Euro Tumbles

The Euro which provided many with Forex opportunity last week has taken a tumble in currency markets. The Euro had risen to a two month high and many took advantage of the forex investment opportunities offered by the Euro. The Euro declined against the US dollar because of remarks by Peer Steinbrück, the German finance minister who said the Euro was threatened if the European Union’s growth pact was not taken seriously.

German Official Expresses Concern About Euro

Mr. Steinbrück told Germany’s parliament that “If it is not taken seriously, I am telling you, the euro will have trouble one day in terms of its own credibility and stability.” The Euro declined 0.8% against the dollar and traded at $1.3429. The US dollar provided forex investment opportunities after Russian and Japanese officials said that the dollar’s status as the world’s reserve currency would not be a topic of discussion at the upcoming G 20 summit.

Dollar Rises Against Major Currencies

The US dollar also rose 0.9% against the Swiss Franc, 0.8% against the Aussie dollar, and 0.5% against the Canadian dollar providing many with forex opportunity. Forex brokers also noted that the British Pound fell 1% against the dollar. Data showed that the UK economy declined by 1.6% in the last three months of 2008, the worst performance since 1980.

Signs of Recovery

Revised fourth quarter data from the US showed that while its economy was shrinking at its quickest rate since 1982 the contraction rate was better than the predicted rate of negative 6.5%. This helped the dollar providing some investors with forex opportunities. Many investors see the better than expected data as promising signs of global recovery.

In the past two weeks investors have taken advantage of the numerous forex opportunities offered by the New Zealand dollar, Brazilian Real, and the Mexican and Columbian Pesos. Many forex brokers see signs of recovery and we can only hope they are right.

CitiGroup Reports Profits In January and February

The announcement by Citigroup’s CEO that the bank was profitable in the first two months of 2009 caused a rise in share prices and signaled a return to risk appetite in Forex markets. Investors were quick to take advantage of new Forex opportunities. The return to risk appetite sent the Euro to two week highs against the US dollar.

Yen’s Safe Haven Status Questioned

Some economists believe that the Euro’s rise will be temporary as concerns about the global economy will support the dollar’s position as the world’s reserve currency. The Japanese Yen rose against the dollar but many investors are starting to question the Yen’s safe haven status. Throughout the recession the Yen has provided little forex opportunities and has been used mainly as a safe haven currency.

US and European Stocks Rise

Forex markets were influenced by the rise in both US and European stock markets as investors sought out the forex investment opportunities provided by higher yielding currencies. The Euro rose 1.3% to $1.2773 against the US dollar and rose 0.6% against the Pound and traded at 92.13 pence and forex brokers were quick to take advantage of the forex opportunities offered by the Euro.

Rally May be Temporary

Although markets were bolstered by Citigroup’s announcement some forex brokers doubted that the rally sparked by the news would last. Adam Fazio of CIBC World Markets stated, “The market is talking about the Citigroup news, but at the same time the U.S. government is readying a fourth contingency plan for Citigroup. The government wouldn’t be putting a fourth plan in place if it didn’t think there was some chance that it would be needed….So I think we’re going to get another round of bad news and I would be a buyer on dips here in the dollar.”

Bernanke’s Comments

Comments by Federal Reserve Chairman Ben Bernanke that the US banking system needs to be stabilized before economic recovery is possible reminded forex brokers and investors that governments globally need to take more action to address the recession.

US Stimulus Plans Having Effect

Despite the bad news forex brokers and investors were busy taking advantage of forex opportunities offered by the Euro and some emerging currencies. The Hungarian Florint and the Polish Zloty offered savvy investors forex opportunities. Some economists and forex brokers believe that the news from Citigroup shows that actions taken by the US government are starting to have a positive effect. One can only hope they are correct.

Dollar Strong Despite Contraction

Despite a 3.8% contraction of the US GDP the dollar remained strong providing investors with Forex opportunity and safe haven. Analysts had expected a 5.5 contraction of the US economy and the news helped to bolster the dollar.  The dollar rose against the Euro and traded at 1.2800 in Thursday’

s late trading.

Rally May Not Last

The dollar remained stable against the Japanese Yen and traded at 89.95 Yen. Kathy Lien a researcher at Global Forex Trading stated, “The smaller drop in GDP drove the US dollar higher against every major currency except for the Japanese yen. However the dollar rally may not last because GDP is a backward looking number. We could still see a larger contraction in growth during the first quarter, especially with the amount of layoffs that have been reported thus far.”

More Unemployment In US

In the US layoffs are expected to continue which could affect the dollar and the Forex investment opportunities it has provided. Analysts say that both the dollar and the Yen are being driven by investor risk aversion as both currencies are seen as the safest in today’

s economic climate. A report quoting billionaire investor George Soros stating that he believes the Euro might not survive if the Euro Zone does not do more addressing the issue of toxic assets further weakened the Euro.

Euro Under Pressure

At present the perception is that the US was the first to deal with the credit crisis and that the US will recover sooner than the Euro Zone. This makes the dollar and the Forex opportunities it provides attractive to investors looking for a safe place to park their money. The Euro also came under pressure from reports that the European Central Bank may slash interest rates even further.

In today’

s markets negative data seems to be the rule rather than the exception. For those with patience and discipline Forex investment opportunities are still out there.

Risk Appetite/Aversion a See Saw Act

Lately risk appetite and risk aversion have been performing a see saw act. One week its risk aversion, the next, returning risk appetite. Obviously a return to risk appetite will provide investors with more Forex opportunity than risk aversion. Traditionally the US dollar and the Japanese Yen benefit from risk aversion as investors seek a safe haven from uncertain and volatile markets. Currency strategist Matthew Strauss had this to say about changing risk appetite, “

Japan’s action earlier in the day had contributed to some risk-taking, but investors are still cautious. I wouldn’t put too much into today’s lower risk aversion, because risk appetite can change overnight.”

Higher Yielding Currencies Benefit

On Tuesday a modest increase in risk appetite benefited some higher yielding currencies such as the New Zealand and Australian Dollars as investors took advantage of Forex investment opportunity caused by a global rise in stock markets. All eyes are on the newly confirmed Treasury Secretary Timothy Geithner. Investors are hoping Geithner will move quickly to address the worst economic downturn in decades.

Japan Rescues Troubled Companies

The Japanese government launched a $16.7 billion dollar plan to buy shares in many troubled companies affected by the economic downturn. The move heightened risk appetite and sent investors to the Forex opportunities offered by higher yielding currencies. The Nikkei exchange rose almost 5% during the day on Tuesday. Matthew Strauss, currency strategist at RBC Capital Markets, stated, “We’re seeing a slight increase in risk appetite as most stock markets have risen and therefore we’re seeing dollar/yen gain a little bit.”

Euro Posts Slight Gains

The Euro rose for the first time in weeks and many short term investors took advantage of the Forex opportunity offer by the slight gain. Gains are expected to be short lived as data from the Euro Zone continues to be troubling. Investors will be watching for developments coming out of the Federal Reserve meeting which begins Wednesday and is expected to last two days. Any actions taken by the Fed are bound to affect currency markets and the Forex opportunity they provide.

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.

Global Recession Deepening

Signs that the global recession is deepening have investors seeking the Forex opportunity and safety that the US dollar and securities offer. The dollar strengthened Tuesday (Nov, 18) as recently released US economic data sent Forex investors and traders scurrying for the safety of US backed assets. Economic data from the Eurozone and Japan pointed towards a continuing recession in the third quarter and US data showing a decline in home prices added to the unease of Forex traders and investors.

Investors Pull Out of Stocks, Commodities

The dollar has rallied and investors are pulling money out of commodities, stocks and high-yield currencies and placing it in safe haven assets such as US Treasury bonds. Chuck Butler, president of Everbank World Markets in St. Louis. Stated, “More and more, the data that comes out points to a long, protracted recession and none of that is going to do risk taking investors any good.”

Dollar Remains Reserve Currency

According to the US Treasury foreign investors bought $143.4 billion of U.S. securities in September, the largest inflow since early 2006. The UD dollar remains the world’

s reserve currency and continues to offer investors Forex opportunities that other markets cannot match. Testifying before congress Federal Reserve Chairman Ben Bernanke reassured congress that massive demand for the dollar means it remains secure as the world reserve currency and will be providing investors with Forex opportunity.

Dollar Trading Higher Against Yen

In late afternoon trading the dollar fell traded 0.6 percent higher against the Yen but fell short of its session peak. Aversion to risk usually benefits the yen as investors who borrowed it at low interest rates to take advantage of Forex opportunities elsewhere are forced to buy it back to cover their positions. Robert Blake, senior currency strategist at State Street in Boston stated, “We are not … out of the woods yet in terms of risk aversion. We’re kind of still cautious about the environment, where discretionary risk taking in the currency market has been fairly limited.”

Forex Traders, Investors Wary of Risk

As long as Forex traders and investors remain wary of risk the US dollar is set to provide the most Forex opportunity for both. Investors will continue to leave volatile stock and commodity markets and flee to the safety the US dollar and Japanese Yen provide.

European Leaders Meet to Address Crisis

French President Nicolas Sarkozy said that he expects Sunday’s meeting of 15 European leaders to produce a united coordinated plan to battle the effects of the current financial crisis. Decisions made by leaders of Eurozone countries will be submitted to the 12 remaining European Union countries at a planned European Union summit Wednesday. Said French President Sarkozy, “I expect an ambitious, coordinated plan that brings solutions.” Currency markets have been in disarray but the US dollar is holding steady and many investors are flocking to the dollar for the safety and Forex opportunities it provides in times of crisis.

Coordinated Measures to Stabilize Markets

In a hopeful statement German Chancellor Angela Merkel said, “Our goal is to define a coordinated joint action for the Eurozone, so that we can in the coming days take national measures that stabilize the financial markets, but that also don’t discredit the individual member states.” Before the summit Sarkozy He met with British Prime Minister Gordon Brown. The partial nationalization of some British banks could serve as a model for Eurozone countries despite the fact that the UK does not use the Euro as currency.

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Stock Market Falls

Stock markets and other financial markets took a dim view of the future today (Oct. 6, 2008) with the Dow Jones Industrial Average falling below 10,000 for the first time since 2004. Credit markets remain strained and investors are wondering if the $700 billion dollar bailout will not work quickly enough to unfreeze credit markets. The credit crunch is starting to affect the average wage earner causing a crisis of consumer confidence.

Banks made bad bets on mortgage backed securities and are saddled with these securities and remain starved for cash. Stocks have taken a beating in the US, Europe, and Asia causing investors to seek the relative security of US government debt and the rising dollar continues to provide Forex opportunities. Oil dropped to below $90 dollars a barrel due to fears of a global recession.

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Bailout Passes House

Friday the US House of Representatives passed the bailout bill by a vote of 263 to 171. The bill was immediately signed by President Bush. In a Rose Garden appearance at the White House Bush stated, “By coming together on this legislation, we have acted boldly to prevent the crisis on Wall Street from becoming a crisis in communities across our country.” The bailout bill remains unpopular with US taxpayers and the revised version of the bill contains many earmarks unrelated to the bill’s original intent.

Bush Administration Lobbies House

The House vote followed intense lobbying by the Bush administration and supporters of the bill. The law essentially allows the US government to purchase toxic assets from troubled banks and financial institutions. The bill is designed to inject massive amounts of money to loosen all but frozen credit markets. Recent market events such as the record fall of the Dow Jones Industrial Average earlier in the week and a worse-than-expected monthly jobs number with 159,000 jobs lost in September. How all this will affect world currency markets is uncertain at this time but many investors are flocking to the dollar seeking the safety and Forex opportunity the dollar provides in times of crisis.

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Forex Opportinity For Small Investors

Many small investors in both Europe and the US are interested in Forex trading but have little or no understanding of how Forex markets work and how to invest. Before trading Forex, or any other markets for that matter, a thorough education is paramount. Forex education and training are necessities for those potential investors who wish to participate and take advantage of Forex opportunities.

Researching Forex Opportunities

There are several ways that investors can educate themselves about Forex markets and opportunities. The internet is the logical place to start and just typing the word ‘Forex’ in a Google search will garner millions of results. Beware of sites that make outlandish claims and offer no useful information. Many Forex sites are blatant advertising sites that offer no real information and should be avoided. There are many legitimate websites that offer thorough Forex training and many of these sites offer demo accounts where potential Forex traders may trade imaginary currencies in real time. These demo accounts allow potential Forex traders to get a feel for the market ,how it works ,and to learn how to take advantage of Forex opportunities

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