Casual Forex Trader

This is another weekly summary for the week of July 31st on the subject of forex trading. This is where I show you all the posts I made over the week and give you a summary of them. It’s a lot easier than digging through them all. Make sure you check out the Forex Killer.

Goldman Sachs: Dollar Rally – Goldman Sachs is calling for a dollar rally. It’s not a rally you’ll see soon though. When the economy starts to improve we are expected to see a nice rally in the US dollar. We shall see since this is a business that was bailed out.

Dollar Continues its Decline – We are still seeing massive falling in the US dollar as of this date. It’s been really getting hammered lately and it seems like people are dumping the dollar and going for equities.

US Dollar Finally Making a Move – The Dollar has finally decided that it should make a sharp move up for once and start giving gains to those that are leveraged with it. Good news for me lol.

Expect a US Dollar Pullback Today – The US dollar is bound to get pounded on Thursday because of the strong equity futures and the price of oil.

Based on the so called fundamentals that we have been experiencing during these tough economic times, we should see a rise in the US Dollar. This is based on a few things, so let me explain it for any of those readers that are new to the blog. First, every time there is some sort of rally in the stock market, people seem to dump the US dollar. It’s been a correlation that has been going on for some time now. Futures are already up significantly this morning for the Dow Jones and S&P 500, so I assume that the dollar will take a dip.

Commodities are also showing strength, which is obviously another reason why the US dollar would dip. Both gold and oil are up. Basically, I’d expect the US dollar to have a pullback today.

Remember, the information I’m giving you here today is purely for educational purposes only. Just watching the market as a non-participating observer should demonstrate what I’m saying, but like any market there is no guarantee of the outcome.

The US dollar seems to be breaking the downward trend that has been occurring over the last few weeks. It has started to move up today. It’s not making any big gains as of yet, but at least it is moving in the right direction for once. I think it is important to pay attention to the stock markets in the United States and around the world to see what is going to happen. I think there is going to be some sort of pull back in the US stock market, but I’m not exactly sure when that will occur though.

It’s tough to call these plays since everything sort of up in the air. For every positive indicator in the market, there is another indicator that is weighing down on it. I’m not saying that we won’t come out of this recession, I just see relatively poor growth, maybe even stagflation.

July 29 (Bloomberg) — The yen and the dollar rose as Asian stocks declined and economists said a report will show orders for U.S. durable goods fell last month, curbing demand for higher-yielding assets.

The Japanese currency also advanced amid speculation domestic investors are repatriating earnings. The Australian dollar fell from near its strongest level this year against the U.S. currency. South Korea’s won ended a two-day advance as the Shanghai Composite Index led a decline in the region’s stocks, tumbling the most in eight months.

“With equities softer, risk currencies are coming off and the dollar and the yen are benefiting,” said Daragh Maher, deputy head of global foreign-exchange strategy in London at Calyon, the investment-banking unit of Credit Agricole SA. “Anything that suggests expectations for growth in China are lower today than yesterday is going to hit the risk currencies.”

The yen strengthened to 94.73 per dollar as of 10:50 a.m. in London, from 94.55 yen yesterday in New York. It was at 133.96 per euro from 133.95. The euro fell to $1.4143, from $1.4167 yesterday. The 16-nation currency traded in July in a range of $1.3833 to yesterday’s high of $1.4304, the strongest level since June 3.

Australia’s currency fell to 82.00 U.S. cents, from 82.68 cents yesterday, when it rose to 83.38 cents, the highest level since Sept. 29.

The Canadian dollar also ended it’s 7 day rally yesterday. Surprisingly the Loonie only fell 1/5 of a cent, even though oil took a dive. That’s good news for the Canadian dollar and economy.

July 28 (Bloomberg) — Canada’s dollar was little changed against its U.S. counterpart, after rising for seven straight days, as stocks and crude oil declined and traders speculated recent gains in the currency may have outpaced economic growth.

The Canadian currency, nicknamed the loonie, earlier touched the strongest level in almost 10 months before tumbling after a report showed U.S. consumer confidence dropped in July more than economists forecast.

The US dollar is continuing to take its noise dive downward. The way it has been currently working is that as the market showed improvement, the dollar went down. Basically people were dumping money into treasury bonds and the US dollar while things were looking bad, but now that the market is showing a little life the money is moving out of the dollar and into other investments. This is leading to the dollar declining and continuing to go down.

I suspect there will be a correction once we see a correction in the stock market because this rally seems over the top. People seem to think things are improving, but companies are merely beating overly pessimistic forecasts. And really that is only a guess on performance. Outperforming a guess doesn’t mean things are good. Profits are down year over date.

July 28 (Bloomberg) — The Dollar Index fell to the lowest level this year as investors bought higher-yielding assets on speculation improved earnings signal the recession is easing. Aluminum rose for an 11th day, leading a rally in metals.

The U.S. currency declined as much as 0.9 percent versus the Australian dollar and 0.5 percent against the New Zealand dollar as of 10:48 a.m. in London. Stocks in Europe fluctuated between gains and losses, leaving the Dow Jones Stoxx 600 Index little changed. The MSCI World Index of 1,654 companies in 23 developed nations added 0.3 percent, extending the best winning streak since June 2003.

“With the risk-appetite switch jammed on, pressure on the dollar and the yen continues to mount,” Steve Pearson, a strategist at Bank of America Securities in London, wrote in a note today. “The move is being led by the commodity block.”

More than half of the 86 companies in Europe’s Dow Jones Stoxx 600 Index that reported results since July 8 have beaten analysts’ predictions, according to data compiled by Bloomberg. Companies in the Standard & Poor’s 500 Index have beaten estimates by an average of 11 percent. The U.S. economy probably shrank at a 1.5 percent pace in the second quarter, following a 5.5 percent contraction in the first three months, according to the median forecast of 66 economists surveyed by Bloomberg News.

The Dollar Index, which tracks the U.S. currency against six peers including the yen, pound and Swedish krona, fell to 78.315 today, the lowest level since Dec. 18.

Goldman Sachs is saying that the dollar is going to have a rally. I hope this is true since I have a lot of money held in the US dollar and I need to get it into some much better currencies. The problem I have with taking advice from Goldman Sachs is that they were bailed out by the US government. The fact that they couldn’t properly predict their own economic problems to the point that they should really be in bankruptcy is something that disturbs me. I’m not sure if I’ll act on such advice. I suppose since I hold a lot of assets already in US dollars that I already have that vested interest. Well, I thought I’d let you guys know.

July 27 (Bloomberg) — The dollar may remain weak until the U.S. economy improves, Goldman Sachs Group Inc. said.

“Cyclically, we are not yet in a situation where the undervalued dollar could perform better,” Thomas Stolper, an economist in London, wrote yesterday in a report. “U.S. demand has to grow more strongly, which we do not expect anytime soon. Once foreign investors believe the rebalancing is well on track, we would expect them to gain more confidence in U.S. assets, and the dollar would naturally re-appreciate.”

Goldman Sachs maintained a bet the euro will rise to $1.45. It gained 0.3 percent to $1.4248 as of 7:06 a.m. in London.

This is the weekly summary for July 24. This is when I give you a breakdown of all the posts throughout the week. Make sure you take a look at the Forex Killer.

Canadian Dollar Gains on Oil Optimism – The big moves in with the USD/CAD pair continues into this week. There are a lot of movements and Canada is heading back toward it’s highs for the year.

Interesting View on the US Dollar – This is a little bit of a technical analysis on the US dollar that you should take a look at it. It should be quite educational to you.

Could We See a Big Move with the Canadian Dollar? – The CAD is up a lot compared to the USD. There has been a very large move after the Bank of Canada announced that the economy looks good and the recession is over in Canada.

Canadian Dollar Best Trading Currency – The Canadian dollar has outperformed 16 other major currencies over the last two weeks. There was a lot of profits to make if you wanted it.

The Canadian dollar has been on a rather large positive move over the last two weeks. It has been able to gain back virtually all of the losses over the last few months. That’s pretty amazing since most of those gains came over 5 days of gains.

The loonie is outperforming 16 other currencies against the US dollar making it the best performing currency currently out there. The reason for this is that oil’s climatic drop has stopped and there is a lot of optimistic news coming out about the Canadian economy. Even businesses are looking to make money in the future, so things are looking at least positive in Canada.

July 22 (Bloomberg) — Canada’s dollar traded near the strongest in more than five weeks as U.S. stocks and crude oil, two of its main drivers, swung between gains and losses.

The loonie, as the currency is called for the aquatic bird on the dollar coin, is the best performer versus the U.S. dollar among the 16 most-traded currencies so far this month. In June it was the laggard. It tends to rise and fall with stocks and commodity prices as a proxy for investors’ appetite for risk.

“Commodity currencies are starting to lose momentum,” said Ian Stannard, a currency strategist in London at BNP Paribas SA, France’s biggest bank. “Caution with long positions is currently the way to play things.” A long position is a bet a currency will rise.

The Canadian currency appreciated 0.3 percent to C$1.1001 per U.S. dollar at 4:43 p.m. in Toronto, compared with C$1.1037 yesterday. It touched C$1.0951, the strongest since June 11, after falling earlier as much as 0.5 percent. One Canadian dollar buys 90.90 U.S. cents.

“A daily close below C$1.0920 is needed to accelerate U.S. dollar losses,” CIBC World Markets analysts Shane Enright in Toronto and Adam Fazio in New York wrote in a note to clients today. The recent U.S. dollar declines “favor an eventual move” toward C$1.0590, they wrote.

Crude oil for September delivery fell 0.5 percent to $65.31 a barrel in New York after tumbling as much as 2.8 percent and rising as much as 0.2 percent. Raw materials including oil account for more than half of Canada’s export revenue.

This is a break down of the US dollar index, which I find to be a pretty interesting look at the dollar. This may all sound a little over the top if you’re new to forex, but try and pay attention. The information is pretty unique and the educational experience is definitely there.

Outlook on the Dollar

If you’re unfamiliar with what this is about, it isn’t on any macro like economic information. It is a look at behavior patterns in the graphs. There could be a double bottom for the US dollar, which could show a sign that the US dollar should start rising up pretty fast.

The thing that sucks is that the US dollar has been much lower than it is right now, which sort of sucks. It could fall. But it still could bounce off the double bottom and head back up to the 90 range.

The Canadian dollar has been on the move for the last 7 days. It has been moving really fast. As you can tell, I was talking about it yesterday. There could be another way to sneak in and get a gain today. Or there could be a sell off. It’s hard to say.

The Bank of Canada is expected to speak today on the state of the economy, so everyone will be listening. I’m going to basically state what I think will be said. Basically they’ll have a very positive and optimistic look for the Canadian economy, but they’ll see a threat with the Canadian dollar advancing so fast.

It’s hard to gauge what they’ll do though. The central bank doesn’t want to get into the game of fixing currency prices or play in that game, but it is obvious that the economy in Canada can’t deal with huge fluctuations in currency since a huge part of their GDP comes from exporting raw material.

I guess time will tell on what will happen, but there has been big moves for the Canadian dollar and if things keep looking good for the Canadian economy we could see it continue to run up.

July 21 (Bloomberg) — The Bank of Canada will probably keep its benchmark interest rate at a record low today, and may say the strengthening Canadian dollar threatens a recovery that has been stronger than policy makers expected.

The target rate for overnight loans between commercial banks will stay at 0.25 percent in a decision due at 9 a.m. New York time, said all 23 economists surveyed by Bloomberg News. The central bank will probably reiterate a plan to keep that rate unchanged through June 2010, economists said.

“There is room to bring in a slightly more optimistic tone, but caution is the overarching theme,” said Stewart Hall, an economist at HSBC Securities in Toronto. “There is no interest in withdrawing stimulus anytime soon,” he said, because “there are gobs of excess capacity not only in the Canadian economy but the U.S. economy.”

Governor Mark Carney predicted in April the economy will shrink 3 percent this year, the most since 1933 during the Great Depression, and recent figures suggest the economy may soon expand again.

The economy will grow at a 1 percent annualized pace this quarter, said Jonathan Basile, an economist at Credit Suisse Holdings Inc. in New York, compared with the central bank’s April prediction of a 1 percent contraction. The median estimate of economists surveyed by Bloomberg is for a 0.5 percent expansion.

Economists surveyed by Bloomberg predict the economy will shrink by 2.4 percent this year, less than the 3 percent the Bank of Canada forecast last quarter.

The Canadian dollar has been really pushing up fast last week. It is already up to 90.5 cents US already today. That’s a pretty fast move considering just the other week it was at 85 cents US.

Personally, I’m not really sure how long this optimism will last. It just seems so stupid. Like stocks and currencies are moving on beating expectations, but if you put expectations low enough you’re bound to beat them. It doesn’t mean things are necessarily improving. The fact of the matter is the root cause is still in play. Banks still have toxic assets on their books. Foreclosures are actually growing and housing prices are still falling.

July 18 (Bloomberg) — Canada’s currency registered its first five-day increase since May, ending a six-week losing streak, as investors raised bets on higher-yielding assets on speculation the global recession is easing.

The Canadian dollar, which was the worst performer last month among the world’s most-traded currencies, strengthened 4.5 percent as crude oil and other commodities that historically benefit from economic recovery advanced. Raw materials account for more than half of Canada’s export revenue.

“You must remember what happened in June,” said Krishen Rangasamy, an economist in Toronto at CIBC World Markets Inc., a unit of Canada’s fifth-largest bank. “This is a recovery from those low levels. We’ve seen in improvement in optimism.”

Canada’s currency, known as the loonie for the aquatic bird on the one-dollar coin, appreciated to C$1.1134 per U.S. dollar in Toronto, from C$1.1638 on July 10. Its last weekly gain, a 2.6 percent increase, was posted May 29. One Canadian dollar buys 89.81 U.S. cents.

The loonie remained below an eight-month high it touched on June 1, C$1.0785, after gaining the most in May since 1950.

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