411 from 1.3340. It’s drifted back but a close above 1.3346 would be the highest since early February. USD/JPY dropped on the new home sales headline but a strong layer of real money bids down to 98.40 cushioned the blow. Eventually the dollar rebounded to 98.70. USD/CAD touched a multi-week high at 1.0568 but couldn’t climb higher despite softer-than-expected Canadian CPI numbers. When USD/CAD couldn’t rise on good news, the selling started and it was compounded by the US home sales flub.

CAD or NZD, which commodity currency will bottom first? Posted: 23 Aug 2013 11:30 AM PDT There’s a commodity currency race to the bottom underway. USD/CAD up 6 straight days in 2.66% rise NZD/USD down 5 straight days in a 4.9% decline The Canadian dollar decline has been longer but the kiwi decline is a much larger magnitude. Looking at the charts, both fell from the 100-day moving average and are nearing support/resistance. USDCAD daily chart. The June high was 1.0610. NZD/USD daily chart. 0.7692 was the June/July low If you had to pick one, it’s tough and if you want to trade NZD/CAD, your broker will love you. A few thoughts. Both are overdue for a rally but CAD looks a bit better to me. A good trade may be to wait for a break of 0.7692 in NZD/USD and sell it. This comes in a period where USD hasn’t been particularly strong so if that side of the equation gets moving, this could be just the tip of the iceberg.

NZD/CHF was the worst performing trade this week Posted: 23 Aug 2013 11:01 AM PDT The Swiss franc was the best performer this week while the kiwi lagged. In the past 5 trading days, the pair gained a whopping 4.26% or 306 pips. I don’t think I’ve ever looked at the NZD/CHF chart but it’s an interesting one as the kiwi tests the bottom of the recent range. NZD/CHF weekly chart What do you think will be the best trade next week?

Bank of Italy sees first signs of a slow economic recovery Posted: 23 Aug 2013 10:38 AM PDT Let’s wait until we see what the politicians have in store to scuttle it.

Caption contest: Bernanke after finding out QE has been ineffective Posted: 23 Aug 2013 09:48 AM PDT Bernanke is a few months from retirement and academic economists are now dumping all over his signature policy — quantitative easing. “You mean to tell me I spent $3.65 trillion for nothing?” Write a funny caption — one that will at least make me exhale forcefully through my nose — and I’ll mail you a ForexLive mug.

Canadian Dollar Steady after CPI, Markets Consolidate Canadian dollar remains bounded in tight range after release of June consumer inflation data. CPI accelerated back to 1.2% yoy but missed expectation of 1.3% yoy. Core CPI also accelerated back to 1.3% yoy, meeting consensus. Both figures were well below BoC's 2% target. Stephen Poloz had his first BoC rate announcement earlier this week and noted in the statement that current monetary stance should remain appropriate "as long as there is significant slack in the Canadian economy, the inflation outlook remains muted, and imbalances in the household sector continue to evolve constructively". With the current inflation outlook, it's believed that BoC is still far from kicking start the normalization of monetary policies. Technically, note that USD/CAD is still maintaining a higher high, higher low pattern since last August. And it's drawing support from 55 days EMA for the moment. There is no change in the bullish outlook yet and another high above 1.0608 is anticipated after completing recent consolidations. Full Report Here...
Featured Technical Report
USD/JPY Mid-Day Outlook Daily Pivots: (S1) 99.69; (P) 100.17; (R1)100.89; More.. Intraday bias in USD/JPY remains on the upside and recovery from 98.18 should extend higher. Break of 101.53 will resume the whole rebound from 93.78. But still, such rebound is viewed as the second leg of the consolidation from 103.73. Thus, we'd be cautious on strong resistance below 103.73 to bring reversal. Meanwhile, below 98.89 will turn bias back to the downside for 98.18 and below. Read more... EURUSD Technical Outlook USDJPY Technical Outlook GBPUSD Technical Outlook USDCHF Technical Outlook USDCAD Technical Outlook AUDUSD Technical Outlook EURJPY Technical Outlook EURGBP Technical Outlook EURCHF Technical Outlook GBPJPY Technical Outlook

Economic Indicators Update
GMT Ccy Events Actual Consensus Previous Revised 04:30 JPY All Industry Activity Index M/M May 1.10% 1.20% 0.40% 0.10% 06:00 EUR German PPI M/M Jun 0.00% -0.10% -0.30% 06:00 EUR German PPI Y/Y Jun 0.60% 0.60% 0.20% 08:30 GBP Public Sector Net Borrowing (GBP) Jun 10.2B 9.3B 10.5B 12.8B 12:30 CAD CPI M/M Jun 0.00% 0.10% 0.20% 12:30 CAD CPI Y/Y Jun 1.20% 1.30% 0.70% 12:30 CAD BoC CPI Core M/M Jun -0.20% -0.30% 0.20% 12:30 CAD BoC CPI Core Y/Y Jun 1.30% 1.30% 1.10%
Orders and Options Watch
US Session: Orders and Options Watch EUR: The single currency remained confined within narrow range after running into resistance at 1.3151, indicated sell orders from Asian CBs and funds are still noted at 1.3150 as well as 1.3170-80, mixture of offers and stops is located at 1.3200-10, more sell orders are tipped at 1.3225 and 1.3250-60. On the downside, bids at 1.3100-10 were filled but buy orders in good size are still seen at 1.3065-70, more buy orders are expected at 1.3050, followed by buying interest around 1.3020 and further out at 1.2990-00, mixture of bids and stops is located at 1.2950. Read more...
Forex Trade Ideas
Trade Idea Update: GBP/USD - Target met and stand aside Although intra-day anticipated resumption of recent upmove to 1.5283 (our long position entered at 1.5175 met target at 1.5280 with 105 points profit) has justified our bullishness and recent rise from1.4814 low may extend one more upmvoe, loss of near term upward momentum should prevent sharp move beyond previous resistance at 1.5305 and reckon 1.5340-50 would hold, risk from there is seen for a retreat later. Read more... Trade Idea: USD/CAD - Hold short entered at 1.0410 Despite rebounding from 1.0355 earlier this week, as the greenback has retreated after faltering below this week's high of 1.0445, retaining our bearishness for the decline from1.0609 top to resume after consolidation, below 1.0355 would bring another test of last week's low of 1.0326, break there would extend the decline from 1.0609 top for correction of recent upmove to 1.0290-00 but reckon previous minor resistance at 1.0239 would limit downside and price should hold above 1.0200 Read more... Candlesticks Intraday Trade Ideas Update Schedule (GMT): 1st Update: 0630 - 0700; 2nd Update: 0930 - 1000; 3rd Update: 1230 - 1300; 4th Update: 1500 - 1530 Pairs Covered: EUR/USD, USD/JPY, GBP/USD, USD/CHF Elliott Wave Daily Trade Ideas Update Schedule (GMT): AUD/USD, EUR/JPY: 0800 - 0830; EUR/GBP, USD/CAD: 1430 - 1500
Suggested Readings
Fundamental Highlights Canada's Consumer Price Inflation Rate Eose to 1.2% in June With Little Noise-No EUR Movement GBP Rallies On Data, JPY Broadens Weakness Technical Highlights AUD/USD - Price Bottom Attempt China Moves Help NZDUSD Clear 0.7950 Resistance GBPUSD - Pressure Builds On The 1.5304 Level