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.

The Treasury secretary spoke; then everything went to Hell.

The Investor in this environment is like a scared little kid who is convinced there’s a monster in his wardrobe. He needs to be consoled, encouraged etc, or he is likely to freak out. He needs you to tell convince him that it’s not there. You will need to throw in loads of reasons why he should believe you. You will need to be confident. If you are bullsh*tting, he will smell it, and there’ll be an even more violent reaction.

This is the current state of affairs today. The Secretary wasn’t convincing enough about the current crisis in the US. He seems to have forgotten (maybe he never knew) that he’s dealing with a very smart kid, one that has suffered quite a bit in the last year. This kid is way past being convinced there is no monster in the wardrobe. He has the scars to prove it.

What this kid needs is exact details of how you are going to get him out of that room before the monster eats him completely. I’m talking about documented escape routes and stuff like that. Then he wants details of how you are going keep the monster trapped in the room until it starves. Then he’ll need to see your weapons.

Even all of the above will not guarantee co-operation. Falling short…well you can see what happens.

Hopefully the kid will see – in time – that there is a long term plan in place, and that plan should ultimately lead to the monster being outsmarted.

Here’s hoping…

I have been trading seriously for a number of years now. Maybe not in huge figures; but I have been around long enough to know when we get to this point, however different the circumstances maybe this time.

Everyone’s waiting for Obama’s stimulus. Everyone’s hoping that the Government is convincing enough (unless you’re a forex trader, in which case you don’t really care…you just know things will go one way or the other). That’s what it boils down to. Do I as an investor fell confident enough to take the risks necessary in the marketplace? Am I willing to put my money on the line? Obama and his henchmen (Treasury Secretary, The Fed) will be making all kinds of announcements and speeches tomorrow.

How will people react? Will deliver the psychological goods? If they do, then we might finally see some proper risk appetite return to the market. In this case, the yen should fall, along with the US Dollar. Otherwise, well the downward spiral will simply continue…or plunge sharply. The upward move we had last week (i.e. Others gaining on the Dollar) is still very much in the retracement range for the long-term downward move in play for the Currency pairs involved.

Keep a close watch…

How low can we go?

I’ve given up asking that one in current market conditions. The GDP numbers last week weren’t quite as bad as people predicted. Still, they were bad. More importantly, I don’t see anything that necessarily shows that things are getting better…at least not yet. 

What I found rather surprising was the strength of the British Pound. It gained substantially against the dollar, Yen and even the Euro. Once the encouraging statements came out of Barclays, the Pound never looked back. The only thing about this is that 4 out of the 5 news items about the Pound were positive i.e. not as bad as everyone thought they would be. Would you be willing to bet that the same will happen this week? Not too sure about that, mate.

We’re also getting the non-farm payrolls report this week, along with possible interest rate cuts by Australia and possibly the UK. It could be a messy week. Investors are going to be on their toes. It would be dangerous to try to work out the direction things are going. We shall watch how things start out this week, then we’ll decide

Happy Trading