1Likes2008 taught us that the market is composed of irrational and clueless panicers.Originally Posted by youngdan
2008 taught us that the market is composed of irrational and clueless panicers.
The market was quite sure of the value of houses and sub-prime mortgages not too long ago.
Both of those are valid points sure enough but I would not bet against the currency traders. They are lightly to be a bit sharper than those who got burned in the property market. Those in the sub-prime market were bright enough as they correctly believed the government here would back the Fanny paper. They did fine.
Perhaps they are smart, but I'm not content with that. I'd like to be able to figure out what's going to happen to the dollar and the euro. I'd just like to hear what rational reason there is to trust the dollar more than the euro, as the dollar seems far more sickly to me. To behave otherwise would be to succumb to the group mentality that helped cause this crisis(which is what I feel is most likely causing the dollar rally: percieved "safety" by a herd).
I'm not in a position to make the bet anyway, I don't have dollars to sell...
Well I follow it as best one can. I did predict that the dollar would rally for 1.60 and it did. My reasoning was that the supply was dropping due to defaults. A few weeks back I said that this was going to be overcome by the bailouts and the dollar was to fall. I went that way up until recently but now the euro is weakening. I believe that bailouts aside, the thinking is that the political unit behind the euro is less united than that behind the dollar. The possibility of a political breakup is being factored into the price. This is my opinion but who knows.
I think it taught that it behaves like a herd of wildebeest and that people will do anything to cover their mistakes. The problems relating to banking most have been known long ago (well at least 18-24 months ago). If they had been addressed then it would have cost less and we would have been heading towards recovery now.
Trying to predict currency movements I find difficult, no virtually impossible, as there are so many inter related and unpredictable factors. I have a simplistic view of such things, solid trade surplus good, high levels of debt bad, but it just does not seem to work like that at all, does it?
Yen, Norwegian and Swiss perhaps as safe a place as there is in the first 6 months of 2009, but truely anyone's guess. The Renminbi should be strong but the government of China may have other views on that. This 1 year graph Chinese against dollar IMO does not reflect relative strength at all and must indicate strong Chinese intervention.
China is running a 280 billion dollar trade surplus whilst that of Japan has plummeted. By comparison the German trade surplus is about 22 billion dollars.
Dollar - versus Euro. Dollar should decline but there are so many with an interest in ensuring it does not. The Euroland will be the interesting one to watch as the decisions will be political as well as economic. Expect easement through activity in secondary markets to help get the PIIGS out of trouble.
Last edited by Squire Allworthy; 25th January 2009 at 11:34 AM.
€/£ at 95p. Target remains 0.9610 in the short term, possibly today. Sterling hit a 23-year low v the dollar last Friday and is set to head further south. Little by way of regular figures to move the market but the UK government, while limited in its options, may get down to the long awaited quantitive easing which again would be bad for sterling.
Technically, the euro is bid on this cross and remains bullish. Not signalling either overbought or oversold, moving averages putting a solid floor under the Euro between 92 and 93. RSI (Relative Strength of the Index) indicating neutral so nothing standing in the way of a rapid move to 0.9610.
For the benefit of QuizMaster and Oriel, it looks like we will be up here for a while. Any move downwards is likely to be temporary and act as a precursor to further moves upwards for the Euro. While the Euro itself is not strong, it is perceived to be stronger than Sterling right now. In forex, perception is everything.
For what it is worth, demoturk, I will give you my opinion as to why the dollar is doing better than many think it should.
1. All the worlds major wholesale commodities, including energy, are priced in dollars as it the means of moving them around, shipping.
2. Obama has, during the transition and starting his term, sounded like he knows the scale of the problem and seems to have an understanding of what needs to be done.
3.The USA is a single political and economic entity. Only one policy and one direction is possible. The Eurozone is not. There will be stresses visible between the bigger governments (Germany and France) and the ECB as time goes on.
4. There was a lot of currency trading up to last year in Brazilian Reals, Rupees, Ringgits and other "exotics". This has stopped and as liquidity has dried up in the exotics, it has moved (in many cases, come home) to the dollar.
5. In the currency markets, there is some truth in the adage that two blocks exist, "Anglos" and "non-Anglos". These are, in essence the US $, Canadian $, Australian $ and the British £ against the Euro, Swiss Franc and the Yen. As the Canadian and Australian $ are referred to as the "minors", it stands to reason the the US $ and British £ are the "Anglos" of volume and liquidity. The British £ is taking a hammering in the market so it is really only the US $ which is capable of taking the fight to the "non-Anglos" right now. If traders want to trade against the non-Anglos right now, they have to do it with US $'s, which requires them to possess dollars first.
This is only my opinion and, while I haven't said anything about the US economy, I believe long term that the problems in the US economy will bring the dollar down. But foreign exchange, particularly the spot market, is incredibly short term and right now, even those long-termers in the market who can see as far as Valentine's Day, will still bid the dollar up for now.
Strange sort of market at the minute. € up 1% v $ at 1.3311, £ up 1.7% v $ at 1.4225. $ down v CHF at 1.1320 but up v Yen at 89.60 having gone above 90 Yen. Where does this leave the ugly sisters?
€/£ at 0.9350, range trading between 0.9325 and 0.9450. Nothing moving these from a fundamental viewpoint and I believe we are going further up with the target of 0.9610 still intact. I think, and it is the only explanation I have, that technicals are ironing out in a pause before next move up for the Euro v Sterling.
However, moving averages put this at bearish and a move by £ to 0.9313 could trigger a € sell-off to 0.9240. If 0.9325-0.9313 does not provide a floor for the €, we could see the upward € move stalling and the cross going technically neutral.
Anyone else got a view?
Man, how can I have a view? I don't speak that language.
All I know is that even you, the best expert I know in worlds real or cyber, can't see past a few days. So I reckon no-one can.
