Posts Tagged "us dollar"

Mirror, mirror on the wall, who’s the fairest currency of them all?

Posted by on Jun 6, 2012 in Commentary, Featured

Mirror, mirror on the wall, who’s the fairest currency of them all?

It’s been an interesting few days. Friday started with gloomy news from the UK manufacturing sector. GBP unloved as the UK remains recession bound. Then the news from the USA. Non-farm payroll figures upstaged the UK in their disappointment. Cue USD joining the ugly currency parade. So now we have EUR, GBP and USD in this parade. The Swiss National Bank decided a while ago to limit the value of the Swiss Franc by linking it to the value of the Euro. The setting of a “floor” rate of exchange effectively fixes the value of the Swiss Franc, so better add CHF as well. With four of the five major currencies in the parade, that leaves the Japanese Yen. Rumours circulated that the Bank of Japan were buying dollars and selling yen in the market to stabilise the value of the yen. Further intervention to weaken the yen cannot be ruled out. The great mining economies Australia and Canada are affected by China. The rate of slowdown in China is not proving supportive to either AUD or CAD, although the reduction of interest rates in Australia lifted the currency a little. At some point, further economic stimulus through the printing of money seems inevitable, certainly in the UK and probably in the USA. This ties back to my previous post where I asked “What is a Euro worth?“. I’ve placed trading on the back burner for a couple of days. Instead, it’s been an amazing short break celebrating the Queen’s Diamond Jubilee. Cheers....

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What is a Euro worth?

Posted by on May 25, 2012 in Commentary, Featured

What is a Euro worth?

I spent yesterday with many other traders at a trading conference in London. An enjoyable day in good company listening to some very good presentations and panel discussions. Naturally, there were many questions about the Euro and Greece’s (future) participation in it. It is fair to say that pretty much everyone in the room (there were a couple of hundred or more) had a negative view of  the value of the Euro. But why? What is a fair price? Hasn’t all of the downside risk already been priced in? Wouldn’t the Euro be stronger without Greece? Once you start asking these questions, you start to realise that every trader has a different opinion. But the herd mentality of trading is carrying the Euro worth ever lower. So how low can it get? Back in October 2000, €1 was priced as low as US$0.8225. That puts today’s price some 50% higher than October 2000. If the Euro is a dead currency, it is significantly over priced right now. The market has taken account of this though and is not assigning the Euro to the bin, at least not just yet. To put a fairer price on the Euro, you have to look at the other currency choices. The US Dollar remains the world currency and the currency of choice. And yet they keep the printing presses rolling, lowering the real value of the dollar. Then there is GBP (£ sterling). Having spent much of the past decade between $1.40 and €1.50 to £1, the Euro has appreciated in value. Look to the devaluation of sterling for the reasons, caused by running those printing presses again (a.k.a. quantitative easing). The more the subject is examined, the more different opinions emerge. Forex trading is evidence based on what is happening right now, not what might happen next month. Successful traders trade facts, not opinions. There is only one fact, that’s the current price. As for the price next week,  I’ll have a better idea at the end of next...

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New 2012 lows for Euro

Posted by on May 23, 2012 in Commentary, Featured, News

New 2012 lows for Euro

It must be some kind of justice that the Euro is currently trading near the lows for 2012 against the US dollar on the eve of another EU summit. As I write, the Euro has just set a new low for the year, heading below 1.2600 for the first time and setting the lowest rate for the currency since August last year. With continuing disagreement in the Euro about substantive measures to solve the problems in the Euro area, this level of trading can only be indicative of market expectations for the EU summit later today. The more that heads of government talk about keeping Greece inside the Euro without any credible measures to ease the strains within the Euro area, the less the markets view the Euro as a strong currency. If I were intending a running commentary, I couldn’t have chosen a better moment, as the low from August 2010 has been breached. July 2010 levels of 1.2500 are now in sight and the Euro seems to be in free fall. The lowest the Euro has traded against the dollar since the financial crisis of 2008 is in June 2010, when it traded as low as 1.1875. Short term and longer term, trading opportunities on the Euro are selling the Euro in favour of the “safe haven” of the US Dollar. But don’t ignore the potential for pull backs as buying support emerges from time to time. For forex traders, strong directional currency moves like these signal good...

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