Forex Investment and Currency Trading

In recent months there has been a significant degree of IAOL – “its all one trade” – in financial markets, with a high degree of correlation of risk-seeking and risk-aversion trades. In particular, movements in equity prices have provided a significant “guide” to performance in the foreign
exchange markets of growth oriented currencies versus risk-aversion currencies– with the AUD/JPY cross a key G10 example on that relationship.
It is in this context that recent signs of support for equity prices could take on significant importance for currency movements during the weeks ahead. First, the S&P 500 index appears to be testing – [...]

[Read more →]

FX Bottom Line: If the S&P 500 Index manages to form a bottoming pattern against last Thursday’s bullish key reversal low of 818.91, the DXY is likely to undergo a retracement phase that would highlight support levels at 84.45, 83.82 and 82.32. Keep an eye on this relationship this week.
The possibility is raised that the S&P 500 Index is attempting to stabilize against last Thursday’s (bullish key reversal) low of 818.91.
With a potential triple bottom pattern forming near 845.27 for stocks, a close above resistance at 940.73 would produce a bullish trend reversal.
This would then highlight the reaction highs near 1007.46 [...]

[Read more →]

The Treasury curve steepened last week as long end issuance met some resistance but economic weakness kept a bid for the front end of the curve. A 9bp tail at last week’s $10bn 30-year reopening may signal that the market is having trouble digesting long end issuance. However, the Treasury appears to be winding down its Special Financing Program, which will enable it to issue bills to finance TARP outlays.
October’s record budget deficit of $237.2bn was larger than the budget deficit in all of FY 2007. With the Fed running out of room to ease, pressure is mounting for even [...]

[Read more →]

The US dollar continues to attract a repatriation bid as the process of global leveraging runs its course. The S&P 500 can be used as a proxy for this process and technical indicators suggest that a bottom may have been put in place, potentially removing this pillar of support for the greenback. The USD index’s first major level of support comes in 84.03, the 23.6% retracement of the rally from March 17 to November 13.
The dollar’s strength has been concentrated versus the core European currencies, leaving EUR/USD vulnerable to a rebound as the repatriation bid fades and the dollar’s pattern [...]

[Read more →]

The first step is to commit to making time for market analysis. The more regular your analysis, the greater the feel you’ll develop for where the market has been and where it’s likely to go. Also, the more regularly you update yourself on the market, the less time it’ll take to stay up to speed. It’s a lot easier updating yourself every day than it is trying to catch up on several days’ worth of market news, data, and price developments.
Give some long, hard thought to how much time you can realistically afford to devote to market analysis before committing [...]

[Read more →]