Forex Investment and Currency Trading

The recessionary pressures building up in the economy have started to develop momentum suggesting that the real GDP is more likely to decline for six consecutive quarters than the three generally anticipated by the consensus forecasters. A contraction of this duration will not only be the longest in the modern period but it will also increases the risk of a deflationary cycle taken root not only in tradable goods but in services as well. A cumulative 10.7% decline in real GDP suggests a surge in the civilian jobless rate into double digit territory or up a full 3.5% from the current level. This large a projected break in the labor market and the associated increase in excess capacity will exert substantial downward pressure on prices and argues for significant disinflation if not out right deflation. This macro environment underlies the recent price action in the equity and bond markets support remaining locked on this course. Specifically, the broad market pushed through its October 10 low leading technical analysts to revise down their near-term target on the S&P 500 to 700 despite exceptional attractive valuations.