Forex Investment and Currency Trading

Yesterday the US House of Representatives unexpectly turned down by a fairly small margin the Troubles Asset Rescue Plan (TARP) put forth by the Treasury. This quite remarkable twist of events, with all the world watching, has left investors highly uncertain about what comes next. It is still possible that an amended version of the bill could be brought back to the floor, although given the mood of those that voted against it, this might be a very presumptuous judgement.
Congress will be in recess today, and will return to legislative business on Wednesday. Another vote then is possible, the earliest [...]

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The bounce back in equities has provided a modicum of comfort to those fearful of a larger panic.  The bounce has its roots in actions from Ireland – where banks have the government backing up their debt, France, which also backed banks debt, and in value hunters who argue that even in a recession US shares are at attractive P/E levels (assuming E is just 20% or lower from the S&P500 $90-ish peak.).  There is also an expectation that the US will come up with some sort of plan-B and that if it gets worse the FED and others can [...]

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FX Implications: The S&P500 closed at 1106 on September 29, well be below the support level of 1218 that was needed to trigger a USD/CAD buy signal.
A significant inverse relationship exists between extreme monthly returns in the S&P500 and 1- & 2-day USD/CAD returns at the turn of each month. This reflects Canadian equity portfolio managers’ tendency to adjust FX hedges at month-end due to changes in the value of their U.S. equities holdings.

The month-to-date change (%) in the S&P500 through the 2nd to- last trading day of a month represents a statistically significant driver of one- and two-day changes [...]

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After looking at the major trading attributes of EUR/USD, it’s time to look at how those elements translate into real-life trading tactics. After all, that’s where the real money is made and lost.
Deciding whether it’s a U.S. dollar move or a euro move
EUR/USD routinely acts as the primary vehicle for forex markets to express their view on the USD. At the same time, EUR/USD will also react to euro-centric news and data. So for traders approaching EUR/USD on any given day, it helps to understand whether the driving force at work is dollar-based or euro-based. Are they bearish on the [...]

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