Mar 4, 2010

Forex Crunch Fight Against 1:10 Leverage Limit Has Results – Keep it up!

Forex Crunch Fight Against 1:10 Leverage Limit Has Results – Keep it up!

Fight Against 1:10 Leverage Limit Has Results – Keep it up!

Posted: 04 Mar 2010 01:09 AM PST


Some American Congressman are dissatisfied with the CFTC’s proposed leverage limit of 1:10 in forex trading. This is a result of pressure that came from the public and forex dealers. The fight for the US forex industry is still on. Here’s an update.

The CFTC wants to limit leverage to “protect the public”. That’s what CFTC Chairman Gary Gensler claimed in front of a House Committee. Well, this stance was met with angry congressmen. Collin Peterson:

“I don’t get what we are trying to accomplish here by lowering this to 10 to 1,” said House Agriculture Chairman Collin Peterson (D., Minn), saying the proposal appears to put investors’ money even more at risk. “Who are you trying to protect here?”

Another member, Jim Marshall. addressed the main point:

“If our leverage rules are 10-to-1 and leverage rules elsewhere are 100-to-1, the business is going to move elsewhere,” Marshall said, adding that investors could be even less protected if business moves to a country with lax regulations.

These opinions by congressmen didn’t come out of nowhere. 5,600 comments were submitted about the proposed regulation. Gary Gensler admitted that most of them were against the 1:10 leverage proposal. Also the FXDC – Forex Dealers Coalition had a contribution.

So, the fight is far from over, and there’s still a chance to have logical regulation in the US: regulation that will protect the people from scams, but will be too protective to kill the forex industry and to send traders abroad, possibly to really unprotected shores…

If you’re an American who cares about the forex industry, I urge you to write to your Congressman, to the CFTC and to anyone that can make a difference. It’s an open game.

Like this story? Vote for it on Forex Factory.

Thanks to Fransesc Riverola for pointing this news item out. Michael Greenberg thinks that there weren’t enough comments, and shows pessimism.

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Forex Daily Outlook – March 4th 2010

Posted: 03 Mar 2010 01:00 PM PST


Tension rises in the forex market as the calendar is very busy today. The highlights are rate decisions in Europe and Britain, plus a busy American calendar. Let’s see what’s awaiting us today.

Tension also comes from a possible resolution to the Greek crisis (although fragile), and the hints towards the big event on Friday: Nonfarm Payrolls, which currently have low expectations. So, let’s start review. Take a deep breath:

After a rate hike and a strong GDP result, Australia receives the last major release today: Trade Balance. Australia’s deficit is predicted to squeeze from 2.25 billion to 1.57 billion, showing a stronger economy.

On the other side of the day, AIG Construction Index will probably remain stable. Only a big surprise will shake the Aussie. For more, read the AUD/USD forecast.

British and European rate decisions

In Europe, the revised version of GDP for Q4 is expected to confirm the very slow growth – 0.1%. This figure usually comes out as expected. So, it will merely be a prelude for the rate decision.

The president of the ECB, Jean-Claude Trichet, is expected to leave the interest rate unchanged at 1%. There’s no reason whatsoever for a surprise, but the announcement of the European Minimum Bid Rate always shakes the markets. In recent days, there are hopes for a bailout program for Greece, so this will probably be the focus of the ECB Press Conference that Trichet will hold.

For more on the Euro, check out my EUR/USD forecast, and Casey Stubbs’ latest analysis.

Also the British interest rate is expected to remain unchanged at 0.5%. But BOE governor Mervyn King can hurt sterling in another way. Along with the Official Bank Rate, also the fate of the Quantitative Easing program will be set. This program, also called Asset Purchase Facility, is meant to increase liquidity by buying bonds – spilling pounds. The program ran out of money, but King didn’t rule out renewing it. He isn’t expected to do it, but a surprise sure is possible.

It’s also important to notice the exact wording of the MPC Rate Statement, which may indicate future policy about the interest rate (probably nothing) or the QE program.

For more on the beaten British Pound, read the GBP/USD forecast.

Canadian strength to continue?

In Canada, after the growth rate was better than expected and the wording of the rate statement was OK, two major releases are due today. Building Permits are expected to rise by 1% after a 2.4% jump last time.

The second moving event for the loonie is Ivey PMI, which is predicted to rise from 50.8 to 56 points, recovering from a drop last month.

Towards the end of the day, the Canadian government will release the Annual Budget Release. This will cause lots of volatility for the Canadian dollar. Traders will check out the wording of the economic forecasts that are part of the budget.

USD/CAD made a break below the 1.04 level, and is now range-trading between 1.02 and 1.04. For more on the lonie, read the Canadian dollar forecast.

Busy American calendar

In the US, ADP Non-Farm Payrolls showed a loss of 20K jobs, within expectations. Today we have the last job indicator before the NFP – Unemployment Claims. They’re expected to drop to 472K after jumping to 496K last week.

Pending Home Sales are predicted to rise by 1.4%, following last month’s 1% rise – a continuation of the positive and steady trend. At the same time, Factory Orders are expected to make the same upwards move. Both indicators should push the dollar higher.

Apart from economic indicators, we also have two speeches from FOMC member James Bullard. He had a role in easing the effect of Bernanke’s mini-rate hike.

That’s it for today. Happy forex trading!

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