Market Analysis » euro

USD now aligned with euro and yen ?

anna — Thu, 21 Oct 2010 08:58:04 +0000

In his latest interview US Treasury Secretary Geithner suggests that the euro and the yen are now aligned with the dollar, and sees no reason for further dollar weakness. In addition he also restates his assertion of earlier in the week, that the US FED policy is not to win the race to the bottom in the currency wars using QE2. Whether anyone believes him or not is debatable, but at the end of the day it will be the currency markets that decide, and at the moment the technical picture looks bleak for the US currency.

US Treasury Secretary Timothy Geithner suggested that he sees no reason for the dollar to sink further against the euro and the yen, saying these major currencies are “roughly in alignment”, the Wall Street Journal reported on Thursday.

You can read the full article by clicking on the link below.

US Treasury chief Timothy Geithner suggests dollar ‘in alignment’ with euro and yen

If you would like to read more of my forex trading analysis, then simply follow the link here where you can find more detailed technical analysis of the various currency pairs and the dollar index.

Further Dollar Weakness

anna — Fri, 01 Feb 2008 11:44:00 +0000

With ADP employment figures on Wednesday coming in at over 3 times higher than expected and the Fed cutting a further .50% on interest rates on the same day we will not be able to gauge dollar direction until release of both the nfp and ISM numbers later today.

However, weekly and monthly charts for both the euro dollar and pound dollar all point to further dollar weakness. The euro is once again eying 1.50 while the pound is looking again at 2.0 as the market waits for the aforementioned nfp and ism numbers. Even if stellar numbers are reported today I still expect both the euro and pound to mount a serious challenge to these levels and beyond. We will not know if it will be a sustained move until the middle of February.

Market Fundamentals To Determine Dollar Direction

anna — Mon, 28 Jan 2008 10:01:25 +0000

Following the emergency interest rate cut by the Fed last week the question being asked was whether the embarrassment at SocGen had anything do with the decision? Whilst the massive loss facing the French bank would be enough to temporarily spook any market is the bank merely using this event to cover up problems in other areas. Indeed the “rogue trader” at the centre of this storm, Jerome Kerviel, has insisted through his lawyers that he “did not commit any dishonest act”. They said SocGen wanted to “raise a smokescreen” to distract attention from losses it had made, “notably in the unbelievable sub-prime affair”. We can only wait and see.
Meanwhile the market moves on and this week is likely to be just as dramatic and possibly define the direction of the US dollar as well as equity and commodity market through to the spring. Not only do we have non farm payroll on Friday but on Wednesday we also have the ADP numbers and the Fed’s interest rate decision. If the employment figures are positive and the Fed cuts a further .50% thereby taking rates to 3% this will benefit both the equity market and the carry trade as the appetite for risk returns. The addition of personal consumption data, ISM and durable goods figures should also give traders the best possible picture of what is actually happening in the US economy and likely to happen in the short term.

Against this background it is not surprising that forex movements in all the pairs can appear somewhat random as the market waits to decide on the future direction of the major currencies.

Yen Trades

anna — Mon, 14 Jan 2008 10:59:15 +0000

Although the dollar is on the slide against almost every currency there is one anomaly, namely the British Pound which, if you will forgive the pun, is taking a “pounding” of its own against the euro, yen and swiss franc. From the charts it doesn’t look like this scenario is likely to change in the short term so consider further sell against the yen and euro.

With regard to the other yen crosses or carry trade pairs most, except the pound yen and canadian yen, appear to be forming a flag on the weekly chart in readiness for a breakout either way. However, my own view is that this is the year of the yen. Part of the reason is the flight from risk which will only return once stability returns to both the markets and banking industry.

Lastly the dollar yen which despite last week’s spike high is now fast approaching 107, last touched back in November 2007. If breached the next level to watch is 105 and then onto 102.

Carry Trade Unwinding

anna — Tue, 08 Jan 2008 09:07:37 +0000

Warnings surrounding the unwinding of the carry trades and, in particular the yen crosses, go back at least 2 years but each perceived threat simply sent the yen lower as investors continued to exploit interest rate differentials. This time, however, the end may just be in sight as all the yen charts are beginning to show significant signs that unwinding is now underway.

The most volatile of the yen crosses, the eur yen and pound yen are two such examples. Last week’s huge bearish engulfing candle on the eur yen and weekly close below 160 should increase bearish momentum over the medium term. In addition given this pair’s close correlation to the S&P500 any sharp moves in this index will also contribute to any fall.

The story is much the same with the pound yen with both the weekly and monthly chart showing downward pressure and the story is repeated across the other yen crosses.

As this is the first full trading week of 2008 now may be the time to review all carry trade strategies to take account of the major changes which are occurring in th yen crosses.