Forex Trading

President Obama signed PORK

2009-07-05T04:18:00.002-07:00

The problem with the world is not that there is an economic crisis, it is that the politicians who are “trying” to deal with it are just making things worse. When US President Obama was candidate Obama, he promised the US people that he would eliminate excess spending, known to all as Pork. Well, after three enormous bailout bills filled with this Pork passed through the US congress, President Obama signed them – saying things arrogantly like “it’s a stimulus bill, what do think we do in a stimulus bill, spend” to justify the frivolous dollars that were spent. Yet yesterday was the clearest sign that this young, charming, good-looking man has no experience as CEO and limited experience in politics. Prior to signing a new 410 Billion Dollar spending bill filled with 8500+ frivolous spending items (pork), he lectured the press about how earmarks (pork) are bad and how it was shameful that congress needed to continue this policy of adding items to a budget that have no place in a budget in times of a crisis the magnitude of which the world is facing.

He then went into a closed room and signed the bill – with no cameras present.

Forex traders took it out on the dollar yesterday as people are starting to worry about where all this money is coming from. The US printing presses are on overdrive trying to make enough money to meet the demands of this Presidency which is already responsible for close to three trillion dollars of spending – more than the GDP of most major countries – and he is not even past his first 100 days.

Sure, all this spending might help the economy in the short term – how can an infusion of so much money not start an economy. But he is sealing the fate of the global economy for the next ten years as interest rates will soar and taxes will be raised in an attempt to pay for all this. Forex brokers have it right, sell the dollar because inflation will kick in and then the devaluation will begin. Get out while you can – before the carnage on Forex street really begins.

Look for Online Forex traders and blogs to begin trying to find a new favorite. Perhaps the Australian Dollar as I have been touting for months. It has done quite well – the yields are high and the potential for growth is great. Keep watching the Aussie – and don’t say I did not tell you so.

Watch out: Dollar in a very erratic trading session | The Euro ended the week with one of its best weeks since the end of 2008 | The Sterling gained

2009-07-05T04:18:00.001-07:00

USD

The dollar gained against the Euro and a host of other currencies on Friday in a very erratic trading session. As the vibe in the stock markets turned negative, investors returned the greenback as a safe haven. The equity markets had been sharply positive all week long, with US markets gaining roughly 9%, Forex investors had taken the opportunity to test their risk appetite, however Friday seemed to indicate a migration back to the US Dollar.

The Dollar did erase early losses brought on by gains in stocks after decent economic data and hints that the US banks might not be as bad off as everyone thinks. Online Forex nalysts believe that the recent rally here for the USD against the Euro is all about the stock market. Investors are trying to gage whether or not the downslide in the economy is nearing a bottom – at this point, any good news can spur a rally. But the rallies are short lived because the sentiment is still quite negative.

At Friday’s close, the Dollar was up .15% to the Euro to 1.2926, up .3% to the Japanese Yen at 97.98, and unchanged versus the Swiss Franc at 1.185. The Dollar did fall to the Aussie and Kiwi, closing down ½% to the AUD to .6579 and down nearly 1% to the NZD at .5248.

EUR

The Euro ended the week with one of its best weeks since the end of 2008. Much of the gains the Euro made this week were based on investors testing their risk appetite, as stated above, however news from European Central Bank executives also played a part in the Euro’s rebound. Last week, several ECB board members declared that the crisis was being managed more aggressively and that a light at the end of the tunnel is in sight.

The Euro closed up ½% to the Yen to 126.68, up .16% to the Swiss Franc to 1.5321, down .4% to the Australian Dollar at 1.9641 and down .35% to the Canadian Dollar to 1.6441.

GBP

The Sterling gained widely on Friday as investors appeared to be giving the battered UK currency a break on Friday. Much hype of the UK’s bank bailout plan and overall negative sentiment about the state of the British economy has kept the Pound down in recent weeks. As investors retreated from more risky positions on Friday they appeared to find value in the Sterling.

The Pound closed up ½% to the dollar closing at 1.4 flat and up .3% to the Euro at .9231, up ¾% to the Yen at 137.18 and up ½% to the Swiss Franc to 1.6591. The Pound did fall slightly to the Canadian Dollar to 1.7803 and to the Australian Dollar to 2.1271.

ChartAnalysis: USDCAD

The recent inability of the USD/CAD to stay firm above the 1.30 level coupled with significant tension in the fundamentals has put pressure on the currency pair. The rising trend line looks like the next key support level below the 1.2675 line of support. Another way to play for a stronger CAD is with a CADCHF or EURCAD trade. USDCAD will need to see 1.2950 again to give bulls renewed hope here....

Dollar is Beginning to Lose its Luster

2009-07-05T04:17:00.001-07:00

Ok, so the stock markets seem to be bouncing back, data releases seem to be telling a good tale and the dollar is beginning to lose its luster as online Forexinvestors move towards a more risky approach to their investing. I still believe there is a long way to go before we can call this crisis over – I still don’t believe we have hit the bottom yet. I would not be surprised at all to see the markets suck everyone in for a few more weeks- perhaps even a month, and then collapse once again. The problem here that everyone needs to see is that this “turnaround” in the economy came overnight – on the heels of a dismal employment report in the US. It was protracted based on a better than expected retail sales report – a report that does not take into account the fire-sales and going out of business sales that saw retail prices drop in some cases, by 80%.

Forex traders and the Forex Broker companies are smarter than that. Have you ever wondered why when the stock market’s fall the currency gets stronger and vice-versa? It is because the Forex tends to work more on economic logic than raw emotion. If people are losing money in equities, they look for a quiet and safe place to park their cash – and what better place to park cash than in Cash, or rather, in foreign currencies. Forex traders know that the economy is no beeter now than it was two weeks ago – and they are preparing themselves for the fall while in the mean-time, taking advantage of some good shot-term trading opportunities to earn some extra money.

We must not forget that the EU is in trouble and still cannot agree on anything related to a solution. What is good for France is not good for Germany and what is good for the West is not good for the (or available to) the East. It’s a problem being connected at the hip when economically when your individual economies are in need of different things. The US is not out of the woods by far. All of this money printing and debt issuing by the US government will come back to bite them, big-time. IF anything, these Trillions – with a capital “T” – have made recovery in the long term a difficult task because deflation can creep up at any moment. The worse situation is retreating to the stagflation days of the seventies after Nixon nixed the gold standard and made deficit spending possible.

History is there for us to learn from it. Why can’t our bright and educated leaders see that?

Forex Online Currency Analysis- This is EURO's Day | Increase in Unemployment in Britain | Bank of Japan’s Non-Move on Interest Rates

2009-07-05T04:16:00.001-07:00

EUR

The Euro had an up day against the Dollar and Pound in advance of the US Federal Reserve’s decision on interest rates and in response to poor unemployment data coming out of Great Britain. In what could signal a change in sentiment the European equity markets have been doing better and the fortunes of the Euro have appeared to reverse.

At 5PM GMT, the Euro was trading above the psychological $1.30 mark against the USD at 1.3151; the Euro was also up strong against the British Pound to .9389 a 1.3% rise. The Euro also rose more than ½% to the Canadian Dollar to 1.6637, up ¼ to the Yen to 128.65 and up over1% to the Australian Dollar to 1.987.

GBP

The amount of unemployed in England rose at the fastest pace ever to a pre 1997 level of over 2 million. The numbers indicated that manufacturing jobs are being lost at alarming pace, sparking fears of an export slowdown. The British government’s assertion that a lower pound will support the export/manufacturing industry is being dismissed by investors that believe that only an increase in overseas demand can help the industry. Wednesday’s numbers have given credibility to this argument as Britons working in manufacturing, the staple of the export industry, have lost their jobs that at any other point since they began recording this data.

At 5:15 GMT, the Pound was down over 1/3% to the US Dollar to 1.3997, down ¼% tot the Aussie to 2.1153, down almost 2% to the Swiss Franc to 1.6283 and down 1% exactly to the Japanese Yen to 136.96.

JPY

Fallout from the Bank of Japan’s non-move on interest rates late Tuesday was muted as the aggressive moves of other Central Banks, notably the UK and Switzerland seemed to take precedence. The Yen slowed its decent, but still was weak in Wednesdays trading session even after the BOJ declared that they will be buying Japanese Government Bonds – which are now perceived to be a non-move considering that none of other major countries are buying Japanese Debt and the BOJ buying debt of their own country is considered to be a wash.

The Yen rose ¾% to the Dollar to 97.87, rose more than 1% to the Australian Dollar to 64.56, rose .8% to the New Zealand Dollar to 51.85 and fell ¾% to the Swiss Franc to 83.97 on top of its losses to the Euro and gains against the Pound mentioned above.

Euro strength sparks export worries

2009-07-05T04:15:00.000-07:00

EUR

The strength of the Euro is beginning to concern many within the European Union. Traditionally, higher currency valuation has a direct affect on the export trade as goods are more expensive to purchase. The rise in the value of the Euro at a time when the European export business is already in a severe state of slowdown will no doubt have a further negative impact on the industry.

The European Union, in contrast to the governments of The United States, Great Britain and Switzerland, has not announced an economic stimulus program that includes the purchase of government debt by the Central Bank or the injection of “new” money into the financial system. While this tactic is typically not common, many countries have employed it in an effort to free up money for business and consumer lending in a market that is essentially void of such at this time.

The fear is that if the EU does not act soon, the Euro could rise to $1.60 versus the Dollar and reach and even exceed parity with the Sterling – a move that would virtually lock out European exports from most major countries.

At Friday’s close, the Euro traded down .6% to the Dollar at 1.358 although for the week the Euro was up over 5% versus the greenback. The Euro traded down to the Pound to close at .9386, down 1/3rd to the Swiss Franc to 1.5294 and up nearly 1% to the Yen to 130.31.

USD

The US Dollar had a rebound on Friday; however it did have the largest weekly fall since 1985 against a basket of major currencies. The fall of the dollar was spurred on by a decision last Wednesday by the US Federal Reserve to purchase more than one trillion dollars worth of long-term US government debt – which is kind of like taking money from your left hand pocket and putting it into your right hand pocket. The money the fed used was “new” money – freshly printed for that matter – and that was seen as flooding the market.

Analysts are expecting the dollar sell off to continue as the US government nears three trillion dollars worth of new spending to help curb the recession. At a certain point the US runs the risk of devaluing their currency – which would have a trickle down affect on imports as well as the sale of government debt. Some analysts are predicting a collapse of the US’s standing as a safe haven currency because right now it is hard to see it sustained as such with record deficit and an overall astronomical national debt that would take at least fifteen years to pay down. The last such country to do something similar to the US was Zimbabwe – and we all know how that turned out.

The Dollar closed up 1 ½% to the Yen to 95.93, up ¼% to the GBP to 1.4459, up .1% to the Canadian Dollar to 1.2411 and down .35% to the Australian Dollar to .6872.

Chart EUR/USD – 30 Day

The Dollar seemed to be holding its own until the US government began unveiling their spending plans. The chart below shows a direct correlation between the various spending bills and their effect on the value of the Dollar against the Euro. To think this is coincidence, one only needs to look at the USD versus every major currency and a similar pattern will be revealed. IN the past 30 days, the Dollar has lost over 7% to the Euro – a staggering number. And many are predicting that this could just be the beginning if the US keeps spending AND if the EU does not implement a more aggressive approach to its handling of the recession. $1.3750 is the next resistance level and if it should hit that the next level up would be $1.3950. It is expected that the Euro to break through both levels in the near term.

Banking Problems in England, considered the worst in Europe at this time | Currency Analysis

2009-07-05T04:14:00.002-07:00

GBP

The Pound also had a good Monday against the Yen. It seems as if the banking problems in England, considered the worst in Europe at this time, is not as bad as the perceived danger in the Japanese economy. The UK still has many hurdles to overcome, including the devaluation of the once mighty Pound Sterling, however it is believed that until the G20 summit, the currency will hold in its current neighborhood.

At 5:20 GMT the GBP was trading up 1 ¼% to the Yen to 140.44, down ¾% to the Canadian Dollar to 1.7825. up 1/3^rd to the Swiss Franc to 1.6349 and down 1 ¾% to the Australian Dollar to 2.0722.

Currency
Daily stance
Analysis
EURUSD
0/+
1.3740 holds the key for the near term direction. If it goes above, then we target 1.3860 or else we will re-visit 1.3580
EURJPY
0/+
Look for a re-test of Asian 131.95-00 high. Support is listed at 130.55
USDJPY
0/+
Buy when it breaks above 96.60 for a short term test of 97.30-35, or else watch it trade in the 95.50-96.50 range
GBPUSD
0/+
1.4580-90 looks a magnet pre-Geithner. Above sees acceleration to 1.4700-20
AUDUSD
0/+
While holding gains above 0.6940-50 look for extension to 0.7020

Be Afraid – The end is near

2009-07-05T04:14:00.001-07:00

The Bank of England is screaming at the British Prime Minister to cease his policy of spending. In fact, they have gotten so vocal for an organization that usually conducts its business behind closed doors and through confidential memos, that every newspaper in England – and most across the world, featured this story on the cover. The Times of London has a picture of Mervyn King, the BOE governor with a headline that reads “No more stimulus” – while online versions of the story have titles – “Stop, we have no more money”. It is interesting to see that the fiscal policy of England is beginning to rattle cages over there. It is worthwhile to note that the Prime Minister, Gordon Brown, is on a whirlwind tour in advance of next weeks G20 summit, trying to garner support for his and US President Obama’s “global stimulus” – and in his home his central bank is saying they cannot even afford it.

Oh, the similarities between the two – US and England – spending silly in the name of recovery while the debt goes higher and higher. There is one difference though, no one is screaming to Obama to stop. IN fact, Treasury Secretary Timothy Geithner just blew another Trillion yesterday and asked the US Congress for powers to seize “troubled companies” in the non-financial sector as well. Sounds more like Soviet style economics to me – but it all came in the name of being able to address an issue before it becomes one. So essentially, a business can be taken over by the US Treasury and its assets sold to other companies if the Treasury secretary (in coordination with the President and Federal Reserve) decides so. In my day we used to have something called a bankruptcy procedure – which required that a company who was in trouble go through the legal system to do the same. Secretary Geithner plan seems to do away with that process – I am not sure that is legal in the US, but have no fear, Congress will pass a retroactive law making it legal.

The world is getting worse – and China and Russia as I spoke about yesterday calling for the world to adopt a global currency in lieu of the dollar just the tip of the iceberg. The UN is doing the same. And while there has been these ideas before, we are entering a period of fear driving decisions, where the irrational becomes the rational in order to save us all from economic disaster. I fear that the UN will get their way now – posing this idea which china and Russia now back as a solution to a problem. I fear a global currency system – as it will destroy the capitalism that has made so many wealthy – and allowed for free markets such as the Forex. IT will kill the Online Forex and commodity industries and turn us all into socialist sheep, following instead of leading and thriving. Be afraid – be very, very afraid.

Geithner: "Proposal for Chinas world currency" | Pounds Stumbles | Chart Analysis EUR/JPY

2009-07-05T04:13:00.000-07:00

USD

Treasury Secretary Timothy Geithner said on Wednesday that the US Dollar was likely to be the worlds reserve currency for a long time to come. And with this, he also said he was open to Chinas world currency proposal. The dollar reacted negatively as Geithner spoke, especially against the Euro which it had been up against until Geithner spoke. As investors began to digest the bank plan the US Treasury announced on Monday, many began to question the viability of the plan which increases US spending and taxpayer liability, and calls on private investors to join in the purchase of these assets with unknown value.

At 5PM GMT, the Dollar was trading down to the Euro .5% to 1.3534 after trading up to 134.95 when Geithner began to speak. The Dollar also fell to the Yen by ½ to 97.57 and to the Canadian Dollar by ½% to 1.2248. The dollar did manage a gain against the Pound to 1.4592, a .6% rise.

GBP

The pound fell after the Confederation of British Industries distributive trades survey balance fell to -44 in March from -25 in February. Analysts had expected a smaller deterioration to -35. The failure to achieve a fully covered Gilt auction, suggesting reduced demand for sterling assets, also weighed on the currency.

Gilt strategists blamed the auction's failure on market uncertainty created by Bank of England Governor Mervyn King when he said on Tuesday that the Bank of England could scale back its program of gilt purchases if they were especially successful in boosting the economy.

At 5:15 GMT, the Sterling was down 1.1% to the Euro to .9272, down about 1% to the Yen to 142.42, down 1 ½% to the Swiss Franc to 1.6394 and down 1 ¼ % to the Canadian Dollar to 1.7858.

Online Forex Chart Analysis: EUR/JPY

The persistent EUR/JPY rally of late finally met resistance late yesterday as equities eased off recent highs. We wonder if the JPY crosses will top out here towards the end of March as Japan gets set for a new financial year. Watch the 200-day moving average in this cross as an important technical level over the coming week.

G20 – The dawning of a new world order.

2009-07-05T04:12:00.000-07:00

The thing about big conferences involving world leaders is that everyone is so proper and polite in front of one another. British Prime Minister Gordon Brown is lobbying the world for a new world order along with President Barack Obama. They are proposing a 1.7 Trillion Dollar global stimulus plan for the world to follow, the trouble is over the weekend news broke that the world is not into that idea. France, Germany, Spain, Russia, China, have all made statements questioning the idea of such a global spending effort – some classifying it as counterproductive.

The Canadian Prime Minister was on American Television on Sunday being very diplomatic in his discourse. He said that he needed to review the proposal and that certain things needed to be ironed out before a “meaningful discussion could be had on the issue” – in plain English, the G20 will not yield any fruit on Brown and Obama’s plans. The few things needed to be ironed out are this – FIX YOUR BANKS FIRST, SHOW US THAT THEY ARE GOOD AND SOLVENT, THEN MAYBE WE CAN TALK ABOUT YOUR IDEA.

The Online Forex world knows this to be true. And the erratic trading on the dollar and pound have proven that there are many skeptics out there with regard to the G20 and what it will produce. Aside from some smiley pictures, a few days in cloudy London and some good old Scotch, what can these leaders say they came home with? I do not believe they will come home with much.

It is going to be a slow week up until the summit on Wednesday – light volumes and erratic swings will be the norm (unless someone big makes a gaffe like Geithner or Brown did last week). I also believe that the world is in for a shock when they see what all the spending and currency manipulation has done to the two staple currencies, the Pound and the Dollar. The Pound used to trade at over $2 to the Dollar and now it is hovering around $1.40 – this is a big drop. And the US Dollar is almost at parity with the Canadian Dollar – this used to be the butt of many jokes about Canada back in the day when I first started out. But now the two are neck and neck – it used to be .60 cents on the dollar for the Canadian currency. Perhaps we are in for a new world order. Perhaps we are in the midst of history in the making.

Possible Automaker Bankruptcy Boosts US Dollar and Chart Analysis EUR/USD

2009-07-05T04:03:00.000-07:00

USD

The Dollar rallied on Monday as news of possible bankruptcy at US automakers, General Motors and Chrysler sent investors into the currency markets seeking the safe-haven USD and Japanese Yen. When times get tense in the financial world it is common for investors to pull their money from higher yielding, higher risk investments and pick up the US and Japanese currencies – viewed as more stable and resistant to losses as other investments.

At 5PM GMT, the Dollar was up 1.08% to the Euro at 1.3142, up 1.14% to the Pound to 1.4157, up 1% to the Canadian Dollar to 1.253, up 2.18% to the Australian Dollar to .6788 and up 1.7% to the Kiwi to .5602.

EUR

The Euro was down broadly as news emerged that Spain was forced to take over a regional bank once thought to be stable. This added to the selling already underway as investors braced for another interest rate cut by the European Central Bank, a move that is expected to bring the core rate down to 1%.

At 5:10 GMT, the Euro was down .1% to the Pound at .9271, down 2.15% to the Japanese Yen to 127.26, down ¼% to the Canadian Dollar to 1.6464, down ½% to the Swiss Franc to 1.5144 and up 1% to the Australian Dollar to 1.933.

Background to Mondays Market Action

President Obama surprised the markets today by denying the US Automakers, General Motors and Chrysler’s, request for additional funding after demanding the resignation of the GM Chief Executive. It was widely expected that Obama would grant their request for an additional 21 Billion Dollars, however as the G20 summit approaches, it seems as if Obama is interested in publicly denouncing his “spender” label. Obama and British Prime Minster Gordon Brown are trying to garner support for a 1.7 Trillion Dollar “Global New Deal” as their counterparts in many European and Asian countries are questioning their tendency to spend blindly on bailing out companies that are failing – termed “Zombie” companies.

The G20 meets Wednesday in London.

Chart Analysis: EURUSD

EURUSD is slicing lower on the new bout of risk aversion to open the week and ahead of a possibly dovish Trichet on Thursday. Online forex sees a key level comes in just above 1.3100, the 100-day moving average (not an important MA recently, but was very influential in recent years), and also the 50% retracement level for the recent rally to north of 1.3700. Below that, the psychologically important 1.3000 level looms.

Yen takes a dive along with the Japanese economy

2009-07-05T01:45:00.000-07:00

YEN

The Yen fell to a three-week low against the US Dollar and took a beating from other major currencies Tuesday after weak economic data out of Japan stifled recent safe-haven flows into the Japanese currency. Ahead of the highly anticipated G20 meeting in London this coming Thursday, newly released data has shown that the economic crisis has destroyed Japanese exports and is responsible for a sharp contraction in the fourth quarter. This reality is threatening to collapse the current government.

At 8:15 PM GMT, the Yen was trading down 2% to the US Dollar to 99.06, down 2 1/2% to the Euro to 131.62, down 2.6% to the British Pound to 142.01 and down 3.4% to the Australian dollar to 68.8.

EUR

Aside from the jump it took against the Yen, Gains in the Euro were limited as investors awaited the European Central Bank policy meeting on Thursday. There is a lot of uncertainty with how the meeting will go, given the many developments in recent days over monetary policy. German Chancellor Angela Merkel has been outspoken against additional stimulus spending while ECB President Jean-Claude Trichet has alluded to a more aggressive policy. Nonetheless, The ECB is expected to cut rates half a percentage point to 1 percent and possibly signal plans for some form of unconventional policy such as buying bonds to boost the money supply.

At 9:00 PM GMT, the Euro was trading up 1/2% to the dollar to 1.3269, flat to the GBP to .9246 after trading up 3/4% most of the day, up 1/2% to the Canadian Dollar to 1.6738 and down 1.19% tot the Australian Dollar to 1.9139.

Worse than expected US Job Losses rattles the Dollar

2009-07-05T01:44:00.001-07:00

JPY

The Yen had a slight rebound day on Wednesday as unemployment fears in the US and pre-G20 jitters took steam out of the US Dollar and Euro. Fundamentally, nothing has changed in Japan since Tuesday’s selloff after a dismal consumer confidence report in Japan, and the common thought is that Japan is still having major problems that will be difficult to overcome.

At 5PM GMT, the Yen was trading up .3% to the Euro to 131.07, up .1% to the USD to 98.82, down .2% to the British Pound to 142.0 and up .3% to the Swiss Franc to 86.57.

USD

Data released on Wednesday showed that the job losses in the US are increasing, however stagnation in the markets due to today’s G20 meeting and European Central Bank interest rate decisions stemmed the losses. Investors troubled by another 742,000 job losses in the US, more than analysts expected, were holding out hope that something positive could come from today’s meetings.

At 5:15 GMT, the dollar was trading down .15% to the Euro to 1.327, down .4% to the Pound to 1.4378, up .42% to the Canadian Dollar to 1.2652, down .4% to the Australian Dollar to .6939 and down .45% to the New Zealand Dollar to .5617.

G20

Today’s G20 is expected to be pivotal in the Forex online markets as French President Nicholas Sarkozy seeks to draft legislation regulating the financial markets including the Foreign Exchange. It is widely believed that President Obama will not push his and British Prime Minister Brown’s spending plan as it has not been met with kind words by most of the delegates in attendance.

As well, the Non-Farm Payroll numbers out of the US are due out on Friday. With dire unemployment numbers coming out on Wednesday this key indicator will be of vital interest to Forex traders holding USD positions.

Better than feared, but worse than expected is good enough for the Dollar

2009-07-05T01:43:00.002-07:00

USD

The US Non-Farms Payroll on Friday showed a higher than expected, but less than feared number of newly unemployed Americans. The 663,000 was more than the 650,000 that was expected and less than the 700,000 that was anticipated. For the American economy, this number was significant because it showed that the rate of unemployment was flat, not growing, which led many to believe that a bottom to the downturn is near. Coupled with better than expected data in housing and auto sales earlier in the week, and surprising earnings reports from some major companies, sentiment towards the US economy, and by default the dollar, was up.

At the close on Friday, the dollar closed up .1% to the Japanese Yen to 100.1 after hitting 100.37, a five month high. The dollar fell to the Euro slightly to close at 1.3483, up .21% to the Canadian Dollar to 1.2297 and up .04% to the Australian Dollar to .7151. The dollar also fell .2% to the Swiss Franc to 1.1297 and was unchanged versus the New Zealand Dollar to close at .5857.

GBP

Data released in Britain on Friday showed a slowing rate of contraction in the services sector which helped boost interest in the Pound. The Chartered Institute of Purchasing and Supply, which conducts the PMI survey, said that March showed a higher than expected rate of growth, coming in at 45.5 which was higher than expected 43.5 and February's 43.2. This coming week will be a telling one for the Sterling as Manufacturing indicators will be released on Tuesday and Thursday and the Bank of England meets to discuss interest rates.

The Sterling closed up .3% to the USD to 1.484, above the psychological 1.48 level which it has struggled breaking for a while. The Pound also rose more than 1% versus the Euro to close at .9084, and was up .35% to the Swiss Franc to 1.6766. The Pound also finished a good week against the Yen, which currency did not, closing up more than 1/4% to 148.32.

Chart Analysis: EURGBP

EURGBP is at a very important inflection point here just after the ECB announcement and ahead of the ECB press conference, having broken initial 0.9150 support and now taking aim at the 55-day moving average and the rising trendline, not to mention the key 0.9000 pivot area. A move through there could help set up a structural top and a new down trend. Stay tuned.

Weak corporate earnings and more bad European data helps the Dollar

2009-07-05T01:43:00.001-07:00

USD

The US Dollar gained broadly on Tuesday as stocks worldwide dropped in advance of what is expected to be a dismal corporate earnings season. The flight from equities helped the dollar as investors continued Monday's push toward the safe-haven greenback. Investors will learn more about the recession's toll on U.S. corporate profits in the comings weeks. It is expected that first-quarter earnings for the biggest companies will fall by almost 37 percent versus last year as global demand slumps.

As of 11:30PM GMT, The Dollar was up almost 1/2% against the Yen to 100.62, keeping above the important 100 level. Up 1/4% to the British Pound to 1.4737, down .1% to the Canadian Dollar to 1.2364 and up 1/4% to the Swiss Franc to 1.1427.

EUR

The European Union revised earlier data that showed a 1.6% contraction in the EU economy, .1% worse than originally reported. This news sent the Euro down on Tuesday as investors were also trying to digest a report that showed England's 12th straight month of manufacturing production decline as well as a staggering 50% decline in German steel output in March. As signs of the recession reappear, investors are nervous as to when they will finally see a turnaround.

At 11:45 PM GMT, the Euro was trading down 2% to the Yen to 132.90, down 1.1% to the US Dollar to 1.3255, down 1/2% tot he British Pound to .9005 and down .3% to the Canadian Dollar to 1.6412.

Other Happenings

The Australian dollar was back and forth all day against the USD after the Reserve Bank of Australia dropped interest rates by another 25 basis points to a record low 3.0 percent.

The Bank of Japan said it would leave interest rates at 0.1 percent for now. This was expected although they surprised the market by announcing additional steps to ease credit strains, saying they would start lending against a wider range of municipal debt to support ailing regional banks.

Silence in the Online forex Market

2009-07-05T01:42:00.000-07:00

We could all feel the silence today as the markets are closed for the Good Friday and Easter Season. Looking at the last Asian session, the Usd recovered in equity markets. The Eur/Usd was traded sharply, lowering from 1.3281 to 1.3091. While the Usd/Jpy pair was in a range bound between 100.70 and 100.21. As European and US markets are closed for a long weekend, we could expect forex onlinetrading to be much lighter today with a continued consolidation in the majors currency pairs for the rest of this week till Monday.

The markets are closed today for Good Friday, but I think it would be interesting to watch some choppy action next week, because of the thin trading conditions. Next week the things I liked to watch will be 1.3050 ahead of 1.30 for EUR/USD. Also for GBP/USD I am expecting a good support level at 1.45 and will hold my position if another go towards 1.50. European and US Markets are Closed Today and Monday for Holidays.

Anyways let me wish everyone a wonderful long weekend and happy Easter and let us try to forget the current economic turmoil during the festive season no matter how gloomy market outlook seems. My forex broker always advices the best way in the gloomy market is to avoid long term positions, as things can change on a daily basis, so 'get in and get out' should be our current motto!

Happy Easter! Enjoy

You know you are in trouble when.....

2009-07-05T01:41:00.000-07:00

There is a growing sense of unease that I have every time I read about the US Federal reserve buying US Treasury debt. It is like paying your Mastercard with your Visa, something we are told from early on in school is just jot a smart way to handle your money. I have written about this several times and am doing so again because last Friday, the US Fed policy maker warned that the US was flirting with severe inflation if it did not stop spending so much. Actually, the term that was used was the US needed to start "winding down" its spending habits or it runs the risk of "a hyper-inflationary surge."

Now, Forex traders and online Forex buffs know much about what hyperinflation can do to a country - just look at Zimbabwe. But for this to happen to the US would be devastating. The fact is that the US has spent nearly 12 Trillion Dollars so far this year, and their gross GDP is 14 Trillion. The question has to be asked, is it too late to stop the inflation or will we see it anyway. At the rate that the US has spent, and the means by which they have done it, specifically monetizing their own debt (probably because nobody else would at this point) and the fact that the US is the most significant player in the financial world, what would hyper-inflation look like there?

Another worrying trend for Forex traders and brokers to consider is the fact that China has just reached 1.9 Trillion Dollars worth of foreign debt holdings. That is to say, US debt holdings. That number is correct - China holds in their hands roughly 15% of the US GDP in debt form - this should trouble us all - especially when China is suggesting a new reserve currency for the world to use. Perhaps it would be the Yuan if they would stop tinkering with it to make their goods so cheap.

Late last week a large US bank that received 25 Billion Dollars in US aid in November 2008, announced they would be turning a profit of 3 Billion in the first quarter of 2009. One needs to wonder if that includes the 25 Billion they got from the US taxpayers - and if not, why did they need the money in the first place? With everyone thinking that the economy has turned a corner, no one is looking at the big picture. This is going to be a hectic week for the Forex - with the Dollar holding high against the Yen, watch the Euro and GBP in play.

And please. When you read a piece of good news - ask questions, don't just look at what is being said, look at what is not.

Surprise to all Crude Oil Forex Online Traders – Sharp decline below $50 per Barrel

2009-07-05T01:40:00.000-07:00

The Crude is experiencing a sharp decline in the prices with the close of last Asian trading session. It plunged 4.2 percent to a close at 50.05 per barrel (an intraday lowest at 48.84) on Monday, when the International Energy Agency (IRA) revised its fall in 2009 demand on last Friday. After this forecast the Stock markets' were opened in negative sentiments and thus dragged down the oil price. Forex brokers and traders observed that in open Asian session, the black gold (Crude oil) extended its weakness and now it is trading at 49.6 per barrel.

According to the reports, IEA predicted that we may see a contraction in the oil consumption by 2.4M bpd to 83.4M bpd, which is the lowest level in last 5 year. Year 2009 is still expected to be seen as the global economic outlook sluggish and auto sales slumped (IEA also revised down global GDP growth to -1.4% from +0.5%). In developed nations the OECD demand is reduced by 760K bpd while that in developing countries the fall is seen for the first time since 1993 by 230K bpd.

Coming to the supply side, IEA expects non-OPEC supplies to witness a down fall of 360K bpd globally, of which 220K bpd is expected to be outside Brazil and the US. In addition, the report forecast over 1M bpd in investment cancellations or delays.

The Crude oil was closed stridently losing 2.11 dollars or 4 per to settle at $49.89. This move was momentous enough for all forex online brokers so it was no shock for them to see a cross below the 9 and 14 day MA. If we see technically crude oil is still in the range of $47.27 - $54.75 sideways which could only turn if we see a break on either side.

Deflation to Inflation: A Trend We Will Soon Witness

2009-07-05T01:36:00.000-07:00

With all the money the US has spent, the fears on the street are that of inflation. History has proven that if you keep spending as a country, and you exceed a certain percentage of your GDP then you run the risk of rampant inflation. Take Zimbabwe for example, where a loaf of bread (if you can find any) costs the equivalent of three days pay for the average worker (again, if you can find any work). Now, I am not suggesting that the US is headed down Zimbabwe's path, however the spending bills they have come up with in the past three months alone total nearly 80% of their Gross Domestic Product.

Wednesday, the US released data that showed that deflation was rampant in the US and Forex Traders flooded to the dollar thinking this is the greatest thing that can happen. My online Forex friends though are not so naive. The fact is, it takes a while for these things to take affect. It is impossible to spent 12 Trillion Dollars in a few months, although give me a platinum card and I will try my best to do so.

The reality is that the US has had a deflationary issue which is why the recession is bad, and which is why the "pros" at the Federal Reserve and treasury think that insane spending can reverse it. I can guarantee you right here, right now, that they are right. The problem is they have gone too far and went crazy on their spending (mostly to fulfill political promises and appease labor unions), that they will find themselves in a hyper-inflationary mode once the spending and borrowing catches up. I talk about this often and I will not say I told you so when you see it.

Anyway, England also reported that the rate at which housing prices are falling has slowed. Many online Forex chatter is elated that a bottom to the housing bust in Britain is in sight, and all I can see is that it's still falling at a high rate. I mean, London property was so overpriced, and even with the year long slide in value it is still one of the most expensive cities to live in. It just shows you how much air was in the bubble. But I would not bet on a speedy recovery here either. Social spending has hampered the future for the UK just like the US and it will be to the detriment of the Sterling overall. Just wait.

Now the EU has it right. They are finally getting in on the bandwagon of spending to stimulate the economy - but they are mindful of the inflation factor in doing so. There is no "blank check" they are writing. They will announce a plan that is not indefinite, it has an end. In doing so they are not writing new laws that will see Billions spent each year to "prevent" this sort of crisis from happening again, it is a one off - one time only - lasting less than a year. They really are putting their money where their mouth is after being so vocal about beating down the US and UK's plans. Bravo Trichet - the Euro just might be the currency of the future yet.

Forex Update of This Week

2009-07-05T01:35:00.001-07:00

EURO Update:

Data released on Thursday showed that industrial output in the Eurozone had plummeted by a record 18.4 percent year-over-year in February while inflation fell by half to an all-time low. This reinforced expectations that the Eurozone economy is deteriorating and that interest rates may fall more at the upcoming European Central Bank policy meeting. In addition, it raised expectations that the much talked about "non-conventional" policies that the ECB will announce might be very aggressive in nature.

At 10:40 PM GMT, the Euro was down .4% to the US Dollar to 1.3183, down .5% to the Yen to 130.89, up .1% to the Pound, up .08% to the Canadian Dollar to 1.5931 and up .9% to the Aussie to 1.8302.

Summary of the Week:

To reiterate that risk aversion seems to be back, The Yen has seen some gains without any new developments to warrant it while the overall net sales of Aussie and Kiwi Dollars has grown. As well, as a commodity reliant economy, the Canadian Dollar has seen a boost as of late.

Investor appetite for risk has picked up over the past month as a rally in stocks and better-than-expected bank earnings fueled expectations that the financial sector and global economy may be past the worst. But this week saw caution return to the market as optimism over the global economy faded and the U.S. corporate earnings season went into full swing.

Forex Online Story: The Cat has Come Out of the Bag

2009-07-05T01:34:00.000-07:00

The funny thing about statistics is that they can be manipulated to tell a story that is contrary to the actual truth. The fact is that for the past few weeks we have been seeing data coming out from government agencies and corporations that provide investors a glimmer of hope that the economic situation is changing. While international organizations like the IMF warn of trouble ahead, companies like General Electric, Citigroup, Goldman Sachs along with various governmental statistical divisions provide the online Forex world with “positive” numbers. I became suspicious of these numbers when Citigroup, a recipient of “bailout” money only three months ago, and only a few weeks ago considered a “zombie” (dead but living on the fat of the US government) announced a pretty healthy profit expectation. It was reinforced when they announced that sales figures in the EU shot up drastically in January.

Well, the cat has come out of the bag. Forex traders and brokers who have been watching this happen and acting on the data will be happy to know that the reason for all of this good news is the result of number manipulation. Let’s start with the sales data, which showed a 30% rise in January. The reality here is that until January, they used to report the numbers YOY or year over year, reflecting the performance of one month against the same month in the previous year. Now this number is reported month over month – meaning January sales rose 30% against one of the worst months for sales in recorded history.

Next, this past weekend I read in the Wall Street Journal that the Goldman Sachs profit increase from 4th quarter 2008 to first quarter 2009 excluded the miserable month of December that Goldman had – thus making the losses in Q4 of 2008 much less. This was allowed because in the change of status that the bank made from investment bank to “savings” bank in order to qualify for federal deposit insurance protection. Because the change was made mid-December, they were allowed to omit Decembers numbers from the report. Nothing changed other than the legal classification of the bank, but it resulted in a major change to its on-paper bottom line.

This week as the world begins to digest this, we will see some volatility and signs that things are slowing down again. The euphoria has left the building along with Elvis and reality is creeping in again. It can be seen on the unemployment lines and in the empty shelves of stores going out of business and on the foreclosure signs lining the streets of what was once thought to be prosperous neighborhoods.

Trade well – and don’t believe the hype until you know the full story.

EURO AND CAD Forex online updates and Chart Analysis EUR/JPY

2009-07-05T01:33:00.000-07:00

EUR

A surprising data release out of Germany was the spark for a Euro rally against the Yen and Dollar on Tuesday although continued worries over next months European Central Bank tempered the Euro's run against the other majors. The German ZEW poll of German Economic Sentiment, which measures investor confidence showed a very surprising increase. The report came in at +13 after falling to -3 in March. It was expected that the report would show a fifth straight month of decline and put the index closer to -10. At this time the Eurozone will take whatever good news they can get, and today's was good enough to push the Euro off of a month low versus the Dollar.

Year to date the Euro is down more than 7 percent to the US Dollar and the prevailing thought is that this trend will continue until the ECB implements a more aggressive monetary policy - a route they have until now been unwilling to take. For now, investors are weary of what "unconventional" plan the Central bank will announce on May 7th, speculating that it will still be too soft and ineffective. For now it is a wait and see market for the Euro - take whatever good news in stride and wait for the big news next month.

At 10:15PM GMT, the Euro was trading up .4% to the USD to 1.2944m up 1.1% to the Yen to 127.88, down .75% to the Sterling to .8823, down 2% to the Australian Dollar to 1.8182 and up .35% to the Swiss Franc to 1.5112.

CAD

The Canadian Dollar went back and forth Tuesday after the Bank of Canada lowered interest rates to an all time low of .25%. This was met with a rush of selling until the Bank President announced that on Thursday the BOC will announce their stimulus plan which is said to include the purchase of corporate securities and government debt with newly created money. This unorthodox and aggressive approach by a generally conservative and tempered Central Bank was greeted with enthusiasm in the Forex market and helped the Canadian Dollar rebound.

The monetary policies that Canada is thought to be proposing is a sign of the times. Historically, a Central Bank buying its own governments debt is a risky proposal as it can lead to inflation, hyperinflation or worse, stagflation. However after the US and England have tempted fate on historical levels (the US has committed close to 20% of GDP to this method), many other countries are following suit. In cutting interest rates Tuesday, Sweden's Riksbank also announced that they too are prepared to resort to "other measures" should their economy continue to decline.

At 10:45PM GMT, the CAD was trading up .3% to the Euro to 1.5998, up .4% tot he US Dollar to 1.2362, up .2% to the Australian Dollar to .8786 and down .5% to the Sterling to 1.8131.

Gaining a Perspective Part 2- Chart: EUR/JPY 1-Year

As we saw with the EUR/JPY chart yesterday, the bottom has seemed to fall out of the Euro. With all of Japan's problems, from disastrous export numbers to severe unemployment to it's fall from grace as a safe-haven currency, it still has managed a near 50 YEN gain against the Euro. A comparison of the EUR/JPY from yesterday will even show similar patterns - eerily similar so again I ask the question, is the Euro's fall a result of bad policy on the part of the ECB? Tomorrow we will try and answer this nagging question.

Online Forex Update: US Dollar Trading Flat Today

2009-07-05T01:32:00.001-07:00

Existing home sales figures showed a 3% fall in March to a less than expected annual rate of 4,570,000 units. Pundits who had thought that the housing market has hit a bottom woke to a realization that the situation is growing deeper. The dollar which had been up most of the day retreated after the report was released. As the market looks forward, forex online investors are waiting for the results of the US government stress tests for banks, a release that could shed great light on the actual state of the US economic environment.

At 11:45 GMT, the Dollar was trading flat to the yen at 98.0, down .04% to the British Pound to 147.06, up .07% tothe Canadian Dollar to 1.2235, up .14% to the Australian Dollar to .7135 and up .11% to the Kiwi to .5609

The Final War is Near

2009-07-05T01:29:00.000-07:00

China opened up the week with a bang that is sure to send the Forex markets in every unfavorable direction. On Sunday, Li Yong, the Vice Finance Minister said “We should attach great importance to reform of the international monetary system…a flawed international monetary system is the root cause of the crisis and a major defect in the current international economic governance structure.” Basically, Mr. Li was openly calling for the removal of the dollar as the primary reserve currency, a call that had been alluded to several times in the past but not directly said. As Dylan once put it, “oh, the times they are changing.”

This was bound to happen. China and Russia have been on a mission – until now a subliminal mission – to overthrow the dollar as the main reserve currency. While they will not admit it, the reason is clear, and I touched upon this last week. Fact: The US Dollar is the most widely held currency by foreign government banks. Fact: The US Dollar is used to set prices for most commodities including oil, gold, silver, wheat and even other currencies. Fact: The US of A has committed them to spending 12 Trillion Dollars even though there is only 820 Billion US Dollars in circulation as of 2007. This means that the debt role the US is planning on will take it close to 90% of the US GDP. And one final fact: a country who has much of its resources invested in one thing, is forced to continue supporting that investment or risk having that investment devalued beyond acceptable levels.

Did you get that? China and Russia and all the countries that hold tons of US money, in hard cash form or debt form, have been increasing their investments through the purchase of debt so as not to allow the Dollar to fall, because, if the dollar bottoms out, the world as a whole will lose Trillions of dollars. The situation will spiral into the worst global economic situation EVER seen. Heard about the Depression? Think ten times that and then square the number – this is the result of a worthless dollar. Remember how the world came out of the depression? They called World War I the “war to end all war’s” - they called World War II “The great war” – they will call this one “The final war.”

This is real, I am not an alarmist – but I am certainly alarmed and so should everyone be, because there is power to destroy out there that can wipe out cities with one blow – and there are thousands of them. All it takes is enough desperation and despair. History is there for us to learn from it and we have not. There is a solution and it is to remove the Dollar as the reserve, but do so in an organized and equitable manner – that requires compliance – can our leaders be man enough to provide it? Let us hope.

The Swine Flu Virus Spread, The Mexican Peso at the Heart of this Epidemic

2009-07-05T01:28:00.000-07:00

Finally, something to take our minds off of the economic crisis and all that goes with it, a health crisis - or pandemic as they are calling it. Yesterday, the World Health Organization upgraded the threat to a 4 on a scale of 1-6, 6 being global - out of control - rampant infection. But the crisis is affecting more than just border crossings - it is contributing to the downfall of some of the worlds most fragile economies, the emerging markets. As news of the Swine Flu virus spread, the Mexican Peso, the currency at the heart of this epidemic, fell over 5% to the US Dollar and similarly to many other majors. This is just another blow that the Mexican economy has endured and it threatens to collapse the country's economic system. Although it is a small market, online Forex traders should be keeping an eye out for this, as what happens south of the US will no doubt affect the US. Meanwhile, traders in the Euro were given another treat of two Central Bank members holding arguments with each other through the media. The disagreement came when Nout Wellink said the rate cut should go further than 25 basis points and Alex Weber said it should not - very exciting news. But, as online Forex pros, you should know that it was all a staged event to distract from the real concerns, whether or not the stimulus that the ECB will unveil next week will be enough to please the street and help the economy. With the Taliban about to take control over the nukes in Pakistan, the Flu set to overload the healthcare systems of the world and China calling for a new reserve - the EU should lighten up and not be so tightfisted with the money they spend. You only live once they say.

Yen hits the floor, Online Forex Investors and Daily FX Traders Fears

2009-07-05T01:27:00.000-07:00

Rumor has it that US Regulators have told the two largest US Banks, Citgroup and Bank of America, that the results of their "stress test" show that will require further capitalization. What this means in simple terms is that the banks are not ok - they have so much debt, bad debt at that, and they are in need of more money to help them stay afloat.

We all knew that Citigroup was a zombie bank, a bank that is dead, bankrupt, kaput, but is being sustained by the generosity of the US taxpayer (with the help of the Chinese treasury Bill holders, of course). But after the results of Treasury Secretary Tim Geithner's test on bank stability - aka The Stress Test - we are witnessing the fact that the US has no intention of following through on their plan to fix the banking sector. It was said that the results will determine the fate of the banks - if they show that they are in fact needy of further capitalization, the US would either systematically disassemble the banks in an orderly manner, or let them fail outright.

The problem is, when the plan was announced, if you remember, it was amidst much criticism that the US did not really have a plan - that they were being too soft on banks with severe problems for fear that their bankruptcy would cause a panic. So Geithner came out with the stress test idea and said that banks that do not pass, will be reorganized (A nice way of saying taken over). But now the outcome has changed - and it seems that the US banks that are at the heart of this whole credit mess will be getting more money to run their failing operations. It looks like the whole plan was to get these results out AFTER President Obama's first 100 days, the yardstick that sets the tone for the presidency.

Is it not ironic that these results were planned for Obama's 101st day?

Wednesday looks like it is shaping up to be a tough one for the US Dollar as risk appetite returns for a bit. I call it profit taking - it will be short lived.

The Next Big Thing in the Forex Online Market

2009-07-05T01:26:00.002-07:00

The British government was rocked last week, first from the scandal involving the insane spending done by their parliament members and then by the warning from Standard and Poor’s that their credit rating – or should we say debt rating – is in peril of being lowered due to huge budget deficits and a rising national debt not seen since World War 2. Did the Sterling fall though? No, it did not – at least not as much as one would think that a “AAA” rated country would fall after hearing that they will soon be subject to higher interest rates and unfavorable terms that comes with anything less than a “AAA” rating. What did happen was quite fascinating, and it was something that I have been saying here for months. The US Dollar collapsed on the news out of England.

Why? You might ask would the currency of a country across an ocean fall on bad news out of the British Isle’s. The answer is quite simple, Forex traders and investors know that the US is next on the chopping block. Although I firmly believe that they should be first based on their crazy debt to income ratio – they are running at a 12 Trillion Dollar deficit carrying a 1.5 Trillion dollar debt and GDP is expected to fall this year – the Dollar enjoys the privilege of being the Dollar, and thus it gets afforded a little more latitude when it comes to these matters.

But the real reason why the US was not first on this list was political and economic in nature. Lower the sovereign debt of the US and countries holding the bonds suffer. As the US will be faced with higher borrowing rates, and will not be afforded the right to offer so much debt and will be regulated as to the terms (10 year, 20 year 30 year), the value of the currency will fall and thus make the value of the debt already out there worth less. This will have a huge impact on the world economy and is probably one of the reasons why China is pondering accepting the Brazilian Real in trade over the US Dollar.

But one last thing on this, it is ironic though that while this might hurt the rest of the world, it will help the US get out of the mess quicker. By deflating the currency it means that the US has to pay less in order to repay a debt. For example, if China is holding $10 in bonds from 1999 those bonds are still worth $10 today – plus interest, however the value of the dollar is lower than it was in 1999 and so the payments that the US makes will be worth less than they were only a few months ago. Forex online blogsters are buzzing about this – and all those trading in the dollar should be aware that this is coming. Don’t say you were not warned.

Light Trading and Poor Data from Germany Highlights Monday

2009-07-05T01:26:00.001-07:00

EUR

On a relatively low volume day, the Euro rose slightly versus the dollar on Monday despite a data release showing German corporate sentiment fell short of market expectations. Traders took the data as a sign that any recovery in the Euro zone's biggest economy would take more time. The German IFO Business Climate Index rose to 84.2, up from 83.7 last month but below the 85 that analysts had predicted. Overall though, the Euro had a decent day.

At 10:15PM GMT, the Euro was up .14% to the USD to 1.4015, up .25% to the British Pound to .8804, up .42% tot he Canadian Dollar to 1.5736, up .17% tot he Australian Dollar to 1.7913 and down .1% to the Swiss Franc to 1.5177.

JPY

The yen returned to the selling pressure that had plagued it for several weeks after news reports confirmed that North Korea had conducted a nuclear test and test-fired three short-range missiles. The occurrence is seen as a negative factor for the currency given the island nation's geographical proximity to Pyongyang, North Korea. Analysts have said though that the downtrend has been exaggerated and that many traders used the North Korean tests as an excuse to unload long positions in the Yen.

At 10:25PM GMT, the Yen was down .3% to the USD to 94.73, down .4% to the Euro to 132.8, down .15% to the British Pound to 150.78, down .21% to the Swiss Franc to 87.5 and down .1% to the Australian Dollar to 74.11.

GBP

British were closed on Monday though the pound did manage to recover slightly after intense selling last week due to Standard & Poor's lowering the outlook for Britain's triple-A credit rating to "negative" from a "stable" rating.

In very light trading the Pound fell .1% to the USD to 1.591, fell .3% to the Swiss Franc to 1.7229 and rose .2% to the Canadian Dollar to 1.7871.

The trading on the Forex was very light Monday, roughly 1/3rd of an average day's trades were conducted. This was due to national holidays in both England and the United States. US and British Banks return to the Forex on today and we should see a return of normal volume.

My Forex Online Views: Perspective is Everything

2009-07-05T01:25:00.000-07:00

So – We saw yesterday that things are not as rosy in Euro land as people thought, I even wrote about it too, but it gets a bit worse. As it happens the German Economy shrank by again the first quarter of 2009 by 3.8% (6.7% for the year) which is the largest decline since the two Germany’s, East and West, were unified in 1990. What this says is that things are still getting worse. To top off that bad news, a German Finance official made a comment about the stability of German banks. He was quoted as saying “the toxic assets will blow up like a grenade” although later he denied saying that --- one listen to the audio that was played on the radio (BBC, of course) confirms that he did not say that. What he did say was “…the bad assets that the banks have on hand are liable to explode like a grenade if it is not addressed in a more aggressive manner.” Sounds the same to me.

In the US, the stock market rallied after consumer confidence numbers rose reflecting that American consumers are optimistic about the future of their shopping. Who wouldn’t be? Have you seen the sales that are going on in the few stores left in America’s big, huge iconic malls? Traders get so excited over the smallest of things. They pumped up the stocks because of consumer confidence but neglected the more alarming data of housing and unemployment. Yesterday also saw the release of housing data which suggests that the price drop in America’s real estate market has not neared a bottom yet – and the forecast from the real estate community is that it won’t any time soon.

Fact is, with the Federal money given out during the stimulus phase, or as I like to call it, hand-out at the expense of taxpayer phase, builders are incentivized to just build. The numbers released yesterday showed that there is a big discrepancy between demand and available units being built. The market is being supplied with 600,000 plus new units – but the demand barely covers 300,000 of them. This alone does not take into consideration what is already on the market, or what is being foreclosed on. This was a housing start data and it showed that the stimulus is only stimulating the builders while the overflow would serve to further lower prices in the communities they are being built in.

Take San Diego County for example; in Oceanside, one of the wealthier, more exclusive areas, there is a house that was built three years ago – beautiful house – 4000 square feet inside – a mini-mansion by many standards which was sold for 1.75 Million Dollars in 2006. The bank took possession of the house and it is now on the market for 600,000 Dollars – almost 1/3rd of the original price.

So, when a consumer sees those prices they get excited and feel optimistic – “I can own that once unreachable house for so much less” – and they tell the pollster who calls them about how they feel and they say, “I feel great, I feel like things are picking up” – but talk to the banks about their toxic assets like the 1.7 million dollar house they are still trying to unload for 600,000 and the picture is completely different.

Those of you reading my Forex Online blogs know better – and if the rest of the trading community could see it – well, perhaps you won’t see these wild swings over nothing.

China Worried about US Debt - The making of a Powerhouse

2009-07-05T01:23:00.000-07:00

Richard Fisher, head of the Federal Reserve Bank in Dallas, Texas – one of the US’s largest states – told a British Newspaper yesterday that the Chinese are incredibly concerned over the US governments handling of the financial crisis, specifically, the printing of money by way of the Federal Reserve buying US government bonds, treasury bills and notes. For those of you that don’t know this, when a government wants to increase its cash position, it “lends: itself money by buying up its own debt. I know most of wish we could do that, but if this were the case we would be bankrupt with houses stripped and cars repossessed and the rights to our firstborn taken as well.

This is yet another example of China showing they are worried. Did they come out and tell Ben Bernanke or Tim Geithner, the US Fed Chairman and Treasury Secretary? No. Did they send a letter to Vice President Biden or talk with Secretary of State Clinton? No, and Clinton was just there. Did they address the congressional delegation who came to visit them this week – a delegation that included the speaker of the US House of representatives Nancy Pelosi, AKA the third most powerful person in the US? No. What they did do was take a round about way to let people know they are unhappy with the status of their investment and the way in which the CEO is handling the company. By Company I mean, The US and by CEO I mean Obama.

The Chinese are in a difficult spot, and I have written along these lines before in my Online Forex Blog, you see if they cause a widespread panic in the markets by making such a fuss over this, the value of their investments go down even further. Widespread panic regarding a rating decrease last week showed what it could do, the Dollar fell hard. What would happen if the Chinese leadership addressed the US leadership on this issue directly – it would take away the air of hearsay that exists now through these drips and drabs of media reports.

The Chinese are able to get their message out this way, but not in a way that would cause so much of a stir. Who reads these little interviews aside fro ma few of us boring people with nothing more to do? Wen Jiao Bing calling Obama on the phone to say “yo, what ARE you doing?” will get front page attention on every major newspaper. This way the Chinese get to have their cake without it collapsing on them. The US gets the message. And, I am sure, the US does not care.

Culturally the US and Chinese mindset are worlds apart. The Chinese are savers and conservative by nature fiscally (they also are superstitious), the Americans are care free, “it’ll all work out” type of thinkers – there is no long term.. Hell, the Chinese emperors buried thousands of ceramic soldiers and preserved aspects of their legacy. In May of 2009 they are thinking of 2030, whereas the Americans in May of 2009 are thinking of June.

In the end the Chinese will emerge stronger – this is certain. It happened the same way for the US in 1914 when it was purchasing all the gold it could. China is now doing the same. And where the US became a global leader in the 40’s because of it, China will dominate later on in this Century. Hold on to your Yuan’s, they might be worth something some day.

Uncle Sam can Sing Chicken Little's song now – The Sky has Begun to Fall

2009-07-04T17:03:00.003-07:00

US Retail Sales Fall Unexpectedly, along with UK's Hope for Speedy Recovery

2009-07-04T17:03:00.001-07:00

USD The Dollar rallied late Wednesday after US retail sales showed a .4% decline against what was widely anticipated to be a flat outcome. The Dollar had been down most of the session after a report in the Financial Times said that the US could lose its AAA credit rating. However, renewed fears about the state of the economy were sparked by the sales data, pushing safe-haven flows back into the dollar and lifting the USD out of a four month low against a basket of currencies and a seven week slide against the Euro. At 11:00PM GMT, the Dollar was up .4% to the Euro to 1.3592, down 1.2% to the Japanese Yen to 95.25, up .8% to 1.5152 versus the Sterling, up 1.16% against the Canadian Dollar to 1.1762 and up 1.75% to the Australian Dollar to .7515. GBP The Bank of England announced that they expect a slower recovery than originally predicted. The BOE revealed that inflation remains below the target level and that suggests that the loose monetary policy of the BOE will remain in effect for now. The figures showed a 4.5% decrease in economic activity for the second quarter and predict an early 2010 recovery. UK interest rates remain at a record low .5% and the British government recently expanded their asset purchasing program to 125 Billion Pounds, however Mervyn King, the BOE Governor said that the recovery will be slow and uncertain, highlighting this by declaring "We may get a recovery that will prove to be sustained and then again we might not." At 11:20PM GMT, the Pound Sterling was down .4% to the Euro to .897, down .7% to the Swiss Franc to 1.6769, down 2.1% to the Japanese Yen to 144.33, up .2% to the Canadian Dollar to 1.78 and up .9% to the Australian Dollar to 2.0145.

Pound makes a Rebound after Good Economic News

2009-07-04T17:01:00.000-07:00

The news from England was great yesterday and yet I still don’t feel secure that we are through this right now, perhaps which is because anything good out of England is great considering the slide they have taken in recent months. The producer prices are better, but their overall production is down which alone would cause a decrease in prices – think about it, if there are less manufacturers bidding for the same supplies, it means there is less of a demand – less demand equals lower prices. So why is everyone celebrating?

Anyway, the Pound rallied on this news yesterday and the British papers have talks about how things are getting better – well are they? The parliament is at near Mutiny stage over crazy things that MP’s charged to the public in the name of “service to the commonwealth” – the banks are teetering on insolvency and would be without the help of the government, or should I say more public money. The manufacturing sector is down and consumer prices are up – so what is the fanfare about?

Ahh, a distraction. Forex online blogs have taken a vacation from the Euro and USD and shifted focus as of late to the Sterling, primarily because there is nothing else going on. IN a hunt to find something good – writers have manufactured another insignificant piece of information into a big deal – perhaps there is an increase in manufacturing and production going on, just maybe not what we really think it is.

So with that, the Pound was up across the board – the Aussie had a good day as well, the Swiss National Bank said that they are still ready to move aggressively against any downturn in the economy and will do so if it is warranted. Absent in Tuesdays trading was the Euro and the USD which went to sleep after weeks of volatile and intense trading. We hope to see them return soon – before the Forex Traders fall asleep.

My Forex Online Views: You Don't Paint Over a Broken Wall

2009-07-04T17:00:00.001-07:00

Monday saw France and Italy come out with industrial production figures that showed a faster and steeper decline than was expected. This data contradicts the banter that the European Central Bank members have been spewing in the news lately that the Eurozone is recovering. If it had been a slight decrease or a slower pace it would not be so alarming for the believers in a quick economic recovery, however the numbers were a shock as it showed that there is a long way to go and that a bottom has not yet been reached in 2 major economies within Europe. Add the fact that 5 banks in Germany are in major trouble and that Eastern Europe is on the brink of financial collapse and you get a picture that is much darker than those charged with managing the Eurozone economy have been painting. Forex Online traders should keep an eye out for this and make their own decisions after reviewing all the facts themselves. IN recent trading, the Euro has been doing well – almost like a safe-haven currency – yet it is my view that the Euro is far from that status and in fact, they are still in big trouble. Also, one of the largest global banks, HSBC, announced that their earnings for the first quarter were better that for the same period last year. Great news, huh? Not really, they released their data with a comment that basically said that if they had to report everything they reported to achieve those 2008 numbers, they would have ended up with a loss. But, because of changes in the way they report, chiefly the permission to exclude certain investments which are part of the so called “toxic assets” that have plagued banks for so long, they ended up with a good number. So essentially what the bank released yesterday was a watered down version of their earnings showing their good assets and excluding their liabilities. It is all in the numbers, and Forex online traders should pay attention to the banks whose ultimate fate will determine the fate of the overall economy. Government intervention into private business has had a negative impact on our perceptions – it has left us with a false sense of security and given us a skewed picture of how things really are. Government regulators telling banks to keep certain investments off the books is not productive – and in the end, these investments that are left off the balance sheets for now will come back to bite everyone in the long run should they ultimately fail. This is a follow-up entry to yesterdays when I ranted about the way the US reported their unemployment numbers and this reaffirms the fact that we are not getting correct information and we are being smoke screened by technicalities that mask the real story. I know I would prefer to hear the truth – if I have a water leak that is damaging my walls I don’t want a fresh coat of paint over the walls just to make it look pretty again, because the source of the problem will eventually come through again and in fact, might create more damage because I have not addressed it. This is the same thing as my leaky wall and the governments of the world’s major economic powers just keep putting paint on it. One day it will burst and no amount of paint will be able to mask the damage.

Lets Analyze the Stress Test Results

2009-07-04T16:59:00.000-07:00

So we finally got the stress test results, we finally heard the European Central Bank President unveil his stimulus plan and we finally saw the ECB lower their rates to 1. We have been waiting for all these for such a long time it is as if there was nothing else going on. But there was, in the mix of all this we saw on Friday the US release their unemployment figures for April, and not to be shown up – they were less than the 590,000 that analysts thought – which was less than the 600,000 I thought and put down on these pages two weeks ago. But there is a sleight of hand going on here and few people have picked up on it – and in fact, it is in front of all of us in the release of that data. You can find it on the US Department of Labor’s website and boy is it telling. When scrutinizing the numbers, I was so happy that I was wrong – that the analysts were wrong, “we are finally coming out of it.” But looking deeper I saw something that struck me. The US government added 66,000 jobs in April. These jobs are not construction, not manufacturing, not industrial, not even office work – they are temporary Census workers – you know the people who come to your house once every ten years at 9:00pm and ask you a whole bunch of personal questions so the government can know how many people live where and what they do and how many kids they have. In the report it clearly showed that 611,000 jobs were lost in the private sector – but thanks to the minimum wage earning, college student Census workers, the US lost less jobs overall than was expected. I think not. I cannot stress enough how looking into the real story is the most vital thing we can do to gather information. Don’t believe what you read until you have read it all – and by that I mean numbers can be manipulated to make us think whatever those presenting the numbers want us to think – and in the case of US jobs, they are falling faster than expected . The US unemployment rate is 8.9%, 9.3% if you discount the pimple faced adolescents who gave up flipping McBurgers, pouring McSoda’s and slating McFries to harass the US citizenry in the middle of the night and are now counted as part of America’s workforce for doing so. God bless the American accountants and number crunchers who have second degrees in marketing. Their efforts helped the market rally to year highs – what will you give us for an encore?

The Waiting is Over – We Hope

2009-07-04T16:58:00.002-07:00

The European Union cannot catch a break. You would think that the weekPublish Post long news of this looming rate cut and speculation on stimulus by the European Central Bank would have been traded out already, and perhaps it has. But with Germany coming in with a 2% constriction in economic activity coupled with a Standard & Poor’s rating cut for five of its banks the Euro just has nothing to look forward to right now. Add into this mix the speculation that England might need to start printing more money and it does not look good on the European side – no matter what the stock markets or flip-flopping analysts say. Look for the Japanese Central Bank to try and boost interest in the ailing currency, only safe haven flows have sustained the Yen as of late. The only thing that can keep the island nation afloat is their exports and right now there are none. So today we find out which US banks are in trouble and we find out what great pplans the ECB has for their economy. My bet is that it will pass with disappointment and we will wonder what we were talking about for the past two weeks. The US Banks are in trouble, this is established – and word has it that 9 or 20 large banks need capitalization, the news is out and nothing has happened. The ECB will lower rated to 1% and announce a passive plan today which they will tout as aggressive. It will make us wonder why they had all the infighting in the newspapers the past few weeks – it will make us wonder what is truly going on in their minds. IT will make us think that all is well – however when you look at the numbers you can see that all is not. For me, the important date is tomorrow – when more unemployment data in the US is released. This will be telling – and no matter how bad, I guarantee, there will be some rays of hope that some politician or economist sees. 1 out every ten people without a job is not good – watch them make us believe that it is.

Cheers Turn to Jeers as D-day Nears

2009-07-04T16:58:00.001-07:00

EUR

The Euro gained early in Tuesdays session only to give it back later on as the US markets opened and investors began taking profits and returned to the safe haven Dollar in advance of Thursday’s US stress test release and the European Central Bank’s decision on interest rates and stimulus. The past few sessions saw the Euro benefit from the positive sentiment on the street as traders took advantage of good economic news to come out from hiding behind the stalwart Dollar and Yen. However, as Thursday’s ECB meeting comes close, investors who traded the Euro in recent days are cashing in and taking cover once more. We,forex online traders can expect to see strength in the Euro should there be signs that the ECB will not adopt and aggressive policy – a topic that has been widely debated in recent weeks and seemingly dominated the market news.

At 11:00PM GMT, the Euro was trading down .4% to the Yen to 131.88, down 1.1% to the Sterling to .8831, down .4% to the Canadian Dollar to 1.567, down 1.2% to the Australian Dollar to 1.7926 and flat to the Swiss Franc after an up and down session to 1.5102.

USD

Federal Reserve Chairman Ben Bernanke said that it was his assessment that the economy is “turning the corner” and that the US could see growth in the second half of this year. This testimony in front of the US Congress contradicted his last month’s report when he declared that it could take until mid-2010 before any growth is seen. What should have been good news was muted by jitters over the release of the stress test this coming Thursday and an announcement by President Obama that he intends to raise business taxes by 5% in the short term to help cover the ever growing national debt. It is thought that 10 of the 19 banks that submitted to the US Treasury’s stress test will have to raise additional revenue in order to remain solvent, however to what degree these companies are struggling was the source of much debate on Tuesday.

At 11:20PM GMT, at broker trading boards, the US Dollar was down .7% to the Euro to 1.3315, up .22% to the Yen to 98.68, down .45% to the British Pound, down .2% to the Canadian Dollar to 1.1746, up .6% to the Swiss Franc to 1.1325, and down .8% to the New Zealand Dollar to .581.

AUD

The Reserve Bank of Australia held interest rates today at 3% after the members said that signs that the recession has grown in Australia are not present and in fact, there are positives that can be interpreted as strength. The Australian Dollar has benefitted lately as investors tested their risk appetite and moved to the higher yielding Aussie Dollar in order to lock in some larger profits.

At 11:40PM GMT, in addition to being up to the Euro, the Australian Dollar rose .45% to the US Dollar to .7421, up .65% to the Yen to 73.52, down .06% to the Pound to 2.034 and down .3% to the New Zealand Dollar to 1.2791.

The Bulls are Back for Now, Dollar Pays the Price

2009-07-04T16:56:00.000-07:00

USD: Risk Appetite Returned with a Loud Bang

As investors bought up European and American stocks the US Dollar suffered on Monday as risk appetite returned with a loud bang. Part of the reason for the lack of demand for the safe haven Dollar was a report out of China that showed a 9 month high in manufacturing activity and a 3.2% rise in US home sales. The theme of Monday seemed to be a fundamental shift in investor attitude as fears of a deepening recession retreated and the bulls came back – if only for a short while. Thursday the US government will release the results of the bank stress tests and already there is speculation that the results will not be received well. Wells Fargo and Citigroup, it is rumored, will require additional funding and Bank of America is denying that they will. In all, of the 18 banks surveyed, it is thought that nearly half of the banks will require more capitalization. Forex online experts says if this turns out to be accurate, it is a sign that things might not be as rosy as investors feel they are today. At 9:00PM GMT, the Dollar was down .93% to the Euro to 1.3392, down .3% to the Japanese Yen to 99 even, down .42% to the British Pound to 1.4982 down .75% to the Canadian Dollar to 1.1763, down 1.14% to the Australian Dollar to .7387, down .84% to the New Zealand Dollar to .5741 and down .75% to the Swiss Franc to 1.1271. EUR: Investors Cautious on the Euro Ahead of the ECB’s Policy Meeting The Euro fell early on Monday as Axel Weber; a European Central Bank member said that Germany will not start to see economic growth until the second half of 2010. However after the news out of China and the US, the Euro recouped some of its losses. Investors still seem to be cautious on the Euro ahead of the ECB’s policy meeting. The ECB is expected to lower their core interest rate by 25 basis points to 1% and announce a quantative easing plan that includes the purchase of securities to stimulate growth and lending in the 16 country Euro zone. Until now, ECB members have been holding a public debate about how far to go with the stimulus plan and investors will find out who won. At 9:30PM GMT in the broker trading boards, the Euro was up .83% to the Japanese Yen to 132.61, up .52% to the Pound to .8938, up .22% to the Canadian Dollar to 1.5762, up .16% to the Swiss Franc to 1.5096 and down .24% to the Australian Dollar to 1.8125.

China has already Canceled America's Credit Card

2009-07-04T16:55:00.001-07:00

The Chinese are making moves to dismantle the Dollars standing, in an article in the Wall Street Journal this weekend, it was revealed that “China has already canceled America's credit card” as a US senator put it.

As China is the leader in US debt holdings, 800 Billion Dollars worth of bonds and another 2 Trillion in Treasury Notes and Bills, it seems as if China’s concern over rampant US spending has taken its toll on the way China conducts business. Last month I told you in Forex Onlineland that China was beginning to amass large reserves of Copper and Aluminum. With a building sector down to near zero production right now, I am sure they are not stockpiling these metals for the future. They are converting their cold hard American debt to tangible assets.

The problem has gotten so bad that the US Federal Reserve has been compensating for the lack of interest in Treasury Bonds, Bills and Notes, by buying it themselves. It’s not even paying your MasterCard with your Visa, its paying one MasterCard with another MasterCard and it is going to get the US in trouble.

Anyway, for the week ahead my Forex trading friends, look for the European Central Bank meeting – nothing exciting will come of it as nothing ever does, but it has been hyped for some time. Also, look for Thursday when the US Treasury releases the results of the over talked about stress tests on banks . Tomorrow I will talk about why the US messed up by having them in the first place. Also, watch the markets flip flop as President Obama announces his new plan for Wall Street – I guarantee you they won’t like it.

Trade well people.

Melting General Motors - Ask a Stupid Question….

2009-07-04T16:45:00.001-07:00

So General Motors is going bankrupt after the US took a 70% stake in the company, China is concerned about the amount of money that the US is spending on its debt, North Korea is distracting the global financial community with its nuclear ambitions and the Eurozone economy is slowly creeping downward after all is said and done. What now? Well, a report in yesterdays Wall Street Journal reported that the US Treasury and Federal Reserve is puzzled over the spike in rates on the open market of their debt instruments.

I ask very cautiously, what is so hard to understand? The dilemma that they have is figuring out if the spike means there is less of a need for the quantitative easing that the US has made a policy of due to increased demand (with demand comes higher rates) or whether the market is spooked by the mounting debt the US is incurring during this downturn. I have a simple answer, and I am by no means an accredited economist. The latter is the correct answer and it is obvious.

The fact that in the last round of 10 year T-note auctions the US bought 30% of them, or should I say the Federal Reserve “invested” non-existent money in debt issued by the US Treasury should be a clear sign of what is going on. Aside from the fact that by bidding on their own debt they increase demand, falsely at that, the idea that an entity issues debt and then buys it themselves is alarming.

What else is new? President Obama had an interview with C-Span, the publicly owned network which covers the US congress and senate 24/7 and was asked if he was concerned that we will run out of money with all of these stimulus measures costing so much. His answer did more to spook the markets than anything else, and went largely unreported by the mainstream (liberal) media.

Obama said “we are already out of money.” A president admitting that can do much for causing an exodus by investors. Perhaps the Fed and Treasury need to look above, to the man in the big white house, and then re-ask themselves the question instead of acting so perplexed at the cause of rising interest rates.

Do you think the 70’s were bad when it came to inflation? Just watch…..

Impact of General Motors News on Forex Market

2009-07-04T16:44:00.000-07:00

So GM did it, they went bankrupt and left the US taxpayers with a 60% stake in a car company. If you consider the money they put into it before – ergo 20 Billion Dollars, they actually own more than 70%, but no matter, the deed was done and the affect on the mood and currency of the US is set. The dollar fell hard yesterday to new long time lows against a bunch of currencies – and in my opinion the pressure will be on it for some time.

You see while the street revels in the stock market gains from the past three months, up over 30%, many attribute that success to the light at the end of the tunnel. There is no real recovery yet, just glimpses of hope that there will be one soon and as an established investor would know, that is all the market needs.

The markets tend to exaggerate their movements, when things might be bleak they panic and sell and when the situation appears to have an end – even though it is not close – they buy. But the Forex Online Market is different; Forex markets cannot hide behind estimates and soft numbers, the market deals with reality mixed in with a little bit of fear. The truth about the US is that they are spending money like crazy, money their president admitted they don’t have, money that the entire world does not own – and as a result the interest rates on their debt instruments are raising. Inflation will hit the US – and most probably England for the same reason. How bad it gets depends upon how both governments handle crises like the GM bankruptcy in the future.

I am a capitalist. Company’s come and company’s go. If the US let them go before they interfered and committed so much money into it, the vacuum that is created will be filled by someone else. The land of opportunity is now stifling that, and it is the change from that value which might come back to bite them in the long run.

My Views on Daily FX Update: Watch China, and Watch the Dollar – From here on, They go Hand in Hand

2009-07-04T16:43:00.002-07:00

Tuesday saw a major help to British bank Barclay’s, during the heart of the credit crunch bailout of their investment. Abu Dhabi, which purchased 11% of Barclay’s shares late last year, just unloaded it all for 2.5 Billion Dollars, a move that sent shivers down the spines of Sterling investors throughout the world who thought that the banking issues were resolved already.

To be fair, no one really knows why they sold the shares, but the fact that they did is huge, because it’s not clear whether or not the bank is stable enough yet – and as a result the Sterling fell, a move that made Forex onlinetraders scratch their heads.

It seems that hot news just keeps coming from the General Motor’s front – US Secretary of State, Timothy Geithner, was in China doing his best to convince the Chinese administration that the US is committed to stabilizing the dollar. While this was going on, China was working behind the scenes on the purchase of General Motor’s luxury SUV brand, the Hummer – a move that clearly made the Obama administration take pause and wonder what exactly it is they are doing.

The company that is in talks with the Bankrupt GM for Hummer is out of North-West China, and is labeled as a plastics company that has a desire to become a carmaker. If you ask me, this is a way for the Chinese to unload their dollars and buy a tangible asset – the problem is with Obama’s new café standards (carbon emission requirements) being so high for even the most conservative friendly vehicles, I am not so sure that cars as big as the Hummer will qualify. Which makes you think, as I am not a rocket scientist and I know this could be a problem - just what is China up to now?

Imagine the scene, the Chinese “help” out GM by buying a luxury brand and then employ Americans in the plants to make cars that can’t even be sold in the US – is that a public relations nightmare or what? Anyway, as Forex online traders (and offline) know, the Chinese will soon be the dominant economic power – just give it 10 years or so –these purchases are just strategic ways to literally “own” a piece of America. It’ll effect the stock market worldwide, Forex online trading etc.

History has shown us that this is the way it’s been done. It is how the US became what they are today, less than 100 years ago. Watch China, and watch the Dollar – from here on, they go hand in hand. As for the British banks, I told you weeks ago it was not over – thanks Abu Dhabi for supporting my case.

Finexo Market Review

2009-07-04T16:43:00.001-07:00

USD

The Dollar gained back some of the recent losses on Wednesday, as it retrieved more than 1% of the recent month long 8% slide against a basket of currencies. A broad selloff in equities revived the safe-haven appeal the US currency enjoys. A falloff in oil prices helped the dollar make sharp gains against the commodity currencies and contributed to the steep rise in the ICE index.

Also contributing to the rise in the Dollar on Wednesday was comments from several Asian governments, reaffirming their policies of investing in US debt instruments. China, Japan, India and South Korea said that even if Moody’s or Standard and Poor’s cut the US’s “AAA” rating, it would not prevent them from investing in the US for the long term.

And, more news for Forex Online traders: at 10:30 PM GMT, the ICE Dollar Index, which measures the Dollar against six other currencies, was up 1.02% to 78.94. The Dollar was up .3% to the Yen to 95.84, up 1.9% to the Pound to 1.6269, up 2.9% to the Canadian Dollar to 1.1109, and up 4.2% to the New Zealand Dollar to .6299.

AUD

The Australian economy grew in the first quarter charged by a 48 year high in international trade. The Aussie GDP rose by .04% from January to March, preventing a recession down under (which is widely accepted as being 2 straight quarters of negative growth).

The rise in trade offset a decline in housing and business, and reduced the need for intervention by the Reserve Bank of Australia, the Aussie Central Bank. The news spurred on the AUD early in the session, although a steep decline in commodity prices Wednesday reversed those gains. As of today, Australia is the only recession free country with a major currency in the Forex market in general and in the Forex Online market in particular.

At 10:50 PM GMT, the Australian Dollar was down 3.1% to the US Dollar to .796, down 1.66% to the Euro to 1.7706, down 2.56% to the Japanese Yen to 76.57 and off .2% to the Canadian Dollar to .8855. The Australian Dollar did rise 1.1% against the Kiwi and was holding at 1.2634.

Chart: GDP Comparison: Australia, US and Japan

The chart below clearly outlines the significance of Australia’s growth last quarter, which is showing a marked increase against the GDP of the 2 largest economies in the world. Commodity prices and China’s hunger for the core exports of Australia, iron, ore and copper, contributed greatly towards this anomaly in the global recession.

Latest Forex Online Updates

2009-07-04T16:42:00.001-07:00

In his after policy meeting comments, Jean-Claude Trichet commented that he appreciated the U.S. government's declaration that they are committed to a strong dollar, the comment helped keep the Dollars continued losses to a minimum. The Dollar had another rough day on Thursday as investors ponder both the size of the US’s growing deficit and the prospect that the recession is slowing – taking away the Greenback’s safe haven appeal.

The Bank of England left their benchmark interest rates unchanged at a 0.5 percent and stuck to its 125 billion Pound target for quantitative easing, as expected.

The Swedish Crown rebounded from 6 week lows against the euro, brought on by concerns that Latvia might devalue its currency in order to offset the cost of repaying their debt. The Swedish currency is very susceptible to economic issues in Eastern Europe due to heavy investments in the region. The reprieve came after rumours regarding additional support for the Baltic country from the International Monetary Fund were circulated.

Is the Obama’s America a Free and Fair America?

2009-07-04T16:41:00.001-07:00

The problem I have with what US President Barack Obama is doing with the “free market” US, is that he is making it impossible to actually be a free and fair market. By “investing” in 60% of GM and 70% of Chrysler, it allows for the government to incentivize the purchase of these vehicles over others.

Take for example the scenario in which a CEO wants to buy 100 new cars for a corporate fleet, and he is looking at Ford as his choice, the US government, in order to ensure that their investments succeed, can offer tax rebates and incentives on the GM and Chrysler lines that would not be available to Ford - the only US automaker that stands on its own.

I bring this up because over the weekend I read a story in the financial times about how protectionist ideologies are beginning to take hold in much of the world. The article focused specifically on Canada, and as Forex online traders know, the Canadian economy lives and dies by the price of commodities.

In response to a strong “Buy American” campaign south of the Canadian border, the Canadians are implementing their own buy Canadian campaign - from everything from Manitoban Wheat to Edmonton Oil. Canada, which has a small stake in GM and Chrysler, is being left out of the loop when it comes to the car sales. There is talk of plant closings and supplier chain closings associated with the bankruptcies of these two carmakers, and the first plants to close will seemingly be the ones in Canada – adding more Canadians to the unemployment rosters while sparing the US of these cuts.

Is this fair? No. And it goes back to my original thought – is the Obama’s America a free and fair America? The signs on the wall are clear, the answer is no. It’s one thing to meet and greet your counterparts from other countries and smile and say the right things like protectionist measures won’t work – yet, it’s completely another thing to put that ideology into practice during the worst economic downturn since the great depression.

Obama’s America is no different from that of the Smoot-Hawley America of the 1930’s - where some senators implemented measures designed to keep Americans working at the expense of their trading partners. This policy was the reason why the depression lasted so long. And if this is the case now, as I believe it is – we are in for a long and painful road ahead.

Forex online traders need not worry though, because unlike stocks – there is always one currency going up when another is falling.

US Debt is getting more Expensive for the Taxpayer while the US digs itself in deeper

2009-07-04T16:40:00.002-07:00

News came out yesterday that shows the US Treasury Bonds yields are going up at a record pace. Well, these yields are not fixed and are set on an open market based on demand - the more demand, the less the yield and vice versa.

For the US taxpayer, it means that the price of funding their enormous debt (11 Trillion Dollar) is becoming more expensive (a lot more…) and if the trend continues, it will inevitably have a stark impact on the value of the dollar.

Just think, for every 100 Dollars the US borrows, it now needs to pay back 104.35, for every 1,000, it needs to pay back 1043.50, for every million, it needs to repay 1,043,500, for every Billion, the cost is 1,004,350,000 and for every Trillion the number is 1,004,350,500,000. Translate that into the 11 Trillion Dollars that the US is in the hole for, and you’ll get an annual interest rate of 47,855,500,000 US Dollars. I’d say we have a bit of a problem here…

If you take that staggering number of almost 48 Billion Dollar payment, and divide it among the 350 million US taxpayers, it totals about $178 per person – to pay back the principle, it would cost almost $32,000 per person – more than average annual wage for an American. So the question on the minds of Forex online traders is “how is this going to work if the US does not devalue their currency to offset these costs?”

Keep in mind that this week the US is auctioning off another 65 Billion Dollars in debt. Considering that the cost is getting higher for them right now, this only adds to the problem. The issue is beginning to overtly affect the way in which the US’s leading lenders, namely China, view the US.

A leading banker in China was quoted recently as saying in a cynical manner that the US should start issuing their debt in Yuan, the Chinese currency, rather than dollars. While this was an obvious joke, my mother always taught me that within every joke lies some semblance of truth.

With the US now owning 60% of General Motors and after the Supreme Courts decision to delay the sale nearly 70% of Chrysler, one has to wonder who really owns it. If the US taxpayer is in hock to China for more than 2 Trillion Dollars (a liability of $5,714 per person) while owning 50 Billion Dollars worth of GM (an asset of $157 per person) – do the math.

The trading in the Dollar has picked up in the past two sessions, as Forex onlinetraders and Forex blogs predict a US recovery – but I ask you here, look at the numbers yourself and decide whether a recovery is indeed “just around the corner”.

And one last thought, if it were, the US GDP would need to swell to 48 Trillion Dollars for it to do so, and that would only pay off its obligations in 10 years. The US GDP currently stands at 12 Trillion - Just something to think about.

My Forex Online Views on Current Market Situation

2009-07-04T16:40:00.001-07:00

I have spent several days now talking about the largest economy in the world, the US, and criticizing the economic policy choices that have been made there. Yesterday, the Wall Street Journal came out with an article that essentially justified my position. The article, written by Bill McGurn - a most respected financial columnist - focused on the claim that the Obama administration has “saved or created” a certain amount of jobs as a result of the stimulus.

The focus is not necessarily on what that number is (Obama puts it at 150,000 so far, and wants to add an additional 600,000 to that category), what is important is the fact that there is no way to tell how many jobs were “saved” as a result of the stimulus – it’s an arbitrary number and the media has fallen for it, time and again.

Another smokescreen the administration has put up was the reporting of the job numbers. When Obama talks about “creating” jobs, he does not tell you that a person, who was unemployed from a job paying him $100 per hour for example, is now on the government roles as a “temporary” worker, making $9 to $15 per hour. So while the numbers of the unemployed are going up at a slower pace now, it’s not like the Obama policy has managed to turn water into wine…

OK, I am done with the US for now. Shift to Germany, and the banking problems that the IMF declared yesterday to be dire. What would happen if these banks became insolvent? Would the IMF move to save them? If so, what would Latvia do? As all you in Forex Online land may know, Latvia has been pondering devaluing their currency in order to offset their debt, while EU officials have been coaxing them into not doing so. The Eastern Bloc nations of Europe have been hit particularly hard by this recession, and the EU has not come to their rescue, neither has the IMF.

Germany, the largest economy in Europe, is having issues - banking issues - that resemble Bear Stearns and Citigroup scale problems, and all of a sudden, the IMF and EU wake up and are now talking about “helping” out – the world is fair, you know?

Two messages that this sends to the East is that, 1) you don’t matter as much as the wealthier nations in the West and 2) while we are all in a partnership here (economic one based on the Euro) we are all not equal, not at all.

Forex online traders need to watch this closely, because if Latvia does devalue, which I suspect they will, it will have a ripple effect on the Swiss Franc, the Krona and the Crown. Forex traders should keep an eye out for EU economic news, and watch the IMF as they watch the German banks. it could prove to be an early warning sign of pending downtrends.

Do you really think the US will dilute their power in the IMF, knowing that it could hurt them financially in the long run?

2009-07-04T16:39:00.001-07:00

Russia made a statement from its Central Bank that they will begin to diversify their reserves, totaling around 400 Billion US Dollar in value, by liquidating some of its US Dollar based assets in exchange for IMF issued bonds. Now, if this were to be taken seriously, rather than political banter meant to rock the financial world, Russia would have to explain a few things.Forex online traders,(while this did affect the trading a bit) need to look at the hard facts before jumping ship on the USD, and take the Russian declaration for what it is - just a hype, nothing more. First, the US is issuing over 2 Trillion Dollars of new debt in 2009, and they already have closed to 11 Trillion already issued. Of Russia’s 400 Billion in reserves, only 30% are in actual US Dollar securities - cash and bonds - so even if Russia were to diversify their dollar holdings, the 120 Billion US Dollars they are holding would not even crack the surface of the overall US debt market. Second, and this is the most important one, at last check, the IMF does not have the authority to issue bonds just yet. While they are talking about it, it has not been implemented yet, so if Russia were to swap their dollars for IMF backed securities, they first need the IMF to implement the program, which as anyone familiar with large bureaucracies knows this could take years upon years. Now, just today, the BRIC (Brazil, Russia, India and China) announced that they too would like to diversify and buy IMF bonds. But here is the real deal - the IMF is governed by countries with “voting rights” in the IMF, and this is the breakdown: Brazil has a 1.38% say, Russia has a 2.69% say, India has a 1.89% say and China has a 3.66% say. The US holds a 16.77% say in what goes on in the IMF – they have so much power there, that anytime the Chairmanship comes up, it is the US which has the pick to fill the vacancy. So with this, let me ask you in Forex Online land: do you really think the US will dilute their power in the IMF, knowing that it could hurt them financially in the long run? Considering that the US Treasury Secretary, Timothy Geithner, is a former IMF head, even with all the changes that Obama has been making, I doubt highly that you will see IMF debt issues anytime soon. Power begets power, and while the US is in financial straits, I doubt they will readily give up some of that power if it will end up hurting them even more down the road.

Note my Forex Online Comments

2009-07-04T16:38:00.000-07:00

In January of last year, specifically the 15th of the month, I wrote about the fate of the carmakers in the US. Specifically, I spoke about the urgent need to let them fail – to not prop them up and create a situation in which they are “owned” by the government.

The fact that no one listened to me is not important here, but what is, is that the policies of the government in Washington, highlighted by the announcement of a car Czar whose job it is to oversee the auto industry in the US, not to mention a pay Czar who is tasked with ensuring companies do not overpay executives, have planted the seeds for the demise of the capitalistic society that created enormous growth and wealth in the world.

There is something that has bothered me about the American people and the American economy as of late. With all the money being spent by the government, one has to ask where it’s all coming from. And aside from a few news mediums and some conservative commentators who would attack any decision and so can be labeled as partisan, no one is doing it.

The fact is that all this money that is being printed and all the oversight jobs being created to regulate industry is not good for the long term prospects of the currency.

Put an exclamation point on that: free markets should be free. It should not be the government which intervenes to save the world from corporate disasters. Helping citizens is one thing, providing food or housing needs is important – but handing over billions of dollars to companies in the name of helping citizenry is a legal form of robbery, and will have enormous impact on the value of the all mighty Dollar.

The nature of a free market is that it can live and die by its own hands – as it can by the success of a competitor or the failings of its own products – these companies, especially the Automakers, lived large and fast and I believe they should be allowed to crash.

Doing what we can to save them will only affect the long term prospects of the country’s standing. Online Forex traders know this to be true, as last week they killed the dollar – and all the data coming out that says that the US is on a recovery path means nothing, because it’s becoming more apparent that what is being shown is what they want us to see.

Online Forex blogs this weekend were littered with talk about the value of the Dollar. With yields going up, mortgages are expensive – with gas going up, energy is expensive – people need to save in order to pay their core bills.

Watch the retail numbers this week and you will see what I mean. And watch the Forex, EUR/USD and USD/JPY specifically – the decisions Obama is making will come to haunt them and I believe that this process started last week.

The “bitch fight” going on between the US and Russia

2009-07-04T16:37:00.001-07:00

Yesterday, the Russian Finance Minister reaffirmed Russia’s belief in the Dollar’s status as the world’s reserve currency – in what seemed to be quite a surprising quote.

This was at least what the American spin on this was, and when the major newspapers reported it they used this spin. The fact is, what Alexi Kudrin said was that “the Dollar will continue to be the primary reserve currency for some time”, and if you listen to the audio of how he said this at the G8 meeting, it was almost a conciliatory tone – as if to say “there is nothing we can do about this right now, as much we would like to, but……..” .

The fun part of all this is that after the American media spun this off as a positive for the Dollar – and the Dollar rose in kind, today, Russian President Dmitry Medvedev commented that the world needs new reserve currency options, signaling in plain English, yes English, what the media refused to focus on – Russia is looking to diversify their reserves and lose the Dollar.

The “bitch fight” going on between the US and Russia is spilling over into all areas, from political alliances involving the Korean and Iranian issues, over to finance – where an American makes a statement and a Russian debunks it. It is probably frustrating for Forex online traders, although I myself have been quite entertained by the whole situation. Carry on boys…

The key here is to not just believe everything you read, if you don’t hear it yourself, and listen to what you are hearing, you might just not get the whole story. It is nice to say that the Dollar will be around as the leader, Forex Online bloggsters know however, that it is not just what you say, but how you say it. Keep your ears posted.

A lesson for us all, not to say I told you so

2009-07-04T16:36:00.000-07:00

I’m beginning to believe that I have some psychic ability. In yesterdays post I spoke about the “spin” that the Americans and the press took on the Russian Finance Minister’s comments backing the dollar.

And, as if he read the posting himself, Russian President Dmitry Medvedev agreed with me and sent shockwaves through the Forex world.

Actually, what Mr. Medvedev said was that there was a strong need for another currency reserve that the world can turn to. Now, many saw this as a contradiction to what his Finance Minister said, but make no mistake, what Alexi Kudrin had said was that the Dollar will be the Reserve currency for some time to come. He did not say, “I believe in the Dollar”, he did not say “I love the Dollar”, he did not say that he wants the Dollar. What he said was practical as “right now there is no option other than the Dollar for countries looking to park their funds someplace”...

The arrogance of some who believe that they can manipulate the system, and manipulate exchange rates by twisting words to their advantage is becoming ridiculous. The Forex Online traders look for quick snippets of information before trading, and are usually hasty in assuming – and what happened on Monday was the Dollar shot up, without traders listening to what was said but rather reading a quick sentence “Russian FM backs Dollar as Primary Reserve” – this is the problem when you do before you think. Because the very next day, all those Forex Online traders got burnt after Medvedev clarified the Russian position.

The key to trading the Forex, and I have said this over and again, is to be informed. You cannot rush to judgment and jump to conclusions, you need to watch out and be thorough.

Warren Buffet, Rupert Murdoch and George Soros did not become rich from buying on rumors, they made (and still make) their fortunes based on knowledge, research – and well thought out strategies.

It is time for the Forex online community to do the same or, we risk turning our very liquid market into the volatile entity that the Stock market is – where everything hinges on nothing and things happen for no reason.

Livin' La Vida Loca Down Under

2009-07-03T06:13:00.000-07:00

I have spent so much time talking about the US and Europe lately, that I have almost neglected my favorite currency, the Aussie. So I will try to avoid ranking on Obama and Brown and Trichet, while I put a plug in for the down under dollar and go back to my love relationship with the potential this currency has.

The Australian employment report that came out overnight brought about another rise in Online Forex AUD Trading, almost across the board (The Yen had a strong day too). While the key change in employment payrolls was much better than most Forex Online traders expected at almost unchanged levels, the internal numbers could spell trouble.

The numbers showed full time employment falling sharply and part-time employment rising sharply, which is normal in a recession when most of the world’s industrialized nations are dealing with a 10% jobless rate. However, you do not want this to continue long term.

As well, the unemployment rate surged to 5.7%, still far below the global average – but nonetheless worrisome as the number keeps going up. This number matches the highest level seen in Aussieland since late 2003.

But here is why the currency is strong: The AUD continues to find strength as bonds have not managed to rally and equities stormed back into the close yesterday in the US after a steep intra-session sell-off.

The background theme for Aussie strength is the idea that the global recovery, led by China, is underway. I read an article in the Wall Street Journal just this morning about the levels at which the Chinese are buying commodities, which is bringing about serious questions of its sustainability.

If this trend slows in the near future, which I do not think it will (and I will explain this below), the Aussie could be in for a very sharp adjustment lower across the board. Chinese trade numbers are still off sharply for both imports and exports on a year over year basis.

Now, while the vaulted WSJ might believe this trend will burst eventually, sooner rather than later as they said, I am finding it difficult to swallow. Here is why: The Chinese have been consuming commodities at an alarming pace for their building, this is how they are stimulating their economy. But back in March I wrote about how the Chinese are also buying up commodities using US Dollar (Yes, I know I promised I but cannot resist mentioning the Greenbuck) while at the same time making public calls for a change in the global reserve standard.

Essentially, China is swapping Dollars for tangible items – and while the WSJ uses the import and export figures to assume that their consumption has to end – I am looking at their 2 Trillion Dollar reserves and saying, they are swapping paper for copper and oil and gold and iron because right now, there is not option other than the dollar – except real stuff.

So have no fear, the Aussie will be here – trust me on this.

Another lesson in Trading - Watch the Aussie this week

2009-07-03T06:12:00.000-07:00

In a demonstration of what the Forex markets have been about lately, instant gratification, the dollar rose against the most currencies in what was seen as profit taking from the traders’ venture into risk appetite late last week. Forex online Traders are hoping for some sign that all will be well this coming week when the US Federal reserve meets and this has hampered volume on Monday, as trading was extremely light, about 1/3rd less than what it normally is. It seems that when there is nothing to report, the Dollar has a good day and analysts make excuses such as profit taking using big words like risk aversion. Don’t be fooled, the Dollar went up today because stocks got hammered, and this is the clearest most consistent indicator in the Forex market. The Dow Jones Industrial Average fell over 200 points as the US business community is becoming more afraid of the changes that President Obama is seeking to bring. With the Congressional Budget Office (CBO) sobering up the healthcare debate with an estimate for over a trillion dollars that will be needed to overhaul it, the healthcare and medical and banking sectors got destroyed. And as I try to do regularly with these entries is show everyone how to trade – more specifically, what news to trade on. If you missed Monday, don’t worry, Wednesday will be much of the same – I have not decided on Tuesday yet as it seems likely that a bounce is coming, but gloal events such as Iran and North Korea might change that. Coming as a pleasant surprise to the Forex trading community was news from Germany that its business sentiment was higher. Being that the German banks are in dire straits and that the EU’s largest economy is in the worst shape it has been in since reunification in the early 90’s, I don’t want to see poll numbers – look at the real numbers and stay away from the Euro for a bit until they become clearer. The place to be still in my mind is the Aussie, the high yields and the rising price of oil will help sustain the currency as the economy down under goes through some rough times. The Canadian Dollar as well looks like a good buy as well to me, but I am not as enamored with it because of its proximity to the US. The auto maker issue is still weighing heavily on the economy and you will see an spike in unemployment – which might offset the jump in commodity prices. All in all, this will be a week of waiting – nothing really will happen until Wednesday’s fed meeting and so we wait. And while we do so, we try to make a quick buck – good luck.

A little perspective please - Internal Polls in the US showed that Obama’s Honeymoon is Over

2009-07-03T06:11:00.001-07:00

o with President Obama’s popularity waning, I thought I would take this opportunity to correlate the issues facing America right now and its affect on the all mighty Dollar.

As Forex online traders (and offline) we live and die, profit or lose, based on the Dollar, so this fine Tuesday morning in the latter part of June, 2009 is a great opportunity to reiterate that you cannot believe just words and that real knowledge truly is power in our business. Yesterday internal polls in the US showed that Obama’s honeymoon is over. His social policies are unpopular and receiving criticism even amongst his own political party. In his first six months as president of the largest economy in the world, he has virtually nationalized the banking sector, the auto industry and is now trying very hard to do the same to the healthcare industry, as I mentioned yesterday. His Treasury secretary, Timothy Geithner, has been trolling the world giving speeches meant to boost the confidence that the investing world has in the Dollar’s value – and has been laughed at during these speeches in China, and most recently in Italy this past weekend. North Korea is warmongering, Iran is blaming the US for their political unrest, Al Qaeda is threatening to use Pakistan’s nuclear arsenal on the US (should they get hold of it), Russia and China are openly calling for a new reserve currency on a daily basis and Brazil has removed the dollar as the primary currency used in trade with other countries. et, all the while we read reports that the economy in the US is rebounding and that things are getting better – well we need to look at these numbers to see just how good it is getting. Monday, the US announced that the numbers of people on welfare have risen at the fastest pace since the recession began and are now at levels unseen since Bill Clinton’s presidency. Last Thursday they said that unemployment was at its highest rate in the US in over 30 years – hitting over 10% in 1/5th of the 50 states that make up the US and that interest rates are at the highest levels in close to a decade. Let’s focus on these rates for a minute and how important they are – the interest rates set mortgage rates and personal loan rates – meaning, people looking to buy big have to pay more – and they are not buying and this is causing a trickle down effect. Last week, the US government auctioned off 160 Billion Dollars worth of Treasury Bonds and Notes, and for the most part it was a success – even with the highest rates in years. But look closer, the record debt sale that went on saw the US Federal Reserve (a.k.a. THE central bank) as the biggest customer for these bonds. This means simply that the US bought their own debt and is paying a larger price for it as well. And it is specifically this information which have brought Obama’s numbers down sharply – it’s one thing to preach fiscal discipline and take over industry after industry in the guise of showing them fiscal discipline – yet it is completely another thing to put into practice something entirely different. And this is where the US is right now - they are not practicing what they preach and as we saw in China, Italy, France and Germany, the US is being laughed at when they tell people that an investment in the US is a good investment right now. We might hear the pundits telling us that everything is great in the US of A, but looking at it logically, the use of the Dollar as a long term investment tool is not looking that smart anymore. We have seen on the Forex and watched online as the dollar has dipped and has lost value – the DAC index is off nearly 30% from its highs – this says volumes about the Dollar – no matter how much they try to show us that all is ok in the USA. Be careful – and if you were like me, watch down under – their Dollars are looking pretty good in comparison.

Make or Break Moment for the Greenback

2009-07-03T06:10:00.000-07:00

With all the talk lately about the dethroning of the US currency as the premiere reserve investment for sovereign countries, the debate is about to get a stark reality check.

This week, the US is doing its best to auction off a whopping 106 Billion Dollars in new debt, in a bond auction and what Forex online blogs and street traders are looking for is how quickly they sell. There is no doubt that it will sell out, but the questions are, who will be doing the buying? And, how quickly will it be sold?

The US auctions typically has a short life, with most of the debt going away even before the official gavel is dropped down. However, it has been a sobering sign for the US Treasury that in recent auctions, it was been more difficult to get rid of the debt, to the point that yields on the bonds and notes have hit record highs as if the buyers are saying that the investment is more risky than others and therefore you need to pay us for assuming that risk.

Another telling sign of the recent sales is that when the Federal Reserve, the Central Bank of the US, sees that the Treasury auctions are not selling out in a timely manner, the Fed buys the debt. This is equated with just plain printing money and diluting the value of the dollar, as the money used to buy the debt extends the treasuries credit line with the Fed.

The Fed is responsible for setting monetary policy such as interest rate levels and balancing the valuation of the dollar in relationship to other currencies. The US Treasury is responsible for the actual management of money. Yet, recent legislation has broadened the Fed’s scope of jurisdiction and it is easier for the Fed now to “loan” the treasury money.

Now, Forex traders are not stupid – we were all brought up learning that paying your MasterCard with your Visa is not a smart policy of money management – yet this is essentially what the US is doing.

China, Russia, Brazil and India – fondly known as the BRIC nations met last week and came out vocally for a new reserve currency alternative – and they did so by specifically mentioning the policy of printing money that the US is employing now. The statements they made make sense, how can they ensure the value of their investment if there is seemingly a conscious policy to water it down?

To correlate this to other investments, take the Ford Mustang. This year the Ford Motor Company is coming out with a limited edition (only 45 cars) of the Mustang to celebrate the 45th anniversary of the car.

Now, each car is unique and a throwback to the old style with modern bells and whistles and is already being bid up to over 200,000 USD per car. If Ford were to make hundreds of these cars, the uniqueness of the product will be devalued and would water down the investment value of the car. This is what the BRIC’s are afraid of.

So, this brings us to the auction this week. Considering that the primary buyers of the debt in past years have been the BRIC nations, what is their interest going to be in the record breaking bond issue this week? Are they going to put their money where their mouth is or will they succumb and continue to buy like heroine addicts in need of a fix?

I am not speculating on the outcome, I truly don’t have a clue. But, I do know that if they stick to their principles, the Dollar is in for a rough ride – and if they do not, the USD seems like a good investment in the short term.

Are the Euro's days numbered?

2009-07-03T06:09:00.000-07:00

So yesterday, the European Central Bank announced that they will be injecting a record 400 Billion Euros (that’s 613 Million USD) into the banking sector to spur lending by the devastated European Banks.

The financial meltdown started in the US with the investment banks taking advantage of lax laws governing certain assets. They grouped bad investments together and sold them as a unit of potentially high yielding securities – without properly disclosing the risks involved.

Now, many US banks purchased these assets and suffered, however the US government intervened and guaranteed these “toxic assets”, which enabled the US economy to begin the path to recovery.

The EU is different, they resisted helping the banks that made poor judgment choices by buying these assets, fueled by greed and the need for stellar returns. In fact, they were so exposed to these assets, that three of the largest banks in the Euro zone had more than 40% of their risk capital invested in these products.

The European Unions failing was that they did not rush to help. Many, including myself, believe that the US went too far with their assistance – some banks needed to fail as “failure breeds success” is the motto of the capitalist society. But, the government did do the right thing by unblocking the path to lending.

The Europeans, in all their hatred of anything American, took the total opposite approach. The Socialist societies which pride themselves on being there for those in need, became ultra-conservative and hardened their hearts towards the banks who made stupid decisions.

So we come to Wednesday, June 24th and the ECB is at the point of no return. Signs of life are flickering in the US, while the Euro Zone is at a standstill, falling deeper into a hole. So what does the Central bank do? The worst thing possible for the struggling Euro – they inject so much money into the system to break the non-lending cycle, that the traders panic and Forex Online bloggers come up with doomsday conspiracy theories about this was the last resort.

The European Union will be fine, but we are seeing that their monetary agreement, resulting in the Euro, might not survive. The problem is there is a large gap between rich states and poor states in the Euro Zone – and it is nearly impossible to please everyone all the time.

But, and this is a biggie, by doing what they did yesterday – by helping out when the big Western European Banks were in the most need, they sent a clear message to the Eastern Europena countries, whose banks have been suffering for nearly eight months with no reprieve, that they are not as important as the wealthier West.

So what impact will this have on the Euro? It got hammered yesterday and is in for a rough ride today. Please do not think for one minute here that I am now a USD fan, I am not by a long shot – but I will admit that the prospects for the Dollar, with all the issues hovering above its head right now, are much greater than those of the Euro.

Another Chinese Call For Change seems to be working

2009-07-03T06:08:00.000-07:00

This is like a bad dream that won’t go away from the US - another jab at the Dollar from China or Russia or someone else that has peeked its head into nearly every week of trading since the G20 meeting in February. However, this time around China was being more direct.

Instead of calling for a blatant ban on the Dollar, the Chinese are hurting the US currency by openly calling for an international sovereign alternative – alternative being the operative word. They never mentioned the Dollar, but that is what makes it so harsh. It is as if the Dollar is a non-factor, and at this point it might very well be.

While there has been no firm evidence of a massive selling of US money assets as of yet, the rate at which China, Russia, India and Brazil (known as the BRIC) have been buying precious metals and other permanent commodities is unprecedented. The US bond markets are yielding their highest in close to 20 years, a sign that bond holders are demanding more return for the risk involved.

The pattern seems to be the same as well, the countries blasting the Dollar seem to wait for the weekends to push their agenda and I have figured out why. Not too long ago I wrote about how the US was safe in this area, because it would take an act of the IMF and the World Bank to establish a global sovereign reserve, and these two agencies are essentially in the US’s control.

So the plan that they have is to start a viral campaign in which they put immense pressure on the Dollar through the Forex marketplace – by inciting and scaring investors to unload – by making the issues appear in the face of Forex online traders every single day so that it sinks in, “The Dollar is bad, the Dollar is evil”, and in my opinion, it’s been working to an extent.

The US needs to show the world that they have their spending and money management in control. I know that the last minute vote on fuel emission standards is not going to do much to build that confidence, considering that it will tax the states and consumers heavily – and hurt industry, and the fact that it narrowly passed after a 3am vote in which most of the dissenters left thinking the issue would be tabled for another time. This is not going to do it – and I know you will see the dollar suffer because of it.

I would also keep my eyes out for the US unemployment numbers towards the end of this week – I am sure they will be of much interest to those feeling like the end of the rocky road is near.

Forex News: Words say Everything - Its how you read them that changes the meaning

2009-07-03T06:00:00.000-07:00

I was going to write yesterday about how the pattern in which the calls for the dethroning of the US currency are made always has a follow up, half hearted retraction.

I did not, partly because it was obvious and partly because this story is getting old and tiresome as a re-run of a TV sitcom from the seventies. This, however, was the case yesterday as China’s Central Bank calmed the markets by declaring that their monetary reserve policy (and keep an eye on that word “monetary”) has not changed.

What they did not say was that they back the sovereign Dollar and love the idea that 2 Trillion Dollars worth of their assets are invested in the Dollar, but we will go back to this in a little bit.

Forex online junkies can recall not too long ago, when the BRIC nations (Brazil, Russia, India and China) met, there was a call by the Russian President, Dmitry Medvedev, to establish a global bond system through the IMF as an alternative to the Dollar. Later on he “clarified” his point by saying “in addition to” the Dollar.

Not too long before that, was the Russian Finance Minister in Italy making a comment about how the world needs a new reserve currency as the Dollar “has become debt weighted” and a day later the statement again was “clarified” by Moscow which said that the Dollar is and will be the primary Russian reserve for a while (specifically because the IMF bond will take a few years to implement – but not many actually realized that).

This pattern of jab and retreat has played out time and again, and it is because the knee jerk reaction to the Dollars vulnerability and the second world’s absolute resentment of the US has caused conflict in Central Banks around the world.

The fact is, even the retractions are not retractions. Let me go back to the word “monetary” that the Chinese Central Bank used, and let us look at some facts. Now, while their policy might not have changed, being that the proportions of their holdings were left intact, their reserve policy as a whole has shifted to include tangible assets. And thus, the dollar dump has begun…

China, which held over 2 Trillion Dollars in Dollar related Assets in January – about 50% of their reserves, has been using those dollars to purchase raw materials, natural resources and precious metals. In fact, China has gone on such a spending spree, they now accounts for nearly 50% of Australia’s natural resource commodity exports, one of the reasons why Australia is not doing so bad considering the rest of the world.

It is not that the Chinese have changed their monetary policy – the proportions might still be the same, however they seem to have changed their overall reserve policy – opting for things rather than paper.

Russia is also playing this game, only 1 year ago they had about a 1/3rd of their currency reserves in the US Dollar with the total reserves that they had estimated at around 800 Billion. Today, Russia still maintains about 1/3rd of their reserves in the USD, but their overall reserves have shrunk to an estimated 500 Billion.

Oddly enough, their Gold, Platinum and Silver holdings have increase by about 250 Billion Dollars – meaning that they have been diversifying their overall reserves with commodities – just like the Chinese.

What does this mean for Forex traders? It means simply that there is a target on the USD – and while the US’s creditors are trying to find a way out, they need to do so delicately so, as not to disrupt the value of the US on the Forex – a weak Dollar does them no good.

But, as they continue to “diversify” their holdings, keep in mind that more Dollars get added to the market system – watering down the value and inflating the currency. I would anticipate a 5-10% minimum inflation rate in the US in the couple of years – I personally think it could get even higher than that.

As the BRIC’s throw Bricks and then claim ‘it was an accident” the next day – the plans are in the works to dethrone the Dollar. It is coming, be prepared.

Forex News: Words say Everything - Its how you read them that changes the meaning

2009-07-03T05:53:00.000-07:00

I was going to write yesterday about how the pattern in which the calls for the dethroning of the US currency are made always has a follow up, half hearted retraction.

I did not, partly because it was obvious and partly because this story is getting old and tiresome as a re-run of a TV sitcom from the seventies. This, however, was the case yesterday as China’s Central Bank calmed the markets by declaring that their monetary reserve policy (and keep an eye on that word “monetary”) has not changed.

What they did not say was that they back the sovereign Dollar and love the idea that 2 Trillion Dollars worth of their assets are invested in the Dollar, but we will go back to this in a little bit.

Forex online junkies can recall not too long ago, when the BRIC nations (Brazil, Russia, India and China) met, there was a call by the Russian President, Dmitry Medvedev, to establish a global bond system through the IMF as an alternative to the Dollar. Later on he “clarified” his point by saying “in addition to” the Dollar.

Not too long before that, was the Russian Finance Minister in Italy making a comment about how the world needs a new reserve currency as the Dollar “has become debt weighted” and a day later the statement again was “clarified” by Moscow which said that the Dollar is and will be the primary Russian reserve for a while (specifically because the IMF bond will take a few years to implement – but not many actually realized that).

This pattern of jab and retreat has played out time and again, and it is because the knee jerk reaction to the Dollars vulnerability and the second world’s absolute resentment of the US has caused conflict in Central Banks around the world.

The fact is, even the retractions are not retractions. Let me go back to the word “monetary” that the Chinese Central Bank used, and let us look at some facts. Now, while their policy might not have changed, being that the proportions of their holdings were left intact, their reserve policy as a whole has shifted to include tangible assets. And thus, the dollar dump has begun…

China, which held over 2 Trillion Dollars in Dollar related Assets in January – about 50% of their reserves, has been using those dollars to purchase raw materials, natural resources and precious metals. In fact, China has gone on such a spending spree, they now accounts for nearly 50% of Australia’s natural resource commodity exports, one of the reasons why Australia is not doing so bad considering the rest of the world.

It is not that the Chinese have changed their monetary policy – the proportions might still be the same, however they seem to have changed their overall reserve policy – opting for things rather than paper.

Russia is also playing this game, only 1 year ago they had about a 1/3rd of their currency reserves in the US Dollar with the total reserves that they had estimated at around 800 Billion. Today, Russia still maintains about 1/3rd of their reserves in the USD, but their overall reserves have shrunk to an estimated 500 Billion.

Oddly enough, their Gold, Platinum and Silver holdings have increase by about 250 Billion Dollars – meaning that they have been diversifying their overall reserves with commodities – just like the Chinese.

What does this mean for Forex traders? It means simply that there is a target on the USD – and while the US’s creditors are trying to find a way out, they need to do so delicately so, as not to disrupt the value of the US on the Forex – a weak Dollar does them no good.

But, as they continue to “diversify” their holdings, keep in mind that more Dollars get added to the market system – watering down the value and inflating the currency. I would anticipate a 5-10% minimum inflation rate in the US in the couple of years – I personally think it could get even higher than that.

As the BRIC’s throw Bricks and then claim ‘it was an accident” the next day – the plans are in the works to dethrone the Dollar. It is coming, be prepared.

Forex News: China, Unemployment and Oil conspire against the Dollar

2009-07-03T05:49:00.000-07:00

The US’s non farm payrolls are due out later on today and for all their trying, the US government has been trumped by a private firm in revealing these numbers.

The street expected about 360,000 jobs were lost, a nice decline and a sign that things might be getting better. However, ADP, the largest payroll processing service in the US, reported that 470,000+ jobs have been “removed from the payrolls” of the companies that ADP services.

Keep in mind that ADP does not service everyone – there are other services and many small businesses do the payrolls by themselves. So it is not out of bounds to think that this number, 470,000 will be higher. For the Dollar, a higher number can be damaging but it is not the only threat to the greenback.

Yesterday, China called for an open debate at next weeks G8 Summit on the viability of another global reserve currency being established. This is a blow to the US efforts to keep the debate out of the IMF and World Bank boardrooms, as they and Britain control the flow at those institutions.

The voices are becoming louder and the masking of their intentions are becoming less – China has now entered the point of no return, the point at which they have firmly committed themselves towards establishing a new world financial order, in which the Dollar is no longer king.

The Dollar fell on this news and the shock from ADP – ironically, the US stock markets rose late in the day. Forex Online traders and Forex chat rooms were abuzz with the news, however the US governments official stance is that ADP’s numbers are NOT official and do not necessarily reflect the non-farms payroll number.

And while the US stock investors seemed to gobble this up, those Forex online traders did not. And I say: good for them.

This is the story that does not die, and it won’t for a while. But as we see the US’s hopes for a second half recovery fading – we should look at the opportunities that are out there for us.

I am still bullish on the Aussie and I am starting to like the Canadian Dollar. As Oil prices rise, as tensions in the middle east drive that precious commodity up, I see opportunity knocking. And I hope everyone is there to answer the door with me


Currency	Daily stance	Analysis
EURUSD	0/+	1.3740 holds the key for the near term direction. If it goes above, then we target 1.3860 or else we will re-visit 1.3580
EURJPY	0/+	Look for a re-test of Asian 131.95-00 high. Support is listed at 130.55
USDJPY	0/+	Buy when it breaks above 96.60 for a short term test of 97.30-35, or else watch it trade in the 95.50-96.50 range
GBPUSD	0/+	1.4580-90 looks a magnet pre-Geithner. Above sees acceleration to 1.4700-20
AUDUSD	0/+	While holding gains above 0.6940-50 look for extension to 0.7020