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.

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Good news this morning out of Canada regarding their unemployment figures has propelled the Canadian dollar (CAD) to a one year high.  The unemployment rate dropped from 8.7% to 8.4% as the Canadian economy unexpectedly added some 30,000 workers.  CAD is up across the board, most notably against the Japanese yen (+2.16%), the Kiwi (+1.93%) and the Euro (+1.15%).

Its also up against the US dollar (+.81%) as the dollar has found its own strength with some jaw-boning from Ben Bernanke early this morning.  The dollar is up most vs. the yen (+1.32%) as well as the other Majors.  This also falls in-line with with my previous commentary on the Yen, that 88 appears to be a short to mid-term bottom.  Rumors that the Japanese would intervene at that level are also contributing to Yen weakness today (see CAD and all other crosses).

Questions remain about when the Fed might act, but don’t forget that the currency market is forward-looking, so any indication that Bernanke may be willing to raise rates or remove QE is seen as positive for the US dollar, despite the fact that Big Ben maintained the Fed Mantra “for an extended period” in his statement regarding accommodative policy.

One thing to note about Bernanke’s comments is that he will tighten when the economy “has improved sufficiently”.   What this means is anyone guess but as I have stated in other comments, this could be sooner than later.

The other side of the coin is that the US economy is NOT recovering, which could lead to further dollar declines.  However, pressure coming from abroad may force Bernanke’s hand sooner than he’d rather move.

So once again all eyes are on Bernanke.   Let’s see what happens.

Tags: Bernanke, cad, canada, comments, currenc, currency, currency market, dollar, economy, EUR, Euro, falls, fed, Il, intervene, Japan, Kiwi, Mike Conlon, news, rate, short, unemployment, Yen

written by admin \\ tags: Ben Bernanke, Big Ben, Canada Currency, Canada Unemployment, Canadian Dollar, Canadian Economy, Crosses, Currency Market, Dollar Economy, Euro 1, Japanese Yen, Kiwi, Majors, Mantra, Mike Conlon, O Canada, Qe, Unemployment Figures, Unemployment Rate, What This Means