| O&F FOREX News & ViewsBy: Head Trader, Derek Frey | |||||
| September 22, 2008 | |||||
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| General Market Comments: | |||||
| What a wild ride last week was! As I mentioned you are seeing the death of the free market. Make no mistake, it was dead long ago, all we are really doing here is burying it. So it is time to usher in a new age of socialism. I am in no way trying to be funny or dramatic for this IS what is happening, like it or not. So what will all this socialization of industry do? Well in the short run the Treasury has told you that it cares little if at all about the value of the Dollar and it is clear that they will need to print more money to pay for all this. So as usual with anything of value, what happens when you create more of it, i.e. increase supply? That’s right; the value of it goes down. So, what do you think is going to happen to the value of the Dollar in the weeks and months ahead since they have told you they will print as much as they need? Now you’re getting it! This is not rocket science. We are still at best only 50% through this process so look for more black swans to appear. Bottom line is to sell Dollars on rallies. | |||||
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Europe |
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| EUR/USD: So last week I did tell readers that this pair was turning back up. We continue to see strength in the days and weeks ahead and are therefore buyers of dips this week more than anything else. That being said we do not expect this weeks range to be a big as last weeks and therefore we could have many trade opportunities on both sides. The underlying situation remains very dynamic and one needs to reassess the situation almost hourly to even have a chance of keeping up. We could see this pair retrace back to the low 1.40’s at some point this week and if it does we expect that dip to be a buying opportunity. GBP/USD: This pair is also tracking higher with the Euro. This pair has more of a head wind than its cousin Euro so it could see more two sided action. Here too we could see a dip back to the low 1.80’s that we would likely buy. Again since the environment is so fluid it is hard to say for sure what we would do in any given moment in the future. Bottom line here too is simply buying major dips if and when they come. USD/CHF: This pair put in a solid top for the near term and we are looking to sell major rallies this week. This pair is one of the “safe havens” in times of trouble so if the underlying situation spin out of control again, look for big moves down in this pair. |
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| ASIA
Yen, Australian Dollar |
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| USD/JPY: This pair has been the one that has traded independently from the other Dollar pairs. We expect this pair to move with the S&P500 and right now anything is possible in the S&P. Looking ahead we do expect stocks, and therefore this pair, to stabilize and even begin a sucker rally but not until we get a clear understanding of 1. the problem at hand, and 2. what we can and will do about it. The “plan” put forth by Paulson still needs to be approved by Congress and that approval process will be watched like a hawk this week. If the government stumbles so too will the market and this pair, but if by some miracle they convince traders that they have it under control we could see a sharp rally in both this pair and stocks around the world. AUD/USD: This pair is also turning back up as we expected and forecasted it would in line with the resumption of the bull market in commodities. How can commodities go up when the rest of the world is in free fall you ask? Simple, commodities are priced in Dollars for the most part and as they and I have said they will be printing more dollars then ever before so it is really a no brainer that commodities will continue to go up. |
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| North America
Canadian |
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| USD/CAD: This pair also turned up along with the turn in commodities and more specifically Oil. We mentioned in the past issue that nothing has changed in the supply demand picture in energy so anyone who thinks that Crude will stay below $100 is dreaming at best. We may see it fall back below the 100 level but any pullbacks will be temporary. Looking ahead to 2009 we see this pair trading below Parity. |
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