Archive for October, 2006
US GDP Hits the Dollar Hard
By Marek W. Stupka | October 29, 2006
Last Friday the US dollar collapsed against all of the majors. US growth fell short of expectations while oil prices rebounded and stocks tanked.
As I already mentioned in previous releases, the outlook for the US economy is getting grimmer and currency fluctuations are reflecting that.
As of 6:20pm EST, Friday, the EUR/USD is trading at 1.2734, USD/JPY is trading at 117.50 and the GBP/USD is trading at 1.8976. The bad news for US continues to pour in as growth in the third quarter was reported to have been the weakest since March 2003. Even if inflation is still really a problem, economic growth is a bigger one. The GDP report not only had a disappointing headline print, but also reported a drop in the price index and core PCE (Personal Consumption Expenditures).
The lower inflation readings validate the Fed’s decision to avoid notching up their concerns about inflation earlier this week and keeps intact speculation for a rate cut early next year.
After 3 days of powerful EUR gains, I caution that the EUR/USD move is looking exhausted. A pullback is possible, but for the most part, the currency pair should hold above 1.2600. The economic calendar next week is just as busy as the past week. For the most part, the market is expecting stronger numbers, particularly in consumer confidence and payrolls. Despite the latter, US the economy is more likely to show further weakness than strength in the long term…
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What Really Moves the Market
By Marek W. Stupka | October 15, 2006
FX market is a complex system (the overall FX market is the largest, most liquid market in the world with an average traded value exceeding $1.9 trillion per day).
Many contemporary writers dealing with the mental aspects of trading (Alexander Elder, Mark Douglas, Marcel Link, Jack D. Schwager) refer to it as to the closest existing example of the “Perfect Market” – economy model from introductory microeconomics, defined in works of famous economists like Nicholson, W. [1979], Markusen, J. H. [1988], and Bohm, P. [1987]
However, when trying to describe FOREX, we don’t deal with just some abstract, theoretical model, or the “Perfect Market”. We deal with people. Real human beings. Behind every trading desk there is a breathing individual – of course with the exception of trading automats (those are, however, not used as frequently as their bragging headlines would say, since experience teaches us that no automated trading software can be consistently profitable).
Our opponents make their trading decisions based on the whole variety of reasons. Those in fact fluctuate anywhere between solid market analysis to sudden strike of fear, greed, excitement or other emotions.
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