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US Dollar is Safe…For Now

Nov 28, 9:23PM

The Dollar is Crashing! The Dollar is Crashing! Such is the perennial claim of doomsday predictors, conspiracy theorists, gold bugs, etc. Those of you who read my blog regularly know that I often come to the defense of the Dollar. Given that it has risen by more than 5% over the last month and is [...]


Interview with Kathy Lien: "Trade Defensively and Use a Stop"

Nov 26, 1:18PM

Today, we bring you an interview with Kathy Lien, the internationally published author, Director of Currency Research of FX360.com and GFT, and co-author of BKForex Advisor, one of the few investment advisory letters focusing strictly on the FX market. She is one of the authors of Investopedia's Forex Education section and has written for [...]


Emerging Market Currencies Still Have Room to Rise

Nov 23, 3:44PM

Emerging market economies must be whining about their currencies for a good reason. Why else would they spend billions intervening in forex markets and risk provoking a global trade war? As it turns out, however, the rise in emerging market currencies has been greatly exaggerated. Over the last twelve months, the Brazilian Real is flat against [...]


A Return to the Gold Standard?

Nov 21, 9:38AM

In my last post, I explored the possibility that the role of the Chinese Yuan (CNY) will expand to the point that it could rival – or even overtake – the US Dollar as the world’s preeminent reserve currency. Ultimately, I concluded that the constraints on widespread foreign ownership of CNY assets are too great, [...]


Chinese Yuan Will Not Be Reserve Currency?

Nov 19, 3:43AM

In a recent editorial reprinted in The Business Insider (Here’s Why The Yuan Will Never Be The World’s Reserve Currency), China expert Michael Pettis argued forcefully against the notion that the Chinese Yuan will be ever be a global reserve currency on par with the US Dollar. By his own admission, Pettis seeks to counter [...]


Euro Correction is Here

Nov 16, 2:40PM

You can think of this as a follow-up to my last post, entitled “Euro Due for a Correction,” in which I proclaimed that “investors got ahead of themselves when they pushed the Euro down 20% over the first half of 2010, but now they are in danger of making the same mistake, and are pushing [...]


Interview with Dollar Daze: Avoid Positions that Entail Currency Risk

Nov 14, 1:05PM

Today, we bring you an interview with Mike Hewitt of Dollar Daze, whose “belief is that the paper currencies of the world are presently undergoing a devaluation.” Below, Mr. Hewitt shares his thoughts on the US Dollar, Chinese Yuan, inflation, and why you should be paying attention to Gold and other commodities. Forex Blog: [...]


Canadian Dollar Reaches Parity…Again

Nov 12, 1:34PM

Last week, the Canadian Dollar became the second currency – after the Australian Dollar – to reach parity against the US Dollar. While the case for Loonie parity is not quite as strong as the Aussie's, there is nonetheless reason to believe that it will continue trading at this level for the short-term. It's not hard [...]


New Zealand: No Forex Intervention

Nov 11, 3:31AM

Despite reaching a temporary stalemate, the currency war rages on, and individual countries continue to debate whether they should enter or watch their currencies continue to appreciate. Nowhere is that debate stronger than in New Zealand, whose Kiwi currency has fallen 37% against the US Dollar since its peak in early 2009, and over 15% [...]


Currency War Will End in Tears

Nov 08, 9:46AM

The “currency war” is heating up, and all parties are pinning their hopes on the G20 summit in South Korea. However, this is reason to believe that the meeting will fail to achieve anything in this regard, and that the cycle of “Beggar-thy-Neighbor” currency devaluations will continue. There have been a handful of developments since the [...]



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Forex Crunch AUD/USD Nov. 29 – Struggling with Important Line

Forex Crunch AUD/USD Nov. 29 – Struggling with Important Line


AUD/USD Nov. 29 – Struggling with Important Line

Posted: 29 Nov 2010 12:20 AM PST

AUD/USD is looking for a direction after getting a blow from the European troubles, but is now looking upwards after Glenn Stevens’ speech. Will it recover? Here's a quick update on technicals, fundamentals and community trends. AUD to USD recovering AUD/USD Technicals Asian session:  AUD USD started with a nice gap, but it was closed [...]

EUR/USD Nov. 29- Fresh Falls on Contagion

Posted: 28 Nov 2010 11:51 PM PST

EUR/USD had a good start after the Irish deal was announced, but the weekend gap was closed quickly and the pair is now falling to fresh lows as contagion spreads. Next support is getting close. Will it stop there? Here's a quick update on technica

Euro/Dollar Jumps on Irish Deal – How Long?

Posted: 28 Nov 2010 02:42 PM PST

The Irish deal boosts EUR/USD, as expected. But there are growing signs of deja-vu from last week - a strong start on high hopes and a fall to harsh reality soon afterwards. Update on the Irish deal, Spanish risks and the Euro' s (temporary?) weekend

Forex Daily Outlook – November 29 2010

Posted: 28 Nov 2010 02:00 PM PST

We start the week with a very busy and interesting day.  Treasury Currency Report in the US, Unemployment in Europe and much more. Let's see what awaits us today. In the US, Treasury Currency Report, It provides a detailed review of global exchan

Eur/Usd Targeting 1.2950 And Then 1.2500

Posted: 28 Nov 2010 08:12 AM PST

Eur/Usd fell sharply during the past few weeks from 1.4279 region, where an impulse wave (C) completed a three wave bounce from 1.1875 region. A decline from the highs is very powerfully, and signals for more weakness ahead since the prices also fell

Canadian Dollar – November 29- December 3

Posted: 28 Nov 2010 06:00 AM PST

GDP and Employment data are the major market-movers this week. Here is an outlook on the events that will shape the price of the Canadian dollar, and an updated technical analysis for USD/CAD. USD/CAD daily chart with support and resistance lines

Forex Blog

Forex Blog


US Dollar is Safe…For Now

Posted: 28 Nov 2010 01:23 PM PST

The Dollar is Crashing! The Dollar is Crashing! Such is the perennial claim of doomsday predictors, conspiracy theorists, gold bugs, etc. Those of you who read my blog regularly know that I often come to the defense of the Dollar. Given that it has risen by more than 5% over the last month and is currently hovering around its average value of the last five years, I think this position is worth reiterating.

US Dollar Index 2006 - 2010
In the months leading up to the expansion of the Fed’s Quantitative Easing Program (QE2), investors took an especially bearish view on the Dollar, precipitating a rapid and steep decline against most currencies. Analysts argued (somewhat contradictorily) that QE2 would be ineffective in the short-run and inflationary in the long-run, and that most of the new cash would be invested abroad – where returns are higher – rather than in the US.

Since the unveiling of QE2, however, the Dollar has rallied strongly. On the one hand, most economists remains skeptical that it will do much to lift GDP and boost employment. However, a parallel thread holds that this was only the ostensible motive for QE2, and that the real motive was to prevent the outbreak of another financial crisis and consequent economic downturn. Given that housing prices are headed downward and banks’ balance sheets are still weak, the Fed’s move reads more like a preemptive move to further shore up the financial system than an economic stimulus program.

At the very least, this probably won’t hurt the Dollar, and certainly not to the extent that the market had priced in prior to QE2. While the stock market rally has stalled, the rise in Treasury Yields has not. The 10-Year rate is close to 3% for the first time in months, making it more attractive (and less costly) to hold capital in Dollar-denominated assets. The Dollar was also helped by the release of GDP data for Q3, during which the US economy beat expectations and grew by 2.5%.

10-Year Treasury Rate Vs. S&P 500 - 2006-2010
As a result, traders are reducing their Dollar-short positions. Analysts have revised their forecasts to reflect a stronger Dollar, based on the notion that “The dollar has found a bottom.” At this point, the main naysayers are “overwhelmingly found in the ranks of the opposition Republican party,” perhaps part of a cynical ploy to hurt both the economy and Barack Obama’s chances of being reelected.

To be sure, there may be other reasons for the Dollar’s rally, namely the growing turmoil in the EU. Evidence is mounting that the EU sovereign debt crisis is spreading, which has spurred both an increase in investor risk aversion and a decline in the Euro. Still, market chatter seems to be focusing less on the Dollar as safe-haven and more on the fact that the Dollar was merely oversold.

On a purchasing power parity (ppp) basis, the Dollar is starting to look cheap. If the opinions of Europeans, Canadian, Australian, and Japanese tourists are to be taken at face value, the US is cheaper than it has been for years. As one commentator summarized, “If the PPP figures are right, the U.S. dollar has more upside than the negative sentiment around it would indicate. If the greenback were to decline further, it would have to do so from an already undervalued situation.”

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Alan's Forex Blog

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Robert Prechter Explains The Fed, Part I

Posted: 28 Nov 2010 08:00 AM PST


The world’s foremost Elliott wave expert goes “behind the scenes” on the Federal Reserve By Elliott Wave International The ongoing financial crisis has made the central bank’s decisions — interest rates, quantitative easing (QE2), monetary stimulus, [...]