Trade Signal 30th of September 2008

EUR/USD
Sell at 1.4370
TP 50 pips
SL = 1.4410

GPB/USD
Sell at 1.8050
TP 50 pips
SL = 1.8090

USD/CHF
Buy at 1.0975
TP 50 pips
SL = 1.0935


Trade Signal 26th of September 2008

EUR/USD
Buy at 1.4580/90
TP = 50 pips
SL = 1.4540/50

GPB/USD
Buy at 1.8350/60
TP = 50 pips
SL = 1.8310/20

USD/CHF
Sell at 1.0890
TP = 50 pips
SL = 1.0930

US Dollar and The Financial Crisis

The Three Factors that Influence the Currency Markets Right Now

by Rob Booker

As fear grips the financial markets and investors panic worldwide, what are consequences for the US Dollar? How do turmoil in the credit markets, the failure of major US investment banks and insurance companies, and sharp declines in stock market indexes affect the value of the world's major currencies?

Despite the fact that discussion of the currency markets has taken a back seat to the rest of the issues surrounding the current credit crunch, the value of the US Dollar and other major currencies have been, and will continue to be, heavily influenced by what is happening in the world of investment banking, the stock market, and especially the bond market.

The first major influence on the currency markets is uncertainty about the quality of US and European investments - primarly the stock market. The second influence is speculation about what the US Federal Reserve and the European Central Bank will do next. The third influence is all about whether the world begins to look at the Euro as the world's reserve currency.


US Dollar Scenario Number One: US Dollar Gains

Here's the bottom line: when investor confidence crumbles, they start buying US government debt. The dollar benefits because what do investors need in order to buy US Treasurys? They need dollars.

The world financial markets are complex but they depend on one major characteristic: investor confidence. At present, major banks, central bankers, hedge funds, and home-based investors share one common emotion: uncertainty. Generally, when traders worldwide feel unsure about market direction, they sell off their riskier assets -- like real estate, stocks, corporate bonds, and complex financial instruments called derivatives -- and they buy safer investments. This is why you've been hearing about a "flight to safety" on television, radio, and financial press.

What this means is that global investors are buying US Treasurys, which are viewed as safe investments (because they are backed by the US Government, which can tax its population or print money in order to pay back its debt; don't you wish you could print money or tax the government to pay off your own debts?).

Here is a chart that shows the price on the 2-year Treasury note and the US Dollar Index. You'll notice that as the price of the Treasury increased in the last 60 days, the value of the dollar increased.

Note: Past performance is not indicative of future results

The demand for "safe" US Government debt is so high that the Wall Street Journal reported on Thursday, September 17:

"The desperation was especially striking in the market for U.S. government debt, long considered the safest of investments. At one point during the day, investors were willing to pay more for one-month Treasurys than they could expect to get back when the bonds matured. Some investors, in essence, had decided that a small but known loss was better than the uncertainty connected to any other type of investment."

Summary of Scenario One: As global investors sell stocks, bonds, and anything else (denominated in their local currency), they can force up the value of the US Dollar as they buy US government debt. If this continues to happen, the greenback could continue to rise against the Euro, the Pound, and other currencies.

What to Watch: Watch for news about the US Treasury market. Remember that Treasury prices increase as their interest rate decreases -- if you hear that Treasury prices are decreasing, or that Treasury yields are decreasing, that is a sign that investors are actually buying more Treasurys.

US Dollar Scenario Number Two: The US Dollar Neutral

The bottom line: The European Central Bank and the US Federal Reserve could make moves which essentially cancel each other's effect on the US Dollar.

First, let's get a basic principle out of the way. Generally speaking, a nation with a higher interest rate will attract more investment into its currency than a nation with a lower interest rate. The currency of the nation with the increased investment can rise in value as the demand for that currency increases.

Central banks generally have two competing purposes: to fight inflation and to maintain stable economic growth. Although some central banks favor one mission over the other, it is unusual for a central bank to ignore rampant inflation or an exploding economy in order to focus on some other purpose.

Right now, the European Central Bank is wildly regarded as focusing much more on inflation than on the economy. In the midst of a world economic slowdown, the ECB has repeatedly stood firm and refused to lower its base interest rate. But what if the ECB buckles under the pressure to lower interest rates and provide some relief to its economy? Such a move would include statements (as we have heard recently from the Bank of England) about weakness in the European economy; such statements plus any rate cuts tend to drive down the value of a nation's currency.

We've already seen this effect recently as the Euro has fallen against the Dollar in the last 60 days. Essentially, the currency markets are betting that the ECB is going to have to eventually move to lower interest rates to spur economic activity. If the ECB actually does this, the Euro could fall significantly lower.

However, at the same time, the US Federal Reserve refused this week to lower the Fed Funds Rate -- which signaled to the marke that the Fed might be done lowering its rate.

Summary for US Dollar Scenario Two: If, as we discussed, the interest rates are correlated to the value of the Euro and the Dollar, then we could see a stalemate. A US Fed which refuses to lower rates (and may increase rates in the next 6-12 months) may cancel any move that the ECB makes to lower rates. In this scenario, the EUR/USD, for example, would not trend as much and would begin to trade in a range.

What to Watch: Be ready for the next European Central Bank interest rate decision, on October 2. Be aware that often the comments made by ECB President Jean-Claude Trichet are generally more influential than the actual decision itself. And then next decision of the US Federal Reserve, on October 29.

US Dollar Scenario Number Three: The US Dollar Losses

Does the US Government really have a "strong dollary policy?" The last scenario is that the US economy gets so bad, so fast, that the value of the US dollar declines regardless of any other news.

Quoting the Wall Street Journal from Thursday, Septemer 18 again:

"[a member of the US Congress] said recurring federal budget deficits already have raised alarms with foreign investors."

In the past two years there has been talk that eventually the Euro could replace the US dollar as the world's reserve currency. We have heard that oil producing countries might start asking for payment in Euros, or that central banks in Asia will begin to diversify their holdings to reduce exposure to the US dollar (remember that China and Japan combined hold over $1.5 trillion in US dollar-denominated securities and investments).

Summary for Scenario Number Three: If confidence in the US economy falters further, we could see another wave of dollar losses across the board, and in particular against the Euro, which is largely viewed to be the next most stable currency (whether it really is or not is a discussion for another time!).

What to Watch: Pay attention to news about central banks diversifying their holdings. You'll hear things about diversification into "currency baskets." Also, you might want to follow any news related to oil, US budget deficits, or statements by central banks about their holdings of US dollars.

Conclusion: Volatile Times Call for Responsible Traders

More importantly than any of the above, it's time to remember that valid arguments, reasoned analysis, or historically successful trading systems all fail miserably when combined with poor risk management.

If the recent failures of banks worldwide have proved anything, they have demonstrated that excessive risk leads eventually to excessive losses. If you trade currency, or anything else, realize that risk management isn't optional; it's critically important that you know how much you stand to lose on any given trade, and that you seek independent financial advice before you make your decisions.

The problems on Wall Street today are really problems of leverage. It's the Great Margin Call of 2008, if you think about it: Bear Stearns, Lehman Brothers, and AIG all suffered the consequences of trading on leverage and then betting big. When the markets tumbled, they didn't have the capital to ride out the losses. These types of losses are the great equalizers of traders: retail traders like you and me and seasoned Wall Street traders both realize that "worst case scenarios" sometimes do happen, that excessive leverage can lead to total loss, and most of all, the markets are bigger than all of us.

FOREX-Risk aversion despite AIG rescue propels yen higher

* Dollar falls as AIG rescue fails to calm markets

* Risk aversion sees yen reversing earlier losses

* Morgan Stanley, Goldman Sachs shares tumble (Recasts, updates prices)

By Lucia Mutikani

NEW YORK, Sept 17 (Reuters) - The yen rebounded on Wednesday as the U.S. government's rescue of insurer AIG and a jump in interbank borrowing costs failed to calm jittery markets, lifting the currency to near four month highs against the dollar.

American International Group's (AIG.N: Quote, Profile, Research, Stock Buzz) emergency $85 billion loan from the Federal Reserve did little to ease investor worries about the U.S. financial sector, with shares of Wall Street giants Morgan Stanley and Goldman Sachs tumbling.

"We are still seeing some very nervous markets despite the best efforts that the government has put forward," said Nick Bennenbroek, head of currency strategy at Wells Fargo in New York.

"It looks like there is significant stress in the market in terms of money market spreads still being wider and U.S. equity markets under pressure and during these much volatile periods, its seems to be the yen that's doing the best."

The dollar dropped as low as 104.39 yen at one point, not too far from nearly four-month troughs seen on Tuesday around 103.51 yen, according to Reuters data. It was last down 1.0 percent at 104.68 yen.

The sharp drop in stocks on Wall Street, which was led by financial shares, saw the euro surrendering earlier gains versus the Japanese yen. The European single currency was last down 0.3 percent at 148.00, after earlier climbing to 151.55 yen.

"Risk aversion remains very much in place. In fact, risk appetite has plummeted this morning with T-bill yields sharply lower as investors seek safety and liquidity," said Samarjit Shankar, global foreign exchange strategist at the Bank of New York Mellon in Boston.

"We are seeing continuing net buying of the yen as a result, while the Swiss franc also remains net bought."

INTERBANK RATES SPIKE

In a sign of continued distress in financial markets, the interbank cost of borrowing three-month dollars posted its biggest daily gain in almost nine years, while the cost of insuring 10-year U.S. Treasury debt against default rose on Wednesday to a record high.

A rise in crude oil prices and some unwinding of safe-haven positions hurt the dollar versus the euro, analysts said.

The euro last traded up 0.2 percent at $1.4148, but off session highs around $1.4269, according to Reuters data.

The ICE Futures U.S. dollar index, which measures the dollar's value against a basket of six currencies, slipped 0.2 percent to 78.974 .DXY.

"The dollar had benefited from safe-haven capital flows into U.S. Treasuries and we are seeing a little bit of an unwinding of that," said said Omer Esiner, a senior currency analyst at Ruesch International in Washington.

The dollar was mute to data showing that construction starts on new U.S. homes plunged to a 17-1/2-year low in August and the current account deficit widened in the second quarter.

The U.S. Federal Reserve elected to leave interest rates on hold on Tuesday at 2 percent, citing concerns about downside risks to growth and upside risks to inflation.

Elsewhere, Britain's economic backdrop continued to show deterioration with data released earlier showing that the numbers of jobless in Britain leapt by 32,500 in August, its biggest rise since December 1992.

The euro rose 0.2 percent to 79.00 pence, while sterling gained 0.3 percent to $1.7914.

Minutes of the Bank of England's latest policy meeting showed 8 of 9 policymakers voted to leave borrowing costs on hold at 5 percent, with one policymaker calling for a 50 basis point cut while a hike was also discussed.

Trade Signal 16th of September 2008

EUR/USD
sell at 1.4242
TP = 50 pips
SL = 1.4282

GBP/USD
Sell at 1.7952
TP = 50 pips
SL = 1.7992

USD/SHF
Buy at 1.1112
TP = 50 pips
SL = 1.1072


Trade Signal 12th of September 2008

EUR/USD
Sell at 1.4090
TP = 60 pips
SL = 1.4130

GBP/USD
Sell at 1.7695
TP = 60 pips
SL = 1.7735

USD/CHF
Buy at 1.1360
TP = 60 pips
SL = 1.1320


Trade Signal 11th of September 2008

EUR/USD
Sell at 1.3930
TP = 50 pips
SL = 1.3970

GPB/USD
Sell at 1.7500
TP = 50 pips
SL = 1.7540

USD/CHF
Buy at 1.1385
TP = 50 pips
SL = 1.1345


Trade Signal 9th of September 2008

EUR/USD
Buy at 1.4170
TP1 = 50 pips
TP2 = 100 pips
SL = 1.4120
TS 50 pips

GBP/USD
Buy at 1.7620
TP1 = 50 pips
TP2 = 100 pips
SL = 1.7570
TS 50 pips

USD/CHF
Sell at 1.1270
TP1 = 40 pips
TP2 = 80 pips
SL = 1.1310
TS 40 pips

Trade Signal 08th of September 2008

EUR/USD
Buy at 1.4340
TP1 = 50 pips
TP2= 100 pips
SL = 1.4290
TS 50 pips

GBP/USD
Buy at 1.7810
TP1 = 50 pips
TP2 = 100 pips
SL = 1.7760
TS 50 pips

USD/CHF
Sell at 1.1175
TP1 = 40 pips
TP2 = 80 pips
SL = 1.1215
TS 40 pips

FOREX-Dollar falls for 1st time in seven sessions vs euro

* Dollar falls on weaker-than-expected August payrolls

* U.S. economy loses 84,000 jobs in August

* Jobless rate highest since matching 6.1 pct in Sept 2003 (Repeats with no changes to text) (Updates prices, adds details, byline)

By Wanfeng Zhou

NEW YORK, Sept 5 (Reuters) - The U.S. dollar fell against the euro for the first time in seven sessions on Friday after a government report showed the U.S. economy lost more jobs than expected last month and the unemployment rate jumped.

The weaker-than-expected payrolls data heightened fears over the U.S. labor market and the general health of the world's largest economy, eroding some support for the greenback.

The dollar has rallied sharply against the euro in the past month or so on expectations that the U.S. economy would outperform those of Europe and Asia.

"Very ugly across the board," said Boris Schlossberg, head of currency research at GFT Forex, New York, of the payroll figures.

"The most startling thing for the market was this huge jump in the unemployment rate," he said. "The jobless rate suggests that the climate for job expansion has become much more difficult and suggests we are probably going to have a much harder fourth quarter facing us."

In early New York trading, the euro was up 0.5 percent at $1.4316 having traded at its lowest since October at $1.4197, according to Reuters data.

The U.S. Dollar index, which tracks the value of the greenback against a basket of six currencies, fell 0.5 to 78.525 .DXY.

The Labor Department said 84,000 jobs were lost in August, significantly higher than the economists' forecast of 75,000. In addition, July's job losses were revised up to 60,000 and June's to 100,000 from a previously reported 51,000 in each month.

The U.S. unemployment rate unexpectedly shot up to 6.1 percent in August, as employers cut payrolls for an eighth straight month and labor markets showed signs of accelerating decline.

Ashraf Laidi, chief FX strategist at CMC Markets U.S., said the negative impact of August payrolls report on the dollar is unlikely to be sustained.

"The recent greenback strength is not a result of improved U.S. fundamentals but of worsening conditions abroad," he said in a note, and the jobs report did not change that.

The dollar earlier fell against the yen, which benefited from a flight from riskier assets, but later reversed course to trade up 0.1 percent at 106.71 yen.

Market players said investors were exiting leveraged carry trades, or positions funded by borrowing yen at low rates to buy higher yielding currencies and commodities.

"A weaker-than-expected (jobs) number means further exiting of risky positions and further yen carry selling," said Andrew Busch, BMO Capital Markets's global FX strategist, in Chicago. (Editing by Tom Hals)

FOREX-U.S. dollar drops after weak August payrolls data

NEW YORK,Sept 5 (Reuters) - The dollar fell against the euro on Friday in choppy trading after a government report showed the U.S. economy lost more jobs than expected in August.

The euro last traded at $1.4274 compared with $1.4260 just before the report. Earlier, the euro fell as low as $1.4217 following the jobs report.

The U.S. economy lost 84,000 jobs last month, the Labor Department said. Economists had expected a decline of 75,000.

The unemployment rate unexpectedly shot up to 6.1 percent in August, its highest in more than 4-1/2 year.

Trade Signal 4th of September 2008

GBP/USD
Sell at 1.7820
TP1 = 50 pips
TP2 = 100 pips
SL = 1.7870
TS 50 pips

USD/CHF
Buy at 1.1030
TP1 = 40 pips
TP2 = 80 pips
SL = 1.0990
TS 40 pips

EUR/USD
Sell at 1.4525
TP1 = 50 pips
TP2 = 100 pips
SL = 1.4575
TS 50 pips

FOREX-Dollar extends gains vs euro on factory order data

(Adds reaction to U.S. data, updates prices, adds comment, changes dateline, previous LONDON)

NEW YORK, Sept 3 (Reuters) - The dollar briefly extended gains versus the euro on Wednesday after a government report showed U.S. factory orders rose more than expected in July.

New orders at U.S. factories jumped by a bigger-than-expected 1.3 percent in July, helped by a rise in transportation orders, the Commerce Department said. Economists polled by Reuters were expecting factory orders to gain 1 percent in the month. For more see [ID:nN02444541].

The euro last traded down 0.3 percent at $1.4470 , after going as low as $1.4449 after the report.

"A good number," said Joseph Trevisani, chief market analyst at FX Solutions in Saddle River, New Jersey.

"We now have five months of positive factory orders. The last two negative numbers were January and February. New orders were up 2 percent. All in all, it will provide the dollar with longer-term support. Not an immediately reactive number for the market but it fills in the picture of a moderately recovering U.S. economy." (Reporting by Wanfeng Zhou and Nick Olivari)

© Thomson Reuters 2008 All rights reserved.

Trade Signal 01st of September 2008

GPB/USD
Sell at 1.8040
TP1 = 50 pips
TP2 = 100 pips
SL = 1.8090
TS 50 pips

EUR/USD
Sell at 1.4640
TP1 = 50 pips
TP2 = 100 pips
SL = 1.4690
TS 50 pips