After a few
months out of the currency spotlight the Federal Reserve will once again be the
focus for traders when the Federal Reserve Open Market Committee (FOMC) meets
this coming Tuesday and Wednesday. This time it will not be
the Fed Funds target rate, the central bankâ€™s chief historical policy tool, that
will be the locus of interest but the several special programs that the Fed has
used to stem the financial crisis, in particular the quantitative easing attempt
to cap Treasury interest rates.
Various Fed disbursements have added more
than one trillion dollars in liquidity to the United States financial system.
With up to $3.25 trillion in Federal debt sold or slated to be sold in the
credit markets before the end of the US fiscal year in September oversupply and
inflation are serious potential concerns that could drive Treasury interest
rates considerably higher.
The 10-year Treasury note has risen more
than 1.6% in yield since March and the reason for this sharp increase has gotten
much speculative coverage in the press. But in fact the yields on the 10-year
note have simply returned to where they were before the financial collapse last
fall. Treasury yields have been trending downward for more than twenty years.
It was the dip to zero yields in the wake of the Lehman failure that was the
singular event not the recent return to trend. That is not to say that the huge
coming supply of Treasuries and the theoretical inflation potential of the
projected Federal deficits could not drive Treasury rates much higher. But the
Friday close of the 10-year Treasury at 3.78% is a likely starting point for an
inflation fueled run higher in yields, not an indication that it has already
The currency market reaction to the Federal Reserve quantitative
easing policy was as negative for the dollar as the policy itself was
ineffective. If the goal of the policy were to put a floor under Treasury
prices it failed. If its purpose was to indicate a serious Fed concern for
consumer interest rates and hope that the bond market would take the hint it was
also a failure. The quantitative easing purchase amount of $300 billion was
always far too small to prevent a fall in Treasury prices if market sentiment
Quantitative easing has been detrimental to the dollar
for three reasons. First and most important it monetizes US debt. With
trillions of dollars more of US debt yet to be sold this year alone any hint
that the US will print dollars to pay for its own debentures is anathema to
currency traders and to holders of US debt. The fact that the policy was a
failure, Treasury rates rose despite the Fed purchases, was unimportant. It was
the potential flood of new dollars that impressed the currency markets. Second,
if the US economy could not tolerate a return to more normal Treasury rates from
the abnormal levels of March when the 10-year note was in the low 2.00s% then
what possibility was there for an economic recovery anytime soon? And finally
if the Fed were willing to take the momentous step of buying Treasury issues to
keep interest rates from rising then any speculation that the Fed might begin
raising rates sooner than expected was misplaced.
When the Fed
announced its quantitative policy in March 18th the governors were in reality
utilizing their other traditional economic policy tool--Talk. Given the small
amount of the announced purchases and the six months time frame the Fed must
have hoped that the mere existence of this exceptional precedent would hold the
Treasury market much as intervention can sometimes deter the currency markets.
The governors must have known that $300 billion would never thwart a determined
Mr. Bernanke also chose to use this traditional central
bankerâ€™s tool to limit the effect of the quantitative easing policy. In
testimony before Congress on June 3rd he said that â€˜deficits cannot continue
foreverâ€™. It is of course a truism, but it is a truism with a point. The Fed
does not control the deficit and rarely makes comment on fiscal policy. But it
does control the Fed purchases of Treasuries. The goal of the easing policy was
to bolster the consumer economy by keeping mortgage and other consumer rates
from rising to levels where they inhibit consumption. Was this criticism of the
administrationâ€™s deficits an indication that the Fed now views the easing policy
as a failure? If that is the case then the link between the deficits and
quantitative easing is the dollar.
Nothing will be more damaging to the
Obama administrationâ€™s deficit funding plans than a collapsing dollar. The mere
hint of such a run on the dollar brought heavy and unusual criticism from the
Chinese and the Russians; their warnings are not empty. If the currency markets
drive down the dollar because traders fear monetization there will be
little that owners of US debt can do with
their current inventory, selling would only worsen the run. But China and Russia
do not have to buy more Treasuries; and the administration must sell Treasuries
or abandon its domestic agenda. A substantially lower dollar could also bring
crude oil prices to $100 a barrel and beyond. One of the contributing factors to
the plunge in consumer spending in the US and elsewhere was the rapid rise in
The Fed cannot do two things at once. It cannot keep US
consumer rates from rising with a renewed and augmented quantitative purchase
program and hope to maintain a stable
dollar. The currency markets have made their view of quantitative easing quite
clear. Even though US interest rates rose from March the dollar fell.
Monetization is a greater threat to the dollar than rates are a support.
The Fed governors must decide which is more important: domestic
interest rates or a stable dollar. The
FOMC approach to quantitative easing will provide the answer. This is an
IMPORTANT NOTICE: These comments are
for information purposes only. Past results are not necessarily indicative of
future results. FX Solutions, LLCÂ® believes that customers should be aware of
the risks associated with over-the-counter, spot Forex. Forex trading is highly
speculative in nature which can mean currency prices may become extremely
volatile. Forex trading is highly leveraged, since low margin deposits normally
are required, an extremely high degree of leverage is obtainable in foreign
exchange trading. A relatively small market movement will have a proportionately
larger impact on the funds you have deposited. You may sustain a total loss of
your funds. Since the possibility of losing your entire cash balance does exist,
speculation in the Forex market should only be conducted with risk capital you
can afford to lose which will not dramatically impact your lifestyle.
To the best of our ability, FX
Solutions believes the information contained herein is accurate and true. We
reserve the right to make corrections and/or update the material when deemed
necessary. Therefore, FX Solutions assumes no responsibility for errors,
inaccuracies or omissions in these materials.
Distributed by: FX
Solutions, LLC., Saddle River Executive Centre, One Route 17 South, Suite 260,
Saddle River, NJ 0745
Forex Trading News
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
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.
POTENTIAL PRICE RISK: HIGH to Medium- Wed --14:15 GMT-- US- Industrial Production
POTENTIAL PRICE RISK: HIGH- Wed -- 15:00 GMT-- CA- Bank Of Canada Decision
John M. Bland, MBA co-founding Partner, Global-View.com
Max McKegg's Daily Forex Trading Forecasts
Veteran FX Trader, Max McKegg, forecasts all the Major currencies and the Australasians; providing Daily and Medium Term Trading forecasts to subscribers, who include large Banks the world over, as well as individual traders in more than 30 different countries.
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.
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.
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 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.
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 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.
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.
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.