Wednesday, February 17, 2010

U.S Dollar Strength Still on the Horizon

I have been attending the Trade Expo here in New York City. It is the first time I have visited the big apple and let me say that it has been a very pleasant experience. After attending several "workshops" I gained some information I thought you might want to know. Several of the analsysts for large trading firms were commenting on this years forecast for the U.S. Dollar. Their forecast is very favorable for dollar strength. The reasoning behind this can get quite complex so I will try to condense it down.
One major factor is the verbal positioning of certains members of the Federal Reserve. Some members are moving away from the view that interest rates should be held at near 0 levels. With this new positioning, the dollar could continue to rise on rumors of higher rates instead of actual news. China also plays a part in the game (don't they always?), by tightening their fiscal policy and slowing down the growth of their economy, thereby reducing the chance that the commodity countries would raise their rates (such as Australia). If China slows growth, they would not need the commodities countries like Australia would provide and that woud slow Australia's growth in turn. Slow growth usually means lower interest rates. Ah, and there is the infamous EURO. It has fallen sharply and one analyst predicts it could see .90 again. .90???? Are you kidding me? Well in trading ANYTHING IS POSSIBLE.For now the eye is on Greece and what is developing between them and the Eurozone. Greece didn't show up at a meeting this week concerning eurozone  policies and so that does not look favorable for this situation. Some Eurozone officials sense that Greece doesn't want the aid and if they can't work out a deal for the needed stimulas the EURO could really see some more depths agains the dollar and other currencies.

We can only gather this information and then use it as a tool to constructively try to place trades in the direction of the overall sentiment in the market. If you trade a 5 minute chart, this information should not affect you very much, but if you are a swing trader, you may want to take note that the EURO could see much lower prices when doing your analysis. And as the EUR/USD goes, so goes many of the other pairs which means a stronger dollar overall.