They say a picture says a thousand words. That’s also true for the EUR/USD Forex Chart below; except in this case I am not all that sure what those words would be.

Geithner and his friends came out with more details about they were going to do to fix…you know…everything. It’s funny. I saw Geithner make his initial announcement about the plan a little while back. It was notable. Investors expected substance to go with whatever confidence would be on display. They pretty much got neither. They sure as hell weren’t satisfied. That was not a good day for the markets.

Well, this time, he looked like a different person. You can see why Obama chose him. He knows his stuff. He seemed confident, knowledgeable…there was even a hint of humour there. Mind you, this was coming on the heels of the rally on Wall Street (Bernanke opened the flood gates…). His plan is also clearer, containing more of the aforementioned (and greatly desired) SUBSTANCE. Result – Good day on Wall Street. Bad Day for the Dollar. So, you can see how on the EUR/USD chart above, yesterday’s bar shows that move.

Today, there was some profit-taking, as would be expected after a big move like we saw yesterday. Once again, this is clearly visible above. What does it mean? Are we about to continue the downward trend? We are still very much in that trend. Was this merely a Bear Market Rally, of is this the real deal?

It’s difficult to say. Things just aren’t as clear cut as I would like them. The Fed unleashing a trillion dollars on the World is, in itself, dollar bearish. However, the dollar is still the most trusted currency. It’s status is being challenged, no doubt. China went as far as to call for a new super currency today. That was not enough to stop the rebound today though. If the Feds ploy starts to work really soon, then that would be good for the Dollar, longer term. Europe is still showing cracks. The US is still on the leading edge here.

In October last year, all of this was straight-forward. I made the most money in my Forex trading carreer when the initial Bailout was announced, along with the plan for the auto bailout. All that went to hell and it was literally buy dollars and yen against everything! Simple times. Predictable times. Good times.

I think there will be a cooldown while people wait for news. There are numbers out that will affect the US Dollar and Europe tomorrow. I don’t expect any major moves, but you never know.

Another thing worth mentioning is that Oil has been quietly gaining. How long will it be before we’re up to the levels we had last year? not long enough, if you ask me…

I am looking at my Forex Trading charts at the end of what was a pretty amazing week. The dollar has clawed back some ground after the record losses that occurred because of the Fed deciding to print more money…a trillion dollars…to buy up treasuries etc, and therefore free up the purse-strings for everyone. Talk about quantitative easing…

A year ago, hearing a figure like that would have been downright frightening. However, all we’ve heard in the US over the last few months is “Bail Out” and “Budget Deficit” etc. All kinds of crazy figures have been tossed around, so this one doesn’t sound out of place in this environment. That said, it’s still major. Thus, the dollar rightfully lost a lot of ground over the last few days.

Today, there wasn’t much news that affected the Dollar directly. Traders took their profits. People have come to terms with what Fed Chairman Bernanke and his cronies have done. Calm has returned. However, I don’t think it is over yet. It’s hard to find fundamentals to back US Dollar strength in the short term. The long term view is different though. The European Central Bank and others will have to follow the Fed’s actions in some way down the line. When that happens, it will be the dollar gets the upper hand.

You can see him the Dollar sitting in the dark, licking it’s wounds. It looks up and, with an evil smirk on it’s green face, says “I’ll be back!”. Will it really? Well, that’s the joy of trading forex…I really don’t care either way. Dollar up or Dollar down, I still get the crown.

Forgive my poor rhyming skills.

The EUR/USD chart below shows what happened to the dollar in the Forex Markets after the Fed announced that it was going to buy up US Treasuries…to the tune of 1 Trillion Dollars.

1 Trillion Dollars…That is some major dough. The US Dollar lost ground across the board, even to the Yen. That highlights an interesting point. In the past, we’ve seen the Yen lose value when confidence is up and Equities gain. In situations like these, the US Dollar would lose value against most other currencies, but gain on the Yen. Yesterday’s case was different. The Fed buying up all treasuries on this scale is bad for the dollars. When a commodity becomes available in large quantities, it loses value. The Fed is going to be printing shedloads of money, so the dollar will lose value.

On the other side of that equation, such an action is actually perceived to be GOOD for the US economy; and good for confidence. So, people tend to invest in high yielding currencies when they have confidence in the markets. The Euro, Aussie Dollar etc. all do well in these conditions. Add to the fact that confidence has been returning (based on that rally we just had), and you have a particularly violent Mortal Kombat finishing move. For non-Mortal Kombat initiates…this is a devastating effect that isn’t likely to reverse easily.

It’s funny how things can change. It was just a couple of days ago when most people still thought the dollar would retain its strength for some time to come, barring some major incident. Voila! Major Incident!!

This is what being decisive means. Bernanke gets points for doing this. This should unplug all the drains. Loans, Credit, everything. This is going all in. Hopefully it works, or else…

So, long term dollar trend anyone? My guess for now is…well, down.

It seemed like we had 5 days under the belt; then at the end of the day stocks retreated. The fun is over, at least for now. It was a near thing. Most of the day was gone. So close, yet so far. Check out the Forex EUR/USD Chart above. If you look at the bar circled above, you can see the retreat reflected. The correlation between Dollar Strength and Equity weakness still seems firmly in place.

There are some note-worthy news items this week. If more negative news comes out…or even if there is no more positive, then we could be on the way down again. Promises are all well and good, but we need more concrete actions. The G20 didn’t really deliver on that front. It is also clear that we are still in trouble as far as the economy goes.

Watch the Markets…if we go up, the Dollar will continue to fall. If not, then it will be back to business as usual.

Happy Trading

This hasn’t happened for over 3 months. 4 days of Stock Market gains in a row. Wow.

Could this be it? Have we hit the bottom? Our we on our way back up?
No one wants to call it. No one wants to jinx it. However, there is reason to be a optimistic. The fundamentals are starting to strengthen; some confidence is returning.

The US Treasury Secretary, having messed up the message the first time he tried to “instill confidence” in the markets, promised to release details of the plan to deal with the Toxic Assets of the US Banks. This is in line with word out of the G20 meeting this weekend.

What does this mean for the Forex Markets? Well, the most obvious thing would be the move away from Risk-averse trades; more investment in higher yielding currencies…at least the few there are left. With most major central banks cutting interest rates during this time, almost all of them have really low rates.

If we go with the trends that have established themselves since this recession thingy got going, we would say that the Dollar and the Yen would be the immediate losers. The fundamentals of the Japanese economy are not good. With confidence returning and Equities gaining, I think it’s pretty safe to say that the Yen is going to go down. The Dollar, on the other hand…well it’s not that certain. There have been instances this year when Equities have done well, and the dollar has done well, or at least not as bad as the Yen. I think with the US seeming like its coming out of this thing might favor the Dollar in the long term, especially if the fear in the markets reduces substantially.

In the short-term though, the other major currencies should get a boost from Equity markets at the expense of the dollar. I don’t expect any major moves upwards for the markets, but we should hopefully be inching our way higher.

It really is time for things to start getting better. We will take this one day at a time.

Happy Trading

After the roller-coaster that was last week, we are beginning another one. For people who are learning forex trading, or are who are new to the Forex markets, it’s been a pretty harsh environment lately. People like me who proclaim to be part-time traders are also getting a good spanking.

Everyone waited expectantly for the Jobs Report out of the US on Friday. Everyone knew it would be bad, so there were no real surprises at the figure of 651,000. The unemployment rate did jump to 8.1% which was a little higher than most people expected though. I think everyone also expected that such figures could not bode well for the Equity markets. This was the case.

What was a little fuzzy was exactly how the Forex Market, particularly the US Dollar, would react to this news. In the recent past, uncertainty and more negative has tended to favor the US Dollar, what with it’s “Haven” status. However, this has not been 100% reliable lately, as more and more news has come out to show that the US is still very much caught in the recession. It’s always been somewhat counter-intuitive that the Dollar should keep gaining, even as the US economy sinks deeper into the recession.

This was something that could no be ignored on Friday, at least not initially. The Dollar lost substantial ground against pretty much everyone. Unfortunately for those who think the Dollar is losing it’s shine, Forex traders quickly realized the error of their ways and bought the Dollar back. The result: The Forex Markets were back to close to where how they begun the day; most gains against the dollar erased.

So we go into this week expecting quite a bit of news out of Europe. Once again, we expect quite some negativity. Consequently, I think the dollar will be back to it’s old ways again.

So, we see it again. This morning, stocks have been rising as the Chinese Government highlights plans for an added Economic Stimulus. This helps to inject some confidence into the market. The risk aversion we have being seeing thus abates a little bit. Investors can come out to play.

After analysis, the offshoot of that is that the dollar loses some steam, at least temporarily. The same goes for the Yen. This loss on the Dollar’s part is furthered increased against the Pound as figures in the UK show that Consumer confidence in February rose from it’s lowest levels in four years. Good times…at least for today.

So, in general terms, a lot of investors talk about long or medium term dollar strength; but as soon as there is the slightest sliver of hope that we might be reaching the bottom of this fall, the dollar is pushed back a little bit. Then some other news comes out that shows that we really aren’t quite there yet; then the dollar gains once more, usually further than it’s previous loss.

It’s no wonder Forex traders still keep betting on the Dollar. We will need a steady succession of good news to end this trend. Today might be the day that starts. More likely, it’s just a breather. More likely, the pain will continue. More likely, dollar strength will continue.

I’ve heard it so many times over the past months…”Don’t fight the trend…The dollar rally will continue”, “The dollar will continue to be a safe haven for some time to come”. Those comments are still valid today. The Dollar just keeps getting stronger and stronger. For a minute last week, I thought that trend was reversing. I mean how can you continue to justify the currency’s strength when there are so many problems with the US economy? The Yen was in a similar situation; its status as a haven is being threatened terminated. The fundamentals don’t really provide support for it.

However, with the Dow dropping below 7000 yesterday, the Yen and the Dollar gained strength again. Once again the discussions have begun. Is anyone willing to make a call on whether this is a bottom for the stock markets? It should be close (but then again, people have been saying that for some time now).

In any case, I am bullish on the US Dollar right now. It certainly will keep its strength longer the Yen in the current climate. If the Equity markets start to rise, then investors will be willing to take their money out of safety. That might take some shine off the dollar. We will see what the rest of 2009 holds.

Happy Trading