Bush Administrations Announces Auto Bailout

Last week was a busy one for Forex trading as several countries released economic and employment data. Most of the news was not good but on Friday the Bush administration announced that they would tap the Troubled Asset Relief Funds (TARP) to bailout the ailing US auto industry. Previous to the announcement the dollar was down against the Euro and Yen but quickly regained ground with the bailout announcement.

Dollar Rises

After the announcement many took advantage of the Forex opportunities the announcement provided to otherwise skittish investors and bought dollar backed assets. Many economists believe the Dollar was highly oversold last week and is currently positioned to regain last week’s losses and potentially even strengthen more in the coming months.

Calm Week Expected

This week is expected to be somewhat calm marketwise as Forex and stock and commodities traders take time off for Christmas. Tomorrow, December 23^rd, the US will release important housing data that should give some insight into the US economy and could affect the dollar and Forex investment opportunities.

Wall Street Reacts

The auto bailout has helped Wall Street regain some measure of confidence and markets quickly reacted to the announcement of the bailout agreement. It has been estimated that the US would face over 2 million lost jobs if the automakers failed and would have a ripple effect throughout the US economy.

For the immediate future things are looking up for the dollar although a small number of economists remain skeptical. At present the dollar is seen as a safe haven and is still the world’s reserve currency. The coming holiday week promises to be a quiet one and we at Forexopportunity.org. wish our readers the happiest of holidays.

Dollar Falls

The US dollar fell on Wednesday and reached a 2 ½ month low against the Euro after the Federal Reserve slashed interest rates to between zero and 0.25%. The Euro reached a high of $1.4192 after the Federal Reserve said it would use “all available tools” to combat the ongoing recession and slashed rates to between zero and 0.25%. The Fed also added that it was considering possible purchases of longer-term U.S. Treasury debt.

Traders Sell Dollars

The announcement had traders taking advantage of this Forex opportunity to sell off dollars helping the Euro gain 11% this month. Adarsh Sinha, currency strategist at Barclays Capital in London. Stated, “

The Fed had an explicit commitment that they will leave interest rates very low for an extended period and that’s quite negative for the dollar because of relative interest rates. I guess the question now is: is this the beginning of a big move for the dollar, say euro/dollar to $1.60?”

Dollar Falls Against Yen

The dollar fell 0.3% against the Yen to 88.70. Yen gains against the Dollar helped to push the euro down 0.5 percent to 124.75 Yen. The yen has gained in recent months as investors unwound carry trades, reducing exposure to riskier and higher-yielding assets as the financial crisis mushroomed. The Yen has provided investors with Forex opportunities in the past because of its low rates.

Bank of Japan to Reduce Rates

There is speculation that the Bank of Japan would reduce rates to almost zero following a two day meeting which ends Friday. Bank of America G10 currency strategist David Powell stated, “With rates in Japan now higher than Fed rates, this puts further downward pressure on dollar/yen. It also increases the possibility that the BOJ will cut rates by 20 basis points on Friday.” Some Forex brokers are wary about the risk of Japan intervening to rein in the yen’s climb, which is hurting the nation’s exporters.

Currency markets can be volatile and the global economic crisis has both traders and investors watching closely for Forex opportunities that present themselves on a daily basis. This week has been a busy one with several countries releasing economic data that could affect Forex opportunities and both traders and investors will be watching closely.

Besides the shoe throwing incident in Iraq Bush’s recent trip to Iraq and Afghanistan yielded some very interesting information. In an interview with reporters on Air Force One Bush hinted that he may use money from the Treasury program to aid financial services companies in order to avoid the bankruptcy of U.S. automakers. Unfortunately Mr. Bush would not provide a timeline. Mr. Bush stated, “An abrupt bankruptcy for the autos could be devastating for the economy.”

When asked if he would use money from the $700 billion dollar Treasury Troubled Asset Recovery Program (TARP) earmarked for Wall Street Bush said, “I signaled that that’s a possibility.” The failure of the ‘big 3’

US automakers would in all probability cause economic chaos in the US and weaken the dollar limiting Forex opportunities for investors.

The proposed $14 billion dollar bailout remains in limbo since the Senate rejected the bailout last week. If no bailout funds are forthcoming the ‘big 3’

may have to declare bankruptcy. Since bankruptcies of this size have no historical precedent many fear the effect it would have on the economy and the value of the dollar. At present many are taking advantage of the relative safety and Forex opportunity the dollar provides.

Many believe that the risk that the collapse of Detroit poses to the American economy and the dollar is not one of fact but of perception. Despite the growing recession the US dollar has not paid the penalty many think it should have. Some think that the early recognition of the severity of the crisis by the Fed and corrective actions taken has given the dollar an advantage. While much of the rest of the world considered the crisis an American problem they did not move to act until the crisis had spread and deepened.

Because of the early actions by the Fed and the Treasury the perception is that the US will surmount the recession first. This has given the dollar a distinct advantage on Forex markets and has given investors Forex opportunity in a time of crisis. A long and public bankruptcy of any of the ‘big 3’

could have very unpleasant consequences for the US economy and undermine the dollar and the Forex opportunities it presently provides.

Asian Auto Stocks Fall 10%

Asian auto stocks fell more than 10% after the US senate rejected a $14 billion dollar bailout plan for US automakers. The failure of the bailout measure increases the chances for a bankruptcy at one of Detroit’s ‘big 3’

automakers. It has been revealed the General Motors has retained bankruptcy counsel. Combined with other negative indicators the future of the dollar and the Forex opportunities it provides is uncertain.

Pressure on White House

Shares of Toyota and Honda fell by more than 10% as investors dumped shares on fears of massive unemployment and supply disruptions in the auto industry. The failure of the bailout measure has put pressure on the White House to consider giving the troubled auto industry emergency funding. Analysts and industry experts say that a bankruptcy at any of Detroit’s car makers could have a domino effect causing the failure of suppliers supplying the industry.

Bailout Failure Bad For Everyone in the Auto Industry

Hiroyuki Fukunaga, representative director of Investrust Inc in Tokyo stated, “

If this causes the parts makers under the umbrella of the Big Three to go under that could disrupt the supply of parts to Japanese automakers producing in the U.S. One way some people choose to look at this is that it could eliminate competition from the U.S., leading to a concentration of power in the auto industry to Europe and Japan. But the reality is that this would probably lead to severe conditions for the Japanese automakers as well.”

Analysts estimate that up to 90 percent of U.S. parts makers supply multiple customers, meaning a shutdown carries a risk of disrupting production all around. Ironically the failure of the automaker bailout has sent Forex traders scurrying to the safety and Forex opportunity that the dollar presently provides.

Forex Opportunities in a Down Market

Probably the most attractive feature of Forex markets is the ability to make profits even when stock markets are tanking. Forex opportunities present themselves even in a down economy. Many Forex traders will be watching this week’

s events closely. The White House will probably move on the bailout this week and the Fed is expected to announce further rate cuts but is also expected to announce that rates will not be cut further. Forex opportunities are out there and those who pay attention to coming events are sure to profit.

Beware of Outlandish Promises

who has considered entering the Forex market as an investor has seen the ads promising unbelievably high returns or Forex opportunities that are outlandish at best. Whenever there is an opportunity to make large amounts of money there will be those who are eager to get rich quick. Unfortunately there will also be those who will prey on those desiring to make large sums of money with a minimum of effort. Those new to Forex markets are especially vulnerable to scammers and fraudsters.

Forex Opportunities Plentiful

Forex opportunities are plentiful but there are things those new to Forex trading should know to prevent being taken advantage of by fraudsters. The Commodity Futures Trading Commission (CFTC), which regulates futures and commodities trading, warns Forex newbies to be wary of anyone promising huge profits with little or no effort. Everyone has seen the ads with their outlandish promises, “I made $2,000 in five minutes” or “Make $1000 per week, every week”â€

, and so on.

Education and Hard Work

The fact is, while there are incredible profits to be made in Forex markets, there can also be incredible losses. Education and hard work are the only tools that can lead to success in Forex markets. There are several ways to recognize Forex scams and persons seeking Forex opportunities should learn these warning signs.

‘Get Rich Quick’ Schemes

Stay away from offers that seem too good to be true. Get rich quick schemes are just that, schemes. The Forex market is complex and those promising large returns with little or no risk are probably fraudulent. The Forex market is very volatile, and, without good money management, an investor can lose most if not all her capital within few days.

Beware of those promising large profits. There are no guarantees in the Forex market. Even the best Forex traders cannot guarantee a profit on any given day. The Forex market is unpredictable and quotes can change quickly.

Unsolicited offers

Unsolicited offers promising huge returns should be discarded immediately. Legitimate Forex brokers and firms do not solicit business in this way. High pressure sales tactics should set off warning bells. Legitimate Forex brokers are concerned with keeping customers long term and will provide credentials when asked.

Sending Funds Online

Those seeking Forex opportunities should be wary of sending funds over the internet. Technology allows anyone to set up a professional looking website, in fact for about $7.00 per month anyone can have a legitimate looking website hosted from anywhere in the world. Potential investors should always do a thorough investigation of any firm they are thinking of doing business with.

The Commodities Futures Trading Commission

The US Commodities Futures Trading Commission (CFTC) is a great place to check out the credentials of the various Forex trading firms and it is highly recommended that potential investors do a background check on any firm they are considering doing business with.

Forex Trading Rewarding

Forex trading can be highly rewarding and Forex opportunities abound for those who know how to take advantage of them. Again, education and hard work are the real keys to success in Forex markets. While there are some bad apples in the business there are many more ethical and responsible Forex brokers and traders out there. Just use common sense, check the credentials your broker, and get in there and make money!

Dollar at Two Week Low Against the Euro

The US dollar fell to a two week low against the Euro as the US automaker bailout helped calm investor fears and lowered risk aversion. The easing of risk aversion could mean increased Forex opportunity for investors and traders. Kathy Lien, director of currency research at GFT Forex stated, “The bailout has been hanging over the market for the past few weeks and when it happens, it will reduce a big uncertainty in the markets, driving equities and the major currencies higher against the dollar and the yen.â€



Signs of Increased Risk Appetite

The Standard & Poor’s 500 index was up 1.3 percent a sign of increased risk appetite. That led to an easing of the move to unwind carry trades which use the low interest rate Japanese Yen to fund the purchase of higher yielding assets. A 1.1 percent drop in U.S. wholesale inventories, which was larger than expected, posted a record decline in sales as petroleum sales and inventories declined producing Forex opportunities for the Euro against the Dollar.

Bank of Japan Intervention

Some analysts expressed fears of an intervention by the Bank of Japan to prevent too much Yen strength after Bank of Japan Governor Masaaki Shirakawa said he was watching Forex markets carefully. The Yen traditionally is used in carry trades and investors take advantage of the Yen’

s low rates and the Forex opportunities it provides.

Forex Traders Watching US Auto Bailout

Forex traders were watching carefully to see if the if the US House of Representatives would approve the automaker bailout which includes conditions to provide low-interest loans to thwart a threatened industry collapse if one of the three U.S. automakers were to fail. Many believe that the bailout will do little to improve the ailing auto industry and will do little to ease the global recession.

Creation of Forex Opportunities

Any loosening of risk aversion is bound to create Forex opportunities for those savvy enough to spot and take advantage of those opportunities. Some economists expect risk aversion to remain high and believe that risk assets are not justified by the condition of the global economy. It remains to be seen how bailout of the ‘big 3’

will affect Forex markets.

Investors Anticipate Automaker Bailout

The US dollar fell against some major world currencies as investors anticipated the imminent US automaker bailout. US president elect Obama also announced massive infrastructure projects to help jump start the troubled US economy. The announcements boosted stock markets globally and helped to ease risk aversion. The dollar has done well on Forex markets and has provided many investors with much needed Forex opportunity.

Ease in Risk Aversion

The rise in benchmark world stock indexes sent the low-yielding Japanese yen and U.S. dollar lower against currencies offering higher interest rates and higher risk signaling an ease in risk aversion among investors. Many investors are pinning their hopes on the auto industry bailout and Obama’

s massive job creation plan. Markets were also affected by announcements by governments in Asia and Europe of measures to combat the growing economic crisis.

Risk Appetite Growing

Vassili Serebriakov, currency strategist at Wells Fargo Bank said in a note to clients, “Extensive infrastructure investment proposals reiterated over the weekend by the U.S President-elect Obama, the largest in 50 years, have spurred risk appetite in the equity markets and the dollar and yen are sliding. Some of the optimism is also sourced to the fact that the US auto industry appears likely to avoid bankruptcy - at least for now.â€

 The easing of risk aversion will mean increased Forex opportunities and may stimulate Forex trading.

Auto Bailout and Obama’s Infrastructure Package Affecting Markets

Hopes for the Automaker’s bailout gained ground after Friday’

s dismal employment figures encouraged congress to take action to shield the economy from the credit crunch and a global recession. Marc Chandler, global head of currency strategy at Brown Brothers Harriman stated, “President-elect Obama’s plans to introduce the largest infrastructure package since the 1950’s and progress on an auto sector rescue package have captured the market’s imagination and is weighing on the dollar.”

Risk Appetite Provides Forex Opportunity

Despite the Dollars drop most analysts do not expect the dollar to lose significant ground because investors still remain concerned about the possibility of a deep global recession. In the meantime any easing of risk aversion is bound to create Forex opportunity for investors who have done their homework.

Many analysts remain wary of the bad news from the global economic front and predict that risk aversion will continues for the immediate future. Other analysts believe that even the slightest easing of risk aversion could provide many with Forex investment opportunities.

Dollar Still Strong

The dollar still remains strong against most major currencies and continues to provide Forex opportunities in the global economic slump. How long this will last is anybody’

s guess as dismal economic data continues to flow from the US. The three major automakers are back in Washington asking for $34 billion dollars in bailout money.

Automaker CEO’s Meet With Senate

The CEO’

s of the three major US automakers will meet with congress for a second round of bailout talks. Congress denied the first bailout request from the automakers but asked them to return with plans detailing how the bailout money would be used. The failure of the automakers would be a catastrophic economic event according to many economists and would result in massive unemployment.

Data Points to Recession

Almost all economic data from the US points to a recession, bailouts or not, but the US dollar has done amazingly well in forex online trading. The massive unemployment that would be caused by the failure of the ‘big 3’

would have a massive impact on the global economy and could possibly send the dollar into a tailspin.

Bailout Remains Uncertain

The fate of the automaker’s bailout remains uncertain. Many in congress oppose the bailout plans and among the public bailouts are unpopular. Part of the new bailout proposal would cap executive pay and bonuses, eliminate ‘golden parachutes’

in an attempt to make the bailout more palatable to the American public.

Bailouts New to the US

Bailouts and the partnership of government and industry are something relatively new in the US. The US has long considered itself a bastion of free enterprise and many consider bailouts as a form of socialism. How this will affect the performance of the dollar on Forex markets is anyone’

s guess. At present the dollar is the currency of choice among investors and continues to provide forex opportunities.

Says Fed Lending Could Distort Expectations

Increased Federal Reserve lending could destabilize the financial system said Richmond Federal Reserve Bank President Jeffrey Lacker. The dramatic remarks were made during a panel discussion on the economic outlook. Lacker said central bank lending can distort expectations and create a moral hazard. An adverse effect on the financial system could severely limit Forex opportunity.

Fed to Watch Closely For Inflation

Lacker also said that the Fed should watch closely for signs of inflation and commented that it reasonable to expect economic growth in 2009. The Fed president said that the recovery will be helped by the Fed’

s monetary policies, and lower energy costs. Hopefully both factors will increase forex investment opportunity.

Consumers Should Spend More

Lacker commented that bank lending is hindered by a lack of credit and credit worthy borrowers rather than a lack of bank capital. He predicted that weak economic growth and a strong dollar will curb exports in the coming year. During a question and answer session Lacker said that consumers should spend more to stimulate the economy. He noted that a bottom in house prices would signal the beginning of a recovery. Lacker said that the risks of deflation are relatively minor. Deflation could have adverse affects on Forex opportunities.

Hopefully the Fed will be able to follow through with monetary policies that continue to provide Forex opportunity for forex brokers and investors.

Crisis Changing the Rules

The recent global economic crisis has thrown world markets into chaos. The recent crisis has destroyed some economic theories that have been held for generations. Crises have a way of separating the strong from the weak but this seems to no longer be the case.

Dollar Strong Despite Massive US Deficits

Take the US dollar for example. The Federal Reserve’

s balance sheets have risen from $300 billion dollars to $3.5 billion dollars in three short months. Some are predicting hat the US budget deficit will be as much as $1 trillion dollars in 2009. The impact of this increased debt so far has not had devastating effects on the US. In fact the US dollar has risen 15% against the Euro and 20% against the British Pound.

Dollar Doing Levitating Act on Forex Markets

Had these things occurred in an emerging economy like Mexico or Brazil, investors and businesses would have fled these countries creating a devastating crisis and a likely devaluation of currencies. Yet under these same conditions the US dollar continues to thrive on Forex markets and the dollar continues to offer many Forex opportunities. The dollars levitating act continues despite the worst global economic crisis since the great depression of the 30’

s.

Risk Aversion Helping the Dollar

The dollar has fallen 13% against the Japanese Yen but economists explain that investors unable to profitably invest the low interest Yen are parking their money in US dollars. Global recession fears and risk aversion also play major roles in the surprising performance of the Dollar. The dollar, at present, is providing more Forex opportunity than the low interest Yen.

Economists Predict Weaker Dollar During Recovery

Some economists believe that the real measure of the US dollar will take place when global economic recovery takes place. The appetite for risk will increase and investors will start to sell of US treasuries in favor of higher return investments. While the dollar will probably not fare as well during a recovery it will provide plenty of Forex opportunity for the immediate future.