EUR/USD Analysis

The USD still looks neutral against a basket of currencies as compared to the rest of the G10 countries, even if the EUR/USD still appears to be in correction mode due to a broadly weak Euro - strong support comes in not much lower in the key 1.4450 area, which must be taken out to start any credible downside technical arguments.

A recovery back above 1.4650 is needed in the near term to aid the argument for a rally back to the recent top.

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Another Pointless Photo-op!

The G20 is happening as I write this, located in steel town USA, Pittsburgh Pennsylvania, one of the most depressing places to be at the moment as its 15% unemployed sit on the sides watching the rich and powerful converge on their domain.

The idea that this meeting is going to accomplish anything substantial is obscene, the recent G20’s were nothing more than a show, a photo-op for the leaders of the World to look like they were getting along and doing something – but time has proven that this was nothing more than a charade.

The interesting issue at hand here is the Forex traders, who have been anxiously awaiting what will happen in Pittsburgh. The tabloids want to know the dirt, while the finance people want to know the scoop – but in the end, there will just be a bunch of bull.

The fact is, these guys need to look like they are working together and that they get along, but in reality they do not. The old adage of “what’s good for me is not necessarily good for you” is very much at play here.

Take the China-US argument over tire tariffs as an example. These two mammoth nations, arguably the largest economies around, are trying to work together to solve global economic problems and here they have a fundamental disagreement over US policy.

China wants to sell the US tires, they are cheaper and they (Chinese tire imports) make up about 30% of the overall US tire industry.

But the US, under pressure from unions and interest groups just issued a special tariff on the tires that China equates with protectionism.

Now, as global leaders working toward a common goal, one would think that they could find common ground – but they cannot.

If the G20 decide that the US must lift the tariff (this is not their call – but use this as an example) do you think the US really would? Of course not.

So how can the world of Forex trading and equity markets hold their breath waiting for something tangible. Everyone in that room is interested in their own issues – and if a policy proposal is in contrast with those issues, there can be no agreement.

Bottom line, keep to the numbers – don’t rely on the words being spoken by the world’s leaders – keep your eyes on how their economies are fairing and trade accordingly. This is the only true smart play.

Trade safe.

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A Kiwi Surprise

Highlighting my theory that nothing big is happening this week because of political and inter-governmental distractions such as the UN convention in NY, today sees the Forex world doing back flips over the GDP numbers out of, of all places, New Zealand.

Yes, the kiwi is soaring to heights unseen in well over a year. And what was this stellar number out of the land of good wine, Rachel Hunter (if they did nothing else in their history, giving the world Ms. Hunter would have been enough) and a green fruit?
The GDP of kiwi-land grew by a seasonally adjusted .1% - a tremendous achievement that deserves of all the fanfare it is getting.

I am 99% certain that if the investment world was actually focused on their profession this week, this would be a non-story.

All kidding aside, considering that the New Zealand GDP was expected to contract by .2%, the miniscule rise takes them out of recession, officially if not practically, and demonstrates yet another emerging economy that is faring better than the world’s leading industrialized nations – (throat clearing sound) like the US, Britain and Japan.
Forex traders are actually riding a wave that is continuing the cycle that started down under with Australia.

The south Pacific is becoming the place to be as of late and the economies of Australia and New Zealand are beginning to provide more options for investors and traders alike.

I do not believe that this would be possible if there was not a crisis going on, but the fact that there is one gave the down under dollars a chance to prove their true worth.

In an environment when the “big-boys” are struggling hard, to come to the point where you are thriving – or at least perceived to be thriving is an achievement.

Without the credit crisis and subsequent recession, the opportunity to shine never would have presented itself.

For the lack of anything else going on in the Forex Online Market today I close this day’s jaunt from anything interesting by saluting the New Zealand economy on their tremendous achievement and while it is strange that the Kiwi is leading the rally in the major’s today – let them know to revel in this moment as it will not be long before this news is old news.

Here is your fifteen minutes kiwi’s – and thank you for Rachel Hunter. Trade safe.

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The Stare that Changed it All!!

So Monday seemed to be one of the most boring trading days of the year. With nothing that compelling to trade upon, investors followed the same old pattern of shoring up their positions in advance of a US Federal Reserve meeting – not that there was any reason for it, it seemed almost habitual.

The UN is meeting in New York for their big annual opening ceremony and the G20 will be meeting in the US on Thursday, the world is waiting for the outcome of these events and I personally think it is giving the investors a minor break.

As I foresaw yesterday, the equity markets are beginning to turn downward and the safe haven flows are trickling into the Yen and USD again, but it is not like it used to be. The Dollar is in trouble and everyone knows it, including the US President, Mr. B.H. Obama.

Sunday was a day like no other in US history - the US President went to four news studios to be interviewed on their notorious “Sunday Morning Talk Shows” – a US pastime in which hot political topics are securitized by a panel of so called professionals and occasionally an official from the administration is interviewed, but rarely if ever at all has a sitting US president participated. As well, Mr. Obama also hit the late night TV circuit, usually a lighthearted comedy style talk show, and again, a sitting US president has never done this before.

The topic of the conversation was primarily about his health care reform, an increasingly unpopular policy that is struggling for survival in the US. But the talk show hosts repeatedly went over to the state of the Dollar – and Mr. Obama repeatedly brushed off the questions as not being the most important thing facing the US at the moment. This worked until one moderator, George Stephanopoulos who used to work for President Bill Clinton, tied the concerns people have over health care reform to the state of the Dollar.

Pointing out that the 1 Trillion Dollars needed for the program will serve to only inflate the US currency. Forex traders should have seen the face of the President at this point - it was as if someone had taken the dessert off of his plate.

The face said it all, and his words after that meant nothing – although he denied that the two are interlinked and gave some half-baked answer using words and terms most people do not understand.

The fact remains though that this is the reality. The US Dollar is in trouble. The UN wants to change the reserve status. The Chinese want to change it as well. The Russians are playing the same game and the US does not seem to think there is an issue. Watch as the Dollar trends downward, and watch as the world becomes more vocal about US spending policy.

I said yesterday to keep clear of the Pound – and after watching the US President squirm, albeit only once, at a tough currency related question – I am leaning towards putting the UISD on that list too.

As a Forex trader I can tell you, there was more behind that look he gave, and I am not one who wants to wait it out and see what he is hiding, because it cannot be good.

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Automated Forex Trading: Some Interesting Facts

Is your overwhelming debt burden giving you sleepless nights? It really makes you feel bad. You have taken money from your family members and acquaintances. Banks and other lenders have turned you down. If you’re troubled by this type of a situation, you should look for some really good profitable ideas and tips to combat your debt. You might be astonished to hear that automated forex trading can help you in debt settlement. Making investment in forex can alleviate your financial problems. You can use the money made from forex trading for settling your debts with a debt settlement program.

When you’re into forex trading, your main goal as an investor certainly is to gain profits from foreign currency movements in the market. There is a range of income-generating opportunities in the forex market and some of them are as follows:

• Zero commission trading options
• 24-hour trading
• Unrestricted accessibility to forex dealers all over the world
• Opportunity to make money from both rising and falling markets
• For leveraged trading, the investors have the chance to trade with low margin
  

To put it briefly, if you truly have a serious approach towards making profit, forex investment is an appropriate option for you. With the arrival of automated forex trading, the forex investors have been successful to manifold their investment in the forex market. Some of them even claim that they have not experienced any losses from 1999 when they commenced using automated forex trading facilities.

Some of the significant advantages provided by automated forex trading include the following:

• The initial investment is small
• The forex market is a large market where the volume of currencies traded is worth trillions of dollars. If you take the help of automated forex trading, it becomes easier for you to trade.
• Automated forex trading can help you trade round the clock or 24 hours a day.
• The forex market is highly volatile. Automated forex trading helps you by managing your risks.
• Under an automated forex trading system, there is no restriction about the volume of trading.
• For investors who are using automated forex trading system, large fluctuations in forex prices signify good profit.
  

Nevertheless, it is worth keeping in mind that nobody can control the forex market. Despite the reality that more and more people are using the automated forex trading system, they don’t have the capacity to control the market.

Within one or two days, automated forex trading system can convert hundreds of dollars into thousands of dollars. The most important aspect of automated forex trading is that you don’t have to be an expert in the domain. You only need to install the program and the rest would be managed by that.

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Big Wheels Keep on Turning - Will they soon Stop?

What can save the economy? If anyone had a clue I am sure they would have done it already, but the fact remains that no one is sure as to what is going to happen.

The speculation of the traders is that the crisis is over, the stock markets are n their way to record September highs while the Forex market is providing good returns for many of the major currencies.

The one to suffer seems to be the US Dollar, and many are even attributing this to enthusiasm about the return of risk appetite – there is no need for a safe have now.

But as usual, I tend to not agree with this philosophy. There is a disturbing trend in the Australian Dollar and Japanese Yen – typically, when one rose broadly, the other fell, but this is not proving to be the case at this time, in fact, they are almost mimicking one another.

It is as if the Aussie has replaced the greenback as Japan’s safe-haven compatriot, but this too is not the truth. The JPY is getting a boost from a newly elected government which is promising to change the way things have been done for 50 years.

Can you imagine, that in 50 years the same party has led the government? That is mind blowing to me and yet as the Japanese people watch history in the making, the new government, the ultra-liberal government, is hinting that they do not care to intervene in “trivial” matters such as the plight of the currency on the Forex market.

Investors have been finding this way of thinking to be refreshing and great – “quick, mom and dad went away for the weekend, let’s have a party” or “ooooh, the candy store is empty, lets raid it” – they are like unattended children.

This cannot last. In contrast, the strides that the Australian Dollar has made are real and true. The economy is not as bad as some of the larger Western ones and the commodity rich country is benefitting from a sharp rise in core prices. This is the real deal and I believe that this will continue. There might be some profit taking in the Aussie, but the overall trend line will be upward.

The economy as a whole is poised for a comeback, but with too many unknowns right now, the Forex traders need to proceed with caution.

I hold that we will see another drop in GDP and production in the coming months, I believe we will see banks fail – or struggle – as I have written before under the weight of the commercial real-estate market and illiquidity issues. The need for vigilance is apparent, trade safe and keep your eyes open.

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Years of Colonialism is the Sterling's Saving Grace

Moody’s came back yesterday to haunt the British Treasury. Nearly six months after the rating agency lowered the rating on the sovereign nations debt, they came back yesterday with a warning that the country will be in negative territory for the next year to year and a half.

With all the whispering about the true state of the UK economy, publicly seen as stabilizing while privately seen as fledgling, the independent auditors at Moody’s has seemingly undermined political efforts to paint a brighter picture.

The result of this effort was a drop across the board in the Sterling, which has not performed as bad as it could have been after the parliamentary corruption scandal of the early summer. In fact, British lawmakers have been scarcely seen on television or the newspapers for that matter, keeping a low profile to avoid any further scrutiny that could bring back the calls for a House of Commons overhaul.

To this end, even the Exchequer, Alistair Darling and Prime Minister Gordon Brown have been less than visible since the scandal – only talking when necessary and not really saying much when they do.

It should not come as a surprise that Moody’s found the British economy in bad shape and is forecasting a bleak immediate future. With record unemployment, manufacturing and exports down to 50 year lows, cost of basic goods rising considerably and increasing poverty at the middle class level, it is a given that they are in trouble.

However, the opinion I hold on the fate of the Sterling in relationship to the current economic climate is bold, by any accounts, and contradictory to the Moody’s report. Here is why:

I believe that the Sterling is one of the most fairly valued currencies in the Forex online market at this moment because of Gold. The UK spent hundreds of years pillaging and plundering the nations of the world for every natural resource it could find, especially Gold.

So the past 60 years has seen the Brits give back the land they occupied, the deals did not include the treasures. The UK has by far one of the largest collections of Gold reserves, next to the Vatican of course, and the price of this precious metal has been on the rise topping $1,000 per ounce last week.

Even if the economy spends another two years in depression, the value of the Sterling can be stable based on their reserves. I am not a fan of the British economic policies and I do believe that the ease in which they have gone about spending citizen funds on bailouts has contributed to their situation, but I must respect the almighty Sterling – it has for a long time, and will for a long time to come, be worth every penny (or should I say quid?).

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American Policy Threatens Dollar Stability - Again

A trade war is brewing between the world’s largest debtor and the world’s largest lender – and the ramifications could prove very costly. Over the weekend, in a very quiet and contrite manner, the US government imposed a 35% additional tariff on Chinese made automobile tires.

The Chinese, since finding this out via a news source rather than an official communication, have accused the US of protectionist policies and referenced the manner in which the tariff was imposed (in the dark of night) and the manner in which it was disclosed to them (via a Reuters report) to prove this point.

The Obama is under immense pressure from internal lobbyists for the Automobile parts industry, which claim that 5,000 jobs have been lost so far as a direct result of the mass influx of cheaper Chinese made tires.

Coupled with the declining popularity of Obama’s policies and administration as a whole, the pressure caused them to make a serious mistake in enacting this policy – and I have to agree with the Chinese that the manner in which it was enacted and disclosed was irresponsible.

The ramifications of this deal will only serve to hurt the US Dollar moving forward. If Forex traders perceive the US to be losing favor with China – and if it was not apparent this was happening until this point, be sure that this surely seals the issue – they will stay as far away from the Dollar as they can.

China has already been converting their Dollar reserves to commodities like gold and platinum, they have already slowed down on their purchases of US Government securities to the point that the largest buyer now of US debt, is the US Government itself. This action will only worsen the situation moving forward.

The Dollar has been beaten on the Forex Market – down to yearlong lows against a basket of currencies. Forex traders cannot afford to have the US Dollar further harmed by inadequate policies that were borne out of politically motivations.

As President, Obama needs to stand strong for the greater good of the country, and this means if he has to say “no” to special interests for the greater good, he needs to do so. His legacy will be better served by doing the right thing for the long term than it would for appeasing a specific group who is making a lot of noise in the short term.

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Another lesson in Research - Its all in the Interpretation

Yesterday, a European central Bank board member gave an interview in which he admitted that there are signs the economy is picking up much quicker than was initially estimated.

The news outlets portrayed this as a sign that the “powers that be” are openly admitting that the turnaround has come and is in full force too. However, after reading the article in depth and a few statements he made after the interview, I am not so certain that he meant to bring elation to the Forex marketplace.

In fact, what he said was a word of caution, not promise and it was the media, yet again, which spun his words to become the precursor for celebration.

Christian Noyer, the ECG governing council member said specifically that he did not believe that there was room for overly optimistic sentiment at this stage. He said that there have been signs, good signs that the economy is rebounding and doing so at a faster rate than anticipated, although these facts are puzzling to the board right now.

I equate what he said to a man who’s legs were badly injured in a car crash – the doctors say he will walk again, although it will take a long time of hard work and physical therapy, to rehabilitate them. Just because he begins to wiggle his toes sooner than doctors thought, or just because the feeling returned to his calves does not mean that he will be running a marathon anytime soon – or walking unassisted to the bathroom for that matter.

The economy was hit hard, and there was much damage, internal and external as a result. There are many elements to this crisis and just because some areas are improving at a faster pace than was thought, does not mean the system as a whole is poised for such a rapid recovery.

We all need to put these things into perspective. Noyer was very clear in his caution, he said that the Central Bank and local governing bodies needed to holds steady on fiscal stimulus policies as right now, this is the one thing that is helping the growth.

Many on the street, Forex online traders and online Forex bloggers included, are anxious to have the governments stop funneling money in to the economy at such a rapid pace and they point to the “recovery” at hand as proof that it is no longer needed.

What I got from Noyer’s statements was that if you eliminate the monetary intervention into the economy at this point, you lose the recovery.

I am not a fan of many of the stimulus packages that were introduced around the world. I am a free market capitalist in my basics and I was anti-quantitative easing policies in the beginning – and to a large degree still am.

But I do admit that to an extent it has helped certain industries and is the reason why GDP in some countries are on the rise. I also believe that we all will pay for this in some form later on down the road too, but I see a point to it all. To eliminate the programs at this stage will undermine the good that has come from it, and set the economies back in a double-dip recession and this is something we cannot afford.

There are still dangers out there and we need to understand this. Patience here will prove to be virtuous. And as for the media outlets that are mincing words and leaving out meanings that can only be derived from the tone of voice and circumstances under which things were said, they are simply looking for a good story to tell.

I have and always will caution my readers to take what they read at face value and if they want to really know the deal – research and read and form your own opinion. A well informed trader will always be successful.

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Making my Dreams come true Down Under - The only bright spot these days!

The US got a shock yesterday on their first day back from a much needed summer break, as the Dollar fell across the board and whispers about the Dollars viability in the future as the primary reserve currency kept the greenback down.

Gold went over $1,000 for the first time since February, in a clear sign that the new safe haven is the old standard. The US government is unraveling, congress is under fire, the Dollar is under attack and it is not getting better.

Yesterday, China restarted their rumblings about the US’s habits of printing money, Switzerland surpassed the US as the “World’s Most Competitive Economy” and the word on street is that even the faithful French are beginning to become concerned over the ability of the US to sustain its debt load.

I spoke about some of this yesterday and it is a recurring theme – so expect more tomorrow as this is the story that does not end.

The key event this week is shaping up to me the Bank of England’s meeting. It is expected that they will not change interest rates, however as I mentioned yesterday – it is their stimulus measures that are of most concern to the Forex world.

The instability of the British government over the past few months have left few with any real confidence in their ability to 1) tell the truth and 2) manage big problems. Forex trading is tricky enough when you have to interpret data and trade on that – but to try and guess what a government policy is after they explained it makes it next to impossible.

The Brits have not been clear as to what they are doing – and they have gone out of their way n several occasions to be vague – I really do not expect this to turn out well for them this week. But who knows, they might surprise.

The Aussie is still my favorite – the unemployment is going down, the commodity prices are going up – trade is improving and the Australian Football season is nearing a close, which means the attention will now focus on manufacturing once again (it is widely known that during the AFL season, the blue collar workers in the mines and on the lines tend to ease back a bit – production usually picks up as the AFL season ends).

The Aussie is nearing highs not seen in a long time, it is up hard on the Dollar – even today it is above .857. Had you all been listening to me from the start you might be smiling now, I know I am.

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Keep your Eyes Open and Pray for the Best

The vacation is over and we are about to enter a critical point in the life of this economic downturn. While all the players involved, from Central Bank figures to generic politicians spin the recovery story, alarming data keeps coming out that seeks to undermine this thought.

The notion that all the data is bad is wrong, there are some signs of life though, particularly in Australia and parts of the EU, however it leaves us not with a sense of an imminent recovery, rather a feeling of a protracted one.

It seems from the news reports of this past weekend’s G20 meeting that the Central Bankers themselves have toned down their enthusiasm. Jean-Claude Trichet, the ECB President gave cautious words last week, highlighting the fact that in the towers of the powerful, uncertainty is prevalent.

The US itself is having a severe credibility issue. While their in-house economic analysts predict recovering unemployment and sales figures, the actual data is far off from their estimates. Last week we saw what was expected to be a decline in unemployment result in an increase that has brought the US to near 10% levels – 9.6% to be exact – a 26 year high. So we need to ask now what is really going on. And I fear, as my skeptical self has for months, that the answer is elusive, no one really knows.

By all accounts, the Australian Dollar is by far the best performer of recent weeks – and this comes at the expense of the US Dollar which hit a year low against the Aussie yesterday. Unemployment is looking to taper down a bit as a browse through the classified ads of major Australian news outlets shows a marked increase in job postings – we will find out the real deal on Thursday.

The Bank Of England is the one to watch later this week too, as they meet and will undoubtedly find reason to spoil any party that Sterling buyers were planning – my bet is that they will not wind down their quantitive easing policies and could, in fact, increase them.

The issue at hand that Forex online traders need to look at moving forward is the commercial real estate business. While the housing issue seems to have bottomed out and is slowly inching higher, the commercial market is more depressed now than at any point in recent recorded history.

Many of the loans used by developers and agents to build and buy property to rent them out will be coming due in the coming months, and just a walk down SOHO in London or SOHO in New York City for that matter will tell you just how that will turn out.

With many malls hosting empty stores and many retail giants paring down their operations in many locations, the prospects for the health of the commercial real estate market are grim.

We are about to enter the holiday season, traditionally a buy-fest for consumers – yet confidence around the globe is low and with double digit unemployment, many people will choose to pay their rent or electricity or grocery bills before buying the latest Barbie Doll for Christmas. We are a long way from recovery – even if the leaders of the world choose their words carefully to give the impression otherwise. Don’t be fooled and read for yourselves. The Forex market will not be kind to those that tow the party line – if you want to succeed in this online Forex space, trading the majors needs to be done with caution.

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As the Fire of Rome Start to Burn – Stand Back or You Might Too

What can I say about the US that will not make it seem as if I am truly pessimistic about their economy? The President had a bad summer, the Obama honeymoon is not only over, but according to the polls the divorce might be in the works.

Never before had the US seen a president with 70% approval ratings at the beginning of his term, drop below 50% in the first year – and this is a country that had Jimmy Carter, Richard Nixon, George W. Bush and Gerald Ford as their leaders.

So fine, much of the issues that Obama has is a result of a targeted campaign against his health care reform – but it runs deeper than that and his policies will prove to be a deterrent for growth in the US Dollar in the coming months and years.

I recall very clearly how Obama complained for the first three months of his presidency how he inherited a 1.5 Trillion Dollar debt from his predecessor, GWB. But how can he explain how this debt has tripled in the first eight and a half months of his presidency? And how can he explain how the projections are that within three years, the overall debt will be on par with the overall GDP of the nation – that is to assume the GDP stays as is which is unlikely in this depressed economic climate.

I was doing some back reading over the weekend and came across some interesting facts. Prior to the inauguration, Obama asked Bush to release 500 Billion of the 1 Trillion Dollars of the stimulus package so that it would be available for him on day one to start putting to use.

Aside from this, Obama and the Democratic led congress voted for the Trillion Dollar bailout which helped no one but Wall Street bankers get Christmas bonuses. So by my calculation, Bush left him with a half a Trillion Dollar debt – Obama and his party had a hand in the other Trillion.

How does all this play into the Forex Online? With Gold inching closer to $1,000 per ounce, a milestone, we see the Dollar collapsing – Gold is the new greenback – the new safe-haven if you will. The interest on the debt the US now carries is more than the annual budget for the US’s five largest cities – and this number is growing and growing.

With Treasury auctions coming up nearly every week now, by year’s end the US will surpass in debt, the entire GDP of the South American Continent. The Chinese are having issues of their own and this will play a big role in how those auctions go – end result will be the US Dollar will suffer as demand shrinks and reality of a country that is so mired in debt and political upheaval sets in on everyones mind.

In my existence I have seen protests and demonstrations against US policies – but I have never witnessed this level of internal unrest – not from anarchists but from middle class housewives and business men and law abiding citizens.

The scenes are disheartening and reinforce my idea that Forex traders need to stay away from the Dollar until the US can sort its issues out – both domestically and economically.

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Interesting Week in Forex Trading Arena

This week has been a strange and yet interesting week on the Forex Trading arena. The volume has been incredibly light, due to end of summer festivities in the US and Canada and Western Europe, however the flow of data and information has not ceased.

We have seen officials declaring the recession is over, and yet only a few hours later a piece of data comes out that contradicts that idea. And we have seen the Dollar getting bounced around.

September in the stock market is normally the worst month, about an average of 3% loss are recorded each year since 1929. While October is the “crash month” (last year alone the market fell 13% in October) the downfalls are few and far between – so September is the hard month.

A reason for this is that people come back from vacation and pull back their investments to gage the market and see what has happened – a portfolio reshuffle is how brokers define it.

In the Forex though, it is different: A down market typically means a stronger currency and although this works out most of the time, this year, 2009, we are not seeing this trend.

The worries that investors have now are no longer just about which company will do better next year, or which company is poised for a breakout, the concern is based on governmental activities and it is affecting the Forex’s relationship to stocks.

As currency is a true indicator of how strong a country is economically, traders have begun translating this into their stock holdings as well. Which company will be most affected by government legislation or which organization will fall under a new law or which bank will need money?

The Dollar has been falling this month – in tandem with the US stock markets. The question remains for Forex traders, will this trend continue and if so, how low can it go?

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Dollar experiencing a Seesaw Ride

The Dollar fell broadly on Wednesday, after an informal data release showed a higher than expected rate of unemployment. US employers in the private sector shed 298,000 jobs in August according to the ADP payroll report.

The Dollar initially rose on risk aversion sentiment, however continued fears over the mounting governmental debt load along with a very light volume combined to bring the Dollar down in late session trading.

The ADP jobs report is an early indicator of how the official government “non-farm payroll” (NFP) report will look. The NFP report is set to come out on Friday and includes both public and private industries.

The consensus on the Forex market is that 225,000 jobs will be reported as lost, although with private industry alone shedding close to 300,000, the NFP is likely to disappoint.

At 11:00 PM GMT, the Dollar was down .42% to the Euro to 1.4282, down .9% to the Japanese Yen to 92.15, down .85% to the British Pound to 1.6286, down .05% to the Canadian Dollar to 1.1041, down 1.2% to the Australian Dollar to .8357 up .2% to the Kiwi to .6736 and down .55% to the Swiss Franc to 1.0594.

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Sitting on the Fence – China and England Watching the Economy Go By

The Chinese stock market has all but collapsed the past several weeks, falling off nearly 25% in a six week span overall, capped by a 6.7% drop yesterday. The causes for concern in the Forex world relate specifically to the Dollar.

As you might recall from several weeks ago, I spoke of the Chinese selling off some of their US treasuries and diverting that money to support their commodity purchases.
This tactic is proving to be detrimental to the short term stability of the Chinese economy, as with the information on the stock exchange shows that industry is not moving, which means the metals and durable goods they are buying are sitting in warehouses, instead of feeding the economic machine.

For the US Dollar this is a signal that could spell out a difficult Fall/Winter once again, as China commits more money to helping their own corporations and diverts more and more funds away from Treasuries.

Already, the US has held three Bond issue auctions in which the Chinese bought nothing – a fact that is not getting as much attention at this stage as it should. I would bet, since my blogs have been a few weeks ahead of the mainstream news, that this will become a bigger deal in the coming months, as more auctions go by and China continues sitting on the sidelines.

Aside from this, we have the British Economy which is sputtering along, as it seems the politicians are doing nothing. Political sensitivity aside, the Sterling has been suffering because the establishment in Parliament is still trying to get over a spending scandal which dominated the headlines for two months. They are timid and afraid to do anything significant for fear of more backlashes, so they are also sitting and watching.

What Forex investors need is a clear sign from governments, that they are doing something, being proactive and working to turn the economy around instead of hoping that it will all by itself.

This week will be a slow one, many in the US are off for the week, and Europeans are spending the last week catching the remnants of the summer sun. The ECB meets this week – don’t look for anything shocking there – they too are catching rays.

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