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Today, stocks took a pounding for most of the day. Risk aversion is back to the markets in a major way. There’s all kinds of bad news about the performance of – or lack thereof – financial firms. We also have to remember that there were those job numbers at the end of last week. The Markets seemed to shrug that off at the time. I guess this is as good a time as any for a late reaction.
There’s also some fear out there regarding the US Government’s actions. The Treasury secretary and his cronies seem to be more than willing to displace high ranking employees at the companies that they have provided assistance to. I am not too sure everyone is comfrotable with that.
In the forex markets, the reaction today was evident. The Dollar and Yen gained, the others lost. Still, if you look at the EURUSD chart below, you can see that resistance at around 1.3320, a Fibonacci level, held. The Euro seems to be rebounding in the Asian Session this morning (evening, Eastern Time), but I wouldn’t put much stock in it. There are a bunch of economic news items for tomorrow, including the Eurozone’s domestic product, and the Australian RBA will be making a rates announcement tomorrow.
We are now back to asking, yet again, whether the dollar will finally stop gaining on the others. I never expected much from the G20 – more like G18, if you really want to get technical about it; but I’m an easy going type of guy – after their planned meeting this week. It was clear that there were going to be differences between the leaders, not to mention the blame on America for the crisis in the first place.
However, it seemed to yield more than just hot air. They agreed to inject $1 Trillion to help address the Economic crisis. There are details to be worked out, and each country still reserves the right to decide exactly how much stimulation they are willing to put into their own economies; but it was generally unified. The markets loved it. The Dollar…not so much.
Forex traders sold the dollar across the board. A No-brainer really, for professionals and those learning forex trading alike. Today, the latest Job numbers in US were released. 663 thousand people lost their jobs in March. In any other environment, that would be horrible:devastating:unbelievably bad. Today, we have a collective sigh of relief instead. Considering what we have seen recently, that figure was pretty tame.
So, it seems that things are getting better. No need to rush to US based Treasuries. No need to buy Dollars. This recession might not be over by a long shot, but the general idea is that there might now be a light at the end of the tunnel. Yee-hah!!
The Safe Haven play might be over for the US Dollar and Yen. That doesn’t necessarily mean that the dollar is going to fall over completely. It’s just that a correction will now happen. This might mean a bit more analysis of each Dollar currency pair, instead of the general strength/weakness play we have been doing all this time.
Things will get interesting…in a different way. Happy trading.
The Central Banks of the world are among the biggest players in the Forex markets. They buy and sell their country’s own currency to influence it’s value for the country’s benefit. All of them do this in some way or form. It doesn’t always have the intended effect, and it can also piss off others who are affected by the move.
Take what happened earlier this month. The Swiss Central Bank sold of the Swiss Franc (it’s national currency) in droves to drive down it’s value. Amongst other things, exports were taking a hit because the value of the Franc was strong. This was viewed as an inherently selfish act by the rest of the Europeans on the single currency, the Euro. Devaluing the Swiss Franc (against the Euro) would have the opposite effect on them…stronger Euro, bad for THEIR exports.
There are all sorts of examples, from the US to China, where these Banks do their thing. Here is a video I found that highlights how this works:
