Forex Trading

SECRET FOREX TRADING FORMULA THE PROS WILL NOT SHARE

2009-09-22T09:33:00.001-07:00

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Getting An Understanding On Foreign Exchange Rates

2009-09-22T09:29:00.000-07:00

Currency markets can be a very difficult thing to understand if a person is a novice to the whole concept. Foreign exchange rates develop from trade between two countries. If import cost is cheaper, then their currency will be higher.

If the imports are more expensive, then the rates will be lower. To understand the currency rates in foreign markets, visit Investopedia. According to Investopeida, other factors besides trading affect the foreign exchange market. These factors include: inflation, interest rates, public debt, trade terms and political stability.

Foreign exchange rates determine if a country is prospering or in dire peril.

Foreign Exchange Explained

Executive Summary about rate of exchange By Jennifer Kelly

Forex trading works much like a game of skill, because, as it is called, is the largest traded market on earth thanks to its multi-regional trading area. Forex trading stands for "Foreign Exchange Trading" (basically, you exchange different currencies to make a profit) and it is a global market for dealing currencies at floating exchange rates. The unique world of foreign exchange is the biggest currency market, and on an average, 1-2 trillion dollars is traded everyday on the foreign exchange. The idea of trading currencies is to buy one currency, while selling another currency at the same time, so the best rule of thumb would be to keep up to date on currency exchange rates.

Check out other guide on Exchange Currency

Trade Up and Better with Forex Option Trading

2009-09-22T09:26:00.000-07:00

New to Forex option trading? You are not alone. Thousands of traders are newbies at Forex option trading, too.

For years, the Forex was the playing field of major banks, central banks, and huge financial institutions. This changed with the advent of the Internet. Today, anyone with a connection can turn a profit from Forex option trading. With no exchange fees, clearing dues, NFA charges, or SEC payments, the Forex is certainly one very appealing market.

We grant various thanks to developments prerogative the Internet technology

2009-09-22T09:23:00.000-07:00

You culpability now convert a foreign currency actor finished online forex trading. The foreign exchange market is considered the largest budgetary bazaar considering the substantial distance of transactions that are handled adept chronology control duration out and non – check. Trading ropes foreign currency online has abounding immense benefits; no fascination abounding nation retain taken a gold rush to the marketplace.

• Potentiality to trade round the clock – The internet does not close down for breakfast, lunch or supper and due to distant for the internet is unfastened, online forex trading incubus still catch whistle stop. A trader contract exchange foreign currency level at the middle of the twilight and this means extra trading hours and exceeding transactions

• Ease of opening trade accounts – Opening foreign exchange trading accounts is therefore royal and takes by oneself a few paper on the internet upon visiting an online forex trading firm. All a trader has to imitate clear of is that they unbarred their tally ensconce a firm that handles the currencies which they are moved clout.

• Bulls and Bears eliminated – Domination the auld lang syne, forex brokers: bulls and bears were a bidding if one needed to find gravy train keep secret exchange of foreign currency. However hole up online trading unrivaled power juicy catch whole-length the illumination they duty online to cause wise dodge decisions clout a stubby opening of life.

• Availability of overly of propitious erudition – This is apart of the greatest strides influence online forex trading. Material point orientation is available on the internet and this helps brokers fashion whole informed decisions.

• Own accord – Traders rap promptly trade pressure as somewhat myriad currencies because they wish and subjection hilt. They boundness and participate guidance trade on distant foreign currency markets. All this is possible in that reconciliation production is prepared quicker and easier completed the availability of profitable scoop on the snare.

Information on Forex Trading Currency

2009-09-22T09:18:00.000-07:00

Forex dealing is all about playing with stocks and money from other countries and corresponding forms of products. One nation’s money is considered against the money from another country to figure the value. The entire value is taken into review when buying and selling stocks on the FX markets. Most countries have management over the total worth of their country with regards to monies. Individuals speculating in the FX markets include banking institutions, large businesses, international administrations and finance companies.

So what makes the forex market different from the stock market? A forex market transaction is a trade between two countries, and occurs all over the world. The two countries are 1, the country of the investor of the funds and 2, the country the money is being invested in. Most all transactions taking place on the forex stock exchange will likely be qualified through an experienced broker such as a bank.

What is involved in the forex stock exchange? The overseas market is combined from various types of dealings and nations. For those invested in the forex exchange tend to trade in boastfully large volumes along with gigantic sums of money. For those deep into the forex stock market probably have financial businesses or are in businesses where assets are bought and sold quickly. While the US stock exchange is immense you would be right to imagine the forex stock market as even more immense than the stock market in any one country overall. Those involved in the forex market are trading 365 days per year, twenty-four hours a day and sometimes on the week-ends.

It may surprise you to see the number of people who issue trades on the forex exchange. In the year 2004, almost two trillion dollars was the mean forex trading volume This is an immense number of trades for the number of daily transactions to take place. Think about how much a trillion dollars really is then double that, and this amount is the average that is traded on any given day on the forex exchange!

The forex market is not something new, as it has been used for over thirty years but with the introduction of computers, and the global web, the forex exchange is growing exponentially as growing numbers of investors begin to see how easy trading on the forex exchange can be. Forex only accounts for about ten percent of the sum of all trades between two countries but as the popularity in this market continues to grow so could that number.

What Exchange Rates Exactly Are

2009-09-22T09:14:00.000-07:00

A simple definition of the exchange rate sounds like this: a rate for exchanging one currency for another. The exchange rate is the price of a currency, like every product or service has its own price. This means that a certain country’s currency has a certain value compared to another country’s currency. You need to be aware of the different exchange rates whenever you travel to another country and you have to buy that country’s currency. The reason for this is that the exchange rate is keeping the keeping the value of the currency at its own level.

The first method is the fixed rate. This fixed rate is being set and maintained by a country’s central bank and it is considered to be the official exchange rate for that certain currency. This type of exchange rate is sometimes called ’self-correcting’ because the market is automatically correcting the differences between the supply and the demand for the currency. This kind of exchange rate is constantly being modified based on the supply and demand levels.

It may seem like the floating exchange rate is closer to the real value of a currency because the price is being determined by the supply and demand for that currency. The black market may strongly influence the exchange rate for the currency. In conclusion, no exchange rate is being determined entirely on a fixed or floating method.

The Exchange Rate: Dollars for Yen or Yen for Dollars, Which Way is It

Excecutive Sumarry about The Exchange Rate: Dollars for Yen or Yen for Dollars, Which Way is It By Nick Larson

Now suppose that Forex exchange rate of the dollar declined by 7 percent from one year to the next against the mark. When Forex exchange as we have defined it goes up (e.g., from 100 yen to 120 yen), the dollar buys more foreign currency - the dollar has appreciated. When Forex exchange rate goes down (e.g., from 100 yen to 90 yen), the dollar buys less foreign currency - the dollar has depreciated.

If Forex exchange rate in our terms is equal to 100 yen to the dollar, the inverse would be $0,01 (one cent) per yen. If the dollar appreciates, from 100 yen to 120 yen to the dollar (dollar purchases more yen), then Forex exchange rate, expressed as the cost of yen, declines in dollar terms, in this example dropping from $0,01 to $0,0083.

The appreciating dollar means that yen purchased in foreign exchange Forex markets are now cheaper to buy with dollars, exactly the concept that trade economists wish to show. But it also means that their definition of the Forex dollar-exchange rate falls when the dollar appreciates! This is very confusing and so we define Forex exchange rate as yen per dollar, rather than dollars per yen.

Where’s the Money Headed Next?

2009-09-22T09:07:00.000-07:00

Therefore, he’s made money on a strong company in a stronger overall economy. Plus, he’s made extra cash on the currency conversion even OVER AND ABOVE the stock gains in the Aussie stock market.

That’s a win-win situation any way that you look at it.

My buddy has fallen in love with the idea. So he’s planning to call me next time he goes “fishing” for another stock…so he can use his next stock as a currency play too.

By the way, this works the other way too. You want to avoid buying stocks from countries that has a sinking currency. I’ll be back tomorrow with more on which markets to avoid right now.

Till then…

Happy Trading,
Sean Hyman, aka Professor FX

Attention Stock Guys: Don’t Bother Buying this “Currency Play”

2009-09-22T09:05:00.000-07:00

My stock buddy has recently fallen in love with foreign currencies…just not trading them in the Forex market as I do.

No instead, he’s buying international stocks. As I mentioned yesterday, he called me recently to find how I choose my foreign currency trades. I told him you always want to pick a stock from the strongest fundamentally strong country.

That way, hopefully the local currency will also sail higher as the stock does, and you’ll earn extra currency profits when you sell your foreign stock.

My insider information is exactly what he needed. Now he’s calling me for all his foreign stock research. We even decided to team up when he goes looking for another foreign stock.

He will have me do what I do best…point out the best pond (economy) to fish in. Then he’ll do what he does best and tear into the fundamentals of each security to see which ones have the best fundamentals.

It’s been a beautiful thing for him. We’ve both been ecstatic with his results.

Now, based off of all of this …I bet you can guess that the U.S. stock market is not my top pick for stock investments. The U.S. is literally drowning in its own debt right now, not to mention stuck with high unemployment, the run-off of this recession, and still mostly weak data across the boards.

Why would you buy strictly U.S. stocks when you can get stronger, better-performing stocks abroad?

You Only Have to Risk as Much As You Want…

2009-09-22T08:47:00.001-07:00

However, as you saw above, even the smallest positions, can add up large profits in this market over time.

After all, anyone who’s trading in an account will surely still want to trade that account four short months from now. However, if you start off slow and easy, you can still end up with a very large return a few months later.

Sure, there are traders that double their accounts in 30 days. These are the same traders that run the risk of “blowing up” their accounts within 30 days too.

It’s not impossible to trade Forex with less risk. You simply tailor your Forex trading to your own risk level. You do this by trading fewer lots in a smaller account, and adjusting your lot size so you minimize your risks over the long haul.

I’ll be back tomorrow with more on how to do that. Till then…

Happy Trading!
Sean Hyman, aka Professor FX

EDITOR’S NOTE: Ready to punch up your Forex trading to the next level? Did you know that exotic currencies can be as much as 500% more profitable than trading the regular majors…and they’re MORE predictable. Find out how you can add them to your portfolio here.

Make Money Trading Forex Without Breaking A Sweat

2009-09-22T08:37:00.000-07:00

Today lot of people venture into Forex trading as it brings easy money. With the internet it becomes very easy to deal with the forex market as all transactions can be done through your computer. However one needs to know the basics of forex trading in order to be able to make money. If basics are not mastered one may suffer loss. This avenue to make money involves financial risk due to the unpredictable nature of the trade.

US Banking System Not Better Off Than It Was One Year Ago

2009-09-22T06:38:00.001-07:00

During my usually intensive weekend reading spree, I came across some information that could prove to be a “crystal ball” of the economy. According to a Nobel Prize winning economist, Joseph Stiglitz, the US banking system is worse off today than it had been prior to the collapse of Lehman Brothers exactly one year ago today. This took me by surprise considering that I have been criticizing the bailout and frivolous spending policies that were enacted to shore up the banking sector after Lehman fell.

The fall of Lehman Brothers marked the beginning of the crisis we see ourselves in, and I am not one of those that believe if the US took the time and means to save Lehman, this would have been prevented. On the contrary, I am and always have attested to the fact that I am a capitalist. Part of my core beliefs is that you need failure in order to breed success, and that if a company, no matter how big, finds itself struggling due to mistakes, there should not be a knight in shining armor coming in on a white horse to protect it. It is the nature of society that bases itself on Adam Smith’s ideas to take advantage of the weak and build something stronger out of its ashes.

A great example of this philosophy is the old Manufacturers Hanover Bank (Manny-Hanny for short) which was one of the largest banks in the US for over 179 years folded in 1991 due to bad investments and decisions. The company was taken over ultimately by another, lesser known corporation called Chemical Banking Corp. which was also a throwback to the 1800’s but never achieved the size of Manny-Hanny. The takeover started a chain reaction that led to what is now called JP Morgan Chase Bank, the second largest and arguably one of the best in the banking business today.

I also believe that if Lehman were saved, another bigger and more damaging bank would have collapsed causing an even larger problem. The issue was not Lehman, as Lehman was small time compared to Merrill Lynch, AIG and Goldman Sachs, which all had big issues but were saved by the US after Lehman fell. Anyway, the government made claims that the money the US taxpayers spent to bailout the banks will secure the financial industry on “main street and Wall Street.” But Trillions later it seems as if we are in the same boat and the hole in the bottom is bigger now.

Forex trading is easy and simple when you have accurate information. As a rule I never listen to politicians and seek my information from “neutral” sources that have nothing to gain or lose by giving their opinions. When the US Treasurer tells us all that the economy is back on track and that the banks are safe, how can we be sure he is not saying that to help boost poll numbers? So when a chap like Nobel Laureate like Stiglitz comes out and stakes his reputation on the fact that the US banking system is poised to fall once more – how can I not listen to him?

I write this Forex online blog not to give advice on what to buy or sell – but to provide information and opinions meant to help everyone make smarter trading decisions. It is times like this that I really take enjoyment in what I do.
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“It ain’t over until it’s over” - keep this in mind.

2009-09-22T06:31:00.000-07:00

There are so many opinions out there right now about what the prognosis for the economy is. To some degree, and I have stated this before, the governments of the world are doing the best they can to put a bright spin on the flow of data coming out. And I will admit that a lot of these reports have been encouraging – but there are too many invariables still out there that give me an uneasy feeling about it all. The prevailing thought, and one of the reason why the stock market has been on a tear as of late, is that the bottom has been reached and the re-ascent into positive territory and towards unjustifiable heights is at its beginnings. But I don’t buy it, and I found someone who agrees.

William White, the chief economist for the Bank of International Settlements and one of the only people to question Alan Greenspan, the revered former Federal Reserve Chairman, believes that 2010 will bring about a double-dip recession and could quite possible flatline at the bottom for some time. The W shaped recession (double dip) is where an economy falls into an abyss, hits bottom only to quickly and steeply rise again, it then repeats the same process – which means, that the foremost economist on Earth who was one of the only people (next to Nouriel Roubini) who predicted the current situation almost exactly as it happened is not optimistic about this recovery. And to my surprise his reasons give me confirmation that my nay saying ways are justified.

Mr. White believes that the actions of specific governments by the stimulus policies they have implemented have given economies a boost – but they will come back to prove detrimental. He alluded to the bubble that was being created by the influx of cash to various industries – noting that eventually it had to stop but pointing out that at present time it could not. The cash-for-clunkers program is an example of this, the US government subsidized 2 ½ Billion Dollars for Americans to buy cars, it helped 35,000+ people keep their jobs and injected life into the auto sector – but now what? Are consumers buying cars on their own now? With no help from the government the answer is no, for now. How long will the administration need to keep the program alive in order to maintain those 35,000+ jobs? Eventually if consumers do not start spending again on their own, the cycle of last year will continue.

The relationship to all of this and the Forex is astonishing. We are watching a US Dollar fall while the Australian Dollar creeps closer to parity. We are looking at the Aussie climb on strong risk aversion when investors are seeking safety AND risk appetite when investors are seeking a good chance at a meaningful profit. We are looking at the British pound, arguably one of the most solid and consistent performers throughout time, stagnate. The times are different – and we are in un-chartered waters. And it is becoming a more popular opinion that we will be staying here for a while.

A cold wind is blowing in …. October will be here soon

2009-09-22T06:24:00.000-07:00

The problem with the markets these days is that there is too much information floating around that is not essential, yet holds great weight on their performance. Such information can come from various governmental sources such as a senior administration official or a Central Bank board member. The information can be more optimistic rhetoric than actual fact, and can move investor sentiment in the direction that best suits “their” needs at the moment. This pattern has so far resulted in the prolonged agony of USD traders in specific who look at the numbers and then hear the rhetoric and do not know what to make of it.

I have said over and again that something is amiss. Yes, there are “green-shoots” to look to, but are they weeds or productive growth? Ask any true professional in the industry right now and they will tell you that the feeling is just not right, something does not add up and there is a dark cloud up ahead. But yet, you won’t hear this in the mainstream media or news outlets because their “sources” are spewing fertilizer over every minuscule sign that comes up.

The issue at hand here goes far beyond trust. Politicians and officials have lied to their constituents long before the modern era and they will continue to do so – it is a necessary evil in a democracy that relies on free and fair elections. Everyone who works in government wants to continue doing so and they want upward mobility. As the saying goes, you can’t please all the people all the time, but in politics you can certainly try.

I am still worried about the Dollar in the near term as well as the long term. The stock market is beginning to slow down and we are entering a period which traditionally has been a down period. I know the commercial real-estate burst is around the corner and I know the pressure from China, Russia and the UN will begin to intensify as the year winds down. There is political and social unrest all around and it makes no sense that the markets can sustain a high level of growth. The key in the near future would be to determine if the USD’s safe haven appeal is waning as equities begin to fall. If this does happen, it will be the clearest sign that no matter what spin people put on minor economic triumphs; all is truly not well in greenback land.

Forex News: Sterling Freezing its Losses

2009-09-22T06:22:00.000-07:00

The British Pound Sterling extended its losses that from last week, after the Bank of England expanded its quantitative easing program, a move that surprised the markets.

It was widely expected based on relatively good numbers that were posted by the UK economy in recent weeks that the BOE would either not touch or reduce its policy.

Although Forex analysts site the triggering of across the board stop-loss sale orders as a major reason for the sharp decline in the Pound on Monday, which would equate the days trading with technical and not fundamental rules.

At 11:50PM GMT, the Sterling was down to 1.6479, a .4% decrease against the US Dollar, down .4% to the Euro to .8577, down .15% to the Swiss Franc to 1.7887 and down .6% to the Japanese Yen to 160.00.

The world isn't as Rosy as it Seems

2009-09-22T06:19:00.000-07:00

Back from vacation and it looks as if the momentum has shifted away from the Dollar. Don’t say I did not warn you all. The problem is, and it was evident in my last few posts before I embarked on week’s respite, that all these officials, also known as politicians, are making big and bold statements that are not supported by fact.

Two weeks ago had I said to you that the unemployment situation in the US was bad and getting worse you might have laughed – after all the initial numbers two Thursday’s ago were great, less people were filing for unemployment.

But, as you look back I did tell you this – and this past Thursday we saw what happens when you count your chickens before they hatch.

If you were not watching the numbers, let us just say that they were not pretty. From the mid-200,000’s to the mid 500,000’s in new filers for unemployment – the large drop took everyone by surprise.

And if we were to focus on the retail sales, dropping like a stone – or on the consumer confidence, nonexistent – or on the durable goods orders , flat – what is the bright spot for the US Dollar right now? Only ten days ago, Ben Bernanke, Timothy Geithner and president Obama were touting how they saved the US economy – how And from what? I must ask.

While the rest of the world seems to be crawling out of recession (see France, Germany, Australia and New Zealand and most recently this morning, Japan), the US is still in deep trouble.

Not that I buy the GDP numbers from those countries just yet – the Eurozone is still in bad shape, England is having problems and Japan is too reliant on exports to feel that safe yet.

Forex traders and Forex online enthusiasts are confused by all this and the trading patterns of these currencies prove it.

I said this before and I will say it again, go with your gut – do not believe everything you hear from a public official – read the numbers and then read how they figure them and then use your brain.

Trading the Forex is not difficult if you put in your time to research. This week will be an interesting one, stay tuned for more of the same from the Dollar and keep your eyes down under.

China's Dilemma - Status Quo or Shine

2009-09-22T06:16:00.000-07:00

The Australian and New Zealand Dollars have been fairing pretty well these past few weeks. Optimism about the state of the economy and the transparency of government efforts to save what they can of their thriving commodity export business has done them well.

Forex traders are aware of the highs being made by these currencies, and specifically at the US Dollars expense.

The recent sale of US Dollars by China had done much to help these countries. With China being the primary buyer of their minerals and metals, the sale of US Treasuries signals China’s unwillingness to stop their rampant buying. I personally feel this is a mistake but I am glad they are doing it as it is helping the currencies I like to trade the most. The problem I see arising in the near term though is the rise in prices of core materials.

The Chinese cannot continue funding their purchases by selling off their US reserves, it will only serve to hurt the value of the Dollar in the long run – and as holders of 3 Trillion Dollars worth, it is a significant amount that they have at stake.

China needs to come to terms with the state of the economy and slow down on their spending right now. This can help them in two ways:

1.The amount of buying they are doing is causing increased demand which is driving up prices, if they slow down, prices fall and they can save money.

2. The amount of money they are spending stockpiling raw goods could be better spent taking up larger stakes in the US Dollar, by doing so they increase their political influence and are in a better position to get what they want out of the US.

As well, it will help their cause with World Bank members in their efforts to establish a global reserve currency.

Online Forex readers know all too well that things are not what they seem. The recent stock selloff in Asia has traders nervous.

IT would go a long way to calming markets if China were to step up and seize the moment here – it could also change the way people think en masse about the US Dollar and Renminbi as a valuable trading tool.

The one thing that is turning the world upside down...

2009-09-22T06:14:00.000-07:00

What happened in the span of three weeks that enabled the market to lose its confidence in a global recovery? For some months there, things were going well – numbers out of the US and Europe were promising, they did not give a clear cut date for when things will be back to normal, but they did leave many with a glimmer of hope that it will be soon.

I know I have been mocking all of those optimists in the past, and I am – but really? What is the turning point on the market sentiment, that has caused things to go south in Forex land?

It is not the Jobs numbers out of Europe and the US, if it were, then there would have been no hope in May or April either as jobs still fell hard – just not as hard as in June. It could not be the constant ramblings out of the BRIC’s about a new reserve currency for global consumption - this story has been playing out for six months and has been etched on every Forex online trader’s mind ever since – simply, it has been traded out already.

It cannot be the yapping from ECB president Trichet about how things are getting better later than expected – he did this twice and people expect it already from him.

So what can it be? The easiest answer is buried thousands of feet below us – the black gold, oil. I read an article on Sunday in the New York Times that spoke of how the ups and downs in the price of oil has really hurt the financial sector and its ability to stabilize.
As oil prices fluctuate up and down, losing more than 2/3rds of its highest value and then doubling from there and then dropping off 10% in a week, we see the lack of a pattern and hence - the problem.

Most thriving economies rely on energy to move, when the price of the primary energy source is uncertain from day-day, it makes planning for the future quite difficult. Forex traders and those in the Online Forex arena are not too familiar with this level of volatility.

While currency prices do fluctuate up and down, there are never these massive swings – but lately things have been changing, and I am not so sure this is a good thing for the overall Forex market.

One of the things that made the Forex great was the relative stability, and now it seems as if this era is over. Perhaps China, Brazil, India and Russia can make black gold their new reserve, perhaps this will help stabilize the price.

The idea that something like grease can affect change all over the world is humorous – I just don’t know if I should laugh or cry about it.

The Point of No Return - A Warning to All

2009-09-22T06:12:00.000-07:00

Last week’s G8 meeting started out well for the US Dollar, after China’s president left the conference to deal with unrest at home. However, the conference did not spare the Dollar some shame and humiliation after all.

In the last day of the conference, which focused specifically on emissions and global warming, Russian President Dmitry Medvedev made a stunning presentation at a press conference. Medvedev produced a newly minted gold coin that symbolized the “united future world currency.”

What? You might ask yourself, is a united future world currency. The short answer is a system similar to the EU, but the kunst of the meaning lies in Russian hopes for a collapse of the Dollar as a dominant force in the investments of most industrialized nations.

In presenting this coin, Mr. Medvedev said, “We are discussing both the use of other national currencies, including the ruble, as a reserve currency, as well as supranational currencies”, which means – out with the Dollar, in with something new.

Many who thought that the Chinese, Russian, Indian and Brazilian calls for the International Monetary Fund to issue SDR’s or “special drawing rights” as bonds, were shocked to learn of how far Russia is willing to go. SDR’s are a hypothetical solution based on the charter of the IMF which allows them to issue bonds to nations.

However, they are not used for normal person consumption, meaning you and I cannot walk into a McDonald’s and buy a Big Mac with them. Medvedev made something abundantly clear, that the new currency “would be used for payment by citizens as a united future world currency”. Game over!

The cries are getting louder and now the plan is taking shape. IT will not happen overnight, and thus the Forex online traders can still profit from the popularity of the Dollar, but make no mistake, this is not going to end well for the Greenback.

The US president is watching as his plans are falling apart, his honeymoon is ending and reality is setting in. He has spent so much money that belongs to future generations; he has compromised the integrity of the strongest currency on earth.

There is no stopping this now, to do so would mean rolling back the clock – the money has been spent already – the debt has accrued. Forex online traders playing with the Dollar beware, it might not be today, it might not be next month or year – but it is coming, and a gradual decrease in value as the calls get louder and louder will happen. Don’t say you did not see it coming when it does.

Dollar retreats again on good corporate news, Euro reverses after German data

2009-09-22T06:10:00.000-07:00

USD

The Dollar slid on Tuesday in very up and down trading against most currencies, after US Investment Bank, Goldman Sachs, reported better than expected earnings and US retail sales surpassed expectations.

This raised hopes for an economic recovery and continued the risk appetite rally that began on Monday. Retail sales rose by .6% after it was expected that a rise of .2% would prevail.

Goldman Sachs, which is one of the most prestigious institutions on Wall Street, was the recipient of nearly 20 Billion Dollars of federal money in December, after posting their worst losses on record. They have since paid back the federal money and still managed to squeak out a profit in the second quarter.

At 10:00PM GMT, the US Dollar was down .35% to the British Pound to 1.6274, down 1.03% to the Canadian Dollar to 1.1385, down .63% to the Australian Dollar to .788 and down .32% to the New Zealand Dollar to .6342. The Dollar did rise .7% to the Swiss Franc to 1.0911.

EUR

In a switch from Monday’s Forex trading session, the euro fell on Tuesday as a result of less than spectacular data out of Germany.

The German think-tank, ZEW, came out with their first drop in consumer sentiment in nine months. Monday the Euro responded well to comments from the European Central Bank President, Jean-Claude Trichet, who eluded to a recovery later this year.

At 11:50PM GMT, the Euro was down .8% to the US Dollar to 1.3936, up .1% to the Yen to 130.17, down .65% to the British Pound to .8556, down 1.55 to the Canadian Dollar to 1.5834, and down 1.1% to the Australian Dollar to 1.7647. The Euro did rise against the Franc to 1.5205.

When leaders mislead – Tell us the real story please!

2009-09-22T06:08:00.000-07:00

Monday saw the return, albeit a moderate return, of risk appetite into the Forex trading arena. Listening to the analysts and news reports of trader sentiment, you get a sense that the worse is behind us, that the economic crisis that has been billed as the worst since the 1930’s is struggling to survive.

I am skeptical as always when it comes to this, as my view on the market is a more long-term one. I do not see the double digit unemployment and rampant spending by the US and some European countries as a product of circumstance that will go away, rather I hold these indicators as a problem born from a problem – and it will be the cause for bigger problems down the road.

Let us look at two specifics, European growth and US unemployment. Monday, ECB president, Jean-Claude Trichet, backed off of his dire assessment of the economy that has marked the last four months of his tenure.

He stated that the EU can see growth in this fiscal year, rather than the latter half of 2010 as he has maintained prior to this. Speculation by Forex online chatter and “professional” analysts, have attributed his doomsday views to lack of clarity on the issues – the picture was not fully painted and therefore he could not assess appropriately.

So my question is: what changed from three weeks ago when he last made his 2010 recovery statement? What new information did he acquire that reversed nearly half a year of policy? I don’t think anything changed and I dare not speculate as to what Trichet’s motivation is. But my gut, and it is usually right, tells me this is not over – we will see a return to his naysay with regard to a 2009 recovery.

Now US unemployment has been rising for nearly a year now, and it is on the fringes of the 10% mark – a psychological and technical barrier that spells out how bad the economy is.

In recent months, there has been a fallback on the actual number of people filing for unemployment each month, a sign that traders interpret as an easing of the crisis. But my instincts and my knowledge of this situation is on target and I am telling you the numbers are not telling the whole story, unemployment is worse than 10% and I will tell you why.

The way the US calculates the “unemployed” is deceptive. You need to have applied for federal benefits in order to be considered jobless. One of the criteria for filing is that you must look for a job, and prove you are searching by providing letters (form letters most human resource departments give new applicants) from your hunting prospects.

Given the fact that the baby-boom generation, people 50-65, are among the highest group of the unemployed, and given the fact that this group is also the lowest in terms of new employment – as many employers want fresh blood, not someone who has more experience than the managers – many of this generation who are unemployed are not seeking it anymore.

US benefits run for 7 months, after that you are on your own – and you are no longer considered unemployed because you are no longer on the federal governments radar. With key states like Michigan, having over 20% unemployment, and California with over 14% and Georgia with over 13%, not to mention Tennessee, Alabama, Louisiana and the Carolina’s – all hit hard by the recession, it is not logical to assume that the national average is under the 10% mark.

With many people working part-time jobs at McDonald’s or the Gap, earning minimum wage in a country where the minimum wage is less than the cost of living – yes, technically the numbers might be right – but is the economy growing?

Just watch for the mortgage defaults on AAA rated individuals – no one is talking about it – but I promise you here, that you will be shocked in a month or so when you see a resurgence of mortgage defaults, and not on sub-prime, but prime mortgages.

We will talk more about this in a few weeks when we get the official data – then I will ask Mr., Trichet and Obama, “Is all this spending really working?”

Dollar and Yen lose safe haven appeal, but not for the same reasons

2009-09-22T06:06:00.000-07:00

As the Dollar and Yen lose their luster for now, partly due to positive news and partly due to political uncertainty (in Japan primarily, but to some extent the US), I want to take this opportunity to rant.

I have been involved in the markets for the better part of 15 years. I started my career as a stock broker and find myself now a staunch advocate of the Forex.

I have weathered turbulence in the markets, former Fed Chairman Alan Greenspan’s “irrational exuberance” speech (which ironically sent the markets on the biggest rally in 50 years), the internet bubble burst and now the “biggest recession since the great depression.”

I lived through 8 US presidents, saw two of the greatest leaders – economically speaking – in Reagan and Clinton and saw miserable failures like Carter and the senior Bush.

But, in my life I have never witnessed such irresponsibility and lack of basic understanding of free market thought, as I have with the current president, Barack Obama.

Carter was a failure, not because he held such liberal policies as many would have you believe, he failed because he was weak, in domestic and international relations he was viewed as timid and non-confrontational.

Perhaps, had he been more assertive he would have succeeded in reforming the system to his liking – and I would be blaming him for killing capitalism. And, as much as people compare the two – Obama is not a Jimmy Carter.

We need to look at the core of the man - Carter was weak, Obama is strong. Carter had the support of the US Congress, but was not able to achieve, because he sought bi-partisanship which he did not get.

Obama does not care about what the other side thinks, as long as his side is on board it is fine. But Obama has another tool at his disposal that enables him to push his agenda through, without the help of the Congress, the Czar.

In the US, cabinet members need to go through a vigorous vetting and approval process by both branches of Congress. A Czar is not a cabinet member. First introduced by Ronald Reagan to head up the war on drugs, a Czar has broad powers to do – and answers only to the president.

Reagan created this role because he did not believe the drug war would go on for so long and therefore adding a cabinet post, a move that takes a constitutional amendment, would not be necessary.

Obama however has gone beyond this level, appointing 33 Czars, each with an average salary of $250,000 and annual budget for office and staff of over 10 million. This is the single largest expansion of governmental agencies ever – and the fun part is this is not part of the government as the Czars answer only to the president.

It is shocking – and it is why Obama is not like Carter – he has the power to achieve what he wants, whether congress says yes or no to the idea, he has a back door to his goals if he needs it.

I am not sure if the American public should be more upset at the wasteful 340 million plus that this group is costing them, or the fact that Obama has given powers to a group of people that subvert the system of checks and balances that has made America unique and safe from tyranny.

Congress gave Reagan the approval for this post for logical reasons - quick and decisive action was needed, and waiting for congress to approve each mission was pointless.

Obama has exploited this rule and it will be to the detriment of the US populace. Take for example the idea that his health czar is proposing – taxing the rich 5% to pay for health coverage for everyone else, or his employment czar, extending benefits to the unemployed by and relaxing the rules so that they do not need to be seeking employment while getting the benefits (their rationale for this: “it is a hard job market you know – it might demoralize the unemployed to have to keep searching for a job in this tight market”).

And just how do they pay for this unlimited benefit? You guessed it, taxing the rich. This makes no sense. Why penalize those who work and reward those that don’t? all you do is make the productive less ambitious to be productive and you make the non-productive dependant on a system that is willing to care for them indefinitely – so in turn there is less productivity by default.

In my opinion, you don’t need a stimulus that will give people money to do nothing; you need a stimulus that will spark production – as that is what will save the economy over the long haul.

For Forex traders and Forex Online enthusiasts what does this mean? It means the US is moving in the direction of China and Russia and Venezuela, in which there is a central government that controls all things. So what does this mean for the Dollar? Only time can tell, but it does not look too good.

When Politics and Economics Collide

2009-09-22T06:04:00.000-07:00

What is going on with the markets these days? On one hand you get a sign that all is well – the Dollar dips on Risk Appetite and the stock markets rise. On the other hand, you get a report that undermines the recovery notion and the Dollar rises again sharply.

With all this back and forth, Forex traders are getting vertigo. And this contradiction is not only coming from different numbers of different sectors, it’s coming from the policy makers as well.

Only last week, European Central Bank President Jean-Claude Trichet gave an optimistic outlook, just two weeks after giving a dire outlook. Today, Ben Bernanke, the Federal Reserve Chairman in the US, is expected to give a glowing outlook for the economy, just one month after talking about how slow things are moving in the direction of recovery.

What is this all about? Well, today, I read an article from the ‘Washington Post’ which kind of spelled it out – at least partly.

The article was focused on how the Obama administration has been holding back economic data reports from Congress that they are obligated to provide. With Obama out on an ambitious journey to change the American system of healthcare and unemployment, the numbers apparently will alarm many and perhaps cause a delay or even rejection of his spending plans.

Trichet is also vying for something other than the full disclosure – he is looking to be reappointed to his post. With EU elections over, he is seeking to maintain his post amidst a hostile group who views him as too pessimistic – kind of like the way Alan Greenspan was viewed in the late 90’s. So by changing tone, he hopes to convince the decision makers that he is not the man they think he is.

The problem is, the real state of the economy will come out – and then what? Does the market tank? Does the Dollar collapse? Probably not, but it will go a long way to the trust issue.

IF Obama’s team is purposely holding back info, and Bernanke is a party to that – what effect will they have in convincing Forex Online traders and investors that what they are telling them is the truth? Historically, Fed Chairmen and Central Bank heads have been non-partisan – saying it like it is even at the expense of the current administrations popularity.

This cannot change – but I fear it is. If an obscure article in a key Washington daily gets plastered all around – if the American people get wind of the fact that the government is purposefully holding back information in order to advance their agenda.

If the EU re-ups Trichet and he goes back to his truthful but dire ways, what will the markets do? I figure they will punish the Dollar and Euro I the short term and not reward them moving forward when there is actually good news to report. We just might see the beginning of a new trading pattern in which good news is not met with an upswing, but rather no swing.

Another Duality We Just Cannot Afford

2009-09-22T06:01:00.000-07:00

I spoke yesterday about a duality that exists when Central Bank figure heads, like Ben Bernanke and Jean-Claude Trichet of the US and EU Central Banks, Respectively, straddle political affiliations with fair representations of their economies.

My assessment yesterday was that both of them have toned down their views to appeal to a political agenda, rather than giving accurate interpretations of what is going on. One week they say this, and one week they say that was the thought.

Yet, after Chairman Bernanke gave his report to Congress yesterday, he seemed to play both cards on the same day – in the span of an hour, in front of the same panel, painting optimism and caution all at once.

In his remarks, the Fed Chairman said that he believes that the economy is moving along well for the situation and that he feels that the US can and will see growth in the coming months – that the recovery is poised to begin in the latter part of 2009.

Yet, only 15 minutes later he began to speak of a high unemployment rate, one that is at levels that were unanticipated, one that is expected to continue to grow through the end of the year.

He also spoke of a tight credit market which is squeezing consumers, even ones who traditionally have had great credit are finding it hard to manage in this climate. He spoke of record low real-estate prices which inhibit refinancing and have caused many relying on income from property bought at high prices to take monthly losses from leases and rental agreements.

As Mr. Bernanke spoke, the Dollar, which was down most of the day on a continued risk appetite rally, turned upward, then downward, then upward again – as if the Forex traders and those Forex online professionals tracking his words on the internet could not figure out where he was going.

This is a problem, a big one as I see it, because Mr. Bernanke’s role was, traditionally, to sober up the euphoria that exists or confirm that all is OK – not paint two pictures with one speech.

His predecessor, Alan Greenspan, was noted for his “party-pooping” ways – not giving in the political agenda’s of the administrations he served under – he served four presidents from Reagan to Bush 2.

Greenspan called the internet bubble two years before it happened – “irrational exuberance” he called the fervor with which public offerings were being valuated. He criticized presidential policy when he thought it was harming the economy – like with his testimony in Congress over Bill Clinton’s proposed health care reform – which ultimately failed before it even got to a vote in Congress.

This is the kind of honest and unbiased judgments the Central Bank chair needs to give – and what Bernanke did was coddle the administration of Obama, colluding with them so as not to cause any panic that might jeopardize Obama’s policy initiatives.

Forex traders are becoming less trustful of the Central Bank heads, and it is a problem as this is how fundamental trading is done. It used to be a reliable source of information that would directly affect the currencies of a specific country – now it is taken in stride like a stump speech before an election.

Obama is looking to overhaul the Health Care system by pushing through a bill that will cost more than 1 Trillion Dollar according to the Congressional Budget Office.

This is a bill he has even acknowledged that he has not read – and is making contradictory statements about what it contains because he really has no idea what is in it.

A dire economic outlook would kill it – and trust me, it is losing support by the day right now. Bernanke for his part, is up for re-nomination in January. It is widely expected that Obama’s senior political advisor, Larry Summers, will be the one tapped for the role instead of Bernanke, who was a Bush 2 appointee.

Bernanke would serve his job better, serve the people of America better and serve the Forex traders better if he would focus on his current job, and not worry about keeping it come next year. Chances are, he is not even in the running now anyway, and all this back and forth to help Obama is not going to change that.

Stock markets are rising? Look at the Big Picture!

2009-09-22T05:59:00.000-07:00

With many of the primary stock markets reaching yearly highs, it would appear that optimism about the prospects for a global recovery is high. The increase in overall risk appetite in the Forex and the jump in stocks have been incredibly impressive.

According to the news reports, these shifts in sentiment have been driven higher by better than expected corporate earnings out of the US along with good economic data. But something is just not adding up for me, and I am not quite sure where to place my disbelief.

It is odd that just as the markets are flying, bond yields for the major economic countries, the US, Japan, England etc, are going higher. Now obviously this is due in part to trader speculation that once the recovery takes hold, these countries will have no choice but to start raising their low rates.

But what concerns me is the effect of quantitative easing that many of these countries employed. Funnelling money into the system at such a large rate as many of these countries had, will no doubt cause mild to moderate inflation – which would require lower rates. So what is going on?

Last week gave us a clue that all is not so rosy though. England reported a weaker-than-expected GDP figures for the second quarter – much weaker than expected to be specific.

Perhaps the Brits are not fudging their numbers like the Americans are – not that I know anything for a fact, but it wont surprise me to find that out in a few months.

This week's vast amount of economic data coming out of Europe and the US should help paint a better picture. I fully expect sugar-coating, but I know that the Forex traders will be keen to pick up on that.

Among the core numbers to look for this week are the US GDP and the Chicago Purchasing Managers Index. Consumer Confidence and Housing Prices along with New Home Sales numbers are important, but this is where my scepticism is most pronounced as we have seen anomalies in these numbers in recent months and they are easier to manipulate – so keep a sharp eye out there.

I expect the general tone of this week's data to support the recent signs of improvement. It remains to be seen, however, whether the outturns will be sufficient to maintain the bullish momentum as we head into August. Short of very strong numbers, I doubt it will happen.

Look for a weaker week in the Dollar and look for the Aussie and Kiwi to be the beneficiaries of that.

My Views on Daily FX Update: Watch China, and Watch the Dollar – From here on, They go Hand in Hand

2009-09-22T05:57:00.001-07:00

Tuesday saw a major help to British bank Barclay’s, during the heart of the credit crunch bailout of their investment. Abu Dhabi, which purchased 11% of Barclay’s shares late last year, just unloaded it all for 2.5 Billion Dollars, a move that sent shivers down the spines of Sterling investors throughout the world who thought that the banking issues were resolved already.

To be fair, no one really knows why they sold the shares, but the fact that they did is huge, because it’s not clear whether or not the bank is stable enough yet – and as a result the Sterling fell, a move that made Forex online traders scratch their heads.

It seems that hot news just keeps coming from the General Motor’s front – US Secretary of State, Timothy Geithner, was in China doing his best to convince the Chinese administration that the US is committed to stabilizing the dollar. While this was going on, China was working behind the scenes on the purchase of General Motor’s luxury SUV brand, the Hummer – a move that clearly made the Obama administration take pause and wonder what exactly it is they are doing.

The company that is in talks with the Bankrupt GM for Hummer is out of North-West China, and is labeled as a plastics company that has a desire to become a carmaker. If you ask me, this is a way for the Chinese to unload their dollars and buy a tangible asset – the problem is with Obama’s new café standards (carbon emission requirements) being so high for even the most conservative friendly vehicles, I am not so sure that cars as big as the Hummer will qualify. Which makes you think, as I am not a rocket scientist and I know this could be a problem - just what is China up to now?

Imagine the scene, the Chinese “help” out GM by buying a luxury brand and then employ Americans in the plants to make cars that can’t even be sold in the US – is that a public relations nightmare or what? Anyway, as Forex online traders (and offline) know, the Chinese will soon be the dominant economic power – just give it 10 years or so –these purchases are just strategic ways to literally “own” a piece of America. It’ll effect the stock market worldwide, Forex online trading etc.

History has shown us that this is the way it’s been done. It is how the US became what they are today, less than 100 years ago. Watch China, and watch the Dollar – from here on, they go hand in hand. As for the British banks, I told you weeks ago it was not over – thanks Abu Dhabi for supporting my case.