U.S. Dollar Makes Gains in Forex Trading

October 31, 2008

Risk aversion fuels greenback in currency tradingEven though consumer spending is down, indicating that the U.S. economy continues to slow, the U.S. dollar is gaining again in forex trading.

One of the main reasons that the greenback is doing well in currency trading is due to the risk aversion on the market. The U.S dollar is seen as a stable currency, and is being sought right now as volatility continues to wrack other currencies.

Even though some feel that the U.S. dollar is overbought, chances are that the currency will retain its strength until the present crisis shows signs of ending.

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Canadian Dollar Plunges in Currency Trading

October 31, 2008

Loonie losing ground fast in forex tradingThe Canadian dollar is plunging in currency trading on the FX market today. The loonie is losing ground fast in forex trading — at a rate not seen since 1950. The dream of maintaining a level close to parity with the U.S. dollar is just about finished now for the Canadian dollar.

Most of the damage has been done due to worries of a global recession. Not only is one of Canada’s main trading partners, the U.S., headed for greater economic problems, but the entire world is slowing down rather dramatically, and this affects Canada a great deal.

Global demand for commodities is down, and, as a commodity currency, the Canadian dollar is one of the hardest hit by these developments. The continuing struggles as oil prices fall is one of the biggest factors.

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Euro Heads Lower in Forex Trading

October 31, 2008

Currency trading with the euroThe euro is heading lower in forex trading on the currency market this morning. After a brief correction higher, the 15-nation currency is down again on the FX market as global recession fears resurface.

In the euro zone, economic fears are being played out as German retail sales data comes in weaker. Germany is the largest economy in Europe (not to mention the euro zone) and it is generally seen as a bellwether for the rest of the European economy.

With the German economy moving toward recession, the rest of the euro zone is following suit, and the euro continues to struggle in forex trading against the U.S. dollar.

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Japan Cuts Interest Rates — By 20 Basis Points

October 31, 2008

Japanese yen gains in currency tradingThe Bank of Japan has made an interesting move: Cut interest rates by 20 basis points. The new rate is 0.3%.

The Bank of Japan was widely expected to cut interest rates in a show of solidarity with other major economies, but 20 points is an odd number to be cutting by.

In any case, the Japanese yen is gaining again in currency trading on the FX market. After a brief appearance by risk appetite in recent days, recession fears are again appearing and risk aversion is the name of the game. As a result, carry trades continue to unwind as traders pay back their yen-denominated debt.

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GFT Daily Market Commentary

October 31, 2008

Forex Market Commentary for October 31, 2008 by Cornelius Luca

GFT Daily Market Commentary

The dollar paired losses versus the European currencies and managed to close higher versus the lower yielding franc and yen. Trading remains impaired by low liquidity and the end of month on Friday won’t improve conditions.  The contraction for third quarter GDP was not as bad as expected, but it confirms the start of a debilitating recession. The dollar remains in a medium-term uptrend against the European currencies and a downtrend versus the yen, but this pattern will be more visible staring November. Bon chance!
 
 

Euro/dollar

The euro/dollar fell from an 8-day high after a 38.2% Fibonacci retracement level and the 20-day moving average held, and closed little changed on Thursday. The medium-term bias remains bearish. 
 
Immediate support is at 1.2805. Below 1.2695, distant support is now at 1.2335.   

 
Initial resistance is at 1.3060. Above 1.3200, resistance is now seen at 1.3260. Distant resistance is at 1.3570 would signal a sustained recovery of euro/dollar.

Oscillators are bullish.

NEAR-TERM: Mixed with significant downside risk
MEDIUM-TERM: Bearish
LONG-TERM: Bearish

Dollar/yen

Dollar/yen climbed up on Thursday, but got stuck in an inside range.   My model remains long, but the medium-term outlook remains bearish.  
 
Immediate resistance is at 99.70. Above 100.50, resistance is now seen at 103.05.

Initial support is at 97.25.  The next level is 95.70.  Below 94.40 there is Friday’s low of 90.94. 

Oscillators are mixed.

NEAR-TERM: Mixed 
MEDIUM-TERM: Bearish
LONG-TERM: Mixed

Sterling/dollar

Sterling/dollar marched higher on Thursday and my model remains long.  The upside is limited, as the medium-term outlook remains bearish. 
 
Initial resistance remains at 1.6635. The next level is 1.6760. Distant resistance looms at 1.6940.

Immediate support is still seen at 1.6355. The next level is at 1.6090. Below 1.5735, distant support is at 1.5270 from a pivot low.
 
Oscillators are rising.

NEAR-TERM: Mixed with significant downside risk
MEDIUM-TERM: Bearish
LONG-TERM: Bearish

Dollar/Swiss franc

Dollar/Swiss reversed from a three-week low to close higher on Thursday. The medium-term risk remains on the upside.
 
Initial resistance is at 1.1420. Above 1.1500, the next level is 1.1767. This is followed by the area between 1.1867 and 1.1873. 
 
Immediate support is at 1.1310.  The next level is 1.1180. Distant support comes at 1.1055. 

 
Oscillators are mixed.

 
NEAR-TERM: Slightly bullish 
MEDIUM-TERM: Bullish
LONG-TERM: Bullish

Asia Session – October 31, 2008 1:24 AM

October 31, 2008

The finial trade day of an epic week in Asia saw the Yen make gains once again against the US Dollar and the Euro as Asian stocks resumed their slide and traders turned cautious. The gains in the Yen are made when investors abandon riskier assets funded with the low yielding Yen, and need to buy back Yen as they sell those investments. USD/JPY opened the session and quickly moved almost 30 pips to its 99.03 session high, but from there it was downhill to 97.86 before bouncing to current levels at 98.40. Early rumors in Japan that the BoJ would not be cutting its key rate had driven traders to buy the Yen against the Dollar and against the crosses. The BoJ followed the trend and cut rates by .20 basis points to .30% although a .25 basis point cut was expected. Evidently the BoJ was deadlocked and the Governor had to break that tie. The market moves were swift as USD/JPY dropped from 98.53 to 97.71 on the news. USD/JPY started the week just near the 91.00 level and topped out at 99.69 before reaching current levels….quite a week. EUR/JPY and the rest of the Yen crosses started the session on the highs, EUR/JPY at a high of 127.54 and subsequently bottomed out at 124.78. After the rate cut the pair hit 124.93, but failed to make a new low. The Nikkei was down over 2%. Full text »

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New York Session – October 30, 2008 4:44 PM

October 30, 2008

US economic data was the focus in the NY session and the deterioration continued.  US 3Q GDP came in better than expected on the headline by printing a -0.3% quarterly annualized growth rate, while the market was looking for a -0.5% result.  The guts of the report were terrible however.  The main takeaway is the huge decline in final sales to domestic purchasers, which fell a whopping -1.8% in real terms after a 1.3% increase in 2Q.  This metric measures all of the goods US residents bought no matter where they were produced and excludes the usually unreliable inventory numbers.  Declines in this metric historically have foretold trouble ahead for the economy as it suggests that US consumers are tapped out.  Not good for 4Q GDP prospects. Full text »

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IMF Offers Loans to Countries in Need of Help

October 30, 2008

0 billion fund less stringent than in the pastNot too long ago, Iceland agreed to accept an IMF loan meant to help the country avoid complete and utter collapse. The terms were, as is the IMF’s tradition, rather stringent.

Now, though, the IMF is relaxing some of its terms in the name of being able to help more countries weather this global financial crisis.

The IMF just announced the creation of a 0 billion fund called the Short Term Liquidity Facility. It is meant to pad reserves and help countries defend their currencies from devastating falls. The money could also be used to pay off import bills or to inject capital into failing banks.

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Brazil Underscores Problems Faced By Emerging Market Currencies

October 30, 2008

Will efforts by Brazil to tide the fall of the real in currency trading fail?Not too long ago, the Brazilian real was one of the hottest currencies around. Now, like so many emerging market currencies in FX trading, the real is taking a nosedive.

In order to stymie the fall, the Brazilian government is injecting billion into the markets. However, reports the Forex Blog, this may not help:

Call it a lack of confidence, or a sudden aversion to risk. Either way, investors are fleeing regions that only months ago, they were still flocking to in droves.

Brazil aptly illustrates the problems facing emerging market currencies right now. With a global recession underway, investors are looking for assets that are less risky, and that means emerging market currencies aren’t seeing much demand.

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Is the U.S. Dollar Weakening Aginst the Japanese Yen?

October 30, 2008

Carry trade back on the FX marketThe Japanese yen is weakening against most major currencies right now, thanks to a return by the carry trade to the FX market. With risk appetite returning, thanks to equity performances, traders are returning to the carry trade.

However, with the U.S. dollar’s new found rate cut to 1% yesterday, things may be turning around and heading down for the greenback as well. While still trading rangebound against the Japanese yen on the currency market, there are signs that the greenback may falter.

The next question is also this: Will the U.S. dollar be used in the carry trade now that its interest rate is so low?

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