Optimism after Bernanke Comments

By: Brewer Futures Group | Wed, Sep 16, 2009
Print Email

The U.S. Dollar is trading weaker this morning as yesterday's optimistic comments from Fed Chairman Bernanke is helping to drive equity markets higher along with the desire for higher yielding assets.

The EUR USD continues to march higher despite weakness in the Euro Zone. Bernanke's comments were much more positive than the rhetoric from the Euro Zone central bankers, but nonetheless, investors are seeking higher yields elsewhere and using the lower yielding assets to fuel these investments.

The GBP USD continues to struggle. Losses have been limited, however, by the pick-up in demand for higher yielding assets. The U.K. economy continues to lag the other major economies. Although there have been signs the economy is nearing a bottom, the economic data has not shown enough strength to declare it has turned a corner. The break since early August was fueled by central bank activity, so don't look for too much upside action until the Bank of England begins to reduce the amount of stimulus being used to prop up the economy.

Optimism about the economy is helping to boost the Japanese Yen after several days of weakness. Overbought conditions have brought the Yen back to an attractive buying area. Japanese investors have felt good about the economy since the administration turned over last month. Continue to look for a stronger Yen as long as the U.S. Dollar remains cheaper. Gains could be limited if the Bank of Japan sees the stronger Yen as a detriment to exports. This could lead to the threat of action to help weaken the Yen. The trend is down in the USD JPY and should remain down unless the Bank of Japan has something to say about it.

Higher yielding currencies like the NZD USD and AUD USD are trading higher this morning. Traders are looking for higher yields and these two currencies offer the highest return of the majors. These two currencies pairs seem to be moving lock-step with the equity markets overnight. Weakness in the U.S. equity markets could lead to a profit-taking break in the Aussie and Kiwi so don't be surprised by a possible reversal later in the day. Speculators are still looking for the Reserve Bank of Australia to be the first central bank to raise rates, but the time frame has been moved to December. Both the New Zealand and Australian central banks are concerned that the rapid rise in their currencies could hurt the economic recovery in both countries if exports weaken.

 


 

Brewer Futures Group

Author: Brewer Futures Group

www.BrewerFuturesGroup.com
Info@BrewerFuturesGroup.com

Contact us at:
Local: 312-896-3930
Toll Free: 1-800-971-2440

DISCLAIMER: Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor. The value of currencies may fluctuate and investors may lose all or more than their original investments. Risks also include, but are not limited to, the potential for changing political and/or economic conditions that may substantially affect the price and/or liquidity of a currency. The impact of seasonal and geopolitical events is already factored into market prices. Prices in the underlying cash or physical markets do not necessarily move in tandem with futures and options prices. The leveraged nature of FX trading means that any market movement will have an equally proportional effect on your deposited funds and such may work against you as well as for you. In no event should the content of this correspondence be construed as an express or implied promise or guarantee from B.I.G. Forex, LLC and Brewer Investment Group, LLC or its subsidiaries and/or affiliates that you will profit or that losses can or will be limited in any manner whatsoever. Loss-limiting strategies such as stop loss orders may not be effective because market conditions may make it impossible to execute such orders. Likewise, strategies using combinations of positions such as "spread" or "straddle" trades may be just as risky as simple long and short positions. Past results are no indication of future performance. Information contained in this correspondence is intended for informational purposes only and was obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted.

Information provided in this correspondence is intended solely for informational purposes and is obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted.

Copyright © 2009-2010 Brewer Futures Group

All Images, XHTML Renderings, and Source Code Copyright © Safehaven.com