Forex Trading - US Dollar

Which Forex Currency Tracks What?

Fri, 27 Jun 2008 18:10:37 -0700

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The US Dollar is the most common currency that is commonly quoted in trade across the globe. It is one of the most popular currencies in the world. However, there are several other currencies that are actually not affected by the US Dollar movements in the forex market. These currencies may not be as popular as the US Dollar; nevertheless, they hold their own importance and are backed by several factors in their own countries that make them hold their ground strongly, in case of Dollar fluctuations.

The Euro:

European Union decided to have its own currency in 1999 and introduced it in the forms of coins and notes by the year 2002. Since then, the Euro has been one of the strongest contenders against the US Dollar. The EU consists of Austria, Belgium, Greece, Germany, France, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain. Socialist countries, which are also the largest countries of EU, hold the reigns of government budget deficits. The ECB or the European Central Bank is the lead bank that decides the monetary policies and aims to keep a check on inflation rather than keeping a check on economic contraction. The ECB has kept steady interest rates in past when there had been an economic slow down. Thus interest rates or adjustments in Euro exchange rates are less frequent.

The Japanese Yen:

Japan is a net importer of goods. However, the US and Europe are its major customer for its machinery and other production. Japan especially needs crude oil to keep its economic machinery running like clockwork. Bank of Japan faced one of the major deflationary crises in 1990s when it was compelled to switch to zero interest policy. At this time, Yen experienced the carry trade – when an entity buys a currency at zero interest rate and parks it in another account with high interest rates. In 1990s, the US treasury bonds and German bunds witnessed many such transactions. This means that the Japanese Yen shall always trade lower against the Euro and US Dollar which gives Yen/Euro trade as a viable pair. The only contention offered to this trade is the Chinese Yuan. China is one of the biggest competitors of Japan. Since china also artificially floats its currency, it may weaken the Yen’s value eventually.

The British Pound:

Britain has oil production in North Sea which can influence its economy. This means that Britain has energy reserves and thus, whenever the oil prices have gone high in past, so has the British pound. However, Britain has been experiencing a net increase in its demand for natural gas which has made it as a net importer of natural gas. This means that if there are any outrageous price spikes in the commodity, it would lead Britain to economic exposure. If oil prices start to head north rapidly, Bank of England may need to keep inflation in check and consumer spending may be severely affected. The British pound is also susceptible to strengthening of European currency. Thus, trading Euro with Pound can be quite a liquid trading relationship.

The Canadian Dollar

It is also referred to as "the Loonie" as it has the bird, huard, on its coin. Loony is the French for huard. Bank of Canada is country’s central bank that dictated the monetary policies for the nation. It holds eight meetings in a year to decide upon the interest rates policy. Canada is also world’s second largest reserve for crude oil with more than 175 billion barrels of reserves. The US is its main customer and if there is an increase in the oil prices, they would further strengthen the Canadian Dollar.

The Swiss Franc

It is commonly known as the "the Swissy". It is one currency that is capable of outperforming the Euro if there is dissention between the EU members. It is backed by gold thus is considered one of the safest currencies. Inflation, economic contraction, political stability and excessive economic growth are some of the factors that affect performance of the Swissy.

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US Consumer Strength - Retail Sales Rebound

Fri, 13 Jun 2008 21:37:43 -0700

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Forex currency price chart of EUR and USD

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Retail Sales rebound on US consumer strength.U.S. Dollar Trading (USD) the much anticipated May Retail Sales didn't disappoint coming in much stronger than anticipated at 1.0% vs. 0.5%. Combined with upward revisions in March and April the numbers paint a resilient picture of the US consumer. The Government stimulus package released in late April has filtered through leaving the US Federal Reserve the possibility of a rate hike later in the year. Driving up inflation fears, US import prices for May rose 2.3% on soaring energy costs. Weighing on the Dollar though was the continued weakness in US initial Jobless claims coming in at 384K up 25K from last week. In the US share markets, the NASDAQ was up 10 points (0.4%) and the Dow Jones was up 57 points (0.57%). Crude Oil closed up $0.36 ending the New York session at $136.74 per barrel. Looking ahead we have the May CPI expected to quicken to 0.5% from Aprils 0.2%. June Michigan Consumer Confidence is expected to fall further to 50.5 from 51.1 in May.The Euro (EUR) continued in a downtrend bowing to USD strength but still performing well against other currencies. Solid April Industrial Production of 0.9% and strong reported sovereign bids helped to rebound off lows. Overall the EUR/USD traded with a low of 1.5379 and a high of 1.5566 before closing the day at 1.5420 in the New York session. Looking ahead, German CPI for May forecasted at 0.6%.

The Japanese Yen (JPY) the USD/JPY traded through 108 for first time since February as US interest rates continue to be forecasted higher. Strong US Retail sales broke down option barriers at 107.85 and 108 but reported strong barriers at 108.10 and 108.30 are expected to provide stiff resistance along with exporters taking advantage of the higher levels. Overall the USDJPY traded with a low of 106.91 and a high of 108.08 before closing the day around 107.91 in the New York session.

The Sterling (GBP) traded to its lowest level since May 15th with the Dollar dictating direction. The Bank of England Bulletin showed public expectations of future inflation running way above current projections and action may be needed by the BoE. Overall the GBP/USD traded with a low of 1.9435 and a high of 1.9644 before closing the day at 1.9473 in the New York session.

The Australian Dollar (AUD) was sold heavily after May Unemployment Data came in very weak. Unemployment Change -19.7K vs. 13.5K expected and Unemployment Rate jumped to 4.3% vs. 4.2% forecast. The data resulted in trimming of interest rate expectations and growth expectations. In the US session the large drop in gold took the glimmer off the recent surging Aussie. Overall the AUD/USD traded with a low of .9329 and a high .9488 before closing the day at .9343. Looking Ahead, RBA Stevens speaks today on the state of the economy.

Gold (XAU) fell steeply through supports as US data came in strong and the USD surged. Overall trading with a low of $857 and high of $882 ending the New York session at $868 an ounce.

Technical Commentary

Euro - 1.5455
Initial support at 1.5380 (Jun 12 low) followed by 1.5366 (Jun 5 low). Initial resistance is now located 1.5587 (Jun 12 High) at followed by 1.5657 (Jun 10 high).
Yen - 107.75
Initial support is located at 106.8 (June 12 low) followed by 106.24 (Jun 10 low). Initial resistance is now at 108.08 (Jun 11 high) followed by 108.61 (Feb 14 high).
Pound - 1.9485
Initial support at 1.9435 (Jun 12 low) followed by 1.9363 (May 14 low). Initial resistance is now at 1.9645 (Jun 12 high) followed by1.9683 (61.8% retracement of the 1.9801 to 1.9493 decline)
Australian Dollar - 0.9380
Initial support at 0.9304 (50% retracement of the .8953 to 0.9655 advance) followed by 0.9291 (May 15 low). Initial resistance is now at 0.9527 (Jun 10 high) followed by 0.9648 (Jun 9 high).
Gold - 872
Initial support at 857.65 (Jun 12 low) followed by 850 (Psychological Number). Initial resistance is now at 883 (June 11 high) followed by 895 (Jun 10 high).

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US Dollar Continues to Fall

Thu, 17 Apr 2008 19:15:27 -0700

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The falling dollar continues to raise eyebrows in the world financial market and now even more than that. Members of the G7 industrialized nations are now seriously warning against strong foreign exchange transactions. They believe this could create more financial instability.

This weeks’ financial data in regards to the dollar do not look good, in fact it appears that the U.S. is falling into a recession, and the dollar continues to fall against the Japanese yen and the euro.

The falling dollar, has also created other problems in the market such as the rise in prices for commodities such as oil, wheat and other items, which means that consumers just don’t have the money to spend. This will cause banks to rethink their interest rates and possibly lower them, and will keep some countries from basing their economy on the U.S. dollar.

At this rate inflation will soon be both a humanitarian and political problem too. Rising food costs because of rising commodities will seriously affect the years of work in trying to reduce poverty worldwide. Consumers are now worrying about filling their gas tanks, but others are now worried about filling their stomachs.

For a long time the G7 industrialized nations have warned that a countries economy should be based on the countries economics and not on other currencies, such as the dollar, but now they are emphasizing the principle even more. In fact this is a probably the strongest concert the group of 7 has expressed since 2000.

For now the financial world is only on alert, and there is nothing being done as yet to back up the dollar.

Some financial experts believe that any recovery that the dollar makes will only be a short term one until investors believe that the U.S. economy is on the rise again. Others say that although there is sure to be bad financial news this week, the dollar should slowly come back. It is believed that the U.S. Federal Reserve Board has almost finished the interest rate cutting period, and the European Central Bank will probably reduce rates before the end years, and that things will probably not get worse for the U.S. economy. This means that the U.S. dollar should recover on its own without any intervention.

"Strong Dollar" Policy Has No Foundation Says Former Treasury Secretary of U.S.

Wed, 16 Apr 2008 03:53:22 -0700

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Paul O’Neill, a former Treasury Secretary for the U.S. recently suggested that the "strong dollar" policy that the U.S has in place since 1995 is not based on strong principles in fact O’Neill has stated that its "a vacuous notion."

This "strong dollar" policy suggests that the US has the capability of managing the value of the dollar and other currencies in the world. O’Neill was in office during 2001 and 2002 and tried to pursue the idea of a of a strong economy instead of pursuing the idea of a strong currency. Today’s Secretary of the Treasury has often repeated his support of the "strong dollar" policy.

O’Neill says ``When I was Secretary of the Treasury I was not supposed to say anything but `strong dollar, strong dollar.'' But in now he doesn’t believe in such a thing, and he didn’t really believe it back then either. In fact he now says, ``I argued then and would argue now that the idea of a strong dollar policy is a vacuous notion.''

In fact, the dollar recently fell again against the euro by 15% and O’Neill believes that the U.S. government has little to do with whether the dollar is strong or not, and it is really the markets that have more control over the rise and fall of the currency than the U.S. government does. "When people say STRONG DOLLAR, if they don't mean that `we believe intervention can work and we're prepared to intervene,' then `strong dollar' is ridiculous,'' said O’Neill.

The G-7 Reunion

In their April 11th meeting, the Group of Seven major nations’, finance chiefs, gave a serious warning as to the repercussions that could arise from the falling dollar. Soon after these concerns were voiced to the people, the Secretary of Treasury of the U.S. reiterated in a following press release, his "strong dollar" motto, but O’Neill says, he was asked to repeat the mantra as well, and that every Treasury secretary is asked to repeat the phrase, and has done so since the Clinton era, when the Motto was instigated. The Treasury secretary always follows the “strong dollar” policy, no matter what the real state of the dollar is.

The dollar recently reached an all time low of $1.5979 against the euro. It has also dropped by 14% against the Japanese yen in the last year, trading at 101.45 yen.

Dollar Continues to Fall

Sun, 13 Apr 2008 03:54:05 -0700

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The falling dollar continues to raise eyebrows in the world financial market and now even more than that. Members of the 7 industrialized nations are now seriously warning against strong foreign exchange transactions. They believe this could create more financial instability.

This weeks financial data in regards to the dollar do not look good, in fact it appears that the U.S. is falling into a recession, and the dollar continues to fall against the Japanese yen and the euro.

For a long time the 7 industrialized nations have warned that a countries economy should be based on the countries economics and not on other currencies, such as the dollar, but now they are emphasizing the principle even more. In fact this is a probably the strongest concert the group of 7 has expressed since 2000.

For now the financial world is only on alert, and there is nothing being done as yet to back up the dollar.

US Dollar falls against the Yen

Fri, 29 Feb 2008 20:35:31 -0800

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The US Dollar has fallen to its lowest level in three years against the Japanese Yen in forex. It also has hit its weakest point ever against the Euro during forex trading. This comes amid the release of US jobless claims data, revealing a large rise in claims. This has shown that the US economy barely grew in the final quarter of 2007. Recession fears alongside the rising speculation of a large rate cut on the 18th of March is causing the US Dollar to fall at record lows. On the positive side, the falling US Dollar is making US goods cheaper overseas, raising exports and reducing its trade deficit for the first time since 2001. The National Association of Purchasing Management Chicago revealed today that its business barometer had fallen to 44.5 in February which is its lowest level since 2001. This has raised speculation of the likelihood of a 75 basis point Fed-rate cut to 2.25 on the 18th of March.

''It's broad dollar weakness because of concerns about the U.S. economy, U.S. yields, expectations of rate cuts and financial markets,'' said Tom Fitzpatrick, global head of currency strategy at Citigroup Inc. in New York.

''They don't care about the weak dollar. I absolutely believe the market is disappointed'' by Bernanke's comment.

In forex trading the US Dollar fell to a three year low against the Japanese Yen, falling to 103.69 Japanese Yen before settling on 103.74 Yen. The US Dollar fell at an all time low against the Euro, trading at $1.5239 per Euro, the weakest since the euro's inception in 1999. The Euro has gained 2.1 percent against the falling US Dollar for this month.

US Dollar falls on rate oulook

Sun, 24 Feb 2008 05:37:58 -0800

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The US Dollar has fallen to a three week low against the Euro on speculation that the US Federal Reserve will continue to cut its interest rates in an attempt to avoid a recession while the European Central Bank (ECB) keep their interest rates steady. The Euro rose against the US Dollar after a government report revealed that the European service industries went beyond the expected forecast in February.

''The U.S. is in a material slowdown and it feels like a recession,'' said Camilla Sutton, co-head of currency strategy at Scotia Capital Inc. in Toronto.

Futures on the Chicago Board of Trade reveal traders see a 96 percent chance of a half a percentage point cut on the target rate on the 18th of March. In contrast, traders have increased bets of an interest rate hike by the Reserve Bank of Australia (RBA) by a quarter of a percent to 7.25 percent when they meet in March. New Zealand's borrowing rate is also at a record level of 8.25 percent. The US Federal Reserve has lowered its interest rates a total of 2.25 percent to 3 percent since the 18th of September last year.

In forex trading, the US Dollar has fallen to $1.4827 per Euro, from $1.4814 yesterday, and dropped to the weakest since the first of February. The US currency touched an all-time low of $1.4967 per Euro on the 23rd of November. The US Dollar fell to 107.17 Japanese Yen from 107.40 Yen. The US dollar posted a second straight weekly loss against the Euro, falling 1 percent.

US Dollar falls on weak economic data

Sun, 17 Feb 2008 05:46:19 -0800

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The US Dollar has fallen on the Friday trade after the release of weak economic data and the generally negative comments made by US Federal Reserve chairman, Ben Bernanke, the day before. The US Dollar fell as a closely observed consumer sentiment index fell to its lowest in 16 years. The US Dollar commenced the day on a weak note, due to Ben Bernanke's assessment of the US economy on Thursday. Bernanke told a Senate committee there were strong ''downside risks'' to US economic growth and that the Fed was ready to respond as necessary, a small hint that further interest rate cuts might happen in the near future.

''With house prices plummeting, employment falling, stock markets in turmoil and gasoline prices still above US$3 a gallon, it is little wonder consumers are unhappy,'' said Paul Ashworth, US economist at Capital Economics.

''But the extent of the decline this month suggests that a degree of panic has now set in -- this is bad, very bad,'' he said.

In forex trading, the US Dollar fell against the major currencies. Against the British Pound, it was at US$1.9612 from US$1.9682. The Euro traded at US$1.4683 at 10pm GMT after US$1.4637 late on Thursday in New York. The US Dollar traded at 107.72 Japanese Yen, down from 107.85 Yen on Thursday.

US Dollar falls on widening rate differential

Mon, 11 Feb 2008 20:54:24 -0800

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The US Dollar fell in forex trading against the major currencies, increasing last night's losses due to speculation that the interest rate differential between the falling US Dollar and other currencies could widen further in the near future. ''Currencies are still rallying when there is a hawkish shift in central bank expectations,'' said John Noonan, an analyst at Thomson IFR. Speculation of another interest rate cut by the US Federal Reserve as early as this month in order to stimulate the stagnant growth in the world's largest economy. Forex traders are currently waiting on the release of economic reports in the Euro zone for more clues on future interest rate rises. Britain's consumer price index is to be released later today while its quarterly inflation report will be released on Wednesday.

In forex trading, the US Dollar fell, trading at 1.4518 per Euro compared to a previous trade of 1.4515 US Dollar per Euro. The British Pound was worth 1.9501 US Dollars compared with 1.9496 US Dollars overnight. Against the Japanese Yen, the US dollar was down at 106.86 Yen from 106.88 Yen as investors continued to unwind their carry trades funded from Japan.

US Dollar at a 2-Month low on rate cut

Wed, 30 Jan 2008 17:50:04 -0800

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The US Dollar is at a 2-month low against the major currencies after the US Federal Reserve cut interest rates by half a percentage point. The rate cut comes just 8 days after the US Federal Reserve unexpectedly cut rates by three quarters of a percentage point in order to support its deteriorating economy. ''The language in the Fed's statement was fairly strong, suggesting the Fed is still worried with the possibility of further deterioration in the U.S. economy,'' said Mark Meadows, analyst at Tempus Consulting in Washington, D.C. Dealers in the New York Board of Trade's US Dollar index reacted by pulling the US Dollar at a 2-month low. Analysts are worried about the inflationary impact of the Fed's aggresive rate cut. Despite that, they have said that Federal Reserve's main focus is to keep the US economy out of a recession.

In forex trading, the US Dollar hit a 2-month low against a basket of currencies. It hit resistance against the Euro, falling by 0.8 percent to trade at $1.4906. The Pound Sterling traded higher by more than a cent and last traded up 0.1 percent at 1.9914. The dollar also fell 0.6 percent against the Japanese Yen to trade at 106.40 Yen and hit a record low of 1.0824 Swiss Francs. It also fell against the Australian Dollar, trading at 89.95 US cents compared with yesterday's trade of 89.77 US cents.

US Dollar falls amidst impending recession

Sat, 26 Jan 2008 20:39:17 -0800

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The US Dollar has weakened against the Euro and the British Pound after the Fed's emergency rate cut failed to convince investors that the world's largest economy will avoid a recession. The US Federal Reserve unexpectedly cut key interest rates by three quarters of a percentage point on the 22nd of January, reacting to a global decline in stock markets. The rate cut was largest reduction in 18 years. ''The Fed easing or not, the economy is in deep trouble,'' said Lane Newman, director of forex trading in New York at ING Financial Markets LLC. ''The negative trend for the dollar still remains.'' Despite the cut, Wall Street plunged at the opening with the Dow Jones industrial average falling by 465 points before stocks rebounded. The Dow ended the day off 128.11 points at 11,971.19.

In forex trading, the US Dollar faced resistance against the Euro and the British Pound, falling by 0.4 percent to $1.4681 against the Euro from $1.4621 on the 18th of January. It also faced resistance against the British Pound, falling by 1.4 percent to $1.9828 per Pound from $1.9554. The US Dollar has declined by 1.5 percent against the Euro since it cut its interest rate. The Japanese Yen rose against the major currencies yesterday after a decline in the Standard and Poor's 500 Index reduced the incidence of carry trading.

U.S. Dollar stronger against major currencies

Sun, 25 Nov 2007 17:12:54 -0800

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The U.S. Dollar has gained strength against the major currencies in forex trading this morning in Sydney, reversing last Friday's losses and signaling a possible comeback. Attention has turned towards the U.S. Federal Reserve's meeting early in December since another interest rate cut would be a plus for the Australian Dollar as it would stimulate the market's appetite for risky investments. ''For the Australian dollar, one driver will be on the message the plethora of Fed speakers send on whether an interest rate cut on December 11 is likely,'' said John Kyriakopoulos, head of currency strategy at National Australia Bank. A decline in interest rates by the U.S. Federal Reserve may also put upward pressure on the Australian Dollar.

In forex trading, the U.S. dollar was worth 108.51 Japanese Yen compared with 108.30 Yen in late New York trade on Friday. The Euro traded lower at 1.4834 U.S. dollars from 1.4838 U.S. dollars on Friday while the British Pound was buying 2.0623 U.S. dollars, down from 2.0628 US dollars at its close last week. Elsewhere, the Australian dollar was up at 87.94 US cents from 87.78 US cents amidst the Australian Labor Party's victory in the federal election on Saturday over the Liberals.

U.S. Dollar declines amidst Bernanke speech

Tue, 13 Nov 2007 17:14:54 -0800

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The U.S. Dollar fell in forex trading amidst comments made by Federal Reserve Bank chairman Ben Bernanke. The U.S. Federal Reserve chairman said that the central bank is prepared to counter the imported inflation risks caused by the high oil prices but also underlined the economic damage that high oil prices could cause. This suggests the use of contractionary monetary policy, or the raising of interest rates. ''Further sharp increases in crude oil prices have put renewed upward pressure on inflation and may impose further restraint on economic activity,'' Bernanke said. Rhonda Staskow at Thomson's IFR Markets also said,'There is no Goldilocks scenario from Bernanke, who sees risks from inflation and an economic slowdown - the worst of both worlds.'

During forex trading the U.S. Dollar fell against all the major currencies, also hitting a 26-year low against the British Pound Sterling. The U.S. Dollar was trading around 1.4695 against the Euro, from 1.4665 just before details of the comments were revealed. The British Pound rose above 2.11 U.S. Dollars before settling back to around 2.1090 U.S. Dollars. The Dollar was also weaker against the Japanese Yen, Swiss franc and other currencies in forex trading.

U.S. Dollar falls on weak payrolls data

Sat, 04 Aug 2007 16:00:43 -0700

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The U.S. Dollar fell against the major currencies as U.S. payroll data showed that the unemployment rate had risen to its highest level in six months. The Labor Department revealed a rise of the unemployment rate to 4.6 percent in July compared to 4.5 percent in June. July added 92,000 jobs in July, way below the expected 135,000 jobs. In response, the U.S. Dollar fell dramatically as it suggests that problems in the U.S. housing market are spreading.

In forextrading, the Dollar fell 1 percent against the Euro to $1.3773 from $1.3636. Against the Japanese Yen it fell half a percent to 118.05 Yen from 118.63 Yen.

U.S. Dollar on a 6 week high amidst impending government reports

Mon, 28 May 2007 05:11:45 -0700

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The U.S. Dollar traded close to six-week highs against the Euro amidst the impending release of housing and job reports as speculation builds that it will reduce pressure for the U.S. Federal Reserve to reduce borrowing rates this year. The U.S. Dollar also recently reached its highest level against the Japanese Yen in three months as speculators reduce the likelihood of the U.S. Federal Reserve to reduce interest rates. ''We have the dollar strengthening into the end of the year,'' said Randall Kendrick, co-head of economic and market analysis at Citigroup Australia in Sydney. Data this week ''will signal the Fed is on hold for quite a number of months.''

In today's trade, the U.S. Dollar traded at $1.3456 per Euro in comparison to a May 25 trade of $1.3442. The U.S. Dollar also traded at 121.68 Yen in comparison to last weeks trade of 121.79 Yen.

Forex Trading - US Dollar

Which Forex Currency Tracks What?

The Euro:

The Japanese Yen:

The British Pound:

The Canadian Dollar

The Swiss Franc

US Consumer Strength - Retail Sales Rebound

Technical Commentary

Euro - 1.5455

Yen - 107.75

Pound - 1.9485

Australian Dollar - 0.9380

Gold - 872

US Dollar Continues to Fall

"Strong Dollar" Policy Has No Foundation Says Former Treasury Secretary of U.S.

The G-7 Reunion

Dollar Continues to Fall

US Dollar falls against the Yen

US Dollar falls on rate oulook

US Dollar falls on weak economic data

US Dollar falls on widening rate differential

US Dollar at a 2-Month low on rate cut

US Dollar falls amidst impending recession

U.S. Dollar stronger against major currencies

U.S. Dollar declines amidst Bernanke speech

U.S. Dollar falls on weak payrolls data

U.S. Dollar on a 6 week high amidst impending government reports