Jobs In Focus!
By Mike Conlon | August 4, 2010
This morning, the markets were still reeling a bit from yesterday’s pullback, but the ADP employment change figures came in showing a gain of 42K jobs vs. an expectation of a 33K gain. This caused the market to flip, and risk-appetite appears to be increasing as we head into the stock market open here in the US.
This comes after an interview yesterday with Treasury Secretary Geithner, where in an obvious CYA move, stated that the employment picture may get worse before it gets better. He is due to speak again later today.
Overnight, PMI figures in the UK and the Euro zone came in slightly less than expected, ahead of tomorrow’s interest rate policy meetings for each. Neither is expected to move on rates, though the UK may be more ready to return to normalized policy.
Home prices in the both the UK and Australia came in higher than expected showing signs that prices may be heading higher which could be an early warning sign of inflation. The RBA will be releasing its quarterly monetary policy statement tomorrow as well.
Lastly, the market is waiting for Friday’s Non Farm payrolls report, which will be a truer measure of jobs growth here in the US. Initial jobless claims come in tomorrow, followed by NFP on Friday.
In the forex market:
Aussie (AUD): The Aussie is higher this morning as home price figures and trade balance figures came in better than expected. In addition, the ADP jobs report helped buoy risk appetite.
Kiwi (NZD): The Kiwi started the morning lower on Asian stock market weakness overnight, but is retracing losses as risk appetite is increasing this morning. Tomorrow NZ will report its unemployment rate, which will show the health of the economy.
Loonie (CAD): The Loonie is mostly higher on risk appetite as well, and Friday’s jobs report is expected to show seven straight months of jobs growth. In addition, oil is hovering around 82.50, near recent highs.
Euro (EUR): The Euro is slightly lower after PMI figures and retail sales numbers came in slightly lower than expected. This comes ahead of tomorrow’s interest rate policy meeting, which is expected to yield no change. On a positive note, Portugal got off a debt issuance without a problem.
Pound (GBP): The Pound is also lower to start the day as PMI figures came in lower than expected. However home prices came in higher than expected, which could cause the BOE to relax statements about stimulus and begin to foreshadow a return to normalized monetary policy. The market is not expecting a rate change.
Dollar (USD): The Dollar is mostly lower as risk appetite is increasing after the ADP jobs report showed a better than expected gain. This helped turn equity futures from negative to positive, and perhaps the resumption of risk-taking may occur going into Friday’s NFP number.
Yen (JPY): The Yen started the morning showing strength as the Nikkei and other Asian stock markets sold off after yesterday’s pullback in US stocks. However, the Yen is giving back gains as risk taking and demand for carry trades picks up.
This week, it’s all about jobs. In fact, it is ALWAYS going to be about jobs. If people aren’t working, then they aren’t spending which ultimately will drag the economy lower. Reports of the profligate and wasteful spending of the stimulus program intended to keep unemployment below 8%– how giving monkey’s cocaine will help people get jobs—have showed to be an unmitigated disaster.
In addition, corporations with plenty of cash in the bank are doing nothing with it at this point as the uncertainty over current economic policies and taxes prevents action. Meanwhile, our Treasury Secretary all but admits that the jobs figures could get even worse; even though he claims recovery (read article) is taking place!
Talk about speaking out of both sides of his mouth! Yet this should come as no surprise to anyone as this has become par for the course. Friday’s NFP figures will show how far along we are in recovery, and I’m sure there is already spin put in place to respond to any possible reading.
Either way, don’t be surprised to hear that he told us so! Gee, thanks Tim!
Tags: article, AUD, Aussie, Australia, bank, BOE, cad, carr, carry trade, course, dollar, dow, economic, economy, EUR, Euro, forex, forex market, gbp, Geithner, home, Il, interest, interest rate, jpy, Kiwi, loonie, lower, market, meeting, Mike Conlon, nfp, nzd, oil, payrolls, pound, retail sales, ssi, stock, stocks, time, trade, trades, Treasury, unemployment, USD, warning, Yen
Topics: What To Look At In The Market | No Comments »
US Earnings On Tap!
By Mike Conlon | July 12, 2010
This week starts earnings season for US companies and, rightly or wrongly, will help show whether or not economic progress is occurring. We’ve witnessed the disconnect between corporate profits and the “real economy”—namely jobs—and good corporate earnings will give the unemployed hope that hiring may be soon to follow.
In the UK, GDP figures came in as expected showing slightly positive growth for the quarter, and there was an article over the weekend claiming that the UK’s proposed bank requirements would lead to a double-dip recession.
In the Euro zone, potential fears of bank solvency issues were balanced out by German economic strength measured by employment and industrial production figures. A lower Euro had helped German exports and if the banks can “pass” the stress tests without setting off a chain reaction, then the Euro could stabilize near these levels.
In Japan, the ruling party lost control of the upper house in elections, providing political uncertainty and causing the Yen to sell-off overnight. However, overall risk aversion has brought strength back to the Yen.
In the forex market:
Aussie (AUD): The Aussie is lower on risk aversion, despite the fact that home loans rose for the first time in 8 months. However, futures are showing that traders are decreasing their bets for an Aussie rise vs. the Dollar. US corporate earnings will be the major driving force this week, with better numbers encouraging risk appetite.
Kiwi (NZD): The Kiwi is also lower on risk fears despite the fact that the NZ budget deficit came in narrower than expected. Home prices came in slightly lower, but still posting gains of 5.2%. Inflation figures are due out later this week.
Loonie (CAD): Not a lot of news for the Loonie this week but expect it to be extra sensitive to US corporate earnings this week. The US is largest importer of Canadian goods and services.
Euro (EUR): The Euro is also lower as the policy makers are already calling for better capitalization of the banks before the results of the stress tests are released. It is no secret that banks would be better off with more capital; the problem is whether or not increased capital requirements will hamper growth. Germany is showing that its economy is still strong, and that may be enough to out-weigh the negativity surrounding the Euro.
Pound (GBP): The pound is lower as DGP figures showed .3% growth in the first quarter; however the current account deficit is at its widest margin since 2007. Economists are expecting better growth in the 2nd quarter, before the impact of fiscal tightening takes place. The Pound traded below 1.50 earlier but has since rebounded higher.
Dollar (USD): The Dollar is seeing some strength this morning as risk aversion is present at the start of the US session. US CPI and PPI figures are due out later this week, but all eyes will be on the US corporate earnings reports. Good earnings will provide hope that hiring may be around the corner, but at the end of the day we may still be in the “tale of 2 economies”, with companies thriving while the unemployed are crying. Bad corporate earnings could send the markets reeling, so expect volatility in the short-term.
Yen (JPY): Overnight, the ruling party lost control of the upper house of government, providing political uncertainty and the fear that Japan may have trouble attempting to tackle its deficit. The Yen was lower, but is now seeing strength on risk aversion. The Bank of Japan Monetary policy meeting is taking place this week but don’t expect them to move on rates. Japan will trade this week on risk themes.
So the market and the US government are counting on good corporate earnings to provide confidence that the economic picture may be improving. With higher profits, the likely conclusion is that companies will begin hiring again which will hopefully help lower unemployment.
However, this may not necessarily be the case. Companies are fearful of the current economic climate as potential new rules, regulations, and taxes spur hesitation. Companies will be very cautious when looking to expand and could be quite content with their present situation.
Whether or not this is the case remains to be seen as the market expects good earnings. Should the numbers be average or even bad, then that could open up a whole new can of worms.
So expect volatility this week, and be ready to profit from short-term fluctuations should the situation present itself.
To learn more about how you can take advantage of world events through the currency market, be sure to check out our currency trading courses!
To follow these events live with a free, real-time practice account, click here! Don’t miss out on the world’s fastest growing market!
Tags: account, article, AUD, Aussie, bank, cad, course, currenc, currency, currency market, currency trading, dollar, economic, economy, EUR, Euro, fear, flu, forex, forex market, free, fx, fxedu, gbp, home, Il, Japan, jpy, Kiwi, live, loonie, lot, lower, meeting, Mike Conlon, news, nzd, pound, practice, practice account, rate, recession, release, RSI, setting, short, ssi, time, trade, trader, unemployment, USD, Yen
Topics: What To Look At In The Market | No Comments »
Appetite For Risk!
By Mike Conlon | May 27, 2010
The US reported growth figures today that while positive, have missed expectations. US GDP came in at 3% vs. and expectation of 3.4%. In addition, initial jobless claims were reported at 460K, largely in line with expectations.
This morning has started out in full risk-taking mode, as no additional negative news has come out of the Euro zone. As I mentioned yesterday, every day without news will embolden the market and encourage risk-taking. Yesterday’s rumor du jour was that the Chinese government was re-evaluating its Euro zone holdings, which sent the market lower as fears of further selling in the Euro were heightened. However, the Chinese denied that rumor and the markets have rebounded strongly this morning.
The Dollar has benefited as of late due to the flight to safety trade, so at this point while the fundamentals are improving, the US still has a long road to recovery ahead.
In the forex market:
Aussie (AUD): The Aussie is higher on risk-taking this morning, as traders aggressively jump back into carry trades. Because the Aussie had been sold off due to risk-aversion, carry traders buying here are essentially getting a discount which is giving them a better return on investment.
Loonie (CAD): The Loonie is higher as well, as oil is back above 73. The market is looking ahead to next week’s rate policy meeting, where the expectation is that they will raise rates. If the Euro zone can stabilize, then this will most likely happen.
Kiwi (NZD): The Kiwi is also up on carry trades and NZ reported last night a better than expected trade surplus, showing that demand for imports declined as exports increased. However, an IMF report said that the Kiwi may be 10-25% over-valued and that a lower valuation would help narrow its account deficit. So there could be a pause at the mid-year expectation if inflation is contained, though carry traders don’t mind as they are content with the yield differential.
Euro (EUR): Hooray for the Euro! They have finally had a day where everyone was on the same page and the message to the marketplace was clear and concise: the Euro is not in danger of failing, and the debt crisis is likely to be contained. CPI figures in Germany came in on target, showing that inflation is contained despite a weaker Euro. Growth in the US and China may offset the Euro zone debt crisis. China did not pile on to the mess, claiming that they are not reviewing their Euro holdings quelling fears that a further sell-off was imminent.
Pound (GBP): The Pound is higher as risk-appetite in the market has picked up, and the lack of negative news from the Euro zone is providing support.
Dollar (USD): The Dollar is lower this morning as risk-taking has reduced demand for the safe-haven trade. GDP figures came in slightly lower than expected, but positive nevertheless. Initial jobless claims were slightly higher; showing signs that while the US economy is improving, it is moving very slowly. Some may claim that part of this GDP growth was due to government stimulus programs, which are starting to expire shortly. Whether or not the economy can remain on this trajectory remains to be seen once the stimulative measures are removed.
Yen (JPY): As expected, the Yen is the worst performer this morning as risk-appetite has increased the selling of yen as yield-seeking traders put on their carry trades. Tomorrow will bring a plethora of economic data, from CPI to the jobless rate; however don’t expect these to be market movers unless they are grossly out of line.
Yesterday’s blog article about the market “proceeding with caution” was prescient in that it showed that market was still jittery. What started out as a positive day quickly reversed as rumors of a potential Chinese sell-off of Euro assets.
However, with an additional day of Euro stabilization due to the lack of negative news, the markets gain confidence in the global economic picture. As you see, it doesn’t take long for the market to have a “short memory”.
As long as the market believes the Euro debt crisis can be contained, then we should see risk-taking occur. Whether or not this will be the case is yet to be seen. So take yesterday’s advice and proceed cautiously, as potential Euro zone landmines haven’t gone away.
To learn more about how you can take advantage of world events through the currency market, be sure to check out our currency trading courses!
To follow these events live with a free, real-time practice account, click here! Don’t miss out on the world’s fastest growing market!
Tags: account, article, AUD, Aussie, blog, cad, carr, carry trade, China, course, crisis, currenc, currency, currency market, currency trading, data, dollar, economic, economy, EUR, Euro, fear, forex, forex market, free, fundamental, fx, fxedu, gbp, Il, invest, jpy, Kiwi, live, loonie, lower, market, meeting, Mike Conlon, news, nzd, oil, pound, practice, practice account, rate, RSI, short, ssi, time, trade, trader, trades, USD, Yen
Topics: What To Look At In The Market | No Comments »
Risk Heating Up!
By Mike Conlon | April 19, 2010
This morning is marked by major risk-aversion in the forex market in an extension of Friday’s sell-off. News over the weekend has sent investors running for the safety of the US dollar and Japanese yen as carry trades are un-wound. What’s causing this fear to heat up?
Well, in addition to the usual Greece rumblings and UK election concerns, the major news of the weekend is: Goldman Sachs. On Friday, the SEC charged Goldman Sachs (one of the world’s most prestigious investment banks) with fraud. What is amazing is that just on last Thursday, I mentioned in this blog article that Goldman Sachs was upgrading its outlook for the Canadian dollar and how I saw that as a bad thing for the Loonie as my experience has taught me to do the opposite of what Goldman Sachs says. Sometimes a trader’s intuition is more important than all of the charts and research combined. I don’t take solace in that call.Also, the volcano in Iceland preventing travel is causing financial duress.
Nevertheless, the commodity currencies are lower, as are stocks and commodities world-wide. Whether or not Goldman is guilty of wrong-doing will be answered in due course, but for now the market is selling and will ask questions later.
In the forex market:
Aussie (AUD): The Aussie is lower this morning on risk-aversion as well as reports that Chinese Yuan re-valuation may cause Australia to slow the pace of its interest rate hikes. If Chinese demand cools, than the Australian economy will be affected by decreased exports. There is now talk in the market that the RBA may have raised rates too quickly, as home loan approvals have fallen for 5 straight months.
Loonie (CAD): As I mentioned last Thursday, while I still have a rosy outlook for the Canadian economy, doing the opposite of what Goldman says is one of my rules to live by. The Loonie is lower this morning as commodities are lower, with oil leading the way down 2.5% to $81. There is also news that the BOC may announce this week at its rate policy meetings that it will begin raising rates in June, rather than starting in July but in larger increments. Tomorrow is the interest-rate statement, and Thursday is the monetary policy report.
Kiwi (NZD): The Kiwi is actually higher this morning despite the risk-aversion in the market, as the Performance of Service Index rose to its highest levels in almost 2 years. A surge in hiring drove the this reading higher, which come a day in advance to the NZ Consumer Price Index which is due out tomorrow in the overnight session. Analysts are predicting a .6% rise after a .2% contraction last quarter.
Euro (EUR): A volcano eruption in Iceland from last week is still causing a major log-jam to commerce as flights have been canceled in Europe since last week. However, it is the other volcano waiting to erupt– namely Greece and the rest of the PIIGS countries that have sovereign debt issues that may be the bigger story. Germany’s bonds are now starting to take a hit as their role in the backing of Greece is starting to call their credit-worthiness in to question.
Pound (GBP): The pound is lower once again as concerns over political gridlock due to the May 6th elections are putting pressure on the Pound. This comes on the heels of a report that showed that house prices have advanced 2.6%, the fastest pace in 3 years. This precedes Wednesday’s BOE policy meeting minutes which are expected to show a dovish stance on rates.
Dollar (USD): The Dollar is higher on the flight to safety trade due to risk aversion. The Goldman news could send shockwaves through the market, especially if other firms are hit with similar charges. Thursday marks the big day of news for the US economy, as PPI, home sales, and initial jobless claims are due. Expect the dollar to trade on risk themes and inversely to stocks and commodities this week.
Yen (JPY): The Yen is higher this morning as the un-wind of carry trades due to risk aversion is creating demand for Yen. In addition, Asian stock markets were down overnight, and the Yen will often times trade inversely to the Asian stock markets, much like how the US stock markets and dollar trade. Adding to yen strength is the news that consumer confidence figures came in at their highest levels in almost 3 years as Japan is benefiting from its export-led economic rebound.
As you can see, all it takes is a little bit of risk-aversion to send the markets into a frenzy. While economic figures have been improving world-wide, none of this matters if fear of loss outweighs potential gains in the market.
Global recovery is still on very fragile terms, despite what media and government types may try to have you believe. This Goldman news could be the first of many dominoes that fall as the truth comes to light about what really happened with the housing market, credit derivatives, and just overall greed.
In the meantime, if the various volcanoes, both real and metaphorical, don’t subside soon, Europe could be in real trouble economically.
To learn more about how you can take advantage of world events through the currency market, be sure to check out our currency trading courses!
To follow these events live with a free, real-time practice account, click here! Don’t miss out on the world’s fastest growing market!
Tags: account, article, AUD, Aussie, Australia, bank, blog, BOE, cad, carr, carry trade, charts, commodities, commodity, course, currenc, currencies, currency, currency market, currency trading, dollar, dow, economic, economy, EUR, Euro, Europe, fear, financial, forex, forex market, free, fx, fxedu, gbp, gold, home, housing market, Il, index, interest, interest rate, invest, investor, Japan, jpy, Kiwi, live, loonie, lower, meeting, Mike Conlon, minutes, news, nzd, oil, piigs, pound, practice, practice account, sales, ssi, stock, stocks, time, trade, trader, trades, USD, Yen
Topics: What To Look At In The Market | No Comments »
More Problems for the Euro!
By Mike Conlon | December 11, 2009
I wrote earlier in the week in an article titled, Euro Dead Zone, that there is some potentially trouble brewing in the Euro. Part of this is due to structure of that currency, in that it is comprised of different economies at different levels of strength.
Typically, the stronger economies “balance out” the weaker ones, and as I mentioned there are starting to be a lot more weaker than strong. One of the “solutions” that I pointed out is that the ECB might consider a lowering rates to make it more affordable for the weaker countries to gain access to capital. It doesn’t appear that there is going to be inflation there anytime soon.
But today there is another solution being reported on Bloomberg: that perhaps the weak countries, most notably Ireland and Greece, would pull out of the European Monetary Union (EMU). Or they can pray that the IMF will bail them out.
This presents a problem that is two-fold: 1) I can’t imagine that these countries would leave the EMU voluntarily, which would mean that they have become “persona non grata”, namely not welcome or forced out; which would 2) undermine confidence in the Euro as a currency.
And today we are seeing this on the charts. Let’s look at a 4-hour chart of EUR/USD: (click chart to enlarge)
Now while part of this move can be attributed to US dollar strength, I can’t help but think that the Euro is inherently weak due to the competing interests of its members. If they expel the “weak” members every time there is a problem, the Euro is quickly going to turn back into the Deutschmark! As of this writing, EUR/USD is down .68%.
To follow this situation real-time with a free, practice trading account, click here!
Tags: account, article, blog, charts, currenc, currency, dollar, dow, ECB, EUR, Euro, Europe, eurusd, forex, forextrading, free, fx, fxedu, Il, interest, lot, lower, market, mie, Mike Conlon, news, practice, rate, time, USD
Topics: What To Look At In The Market | No Comments »
Weekly Outlook from InnerFX 12/07
By Mike Conlon | December 7, 2009
EURUSD
Despite several attempts to breach higher last week, the euro failed to hold gains as the dollar rallied across the board on Friday, as a result of better than expected unemployment figures. The 270 points decline of Friday has cleared half of euro’s gains accumulated during the previous two months, hence December started by favoring the dollar bulls. Is this the time of a prolonged correction? Could be… but I maintain my positive view on EUR against the buck, for now, treating such declines as potential opportunities to re-initiate EUR long positions. Speaking of current market conditions – short-term sentiment is slightly bearish due to recent rejection into the 1.5150 region along with Friday’s collapse below the 1.49 handle, back into the key support region around 1.4850. A rising trend line support coming from July’s low at 1.3830 has been reached and limited intra-day losses but in case of the decline’s resumption within the coming trading sessions, we should focus towards the next support levels – into the 1.4700/30 and 1.4600 regions. In case of a recovery, which at this moment seem more plausible to me, I expect the 1.5000 mark, along with 1.5050, to provide a minor barrier – a lot weaker than before (during October and November). A sustained breach above the 1.5 handle would also turn momentum positive, signaling that the correction is over. Also keep an eye on the S&P500 as important levels are still intact into the upside – the 1113 barrier which is still intact, despite several attempts to breach higher along with false breaks/spikes to as high as 1119. Another key barrier is the median retracement of the long-term decline from 1576 to 666.75 which is set at 1121. Due to the solid correlation between EURUSD and S&P500: no sustained break above 1113 -> no breach above the 1.5100/50 region, simple as that.
(click all charts to enlarge)
Gold
The superior band of the uptrend channel (seen in the chart below) is, once again, providing support on current pullback. In case of a break lower, next downside barriers into the 1126 and 1100 regions may limit losses. Short-term sentiment shows some bearish signs but it was about time to look for a correction – because it can’t just climb to record highs forever, right? However, if the correction continues – below 1100, bulls should start to worry. On a medium term basis – uptrend is intact and extended dips will favor further buying.
GBPUSD
In my previous article, when cable was trying to recover some ground pushing on the 1.6600 handle from below, I pointed out that more selling towards 1.64 was likely – further weakness emerging, as expected, and cable printed session lows around 1.6420 before closing the week .36% lower. Downside remains favored for now, and a break above 1.6700 is needed to confirm the positive bias. Recent hesitation into the 1.6700 zone confirms the indecision of both bulls and bears and the 1.6270-1.6700 range will probably remain valid for now. However, the said 1.6270/00 support region may limit extended losses and provide a reversal point, as that’s quite an important level.
NZDUSD
Former support provided by the rising trend line coming from .6475 of July has provided a stable resistance on last upside attempts into the .7280/00 region. A break was needed to resume uptrend but selling into rallies favored the current decline which extended to as low as .7130 on Friday. Although NZD’s losses have been relatively smaller comparing to EUR (-0.86% vs. -1.37%), there are no signs of uptrend’s recovery yet. Below current market levels, important support is formed around .7050 by the 61.8% fibonacci retracement of .6685 – .7635. We’ll see how it reacts if current decline continues.
Happy trading!
Tags: analysis, article, blog, buck, charts, decision, dollar, dow, EUR, Euro, forex, forextrading, gbp, gold, Il, lot, market, momentum, nzd, sentiment, ssi, time, trend, unemployment, uptrend, USD
Topics: What To Look At In The Market | 1 Comment »
Yen Strength!
By Mike Conlon | November 25, 2009
As I’m getting ready to take off for Thanksgiving, was just taking a look through some different charts and noticed this one on dollar/yen (USD/JPY): (click chart to enlarge)
This 10-year chart of USD/JPY shows that the dollar is at its weakest against the yen in over 10 years! Remember that when this chart makes new “lows”, it actually means strength for Japanese yen. And you thought I was kidding about dollar weakness in my article below!
To learn more about how to use charts in your analysis, be sure to check out our currency trading courses!
To get started with a demo account, click here.
Happy Thanksgiving to All!
Tags: account, analysis, article, blog, charts, course, currenc, currency, currency trading, demo, demo account, dollar, forex, forextrading, fx, fxedu, Il, Japan, jpy, USD, Yen
Topics: What To Look At In The Market | No Comments »
Blog Review at DailyForex
By Mike Conlon | November 2, 2009
I just wanted to take a moment to thank Hillel at DailyForex for taking the time to review my blog. I guess my Mom is not the only one who thinks I’m pretty great LOL! All kidding aside, you can read the review here.
One thing I did want to note about the review is that while I typically don’t offer tutorials on the blog for newbies, I do assume that my readers have a certain level of currency understanding and basic knowledge.
And that’s my role here at FXEDU. I am an instructor. It is my job to make sure that you, the reader, understand the currency market and are comfortable placing trades and participating in the largest financial market in the world.
It is my opinion that a little bit of knowledge can be dangerous in the “wrong” hands. And by wrong I mean “uneducated”.
It is very true that there is a lot of good, free information out there on the internet. But the problem for the novice trader is that it is very unorganized. Because of the nature of being new to something, one might not necessarily know what they should be looking for and could miss very basic, fundamental information that could be critical for their success.
And that’s what we do in our courses. I’m not here to act like some big-shot guru and promise you wild success and if you follow my methods that you’re going to be rich, etc. like you see out there on the internet.
What you’re going to get in our courses is a step by step plan that will take you from start to finish, and help you put together a trading plan that is right for you. The course is an online format, and you have access to our instructors 24-hours a day to ask as many questions as you like. So you can take the course on your own time, at your own pace. And its affordable. Only $100. If you are serious about getting started in forex, our course is the greatest value out there on the internet.
And it won’t cost you an arm and a leg. But it just might save you one. So what are you waiting for???
Get enrolled in a course today!!!
Click here to see all of courses.
Tags: article, blog, course, currenc, currency, currency market, education, financial, forex, forextrading, free, fundamental, fx, fxedu, Il, instruct, instructor, lot, Mike Conlon, news, time, trade, trader, trades
Topics: What To Look At In The Market | No Comments »
Secret Meetings Tanking the Dollar?
By Mike Conlon | October 6, 2009
There was an article published in the UK Independent by a fairly credible journalist claiming that there were “secret meetings” taking place between Arab Nations and the BRIC countries to end the US dollar’s reign as the world’s reserve currency by agreeing to trade oil in anything but the dollar.
As a result of this speculation, the US dollar is down and gold is up pretty big today (+2.53%). The talk is that they are looking to establish a basket of world currencies plus gold as payment for oil. While foreign dis-satisfaction with the devaluation of the US dollar is nothing new, should these nations pull this off it could have serious repercussions for the US dollar.
Now I don’t want to speculate what would happen if this were to be true, but this appears at least on the surface to really put pressure on Helicopter Ben and the Fed to do something about the falling dollar. But at this point it doesn’t look like that’s going to happen.
Until global account balances come back into more of a balance, expect this to be nothing more than rhetoric as foreign nations like China and Japan (who have major dollar reserves) have way too much to lose should the US dollar decline further due to losing its reserve status.
In the end, something has to give. This global game of chicken will not end well if we stay on the same course. The question is, who is going to swerve first???
Regardless of what happens, it is now more than ever so important that you have an understanding of what goes on in world politics and currency markets. To learn about it, click here.
Tags: account, article, China, course, currenc, currencies, currency, currency market, dollar, dow, fed, fx, fxedu, gold, Il, Japan, meeting, Mike Conlon, news, oil, ssi, trade
Topics: What To Look At In The Market | No Comments »
Australia Raises Rates!
By Mike Conlon | October 6, 2009
I wrote back on Sept. 28th that there was some speculation of an Aussie Rate Hike, and yesterday it happened. Reserve Bank Governor Glenn Stevens increased the overnight cash rate target to 3.25 percent from 3 percent, the lowest it had been in 49 years. What surprised me most about this news was not that it happened, but rather that 1 out of 20 currency analysts surveyed by Bloomberg predicted it!
Readers of this blog had a one week headstart!
Well enough back-patting for me now, as I’ve made plenty of wrong calls in the past. But what this means is that there will be further strength for the Aussie (AUD) which also means weakness for the US dollar (USD) and Japanese Yen (JPY).
However, there has been a lot of Yen jaw-boning recently from Japanese officials about possible intervention so be careful with AUD/JPY. Stick with AUD/USD if you want to participate in the carry trade.
I mentioned recently in another article that the US Fed and Bernanke may have to take action to halt the US dollar decline, but it doesn’t appear that they’re ready to do so.
Want to learn how to do a carry trade? Click here.
Want to test my market calls? Click here.
Tags: account, article, AUD, Aussie, bank, Bernanke, blog, carr, carry trade, course, currenc, currency, dollar, fed, forex, forextrading, fx, fxedu, Il, Japan, jpy, lot, market, Mike Conlon, news, rate, ssi, USD, Yen
Topics: What To Look At In The Market | No Comments »