Interesting article in the FT:

A strong US needs a weakened dollar
Published: October 9 2009 22:23 | Last updated: October 9 2009 22:23

Lawrence Summers, the director of President Barack Obama’s National Economic Council, has voiced his support this week for “a strong dollar based on strong fundamentals”. He was responding to the greenback’s recent feebleness: the US currency has depreciated by 13.3 per cent on a trade-weighted basis since its peak in March of this year. But this fall in value, while large, should neither be feared nor obstructed.

The immediate cause of this slide is not growing fear of inflation: market expectations for future inflation rates have been stable and low. Rather the decline in the dollar has been caused by the recent recovery in world economic confidence.

The weakening is part of the unwinding of the stampede to safety that, between August 2007 and the spring of this year, drove the value of the dollar up by 12.6 per cent as investors rushed to hold safe assets. The US currency is now roughly where it was as the crisis was emerging.

It would actually be rather helpful if the dollar were to weaken further. Politicians everywhere see strong currencies as national virility symbols, but the effect of a cheaper dollar would be to help American exporters while making imports to the US dearer.

This is what America – and the world – needs. In the medium term, as Mr Summers put it earlier this year, “the rebuilt American economy must be more export-oriented and less consumption-oriented”. In short, the US must start living within its means, and the rest of the world must stop relying on its profligacy.

This is the prospect that has worried monetary authorities in Asia. The central banks of South Korea, Taiwan, the Philippines and Thailand have intervened in markets in the past week to bolster the dollar’s strength against their currencies. They are trying to slow the pace of any such rebalancing.

That is understandable: this type of reordering of the world economy would be enormously disruptive for these export-led countries, since their economic strategy is to sate the appetites of the consumption-led countries.

But this is a losing game. Devaluing their own currencies to maintain weakness against a sinking dollar is dangerous. It risks domestic inflation and stakes public money on currency speculation in a race to benefit from the largesse of already over-indebted consumers. Mr Summers may be inclined to repeat his empty mantra in favour of a strong dollar. We can only hope he does not mean it.

The FOMC minutes were a disappointment for the USD yesterday - and Obama's stimulus package is unraveling as the US goverment may continue buying MBS securities in an effort to stave off the crumbling of an empire. But hey, at least he's $1M dollars richer after winning the Nobel. Maybe Obama will make an anonymous donation to Fox news.

The Euro rally toward 1.50 versus the Dollar continued as Industrial Production gained for the 4th consecutive month. Industrial Production came out at 0.9% as expected. EUR/USD traded with a low of 1.4838 and with a high of 1.4946. Today, ECB Monthly Bulletin will be released and will provide detailed analysis of current and future economic conditions. European Core CPI is expected slightly weaker with 1.2% versus 1.3% prior.


Resistance
1.499
1.501
Support
1.486
1.48
1.476

We experienced a little bounce in the USD and if Bernanke doesn't shock us, we may be pippin' later on today when the NY session is is full gear. As much as I like charting/technical analysis - I'm never opposed to making a buck, jappy, cable, etc. off of these policy wonks and their diatribes. Which way do you think the dollar will go after Bernanke takes the microphone? Your thoughts are much appreciated. Still thinking about shorting XAU too. Made some quick bucks last week doin' it. Anyone else sell for the trade?

The Dollar ended Friday's session mixed, rising versus Euro and the Yen and declining versus the Pound as Industrial Production was higher but Consumer Sentiment was lower. Industrial Production rose by 0.7% better than 0.1% expected, but University of Michigan's Consumer Sentiment was surprisingly lower with 69.4 versus 73.6 forecast and 73.5 prior. NASDAQ and Dow Jones declined by -0.76% and -0.67% respectively, as bank stocks declined sharply. Crude advanced by 1.2% closing at 78.65$ a barrel. Gold (XAU) finished almost flat with 0.12% change, closing at 1052.25$ an ounce.

Forex market volatility expectations have gained considerably through the past week’s trade, increasing the likelihood of major US Dollar breakouts against the British Pound and other key counterparts. Extreme US Dollar sentiment likewise increases the probability of turnarounds in key pairs, and as such the market remains ripe for sustained moves through near term trading. We will position ourselves for Breakout and Momentum-based trading signals, while Range trading strategies look less attractive given the spike in volatility expectations.
The US Dollar continues to trade at major lows against major forex counterparts, and there is admittedly little scope for an immediate turnaround.[dailyfx]

The Gold Price held flat against all major currencies in London trade Monday morning, beginning the week at $1054 an ounce as stock markets rose and government bonds ticked lower.

'Spot gold is still trying to break through the top of its 38-year uptrend channel at $1057,' reckons Commerzbank.

'Gold on the weekly chart [posted] a flat week,' says Scotia Mocatta's technical note, 'a Doji formation which is often a warning for a pending trend reversal.'

'My view is that gold's probably going to consolidate around current levels,' said one Singapore dealer to Reuters this morning.

'I think gold is waiting for crude oil to top $80 before rising again on inflation fears,' reckons a Tokyo analyst, also speaking to Reuters.

Crude oil today touched a fresh 12-month high above $78 per barrel, while foodstuff prices leapt again and copper rose almost 1%.
[oilngold]

Attached Files

Oil_VS_Gold.zip (45.5 KB, 5 views)

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Interesting facts from today’s GDP report:
Fully 2.2 percentage points of the third quarter's 3.5% growth figure related to vehicle purchases and residential construction, both juiced by government support. Federal spending added 0.6%. What’s going to happen when all the stimulus spending is taken away? It won’t be good for the US economy and in that case the dollar will rally. Starting to worry about the longevity of the long euro trade.

With interest rates so low investors have been using the dollar as a funding currency for riskier investments. The bearish case against the dollar is that interest rates are so low and that the US will increase interest rates far after other major countries. The bullish case for the dollar is that the US and global economy is still not out of the woods and will experience further pain and declines in GDP. It is starting to look as if the US equity rally has gone too far too fast – over 80% of S&P companies having reported have beaten earnings by the S&P is down from its highs during this period. With the decline in the S&P, foreign exchange investors are becoming increasingly worried about risk and are starting to move back into the dollar. I’ve taken off my long euro vs. the dollar trade. Waiting for further data points until I go long the dollar against the euro.

Although the single currency rose marginally to 1.5064 in the beginning of last week, lack of follow through buying and the retreat from there suggest a temporary top has possibly been formed there and consolidation with mild downside bias would be seen. A daily close below 1.4674-83 minor support would add credence to this view and further fall towards support at 1.4480 but it is necessary to see a clear break of this level to confirm and bring correction of recent upmove to 1.4232 (38.2% Fibonacci retracement of 1.2885 to 1.5064) would follow.[actionforex]

"P&F EURUSD60 Box Size 40X3 or(0.83%) HI/LO
Data 1.5062 - 1.3832 ~ 4 Month ~ 118.04 Day
Database 2001 records 1.47681 (Last Close)
2009-07-07 11~00
2009-11-02 12~00 (GMT+01:00) Paris
BJF Trading Group"

1.5040|~4O|||==========================X===|0.15%| 8.73%
1.5000|~8O|||__________________________Xo__|0.41%| 8.44%
1.4960|~12O||________________________X_Xo__|0.68%| 8.16%
1.4920|~16O||________________________XoXo__|0.94%| 7.87%
1.4880|~2OO||________________________XoXo__|1.21%| 7.58%
1.4840|~24O||____________________X___Xo_oX_|1.47%| 7.29%
1.4800|~28O||____________________XoX_X__oXo|1.74%| 7%
1.4760|~32O||__________________X_XoXoX__oXo|2.01%| 6.71%
1.4720|~36O||==================XoXoXoX==o=o|2.27%| 6.42%
1.4680|~4OO||__________________XoXoXo______|2.54%| 6.13%
1.4640|~44O||__________________Xo_oX_______|2.8%|5 .84%
1.4600|~48O||__________________X__oX_______|3.07%| 5.55%
1.4560|~52O||__________________X__oX_______|3.33%| 5.26%
1.4520|~56O||==================X==o========|3.6%|4 .97%
1.4480|~6OO||__________________X___________|3.86%| 4.68%
1.4440|~64O||________X_________X___________|4.13%| 4.4%
1.4400|~68O||________Xo____X___X___________|4.4%|4 .11%
1.4360|~72O||________Xo__X_Xo__X___________|4.66%| 3.82%
1.4320|~76O||________XoX_XoXoX_X___________|4.93%| 3.53%
1.4280|~8OO||____X_X_XoXoXoXoXoX___________|5.19%| 3.24%
1.4240|~84O||____XoXoXoXoXo_oXoX___________|5.46%| 2.95%
1.4200|~88O||====XoXoXoXoX==o=o============|5.72%| 2.66%
1.4160|~92O||____XoXoXoXoX_________________|5.99%| 2.37%
1.4120|~96O||____Xo_oXo_oX_________________|6.25%| 2.08%
1.4080|~1OOO|____X__oX__o__________________|6.52%| 1.79%
1.4040|~1O4O|__X_X__o______________________|6.79%| 1.5%
1.4000|~1O8O|__XoX_________________________|7.05%| 1.21%
1.3960|~112O|_oXoX_________________________|7.32%| 0.93%
1.3920|~116O|XoXoX_________________________|7.58%| 0.64%
1.3880|~12OO|_oXo__________________________|7.85%| 0.35%
1.3840|~124O|_o____________________________|8.11%| 0.06%
1.3800|~128O|______________________________|8.38%|-0.23%
Column|~132O|145414461856734533135873735833|
Count|~136O|____O___O_________4___________|

Attached Files

Excel_eurusd_240min_091102.zip (23.4 KB, 4 views)

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Point & Figure Chart in Forex