SpotEuro Forex Trading and Analysis

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2009-11-12T21:55:00.000Z

Forex Daily Outlook

2009-10-27T22:54:00.000Z

As we expected, the dollar stayed on track and made further gains, especially after US consumer confidence was released worse than expected. The euro found support at 1.4780, the cable managed to gain a bit of ground to close at 1.6370 after bouncing off 1.6244 and a lot of cross related buying against the euro, Yen rallied to fall below 92, and the Suisse continued to test the 1.0225 level, closing just under. We are still bullish on more dollar gains in the very short term except for the Yen, but we expect a bounce and more dollar losses to come in the mid-long term. Everything right now depends on risk appetite. If equity markets continue to decline, the dollar will gain ground; if equity markets stay at these levels or go higher, the dollar will continue to lose ground. Even Fed comments about a strong dollar policy aren’t helping the buck.

Euro to 1.5250 - Economic Data Pending

2009-10-23T03:29:00.000+01:00

EUR/USD - Equidistant Channel

With a lot of economic data out of the EU pending, if all looks good, we will most likely see 1.5250 before the weekend. With the euro stalling at 1.5050, we need a push higher otherwise we may see euro bulls pull out of the trend.

Forex Daily Outlook

2009-10-23T00:14:00.000+01:00

The Euro held on to the 1.50 level very well, bouncing off the 1.4950 level as we predicted in yesterday’s update. The close above 1.50 is important and we are placing even more significance if it closes above 1.5050 today. Fed governor of Boston made some pretty heavy statements about the dollar and blamed the weakness on fundamentals. He also reiterated that the Fed’s dual mandate covers inflation and unemployment; this means that even though they support a strong dollar policy, it is unlikely they will do anything about it until a recovery is for certain.

EUR/USD Long

2009-10-22T20:21:00.001+01:00

EUR/USD 5m Chart - Breaking the Wedge

The euro finally broke above the wedge I was monitoring. A close above 1.50 today and Friday will confirm a move towards 1.5220 and possibly higher.

Daily Forex Outlook- October 22

2009-10-22T04:53:00.000+01:00

video URL - http://www.youtube.com/watch?v=WGigSIA_Vcc

The euro finally cracked the 1.50 mark, but stalled just under 1.5050. We expect a continuation north, but are likely to see dips as low as 1.4950. The market is going to be careful testing the waters higher as we can all recall what happened last time, a sharp move to 1.60 before melting down in the following months into the 1.20 zone. The only difference today are the economics. There are good reasons for both scenarios, the US deficits are growing and there is no sign of improvement; the Euro zone is also vulnerable due to many member countries falling below the Copenhagen criteria, which sets conditions of entry for states waiting to join. I wouldn’t be surprised to see a head and shoulders pattern before a reversal lower. The Pound stood out as the winner yesterday following a release of the Bank of England Minutes as traders rushed to cover their short positions.

Euro Fib

2009-10-21T01:25:00.000+01:00

The Euro Fibs are drawn on the 1H chart. Breaking higher will definitely break 1.50, breaking below 1.4820 opens more downside.

Forex Daily Outlook

2009-10-20T23:21:00.000+01:00

The euro came within 5 pips of breaking through 1.5000, upon a rejection, the pair traded to a low of 1.4881. With the way the pair recovered in to the 1.4950 level before the NY close, we think there is still room to run further north. The Canadian dollar was the standout loser of the day, falling more than 2 cents after the release of their interest rate policy along with the statement that said they will keep rates at .25 until June 2010. Depending on how the loonie reacts over the next several days, we may or may not see another run towards parity. Data out of the US pointed to no inflationary pressure from producers of goods. There is little data being released today, much of it out of China, we’ll be keeping an eye on Chinese Industrial Production and their GDP.

October 20 - Daily Outlook

2009-10-20T00:54:00.000+01:00

The euro looks prime for a break of 1.5000. If it stalls, then we’ll be expecting a reversal in the short term, perhaps some serious consolidation towards 1.47 level before another run at 1.5000. The Yen found support at 90.50, a close below that level is what we’re expecting, a break above 91.30 is not welcomed and will push us out of a trade. We have important data coming out of the US and Canada today, along with a speech by BOE Gov. King that will be carefully scrutinized for any subtle clues leading to a change in monetary policy. It’s important to note that the market may wait for the US data releases prior to running above the 1.50/Euro level. There has been much scrutiny of the US interest rate policy and economists are suggesting that Bernanke should raise interest rates sooner rather than later. Bernanke will be speaking on Friday.

Daily Forex Analysis - October 19

2009-10-19T00:06:00.000+01:00

The buck enjoyed another test of 1.4850 for a second day in a row before closing just under 1.4900 to end the week unable to break the 1.50 mark. The talk in the market is now about the extreme optimism of the equity markets, specifically the DOW breaking 10K, and the mounting likelihood of a reversal. There’s quite a bit of economic data being released this week and we are counting on either a break of 1.50, or a range trade that continues to mount pressure on that level. We don’t think the market will support a reversal so quickly, so expect 1.4850 and 1.50 as important markers. We will cover what we expect from the economic data releases during the day they’re released.

Daily Forex Analysis

2009-10-16T00:21:00.000+01:00

The British Pound was the clear winner yesterday, enjoying a nice rally after failing to close below the 1.58 level. With the sterling now breaking above the 1.6120 level and out of the recent range, we expect it to continue heading higher after retesting support at 1.6120. The Yen has closed above the 90 level and we now expect a test of 91.50. Suisse looks to have stabilized and may allow the buck to etch out some gains to 1.0225 before continuing further south. Please watch the video above as we talk about potential moves over the next 12-24 hours.

If you’d like a more detailed analysis with potential trade opportunities during our live trading session, please join us in the member’s area.

Daily Forex Analysis

2009-10-15T00:39:00.000+01:00

Dow 10,000 and analysts are still questioning the recovery. We’ll see what kind of action we’ll see tomorrow now that the psychological level has been pierced. Euro is aiming at the 1.50 level, sterling is hanging in there – still within the recent range, dollar losing more ground against the Suisse, loonie and the yen. One important note about the 10,000 level is that its not even at a 50% retracement since hitting its low back in March. The 50% retracement level is just under 10,500, the 61.8% level is just under 11,500. Most importantly, we expect the flow of money towards higher yielding markets continue to provide the guidance. This is directly related to equities as we’ll see a shift as soon as risk aversion takes place again.

Comments - September 28

2009-09-27T22:41:00.000+01:00

Happy Monday everyone! This week should be important as we expect to see more volatility as the fight for a trend continues. It seemed to us last week that the Dollar would resume losing more and more ground after breaking certain levels of resistance; however, we saw a general reversal as risk aversion once again set the scene. The rest of September may set the trend through the end of the year. We keep thinking that the Dollar will recover before the end of the year. Iran is once again in the news, testing short range missiles. Israel has already commented that they will not allow Iran to have nuclear capabilities, neither friendly civilian nuclear power or for weapons purposes, so it’s a matter of time before a major conflict arises. There are debates on both sides as to how this will happens and when. We are certain the USD will strengthen on the news if something were to occur. This is a point to think about as it will come unexpectedly. Below is a link to a Bloomberg article discussing the G20 meeting, with some comments about the buck.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aINN4BM6Fy5w

Comments - September 8

2009-09-09T22:24:00.000+01:00

Another strong day for the majors against the Dollar yesterday. I am still hearing a lot of market analysts give reasons for a possible Dollar rally before the end of the year. It’s difficult to imagine a rally following the recent breakouts, but the question we have to ask ourselves is, how much higher can the majors go? If you recall, Europe was screaming 2 years ago as it was flying to record highs. What will the EU say or do, now that we’re nearing 1.50 in such poor economic conditions.

GBP/USD Below 1.6200

2009-07-07T17:48:00.000+01:00

GBP/USD - Below 1.6200

Well... we were a few days late, but the Pound broke below the 1.6200 level. We don't like the circumstances behind the late move down, as we've seen too much volatility for our strategy to be effective. We still hold to our notion that the USD will continue to gather strength near term. Our longer term outlook is for continuous USD decline.

Looking Back...and Forward

2009-06-30T07:31:00.000+01:00

Resistence Broken, Further USD Losses?

Looking back into our last trade, shorting GBP/USD, there was a reason we didn't want to put on a full trade. The potential was there but the market decided on a weakening dollar into the new week. We were stopped out at 1.6485 a session later. Looking into this week, the USD will most likely continue to weaken as we've broken several areas of resistence for the EUR$ and GBP$ pairs.

With a lot of economic data coming out on all fronts, we'll look for a fundamentals moving the market with techs supporting. In observance of Independance Day, Saturday July 4th, U.S. markets are closed Friday. Non-Farm Payrolls will be released Thursday instead. This release will most likely set the trend for the following week.

GBP/USD Short

2009-06-25T22:38:00.000+01:00

GBP/USD - Technicals point lower
Short @ 1.6366, Stop @ 1.6485, Open Objective

Looking into tonight's London session, we believe the USD will continue to strengthen. There has been a lot of volatility that threw our technicals off the last few days. We're staying away from exposing our account to too much adverse movements until we see a better set-up; however, we are shorting the GBP/USD overnight- playing the fib retracement off the second shoulder of the recent head and shoulders formation. Our target is open, but a move below 1.6250 will make us move the stop to break even along with some profit taking. A further break below 1.6200 opens up a further slide. Our stop is 15 pips above the shoulders, 1.6485. With no major overnight data from the UK, we expect technicals to either work for us, or keep the price stable within the current range.

USD/JPY - Updated - 99.90 High

2009-04-02T15:43:00.000+01:00

USD/JPY - Where to Next?

Just a quick update - the Yen continued to lose ground vs. the majors. USD/JPY hit a high of 99.90 before retreating. I'm currently neutral at these levels, though I think another run at 100 is possible.

USD/JPY - Selling of Yen Assets Continue

2009-04-02T03:46:00.000+01:00

USD/JPY - Positive Outlook - 100 Mark?

I think we'll continue to see a move towards the 100 mark into the next 48 hours. Tech studies looking good. Fundamental data supports. Equities up.

******DailyFX Plus Article - Japanese Buyers Of Foreign Assets, Foreigners Sell Japan Tokyo, April 2. MoF flow data for the week-ended March 28 show recent trends intact. Japanese were net buyers of foreign assets during the period and foreign investors were, by and large, net sellers of Japanese assets.

Japanese bought a net Y246.4 bln in foreign stocks, Y663.1 bln in foreign bonds and a net Y21.4 bln in foreign bills. Flows in and out of foreign bonds continued to be heavy with Y1.9819 trln in sales against Y2.6451 bln in purchases. Anecdotal evidence suggests Japanese interest in foreign assets continued after the above period with flows noted from Japanese investors early this week and into the new Japanese fiscal year. Institutional investors look to be returning to foreign bonds with most JPY pairs looking to have bottomed in Q1 of "09. Retail investors, for their part, look to invest afresh in foreign assets with quite a few redemptions already having taken place and on the back of more redemptions at the start of the Japanese fiscal year. Though more picky than in the past, demand is still expected from the retail community and into the summer bonus season, though bonuses will definitely be much smaller this year (if paid out at all by some firms, especially manufacturers).

On the other side of the ledger, foreign investors sold the gamut of Japanese assets. They sold a net Y189.7 bln in Japanese stocks, Y719.8 bln in Japanese bonds and a net Y1.3753 bln in shorter-term Japanese securities. All were on heavy volume. Stocks saw purchases of Y3.0631 trln against sales of Y3.2528 trln, bonds saw purchases of Y1.0231 trln against sales of Y1.7429 trln and shorter-term bills saw purchases of Y1.8769 trln against sales of Y3.2521 trln. --Haruya.Ida@thomsonreuters.com******

USD/CHF - Continued Strenght?

2009-04-02T03:08:00.000+01:00

USD/CHF - Triangle Formed with Fibonacci Support

Since the Fed's announcement of QE (Quantitative Easing) policy on the 17th of March, which led to a 5.6% depreciation of the dollar (1.1800 - 1.1170) in 24 hours, USD/CHF has been able to rebound to a high of 1.1550/CHF. Since reaching the highs last week, we've now tested the 50% retracement level of 1.1360 several times, being able to close above every time. The pair needs to hold above 1.1400 level if our trading plan is going to turn into a bullish opportunity. The 55 day moving average is aligned perfectly with the drawn trend line from last weeks' high to yesterdays' high. The 21 day MA is just underneath at 1.1381; USD/CHF currently trades at 1.1432.

A triangle/flag pattern has formed with a lot of Fib support inside. Besides U.S. unemployment claims Thursday morning, Suisse Gov. board member Hildebrand will be speaking about the "Developments in the Current Financial Crisis" at the Swiss Funds and Asset Management Forum, in Bern. With Switzerland's recent surprise announcement of intervention in the EUR/CHF pair, his comments will be closely monitored by the forex community for any clues surrounding the Swiss National Bank's intervention.

We shall see what happens during the London session and into the NY open.

USD/CAD - Hits 61.8% Retracement

2009-03-30T15:57:00.000+01:00

USD/CAD - 61.8% Retracement Hit

Just a quick update, the USD/CAD hit the 61.8% retracement after the USD overnight rally. A lot of data out this week so I'll be keeping an eye on more opportunities.

USD/CAD - Makes Gains, Hits 38.2% Fib

2009-03-27T20:24:00.000Z

USD/CAD - Triangle Breaks - Higher

USD/CAD - Holding at 38.2% Fibonocci Retracement

The USD/CAD was able to break out of the triangle and closed just under the 38.2% Fib retracement - the move lower after Fed announced a $300 billion treasury purchase plan on March 17th (1.2750 high) to the low set a day later of 1.2190. A double bottom was set on the 23rd of March, which followed by a period of consolidation and a triangle pattern trapping the pair until Friday's European session. I'm looking to reset a long position in the 1.2330s for a move to the 50% retracement. I am very hesitant in doing much since the market is headline driven, with Quantitative Easing in focus, if Canada follows in US' footsteps, then I surely believe we'll see another run towards 1.30, at which point I'd like to think we'll break further above that top. See charts above for support.

Commentary By Peter Wadkins of ThomsonReuters/DailyFXPlus

2009-03-27T18:25:00.000Z

DailyFX - Plus: 16:12 EUR/USD: Bad Omen For Bull Trend New York, March 27th.

As we have noted many times in this column, a strong trend should open the week and close the week in the direction of the trend, the middle should be backing and filling. Today's EUR/USD collapse belies that, and even with the cycle gurus looking for a currency top in 'the next few days' there is a distinct feeling to this market that their initial call for a March 23rd week peak was the prescient one. The cycle gurus tell us another EUR/USD bounce is on the way, the week of April 20th (originally Easter week, April 13th) and then a pronounced strong USD uptrend.

They also cautioned 'supports at 1.3300 (EUR/USD), 1.1400 (USD/CHF) and 1.4200 (GBP/USD) must hold on a closing basis if our positive outlook is correct. If these levels give way then these currencies are headed directly lower into July'. EUR/USD is at 1.3295/00, USD/CHF 1.1440, and GBP/USD 1.4300 (by virtue of a drop in EUR/GBP).

The key phrase there is 'on a closing basis', if supports hold and can close above there, we may yet see the bounce they look for, and considering we hit 1.3262 at the low, we have cleared out most of the stops. Our 1.38% Fibo target of 1.3420/1.3736 was 1.3300, and here we are, hmmm.

- Peter.Wadkins@ThomsonReuters.com

USD/CAD Breakout Opportunity

2009-03-26T15:49:00.000Z

USD/CAD - Breakout Opportunity

Based on the 1 hour chart above, I'm watching the USD/CAD for a possible breakout to the topside. The CAD has been stuck in a range for several days now and looks prime for a move. Current floor is at 1.2190 and resistance is at 1.2350. Next couple of hours are important as it will lead me to believe in a USD rally. More to follow.

Euro Update

2009-03-18T19:46:00.000Z

Two weeks ago, when EUR/USD was trading in the 1.25s, I wrote that I thought the pair may have a chance to reach 1.32s. Unfortunately, my analysis never materialized in the blog and I wasn't able to document my reasons. Today, following the FOMC meeting and comments, the pair blew through that level and nearly hit 1.3500, pausing 3 pips below, still trying to find a good place to settle as I write this. The FOMC meeting comments pionted towards a more aggresive quanititave easing policy than the market expected, allowing more bad debt to be purchased.

"The Committee decided today to increase the size of the Federal Reserve's balance sheet further by purchasing up to an additional $750 billion of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this year, and to increase its purchases of agency debt this year by up to $100 billion to a total of up to $200 billion. Moreover, to help improve conditions in private credit markets, the Committee decided to purchase up to $300 billion of longer-term Treasury securities over the next six months".

We'll see if this works. In the meantime, let the algos do their work while we, humans, attempt to figure out where the rate may be tomorrow.

USD/JPY - Target Approaching

2009-03-04T17:34:00.000Z

USD/JPY - Target of 100JPY Approaching

Good morning. First of all, I apologize for not writing more of an analysis for my target of 100JPY on USD/JPY trade I posted early December. The market is now approaching 100JPY, which also represents the 200 day MA. The current price also represents the 50% retracement level from August 110.70 to December and January low of 87.21 (which double bottomed).

The Yen pairs are no longer following equity prices as a norm. Interesting to see what the next trend will be. Next analysis will be the EUR/USD pair. I'm looking for a gain towards 1.32, unless we break 1.23 first.

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The Case of the Yen

2008-12-09T18:25:00.000Z

Is the US DOllar ready for a bounce against the Yen? I think so. Stay tuned, more to come...

Current Price is 92Y/USD. My price target is 100Y/USD in 3 months.

Auto Bailout - by Larry Levin

2008-11-21T16:54:00.000Z

The CEOs of the Big 3 automakers were on the Hill again today. Yesterday they were grilled by the Senate; today was the House's turn. The shock and disappointment expressed by members of Congress is another charade folks. No matter how they gnash their teeth - this latest massive handout is a done deal. And once the cash is gone, they will be back for more.

Although there were arguably worse reasons for today's big sell-off other than the latest taxpayer stickup by another failed industry, the shares of GM and Ford hurt the indices indeed. GM paced the Dow's decliners with a drop of -9.7%, while Ford dropped -25% today. Sure, their share prices are already terribly low, but I believe the psychological impact was big today.

Should there be a bailout of the Big Three? Both GM and Ford stocks are headed to $1 per share - maybe lower. GM closed at $2.79 and Ford closed at $1.26 today. The market capitalization of GM is now $1.7 billion versus a market cap of $46 billion 10-years ago, at the end of 1998. Ford's market capitalization at the end of 1998 was $71 billion and today is now $2.92 billion. Ford has about 1.7 billion more shares outstanding than GMs. Back of the envelope math tells us that the combined market cap of both GM and Ford is now $4.62 billion. Throw in, at most, $1 billion for Chrysler and we can buy the whole lot of them for a pittance.

Questions: If their combined market caps are worth just $5.62 billion, why is Congress even considering a $25 billion handout? Congress could buy all of the stock in each company for less than $6 billion and keep the change. Wouldn't that be far cheaper?

If that was the end of the story, then buying them outright might make sense. However, the story does not end there at all. What about their debt you ask? Ah yes, therein lies the problem! According to GMs 10-Q for the period ended September 30th 2008, GM has a NEGATIVE net worth of $60 BILLION. If Congress gave GM the entire $25 billion and nothing to the others, GMs net worth would still be -$35 BILLION.

Ford's situation is nearly three times worse. I have read from several sources that it is weighed down by $160 BILLION in debt. If Chrysler carries say $40 billion in debt, what is $25 billion from the taxpayer - BORROWED from China - going to do against more than $1/4-TRILLION in debt? Nothing - absolutely NOTHING!

Within months, all three will come back to the fools in CONgress, hat in hand asking for more money. To you, however, it will feel more like a gun at your back as you are forcibly made a victim again.

Of course there is a lot of wailing and gnashing of teeth that we must do something. And what is that? We must borrow the money to give to these failed executives...to save the Union - UAW. Oops, that's not how it is presented. Pundits simply say that we must borrow this money to give to the failed policies of the executives and the UAW to save jobs in general. (Of course, they're never truthful at all - never saying that this money must be borrowed first!)

Really? Is that a guarantee? Just a few weeks ago Treasury Secretary Paulson gave Citigroup $25 billion. Odd thing is that just two-days ago Citigroup announced it will slash 53,000 jobs. Exactly what taxpayer benefit did we get for that $25 billion? It certainly didn't save any jobs at Citigroup.

Isn't it about time CONgress stops borrowing money from the Chinese to then waste it on a failed industry? (Remember, I was also against the Wall Street handout.) Let GM, Chrysler, and Ford go bankrupt. Filing for bankruptcy protection will be a good thing in the long run. These companies will not disappear. The world will not end and few jobs will be lost that are not going to be lost anyway. The more money CONgress wastes attempting to bail out organizations that deserve to fail, the less money there will be for legitimate uses down the road. It's high time that Congress understand that simple economic fact.

The airlines have been in and out of bankruptcy before and there is still an airline industry. And to those who squawk that this is different; buying a $300 airline ticket isn't nearly like buying a $30,000 car. People just won't do it. I say - stop with the scare tactics! Do you really think that people put a price tag of their own life, and their children's lives, at less than $30,000?

Those who argue this claptrap on CNBC are suggesting that nobody will buy a car from an automaker going through bankruptcy protection because the cost of the car is too much to bear if something were to go wrong. The same dingbat argues, however, that we will freely RISK OUR LIVES flying in the plane of an airline that is in bankruptcy protection - completely impervious to the thought of something going wrong. Yet, something going wrong at 25,000 feet is far more devastating than a car with an electrical problem. Wouldn't you agree? It doesn't make sense to me either.

There were a few great moments today during the hearings on the Hill. Representative Bachus said - If we continue down the path of taking money from more efficient and competitive companies and giving them to companies which are less efficient and in trouble because of bad management and bad decisions, our overall productivity as a country will continue to suffer. He couldn't be more correct. But when did that matter to the circus clowns running the government?

Representative Ackerman said there was - A delicious irony is seeing private jets flying into Washington D.C. and people coming off them with tin cups in their hands. Couldn't you all have downgraded to first class? I don't know how I go back to my constituents and say the auto industry has changed.

A short while later Representative Sherman asked - (loosely quoted) May I see a show of hands from all of you who flew-in today on a commercial jet? Let the record show that no one raised their hand. May I see a show of hands from all of you who will sell your corporate jets today and fly commercial in the future (because you're getting $25 billion soon)? Let the record show that nobody raised their hand. By the way, these questions were also directed at the President of the UAW, who apparently doesn't plan on giving up his corporate jet either.

If you agree that the automakers need to go through an admittedly tough restructuring in bankruptcy court, rather than have tens of billions of dollars thrown at the problem, then please tell your CONgressman. I know it won't matter, even though they were flat out LIED to by the White House and Treasury Dept, they will fall for the scare tactics again.

However, it will make you feel like you tried. I did!

Trade well and follow the trend, not the so-called experts.

Written by Larry Levin of www.SecretOfTraders.com

Weekly Update

2008-11-21T16:50:00.000Z

U.S. dollar charting a course for its third consecutive weekly gain against the euro. A decline in stock market prices around the world has evoked heightened risk aversion in the markets, driving investors toward safe havens. This safe haven seeking has been a boon for the U.S. dollar, because despite the economic woes of the United States, U.S. government debt is still trusted more than most other investment vehicles.

The Australian and New Zealand dollars are heading towards a second weekly decline against the U.S> dollar as U.S. stock prices sank to 11-year lows. This and softness in equities around the world has prompted an exodus from the carry trade, dragged commodity prices lower on concerns a slowing global economy will translate into less demand for commodities. The Australian dollar did find some support as the Reserve Bank of Australia intervened in the market, buying Aussie dollars as it approached five year lows against the U.S. dollar.

The Canadian dollar snapped its losing streak, rising for the first time in four days. This could be profit taking as the loonie has been plunging sharply this month, and it is on course to suffer its sixth consecutive monthly drop, which would make this the loonie’s longest losing streak in 15 years. Oil, which accounts for ten percent of Canada’s export revenue, has fallen 65% since July 11, dragging the loonie down with it.

The British pound also gained against the U.S. dollar this morning, and is on track to end the week higher against the greenback than it started. The pound rose almost two percent against the U.S. dollar today. It also eked out gains against the euro, despite indications that the Bank of England is going to continue cutting interest rates.

GBP/USD Analysis

2008-10-28T08:12:00.000Z

GBP/USD 15m

Double bottom at 1.5575 is now support. Current analysis would point to another bounce from 1.5450 (see graph above). Currently retracing from today's high of 1.5750.

Weekly Update

2008-10-27T15:56:00.000Z

Japanese yen rallies against U.S. dollar; greenback extends gains against Euro and pound. The Japanese yen rose to its highest levels against the euro since May 2002 and traded near 13-year highs against the U.S. dollar as a decline in global stock markets prompted investors to continue retreating from the carry trade. The carry trade is the practice of borrowing money in countries with low interest rates for investment in higher yielding assets. With heightened anxiety about the prospect of a slowing U.S. and global economy, investors are continuing to exit holdings in higher yielding assets and repatriating those funds to Japan.

There had been some speculation that G7 countries might intervene to weaken the yen, but this speculation fell by the wayside after French Finance Minister Christine Lagarde did a Bloomberg interview where she said the G7 does not plan to intervene in the market despite concerns that volatility in the currency markets could threaten financial stability.

The Reserve Bank of Australia did intervene in the currency markets, selling its currency for a second day to defend the value of a weakening currency. The Australian dollar has fallen sharply in value as commodity prices coupled with the exodus from the carry trade exert downward pressure on the Australian dollar.

The British pound fell 3.2% against the U.S. dollar this morning, approaching give year lows. The value of residential property in England and Wales fell 7.3% from a year earlier, cementing views that the British economy is in trouble and interest rate cuts are likely. Sterling fell 1.7% against the euro today.

- contributed by Christopher Empett
Associated Foreign Exchange

Weekly Update

2008-10-07T16:35:00.000+01:00

The euro suffered its biggest single session drop against the Japanese yen since it was launched in 1999, and it extended losses against the U.S. dollar as the credit crisis prompted European governments to step into the marketplace and promise to shore up beleaguered European financial institutions. The euro is currently plumbing 14-month lows against the U.S. dollar.

Over the weekend, the German government hobbled together a bailout package worth EUR 50 billion for Hypo Real Estate Holding AG, France's BNP Paribas SA, the largest French bank, took over the Belgian segment of Fortis Bank after the Belgian government's efforts to bail the bank out faltered.

The expansion of the credit market crisis has translated into a heightened state of risk aversion which has in turn led to a virtual drying up of the carry trade. (Carry trade is the practice of borrowing money in a country with low interest rates, such as Japan, to invest in higher yielding assets elsewhere). With diminished access to liquidity, investors are exiting those higher yielding assets and repatriating funds to the source currencies, which has been a massive benefit to the Japanese yen, one of the main currencies used for financing the carry trade.

The Canadian dollar fell to its lowest levels against the U.S. dollar since May 2007 as commodity prices fell. Commodities account for over half of Canadian exports, so dips in commodity prices often impact the loonie's fortunes. In particular, oil prices fell below USD 90.00 a barrel for the first time since February. As a net exporter of oil, Canada's currency is especially sensitive to movements in the price of crude.

Cash is King

2008-10-07T15:51:00.000+01:00

Much has occurred since last week. The EU system is now showing signs of a breakdown as member countries are having difficulties deciding how to best deal with the global economic crisis. With Ireland now insuring consumer deposits and Germany helping their banking system with a bail out of their own, investors are wary and have begun moving their money back to safe haven assets.

My first target on the Euro was reached; however, I did miss the aftermath of the U.S. bail-out bill. I'm surprised gold has not topped $1k as it is the first "go-to" safe haven asset. If current sentiment continues, I'll be looking for further Yen purchases and higher gold prices.

EUR/USD - Dollar Upside Too Much?

2008-09-30T18:24:00.000+01:00

EUR/USD - 1.40 figure held

EUR/USD - Too much, too fast (Waiting Bail Out Plan)

I'm beginning to believe the Euro fall is now overdone, after reaching within pips of 1.40 figure, more importantly, not breaking below. The $700b bail out bill didn't pass and the Euro sprung to 1.46 before returning all the gains in the last 48 hours. With the Euro losing almost 3% in the last 8 hours, I expect a decent bounce to at least 1.4150, and then the 1.42 figure will be the target before another move to 1.43/1.4350.

I think one of the more important conditions is that the Euro closes above 1.41 during the next 16 hours. The other condition is dependent on what happens with the bail out bill. If it passes, I'll be looking for the USD to lose a bit of ground and then watch the trend after the dust settles.

GBP/USD Objective Met

2008-09-22T22:07:00.000+01:00

GBP/USD Objective Met (1.80-1.86)

I've met my condition on the below GBP/USD move from 1.80 to 1.86. As the market continues to be very volatile, I'll stand aside to see how the US deals w/ the major $700B "bail-out". I think there will be more downside pressure on the pound as soon as the dust settles. As of now, keep an eye on the Euro, significant level being 1.49. I'll be a seller of Euros at that point.

GPB/USD - Stronger Pound Ahead - Target 1.86

2008-09-19T01:44:00.000+01:00

GBP/USD Current Retracement, 1.86?

GBP/USD Trending Higher Short Term

GBP/USD is currently retracing just below the 50% fib level from the past 24 hours. Given this week's volatile markets, I wouldn't be surprised to see the Pound continue the retracement into the lower 1.80s before continuing the trend higher into 1.84, testing the 38.2 fib retracement from July 31st at 1.8350 and then possibly moving towards the 50% retracement level of 1.8650.

There is a possibility that the pound may test the 38.2 fib level of 1.7950 in the next couple of sessions from the 8 penny gain in the past 7 days. The 100 day moving average is also going to support the cable at 1.80. I don't expect the cable to fall further than 1.7950, giving me a good opportunity to go long for a move from 1.80 to 1.85.

No relevant economic data is being released tomorrow for either markets so I expect it to be technically driven. I am very interested in seeing how the equity markets will fair tomorrow given the large swings in the last 2 days.

News Driven Forex

2008-09-16T17:05:00.000+01:00

The U.S. dollar recovered against the Japanese yen this morning on speculation that the U.S. government may extend assistance to troubled insurance titan AIG. Dollar volatility against the yen has leaped to six month highs as turmoil in the financial markets buffet markets, and investor sentiment swings from fear to optimism like a pummeled piñata.

The Canadian dollar weakened against its southern counterpart this morning, The loonie continues to react to falling oil prices, as Canada is a net exporter of oil. (Crude oil prices fell almost 2% today). Oil and other commodities account for over half of Canadian exports, and as other commodities have also seen a declining value, adding a further burden to the loonie.

The British pound declined against the euro and the U.S. dollar this morning, after Bank of England Governor Mervyn King told the market that inflation will peak “soon”. Furthermore, he expects inflation will slow “sharply” in 2009, which seems to confirm the market’s sentiment that British interest rates will not be rising any further, and fueling speculation that rates in the United Kingdom will fall next year. Mr. King’s comments prompted the pound to end an eight-day winning streak against the euro, falling 1.2% against the single currency this morning. Sterling’s drop against the U.S. dollar was its biggest in two weeks.

The New Zealand and Australian dollars continued moving downward in the face of escalating sentiments of doom and gloom regarding the global economic outlook. The New Zealand dollar fell to four year lows against the Japanese yen as this risk aversion continued to drive an unwinding of carry trade flows. The Australian dollar slid to a two-and-a-half year low against the yen this morning, and both currencies ebbed versus the U.S. dollar.

- contributed by Christopher Empett
Associated Foreign Exchange

USD Advanceds to 6 Month Highs vs. Euro

2008-08-26T16:49:00.000+01:00

Growing speculation that the global economy is heading into a slowdown has helped the U.S. dollar advance against the euro. The German Ifo Institute released its index of German business confidence this morning. The index fell to 94.8; it’s lowest in three years and significantly worse than the 97.2 reading that had been expected. This news and other negative news about other economies around the world has helped raise the outlook for the U.S. dollar since many analysts believe the U.S. economy has weathered the greater part of the credit crisis storm.

House loans for home purchases in the United Kingdom fell 65% from a year earlier in July. The news reinforces the view that British interest rates have peaked and will next be moving downward. The news sent sterling lower by almost a full percent against the U.S. dollar and hitting its lowest level against the greenback since July 2006.

The U.S. dollar also rallied against the Japanese yen and other currencies as it benefited from a boost in U.S. consumer confidence. The Conference Board reported that its index of consumer sentiment rose from 51.9 in July to 56.9 in August as consumers responded happily to dropping gasoline prices.

The Canadian dollar rallied to three week highs against its southern counterpart this morning, benefiting from rising crude oil prices. Oil prices were on the rise due to fears that Hurricane Gustav may move into the Gulf of Mexico and impact oil production. As a major oil exporter, Canada’s currency often benefits from rising energy prices.

- contributed by Christopher Empett
Associated Foreign Exchange

USD Range Bound; Markets Thin

2008-08-25T17:05:00.000+01:00

The U.S. dollar rallied against the euro and sterling, and pared earlier losses against the Japanese yen after the latest existing home sales data came out. Existing home sales rose to an annual rate of 5 million units in July, according to the National Association of Realtors. This was almost a million more than expected, and raises hopes that the plunge in existing home sales is nearing a bottom. However, the credit crisis still overshadows the U.S. economy as home inventories also rose.

The Japanese yen and Swiss franc rose significantly against most of the major currencies on the continued risk aversion that has investors staying away from the carry trade – the practice of financing investments in higher yielding assets through loans taken out in countries with very low interest rates. Columbian Bank and Trust became the ninth U.S. bank to fail in the U.S. this year, and American International Group is expected to post a hefty quarterly loss on the back of mortgage related losses.

The South African rand fell against the U.S .dollar for a second consecutive day on speculation that the South African inflation report will reflect inflation staying above the central bank’s target level for a 15^th month. The rand is also being dogged by speculation that a global economi8c downturn will translate into diminished demand for the gold and other commodities that are the lifeblood of the South African economy.

- contributed by Christopher Empett
Associated Foreign Exchange

U.S. Dollar Rallies Into Weekend

2008-08-22T16:55:00.000+01:00

The U.S. dollar was enjoying greater buoyancy this morning, boosted by a rumour that a South Korean bank is “considering” making a significant investment in beleaguered Lehman Brothers Holdings, Inc. This news raises hopes that U.S. financial companies will be able to weather the storm created by the credit market crisis.

The U.S. dollar also beneficiated from market speculation that yesterday’s sharp drop against the euro – the dollar’s biggest single day plunge since June – was overdone. Add to this continued evidence that the European economy is slowing – as exemplified by a drop in European industrial orders – and things look relatively upbeat for the dollar. Nevertheless, the dollar is almost one percent weaker today than it started the week, making this the dollar’s first weekly drop against the euro in six weeks.

The Australian and New Zealand dollars are on course to end the week stronger against the U.S. dollar, boosted by a sharp increase in commodity prices – the biggest weekly jump in 33 years – that is expected to boost the value of exports.

The British pound fell sharply against the U.S. dollar this morning, down 1% against the greenback in the wake of news that British economic growth stagnated in the second quarter. It is the fifth consecutive weekly loss for the pound, making this its longest losing streak since February 2006.

The Canadian dollar weakened against the U.S. dollar for the first time in four days this morning. Oil prices dipped, a negative for oil-rich Canada, and after rising for two weeks many traders feel it was time for a little profit taking on the loonie’s gains.

- contributed by Christopher Empett
Associated Foreign Exchange

Dollar Weakens On Credit Market Fears

2008-08-21T17:07:00.000+01:00

After a long, healthy rally the dollar took a stumble this morning, slipping against most of the major currencies. The Financial Times reported that Lehman Brothers failed to sell a 50% stake to investors – news that re-awakened fears about the broader implications of the global credit crisis that had slowed to a simmer in recent weeks. Now the market is back too worrying that there will be further write downs in financial markets. This, coupled with significant jumps in crude oil prices, has triggered the dollar’s steepest single day decline in over a month.

The Japanese yen and Swiss franc rose against all the major currencies as the renewed risk aversion caused a further unraveling of the carry trade. Investors sold higher yielding assets and repatriated the funds to the country with low interest rates where investors took out loans to finance the investments in higher yielding assets.

Oil prices rose for a third day, boosting the Canadian dollar which enjoyed its biggest gain against the U.S. dollar in six weeks. Oil prices rose to over USD 119.00 a barrel, and since Canada is a net exporter of oil strong oil prices tend to favour the loonie.

The British pound fell against the euro this morning on news that U.K. Retail sales fell at the weakest annual rate in 17 years this July. This reinforces speculation that British interest rates could fall, pulling the pound lower. However, the poor news from Britain was little help to the U.S. dollar, which was weaker against sterling this morning as traders ponder the U.S. economic outlook and how much more pain the credit market crisis is likely to cause.

- contributed by Christopher Empett
Associated Foreign Exchange

USD Still Volatile; Worries Remain

2008-08-19T16:54:00.000+01:00

The U.S. dollar failed to gain traction against the euro this morning, even though the Producer Price index number for July showed a gain of 1.2% in July. Although this reflected lower inflation than in June, it was still almost double the expected rate for July. Nevertheless, the market remains anxious regarding the pace of the dollar’s recent rally and the possibility that the dollar has moved too far, too quickly. This fear is at the heart of the dollar’s inability to break out higher – traders are assessing its current condition and evaluating what moves they should expect it to make next.

The Japanese yen rose to a three month high against the euro this morning. Heightened risk aversion, driven by the credit market crisis and the fear that major financial firms will continue to report large losses, have reduced investor demand for higher-yielding assets that were normally financed by money borrowed at low interest rates in Japan.

The Canadian dollar was treading water this morning despite news that wholesale prices rose at their fastest pace in over a year. Statistics Canada reported that wholesale prices rose 2% in June, almost trebling the rate of growth expected. The news raises hopes for Canadian interest rate hikes, but the loonie did not advance much on the news because it continues to be dogged by weaker prices of gold, oil and other commodities. Commodities account for over half of Canadian exports.

The British pound fell to a two-year low against the U.S. dollar this morning and continued its downward trend versus the euro. Bank of England policy maker Tim Beasley predicted that inflation will fall by the end of next year, fueling the ongoing speculation that interest rates in the U.K. have peaked. The pound has now weakened against the U.S. dollar for 13 consecutive days, making this its longest downtrend in over 37 years.

- contributed by Christopher Empett
Associated Foreign Exchange

USD Retreats on Fears Rally is Overdone

2008-08-18T17:00:00.000+01:00

The U.S. dollar retreated from the seven-month highs it posted against the Japanese yen and headed south versus the euro, Aussie dollar and several other majors. The U.S. dollar had touched six month highs against the euro on evidence other global economies are slowing.

However, there has been anxiety that the U.S. dollar was rising too quickly and now the market is nervously anticipating two pieces of data this week. The market expects the annual rate of housing starts to fall to 960,000 units in July, which would be a seventeen-year low. The official number will be released tomorrow.

Traders are also nervous about another figure coming out tomorrow: The Labor Department will release Producer Price data, and analysts expect that it rose just 0.6% in July. If these numbers are as weak as expected, that undermines the case for the Fed to raise interest rates and could open the door to some further dollar weakness, which is why the market has grown more cautious ahead of the publications of these figures.

The British pound weakened against the U.S. dollar and plunged toward two year lows against the euro this morning. Sterling was ground lower as a result of news that U.K. house prices suffered their biggest monthly decline in six years this August, which boosts expectations that the Bank of England will lower interest rates.

- contributed by Christopher Empett
Associated Foreign Exchange

USD - Fifth Consecutive Weekly Gain

2008-08-15T17:07:00.000+01:00

The U.S. dollar is stretching its longest winning streak in over two years into the weekend. Falling oil prices and signs that economies around the world are growing sluggish continue to serve the U.S. dollar's interest. The greenback has reached six month highs against the euro and a seven-month high against the Japanese yen. The dollar has risen 2.1% against the euro this week.

The British pound sank against the U.S. dollar for the 11^th straight day, making this its longest losing streak against the U.S. dollar in 37 years. Traders are wagering that the British economy is heading into a recessionary trend that could force the Bank of England to cut interest rates.

One of the few currencies that has performed better than the U.S. dollar this week was the Canadian dollar. Canada’s trade surplus increased in June and manufacturing shipments rose, improving the outlook for the Canadian economy.

The South African rand has suffered a weekly decline for the second week, dragged lower by sagging commodity prices. Gold and platinum values headed lower this week, along with other commodity prices, and as a major exporter of these and other commodities South Africa is particularly sensitive to movements in their prices.

Euro Weakens to 5 Month Lows

2008-08-14T16:44:00.000+01:00

Eurozone GDP contracted for the first time since the single European currency was launched. GDP shrank 0.2% in the second quarter, after growing 0.7% in the first. The German economy contracted for the first time in four years. The euro has now fallen 3.6% since last week, its biggest weekly decline since January 2007.

Commodity prices rose yesterday, boosting the Australian and New Zealand dollars higher. The Aussie dollar rebounded seven tenths of a percent overnight on the news, snapping a five day losing streak during which it had been the worst performer of the major currencies.

The rise in commodity prices, especially oil, was also helpful for the Canadian dollar which rallied overnight. Commodities, including oil, gold and copper, account for over half of Canada’s exports.

The British pound was treading water this morning after hitting 22-month lows yesterday. The pound’s most recent negative moves were precipitated by the Bank of England’s recent negative revision of its economic growth forecasts, which leads traders to anticipate British interest rate cuts.

Many traders are still fearful that the dollar is going to face a correction because the rally has seen it move too far, too fast. Some analysts also believe that the U.S. economy is still encumbered by some serious negatives that could come back to haunt the greenback. These concerns were underscored by U.S. initial jobless claims last week – there 450,000 new filings for unemployment benefits, compared with market expectations for just 435,000.00

-contributed by Christopher Empett
Associated Foreign Exchange

USD Trading 22 Month Highs Vs. GBP

2008-08-13T16:55:00.000+01:00

The Japanese yen also rose against the U.S. dollar and surged against the euro this morning and hit two month highs against the British pound. The yen’s moves were precipitated by a reduction in carry trade activity – the practice where investors borrow money in countries with low interest rates, such as Japan, to invest in countries where interest rates are higher. With a sudden shift in the outlook for interest rates in Australia, the U.K. and Europe, coupled with the market’s creeping suspicion that commodity prices may have peaked, have caused investors to exit carry trade positions and repatriate those funds to the source countries.

The Canadian dollar fell close to its lowest levels against the U.S. dollar in almost a year, having weakened during nine of the last ten days. The loonie has slipped 5.5% since oil prices peaked on July 11.

Many analysts believe that when European GDP data is released tomorrow it will show the Eurozone’s economy shrank 0.2% in the second quarter. The fear that a contracting GDP could lead to lower European interest rates has been a key factor in the dollar’s sudden turnaround.

The British pound sank to 22-month lows against the U.S. dollar this morning after the Bank of England reduced its growth forecast. It was the ninth consecutive day of sterling depreciation. U.K. unemployment benefit claims jumped in June by the largest amount since December 1992, the latest in a tide of news that has raised fears that Europe’s second largest economy is slip sliding toward recession.

U.S. Dollar Sustains Friday Rally; Traders Remain Cautious

2008-08-11T17:20:00.000+01:00

The U.S. dollar emerged from the weekend as strong as it entered it, retaining all of the gains that were achieved as it posted its sharpest single day rally in eight years. The dollar has rallied over four percent against the euro this month, but many analysts are striking a cautious chord, worried by the dollar’s rapid ascent and the possibility the greenback could have moved too fast, too soon.

The negative factors that have plagued the dollar over the last year, specifically the crisis in credit markets, have not gone away. Also, the U.S. housing market continues to struggle and there is anxiety over how fast the U.S. economy will grow. Underscoring, these fears, the number of U.S. foreclosure filings more than doubles in the second quarter, and the market expects to see a drop in retail sales for July when the data is released tomorrow. For these reasons, many traders are looking ahead with some trepidation, despite the dollar’s rampant charge last week.

The Mexican peso rose this morning, posting its first gains in a week as rising global stock market prices increased investor appetites for higher yielding assets in developing nations. The peso was up three tenths of a percent against the U.S. dollar and has risen 7.7% against the dollar this year after two interest rate hikes implemented by the Banco de Mexico increased Mexico’s yield advantage over the United States.

The Norwegian krone rose against the U.S. dollar for the first time in five days on news that inflation in Norway rose at the fastest pace in 7 and a half years. Statistics Norway reported that inflation rose to 2.9% in July, the highest level since February 2001. This was higher than expected and fuels speculation that the Norwegian Central Bank will raise interest rates again, enhancing the krone’s yield advantage over other currencies.

U.S. Dollar Surges; Fed Leaves Rates Unchanged @ 2.0%

2008-08-05T20:54:00.000+01:00

U.S. dollar surges to seven-week highs against the euro. The U.S. dollar was on a rampage this morning, soaring against the euro on the hope that the Federal Reserve will strike a hawkish chord at the conclusion of today’s monetary policy meeting. The market expects the Fed to express the need to contain inflation and leave interest rates unchanged. This speculation has pushed the dollar to seven-week highs against the euro, but should the Fed fail to fulfill these hopes the dollar could be set up for a stumble later in the day.

The British pound fell to seven-week lows against the U.S. dollar on news that factory production in the U.K. fell for the fourth month in June. The 0.5% drop in manufacturing output was worse than expected – the market had expected a modest gain.

The Australian dollar sank to four month lows against the U.S. dollar after Reserve Bank of Australia Governor Glenn Stevens said that there is “scope to move towards a less restrictive stance of monetary policy.” In plain English, there is a growing possibility that Australian interest rates have peaked at 7.25% and that rates could come down in the foreseeable future.

The Canadian dollar fell again versus its southern counterpart, hurt by news that oil fell below $119.00 a barrel for the first time since May. Other commodity prices have also moved lower, hurting the outlook for the Canadian economy because commodities account for over half of Canadian exports. The Canadian dollar is plumbing its lowest level since September on the news.

USD Trades Near Two Week Highs

2008-06-04T17:18:00.000+01:00

The U.S. Dollar continued to turn in a favorable performance against most of the major currencies in the wake of new that the U.S. services industry expanded in May at a faster pace than expected. The Institute for Supply Management’s index of non-manufacturing business decreased to 51.7 in May from 52 in April. However, a reading above 50 still reflects positive growth and the number was still stronger than the 51 number that was expected, suggesting the U.S economy is doing a reasonably good job of weathering the economic downturn.

The Australian Dollar regained some of its losses from yesterday after a government report revealed that the economy grew at double the expected pace in the first quarter. The news helped restore hopes that the Reserve Bank might raise interest rates further, and it helped the Aussie Dollar rally almost a full percentage point against the U.S. Dollar.

The Canadian Dollar declined for a fourth consecutive day, touching one month lows versus its southern counterpart. The Loonie has come under fire for a couple of reasons. Oil prices have been descending in the last few days, and as a net exporter of oil Canada’s currency is often influenced by oil prices. Furthermore, the Canadian economy shrank unexpectedly in the first quarter, raising the likelihood of Canadian interest rate cuts in the future.

USD Rallies After Bernanke Comments

2008-06-03T16:30:00.000+01:00

The U.S. Dollar rose against both the Euro and Japanese Yen this morning after Federal Reserve Chairman Ben Bernanke said that the Fed was “attentive” to the impact of a depreciating Dollar. Speaking for the first time in two months about the U.S. economic outlook, Mr. Bernanke said that interest rates are “well groomed” to fuel growth and maintain price stability – suggesting that the Fed will refrain from further interest rate cuts. The market also inferred that the Fed has reservations about seeing the Dollar weaken beyond its current levels.

The Swiss Franc rose against the euro in the wake of news that Swiss inflation accelerated more than forecast n May, rising to its highest level in 15 years. The news fuels speculation that Swiss interest rates may rise, which helped the franc surge to a six-week high against the Euro. Analysts had expected Swiss consumer prices to rise 2.4% from a year earlier. But the Federal Statistics Office reported a 2.9% actual rise.

The Swedish Krona was on the advance this morning, making its biggest single session gains against the Euro after the Swedish central bank said it feels Swedish lenders have weathered the worst of the credit crisis without undue ill-effect.

The two currencies that generally draw the lion’s share of carry trade flows because of their high underlying interest rates, the New Zealand Dollar and Australian Dollar, were both in retreat this morning. The Reserve Bank of Australia has indicated that rate hikes already implemented have caused a “moderation in demand” – central bank speak for “ have done their job” and chinks in New Zealand’s economic growth have led to speculation that interest rates have not only peaked there, but they may be poised to start coming down. The two currencies weakened against most of the majors this morning.

No Letup in Sight for the U.S. Economy - by Sarah Scrafford

2008-06-03T01:26:00.000+01:00

The days when the dollar ruled supreme against every other currency in the world are long gone. The continuous slump in the greenback’s value since the turn of the century has turned only over the last few weeks. But though the US dollar might be showing signs of a revival in the short term, the long term tailwind is still down. The Federal Reserve has in effect put itself in a bind by giving precedence to growth over controlling inflationary pressures. It has been proven time and time again that the interest rate cycle decided by monetary policy has a considerably higher influence on currency movements when compared to the effects of fiscal policy. The recent credit crunch has bought things to a head.

For example, let’s compare the movement of the dollar vis-a-vis the euro. The dollar has been falling continuously since peaking in October of 2000. During that time, both the Euro zone and America have been battling low growth. Interest rates started to go up as inflation took centre stage. At every point, the European Central Bank has paid more attention to inflation while the US has had its eye on growth and the easing of the credit crisis. The real interest rates in Europe inched higher and higher. As the supply of money in the US stayed up due to lower interest rates, inflation remained high. Currently, inflation is at a level not seen since early 1991.

Today, the US is saddled with increasing trade and budget deficits. Increased government spending (evident in the huge budget deficit numbers) have contributed to inflation in no small manner. Coupled with low interest rates, the supply of money has not eased up. When comparing two currencies, the one that has the lower interest rate will over time depreciate against the one that has the higher. As long as the triad of a burgeoning budget deficit, a sputtering economy and a weak currency holds, the rest of the world holding trillions in dollar-denominated debt will just have to wait for the Fed to bite the bullet and allow nature to run its course. Only a stronger dollar will ease inflation and bring the economy back on track.

-Sarah Scrafford is an industry critic, as well as a regular contributor on the subject of how to manage your money. She invites your questions, comments and freelancing job inquiries at her email address: sarah.scrafford25@gmail.com.

USD Enjoying Mixed Fortunes

2008-06-02T16:50:00.000+01:00

The British Pound fell against the U.S. Dollar and most of the other major currencies as traders speculate that continuing credit market losses at banks will slow growth of the British economy and forestall higher British interest rates. Sterling suffered its biggest single session drop against the U.S. Dollar in over three weeks after one of Britain’s largest lenders announced a large loss due to its exposure to sub-prime loan write offs.

The British news elevated the level of risk aversion in the market, but the Dollar was able to weather the storm and held onto last week’s gains versus the Euro. The Institute for Supply Management reported its factory index improved from 486 in April to 49.6 in May. Although a number below 50 indicates negative growth, the improvement is still beneficial news for the U.S. economy as domestic manufacturers benefit from the impact of a weak Dollar.

The risk aversion caused by the British credit market news helped boost the Japanese Yen, especially against the South African Rand and the Norwegian Krone, as investors unwound carry trades while digesting the implications of the British news.

The Canadian Dollar weakened for the second day this morning, dragged lower as oil prices retreat. As a net exporter of oil, the Canadian Dollar is often influenced by movements in oil prices. Also, the Canadian economy has felt the drag from the declining economic fortunes of its largest trading partner, the United States, and there is speculation that the Bank of Canada may cut interest rates next week to try and goose the economy.

Dollar Rallies on Strong Economic Data

2008-05-29T17:02:00.000+01:00

The U.S. Gross Domestic Product grew more in the first quarter than previously estimated, the Commerce Department reported today. Originally estimated at 0.6%, the figure was revised upwards to 0.9%. The improvement came as a weak Dollar prompted a decline in imports and a significant increase in exports. The news prompted the U.S. Dollar to rally by the biggest margin in four weeks versus the Euro and helped it gain against the Japanese yen for the fourth consecutive day.

In addition to falling against the U.S. Dollar, the Japanese Yen sank to its lowest level against the Australian Dollar since November 14. The yen’s decline has been largely driven by carry trades, the practice of borrowing money in countries with low interest rates, like Japan, for investment in higher yielding assets elsewhere.

The greenback’s gains against the Euro were contained by news that consumer prices in the Euro-zone rose 3.5% in May, faster than in April and well above the European Central Bank’s tolerance level. This news diminishes the likelihood that the European Central Bank will cut interest rates anytime soon.

The Canadian Dollar rallied against its southern counterpart, boosted by surging demand for the commodities that account for over half of Canadian exports. Statistics Canada today reported that money flows into Canada exceeded outgoing payments by CAD 5.56 billion last quarter, after a CAD 778 million surplus in the prior quarter, further underscoring the demand for the Loonie.

Japanese Yen dips against U.S. Dollar; falls to four-week lows versus Euro.

2008-05-27T15:57:00.000+01:00

Rising U.S. stock prices emboldened global investors, prompting them to take advantage of low interest rates in Japan to borrow money for investment in higher yielding investments elsewhere. Carry trade flows drove the Yen lower across the board, but especially against the Euro and both the Australian and New Zealand Dollars.

The Euro gave up some of its gains from Friday and Monday after negative reports from Germany and France undermined optimism about the health of the European economy. German Consumer Confidence fell more than expected and an index of sentiment among French manufacturers fell to its lowest level since December 2005. Since Germany and France are the largest economies in the European Union, their fortunes often harbinger the fate of the Euro-zone as a whole. However, the news wasn’t all bad for the Euro – consumer prices in the Euro-zone rose 3.5% in May, faster than the previous month and still well above the European Central Bank’s tolerance zone – which leaves the possibility of European interest rate cuts still seem like a shaky proposition.

The British Pound weakened against most of the major currencies this morning as the slumping U.K. housing market continues to sap enthusiasm for the British economy. After rebounding to three-week highs against the U.S. Dollar, the Pound was back on the defensive after it was reported that over twenty-percent of British homebuyers with poor credit histories were falling behind on their payments in the first quarter. The British economy grew at its slowest pace in three years during the first quarter, and Cable has weakened 8.6% against the Euro and 0.6% against the U.S. Dollar so far this year.

The demand for higher yields helped push both the Australian and New Zealand Dollars higher this morning. The Aussie Dollar rallied to quarter-century highs as high interest rates and a healthy outlook lured investors. The New Zealand Dollar, which had fallen out of favor a few weeks ago as investors feared the central bank would cut rates, has found new life since the government introduced a stimulus package built around tax reductions which investors believe will forestall the need for the Reserve Bank to cut interest rates.

USD Snaps 2-Day Losing Streak Vs. Euro

2008-05-22T17:27:00.000+01:00

The U.S. Dollar ralliedagainst the Euro this morning as traders increased their wagers that the Federal Reserve will raise interest rates by the end of the year. The minutes of the most recent Fed meeting revealed that policy makers felt that even cutting interest rates to 2 percent was a close call. This reinforces speculation that the Fed has finished cutting interest rates for now.

The New Zealand Dollar gobbled up recent losses this morning, bolstered by a package of tax cuts that made traders feel it is now less likely that the Reserve Bank will cut interest rates. The news boosted the Kiwi to two-week highs against the U.S. Dollar.

The Australian Dollar hit its highest level since it started trading freely in 1983 as investors chased yields. The Aussie Dollar has rallied ten percent this year, making it the second biggest gainer among all the major currencies.

The British Pound rallied against the U.S. Dollar, surging to three week highs against the U.S. Dollar. The Pound benefited from news that the Retail Sales in the U.K. fell less than expected in April, which diminished fears about the health of the British economy.

Euro Rallies on Rising German Business Confidence

2008-05-21T16:54:00.000+01:00

The German IFO Institute reported this morning that its index of business confidence rose from 102.4 in April to 103.5 in May. The news defied the market’s expectations that the index would decline to 102 and bolstered the argument that the ECB can maintain its focus on inflation and keep interest rates high instead or worrying about stimulating the economy. The German economy is the biggest in the Euro-zone, so its fortunes tend to harbinger the fortunes of the European economy generally.

The British Pound performed well after the release of the minutes from the most recent Bank of England monetary policy. According to the minutes, policy makers are reluctant to cut interest rates despite a slowing economy due to their fears regarding the accelerating rate of inflation in the U.K.

Commodity currencies rose as commodity prices gained, led by movements in gold and oil prices. Gold rallied for the fifth consecutive day and oil broke USD 130.00 a barrel for the first time. This helped the Australian Dollar hit its highest levels against the U.S. Dollar since 1984 and the Canadian Dollar rallied 0.7% against the U.S. Dollar this morning.

In addition to the commodity news, the Loonie was boosted by speculation that the Bank of Canada may be less keen to cut interest rates than previously expected. Inflation accelerated in April as consumer prices rose 0.8% in April compared with a 0.4% gain in March. The news helped the Loonie enjoy its biggest single session gain in over two months.

USD Tumbles on Surging Oil Prices; Concerns of EU Interest Rate Outlook

2008-05-20T16:40:00.000+01:00

The U.S. Dollar suffered its biggest single session plunge in over a month against the Euro. The Euro rallied after a German government adviser said that European Central Bank policy makers may raise interest rates as soon as the financial crisis ends. Also boosting the Euro, German Producer Price inflation accelerated to the fastest pace in nearly two years which makes interest rate cuts less likely.

Meanwhile, oil prices broke USD 129.00 a barrel, a new record. The oil rally was precipitated by hedge-fund manager and legendary oilman Boone Pickens who foresees oil reaching USD 150.00 a barrel this year. This led to anxiety about the strength of the global economy and the resultant heightened levels of risk aversion prompted an unwinding of carry trades, which helped the Japanese yen rally against the U.S. Dollar.

The Australian Dollar rose to its highest levels against the U.S. Dollar since 1984. The Aussie Dollar’s latest surge was triggered by the release of the minutes from the most recent Reserve Bank meeting. Central bank policy makers discussed the possibility of raising interest rates at length during the May 6 meeting, and still worry that inflation in Australia is “uncomfortably high”. The revelation that the central bankers are still biased towards tighter monetary policy drove the currency higher for the fourth consecutive day.

USD Surges Into New Week

2008-05-19T16:52:00.000+01:00

A worldwide rally in stock prices helped the U.S. Dollar enjoy its biggest single session rally in over four days, and it also boosted the greenback against the yen as investors took advantage of low interest rates to borrow money in Japan to invest in higher yielding investments elsewhere.

The Icelandic Krona is not normally a newsmaker but it rallied sharply against the Euro and the U.S. Dollar this morning on news that three Nordic central banks have extended an emergency loan offer to Iceland. This has raised hope that the Icelandic central bank will be able to shore up its currency and maintain stability in Icelandic financial markets.

The Australian and New Zealand Dollars, which have often tracked each other over the last couple of years, parted company over the weekend. The Australian Dollar shot up to 24 year highs against the U.S. Dollar while the Kiwi fell. The Aussie Dollar’s good fortune came from rising raw material prices which boost the outlook for Australian exports and hence its economy.

The New Zealand Dollar depreciated on fears that interest rates could fall. On March 14, the New Zealand Dollar hit its highest level against the U.S. Dollar since it started trading freely in 1985. Since then, home sales slumped to 16 year lows and unemployment rose to its highest level since 1989, dragging the New Zealand Dollar down.

USD Weakens on Surging Oil Prices and Low Consumer Confidence

2008-05-16T16:27:00.000+01:00

The U.S. Dollar is ending the weekend on the defensive. It was the Dollar’s first drop in four days, precipitated by oil prices which surged to new record highs and the University of Michigan consumer sentiment index. According to the survey consumer sentiment slipped from 62.6 in April to 59.5 in May – a 28 year low. This raised the level of risk aversion in the market and led to an unwinding of some of the Dollar’s gains from this week.

The Canadian Dollar surged to an eight-week high against the U.S. Dollar on the oil price news. As a net exporter of oil, Canada’s currency often tracks the value of oil. Commodities account for over half of Canada’s exports, and prices for commodities are generally stronger which also benefits the loonie.

The South African Rand has enjoyed its biggest weekly gain in six weeks as rising inflation has triggered bets that the central bank will raise interest rates. Reserve Bank Governor Tito Mboweni said that he will raise interest rates “if he gets his way.” – An uncommonly transparent comment from a central banker. Inflation in South Africa is running above the central bank’s tolerance level of six percent.

USD Relatively Mixed Among Majors

2008-05-14T16:54:00.000+01:00

It was another upbeat day for the Dollar as rising U.S. stocks drew carry trade flows into the U.S. carry trades are the practice of borrowing money in a country like Japan where interest rates are very low to invest in higher yielding assets elsewhere.

The Dollar was able to shrug off better than expected inflation data because of the generally positive sentiment surrounding the U.S. Dollar which was boosted by complaints of the French Finance Minister who said that he believes the Euro is overvalued by about 20 percent. Consumer prices in the U.S. rose 0.2% in April following a 0.3% gain the previous month.

The Canadian Dollar rallied for a fourth day, building its longest winning streak since February, as rising commodity prices and growing optimism about the potential for global economic growth broadened its appeal.

The Australian Dollar fell against the Canadian Dollar, U.S. Dollar and British pound on news that wage growth slowed in the second quarter. The news ran counter to market expectations and raised doubts about how much upward potential Australian interest rates still have,

USD Rallies Despite Softer U.S. Retail Sales Data

2008-05-13T16:42:00.000+01:00

U.S. Retail sales fell 0.2% last month, double the expected decline, but excluding auto sales retail sales actually increased more than forecast, raising speculation that the Federal Reserve will suspend interest rate cuts. Excluding auto sales, retail sales actually grew 0.5%.This speculation was boosted by Federal Reserve Bank of Cleveland President Sandra Pianalto expressed concerns about inflationary pressures.

The resilience of U.S. retail sales coupled with Ms. Pianalto’s remarks diminished the market’s aversion to risk, boosting the U.S. Dollar against most of the major currencies. It also led traders to wade deeper into the carry trade, borrowing money in countries like Japan and Switzerland where interest rates are very low to invest in higher yielding assets elsewhere.

The British Pound weakened against the U.S. Dollar on news that the London property market suffered its biggest price decline in the last 14 years in April. Sterling also weakened against the Euro as the Bank of England finds itself trapped between a rock and a hard place. Economic data like the slumping housing market would suggest interest rate cuts are called for, but inflation in April hit a six-year high, which makes interest rate cuts undesirable.

The Norwegian Krone got traders’ attention this morning as it rallied for a fourth day on speculation that the central bank will continue raising interest rates this year. Inflation levels are surging in Norway and as a net exporter of oil the Krone is often prone to track oil prices, which are near record highs. The prospect for higher interest rates is also making the Krone appealing to carry traders.

USD Emerges From Weekend In Favorable Light

2008-05-12T16:27:00.000+01:00

For the first time in three years, futures traders are betting on a gain in the U.S. Dollar versus the Euro. According to a review of futures contracts, the net longs were 21,315 on April 29. For the previous 123 weeks, futures traders were betting against the U.S. Dollar. This news bolsters hopes that the U.S. Dollar’s recent rally could gain traction, especially if the Federal Reserve has finished cutting interest rate for the time being.

The Fed said in its statement after last month’s monetary policy meeting that the “substantial” rate cuts already implemented would help stimulate growth. The Dollar also got some help from news that U.S. employers cut fewer jobs in April than expected. At the same time, there has been a slide in business confidence in France and Germany, the two largest economies in the European Union. This has fostered hope that the ECB may trim interest rates later this year.

The British Pound rallied against the U.S. Dollar this morning after a surge in Producer Prices made it seem less likely that the Bank of England will cut interest rates next month. Although the fallout of the credit crisis has been slowing British economic growth, PPI rose 7.5% year on year, the biggest year-on-year increase since the Office for National Statistics started tracking the figure over twenty years ago.

The Swiss Franc took its biggest tumble against the U.S. Dollar in over a week as stock market rallies around the world encouraged investors to borrow money in countries with low interest rates to invest in higher yielding assets around the world. The Swiss Franc fell almost a full percent against the U.S. Dollar as diminished risk aversion fueled carry trade activity.

Japanese Yen Rallies Into Weekend

2008-05-09T17:04:00.000+01:00

The Japanese Yen is on course to achieve its biggest weekly gain against the U.S. Dollar in three months as the market's risk aversion was on the rise yet again. American International Group, Inc reported that it needs USD 12.5 billion to offset sub-prime related write downs, igniting fears that the credit-market losses continue to spread. This triggered an unwinding of carry trades as investors fled from higher yielding opportunities to pay off the loans they took in countries with low interest rates to fund those investments.

The Euro extended its gains from yesterday as the market continued to digest its disappointment over the ECB meeting. The European Central Bank left interest rates unchanged, as expected, but ECB President was much more hawkish in his post policy meeting press conference, saying that inflationary pressures remain very high in the Euro-zone. This erodes hopes that the ECB will start lowering interest rates any time soon.

The U.S. Dollar was able to retake some of its losses in the wake of a Commerce Department report that showed the trade deficit narrowed more than expected in March as imports dropped by the largest amount in over six years.

The British Pound is on course to suffer a third weekly loss against the U.S. Dollar on speculation that the Bank of England will continue cutting interest rates as the effects of the U.S. subprime mortgage meltdown continue to reach into the British economy. The British housing market is in as much of a mess as the U.S. housing market, with British courts issuing the most repossession notices in the first quarter of this year since the 1990s.

Euro Rebounds After Trichet Highlights Inflation Fears

2008-05-08T18:17:00.000+01:00

After plumbing eight-week lows versus the U.S. Dollar overnight, the Euro rebounded this morning when ECB President Jean-Claude Trichet told the market inflation management remains the central bank’s first priority. ECB officials believe that inflation in the Euro-zone will remain high for a “rather protracted period”, according to Trichet who spoke at a press conference after the ECB left rates unchanged at their monetary policy meeting. His remarks lead the market to believe the ECB will refrain from cutting interest rates any time soon.

The British Pound rallied against the U.S. Dollar after the Bank of England left interest rates unchanged at 5%. The gains were relatively modest as the rate decision was in line with market expectations.

The New Zealand Dollar tumbled sharply after a government report revealed that New Zealand employers cut the largest number of employees in 19 years. The negative New Zealand data reveals chinks in the nation’s economic armour that could indicate there is less room for interest rates, currently at record highs, to rise any further.

The Canadian Dollar weakened for a second day on news that new-home starts fell at a faster than expected pace last month. The Canadian Dollar has weakened 1.3% against the U.S. Dollar so far this year as America’s economic woes trickle north of the border to infect its largest trading partner, although the Loonie has derived some succor from the high price of oil and other commodities which account for over half of its exports.

USD Rallies after Negative European and Positive U.S. Economic Data

2008-05-07T17:13:00.000+01:00

The U.S. Dollar was back on the offensive this morning after it was reported that U.S. productivity unexpectedly rose at a 2.2% annual rate during the first quarter. German manufacturing orders fell 5% in the year ending in March, compared with an 8.9% increase the prior month. Retail sales in the Euro-zone fell 1.6% in March from a year earlier, the steepest drop since data for the Euro-zone started being tracked in 1995.

The negative European news indicates that the global economic slowdown is spreading into the European economy and although it does not change the general expectation that the ECB will leave interest rates unchanged tomorrow, it does create the feeling that the European Central Bank may feel less hawkish about monetary policy deeper into the year.

The British Pound fell sharply against the Canadian Dollar and U.S. Dollar after the Nationwide Building Society reported its index of consumer sentiment in the U.K. plunged to its lowest level since the survey was introduced in May 2004. The Pound was also hurt by news that factory output fell 0.5%, compared with a 0.4% gain last month.

Fannie Mae Losses Puts USD On Defensive

2008-05-06T17:01:00.000+01:00

Fannie Mae reported a larger than expected loss this morning, raising the market’s fears that the worst of the credit market crisis may not yet be over. News that Fannie Mae, the largest U.S. mortgage finance company, lost USD 2.19 billion sent the Dollar lower across the board this morning. The heightened risk aversion has caused a retreat from the carry trade, which boosted the Yen 0.4% against the U.S. Dollar as of this writing. The Swiss Franc, another popular currency for funding the carry trade, was also stronger against the U.S. Dollar on the news.

The Euro received a boost from European Producer Price data this morning. Producer Prices rose 5.7% from a year ago, the highest increase since August 2006 and more than the forecasted 5.6% gain. Higher than expected inflation data plays well for the Euro because it raises hope that the ECB will keep interest rates unchanged for longer.

The Canadian Dollar is stronger against the U.S. Dollar this morning, despite news that Canadian building permits unexpectedly fell in March. This negative news was offset by the upward stampede of oil prices because Canada is a net exporter of black gold.

The Australian and New Zealand Dollars were both on the advance this morning, boosted by the U.S. Dollar’s latest misfortunes coupled with their own interest rate outlook. The Australian Dollar rallied towards a 24-year high after Reserve Bank Governor Glenn Stevens indicated that the strength of economic growth and inflation may yet predicate further interest rate hikes. While not expected to raise rates any further, the inflation outlook is expected to keep New Zealand interest rates at record highs until the fourth quarter.

Euro Recovers on Speculation ECB Holds Rates

2008-05-05T17:05:00.000+01:00

The U.S. Dollar found itself on the defensive for the first time in three days as speculation that the ECB will leave interest rates at six-highs boosted the Euro. The Euro’s upswing was triggered by ECB President Jean-Claude Trichet, who said he continues to feel there is significant inflationary risk in the European economy. The ECB convenes to set interest rates on May 8.

The Australian and New Zealand Dollars also rose against the U.S. Dollar as commodity prices buoyed them higher. The Australian Dollar was 1.2% stronger against the Euro and the New Zealand Dollar rose 0.7%.

The British Pound fell 0.6% against the Euro and ebbed lower against the U.S. Dollar on speculation that the Bank of England has finished raising interest rates for the time being.

The Swedish Krona rose against the Euro and all but one of the major currencies on expectations that the Swedish Riksbank will leave interest rates on hold longer than the European Central Bank. The Krona was up 0.2% against the Euro and 0.5% against the U.S. Dollar on this rate speculation.

The Canadian Dollar recovered from the three week lows it had been plumbing against its U.S. counterpart this morning. Rising commodity prices, particularly oil which hit record highs, have boosted the Loonie’s fortunes. Commodities account for over half of Canadian exports so the Canadian Dollar is generally sensitive to moves in their values.

USD Rallies Expecting Fed Stops Cutting Rates

2008-05-01T16:34:00.000+01:00

The U.S. dollar rallied to five week highs against the Euro this morning, boosted by speculation that the Federal Reserve will suspend rate cuts and allow time for the rate cuts implemented since September to take full effect. The Dollar was also up against the Swiss Franc, Norwegian Krone and British Pound after the Fed cut interest rates a quarter point and said the previous rate cuts were “substantial.”

In addition to sliding against the Dollar, the Euro dropped one percent against the Yen and 0.9% against the Brazilian Real. Recently there has been Euro-zone data showing chinks in the European economic armour and a slight easing of inflationary pressures. The market feels that European interest rate cuts are now a real possibility, perhaps as early as September.

The Canadian Dollar fell sharply against the U.S. Dollar this morning, suffering its biggest single session loss in six weeks on speculation the Bank of Canada will continue to cut interest rates as the Federal Reserve reaches the end of its current loosening cycle. The loonie (CAD) dipped against all but one of the major currencies after Bank of Canada Governor Mark Carney expressed his belief further rate reductions are necessary after a report showed the Canadian economy contracted in February.

The British Pound was down against the Dollar but up against the Euro after the Bank of England’s financial stability report predicted that the worst of the credit crisis is over and that market aversion to risk will diminish in the coming months. The Chartered Institute of Purchasing and Supply also said its factory-price index rose to its highest level since 1999.

USD Monthly Positive Close Dependent on Fed

2008-04-30T17:08:00.000+01:00

The Federal Reserve will announce its decision on monetary policy at 2.15 PM Eastern time, 11.15 AM Pacific. The market expects the Fed to reduce rates by a quarter percent, but more importantly it expects the Fed to signal that this is the final rate cut in its current loosening cycle. Falling interest rates have been one of the key architects of the Dollar’s recent declines, so the belief that interest rates in the U.S. may have found a floor is very Dollar supportive.

Hopes that U.S. interest rates have fallen as much as they are going to in the near-term has helped the Dollar enjoy its biggest monthly gain against the Japanese yen since December 2001. Rising U.S. stock prices have also helped boost the Dollar against the yen as it has inspired less risk aversion and prompted an increase in carry trade activity. (Carry trade being the practice of borrowing money in Japan at very low interest rates to invest in stocks or other potentially higher yielding investments elsewhere).

The Euro has depreciated 2.8% against the U.S. Dollar since hitting its all time high versus the greenback on April 22. This day saw the release of reports showing both business and consumer confidence in Europe fell to two-year lows. Inflation in Europe decelerated in April from 3.6% to 3.3%. While still exceeding the European Central Bank’s tolerance level, the fact that inflationary pressures seem to be easing raises the possibility that the ECB could become less hawkish on interest rates in the coming months.

USD Rallies to 3-Week Highs Against Euro

2008-04-29T16:27:00.000+01:00

Speculation that the Federal Reserve will signal it is suspending its cycle of lowering interest rates when it concludes its monetary policy meeting tomorrow has helped the U.S. Dollar rally against the Euro and British Pound. Although the Fed is expected to cut interest rates a quarter percent tomorrow, it is also expected to signal and end to the rate cuts in order to give the cuts already implemented the opportunity to work.

The Dollar is on course to enjoy its first monthly gain against the Euro this year, and rallied to one-month highs against the British pound. The U.S. Dollar’s gains were limited by news that U.S. consumer confidence fell to its lowest level in five years, striking 62.3. Also dogging the Dollar was news that U.S. home prices fell 12.7% in February – the steepest monthly drop on record.

The British Pound has suffered its biggest monthly decline against the Dollar so far this year on the back of U.S. interest rate expectations coupled with news that U.K. mortgage approvals fell to nine-year lows in March.

The Australian and New Zealand Dollars ebbed lower against the greenback this morning after a pair of economic indicators raised concerns that the economies n these two countries could be headed for tougher times. New Zealand’s trade deficit unexpectedly widened in March, and the Australian index of leading economic indicators fell in February for the third month.

Market Update - 4/21/2008 - Dollar Weakness

2008-04-21T17:01:00.000+01:00

Euro approaching record highs on ECB inflation outlook. European Central Bank officials continued to express anxiety over European inflation levels over the weekend, keeping fears high that the ECB will keep interest rates at current levels for some time. ECB council member Klaus Liebscher warned that record oil prices are pushing up wages and forcing the ECB to remain vigilant against rising inflationary pressures.

Meanwhile, the British pound stumbled against the euro on anxiety that a Bank of England plan to swap government bonds for mortgage-backed securities won’t be enough to restore lending between British banks. The Bank of England plans to swap GBP 50 billion of government bonds for mortgage related securities, but this is not a substantial amount when measured against the GBP 1.2 trillion in the U.K. mortgage market. The pound fell 1.4% against the euro this morning, its steepest decline against the single currency since March 17.

The Australian dollar advanced this morning on news that Producer Prices rose by a record margin in the first quarter. The news bolstered hoped that the Reserve Bank of Australia will leave interest rates at their current levels, and may even feel the need to extend the cycle of interest rate hikes that have given Australia a substantial yield advantage over most other currencies.

The Canadian dollar slipped against its southern counterpart this morning, hurt by fears that the Bank of Canada may cut interest rates by half a percent tomorrow. Should the Canadian central bank fulfill market expectations, this would reduce Canadian interest rates to their lowest level since December 2005. The Bank of Canada slashed rates half a percent at its last meeting and suggested further dramatic rate cuts may be necessary to help the Canadian economy respond to the U.S. economic slowdown which hurts demand for Canadian exports. Since Consumer Prices rose just 1.4% in March from a year earlier, the market believes the Bank of Canada will feel safe in focusing on stimulating the Canadian economy rather than worrying about inflationary pressures.

Dollar Weakness Continues

2008-04-11T16:21:00.000+01:00

Rising risk aversion boosts yen and Swiss franc; U.S. dollar treading water. General Electric reported its first quarterly profit drop since 2003 which raised investor anxiety about global economic prospects and prompted an unwinding of carry trades.

Carry trades refer to the practice of borrowing funds in countries with low interest rates like Japan and Switzerland for investment in higher yielding currencies like the Australian dollar and South African Rand. When investors unwind carry trades they divest themselves of the riskier assets and repatriate funds to the source countries to pay off the loans used to fund the investments. This helps boost the value of the source currencies.

The Euro continued to exert its downward pressure against the dollar after ECB council member Axel Weber told a press briefing in Washington (where he is attending a G7 conference) that there is “no room” to lower European interest rates. His comments overshadowed German Finance Minister Peer Steinbrueck’s complaint that the strong Euro has had a “massive impact” on Euro-zone exports because the ECB is not beholden to the governments of the EU member states.

The British Pound ebbed lower against both the Euro and the U.S. dollar this morning as traders wagered that the Bank of England will cut interest rates further even as the ECB holds rates at six-year highs. The Sterling dropped to its lowest level against the Euro since 1999 and has depreciated 1.6% against the Euro this week.

EUR/USD - Dollar Tumbles! Opportunity?

2008-02-28T20:48:00.000Z

EUR/USD - Opportunity to Short Euro

Now may be the time to short the Euro. I think the market is underestimating the U.S. economy and has pushed the pair overboard. Now that we've cleared the 1.50 level and currently sitting at 1.5220 - all articles say that we're in "blue sky" territory and that the Euro will head higher. I don't agree and once again believe that the market has stretched a little too far. I'm looking for a 1.50 as the fair value. Will have to wait to see what happens.

EUR/GBP - Current Position Up 40 Pips

2008-02-22T17:46:00.000Z

EUR/GBP - Up 40 Pips, Holding

The Sterling has benefited, although not as much as I expected, from stronger Retail Sales posted yesterday. The EUR/GBP pair had a tough time breaking through .7580 and fell to daily low of .7520. Current position is up 40 pips, I'll continue holding through next week. There is quite a bit of data out next week. For more information, please visit ForexFactory for more detailed economic information.

The graph above shows some technical levels that, if broken, could provide further upside for the Pound.

U.K. Retail Sales Rise .8%!

2008-02-21T18:19:00.000Z

U.K. Retail Sales rose .8% in the month of January, better than the expected .3%. However, there remains a strong resentment and the GBP hasn't been able to gain much ground against the Euro. If data out of the U.K. continues to surprise to the upside, we may see a late reaction and a strong reversal to the current oversold EUR/GBP pair. Next week's economic calendar is packed with important announcements out of the U.S., Euro Zone, and the U.K.

EUR/GBP - Euro Continues Upward? Short @ .7575

2008-02-20T21:13:00.000Z

EUR/GBP - Short EUR @ .7575

Euro continues to surge on all fronts! Thats all I keep reading about. Apparently all modernized economies except the ones in the EZ are experiencing a slowdown. Why the exception? The flow of money is governed by several things: rate of return, default risk (safety), and expectations of future returns. Have international investors given up on the good ol' buck? Apparently so.

I beg to differ. The current cycle that is now being written into history books, is without a doubt overdue. However, currency markets have historically proven to over exaggerate current fundamentals, which are backed up by technical indicators - (or mathematical calculations created by none other than investors themselves, to help deal with the decision making process of buying or selling within trends), which in turn add more reason to the original decision; so we get a snowball effect.

Current news articles state that the Euro will continue to gain ground against the Pound - which has fallen by 8% since establishing the all time high of USD2.10/GBP. In my view, this is a perfect opportunity to short the Euro - again. We may not see any profit materialize for sometime, however, all things that go up, must eventually come down.

USD/JPY +110 Pips - Position Closed

2008-01-23T23:32:00.000Z

USD/JPY: +110 Pips, Closed

Position closed out at +110 points. The stock markets reversed earlier losses and helped bring risk appetite back into the market. Will look to buy more on dips.

I stated in my prior post that my target was 107-108; however, I decided to close it out early given how quickly the market repositioned itself. I'll be looking for another opportunity to re-enter this position, hopefully soon.

USD/JPY - Looking for a USD Correction

2008-01-23T19:52:00.000Z

USD/JPY: Long @ 105.70

The Dollar has been severely oversold in the past few weeks vs. the Yen as the carry trade has fallen out of favor amidst the volatile conditions in the credit markets along with recent news of the U.S. Federal Reserve cutting interest rates by 3/4 percent. As we've been thinking that a recession is among us, there is no doubt the USD should depreciate; however, the Fed's move to cut rates during an "emergency meeting" may just help the U.S. get back on its' feet. My recent analysis of the USD/JPY pair has presented an opportunity to go long USD. The Japanese economy is going to be affected directly and indirectly - during a time that most market participants expect the Central Bank of Japan to keep rates at half a percent. The 105 mark is key to watch as it was key to two of the most recent bounces in the last 24 hours. I'm placing a stop just under the key support, at 104.90.

Target will be 107, but may keep portion of total position until 108, depending on new information.

EUR/GBP - Position Closed/Waiting Further Development

2008-01-17T17:20:00.000Z

EUR/GBP: +100 Points Booked

As many have long expected, the Euro finally broke its' trend and fell by more than 100 pips in the last 48 hours, fueled by weaker than expected EZ economic data as well as dovish comments from central bankers. I'm going to sit on the sideline for now to see how this develops and may take a further short if the price bounces back up above .75

EUR/GBP - Reversal Bearish for Euro

2008-01-15T18:41:00.000Z

EUR/GBP: 8 hour - Beginning of Correction?

Today's minor correction could be the beginning of what we've been looking for. Based on the chart above, I am going to begin shorting the Euro with a .7610 stop. If the RSI falls under 50 on the 8 hour chart in the coming days, I'm going to add fuel to the fire and double my position, dependent on the outcome of upcoming economic data.

European Data Weak - EUR/GBP Corrects

2008-01-15T17:13:00.000Z

Economic data released out of the EU overnight proved to be a bit worse than expected; combined with a higher reading of British CPI, 2.1%y/y vs. 2.0% expected, caused a 50 point correction in the EUR/GBP cross. This may continue as more information is to be released over the next few days: more importantly U.K. Retail Sales set to be released on Friday, as well as any comments Trichet may make during 3 speeches on Wednesday, Thursday, and Friday of this week. We'll see if this continues.

Still looking for a pullback into the .74s.

EUR/GBP Continues Higher

2008-01-14T21:24:00.000Z

I, along with other analysts, continue to be surprised that the market hasn't given in to the fact that worst of expectations have already been priced in to the British Pound. The European cross is currently sitting at the .76 level. I'm going to wait for the release of economic data overnight before pulling the trigger on what I think is a well deserved and needed Sterling correction.

EUR/GBP - Stopped Out @.7500 (-50)

2008-01-09T17:04:00.000Z

The EUR/GBP hit a high of .7502 overnight, stopping the position at .75. This came with bad timing as I was looking forward to tomorrow's EU and UK data helping the GBP. I am going to wait until today's close to figure out if a re-entry is worth a shot as the .75 mark is currently holding.

EUR/GBP - Current .7450, Target .7350, Stop .7500

2008-01-08T18:07:00.000Z

EUR/GBP - 2 Hour

EUR/GBP - Daily

The Euro will be tested this week as traders await Trichet's comments following the ECB meeting on Friday, Jan. 11th. The Pound has come off quite a bit since Nov. high of 2.11 and has recently found support near 1.97 mark. This support is very significant having been a USD resistance level all of 2007. Current technical levels lead me to believe EUR/GBP may come down to .7350 in the next week. More room to the downside is also possible given certain circumstances, which I will follow up on once this target is reached.

Happy New Year! Welcome to 2008!

2008-01-04T23:02:00.000Z

Thanks to everyone for being patient while I have been traveling. I'm back on board for 2008 and ready to get back into the action. I already see some trading opportunities as 2007 closed out with a bang: Euro surging back into the 1.47s vs. the mighty U$D and GBP, setting an all time high for the latter.

Keep an eye on both. The EUR/USD may be in the process of forming a double top - watch the 1.50 mark as this break could push the pair even further. The EUR/GBP may be topping, definitely oversold and ready for a break before hitting the .75 mark.

Data out of the U.S. today wasn't great, NFP at only +18k. Is the ECB falling behind the curve or is this the year they prove themselves to the world that they're the leaders in setting monetary policy?

Temporary Inactivity

2007-09-25T16:29:00.000+01:00

Good morning,

Due to my recent and future travels, I will not be updating this blog for the next few months. I apologize to all the readers and thank you for all the support over the past year. I look forward to updating this blog and sharing my ideas about the Forex market once I am done with my travels. I regret that this comes during a time of historic significance.

Thank you all,

Alex Kazmarck
SpotEuro

More Volatilitiy - More Yen Unwinding

2007-08-15T23:42:00.000+01:00

EUR/JPY - More Unwinding Helps Yen Appreciate

The Yen appreciated at the last minute after the Dow Jones turned a positive day into a negative after closing down 167 points in the final 2 hours. The Yen followed suit, gaining lots of ground against the USD and the EUR. Rumors are now surrounding Countrywide Financial's insolvency if creditors requested the sale of assets at current low prices.

Fed Reserve Bank of St. Louis President Poole said that there are no signs that the subprime troubles are interfering with the broader economy. If this happens to be the case, the unwinding of carry-trades may be temporary.

As of right now, I still don't believe the markets are ready to give up on higher yielding currencies such as the Aussie and the Kiwi. More to come.

NZD/USD Target Hit; Yen Commentary

2007-08-14T16:09:00.000+01:00

NZD/USD - Target Hit

USD/JPY - Volatility Continues

The target on the NZD/USD pair hit the .7275 just moments ago as this was the 38.2% retracement from June 2006 lows. We may continue to see the downtrend continue as appetite for risk continues to linger. Next retracement is .7025 - 50% from June of last year. My focus at this time isn't on any specific currency as I am more interested in how the market digests the past weeks' news. As I mentioned yesterday, once we've come to a fork in the road, history will start to take shape as the market decides the path of least resistance. Logic or emotion? Which will prevail? Most likely emotion.

If hedge funds continue to unload more carry-trades, we'll most likely see new lows on the USD/JPY. Per the weekly graph above, we're finishing up a Fibo 3rd wave down, which leads me to believe the market will either bounce from here or head lower - pretty obvious statement, right? Well, my point is not to bet on either direction but to watch the market as it develops.

Economic data pending of course, I'll keep you updated.

NZD Retail Sales Lower - Turn Negative

2007-08-14T00:02:00.000+01:00

NZD/USD - Weaker Retail Sales/Fibonacci Retracement

Retail Sales just released from New Zealand decreased by .4% vs forecasted increase of .4%. What will the markets do? Reports continue to emphasize Yen funded carry trade unwinding. U.S. data tomorrow may help guide the market even lower. We'll see what happens when the U. S. Producer Price Index and Trade Balance are released tomorrow morning.

Above graph suggests a Fibonacci retracement for the NZD/USD pair to .7275 (current target).

The Setup: News and Volatility

2007-08-13T16:59:00.000+01:00

The best thing to say about last week is that the market has been awakened. By awakened, I mean recent factors have changed the course of direction. The markets have been shaken up and a new path may lay in front of us. More so, I would say that we've come to a fork in the road. The markets will chose the interim direction; however, no matter which path the market decides to take, the roads will inevitably intertwine once again. This is important to understand because the current liquidity crunch we've seen during the past few weeks is only the beginning of something larger. I don't think the markets are ready for that realization.

I think we'll see another run towards higher yielding currencies soon; yet I am not entirely convinced. My only motivation for my statement above is that if a turn around is to occur, it won't be a correction but in fact a more longer term reversal that may last years in which case the Yen will fall under 100. As I've said above, I don't think the markets are ready for that yet.

This week brings a lot of economic data along with a renewed mindset for stronger equities. I hope to see improving global fundamentals, higher inflation, higher global interest rates, and a return for risk appetite.

Economy Stable, NFP 92K vs. 135K Expected

2007-08-03T19:11:00.000+01:00

Data released this morning was a bit worse than expected; however, still in line with the Goldilocks economic scenario.

The market is still primarily concerned with investments funded by high risk credits. This continues to be the story to follow as more and more funds are announcing liquidity concerns. More investment houses have halted redemption from such funds amidst large withdrawals, causing a liquidity crunch and possible fire-sales. Lets go back 80 years and recall what happened to the U.S. economy when banks shut down due to insufficient funds.

I'm not stating any similarities, I'm just pointing out certain facts. Today's scenario is in fact different; we're a global economy and we may be able to write this off. Let's just see what happens.

What Else Would Officials Say?

2007-08-01T23:36:00.000+01:00

Bear Stern froze redemption on a third fund today to prevent itself from having to sell into a market with little appetite for today's mortgage backed funds. (click for full story)

U.S. Treasury Secretary Henry Paulson said he's confident about the strength of the American economy and suggested it can weather the sell-off in financial markets. (click for full story)

Federal Reserve Bank of St. Louis President William Poole said last week's slump in benchmark U.S. stock indexes was a "typical market upset.'' (click for full story)

Brought to you by Bloomberg.com

Profit Taking Today, More Trouble Tomorrow

2007-08-01T23:13:00.000+01:00

USD/JPY - Profit Taking

The title says it all. During the last 4 weeks, the Yen has been appreciating as the risks concerning sub-prime funds continues to increase. More and more investment houses are coming out with bad news relating to those investment. Bear Sterns' 2 funds that have made headlines during this time finally filed for bankruptcy yesterday afternoon and we continue to get reports that more may be on the way.

The Yen hit 117.60 before bouncing back into the 118s and now into the lower 119s. I can say with confidence that this should be speculators taking profit from the multi-year highs of 124. As the markets await more U.S. economic data, I don't think it will be long before the Yen falls further. I've been determined not to make conclusions into the current direction of the USD as I've mentioned many times that I believe a surge will occur prior to a historical correction. We'll see what happens over the next few days. The overnight move into 117.60 and the current bounce is the specific reason I decided to stay out of the market; there is just no telling where its headed.

Commenatry on the Yen: Heading South

2007-07-31T22:22:00.000+01:00

USD/JPY - Weekly - Fibo Levels

I think its worth to point out that the weekly graph posted above is showing signs of Yen appreciation. The reversal we're currently monitoring isn't the first to hit the markets since last year's lows of 109, back in May of 2006. This months' correction is the 3rd and most significant, which is why I would like to assume that the Yen has more room to appreciate. The retracement levels from May of 2006 to this months' high of 124 are pointed out as well. The 38.2% level is exactly today's floor of 118.50 - should the Yen break it, the next level is 116.50, followed by 114.70. My instinct and experience tell me that the market is greedy enough to ignore the warning signs and push the USD higher in favor of higher yields. This is the reason I am choosing to stay away from a long JPY opportunity at this time.

Fundamentally, the USD wasn't able to hold on to a good start this morning after an announcement from Home Mortgage Investment Corp., relating to the company possibly liquidating assets, spooked markets and re-introduced a heightened level of investor risk aversion. Consequently, nervous traders dumped equities (the Dow Jones opened up nearly 130 points and closed down 146) and unwound carry trades to the benefit of the low yielding Yen.

Be careful these days. Danger is just around the corner.

Back To Making Money: Higher Yields

2007-07-30T23:22:00.000+01:00

EUR/USD; EUR/JPY; NZD/JPY

Once again we're beginning to see a turn around as speculators/investors revert to purchasing higher yielding, riskier assets. I don't think it will be long before a 'real' change begins to unfold. The last several months, beginning with February's melt down, have shown what could happen if risk aversion sets into place. The only difference is that the past scenarios have been relatively small and the large reversal is still to come. If the Dollar continues to reverse against the majors while gaining ground vs. the Yen, we should see a large boost prior to a real disaster. The significant boost will be the event to look out for as it will lead into exhaustion; once exhaustion takes place, the size of the reversal could be many times greater than what we've seen in the past 6 months. Until further developments, I don't anticipate last week's slide the beginning of what I mentioned above (although very much possible).

Commentary on Yen Crosses - Reversal or Correction?

2007-07-27T20:36:00.000+01:00

NZD/JPY - WOW! Risk Aversion Reversal

EUR/JPY - Risk Causes Major Reversal

USD/JPY - Speculators Continue Liquidation

During the past few weeks I've become intrigued with the NZD/JPY pair, not only because I thought there was huge potential for a reversal, but because of the impact it had on every other cross pair. The last few weeks may have confused the market as to the direction of the carry-trade.

Let me go back a few weeks when on June 14th, I discussed the opportunity for the Yen to hit 125+ (click here for article). After discussing my reasons for 125+ I mentioned that I was hoping to call the slide back into the 115 territory soon enough. Unfortunately, the 125 never hit (for now anyways) and I wasn't able to predict the current slide into 118s. I begin to wonder, is this a correction or a reversal? My gut tells me its only a correction and we should see another swing towards 125. On the other hand, the volatility that currently resides in the market may prevail and the current shift in momentum may be strong enough to continue; lets keep in mind that the current movement began with the sub prime jitters that has affected other areas of leveraged credit. If this blows over quickly, bond yields rise, stock market continues to make new highs, and the Yen pairs begin to appreciate once again.

On June 26th, I mentioned how volatility may build on itself and continue to help the Yen appreciate in the coming days; I only missed the timing as the volatility picked up July 8th and we saw another bout of unwinding of Yen carry-trades.

On July 11th, I posted a graph of the NZD/JPY pair, questioning if the 2nd wave of Yen appreciation was the beginning of a recovery; once again pointing out how volatility could increase the chance of further Yen carry-trade liquidation. July 11th through the 22nd saw the NZD/JPY hit new all time highs as speculators continue to accept higher yields in the wake of volatility.

We are now in our 3rd string of corrections; first one taking place June 23rd, second July 8th, and the current, largest, more significant correction has taken the Kiwi from an all time high of 97.50 to today's low of 90.43 - all in a matter of 3 days. My fears are that I may have missed the opportunity to short the New Zealand Dollar and that this may be a reversal. We'll have to see how it plays out in the coming week as more U.S. data supports the case for a strong recovery that may alleviate some of the ongoing credit fears.

I am on the sidelines until further developments.

USD/NZD - Carry Trade Unwinding

2007-07-26T16:21:00.000+01:00

USD/NZD - Breaks Through .80

The Dollar continues to gain ground against the NZD after New Zealand Central Bank Governor Alan Bollard suggested the interest rate increase to 8.25% may be last. Concern over international credit risk is also fueling the unwinding of carry trades. Tonights economic data out of Japan may hold the Yen from appreciating any further as the CPI is forecasted to report in negative territory (-.1% y/y).

The USD/NZD pair has made a nice adjustment to the lower .79s (graph above). I am not sure how long the jitters regarding America's sub-prime and mortgage markets will last so I will leave the NZD pairs alone for now until further developments. I am now more interested in the USD/JPY pair as it has fallen below 119. As I've said before, I believe a move towards 125+ will occur sooner than a correction to below 110.

NZD - Overnight Update

2007-07-25T15:03:00.000+01:00

USD/NZD - .7999 Direct Hit

Just as expected, a small rebound in the USD/NZD overnight led the pair to .7999 but wasn't able to break through that barrier and quickly retreated to the lower mid .80's. I would consider .80/NZD going forward as a heavy floor that will be difficult to break through, unless it happens this week.

More U.S. economic data this week and today's Interest Rate announcement in New Zealand will play a big role in determining the direction of the pair. I still believe that the Kiwi has more room for appreciation, data pending.

Dollar continues to appreciate despite weaker Existing Home Sales data.

NZD Commentary - Overnight

2007-07-24T22:30:00.000+01:00

USD/NZD - Technical Rebound, Under .80?

At this point, I think the NZD is a bit overdone, at least for the night, going into tomorrows U.S. existing home sales. I am still trying to formulate my thoughts as to what the market is doing and how I'd like to engage the next few weeks/months. I believe that there is plenty of concern for hedged carry-trade bets as well as the housing markets in th U.S - so to say the least, the carry trade may prevail until we get a better understanding of the sub-prime jitters. I think the opportunity would be the NZD. It has been volatile and I wouldn't be surprised to see it come under .80 tonight. Technically driven until more data.

How Will The U.S. Economy Impact FX?

2007-07-18T19:08:00.000+01:00

USD/JPY - Testing Ceiling

As you may have noticed, over the last few days I've concentrated mainly on the New Zealand market. The reasons are clear that this will be the currency of choice to short when the time is right. However, I've decided to hold off on writing much more until further developments in the cross pairs, not EUR, GBP, or AUD cross but specifically the USD/NZD and NZD/JPY. Sooner or later these pairs will come crashing down, not because of fundamental reasons but because of volatile market conditions.

Recent fears regarding sub-prime mortgage backed assets is only the beginning. Bernanke himself noted today that he is concerned about the housing sector affecting other parts of the economy; I don't see why the Dow Jones should be setting record highs (boosted by stock buybacks and M & A activity) at this time, unless the market's outlook is incorrect. If the above fear materializes and the housing downturn spills into other sectors, I see the Dow coming back quite a bit, which may cause a big pull out of foreign Dollars. This will only exacerbate the currently weak USD and spill over to the JPY positions causing speculators to begin unwinding their carry-trades.

As I've said several days ago, the 2 point drop in NZD/JPY last week was only a fraction of what may happen if the above fears come true. We have already started to see the Yen begin to strengthen against the USD. Amids all this talk, lets not forget ongoing political tension in the Middle East.

I'll be monitoring the GBP over the next 24 hours and will post another update later today.