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Economy still headed down?

A somewhat frightening assessment of where the global economy is right now is shown in the video from CNBC below. Bear in mind that the dude’s name is Stephen King. There’s another chap by that name who’s a good story teller!

Things do seem to be getting better though. The Euro, Swiss Franc, Aussie and Canadian Dollar all gained on the Dollar this last few days. I have said that the Risk Aversion trade which we have been seeing might be losing it’s edge though. That means that we can no longer assume that things are getting better simply because the Dollar is losing value. This is especially true as the Yen also gained on the Dollar! Normally, the Yen would lose as well.

The numbers out of Europe this week have been good. Commodities are also doing well. Oil is back above 50 Dollars a barrel. There is hope that we have turned the corner. Maybe Mr. King is just being a killjoy.

Till there is more stability, it is still a trade by the day type scenario. Good news in a particular region will mean up, bad news down.

Dollar Commentary

Check out this video that talks about what’s going on with the dollar. The ride might be over…

Poor Gordon Brown gets it…

Check out this clip below. This is pretty harsh. Does The British Prime Minister deserve it? I don’t know, but it’s funny as hell

Forex Trading: The Dollar rebounds…violently

Europe is in a world of pain right now. The UK GDP contracted even more than was forecasted by analysts. Today, the German Finance minister made comments about preventing member states from straying away of the Euro Budget rules on spending. He claimed that if member states engaged in excessive spending, it would affect the Euro’s stability. Add that to some bad data, and you have what you see in the Forex chart below on the EUR/USD pair:

chart

So, the Dollar is back in the game. In fact, this shows that the Dollar never left. When it really comes down to it, people still count on the dollar for support. We’ll see where it goes from here.

Bull Market or Bear Market Rally?

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.

Forex Chart

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…

Job Losses, Central Banks and Forex Blues

I was in Ottawa, Canada earlier on this year. What struck me the most (aside from the fresh air, and the fact that no one I met actually said “oot and aboot” instead of “out and about”) was the muted reaction to the World Economic crisis. The atmosphere didn’t have that heaviness to it. It seemed like they were fine, and were going to remain so…unless you count the suicidal bellhop at my hotel who tried to convince me that Ottawa was a cr*phole and that I needed to get out before the shadows got me.

This is relevant because today the Canada job report is out. They lost 82,000 jobs, against expectations of 46,000. Unemployment was also up considerably. It seems that Canada is making a late entry into the “we are screwed” category of countries. To be fair, Canada has had it’s fair share of bad news; these items just didn’t have the biggest impact on my Forex Trading.

I mentioned previously that the global economic environment has been a somewhat harsh classroom for people learning about Forex Trading. You want to keep things simple. You want to be able to draw conclusions from established correlations. Consequently, it has been easy to see Oil having a good day, and generally assume that the Canadian Dollar would have a good day as well. This correlation has served well on the USD/CAD Currency Pair, even in this Environment.

Throw in a really crappy national economy in Canada and this is ruined. Oil might have an up-day, stocks might do alright, but bad news out of Canada would mean it would be even less likely that it’s currency would rise as expected.

In other news, the Swiss National Bank started a Global Forex War! Well, not really. They caused the Swiss currency to lose value by selling their own currency. The Swiss Franc has been doing quite well this Economic Crisis. Having a strong currency in this climate is bad for business and trade…exports mainly. That’s why the US Treasury Robot Secretary made comments about China earlier on this year. Low Value currency = Decent money from exports.

The issue here is that Switzerland is part of the European “Community”. Such an action was unexpected, even shocking, because it is blatantly selfish. The rest of the EU will be affected, and not necessarily in a positive way. Still, it’s all about Self-preservation. If, however, the rest of European Union decides to respond in kind…then it could get ugly. Bring on the war!

This highlights a key issue in Forex Trading. NEVER TAKE ANYTHING FOR GRANTED. Stay sharp. Always watch for the change that is coming. That way you won’t suffer too much when it happens.

The League of Super Heroes (AKA the G7)

The G7 (or G8. It’s been going back and forth between those two for a while now. In keeping with this indecision, I will interchange these throughout this post) have been meeting in Rome over this weekend. They have said that the World Economy is in a pretty bad state. They think it’s going to remain that way for the rest of the year, at least. A dire assessment of things, if you ask me. However, this in not unique. Everyone else has been saying the same thing. It’s nice to see that we are all on the same page, right?

Well, the G8 claim that they are going to do everything in their power to fight this global recession, or depression, as it is fast becoming. I think this underscores what is different about this particular downturn. It’s the unprecedented level of influence the Governments of the world are unleashing to combat it. It’s also the fact that they are willing to work together on a global scale. This is what gives me hope. It’s why I think we might get out this in better shape than we got in.

It’s in times of adversity that people come together the most. Differences are put aside, old squabbles temporarily suspended as we unite to fight the common enemy (To experience this phenomenom first hand, try saying something disrespectful about the US Army at Baseball game). In this case the enemy is one that threatens to wreak havoc on all of us. It’s nice to see we are all on the same side.

In keeping with this, the G7 have stopped attacking China on it’s “controversial” Currency Policy. The US was initially speaking out against China, trying to get it to revalue it’s currency, which currently is undervalued, as far as most others are concerned. This means that China’s Export industry, for instance, is holding up better than others. In this environment, where the US (and Japan) are hurting, one can see why the US was moaning. That’s out of the window, for now.

The G8 said little about influencing Currency rates though. I guess some people expected that. The conspicuous absence of a statement on this means that any co-ordinated response, currency-wise, will be minimal. All-in-all, like everybody else, they are still trying to figure out how to beat this. There’s a silent hope that it will simply pass way, like a particularly bad storm, or nightmare even.

As always, I am hopeful that it will pass…sooner rather than later.

  
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