User Name: Password:      Register - Lost password?

Forex News Blog
Back to The Headlines
Monday November 8, 2004 - 15:24:33 GMT
Foreign Exchange Analytics - www.fxa.com

Share This Story:
| | Email

Forex: Trichet Protests Dollar Slide, China Defends Peg, US Jobs Hum

Trichet Protests Dollar Slide, China Defends Peg, US Jobs Hum

You would have to search very hard to find anyone more bearish on the outlook for the dollar than myself. But it would be foolhardy to believe that the structural theme of towering twin deficits can alone drive the dollar lower, indefinitely. The stars need to be better aligned to keep this trend going and right now the night time sky is only partially visible.

Don't get me wrong. Running a near 6% current account deficit as a share of GDP is unsustainable. But structural themes like the current account deficit and its subset the budget deficit are rarely adequate cause for day in and day out liquidation short of a funding crisis. And the US is not an emerging market economy on the verge of default, credit downgrades and a run on the currency. Indeed, even maintaining an orderly dollar decline will demand a greater alignment of causal factors than simply wider US twin deficits and a de facto weak dollar policy.

What is missing sort of? An unambiguous cyclical story is essential to any sustained period of dollar selling in absence of a funding crisis. A US slow patch and a Euro Zone updraft would be ideal. But Friday's US jobs report for October suggested that the slow patch vanished this fall (not in the spring as Greenspan asserted in Congressional testimony). Moreover, the German economy is wounded. Domestic activity is flat to down and short of strong exports, Germany would be flirting with recession. Not all the Euro Zone shares this problem...French domestic demand is firming and real estate is booming. But as Germany goes so goes the Euro Zone. And it is with this in mind that Trichet today resurrected the brutality comment that first appeared in January. Trichet said after today's BIS meeting that the move up in euro/dollar is tending toward brutal and unwelcome. While Trichet may have implanted a smidgen of two-way risk into the psychology of traders it is unlikely that he turned the tide. Indeed when Trichet protested the dollar's decline earlier this year the US cyclical story was on the verge of giving the FX market lots to chew on...spurt of inflation in the spring (before oil really took off), start of the Fed tightening cycle and calls for ECB rate cuts. Currently the Fed is nearly complete with ending ultra-policy accommodation (restoring positive real Fed funds rate or 2.00% nominal rate) and ready to adjust rates solely on the data with an emphasis on flexibility. And low inflation should keep the Fed more inclined to get GDP up to a rate that will grow jobs. The October jobs report suggests this pace may already have been reached. But more likely the Fed is lacking a preponderance of evidence to conclude that NAIRU has been reached. My point on the Fed is that future rate hikes from Wednesday's move to a 2.00% Fed funds rate will likely err on the side of accommodation. Furthermore, the Fed is still quite focused on first-round effects from the rise in oil...mainly headwind for the economy through tax on consumption and corporate profits. Last Thursday Trichet was unequivocal on the policy bias...balance of risks are tilted toward inflation. While an ECB rate hike is not in the cards now, and a rising euro buys some time before the ECB hikes, it is reasonable to conclude that the cyclical story is on balance bearish the dollar and bullish the euro, though lacking in thrust.

Enter China. China's much awaited yuan revaluation seems to have a Chinese sense of urgency and not a Western sense of urgency. A wider yuan band (versus the dollar or a new basket of currencies) would be an entree to selling dollars more broadly. Unfortunately, the Chinese authorities are not really keen on making a change now, or ahead. Sure 2005 seems reasonable for a wider yuan band, but this could be delayed until year-end.
China's central banker Guo said at BIS today that there is no timetable for a revaluation and that the dollar decline may prove short-term. Surely, the latter remark was a reflection of the heat China is facing at the G10 level, and the desire to see China and Asian currency appreciation. As long as China stalls on a revaluation, the more markets will perceive China as a dollar and US Treasury accumulator, reducing concerns over financing the US current account deficit.

Intervention risk is low despite steady rhetoric from Japan and now Trichet's first verbal protest. Inflation is a growing concern for the ECB which should cast the euro rally in a very different light. Currency appreciation is a form of tightening monetary conditions. Okay if Trichet had his druthers it would prefer to remove policy accommodation through interest rate hikes rather than a higher euro. But the euro at 1.30 is not wholly unwelcome. Furthermore the ECB has made it clear that it does not have much faith in currency intervention and when the tool is deployed, multilateral intervention is preferred over unilateral intervention. This begs the question of what will it take to get the Bush administration to intervene using US resources? A disorderly dollar decline of course...one that sends stocks and or bonds into a severe decline. So put intervention in euro/dollar to bed for now. Japan intervention is threatening to return from a lengthy vacation (last intervened March 16 and before that Japan was engaged in an orgy of dollar buying lasting well over a year). But even Japan is less inclined to intervene to put a floor under dollar/yen as was the case until March. The Japanese economy is in better shape, though surely not out of the woods yet. So the case for intervention is less than it was in the spring. That said Japan should soon begin intervening again...though this time around the exercise will be aimed at smoothing the move down in dollar/yen, not preventing one. Conveniently, Japan will resume accumulating dollars and US Treasuries albeit at a pace a shadow of what was seen through March. Where does this start? Probably under 105, and look for discreet intervention as well.

How does the current account story hold up across markets? Not great. US Treasuries are not weaker on the notion that foreign investors are selling. Rather Asian monetary authorities = were large buyers last week when the dollar was selling off. If the current account story is truly driving a major realignment in portfolios, by definition look for a steady rise in US yields. And further down the road a current account funding shortfall would also pressure US stocks lower and right now this market is bid.

My point today is simple...the dollar bear trade is still favored, but it is simply not a one-way street. From the viewpoint of flows, real money is participating and this should reduce the speculative position flushes that we saw through early October. Meanwhile be patient with the short dollar trade and wait for a more optimal alignment of causal factors beyond simply Bush as a budget buster and US Treasury as a weak dollar steward. The real power in the downtrend ahead necessitates weak US fundamentals (this will help reduce the c/a deficit, but like strong jobs data suggesting wider deficit, doubt this plays into a bullish dollar outcome). Between the Fed pausing on rates once emergency accommodation is removed, record household debt and headwind from oil, I am confident the cyclical story will merge with the structural story ahead to provide the most powerful dollar decline in two decades.

David Gilmore
FXA

 

Forex Trading News

Forex Research

Daily Forex Market News
Forex news reports can be found on the forex research headlines page below. Here you will find real-time forex market news reports provided by respected contributors of currency trading information. Daily forex market news, weekly forex research and monthly forex news features can be found here.

Forex News
Real-time forex market news reports and features providing other currency trading information can be accessed by clicking on any of the headlines below. At the top of the forex blog page you will find the latest forex trading information. Scroll down the page if you are looking for less recent currency trading information. Scroll to the bottom of fx blog headlines and click on the link for past reports on forex. Currency world news reports from previous years can be found on the left sidebar under "FX Archives."



Elevate Your Trading With The Amazing Trader!

The Amazing Trader includes:
  • Actionable trading levels delivered to YOUR charts in real-time.
  • Live trading strategy sessions.
  • Market Updates with Trading Tools.

Register To Test Your Amazing Trader


Trading Ideas for 18 October 2017

Register for the Amazing Trader

1.

Amazing Trader EVENT RISK Calendar:

Wed 18 Oct
12:30 US- Housing Starts & Permits
14:30 US- EIA Crude
Thu 19 Oct
01:30 AU- Employment
08:30 GB- Retail Sales
12:30 US- Weekly Jobless
Fri 20 Oct
12:30 CA- Retail Sales & CPI
14:00 US- Existing Homes Sales

Forex Trading Outlook


Trading Opportunities


  • POTENTIAL PRICE RISK: HIGH Tue-- 08:30 GMT GB- CPI top tier confirmation of Inflation.

  • POTENTIAL PRICE RISK: Medium Tue-- 09:00 GMT DE- ZEW Survey second most important German monthly Survey.

  • POTENTIAL PRICE RISK: Medium Tue-- 09:00 GMT EZ- final HICP revision to flash report. Revisions are usually minor.

  • POTENTIAL PRICE RISK: Medium Tue-- 13:15 GMT US- Industrial Production. Top output indicator.



  • POTENTIAL PRICE RISK: Medium Wed-- 12:30 GMT US- Housing Starts and Permits revision to flash report. Useful housing leading indicator.

  • POTENTIAL PRICE RISK: Medium Wed-- 14:30 GMT US- EIA Crude. Top WTI inventory measure.



  • POTENTIAL PRICE RISK: Medium Thu-- 01:30 GMT AU- Employment. Top economic indicator.


  • POTENTIAL PRICE RISK: Medium Thu-- 02:00 GMT CN- GDP. Top economic indicator.


  • POTENTIAL PRICE RISK: HIGH Thu-- 08:30 GMT GB- Retail Sales. Top consumption indicator.


  • POTENTIAL PRICE RISK: Medium Thu-- 12:30 GMT US- Weekly Jobless. Employment Indicator.



John M. Bland, MBA
co-founding Partner, Global-View.com

EXCLUSIVE: Global-View Daily Trading Chart Points Updated

EXCLUSIVE: Global-View Free Forex Database updated




TRADER ADVOCACY ARTICLES

Trader's Advocate Articles..

pic

Retail Forex Brokerage Changing!

Are you looking for your first broker or do you need of a new one? There are more critical things to consider than you might have thought.

We were trading long before there were online brokers. Global-View has been directly involved with the industry since its infancy. We've seen everything and are up-to-data with recent regulatory changes.

Our Best Brokers listing section includes:Forex Broker Reviews, Forex Broker Directory, Forex Broker Comparisons and advice on How to Choose a Forex Broker

If would like guidance, advice, or have any concerns at all ASK US. We are here to help you.

SEE Our Best Brokers List

Currency Trading Tools

  • Live rates, currency news, fx charts. 

  • Research reports and currency forecasts.

  • Foreign Exchange database and history.

  • Weekly economic calendar.

Directory of  Forex trading tools

 
Terms of Use    Disclaimer    Privacy Policy    Contact    Site Map


Forex Forum
Forex Trading Forum
Forex Forum + forex rates
Forex Forum Archives
Forex Forum RSS
Free Registration

Trading Forums
Currency Forum Guide
Forum Directory
Open Forum
Futures Forum
Political Forum
Forex Brokers
Compare Forex Brokers
Forex Broker News
Forex Broker Hotline

Online Forex Trading
Forex Trading Tools
Currency Trading Tools
Forex Database
FX Chart Points
Risk/Carry Trade Chart Points
Economic Calendar
Quicklinks to Economic Data
Currency Futures Swaps
Fibonacci Calculator
Currency Futures Calculator

Forex Education
Forex Learning Center
FX Trading Basics Course
Forex Trading Course
Forex Trading Handbook

Forex Analysis
Forex Forecasts
Interest Rate Forecasts
Central Bank Forecasts

FX Charts and Quotes
Live FX Rates
Live Global Market Quotes
Live Forex Charts
US Dollar Index Chart
Global Chart Gallery
Daily Market Tracker
Forex News
Forex Blog
Forex News
Forex Blog Archives
Forex News RSS
Forex Services
Forex Products
GVI Forex
Free Trials
FX Bookstore
FX Jobs and Careers
Jobs USA
Jobs UK
Jobs Canada

Forex Forum

The Global-View Forex Forum is the hub for currency trading on the web. Founded in 1996, it was the original forex forum and is still the place where forex traders around the globe come 24/7 looking for currency trading ideas, breaking forex news, fx trading rumors, fx flows and more. This is where you can find a full suite of forex trading tools, including a complete fx database, forex chart points, live currency rates, and live fx charts. In addition, there is a forex brokers directory where you can compare forex brokers. There is also a forex brokers hotline where you can ask for help choosing a forex broker that meets your individual fx trading needs. Interact on the same venue to discuss forex trading.

Forex News

The forex forum is where traders come to discuss the forex market. It is one of the few places where forex traders of all levels of experience, from novice to professionals, interact on the same venue to discuss forex trading. There is also the GVI Forex, which is a private subscription service where professional and experienced currency traders meet in a private forex forum. it is like a virtual forex trading room. This is open to forex traders of all levels of experience to view but only experienced currency tradingprofessionals can post.

Currency Trading

Currency trading charts are updated daily using the forex trading ranges posted in the Global-View forex database. You will also find technical indicators on the fx trading charts, e.g. moving averages for currencies such as the EURUSD. This is another forex trading tool provided by Global-View.com.

Forex Brokers

The forex database can be used to access high, low, close daily forex ranges for key currency pairs, such as the EURUSD, USDJPY, USDCHF, GBPUSD, USDCAD, AUD, NZD and major crosses, including EURJPY, EURGBP, EURCHF, GBPJPY, GBPCHF and CHFJPY. Data for these currency trading pairs dating back to January 1, 1999 can be downloaded to an Excel spreadsheet.

Forex Trading

Forex chart points are in a currency trading table that includes; latest fx tradinghigh-low-close range, Bollinger Bands, Fibonacci retracement levels, daily forex pivot points support and resistance levels, average daily forex range, MACD for the different currency trading pairs. You can look on the forex forum for updates when one of the fx trading tools is updated.

FX Trading

Global-View also offers a full fx trading chart gallery that includes fx pairs, such as the EURUSD, commodities, stocks and bonds. In a fx trading world where markets are integrated, the chart gallery is a valuable trading tool. Look for updates on the Forex Forum when the chart gallery is updated.

Forex Blog

Global-View.com also offers a forex blog, where articles of interest for currency trading are posted throughout the day. The forex blog articles come from outside sources, including forex brokers research as well as from the professionals at Global-View.com. This forex blog includes the Daily Forex View, Market Chatter and technical forex blog updates. In additional to its real time forex forum, there are also Member Forums available for more in depth forex trading discussions.

 

WARNING: FOREIGN EXCHANGE TRADING AND INVESTMENT IN DERIVATIVES CAN BE VERY SPECULATIVE AND MAY RESULT IN LOSSES AS WELL AS PROFITS. FOREIGN EXCHANGE AND DERIVATIVES TRADING IS NOT SUITABLE FOR MANY MEMBERS OF THE PUBLIC AND ONLY RISK CAPITAL SHOULD BE APPLIED. THE WEBSITE DOES NOT TAKE INTO ACCOUNT SPECIAL INVESTMENT GOALS, THE FINANCIAL SITUATION OR SPECIFIC REQUIREMENTS OF INDIVIDUAL USERS. YOU SHOULD CAREFULLY CONSIDER YOUR FINANCIAL SITUATION AND CONSULT YOUR FINANCIAL ADVISORS AS TO THE SUITABILITY TO YOUR SITUATION PRIOR TO MAKING ANY INVESTMENT OR ENTERING INTO ANY TRANSACTIONS.

Copyright ©1996-2014 Global-View. All Rights Reserved.
Hosting and Development by Blue 105