EURUSD - Trends, Forecasts and Implications (Part 3) - page 860
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Buffett: wouldn't bet on dollar - CNBC
When EUR gets bad, there aren't many options...
There you go =)
+1
NEW YORK, May 2. /Dow Jones/. The US dollar's initial rise amid reports of the death of Osama bin Laden weakened on Monday. Traders pushed the American currency to new lows in two and a half years as news of the death of the mastermind of the September 11, 2001 terrorist attacks finally overpowered pessimism about the dollar's dismal fundamentals.
>The attention of markets around the world was riveted on reports that Bin Laden had been killed in Pakistan, boosting the dollar amid low trading volumes due to holidays in Asia and London. His death was the culmination of a decade-long hunt for the mastermind of the September 11, 2001 terrorist attacks and spiritual leader of the global terrorist organization Al Qaeda.
>The dollar rose instantly amid excitement over bin Laden's death. However, it eventually succumbed to a longer-term downtrend as the yield advantage of European assets over US assets proved to be a market driver.
>The preference for a soft monetary policy by the US Federal Reserve /Federal Reserve/ and an apparently intractable federal budget deficit have made investors reluctant to invest in the US currency. As they seek higher yields, the euro has benefited from expectations that the European Central Bank / ECB/ will raise interest rates in the eurozone to curb rising inflationary pressures.
>The death of bin Laden "is more of a justification for profit taking on long positions... However, it doesn't actually change the outlook for a lower dollar," says David Gilmore, partner at FX Analytics in Essex, Connecticut.
>With Europe still unable to resolve the ongoing debt crisis, "we're just a headline or two away from another euro rise," Gilmore jokes. However, he predicts that the euro is likely to test levels above $1.50 in the short term.
>Continuing the fall it ended last week, the dollar index fell to its lowest level since July 2008, 72.722. The euro/dollar pair reached its highest level since December 2009, surpassing 1.49. It was trading up nearly a cent from the previous session's closing level. The dollar/Swiss franc was trading near 0.8640, within touching distance of last week's record low of 0.8625.
>The dollar/Japanese yen pair was trading at 81.16 at the time of writing, while the euro/yen pair rose to 120.77. The British pound was one of the few currencies that declined against the dollar. The pound/dollar pair traded around 1.6703.
>Analysts are comparing the current situation to that seen in December 2003, when Iraqi leader Saddam Hussein was captured and the news pushed the dollar down for a while. The dollar's rise then eventually weakened as the euphoria passed, which was consistent with the behaviour of currencies on Monday.
>While major US stock indices and risky assets rose amid reports of bin Laden's death, the return of risk appetite undermined the dollar. Low US currency yields are an obstacle for investors seeking higher returns, causing them to ignore the euro's own debt-related problems.
>"With every cent gained, the euro becomes more vulnerable to a correction," said Boris Schlossberg, director of currency research at GFT Forex in New York. The $1.50 level "will be a serious psychological barrier to further growth", he adds.
Earlier, the dollar index rose after the US reported the death of Osama bin Laden, leader of the al-Qaeda terrorist group.
The euro currency hit a 16-month peak ahead of this week's ECB meeting after the central bank raised its rate by 25 points to 1.25% last month, while the Fed kept its rate around 0-0.25% last week.
"The driver of the market right now is the interest rate differential," says Fabian Eliasson of Mizuho Financial Group Inc. "Unless the Federal Reserve changes its policy, the dollar will continue to lose ground."
The Institute for Supply Management said today that its manufacturing activity index fell to 60.4pc in April from 61.2pc a month earlier.
"Even so, the US economy looks strong enough, although not as strong as it has been," says David Mann of Standard Chartered Plc.
The growing rate differential between the US and the rest of the world may suggest the dollar will not recover this year.
The Federal Reserve is expected to hold interest rates at current levels until the first quarter of 2012.
On the one hand, a weakening dollar may indicate weakening confidence in the USA and on the other hand it may help Obama to achieve his plan to increase exports by 2015 and reduce unemployment.
>Trading is ace :) 70% positively closed positions... April in all pairs at + about 1700 pips... The only bad feeling is sel at 0.6 lots, which I've been pulling for 4 months... I'm already sorry to close it :( >I'll wait for the reversal...I'm working with a lock
It's a dangerous tactic, you may not wait for the reversal at all and close with a heavy loss.
You can open a counter-order with a larger volume (say, 6 lots). Wait until the profit covers the loss and close the position.
If the price goes back, open an order opposite to the last one, say for 12 lots. This way you can quickly leave the lock but do not go too large with lots.
This technique has already been described here on the forum - "Avalanche".