Forex Investment and Currency Trading

Despite the rally in stocks, both USD and JPY have performed well overnight, with the euro weakening against the dollar despite a stronger than expected ZEW survey. GBP has once again been under pressure. The outlook for FX appears confusing over the near-term as the equity market moves have failed to provide the signal on the direction of FX as they have done in the past. Under such circumstances, and with very little new in the way of fundamental data, one stay long JPY and short GBP.
Though USD funding concerns over year-end may support USD sentiment in the coming weeks, the arguments for a weaker dollar are building. Quantitative easing by the Fed and the move in real yields is likely to pressure USD into 2009. US policymaker comments on Monday suggested a deal on the auto bailout would be reached soon, however there is no significant development so far, except Ford Motor said it does not face near-term liquidity issue and won’t be seeking short-term bridge loan. The market will remain focused on developments in the automakers plan.