Forex News Blog
Back to The Headlines
Monday August 10, 2009 - 17:53:40 GMT
Share This Story
FX Solutions - www.fxsol.com
The End of tghe Dollar Asset Bubble
reaction of traders to Fridayâ€™s Non Farm Payrolls may be the most concrete sign
that the currency markets are coming to the end of the financial crisis. The
initial response was, as it has been since the unwinding of the security dollar
bubble began in March, to sell the dollar against the euro. But the dollar
sellers exhausted themselves after barely five minutes and the following dollar
surge, though also five minutes, covered twice a much ground. From 8:30 am to
8:35 am euro rose 34 points, from 8:35 am to 8:40 am it dropped 76; good
American economic news had finally garnered a positive response from the
September until March the dominant currency trade was a direct kin to the panic
in the financial markets. When in doubt, which was a constant, purchase dollar
denominated assets. A huge bubble of Treasury assets were bought with foreign
and domestic money. As the crisis rolled on, even though it had started in the
US, involved many of the most prominent United States financial institutions,
and called forth an unprecedented amount of government intervention and a deluge
of dollar liquidity, nothing dented the dollarâ€™s ascendancy. Compared with the
potential for the rest of the world the United States was the safest holder of
The strength of the dollar in this period owed nothing to the
traditional standards of economic and currency comparison. Though the amassing
of the worldâ€™s financial liquidity in United States Treasuries would not
typically be thought of as an asset bubble, by any measure of the origin and
behavior of asset bubbles it was. Treasury prices were driven higher by
unceasing demand which for a time ignored cost and return in a desperate race to
secure principal. The psychology of fear is not very different from that of
greed in its ability to push markets to excess. Bubbles can form for negative
as well as positive reasons.
The dollar asset bubble began to unwind with
the bottom of the equity markets in March. If the September to March dollar was
the security dollar then we can call the March to June dollar the repatriating
As financial conditions gradually improved, investors sold
Treasuries and placed their funds in commodities, worldwide equities, currencies
and other instruments looking for appreciation and return. Because the process
did not unfold at once, and because it was largely better conditions in the
United States that emboldened investors to assume more risk, it seemed that
whenever there were improving economic statistics in the US the dollar would
sell off. In fact this was the necessary dollar selling that accompanied the
repatriation of foreign-owned dollar assets or American dollar assets
transferring to overseas markets and investments. .
Neither the rationale
for the security dollar nor the logic for the repatriating dollar could last
beyond the original financial and market conditions that produced them. Owners
of investment funds will not accept minuscule earnings forever. And despite
appearances the amount of funds stashed in Treasuries is not infinite. When the
repatriation is complete the pressure on the dollar engendered but not caused by
a mending US economy will be removed. We may have finally reached that
This does not necessarily mean that the dollar is poised for a
strong recovery. The US economy has very serious current and pending problems
and the path away from the financial crisis to recovery is unknown; but then
again that applies to the rest of the world as well.
The Eurozone and
Japan are trailing even the small signs of stability that have arrived in the
United States. Still, if the historical performance of the US economy is
considered along with the enormous fiscal and monetary stimulus that has been
applied to the American economy, the dollar could well outstrip its competitors
without the revival of normal economic growth anywhere in the
Chief Market Analyst
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 07458
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
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:
Register To Test Your Amazing Trader
- Actionable trading levels delivered to YOUR charts in real-time.
- Live trading strategy sessions.
- Market Updates with Trading Tools.
Trading Ideas for 18 October 2017
Register for the Amazing Trader
Amazing Trader EVENT RISK Calendar:
Wed 18 Oct /ul>
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
John M. Bland, MBA
- 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.
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..