Forex Automoney

Bill Gross, whom you’ve probably seen on CNBC or the like of PIMCO is known on the street as the “bond king“.  He is undoubtedly one of the most astute bond investors on the planet.  So you could consider him the EF Hutton of bond investing– when he talks, people listen”!

So I’m a little surprised that when it was reported that he increased his dollar holdings to its highest levels since the pre-Lehman Bros collapse last year, it wasn’t deemed more news-worthy.   This is significant because what this tells the market is that Gross is anticipating an increase in interest rates, as he moves out of bond holdings and into cash.

Remember that when bond yields go up, prices go down.  I have hinted around about the different reasons why the US dollar can strengthen this year without Fed rate increases.  Should the Fed move rates sooner than later then that could be the dollar “double whammy”!

However, to take advantage of potential dollar strength, you need to take action in the forex market to realize gains.

If you are unfamiliar with forex trading, make this a New Years resolution to remember.  Check out currency trading courses and find out why the forex market is the fastest growing market in the world.

Tags: bill gross, course, currenc, currency, currency trading, dollar, dow, fed, forex, forex market, fx, fxedu, Il, interest, interest rates, invest, investor, Mike Conlon, news, nfa, rate

written by admin \\ tags: Bill Gross, Bond Holdings, Bond Investors, Bond Yields, Cnbc, Collapse, Currency Trading, Different Reasons, Dollar Strength, Double Whammy, Ef Hutton, Fed Move, Fed Rate Increases, Forex Market, Interest Interest, Interest Rates, Lehman Bros, Mike Conlon, New Years Resolution, Nfa

Overnight, world stock markets sold off as once again as Greece had their debt downgraded by S&P.  As a result, EUR/USD is down 1.27% as mounting fears of debt default or a material change in the composition of the Euro is putting pressure on the region.  The Euro is near a 3-month low at 1.435.

Also, UK retail sales “unexpectedly” fell in November.  This has sent the British pound to a 2-month low vs. the US dollar.  As of 9AM EST, GBP/USD is -1.44% to 1.61.

As I mentioned yesterday,  the Fed really doesn’t need to do anything about interest rates to see dollar strength.  As long as there are potential economic problems somewhere in the world, the flight to safety trade will cause investors to return to the US dollar.  The forces of supply and demand then take over and the dollar rises as demand goes up.

In addition, the Aussie is also down 1.56% vs. USD, again high-lighting  the risk aversion trade.  And even though I’m in love with the Aussie and want to move there because of the way they run their economy LOL, I am a trader at heart and I do what the market tells me– rather than what I think should happen.

So, if the problems in the Euro zone aren’t dealt with soon, we will continue to see US dollar strength.  This means no Aussie trades for me, even though I’d love to have the carry interest.

One last thing I want to mention.  A lot of investors ask me, ” well if the dollar strengthens, isn’t that good for me?  I hold US dollars in my bank account.”

Well, the answer is two-fold.

1) yes it can be helpful as it increases your purchasing power for foreign goods and services.  But it does nothing to help you domestic purchasing power– unless of course merchants pass those savings along to the consumer, (which they won’t do unless they have to).

2) You won’t actually see monetary gains unless you trade dollars against other currencies.  This involves the forex market.  Many investors are afraid of this market and they shouldn’t be– as there are tremendous gains to be made.

To learn more about how you can get involved with this market, please check out our currency trading courses!

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written by admin \\ tags: Amp, Aussie, British Pound, Composition, Currencies, Debt Default, Dollar Strength, Economic Problems, Euro Zone, Fears, Forex Market, Gbp Usd, Interest Rates, Material Change, Monetary Gains, Purchasing Power, Risk Aversion, Supply And Demand, Uk Retail Sales, World Stock Markets

At 8:30 this morning, the US PPI (producer price index) came in a little hot at an increase of 1.8% vs. expectations of .8%.  In addition, the Empire Manufacturing Index came in at a disappointing 2.55 vs. an expectation of 24, missing by a wide margin.

What does this all mean?

Well there are a few takeaways from this.  The first is that PPI is showing that inflation is heating up faster than expected which could cause the Fed to have to think about a rate increase sooner than they wanted.  All eyes are on the Fed this week for tomorrow’s FOMC meeting, and now there is an increased possibility that they may change their language regarding rate hikes.  Because we are near year end, many traders are on the sidelines, content to hang on to gains from earlier this year.  This could be a time that the Fed could try to “slip one in there” while market impact could be minimized.

The manufacturing index number is disappointing because it shows that the temporary pick up we have had may have been due to the stimulus packages and that the economy may not be ready to stand on its own 2 feet.

So this could have a negating effect, although if inflation really starts to heat up, the Fed may have to act quickly to keep inflation at bay.

Another thing to consider is the news out of the Euro-Zone, that Austria nationalized a bank in a multi-billion dollar bailout to prevent further contagion throughout the region.

This all plays in handily to the risk aversion trade, which seems to be the way the market is headed this morning.  US stock futures are down this morning, and the US dollar is showing major strength, up .96% vs. the Aussie, .8% vs. the Kiwi, and 1% vs. the Yen.

I’m going to keep an eye on dollar strength today, and will put up some charts later.  It is quite possible that we may see dollar strength due exclusively to risk aversion and not interest rate fears, although any change out of the Fed could be the “double whammy”.

To learn more about how to trade currencies, please check out our courses!

To follow these developments in a free, real-time practice account, click here!

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written by admin \\ tags: Bailout, Contagion, Dollar Strength, Double Whammy, Euro Zone, Fomc Meeting, Index Number, Kiwi, Market Impact, Ppi, Producer Price Index, Rate Fears, Rate Hikes, Rate Increase, Risk Aversion, Sidelines, Stimulus, Stock Futures, Takeaways, Wide Margin

Last Friday the markets seemed a bit “nervous” as recent negative news around the globe has been trickling out.  Going into year end, traders are more cautious over the weekend as there are any number of potential land mines out there that could derail world economic stability.  Let’s examine a few:

Problems with the Euro.  We covered this one last week but its going to be interesting to see what happens to the PIGS (Portugal, Ireland/Italy, Greece, Spain).  If any of these countries comes any closer to sovereign debt default it could be a MAJOR problem.  As a result, there are growing short positions in the Euro.

Reduced oil demand.  Because economies are not improving as rapidly, oil demand is off and oil prices are coming down a bit, with oil trading at around $69/barrel.  This is also due to recent dollar strength, which is also causing a pullback in gold prices as well.  As a result, so far this morning the Canadian dollar (CAD) is down across the board.

Yen moving back to become the funding currency of choice for the carry trade.  Yen strength may reverse if there are any signs that the Fed may change their language at this weeks FOMC meeting.

Other than that, there’s nothing major happening today.  The yen is strong as Japan continues to battle deflation and there is no threat of a rate hike anytime soon.  So today seems like sideways action, perhaps waiting for Wednesday’s meeting.

To learn more about how the currency market works, be sure to check out our courses!

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written by admin \\ tags: Canadian Dollar, Carry Trade, Currency Market, Debt Default, Deflation, Dollar Strength, Economic Stability, Gold Prices, Ireland Italy, Italy Greece, Land Mines, Last Friday, Negative News, Oil Demand, Oil Prices, Oil Trading, Pullback, Rate Hike, Sideways Action, Sovereign Debt

I wrote earlier in the week in an article titled, Euro Dead Zone, that there is some potentially trouble brewing in the Euro.  Part of this is due to structure of that currency, in that it is comprised of different economies at different levels of strength.

Typically, the stronger economies “balance out” the weaker ones, and as I mentioned there are starting to be a lot more weaker than strong.  One of the “solutions” that I pointed out is that the ECB might consider a lowering rates to make it more affordable for the weaker countries to gain access to capital.  It doesn’t appear that there is going to be inflation there anytime soon.

But today there is another solution being reported on Bloomberg: that perhaps the weak countries, most notably Ireland and Greece, would pull out of the  European Monetary Union (EMU).   Or they can pray that the IMF will bail them out.

This presents a problem that is two-fold: 1) I can’t imagine that these countries would leave the EMU voluntarily, which would mean that they have become “persona non grata”, namely not welcome or forced out; which would 2) undermine confidence in the Euro as a currency.

And today we are seeing this on the charts.  Let’s look at a 4-hour chart of EUR/USD: (click chart to enlarge)

Now while part of this move can be attributed to US dollar strength, I can’t help but think that the Euro is inherently weak due to the competing interests of its members.  If they expel the “weak” members every time there is a problem, the Euro is quickly going to turn back into the Deutschmark!   As of this writing, EUR/USD is down .68%.

To follow this situation real-time with a free, practice trading account, click here!

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written by admin \\ tags: Bloomberg, Confidence, Countries, Dead Zone, Deutschmark, Dollar Strength, Ecb, Emu, Euro Currency, Euro Zone, European Monetary Union, European Union, Greece, Imf, Inflation, Ireland, Lot, Real Time, Strong One, Trouble Brewing

Retail sales in the US for the month of November 1.3%, better than analyst expectations of .6%.  This could mean that the consumer in the US is starting to come back, which would bode well for the US economy and the world economy as well.  Since the US consumer makes up more than 2/3 of US GDP, retail sales is very important to get the economy back on track.

New such as this is something that traders should keep an eye on.  At 8:30AM when the figure was announced, USD advanced vs. JPY,  but pulled back against Aussie.  Currently, the Aussie is benefiting from improved export numbers from China, also indicating a global recovery may be underway.

The Japanese yen is noticeably weak today, as signs of recovery are encouraging risk taking.  JPY is down 1.4% vs. USD, 1.2% vs. GBP, and 1.2% vs. AUD.

So basically today appears to be a risk-taking today… with a little bit of US dollar strength mixed in.  Interest rate hawks are starting to believe that good economic news in the US is going to cause the Fed to act sooner than later to raise rates to ward off inflation.

Only time will tell if that is the case.

To learn more about how economic figures can affect your currency, be sure to check out our courses!

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written by admin \\ tags: Analyst Expectations, Aud, Currency, Dollar Strength, Economic Figures, Economic News, Gbp, Gdp, Global Recovery, Hawks, Interest Rate, Japanese Yen, Jpy, Little Bit, Month Of November, November 1, Retail Sales, Signs, Us Gdp, World Economy