Heracles FX

Olympus Wealth Management has just launched its newest Managed FX Account, Heracles FX.

To learn more and to download the Executive Summary and Trade Breakdown, use the link below

Heracles FX

This account has been running since July 2011 for corporate investors only, but thanks to the success Olympus Wealth Management has had with it, it is now open to private investors

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The Week Ahead - Week of March 18, 2012

Shift in FX drivers may provide support for the USD

This week U.S. Treasury yields broke out of their ranges and rocketed higher. 10-year yields rose nearly 28bps since Monday and advanced above the 200-day sma for the first time since July to reach current levels of around 2.31%. U.S. equity markets rallied significantly as well this week with the S&P 500 closing above 1400 for the first time since 2008 while the Dow Jones Industrial Average traded at levels that have not been seen since 2007. At the same time, the USD gained against its major counterparts most notably against the Japanese yen. This may be the start of a significant shift in FX drivers as a risk rally has typically coincided with USD weakness and a sell-off in US Treasuries (yields higher). What we are seeing now is that the USD and its relationship to the risk-on/risk-off environment is deteriorating as markets revert back to fundamental drivers and interest rate differentials. The correlation between the Dollar Index and the S&P 500 has diminished with the 30-day rolling correlation (based on % change) now at -0.42 from -0.59 late last week. This underscores the breakdown in the inverse relationship between risk and the greenback. On a shorter term basis (5-day), the correlation has actually turned positive for the first time since July of last year which indicates a positive relationship between the USD and risk (i.e. risk-on, dollar strength).

U.S. economic data and what it implies for Fed policy moving forward is increasingly impacting exchange rate fluctuations while risk sentiment has taken a backseat. Positive data surprises have been constructive for the greenback as traders price out the likelihood of QE3 as the economy improves. Likewise, softer data weighs on the buck as seen with Friday’s weak Feb. industrial production, softer core CPI, and unexpected decline in consumer confidence. While the Fed has not completely taken the option of more asset purchases off the table, it has backed off from the prospect of additional stimulus for now and acknowledged positive developments in labor markets and expects “moderate” (upgraded from “modest”) economic growth. The pledge to keep rates low until late 2014 remains unchanged, however if more members join Lacker in his dissent with regards to the time commitment, yields could move higher and the dollar may follow suit. The week ahead sees a number of Fed speakers scheduled which include FOMC voting members Dudley, Lockhart, and Chairman Bernanke. There is relatively light data flow in the U.S. with key February housing reports (new and existing home sales, housing starts) and leading indicators of note. We will also be monitoring weekly jobless claims which hit multi-year lows of 351k.

We expect that the USD will continue to be the beneficiary of safe haven flows as the CHF and JPY are expected to remain weak as a result of SNB and BOJ policy stance. This past week, the Swiss National Bank reiterated its commitment to maintain a ceiling on the franc while the Bank of Japan seeks to achieve its 1% inflation target which may require further easing of monetary policy as Japan currently faces deflation. The removal of a significant tail risk in Europe and easing of financial conditions after extraordinary liquidity operations provided by the ECB have resulted in a rise in European bourses and reduction in sovereign yield spreads. We would not downplay the severity of the Euro zone crisis however as the situation remains fragile. Political disruptions may intensify heading into key elections and structural imbalances as well as a pending recession continue to be a major concern. Euro zone PMI’s are scheduled for release in the week ahead and this will provide insight into the economic growth of key nations in the region.

Budget D-day for Osborne

The highlight event in the UK next week is the Chancellor presenting his Budget to Parliament on Wednesday 21 March at 1230GMT.  This comes at a difficult time for the exchequer, growth faltered in the fourth quarter of this year, and although it is expected to recover later this year it is likely to remain fairly lackluster this year and next.

However, as much as the Chancellor may want to try and boost growth he needs to balance this with preserving the UK’s prized triple A credit rating. Thus, don’t expect a deviation from the government’s austerity program, as it has become even more pressing since rating agency Fitch joined Moody’s and put the UK on ratings watch negative last week.

Osborne could have some good news on this front. There are signs the UK’s finances are better than expected. The Office for Budget Responsibility’s borrowing estimate for 2011-2012 was GBP127 billion, however the actual figure is likely to come in below this at the GBP122 billion mark after tax receipts were extremely strong in January and public spending has been slower than anticipated.

The UK still has a mountain to climb when it comes to fiscal consolidation, so don’t expect any un-funded giveaways from Osborne this year. Instead we expect a few changes that may cause some volatility in sterling-based markets in the middle of next week.

The markets are likely to react positively to anything that is pro-business, for obvious reasons. But this budget could be more muted than usual since a corporation tax cut is due to come into effect in April 2012 as part of the Finance Bill.  We don’t believe the Chancellor will cut the new 25% rate any further this year, although a small cut like 1% could surprise the market and might be considered affordable by the Chancellor especially if it could help boost jobs in the UK economy.

Any reduction in red tape for business is also likely to be warmly welcomed by the markets including the outcome of the Office for Tax Simplification’s review of the taxation program for small businesses and a reduction in the compliance burden for firms with foreign subsidiaries.

Added to that any cut to the top 50% rate of tax, which could be reduced to 45% and maybe even back to its original 40%, may not be popular with the overall electorate but could help boost consumption among high earners. The Chancellor may admit that the tax increase for those earning GBP150K or more failed to bring in the GBP 2 billion revenue expected, so is not worth keeping in place.

We believe a pro-business budget could have a temporary upward impact on the pound only. However, a budget that either 1, constrains growth or 2, threatens the UK credit rating could have a longer-term negative impact on sterling. The pound had a storming end to last week’s trading session as the dollar gave back recent gains. It closed the week on Friday approaching its 200-day sma resistance at 1.5870. This could thwart further gains as we start the week as markets get nervous about the prospect of Osborne’s Budget and take profits.

We also get MPC minutes and inflation out next week. Any sign that inflation is not falling as fast as the MPC predicts could see expectations of QE get taken off the table. This could limit future declines in the pound especially versus the euro, the CHF, the yen and the dollar. These currency crosses are all being driven by relative monetary policy. The US-UK interest rate differential has been widening since October 2011 helping to keep GBPUSD fairly weak, thus if movement in this spread slows then further losses in GBPUSD could be muted going forward.

The ECB's tough talk

There were two developments in the Eurozone last week that could impact the value of the euro. The first was the Bundesbank’s annual meeting last week where President Jens Weidmann said that the ECB needs to start thinking about how to unwind its crisis measures like LTRO loans to Europe’s banking sector.

Added to this the head of the Austrian Central Bank Nowotny said that further rate cuts from the ECB are not on the table right now. Weidmann was careful not to say that all emergency measures to help support the banks should be removed, however, he did say that the consequence of the LTRO auctions clearly raised the risks that the ECB now has to burden in the form of low quality collateral that banks from the currency bloc can use to get hold of ECB cash.

So the ECB isn’t exactly hawkish, but it is unlikely to add any new stimulative measures to its policy mix any time soon.  But what does this mean for the euro? We have noted in previous reports that the interest rate differential between the US and Germany (as benchmark for the currency bloc) has widened for the last five months. This has contributed to the bout of euro weakness we have seen since the late summer and the failure of EURUSD to crack 1.35 in recent weeks. Thus, now that the ECB is talking tougher than it has in the past about inflation risks the spread may not widen at such a fast clip.

This doesn’t mean that we will see a rebound in EURUSD any time soon, even though the single currency had a storming finish to the European session on Friday. Instead it suggests that further declines could be muted and we are back to range trading. As we start a new week the range to note in EURUSD is 1.3050 – 1.3250.

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The Week Ahead - Week of February 19, 2012

Greece’s day of reckoning is only the start

Another week and another Greek deadline has come and gone. But EU leaders have vowed yet again that a final decision will come on Monday, and this time they really, really mean it. Except that they’re still working over the weekend on the final details of the accord, so yet another impasse or breakdown could materialize. But we’ll give them the benefit of the doubt and expect that EU finance ministers will approve the second bailout, likely requiring some form of escrow account. Such an arrangement will set the stage for further showdowns in the months ahead, as Greece will repeatedly need to meet deficit reduction targets to obtain subsequent aid disbursements, and their track record there is not good.

While we think the Eurogroup will approve the next Greek bailout on Monday, we can’t rule out last minute hang-ups on key issues, potentially pushing the decision into the March 1-2 EU Summit. Eurogroup officials will meet informally on Sunday night and begin the formal session around 1430GMT on Monday. If they do approve the bailout, we would look for risk assets (stocks and commodities) and EUR to make yet another minor relief rally. Clearly, if they don’t approve of the aid, we would expect risk markets and EUR to come off relatively hard, as the risk of a disorderly default would be intensified. The ultimate deadline to keep in mind is the March 20 maturity of EUR 14.5 bio in Greek government debt.

While much attention has been focused on the question of whether Greece will or won’t receive the second bailout package and avoid a default, we think the bigger risks are from the fallout over the Greek debt swap deal with private sector investors (PSI). In this situation, we are looking at many so-called ‘known unknowns.’ This stems from the credit default swaps on Greek government debt and whether they will be triggered, which financial firms are on the hook for them, and for how much.

The current terms of the PSI negotiations strongly suggest that a ‘credit event’ will be declared, but ultimately that’s up to a committee of ISDA (International Swaps Dealers Association, the CDS and derivatives industry self-regulatory body) to determine. However, reports circulating on Friday indicated that some private creditors were already preparing legal action against the Greek government over the amount of losses they’re being forced to swallow. Friday also saw the Greek government announce that it’s preparing a ‘collective action clause’ law (CAC) for outstanding Greek government debt. CAC’s permit a super-majority of bond holders to alter the terms of existing bonds, making the debt swap deal a non-voluntary affair. Various credit rating agencies have indicated imposition of CAC’s would constitute a ‘credit event’, likely triggering CDS payouts. This brings us back to the known unknowns of which financial firms are liable and for how much, potentially sparking global financial sector upheaval as investors retreat to safe havens. And then there are the ‘unknown unknowns,’ where we don’t know what we don’t know. For many, this is the bigger risk out there, potentially making the fallout from the Greek debt deal make Lehman look like a walk in the park.

Overall, we think a resolution to the Greek rescue drama next week may simply be the start of a larger, messier drama involving previously unentangled financial institutions globally. At the minimum, we would expect a deal on Greece to offer only a short-lived respite, before markets begin to question anew the sustainability of Greece over the longer haul.

Further JPY-weakness may be in store

The JPY has undergone a distinct adjustment lower versus other major currencies over the past week following the BOJ’s decision to initiate another round of QE and establish an inflation target of +1.0% (latest CPI was -0.3%), suggesting more QE will be needed in the future. Together with Japan’s trade surplus evaporating into a deficit (January trade data due out on Monday morning in Tokyo; adjusted trade deficit of –JPY 850 bio expected), we think there is scope for further JPY weakness in the weeks ahead. Anecdotal reports also suggest Japanese investors started to actively reduce their portfolio hedges, leading them to buy foreign FX and sell JPY, adding yet another flow to JPY-selling pressure.

USD/JPY and many of the JPY-crosses have reached 3-month highs and are testing key resistance levels, such as USD/JPY 79.50/80.00 and EUR/JPY 104.50/105.00. While we think there is further upside in store, we would avoid getting long at these levels and prefer to wait for a pullback to pursue long entries (selling JPY), ideally around 78.00/50 in USD/JPY and 102.70/103.20 in EUR/JPY. Breaks above the resistance zones mentioned above may see JPY-pairs move directly higher in this adjustment. Potential turmoil emanating from Europe next week could provide the desired pullback, if investors turn back to the JPY and the USD on safe haven demand.

Light US data may see risk rally stall

Next week sees the US President’s Day holiday on Monday where US stock and futures markets will be closed. The rest of the week sees relatively minor US economic data (existing/new home sales; weekly jobless claims) only late in the week. We note this because the risk rally currently underway has been extremely tentative and seems to require frequent injections of better-than-expected news and data to keep going. More positive US data reports of late have been a primary source of that optimism, but with minimal data out of the US next week, that medicine may be in short supply. Together with potential disappointment or outright disarray out of Europe, we would not be surprised to see a more negative correction to risk assets and a further bounce for the USD.

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ROI for January 2011

Its been another good month all round for Olympus Wealth Management with all our Managed Accounts ended up in the black. Below is a breakdown the monthly return for January



The Athena Futures Managed Account returned 7.54% in January
read more: Athena Futures

The Ares Soft Commodities Managed Account returned 9.91% in January
read more: Ares Soft Commodities

The Hades Energy Managed Account returned 4.18% in January
read more: Hades Energy

The Apollo Metals Managed Account returned 6.23% in January
read more: Apollo Metals

The Poseidon FOREX Managed Account returned 6.05% in January
read more: Poseidon FOREX


Olympus Wealth Management are also near to launching its new FOREX Managed account concentrating on Night Scalping on the Canadian Dollar. For more information about this please click here

For more information on how to open an account, please use the link below

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Yen Slumps After Japan Expands Bond Buying

The yen plunged to its lowest level in more than three months against the dollar after the Bank of Japan unexpectedly expanded its asset-purchase program.

Japan's central bank caught markets off guard by ramping up its bond buying by an additional ¥10 trillion ($128.92 billion), and set a de facto inflation target in an effort to pull the country out of its deflationary spiral. The asset purchases undermine the yen by increasing the money supply, much like the bond buying undertaken in 2010 by the Federal Reserve weakened the dollar.

With the yen already under pressure because of Japan's grim economic fundamentals, the news encouraged traders to snap up dollars. The greenback shot up by more than 1%, with its session high of ¥78.54 marking the yen's weakest point since Nov. 1, the day after the Bank of Japan launched an intervention to knock the yen back from post-World War II highs.

Late Tuesday in New York, the dollar was at ¥78.44, down from ¥77.57 late Monday. The euro was at $1.3131 from $1.3187. The pound was at $1.5694 from $1.5766, while the dollar bought 0.9195 Swiss franc from 0.9164 franc late Monday.

Analysts, however, predicted the yen soon would begin to edge higher again, especially because the world's largest economies are embarking on what Deutsche Bank on Tuesday called "competitive quantitative easing," or bond buying. There is speculation that the Federal Reserve may launch a third round of bond buying.

"I don't think in the long run [a weak yen is] going to be sustainable, with the prospect of QE3 still on the table," said Chris Fernandes, vice president and FX adviser at Bank of the West in San Francisco.

Because worries about Greece's debt still are sending traders in search of haven currencies, "I foresee risk aversion rearing its ugly head again," Mr. Fernandes said, which will drive investors back to the yen.

The Bank of Japan's decision was the latest in a series of moves demonstrating Japan's resolve to combat a strong yen, which is undercutting the country's efforts to engineer an economic recovery. In the final quarter of 2011, the world's third-largest economy shrank at an annualized 2.3%, which coincided with exports tumbling to their weakest level in more than 30 years.

In August, Japan set up a $100 billion facility to encourage companies to exchange yen for foreign currencies. Meanwhile, the central bank disclosed this month that it had secretly sold yen during the first week of November, in the immediate wake of its Oct. 31 yen-selling spree.

At least for one day, the news out of Japan momentarily diverted traders' attention away from Greece. Fears that the Hellenic republic may default are festering, despite parliamentary backing of austerity measures designed to secure another round of international assistance.

Meanwhile, the euro came under renewed pressure after euro-zone finance ministers scrapped a planned meeting in Brussels Wednesday that had been called to approve Greece's bailout and debt restructuring. Athens's warring political factions have failed to give European leaders clear pledges on how to implement new belt-tightening moves the country's Parliament approved on Sunday.

"After the weekend's vote, people are realizing there's more stuff to be done, and the stuff that needs to be done is being postponed," said Brian Kim, FX strategist at RBS Securities. The single currency is suffering from "a post-Greek vote hangover."

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UK unemployment continues to climb

UK unemployment rose by 48,000 to 2.67 million in the three months to December, official figures have shown.

The unemployment rate was 8.4%, the Office for National Statistics said, the highest for 16 years.

The number of young people without a job rose 22,000 to 1.04m, taking the unemployment rate for 16- to 24-year-olds to 22.2%.

The number of people claiming Jobseeker's Allowance in January increased by 6,900 to 1.6 million.

While the unemployment rate is now at its highest since 1995, the number of job vacancies rose to 476,000 in the three months to January.

Lord Freud, a work and pensions minister, told BBC News: "This clearly shows we are by no means out of the woods yet."

"But it is quite a mixed picture. There are signs of stability. The inactivity level is coming down," he said.

Labour's shadow work and pensions secretary, Liam Byrne, said it was clear government policy was not working.

"Today's figures make for grim reading for the millions of squeezed families desperate for good news on the economy.

"With unemployment at its highest rate since 1995 and long term youth unemployment doubling in the last year, ministers must now get a grip," he said.

Contradictory trends

Despite the continued rise in unemployment, the proportion of the workforce in paid work also rose.

The number of people in jobs went up by 60,000 in the last three months the year to 29,130,000.

This meant the employment rate rose by 0.1 percentage points in the three months to December to 70.3%, although this rate was still 0.2 percentage points lower than a year ago.

The apparent contradiction is explained by the fact that the number of people classified as economically inactive has dropped.

Their number fell by 78,000 to 9.29 million.

This included a drop in the number of people categorised as long term sick or retired, who went back into the workforce.

Howard Archer of IHS Global Insight said overall the figures indicated that worsening employment outlook had eased recently.

"[This] supports hopes that the economy will return to modest growth in the first quarter and avoid recession," he said.

"Admittedly claimant count unemployment rose at a modestly increased rate of 6,900 in January to a two-year high of 1.605m but this is well down on the increases seen a few months ago."

Earnings squeezed

The ONS data also showed that average earnings increased by 2% in the year to December, unchanged from the previous month.

That figure lags well below the rate of inflation and indicates a continued squeeze on spending power.

Earlier this week, official figures showed the Consumer Prices Index (CPI) measure of inflation fell to 3.6% in January, from 4.2% in December.

Vicky Redwood, economist at Capital Economics, said: "We continue to expect unemployment to rise much further in response to the weakness in the wider economy.

"At least with inflation falling, the squeeze on real pay is easing. But it won't be for a few months yet until real pay actually starts to rise again."

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Apple, Suppliers Test Tablet With Smaller Screen

Apple Inc. is working with component suppliers in Asia to test a new tablet computer with a smaller screen, people familiar with the situation said, as it looks to broaden its product pipeline amid intensifying competition and maintain its dominant market share.

Officials at some of Apple's suppliers, who declined to be named, said the Cupertino, Calif., company has shown them screen designs for a new device with a screen size of around eight inches and said the company is qualifying suppliers for it. Apple's latest tablet, the iPad 2, comes with a 9.7-inch screen. It was launched last year.

One person said the smaller device will have a similar-resolution screen as the iPad 2. Apple is working with screen makers including Taiwan-based AU Optronics Co. and LG Display Co. of South Korea to supply the test panels, the person said.

Apple, which works with suppliers to test new designs all the time, could opt not to proceed with the device.

An Apple spokeswoman in California declined to comment.

The move comes as Apple is preparing to announce a new iPad in early March, according to people familiar with the matter. That device is expected to have a higher-resolution screen than the iPad 2 with a similar screen size, according to people familiar with the matter. A version will run on fourth-generation wireless networks from Verizon Wireless and AT&T Inc.

A smaller tablet device would broaden Apple's portfolio and could help it compete with rivals such as Samsung Electronics Co. and Amazon.com Inc. It would also begin to emulate the strategy it took for its iPod music player, which it released in a number of shapes and sizes over time. The company has taken a different tack with its iPhone, releasing one design at a time.

Analysts said a tablet with a smaller screen would help Apple expand its market share in the increasingly competitive market.

Diana Wu, an analyst at Capital Securities in Taipei, says that consumer demand for Samsung's 5.3-inch Galaxy Note and Amazon's 7-inch Kindle mean "consumers want a tablet that is smaller than the existing 9.7-inch iPad." "IPad's features are good enough, but pricing would be an important factor in the mass market, especially in big emerging markets like China and India," she said.

The iPad represented more than 61.5% of world-wide tablet shipments in the third quarter, down from 63.3% in the second quarter, according to market researcher IDC.

Samsung, which supplies Apple with key components such as memory chips and processors used in iPads, sells its Galaxy Tab iPad competitor in three screen sizes: a seven-inch, an 8.9-inch and a 10.1-inch.

Amazon.com's Kindle Fire has a seven-inch screen size and is priced at $199, well below the iPad's entry-level price of $499.

Apple has long contemplated different tablet designs, according to people familiar with the matter. But it had indicated it was wedded to the iPad's current size.

In October 2010, Steve Jobs, Apple's late co-founder and chief executive, criticized smaller tablets, saying the iPad's 9.7-inch form was "the minimum size required to create great tablet apps."

Apple, like many other big personal-computer and consumer-electronics brands, doesn't actually make most of its products. It hires manufacturing specialists—many of which are from Taiwan and have extensive operations in China—to assemble its gadgets based on Apple's designs.

They use parts from other outside suppliers, many of which also are from Asia. The arrangement frees Apple and its fellow vendors from running complicated, labor-intensive production lines, while the ability of Taiwanese companies to slash manufacturing costs helps cut product prices over time.

Apple, facing growing scrutiny about working conditions in its supply chain, Tuesday continued to combat the criticism.

Apple CEO Tim Cook , appearing at a Goldman Sachs technology conference in San Francisco, said the company takes working conditions very seriously. "The supply chain is complex. We believe every worker has the right to a safe working environment. Apple's suppliers must live up to this to do business with Apple," he said.

Mr. Cook said Apple is constantly auditing facilities. At the beginning of the year, he said, Apple collected weekly data on over a half a million workers in its supply chain. Apple will now be reporting its audits on a monthly basis on its website, which Cook said is unprecedented in the industry.

In the quarter ended in December, Apple hit new sales and profit records based on runaway holiday demand for the iPhone and iPad.

The company's share price has climbed in the wake of those results, closing above $500 a share for the first time Monday.

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