Cheers Turn to Jeers as D-day Nears!

EUR

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

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

USD

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

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

AUD

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

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

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The Bulls are Back for Now, Dollar Pays the Price

USD: Risk Appetite Returned with a Loud Bang

As investors bought up European and American stocks the US Dollar suffered on Monday as risk appetite returned with a loud bang. Part of the reason for the lack of demand for the safe haven Dollar was a report out of China that showed a 9 month high in manufacturing activity and a 3.2% rise in US home sales. The theme of Monday seemed to be a fundamental shift in investor attitude as fears of a deepening recession retreated and the bulls came back – if only for a short while. Thursday the US government will release the results of the bank stress tests and already there is speculation that the results will not be received well. Wells Fargo and Citigroup, it is rumored, will require additional funding and Bank of America is denying that they will. In all, of the 18 banks surveyed, it is thought that nearly half of the banks will require more capitalization. Forex online experts says if this turns out to be accurate, it is a sign that things might not be as rosy as investors feel they are today.

At 9:00PM GMT, the Dollar was down .93% to the Euro to 1.3392, down .3% to the Japanese Yen to 99 even, down .42% to the British Pound to 1.4982 down .75% to the Canadian Dollar to 1.1763, down 1.14% to the Australian Dollar to .7387, down .84% to the New Zealand Dollar to .5741 and down .75% to the Swiss Franc to 1.1271.

EUR: Investors Cautious on the Euro Ahead of the ECB’s Policy Meeting

The Euro fell early on Monday as Axel Weber; a European Central Bank member said that Germany will not start to see economic growth until the second half of 2010. However after the news out of China and the US, the Euro recouped some of its losses. Investors still seem to be cautious on the Euro ahead of the ECB’s policy meeting. The ECB is expected to lower their core interest rate by 25 basis points to 1% and announce a quantative easing plan that includes the purchase of securities to stimulate growth and lending in the 16 country Euro zone. Until now, ECB members have been holding a public debate about how far to go with the stimulus plan and investors will find out who won.

At 9:30PM GMT in the broker trading boards, the Euro was up .83% to the Japanese Yen to 132.61, up .52% to the Pound to .8938, up .22% to the Canadian Dollar to 1.5762, up .16% to the Swiss Franc to 1.5096 and down .24% to the Australian Dollar to 1.8125.

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

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

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

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

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

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

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G20 – The dawning of a new world order.

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

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

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

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

Hang on.

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President Obama signed PORK!

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

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

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

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

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

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Trade Online Forex with Major Currencies

EUR

Christian Noyer, the European Union Central Bank Governor, made some key comments today about the EU’s economic policy and as a result, online Forex brokers and investors traded the Euro sideways most of the day on Tuesday. Governor Noyer had said that the Central Bank was mulling over “unconventional” monetary policies in order to stem a dire economic situation in much of the Eastern and some Western European countries. This declaration tempered the Euro, which had earlier posted decent gains, because traders did not seem to like the vague reference to unconventional methods. If the politicians could learn anything in this crisis, it is that the markets do not like uncertainty – and the words “maybe” and “perhaps” are as uncertain as they come.

At 5PM GMT, the Forex brokers were trading the Euro up slightly to the GBP at .8967, slightly versus the CAD to 1.6277, slightly to the Swiss Franc at 1.481.

USD

After a dismal day on Wall Street, Monday, that saw the Major Stock indexes fall to levels unseen since 1996, the US Dollar continued seeing those trading and investing in the Forex fly to the relative safety net that the greenback offers. While the Dollar had a mixed day due to good news down under, it still posted nice gains against the Yen, its key rival for safe-haven status.

As of 5:10 GMT, the USD recaptured most of its losses to the Euro and was down ¼% to 1.2639 after having fallen off the 1.2677 level, the intraday high for the Euro. The Dollar rose versus the Yen nearly ¾ of a percent to 98.07 and was down slightly to the Pound at 1.4085.

AUD

The champion of Tuesday’s trading session with Forex online traders was the Australian Dollar, which benefitted from the Reserve Bank of Australia announced they will leave interest rates untouched for this month. The unexpected move, came with a warning though, that credit default swaps were straining the Aussie economy – which raises the ultimate cost for protection against Australian debt default.

The AUD was trading up 2.5% to the USD at .6454, 3 ¼% to the Yen to 63.31, 2.4% to the Canadian Dollar to .8341 and 1% to the New Zealand Dollar at 1.2914.

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Broker Trading Updates - Currency Analysis

USD

Concerns over banks in jeopardy of going under and global economic concerns spurred the US Dollar on Friday against the Euro and the Sterling. In a day that saw the US Stocks fall to a nearly 10 year low and capping a week that saw a sharp decrease in global equity prices, the greenback fell to the European currencies. Despite Friday’s rough patch, the USD is still widely believed to be the only safe-haven currency left.

Against the Euro, the dollar lost 1 ¼% to 1.2824. Versus the Pound, the Dollar fell 1% to 1.4432.

YEN

The Bank of Japan (BOE) announced on Friday that the decline in corporate profits has continued to increase at a rapid rate and that the overall economic situation was deteriorating steadily. Japanese economic problems have driven investors from the Yen, long seen as a safe-haven in times of economic distress because of its stability, and this trend continued last week. While the Yen did make some marginal gains on Friday, it was widely seen as profit taking from short-term investors.

At Friday’s close, the Yen rose slightly to the US Dollar to close at 93.32, down 1/3^rd to the Euro at 119.72. Down slightly to the GBP at 134.69 and up ¾ against the AUD to 60.23.

Euro

The Euro had a decent day on Friday for a currency that has seen better times. Fears over the decline of Eastern European nations plagued the currency all week and it seems as if traders gave them a reprieve on Friday. While the European Union continues to field downgrade warnings from Moody’s and Standard & Poor’s over the financial viability of its Eastern members, the ECB is under pressure to find a way to stop the bleeding.

Versus the Pound, the Euro rose ¼% to .8884. Against eh Canadian Dollar, the Euro gained ¾% to close at 1.6058 on the week. The Euro also picked up a bit to the AUD at .6452 and the Kiwi to .5113. Capping the day, the Euro also gained 1/3^rd of a percent versus the Yen to close the week off at 119.72.

Gold Chart – The most profitable investment in the past three months

Gold has been making the headlines lately as the standard by which all currencies were once valued at has gained more than 20% since mid-November. Gold, not too long ago valued in the two-three hundred Dollar range has been the recipient of much investor interest as they try and find a stable, recession-proof home for their investment dollars and savings. Gold is about to hit a monumental mark, closing in on a $1,000 closing price. Many traders believe that Gold is overvalued at this point and is benefitting from inexperienced and misinformed private investors.

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US, Japan and Europe Daily FX Update

It was fascinating to watch yesterday, as President Obama was signing the 800 Billion Dollar economic stimulus package, the US stock markets were falling – I guess the traders and investors on Wall street were not too happy with the idea of severe regulation combined with massive spending on nonsense. Forex brokers trading in the USD though had a different kind of a day. The US dollar, while it should be falling based on all this spending that the government is doing, was rising – sharply in some instances.

The problem around the world is that there are problems around the world – and they keep getting worse. Japan, for a while looking to hamper the strength of Yen to offset losses to the export business it thrives on, sobered up when they realized that their economy has fallen more than at any point in 35 years – which is scary because they are still feeling some effects from their 1990’s prolonged recession. Those investing and trading in the Yen have been hit hard as the Yen has fallen to even the lowly Euro recently.

Speaking of the Euro, yesterday the EU got word from not one, but two rating agencies letting them know that the sovereign debt of many EU members states is in jeopardy of having a ratings cut. This is not a shock considering that many Western European states are the primary debt holders for much of the Eastern bloc countries who have been hard hit as of late. President Obama had said yesterday, I guess to cover himself when this plan does not do what he says it will, that “the economy is going to get worse before it gets better” – in the EU’s case, Forex traders are wondering if it will ever get better or is there some major restructuring of the way they do things that needs to get done. I expect the Euro to continue its slide.

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Daily FX Breaking News: US dollar slump

Last week saw the US dollar slump towards the end of the week as fears over the proposed 900 Billion dollar stimulus package took traders and investors away from the greenback. It is in my opinion that the US needs to rethink their entire fiscal policy at this point. IT is ignorant to believe that they can just print their way out of the economic mess without affecting the global economy in the long run.

The US holds special status as a maker and breaker of economies around the world. Brokers trading the Forex know that the US is relied upon for trade and assistance my countless countries, developing and developed. And yet, their proposed spending bill will put enormous pressure on their own economy, and will have a trickledown effect to many of economies of the world.

In 1930, President Herbert Hoover, in an effort to stave off the coming depression, launched a series of laws that made things worse. By over-spending, and insisting on US made products only – he excluded the world economies from his plans. This snub at the world ended up causing the “great depression” as trade was now limited and “what you had, was what you would get” as they said. Today, 2009, sees the US making the same mistakes they made back then. The worlds economy is one. We are a global entity – and we are mutually reliant upon one another. For the US to have protectionist clauses in an enormous bill that even their own oversight committees believe will not have enough of an impact to help their economy in the long-run is short-sighted.

Forex brokers, traders and the investing community will not be kind to the dollar if this bill passes – as I am sure US public opinion will change drastically towards their new President who promised change. A promise of change seems to be translating itself into a repeat of the past. And the world cannot afford that at this time.

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Market Impacts on Major Currencies

These are some currency updates for all my readers out here. Please recommend your suggestions and views on the same.

EUR

Both the Japanese Yen and the US Dollar grew stronger against the Euro on Tuesday erasing minor losses from earlier in the day. Traders fled the Euro to the Yen and Dollar as new data from Europe showed that producer prices fell 1.3%, a larger than expected drop. Many Forex traders believe that the US and Japanese currencies are a safe bet in times of crisis and it was this that analysts believe prompted the turnaround. The investing and trading community traded down the Euro close to ¼ of 1 percent against the dollar to 1.2841 and ¼ of a percent against the Yen to 114.93 during the Tuesday afternoon European trading session.

The Euro-zone issues were compounded when Germany, the largest economy in the European Union, announced that their retail sales had fallen off for a third straight month. German retail figures showed a .2% decline in December, leaving a negative .3 % drop for the year. This was the first time in over a decade Germany had experienced negative sales growth.

Even with Tuesday’s poor economic data, the European Central Bank is still expected to keep interest rates the same until their March meeting.

JPY

The Bank of Japan (BOJ) announced on Tuesday that is going to begin buying shares of Japanese banks to the tune of 11 Billion US Dollars. The BOJ believes that the biggest risk to their financial services industry is the exposure within the equity markets.

The stimulus plan would commence immediately and would allow for shares that are rated BBB- and above to be purchased until April of 2010. Traders were skeptical that this move would cause a rally in the Japanese equity markets and mark a return of the speculators with an appetite for risk.

Analysts and brokers trading Forex believe that the move will help the Japanese banks in the long run, however the announcement did not immediately trigger a rally in the Japanese currency or equity markets.

The US Dollar gained ½ of 1 percent against the Yen to 89.51. The move was mild and should be the rest of the week as the January 90.00 options on the pair are expiring this week and next. On Tuesday, close to 1 Billion US Dollars worth of USD/JPY options expired.

AUD

The Reserve Bank of Australian cut their key lending rate to 3.25%, down a drastic 100 basis points. The move was widely expected and much of the hype of the move had been traded out in the sessions leading up to Tuesday cut.

The Australian Dollar was up over 1% against the UD Dollar to .6376 as Forex traders helped it climb more than 1 ¼% against the Japanese Yen to 57.09.

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