Forex Investment and Currency Trading

1 - 3 Month Outlook:
USD suffered staggering body blows in July with the collapse of IndyMac, the third largest banking failure in US history, and a near-death experience by mortgage giants Fannie Mae and Freddie Mac. USD wobbled and net USD shorts did increase, but USD did not test the March 17 low of 70.7. Its resiliency lends support to the view that USD bottomed in Q1. With confidence unstable, USD might struggle to show steady gains over the next 1-3 months, but it is poised to advance.
The response by Congress and the Administration to the Fannie Mae and Freddie [...]

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USD There are tentative signs that the USD Index has broken its downtrend, setting the stage for further gains. Lower oil/gasoline prices should be a modest USD positive, but gains should remain gradual.
EUR The view is retained that the trade-weighted EUR has peaked, and falling oil prices should add to the downside as it would allow the ECB to shift focus to downside economic risks from upside inflation risks.
JPY The upside for USD/JPY remains heavy as shown by the repeated failure to close above the 200-day moving average (107.07), but seasonal Japanese capital outflows should limit the downside.
GBP Cable still straddles its [...]

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The majors are still stuck in relatively tight ranges against the USD. This reflects a number of factors. First, US economic weakness is gradually spreading elsewhere as business and consumer confidence are deteriorating in the euro-zone, the UK and Japan. Second, relative interest rate expectations have stopped moving consistently in favour of non-USD major currencies. Third, the warning from G7 that they do not want excess volatility in FX markets is likely to put a floor under the USD. Near term the greenback may have a bit more downside as it is believed that current market pricing that the Fed will hike [...]

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