Interview with a Forex Master
By Mike Conlon | June 23, 2010
Every once in a while, my status as a blogger gives me access to resources that otherwise might not be available to me. One such “perk” of the job is that I get to meet experts in the forex field and have an opportunity to pick their brain.
One such opportunity just came about with Abe Cofnas, one of the original pioneers of retail forex trading and author of three books on the subject. I first had occasion to run across Abe’s work when I started my own journey into forex. At the time I was trading futures and stocks, and came across Abe’s column in Futures magazine.
I was impressed by his straight-forward approach and ability to explain the intricacies of the forex market. I was hooked. So I went out and bought Abe’s book and dove right in and it was instrumental in my development as a forex trader.
In addition to his books, Abe is the president and founder of Learn4x.com and has been teaching students the forex market since 1999. I had a chance to catch up with Abe, and here are the highlights of the interview:
(FTB): You’ve seen a lot of traders come and go in the forex market. What is the one common trait all successful forex traders must have?
(AC): When all is said and done it comes down to psychology-the trader’s mindset. Successful traders may have different technical analysis tools, and fundamental views, but they have a mind-set that permits them to survive. The best of us lose money, and maybe even 40% of the time. The mindset is to recognize the opportunity and not dwell on the loss. Also, of critical importance is recognizing just what is driving the currency prices. There is a lot of noise, and you have to filter out the noise as well. The most successful traders “listen” to the market.
(FTB): In your opinion, why is the forex market the fastest growing financial market to trade and what are the advantages over other markets?
(AC): The key reason is that the world is interconnected as never before and forex allows a person to ride what I call, “the light-beam” of the world economy. By trading currency pairs you participate globally immediately and that is exciting.
Also, an average person no matter what their background can trade and win! I see it all the time, the “best and the brightest” often can’t trade better than Mr. Joe Six-pack!
(FTB): How has the industry changed since you began as one of the pioneers in forex trading?
(AC): There is greater awareness of forex. Today forex is considered a legitimate alternative investment and trading medium. The industry was the “wild west” years ago. Spreads were 5 pips and more and today, retail trading offers institutional spreads. The industry has acquired legitimacy and the players are required to be more capitalized.
(FTB): Which is more important, fundamental or technical analysis?
(AC): There is a common notion that it’s a battle between fundamental thinking and technical analysis. I don’t think that is true. Let’s define the terms. Technical analysis is deriving insight into the price action by ONLY looking at charts. Fundamental analysis is detecting the forces that move the prices. So price action is both fundamental and technical. You need to know what moved the price and not just that it moved a certain distance with momentum. The movement of the EURUSD in the next 5 minutes may be a reaction to the words of a central banker, or the release of a budget policy. If the trader doesn’t see what is going on outside the chart, there is exposure to misinterpretation.
(FTB): What is the biggest mistake novice traders make time and time again?
(AC): One word: Anticipation. “Newbies” or novice traders think they can anticipate the price direction. So they assume the currency pair will move to “their” script. The more experienced trader reacts and confirms what the price is doing, and THEN decides to join a direction instead of anticipating one.
(FTB): What advice would you give to new traders looking to enter the forex market?
(AC): Get into the action as soon as possible with real capital. I have found the best traders in the world in virtual trading-until they go live and face the psychodynamics of real trading. Set aside some risk capital and join the action. Put on trades, learn from errors, etc.
(FTB): Do you have a favored style of trading that you use?
(AC): I do have many different styles that fit different goals. But to answer the question, I like what I call “sniper” trading. I focus on entry conditions, and get into the action and ride the predominant wave. A good entry can result in a short grab of 5-10 pips or even more. But you have to catch the momentum and then-get out of the way and protect your profit. I have pioneered Price Break charting and Renko charting for detecting trend variations and what I call the “micro-detection of sentiment”. We can go down to the pip level of granularity in detecting if it’s time to get out!
(FTB): What is the “secret” to making profits in the forex market?
(AC): Hmmm…. ”Pip Accumulation”. What I mean by that is that one can spend an entire day waiting for a big move opportunity or scan about 12 currency pairs for 5 good moves per pair for short term gains. It’s easier to get 50 pips with several trades than with one.
(FTB): What was the best trade call you ever made?
(AC): Long the Aussie at .63 in March 09 and it went to .94 in November 09. I didn’t hold it that long but it was a beautiful move I caught several times in and out on the way.
(FTB): How has becoming a best-selling author impacted your trading?
(AC): My books: The Forex Trading Course (Wiley), The Forex Options Trading Course (Wiley), and my new book Sentiment Indicators (Bloomberg Press) were probably the best source of improving my trading than any other. The reason is that it forced me to be clear in my thinking about how to trade. I learned that if you can teach and tell someone exactly how to do something, the process of doing so forces you to detect your own weaknesses. It was a therapeutic experience.
I’d like to thank Abe Cofnas for speaking with me and providing insights for our readers. He has graciously agreed to entertain questions from our viewers. If you’d like to ask Abe a question, you can email them to me here.
To read today’s blog article on the forex market, click here.
Tags: Aussie, bank, blog, course, currenc, currency, dow, economy, EUR, forex, forex market, forex trading, forextrading, fx, fxedu, Il, invest, live, money, pair, ssi, stock, stocks, time, trade, trader, trades, trend, USD
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Not So Fast, Canada!
By Mike Conlon | April 9, 2010
I admit it. My rose-colored glasses when it comes to the Loonie have perhaps soured me on the Kiwi and for that I am sorry. I have moved the Loonie higher in my “risk totem-pole” as my belief is that prospects for growth are better in Canada than in New Zealand.
Well today the market is saying otherwise. Canadian job growth came in less-than expected, prompting those in my camp to run back to the Kiwi.
In other news across the pond, both the Euro and the Pound are finding support after ECB President Trichet re-assured the market on Greece, and UK PPI figures came in higher than expected prompting inflation fears.
In general, the market has been positive toward risk-appetite for some time, though it is always interesting to see that one day of losses can wipe out two days of gains, etc.
In the forex market:
Aussie (AUD): The Aussie is higher on risk appetite, as well as a report that Australia’s jobs boom may stoke inflation sooner than had been predicted. The jobless rate now stands at 5.3%, which may indicate a shortage of skilled workers which would in turn cause prices for said workers to increase. Basic supply and demand. Wage growth is one of the top indicators of inflation and the RBA has been vigilant in attempting to stave off inflation so more rate hikes may be coming.
Loonie (CAD): Loonie, I won’t quit you! I’m leaving the Loonie ranked higher than the Kiwi despite what the market is saying today. Employment figures came in this morning and Canada “only” added 17.9K jobs vs. an expectation of 25K, thus leaving the unemployment rate at 8.2%. While this rate is still high by world standards, the Canadian economy is poised to show growth and I still think that outside of Australia, Canada will be the next to raise rates.
Kiwi (NZD): The Kiwi is the best performer this morning, punishing those who abandoned it for the Loonie like only a jilted lover could. The main reason behind this is the interest rate differential, with the Kiwi currently yielding 2.5% as opposed to .25% for the Loonie, making it a better destination for carry trades RIGHT NOW. However, because the forex market is forward looking, any further signs of inflation in Canada could change this sentiment. Today, however, the Kiwi is king.
Euro (EUR): The Euro is going from “zero to hero” overnight as ECB President Trichet re-assured the marketplace that Greece would not default, claiming it is “not an issue”. In addition, signs are that economic recovery may be taking place as the German account surplus came in better than expected as exports were higher. Also, French manufacturing production ticked higher, as both have undoubtedly gained from recent Euro weakness.
Pound (GBP): The Pound is higher as UK PPI figures came in hotter than expected, showing signs that economic recovery may be stoking inflation. Much of the recent Pound weakness has been from uncertainty over elections and concern over the UK debt. The pound has had 10 straight days of gains vs. the Euro.
Dollar (USD): The Dollar is giving back some of its recent gains as risk appetite is on the palate of investors. The Dollar is back above parity vs. the Loonie after the Canadian jobs report. No major news for USD today.
Yen (JPY): No demand for the Yen today is driving it lower as it is game on for carry trades and world stock markets and commodities are higher. As the primary funding currency for yield-seeking carry traders, world market gains are usually Japanese yen losses. And that’s just fine by the BOJ and Japanese government.
Sometimes it is interesting to see how the forex market can shift moods back and forth so easily. One day you are afraid that a major country may default on its debt thereby causing structural complications for one of the world’s major currencies; and the next day its pizza and ice cream because assurances are made and some good economic figures provide a respite from fear.
And that’s the beauty of the forex market. By understanding that forex trading is relational, one can benefit from short to medium term trading in addition to longer term time-frames.
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!
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Euro-Mess!
By Mike Conlon | March 24, 2010
It’s no secret that the majority of the risk in the global marketplace is coming from the Euro zone. Most recently, the debt problems in Greece have been center-stage; however now it looks like the fun is spreading to Portugal.
Earlier this morning, Fitch ratings agency cut its outlook on Portugal, citing the sluggish economy as a negative factor in Portugal’s ability to repay its debt. This could set off a dangerous tidal wave of downgrades in the PIIGS countries, which could challenge the structural viability of the Euro. For a while, the concern had been Greece and the possibility of contagion; it now looks like the inability of the EU to come up with a plan is going to hurt the other PIIGS countries.
In the meantime, Germany and France are attempting to find a solution to help Greece, and it looks like France caved to German pressure to involve the IMF in any bailouts if necessary. I can only speculate that Germany was threatening to leave the Euro zone and leave France holding the bag.
There is a ray of hope in the Euro zone though, as European services and manufacturing grew at the fastest pace since 2007, and business confidence in Germany was higher. I’m not surprised by this as a weaker Euro is good for exports.
So this morning is all about risk-aversion.
In currencies:
Aussie (AUD): Not much to say about the Aussie, which is lower on risk aversion. The Aussie is at 10-year highs vs. the Euro.
Kiwi (NZD): In the overnight session, the NZ current account deficit widened more than expected putting downward pressure on the Kiwi, in advance of tomorrow’s GDP report. GDP is expected to grow at the fastest pace in 2 years, which is one reason why the Kiwi isn’t down further. The other reasons are the Euro situation and news out of Japan regarding exports.
Loonie (CAD): There is speculation in the market that BOC Governor Carney is going to use a speech today to prepare Canada for a series of interest-rate hikes in the upcoming months as economic recovery has spurred inflation to rise faster-than-expected. The Loonie is higher against all but the Dollar, which is benefiting from risk-aversion.
Euro (EUR): If you haven’t figured it out, the Euro is lower this morning. I discussed the problems above but do want to mention a few “interesting” points. For starters, because Germany is the second largest exporter of manufactured goods, they benefit from a lower Euro. They have an enviable position in the Euro zone as their economic strength has come about because of the favorable treatment they receive by being part of the EU. But now that there is trouble with some its members; Germany does not want to be on the hook. While at this point in time members cannot be expelled from the EU; members can leave. So if Germany were to leave, the Euro could become virtually worthless overnight. Food for thought.
Pound (GBP): The Pound is slightly higher this morning, though down against USD. Today the government will outline its current budget, which is expected to “show some restraint” in an attempt to woo voters before the elections. There has been a lot of talk about the “hung Parliament”, but a consensus is building that fiscal restraint will be needed regardless of who gets elected.
Dollar (USD): US durable goods orders just came in showing growth for the third month in a row, though slightly lower than expectations. Home sales are due out at 10AM EST but at this point, these numbers have become less important to an already apathetic market. Outside of a major move to the upside, this number should be a non-event. Today is about risk-aversion from the Euro.
Yen (JPY): Japanese exports have grown at the fastest pace in nearly 30 years, showing signs that economic recovery may be taking place. So this should be good for the Yen then, right? Actually it’s wrong. In what can only be described as counter-intuitive, the Yen is actually the biggest loser this morning. Here’s why: the BOJ is committed to fighting deflation so is pushing to keep rates low while NOT adding to the deficit. The government has been pushing for more QE (which the BOJ partially caved to last week) in order to stimulate the economy. Because Japan relies on exports, this is showing signs that global recovery is underway so the economy is Japan is stabilizing. A stable economy plus extraordinarily (.1%) low interest rates makes for a weak currency.
As more and more economies gain traction in the global economic growth scene, the more and more the risk themes tend to breakdown. I’ve long been a fan of the Aussie, and have used risk-taking days as opportunities to buy. Canada appears to be poised to strengthen next. And don’t rule out the US dollar. Even though rates are likely to stay low for “an extended period”—sorry had to do it–, the economy is turning around, albeit slowly.
Another force driving these currencies higher is the Euro. While Germany may encourage the weakening of the Euro on the backs of the PIIGS, money still needs to go somewhere.
And that’s what forex trading is all about!
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, AUD, Aussie, cad, canada, course, currenc, currencies, currency, currency market, currency trading, dollar, dow, economic, economy, EUR, Euro, Europe, forex, forex trading, franc, free, fx, fxedu, gbp, home, Il, interest, interest rate, interest rates, Japan, jpy, Kiwi, live, loonie, lot, lower, market, mie, Mike Conlon, money, news, nzd, piigs, pound, practice, practice account, RSI, sales, ssi, time, USD, Yen
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Fundamentals Do Matter!
By Mike Conlon | March 10, 2010
Now that the fears of global collapse have abated—for now—the markets have returned to heavier scrutiny on the fundamental numbers being reported in various countries. It is times like these that remind traders that indeed the fundamentals do matter. The longer the global economy can sustain itself without Armageddon taking place, the more and more traders will focus on specific stories and not overall risk themes.
So, while one might look at this morning’s action and be inclined to say that today is risk-taking because commodity currencies are higher, a more appropriate reaction would be that are actually both good and bad stories out there which are driving individual currency pairs.
More specifically, in currencies:
Aussie (AUD): One of the good economic stories out there is coming out of Australia which has had good gains as of late. Tomorrow they will be reporting their employment figures, which are expected to gain for the sixth straight month. In fact, the economy is buzzing along so well there that there is no an expectation that they may raise the benchmark interest rate again next month. The Aussie is in a clear uptrend and I expect it to test 2010 highs very soon.
Kiwi (NZD): The Kiwi is also another good economic story, though not as strong as the Aussie. While the interest rate decision due out tomorrow is expected to be unchanged, overall Asian recovery will benefit the Kiwi. The most important take-away from the rate decision will be the language used to give a clue as to a timeframe for further hikes. And should they surprise the market with a rate hike (highly unlikely), then lookout above!
Loonie (CAD): The Loonie is just kind of hanging out today, with no real news on tap in Canada. Oil is higher so the Loonie is up; and also riding the coattails of the Aussie and Kiwi. The only anomaly is USD/CAD, as there is dollar strength this morning.
Euro (EUR): The Euro is mixed this morning. On the one hand, now that the risk of a Greek default is mitigated, the focus is back on the fundamentals in the Euro zone. On the other, news out of Germany is that German exports are down, but German CPI is up. Traders are using this opportunity to cover some EUR/USD shorts, but otherwise the Euro is down vs. the commodities and up vs. the rest. I expect EUR/USD to be range-bound for a bit.
Pound (GBP): Another tough day for the Pound, which would be down across the board if not for the Yen. The Industrial production figures and manufacturing came in negative, marking the first decline since last August. This is likely to keep rates low in the UK for an extended period. Meanwhile, the BOE’s Adam Posen stated that he hopes their bond purchase plan “has done it” with regard to stimulating the economy but he didn’t rule out further quantitative easing.
Dollar (USD): There’s a bit of optimism about the dollar this morning as economic recovery appears to be going faster in the US than in Europe and Japan. As risk of a global collapse is lessening, traders are looking more toward the fundamentals. So the expectation is that we may see a rate hike in the US sooner than in Europe or Japan. However, don’t be surprised to see Dollar weakness should commodity inflation pick up.
Yen (JPY): The Yen is down across the board this morning in advance of the Japanese GDP report due out tomorrow as fears of deflation are warranted. Combine this with good news from the commodity currencies, higher commodity prices, and “risk-taking” and you have a recipe for Yen weakness. Carry traders are gaining more confidence and the Yen is the funding currency of choice.
As you can see, when global economic conditions become more stable, market fundamentals return to center-stage. Under “normal” conditions, currencies from the best economies will flourish, while those not doing as well will be sold.
And that’s the basic idea behind forex trading; that you want to own the strong currencies and sell the weak ones, hopefully picking up interest along the way!
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, AUD, Aussie, Australia, cad, canada, carry trade, commodities, commodity, course, currenc, currencies, currency, currency market, currency pairs, currency trading, decision, dollar, dow, economic, economy, EUR, Euro, Europe, fear, forex, forex trading, fundamental, fx, fxedu, gbp, Il, interest, interest rate, Japan, jpy, Kiwi, live, loonie, market, Mike Conlon, news, nzd, oil, pair, pound, practice, practice account, rate decision, short, ssi, time, trade, trader, trend, uptrend, USD, Yen
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Top Performers!
By Mike Conlon | March 3, 2010
Forex System Selector (FSS) Top Performers!
When considering any automated forex system providers, not only is it important to have good strategies, but also it is equally important to have a good platform. FSS has you covered on both fronts!
When investors select individual EAs to use, market conditions will determine how effective any one EA will be. If market conditions aren’t ideal, even the greatest strategies can have less-than-desired results.
And that’s the problem with the “one size fits all” approach. You wouldn’t take a sports car four-wheeling, would you? Nor would you want a golf cart on the Autobahn!
Not to worry, the FSS has you covered, as there are over 40 different systems that can excel in a variety of different market conditions. Now you have the power!
Well by now you must be thinking to yourself that, “these systems couldn’t possibly be any good”. Am I right?
Well how does earning 9000 pips in one month with a 95% winning rate sound to you? That’s the type of system you will find in the FSS.
Here’s a look at our top 5 performing systems from last month:
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Tags: account, blog, demo, demo account, forex, forex trading, forextrading, free, fx, idea, Il, invest, investor, market, pip, pips, rate, ssi
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Obama Spooks the Markets!
By Mike Conlon | January 22, 2010
In what can only be described as adding insult to injury, President Obama announced yesterday his plan for regulating the too-big-to-fail banks and bring back some provisions of the Glass-Steagall Act. Now don’t get me wrong, I think these banks should be reigned in and be subject to stricter regulation, but man, his timing couldn’t have been worse.
After the employment figures came out yesterday and the Philly Fed announcement, the stock market began to tank and we saw a rapid shift to risk-aversion. Combine that with the uncertainty created by Obama and we saw a volatile confluence of events. The sad part of all of this is blame game going on between Washington DC and Wall St.
The American people responded in Massachusetts by pushing back against the political machine and its a shame that the administration feels the need to pile on with the timing of this proposal. The “be careful what you wish for” line of thinking in Washington is disgusting, and the fear and bully tactics won’t gain them any political goodwill.
In general, I can’t stand politics but unfortunately this needed to be addressed as government actions can have a MAJOR effect on the market place.
This morning, I’m seeing a brief respite from yesterdays move but that doesn’t mean it won’t continue. Japanese yen (JPY) is strong this morning and the US dollar (USD) is weak.
Also this morning there was weaker than expected retail sales figures coming from both Canada and the UK. Both the Loonie (CAD) and the British pound (GBP) are down this morning. The Loonie is seeing added weakness as the price of oil has pulled back to around $76 on weak demand.
So if you’re an investor, I would lighten up on the risk-taking and keep an eye on news coming out of Washington DC. Either way expect market volatility to pick up.
To learn more about how politics and your investments are intertwined, be sure to check out our forex trading courses!
Tags: bank, British, cad, canada, course, dollar, dow, fear, fed, forex, forex trading, fx, fxedu, gbp, Il, invest, investor, Japan, jpy, loonie, market, market volatility, Mike Conlon, news, oil, pound, retail sales, RSI, stock, USD, Yen
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Chinese Growth Unstoppable?
By Mike Conlon | January 21, 2010
Wow. Chinese GDP has reportedly come in with a 10.7% increase for last QUARTER. This is the highest percent gain in China since 2007, when they were operating in overdrive to prepare for the Beijing Olympics! To put this in perspective, there are still countries out there reporting negative GDP growth!
If this number is for real (some would argue that’s always a question when dealing with China), then its pretty clear that their growth will be leading the globe out of recession. As a result, we are seeing a bit of risk-taking in the market today, with both the Aussie (AUD) and the Kiwi (NZD) benefiting. After all, China does import a lot from those countries so when the goings good in China, its probably going well in Australia and New Zealand as well.
The yen (JPY) is also down the most, as it is resuming its status as the world’s funding currency for carry trades and risk-taking.
Coming out of Europe, the Euro (EUR) is down slightly against the US dollar (USD), having been down lower during the Euro session to its lowest levels in 6 months. However, it is still holding support at 1.40, an important psychological level for the Euro. Rumors are floating that the Euro Zone may offer an emergency loan to Greece, but this is being vehemently denied as that would set a bad precedent for the other PIIGS countries.
The British pound (GBP) is down as well, as the UK budget deficit widened the most in almost 15 years.
So the overall tone today is mild risk-taking, which could also just be a rebound from yesterday’s increased appetite for risk-aversion.
To learn more about how economic events can affect currencies and how you can profit in the forex market, be sure to check out our forex trading courses!
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Canada Rate Decision Imminent!
By Mike Conlon | January 19, 2010
Canada’s interest rate decision is due out at 9:00AM this morning. It is widely accepted that they will leaves rates unchanged at .25%, which is a record low. Inflation appears to be well within the Central Bank’s target rate of 2%, which could mean that they won’t consider a rate hike until the second half of the year.
Part of the reason to remain flat is due to Canada’s reliance on a US economic recovery, as the US is the largest market for Canadian exports. So it is quite possible that we won’t see a rate hike in Canada until we see one in the US. While the recovery is taking place in Canada, its not strong enough to warrant rate hikes at this time.
According to Bank Governor Mark Carney, the economy will operate with “slack” throughout the middle of next year as the Canadian dollar’s 20% gain versus the US dollar has hampered exports.
So barring any unlikely rate hikes, I expect the Loonie to trade sideways until inflation becomes a problem in Canada, and the Loonie will continue to benefit from its status as a commodity currency.
To learn more about forex trading, be sure to check out our courses!
Tags: bank, canada, central bank, commodity, course, currenc, currency, decision, dollar, economic, economy, forex, forex trading, fx, fxedu, Il, interest, interest rate, loonie, market, Mike Conlon, rate decision, ssi, time, trade
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US Retail Sales Numbers Stink!
By Mike Conlon | January 14, 2010
From the “unexpected” category: US retail sales fell .3% in December, vs. analyst expectations that it would GAIN .5%. This is significant in that the December holiday season is one of the busiest times of the year and December is supposed to be a great month for sales. Holidays, end-of-year bargains, etc usually bring the shoppers out in droves. OUCH!
So what happened?
Well its clear that consumers are not confident in their own fiscal health which in turn affects their consumption patterns. With “official” unemployment figures at 10%– the reality is much higher and record housing defaults, its no wonder people are concerned. Not to mention the mounting debt the US is incurring that will have to be paid for at some time in the future. As tax receipts continue to decline, it won’t be long before everyone is called upon to “do their part”. Yep I’m talking about higher taxes.
So why is this disappointing figure so important? Well consumer spending in the US makes up close to 70% of US GDP!
Whoa. So if consumer spending is declining, foreclosures and unemployment are rising, it may be a VERY long time before we see an interest rate hike out of Bernanke and the Fed. And it looks like the markets have picked up on this, as the stock market has shook off this figure and has gone from an initial negative to positive. So that means the dollar is down against all but the Euro (see earlier post) as it is clear that the only thing driving world markets right now is the US zero interest rate policy (ZIRP).
So the risk-taking trade is on so far this morning. It will be interesting to see if stock investors come to their senses at all today– though I doubt that will happen in what’s become the bizarro world of investing!
Trade carefully!
To learn more about how these economic figures can have an impact on all markets, be sure to check out our forex trading courses!
Tags: Bernanke, course, dollar, dow, economic, EUR, Euro, forex, forex trading, fx, fxedu, holiday, Il, interest, interest rate, invest, investor, market, Mike Conlon, retail sales, stock, time, trade, unemployment
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Non-Farm Payrolls Disappoint!
By Mike Conlon | January 8, 2010
The US Non-Farm Payrolls Report (NFP) is usually one of the biggest market moving numbers in the currency markets. Today’s number is no exception. The report came in for December at -85K, a very disappointing figure. Estimates were expecting this number to be flat, that we neither gained or lost jobs for the month. Although I had seen some pretty wild numbers tossed around, anywhere from +/- 200K. The revisions for the prior two months showed a net loss of 1K jobs, a negligible but encouraging figure.
So what does this all mean? Well in a word: trouble.
The US economy is not adding jobs nearly as quickly as the government had hoped. With all of the enormous amounts of stimulus spending, we have little to show for it. As a result of this figure, the US dollar reversed course and immediately began to weaken. If anyone had any delusions about a US rate hike in the first quarter of the year, they can pretty much forget about it as its now off of the table. Unless the dollar tanks so badly that Bernanke HAS to do something.
My guess is that we’re going to be looking at Japan 2.0 here in the US, our own version of their “lost decade”.
Just to illustrate the volatility that can occur around this figure, take a look at this chart of EUR/USD: (click chart to enlarge)
Close to 100 pips in a few minutes!
This could make an interesting year for the US dollar. There are 2 basic ways that we will see dollar strength this year; either through interest rate hikes or risk aversion plays. So while this logic may be a bit counter-intuitive to some, it’s going to be very important to take our clues from the other markets to see which theme is playing out.
And of course don’t forget that the dollar can continue to weaken well into this year, the question is going to be that if things don’t get better on the employment front, at what point does that filter through to the other markets?
Only time will tell.
To learn more about how these government figures can affect your savings, be sure to check out our forex trading courses!
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