Forex Crunch AUD/USD Nov. 30 – Trading Under Resistance, Despite Strong Economy

Forex Crunch AUD/USD Nov. 30 – Trading Under Resistance, Despite Strong Economy

AUD/USD Nov. 30 – Trading Under Resistance, Despite Strong Economy

Posted: 30 Nov 2010 05:23 AM PST

AUD/USD is still suffering from the European debt crisis, and is unable to climb back over the important line it lost, despite signs of strength in its economy. Is it gathering energy to rise above this line on the GDP release? Here's a quick update on technicals, fundamentals and community trends. AUD to USD under [...]

Another Contagious Day, Another Euro Collapse

Posted: 30 Nov 2010 03:53 AM PST

A big load of bad news came out of Europe today, adding to the Euro's fall. Here's a roundup of bad news in 5 countries. EUR/USD already dipped under 1.30. Where will it stop. Portugal - the next domino: The talks about Portugal needing urgent hel

EUR/USD Nov. 30 – Stabilizing on Low Ground

Posted: 29 Nov 2010 11:21 PM PST

EUR/USD is stabilizing after another big fall and is expecting many economic indicators today. Will it recover, or is it just a pause before another collapse? Here's a quick update on technicals, fundamentals and community trends. Euro/Do

Forex Daily Outlook – November 30 2010

Posted: 29 Nov 2010 02:00 PM PST

Many important events appear on our schedule today: US CB Consumer Confidence, Ben Bernanke's speech, Canadian GDP, ECB President Trichet's speech and many more. Here is an outlook on the market movers this day. In the US,  CB Consumer Confidence

[Video] Free Falling Euro, Technical Levels for Key Pairs, Busy Week and more

Posted: 29 Nov 2010 09:17 AM PST

The Euro is free falling. Where will it stop? In the weekly interview on Forex TV, I spoke with Julie Sinha about technical levels for the Euro, the pound,  the Aussie and the loonie, in this very busy week. Enjoy! In addition, we covered key c

Spanish Yields Break Higher – Euro/Dollar Falls

Posted: 29 Nov 2010 03:20 AM PST

EUR/USD broke another significant support line, and is now supported by the round, yet not so strong figure. Contagion is spreading, with Spanish bonds now sharing the limelight with Italian bonds - which also see soaring yields. Update on the fast m
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Forex Blog

Forex Blog

War = Good News for South Korea?

Posted: 29 Nov 2010 11:25 PM PST

South Korea was in the midst of figuring out what to do with its appreciating Won when disaster struck, in the form of an unprovoked attack from North Korea. Combined with a worsening of the sovereign debt crisis in Europe, the news was enough to send the Won down 5% over the course of a couple weeks. From the standpoint of managing its currency, it looks like the (distant) prospect of war is actually a blessing in disguise.

Over the last decade, South Korea has been one of the world’s largest serial interveners in currency markets. Over the last two years alone, as evidenced by the growth in its foreign exchange reserves, it has spent more than $100 Billion defending the Won. As the so-called currency war has intensified, so, too has the Bank of Korea intensified its efforts to hold down the Won, having spent more than $20 Billion since July towards this effort.

South Korea Forex Reserves 2005-2010
You could say then that South Korea’s hosting of the G20 Summit on November 15 put it in a slightly awkward position. Still, it was determined to make clear that it would continue to take steps to combat the rise in the Won. According to Shin Hyun-song, the special economic advisor to President Lee Myung-bak, “This means that countries can intervene in the currency market when the market is in disorder and when there is a gap between the market rate and underlying economic fundamentals.” Of course, fundamentals is hardly an objective notion in this case.

While the G20 predictably called on participants to “move toward a market-driven exchange rate system and to refrain from competitive devaluations,” it nonetheless also guided them towards “implementing policy tools for bringing excessive external imbalances down to sustainable levels.” The underlying message is that certain countries should curtail their reliance on exports and try to achieve more balanced growth.

Naturally, South Korea’s interpretation was that while direct intervention is now taboo, taxes and other capital controls are sanctioned. Thus, it has been reported that “the Korean government has been gauging its timing to launch further measures to tighten the financial market and protect it from volatile global capital movement..bank levies on non-deposit liabilities and taxes on foreign purchases of government bonds are both possible options.”

As I said, though, the South Korea now has some breathing room. Its Won depreciated rapidly in the minutes after the shelling of Yeonpyeong island, which killed four and wounded 20, was first reported. The fact that the US government immediately pledged its support and solidarity (by sending over an aircraft carrier) is not instilling confidence. One analyst indicated, “We see a strong chance of further Korean won weakness in the days ahead as more details emerge, particularly if public opinion in South Korea puts pressure on the government there to take a stronger stance.”

Korean Won / US Dollar Chart

Even before this episode, the EU sovereign debt crisis had spread to Ireland, and put Spain and Portugal at risk, too. As a result, the Dollar-as-safe-haven mindset re-emerged, and spurred some capital movement back to the US. In this context, the drama with North Korea only exacerbated the climate of risk aversion.

Ultimately, both the EU fiscal crisis and the tensions with North Korea will subside, which should cause the Won to resume its rise. (In fact, Korean exporters have come to view this as inevitable, and have taken advantage of the relatively favorable exchange rate to repatriate overseas earnings). At this point, you can expect the Bank of Korea to begin implementing capital controls and continue the face-off with currency markets.

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Alan's Forex Blog

Alan's Forex Blog

Robert Prechter Explains The Fed, Part III

Posted: 28 Nov 2010 11:25 PM PST


The world’s foremost Elliott wave expert goes “behind the scenes” on the Federal Reserve By Elliott Wave International This is Part III, the final part of our series “Robert Prechter Explains The Fed.” (Here are Part [...]

Robert Prechter Explains The Fed, Part II

Posted: 28 Nov 2010 11:22 PM PST


The world’s foremost Elliott wave expert goes “behind the scenes” on the Federal Reserve By Elliott Wave International This is Part II of our three-part series “Robert Prechter Explains The Fed.” You can [...]
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