Forex Investment and Currency Trading

Economic: The Canadian economy is now well into what is expected to be its most severe economic recession since the early 1980s, and all indications are for a rather sizeable drop in economic activity in November. In fact, with retail sales, manufacturing sector shipments, wholesale trade and housing sector activity all declining in dramatic fashion during the month, and export demand for Canadian products falling by the day, it appears that all segments of the Canadian economy are being whiplashed. For November, analysts expect GDP to fall by a massive 0.6% M/M, which will be the first back-to-back monthly drop [...]

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Global currency moves continued to be dominated by the swings in risk appetite, capital and trade flows, and gyrating terms of trade stemming from the worsening global recession. Policy responses — monetary easing, FX intervention, capital controls — have also added to FX volatility. In general, the US dollar is expected to outperform in this period of stress, with riskier currencies gaining ground later in 2009 when a bottom to global activity and a firming of risk appetite are nearer to hand.
EUR is expected to weaken further, the outlook for euroarea growth currently endorsed both by the market and by [...]

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The markets continue to vacillate between risk-seeking and risk-averse strategies, with risk aversion remaining the underlying theme broadly in the overnight session following the USD’s recovery in the aftermath of the FOMC decision.
Equities are on the defensive again broadly – though earnings numbers out so far today are mildly better – suggesting that the main themes in the overnight session (which have favoured the JPY and the CHF over the commodity currencies generally) is liable to continue in the near term at least. There is a window for the broader risk appetite in the market to improve though; US law [...]

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The CAD has been a relative under performer in the overnight session (dragged down by weakness in the AUD and NZD) though the market remains somewhat low on conviction generally and thin and rather illiquid trading conditions continue to characterize USD/CAD trading. And with month-end on the horizon, the market has even less incentive to stick its collective neck out too far today. USD/CAD managed to grind steadily higher from yesterday’s 1.2030 low and while the high reached surpassed expectations slightly, funds still looks to be struggling to attract support above the 1.22 area. It appears, fact, as if the [...]

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