The US dollar exchange rate fell victim to a selling frenzy Friday afternoon that no one can explain

Foreign Exchange - Pounds Sterling and Euro Exchange Rate Outlook

The US dollar exchange rate fell victim to a selling frenzy Friday afternoon that no one can explain. On the hourly chart it is a shocking move, from 1.2560 around 9 am to 1.2884 by 1:30 pm ET, or 324 points in under four hours. The Dow-Jones newswire reported that the move was triggered by the break of a key resistance level that set off a flurry of stop-loss selling, but other than that, the press ignored the move. The WSJ says there was a euro spike (but the US dollar remains set to rise), while the FT website doesn’t even have a currency story update as of 5:30 am ET.

Market News says the move was set off by a big hedge fund trade that triggered a series of cascading stop losses.

On Sunday night as Asia came in, the euro exchange rate took another jump upward to 1.2992, perilously close to the round number 1.3000, but then started to fall back. So far today, the euro is at 1.2781 at 8 am, or down about 50% of the upmove from early Friday. If it continues past the 62% Fibonacci level, about 1.2738, the whole thing could be over.

What is not over is the dollar/yen rise.

On Friday, the US dollar slumped against the yen along with everything else. But as the Asian day progressed and especially after Europe came in today, the dollar spiked to 94.95 - twice. This was a 200+-point rally is under 12 hours, or in the bigger picture view, 780 points since Jan 21, about one month. Again, note the reluctance to print a round number. In this case, the US dollar high is higher than on Friday and over the highest high so far this year (Jan 6 at 94.64).

Might the dollar/yen get back to 110.67 from last August?

Some foreign exchange forecasters say so.

The 50% retracement of the dollar’s downmove/yen upmove from 110 would be 98.86, or nearly 99…. Again, near the key round number of 100.

You have to wonder if foreign exchange traders are fighting their inner OCD, like Mr. Monk.

Pounds to US Dollars = 1.4340
Pounds to Euros = 1.1275
Euro to Pounds = 0.8865
Pounds to Australian Dollars = 2.2100

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
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The UK is the first country to admit out loud that it has nationalized some banks

Foreign Exchange - Pounds Sterling and Euro Exchange Rate Outlook

The UK is the first country to admit out loud that it has nationalized some banks. According to the Office of National Statistics, it will start including the liabilities of Royal Bank of Scotland and Lloyds on the government balance sheet, meaning they are "public sector entities."

Technically this happened last October with the injection of capital giving the government a majority share. We don’t know how much this adds to the public debt just yet, but it’s probably on the order of £1 to £1.5 trillion, or 70-100% of GDP.

Pounds to US Dollars = 1.4340
Pounds to Euros = 1.1275
Euro to Pounds = 0.8865
Pounds to Australian Dollars = 2.2100

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
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We are having a hard time understanding why sterling is holding up so well,

Foreign Exchange - Pounds Sterling and Euro Exchange Rate Outlook

The US Dollar exchange rate continued to gain against the euro rate to about mid-day yesterday in New York on the European bank story, but the power of the story had faded by the close. Overnight as Asia was handing off to Europe, some euro bulls tried a push to the upside, but it failed to go very far - only 1.2640 from the US closing low of 1.2556. Market News reports somewhat cryptically that "Early (euro) dips met with demand from a major German name and a semi-official entity, though this proved insufficient to halt further slippage as strong cable sales helped to drag euros to dollars lower." We take this to mean that the euro's bounce is merely a minor correction and doesn’t signal a change in sentiment.

Sterling is buffeted by opposing forces, including the Bank of England seeking permission to expand money supply to buy government paper and the minutes of the last meeting showing that the 50 bp rate cut would have been 100 bp if Blanchflower had had his way. The Policy Committee voted unanimously to ask for the power to carry out quantitative easing (buying government paper), which it is already doing - pretty darn fast for a government agency. We are having a hard time understanding why sterling is holding up so well, relatively speaking, in a flattish range of 1.4100 to 1.4300. It’s well off last week's weird high over 1.4600 but why is it not breaking 1.4000?

Evidently because the euro exchange rate looks worse.

The dollar/yen (and euro/yen) are highly controversial these days. Bloomberg reports that some foreign exchange analysts see 96 and others see 85 (whereupon we should expect intervention). We are following the chart, which shows Day 1 of an upside breakout. We switched the signal but are never really happy with a new signal until it surpasses the most recent extreme level, in this case the high of 94.64 from January 6. Considering that the Japanese economy is in the worst shape of all G7, the yen "should" be weak… but considering that there is probably a trillion of two still out in the world to be repatriated to Japan and plenty of risk aversion triggers to come, the yen could resume its uptrend on capital flows or perception that capital flows "should" be occurring.

Pounds to US Dollars = 1.4287
Pounds to Euros = 1.1330
Euro to Pounds = 0.8817
Pounds to Australian Dollars = 2.2390

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!
Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

Euro to us dollar exchange rate is trading in a narrow congestion band

Foreign Exchange - Pounds Sterling and Euro Exchange Rate Outlook

The US dollar exchange rate was moving sedately upward until late in the day yesterday, when a sudden rally in US stocks surprised the Foreign Exchange market. Foreign Exchange Traders rushed to sell the yen against everything and to buy emerging market currencies (including the Mexican peso), putting the US dollar rate on the defensive. The dollar/yen rose to a new high of 91.77. The new rule - Foreign Exchange traders need to follow equities - was proven. Overnight in Asia, the euro to us dollars was all but forgotten as attention and activity focused on euro to japanese yen, which whipped from 116.95 at the US close last night to a high of 118.54.

Euro to us dollar exchange rate is trading in a narrow congestion band of 1.2860 - the New York close last night - to 1.2943, the overnight high and 1.2853, the overnight low. This is under 100 points and may not mean anything. The euro exchange rate might have moved more but economic releases were just awful - eurozone GDP falling more than forecast. See below. Sterling is getting a boost from having been dramatically oversold and a rumor in the UK press that G7 will talk about it (of which there is zero chance, since the UK would squelch any such thing and the agenda was set a long time ago, anyway).

Bye For Now

Barbara Rockefeller

Foreign Exchange Trading

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Pound and Euro Exchange rate fall again against the US Dollar

Foreign Exchange - Pounds Sterling and Euro Exchange Rate Outlook

Yesterday a draft EC paper, drawn up together with the ECB, was released. It recommends the "bad bank" approach to the crisis as the least budget-heavy way to rescue banks. This assumes the bad bank toxic assets can eventually be sold for a profit… How to get started? "In order to limit this budgetary impact, one could consider combining a bad-bank approach and asset insurance whereby bad assets are transferred to a separate entity which benefits in some way from a government guarantee," the report suggests, according to Market News.

Meanwhile, officials in the UK are defending quantitative easing, aka buying Gilts, as the first line of defense. BoE Gov says the Bank has a mandate to hold inflation at around 2%--not zero. It’s a symmetrical obligation, meaning the Bank has to create inflation. The US Fed may end up in the same place, as Bernanke has suggested, but is holding off as long as it can. So far the ECB rejects any thought of quantitative easing, mostly because it has a "no bailout" clause and is technically forbidden to buy government paper lest it be charged with favoritism.

Pounds to Euros = 1.1087
Euros to Pounds = 0.9003

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!
Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

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Sterling’s odd firmness against the euro and US dollar is due mostly to firmness in the cross-rates

Foreign Exchange - Pounds Sterling Outlook

Sterling’s odd firmness against the euro and US dollar is due mostly to firmness in the cross-rates,including some fairly exotic ones like the pound/Swedish krona, recommended by Morgan Stanley.This is a strange outcome considering that the IMF just said on Wednesday that Britain will have the worst contraction in all of G7 this year, 2.8% (actually, Japan will be worse). Still, sterling was strong today after the Bank of England reported a rise in mortgage approvals, 31,000 in Dec after 27,000 in Nov and widespread forecasts of an additional drop. Probably the main point is that pessimism was overdone. We doubt the trend will reverse to upward for sterling. Overnight policy committee member Blanchflower said rates can still go to zero and the BoE may consider quantitative easing.

This was taken as sterling-negative but perhaps it can be twisted to be sterling-positive.

Confused? You are not alone.

Bye For Now

Barbara Rockefeller
Forex Trading Reports

Pounds to Australian Dollars exchange rate currently 2.2660

Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates! Contact IMS Foreign Exchange + 44 207 183 2790