User Name: Password:      Register - Lost password?

Forex News Blog
Back to The Headlines
Monday December 1, 2008 - 23:37:18 GMT
Global Forex Trading - www.gftforex.com

Share This Story:
| | Email

Forex Research - What is Behind the Dollar Rally?

What is Behind the Dollar Rally? Last Updated 12/1/2008 5:51:56 PM EST (GMT +5)

TODAY’S BIGGEST PERCENTAGE MOVERS

NZD/JPY ( -308 pips or -5.88%)

GBP/JPY ( -805 pips or -5.47%)

AUD/JPY ( -300 pips or -4.75%)

THE STORIES IN THE CURRENCY MARKET

  • USD: What is Behind the Dollar Rally?
  • GBP: British Pound Takes a Beating
  • AUD: RBA to Cut 75bp
  • CAD: Strongest GDP Growth in 1 Year
  • NZD: Oil Prices Drop $5 to $49.28
  • EUR: Weak Economic Data Supports Need for Larger Rate Cut
  • JPY: BoJ Prepares for Emergency Meeting

EXPECTATIONS FOR UPCOMING FED MEETINGS

 

** PERCENTAGES MAY NOT ADD UP TO 100% BECAUSE OF THE PROBABILITY OF LARGER OR SMALLER MOVES BEYOND THOSE SHOWN ON THIS TABLE

US DOLLAR: WHAT IS BEHIND THE DOLLAR RALLY?

Fresh concerns about the global economy have triggered sharp gains in the US dollar and the Japanese yen. Risk aversion continues to seep through the markets as the National Bureau of Economic Research finally admits that the US economy fell into recession in December 2007. The first trading day of the last month in the year has been exceptionally brutal with the Dow Jones Industrial Average falling more than 635 points or 7 percent. Even President Elect Barack Obama’s nomination of Hillary Clinton as Secretary of State has failed to help the markets.

Dollar Remains the Safe Haven Play, Bernanke Signals More Rate Cuts

There is no question that the meltdown in the equity market singlehandedly triggered the sell-off in the currency market today. Most people knew that the US economy was already in recession, but as reality hits with the official NBER announcement, investors bailed out of equities once again. In fact, we have seen a global flight to safety today with stock exchanges across Europe slipping more than 5 percent. The flight to safety has led to repatriation back into US dollars even though there is still more trouble ahead for the US economy. On day when manufacturing indexes across the globe hit decade to record lows, the US Federal Reserve was the only central bank to offer practical reassurance. Fed Chairman Ben Bernanke said in a speech today that further interest rate cuts are certainly feasible and even though their scope for conventional rate policy is limited, their other options include buying long term Treasuries or agency securities in substantial quantities.

Cyber Monday May Not Save the US Economy

Investors are looking to Cyber Monday in the hopes that retail sales may support the economy but even if consumers spent more this year than last, it is a result of discounts rather than underlying demand. Foot-traffic at the nation’s retailers on Black Friday was stronger than expected but many forecast that because the discounts were so deep this season, often reaching more than 50%, increased sales will not transfer into strong profits. The shopping event that transpired last Friday was more of an act of desperation by retailers than anything else. Industry groups, such as the National Retail Federation, note that weekend traffic fell-off significantly as buyers felt satisfied that they took advantage of all available discounts during Friday’s rush. In addition, more shoppers indicated that they were already done with their holiday shopping this year than last. Buyers also specified that gift purchases will be constrained to the younger audience, with older friends and family agreeing to forgo adult gifts. This type of behavior suggests that the momentum may be difficult to sustain for the remainder of the month.

Dollar Rally Should Continue

This is the week where the problems in the US economy will come to forefront as reality sets in and investors realize the US is still in big trouble. If the data is as bad as we expect, the dollar rally should continue. We said often that recession trades such as short EUR/JPY and USD/JPY should thrive in this current environment and that is exactly what we have seen today. Contributing to the sell-off in US equities was the ISM manufacturing report which fell to a 26 year low. Every single subcomponent of the report either declined or remained unchanged with big drops seen in the prices paid and employment components. As we week progresses, we will be looking at the leading indicators for non-farm payrolls for clues on the degree of job losses in the month of November. The manufacturing ISM report suggests that the sector will see its 29th consecutive month of job losses. The fate of the Big 3 automakers will play a central role in determining whether this continues.

GBP/USD: BRITISH POUND TAKES A BEATING

With the recession in the UK economy in full swing and the Bank of England scheduled to cut interest rates this week, further weakness in the British pound was expected. However not many people could have anticipated the degree of the sell-off that we saw in the British pound today. The currency fell 3 percent or close to 500 pips against the US dollar, 2.8 percent (230 pips) against the Euro and a whopping 5.4 percent (800 pips) against the Japanese Yen. This price action indicates that the latest pieces of UK economic data suggest that the economy may be in weaker state than everyone initially anticipated. The Bank of England has a tough decision ahead of them and a full percentage point rate cut is the minimum that we expect on Thursday.

The contraction in the UK manufacturing sector continues with the purchasing managers’ index falling to a record low of 34.4 in the month of November. Not only was the index much weaker than expected, but the new orders component also slipped to a record low. The deterioration in business confidence amid the mild improvements in consumer confidence suggests that consumers may not be translating their less pessimistic attitude into stronger spending. Mortgage approvals also fell to the lowest level in 9 years as the credit markets remain tight. Bank of England Governor King has previously said that the single most challenging task at hand is to get credit to flow into the economy again. This is one of the main reasons why the central bank has been very aggressive in recent weeks. If the BoE still believes that over-delivering is the right solution, then we could see a bigger move on Thursday. Even if rates are only cut by 100bp, the next rate cut will certainly not be their last. While the Monetary Policy Meeting of December 4th will likely see rates decline to 2.00 percent, interest rates may not hit a bottom until 1.00 percent.

AUD/USD: RESERVE BANK EXPECTED TO CUT 75BP

It is a big night for Australia with retail sales, current account and an interest rate decision on the economic calendar. The Reserve Bank of Australia is expected to cut interest rates by 75bp to 4.5 percent. Of the major currencies, Australia has the second highest interest rate, but that has not stopped the Australian dollar from being the second worst performing of the year against the US dollar. The RBA has already cut interest rates by 175bp this year and the monetary easing this evening will drive Australian rates to 6 year lows. Since the OECD believes that Australia will avoid recession and the government believes that the weakness of the Australian dollar should help support growth, it remains to be seen whether the RBA will signal further rate cuts. If they do, the Australian dollar could break 63 cents but if their statement is neutral, the Australian dollar should rally. Like the rest of the world, Australia reported a sharp decline in their manufacturing PMI report for the month of November. There was no data from New Zealand overnight, but Canada reported the fastest pace of annualized GDP growth in 1 year. Although the Canadian dollar initially rallied after the reports, the gains were not sustained as oil prices slipped and the Bank of Canada warned that a slowdown in growth will prompt continued rate cuts.

EUR/USD: WEAK ECONOMIC SUPPORTS NEED FOR LARGER RATE CUT

The theme of today’s trading can be emphasized as broad contraction in global manufacturing. We have seen Manufacturing-related indicators from across the globe show that the world may truly be in a Manufacturing recession. Euro-zone PMI was reported to be the worst on record since the figure was established a decade ago. German and Italian PMI reiterate the results from the broader measure. German Retail Sales were also much weaker than expected, showing a 1.6 percent compared to a +0.5 percent forecast. EUR trading responds with seemingly small declines amidst some impressive falls in GBP/USD and USD/JPY. At this time, all attention will be concentrated on Thursday’s ECB rate decision. Today’s economic results certainly support the need for a larger rate cut. When compared to it peers, the ECB has not reacted with much force when easing monetary policy, perhaps opening the door to a sizeable rate cut later this week. Tomorrow, we will see EZ Producer Prices, likely to elicit little attention as the focus has long been diverted from inflation.

USD/JPY: BOJ PREPARES FOR EMERGENCY MEETING

Although the Bank of Japan’s plans to hold an emergency policy meeting this week should have helped spur demand for the Japanese Yen, it was the sharp drop in equities that really drove the currency higher. Once again, the Yen has outperformed all of the major currencies including the US dollar as risk aversion hits the markets. However the announcement from the BoJ should not go unnoticed. Recognizing that interest rates are at ultra low levels, the BoJ is searching for other ways to stimulate the economy. According to the Japanese press, the bank will be looking into creating a special lending program aimed at stimulating lending by bands. Under the plan, the BoJ would accept lower credit rating corporate bonds as collateral. Even though any announcement from the BoJ should help the Japanese financial system, it may not impact the Japanese Yen. Keep an eye on equities as the Nikkei may open lower, adding pressure on the Japanese Yen crosses.

AUD/USD: Currency in Play for the Next 24 Hours

AUD/USD will be the currency in play for the next 24 hours. The Australians are engineering one of their most influential economic days of this month. Among the vast array of expected economic indicators, the Current Account Balance and Retail Sales Trend will be released at 00:30 GMT and the much anticipated RBA Rate Decision is scheduled for 3:30 GMT.

AUD/USD has been able to maintain itself within the range-bound Bollinger band zone for the last few days. The pair has been in a volatile consolidation phase that has lasted for most of the month of November. Traders are still debating whether or not the economic conditions in Australia warrant the further continuation of a strong downtrend. Several areas of support exist below current prices. While the first and second-standard deviation Bollinger bands will be important levels, the most significant support should be in the form of the lows placed at 0.6084. Lying above, resistance takes shape at 0.6609, which saw its significance develop as it has resisted several rally attempts in the last week. If this resistance level is broken, it is conceivable that prices may be able to extend toward the 0.7000, a major high placed on November 4th. However, a break of the 0.6084 may be the start of a new leg in this crippling bout of Aussie devaluation.

 

About The Author

Lien has extensive knowledge within the interbank market, particularly in trading spot FX and options. She has written for numerous publications, is frequently quoted on financial media outlets, and is the author of several books, including Millionaire Traders. Read more >>

DISCLAIMER: This forum and the information provided here should not be relied upon as a substitute for extensive independent research before making your investment decisions. Global Forex Trading is merely providing this column for your general information. This forum and its information does not take into account any particular individual’s investment objectives, financial situation, or needs. All investors should obtain advice based on their unique situation before making any investment decision based upon this forum or any information contained within. In addition, any projections or views of the market provided by the author may not prove to be accurate. Global Forex Trading and Kathy will not be responsible for any losses incurred on investments made by readers and clients as a result of any information contained in this column. Global Forex Trading and Kathy do not render investment, legal, accounting, tax or other professional advice. If such advice is sought, or other expert assistance is required, the services of a competent professional should be sought.

 

 

 

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 23 October 2017

Register for the Amazing Trader

1.

Amazing Trader EVENT RISK Calendar:

Tue 24 Oct
All Day flash PMIs
Wed 25 Oct
01:30 AU- CPI
08:00 DE- IFO Survey
08:30 GB- GDP
14:00 CA- BOC Decision
14:30 US- EIA Crude
Thu 26 Oct
11:45 EZ- ECB Decision
12:30 US- Weekly Jobless
14:00 US- Pending Homes Sales
Fri 27 Oct
12:30 US- GDP
14:00 US- final Univ of Michigan

Forex Trading Outlook


Potential Trading Opportunities


  • POTENTIAL PRICE RISK: Medium Tue-- All Day Global flash PMIs. First good look at October economic performances.



  • POTENTIAL PRICE RISK: HIGH Wed-- 01:30 GMT AU- CPI. Top Inflation indicator.

  • POTENTIAL PRICE RISK: HIGH Wed-- 08:00 GMT DE- IFO Survey. Top German indicator.


  • POTENTIAL PRICE RISK: HIGH Wed-- 14:00 GMT CA- BOC Decision. No Policy Change Expected.


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



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