Boring……
This was one long trading day. Mostly because very little happened in the currency’s and instruments that I trade. With the Jewish holiday, staffing was thin and the volume being traded very little. With that being said Emerging Market currency’s had a hard time strengthening in spite of the very good day from the stock market. This is a recurring theme, that being the Dollar struggling to weaken further. I think we are seeing a bottoming (dare I say reversal…at least temporary) of the Dollar. Today’s reaction strengthens my view that we are nearing the end to Dollar weakness.
Positions
Long Usd/Clp
Long Usd/Brl
Short Usd/Ars
Short Usd/Cop
Short Eur/Usd
Overall Long (very Long) Dollars.
Good Luck and Good Forex Trading.
Currency Trading for Dummies
In today’s Wall Street Journal was a cover story article Small Investors Making Big Bets on Currencies. The article is very good and basically is what I believe, but I was quite surprised by the number of people trying to make money this way. Could this be a sign of how bad the economy is? The article states that most people are attracted to currency trading because of the leverage that is available, as much as 500 to 1. This is a big advantage if you know how to manage your money, risk and understand that it is not easy to turn $50,000 into “something north of seven figures”. 
Another big problem that I see is that so many people look for the “Holy Grail”. Once again the article states that many newcomers are “lured by currency trading system, seminars and software sold online that promise big returns”. It scares me to think how many people are trading with their last dollars, I would think there are a lot. This is not a “job” for the faint of heart.
CLICK HERE to read the article and please let me know your thoughts.
Good Luck and Good Forex Trading.
“Sir” Allen Stanford….Attacked in Prison
I would bet that “Sir” Allen doesn’t have that smile on his face anymore. According to reports Mr Stanford was attacked in Prison and needed medical attention. Welcome to the world of prison! From the reports that I have read he will be there for quite a while. If anything good came out of this Financial Crisis it is that people like Stanford and Madoff have been exposed.
CLICK HERE to read the story.
Good Luck and Good Forex Trading.
Fed Funds unchanged
The Federal Reserve left interest rates unchanged at 0-.25% which was highly expected. They said that although the Economy picked up and inflation was low that rates would remain exceptionally low for an extended period of time. Also they said that they would slow the pace of its purchases of $1.45 trillion of MBS and Agency debt to stretch them out through the first quarter of 2010. Here is the text from the FOMC:
FOMC Announcement Text
With substantial resource slack likely to continue to dampen cost pressures and with longer-term inflation expectations stable, the Committee expects that inflation will remain subdued for some time.
In these circumstances, the Federal Reserve will continue to employ a wide range of tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt. The Committee will gradually slow the pace of these purchases in order to promote a smooth transition in markets and anticipates that they will be executed by the end of the first quarter of 2010. As previously announced, the Federal Reserve’s purchases of $300 billion of Treasury securities will be completed by the end of October 2009. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.
Stop Fading the Move
Ok, I have been talking about buying the Dollar for weeks now and although I have been able to scrape out a few dollars it is certainly no thing to speak of. Today I officially give up (if I were you I would go out and buy Dollars immediately as you know this is the bottom!).
Why, well Usd/Brl broke below 1.8000. This is a “line in the sand” that I have been watching. Also Moody’s upgraded Brazil’s Credit Rating to investment grade joining the other two major rating agency’s (S&P and Fitch ) with this assessment. This could enable any fund that needed the Moody’s rating to purchase Brazil fixed income instruments. This could add to increased purchases of the currency and also lower rates. We saw the initial move after the announcement. In addition there has been strong speculation coming out of Argentina of an imminent deal with the untendered debt holders. Although this rumour was initially denied by the finance minister Boudou, where there is smoke there is fire. How the deal will be structured I am not sure but in any case I would think it would be positive for the economy and rates (although there is considerable debate on this point). Closure is important and opening up the country to outside financing again would seem like a positive to me.
The rest of the region is also trading very well with Chile and Colombia climbing to recent highs against the dollar. The old saying “if it ain’t broke don’t fix it” is so true in this case. Ride the trend and be happy.
The currency that I think has the most short term upside is Mexico. I sold dollars at 13.3320 before I left and expect it to trade below 13.0000 in the coming weeks. This because the Usd/Mxn has done the least from a strengthen point of view. I see real potential here.
Good Luck and Good Forex Trading
P.S. I am still short Euro’s. I just cannot get myself to buy it.
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