EURO vs USD - Page 13 - The Orange Room

admiral

Quote:

Originally Posted by J. Abizeid

We are going through some extraordinary times.
Today’s euro fluctuation ranged between 1.4011 and 1.4427 so far.
The dollar boost was not caused by foreign currency sell off but the stock sell off. Investors are parking their stock proceeds in dollars and T bills with lower return until the dust settles. I believe it’s a good opportunity to dump your dollars now.
Last time oil went below $100, the euro fell to $1.36; holding its own above 1.40 today is considered the new euro bottom out from which it will be building upon from now on.
[There are advantages and disadvantages from passing this bill.
If it doesn’t, it will help the dollar hold its present value in the short term but the real estate will completely collapse.
If it does, it will help real estate hold some of what’s left of its value and the stock market goes up short term but the price will be weaker dollar, higher interest rates and oil prices. That’s what I think will happen in the next few months.

Technically speaking there is no indicators supporting your analysis , when looking at the charts the Euro is still in an downward move ,this outlook will only become positive when it breaks its downward trend line which is in the area of 1.45/46 and breaks above its last spike high at 1.4866 .
Eventhaugh i dont like to speculate at the exchange rates , however according to the charts at the current situation , and if no additional negative news comes out of the US , and if the Euro breaks below the 1.39 area , there will be a very big probability that it will be heading towards the 1.30 area in the period till the beginning of next year.

As for the second part of your analysis you are only concentrating on the US market , and ignoring the European economical situation which will also effect the Euro in case there were more trouble in the Euro area banking sector like the ones of Fortis and Dexia , in addition the ECB is expected to decrease its rate by the end of the year which is euro negative.

J. Abizeid

Today’s headlines:

http://www.marketwatch.com/news/story/recession-now-certain-economists-say/story.aspx?guid=%7B19786F11%2D56EF%2D4FCF%2D94CA%2 D88189A007276%7D
Recession now certain, economists say; Consumer spending on track for first quarterly decline since early 1990s

http://www.marketwatch.com/news/story/factory-orders-drop-4-august/story.aspx?guid=%7B1173861B%2DAD58%2D4D7A%2DBA24%2 D6B3B5279A431%7D
Factory orders drop 4% in August, most in 2 years;Demand drops, pushing inventories at factories higher

Dollar goes up……..
Too good to be true! Or is it?
Any comments or suggestions before Friday night House vote?

admiral

Tomorrow is an important day for the USD , first we have the non farm payroll in the US and later on the voting in the house .

What accelerated today strength in the USD was the comments from the ECB President Trichet that the economical situation in the Euro area is deteriorating and he hinted for a rate cut in their next meeting , which is Euro negative.

I am attaching a chart for the Euro from the year 2000 till today , if we study the chart we see that the USD touched the longterm trend line (2001 , 2006 ) at around 1.40 , and it broke below it , as per the charts the outlook is positive for the USD , as long as the Euro stays below 1.4867 as a strong resistance , and 1.40 as a short term resistance.

J. Abizeid

One of the main driving forces behind the dollar strength this week was caused by demand and supply.
The banks have been exercising their leverage by denying access to credit and loans or dramatically increasing their lending fees in order to put pressure on the public and their representatives to make the bailout bill pass.
As a result, many workers didn’t get their paychecks and most retail businesses including auto sales came to a halt.
The other interesting observation is that not only the stock market was down today, but gold as well which means the sales proceeds are staying in dollars for the time being.
Once the bill passes and the $770 billion start flooding the banks, we’ll see a different picture.
Today’s drop in the US stock might be countered with a record high gain Monday which will drive oil up and the dollar down.
It’s funny, we must choose between a bull market and weak dollar or a collapsing market with a strong dollar. The problem with the later is a strong dollar doesn’t help you buy food if you don’t have it.
As I mentioned before, the bailout bill is a rip off and blackmail to the average people but it must pass for now before we start figuring out where to get the money from as we go along. In other words, we are not really resolving our problem; we are simply differing it and making it bigger.
That is the reason why I don’t have faith in the dollar. The US economic fundamentals have not changed and once you trust them, they’ll get you just like they just did to the innocent/ naïve taxpayer.

Raficoo

Euro is 1.37880$ now

J. Abizeid

(This report tells the story about the emergency demand for the dollar last week awaiting the bailout.
It’s up to the observant to understand why the dollar went up and when it will go back down.)
Financial companies borrow record amount from Fed: Financial News - Yahoo! Finance

Financial companies borrow record amount from Fed
Thursday October 2, 5:13 pm ET
By Jeannine Aversa, AP Economics Writer

Banks, investment firms push borrowing from Fed's emergency loan program to record
WASHINGTON (AP) -- Banks and investment firms borrowed in record amounts from the Federal Reserve's emergency lending facility over the past week, providing fresh evidence of the credit stresses squeezing the country.
The Fed's report released Thursday said commercial banks averaged a record $44.5 billion in daily borrowing over the past week. That compared with a daily average of $39.36 billion in the previous week. On Wednesday alone, banks borrowed a record $49.5 billion, surpassing the previous high that came one day after the Sept. 11, 2001, terror attacks.
For the week ending Wednesday, investment firms drew a record $147.7 billion. That was up significantly from $88.15 billion in the previous week. This category was broadened last week to include any loans that were made to the U.S. and London-based broker-dealer subsidiaries of Goldman Sachs, Morgan Stanley and Merrill Lynch. On Wednesday alone, investment firms borrowed a record $146.6 billion, breaking the previous record set on Sept. 24.
The Fed report also showed that $122.1 billion worth of loans were made to money market mutual funds -- via banks -- to help the funds, which have been under pressure as skittish investors demand withdrawals.
And, the report showed that the Fed has loaned $61.3 billion to insurance giant American International Group. In mid-September, the Fed said it would provide the troubled company a two-year, $85 billion loan.
The report comes as Washington policymakers battle the worst financial crisis since the stock market crash of 1929.
Fed Chairman Ben Bernanke has urged quick action by Congress on a $700 billion plan to buy bad assets from banks and other institutions to shore up the financial industry. He has warned that failing to do so would let problems fester, pushing the country into a recession and driving unemployment and home foreclosures even higher.
Investment houses in March were given similar, emergency-loan privileges as commercial banks after a run on Bear Stearns pushed what was the nation's fifth-largest investment bank to the brink of bankruptcy. The situation raised fears that other Wall Street firms might be in jeopardy.
Bear Stearns was eventually taken over by JPMorgan Chase & Co. in a deal that involved the Fed's financial backing.
The identities of commercial banks and investment houses that borrow are not released. Commercial banks and investment companies now pay 2.25 percent in interest for the loans.
In the broadest use of the central bank's lending power since the 1930s, the Fed in March scrambled to avert a market meltdown by giving investment houses a place to go for emergency overnight loans. The Fed has since extended those loan privileges into next year.
The Fed's expanded lending programs, its involvement in the Bear Stearns rescue and the government's bailout of mortgage finance giants Fannie Mae and Freddie Mac have spurred concerns that taxpayers could be on the hook for billion of dollars. Critics also worry that the actions encourage "moral hazard," where companies take on extra risks because they believe the government will come to their aid.
Separately, as part of efforts to relieve credit strains, the Fed auctioned $25 billion in super-safe Treasury securities to investment companies Thursday. Bids were placed for $49 billion worth of the securities.
In exchange for the 28-day loans of Treasury securities, bidding companies can put up as collateral more risky investments. These include certain mortgage-backed securities and bonds secured by federally guaranteed student loans.
The auction program, which began March 27, is intended to make investment companies more inclined to lend to each other. A second goal is providing relief to the distressed market for mortgage-linked securities and for student loans.
All the Fed's extraordinary efforts, however, haven't been able to halt the crisis or prevent a seismic shake-up on Wall Street. In recent weeks, Lehman Brothers, the country's fourth-largest investment bank, filed for bankruptcy protection. A weakened Merrill Lynch, deciding it couldn't go it alone anymore, found help in the arms of Bank of America. AIG was thrown a financial lifeline. And, the last two investment houses -- Goldman Sachs and Morgan Stanley -- decided to convert themselves into commercial banks to better weather the financial storms.

Abou-Eddie

The fact that the economic policies followed in the US in the past few years were so clearly flawed and went unchallenged for so long is simply mind-boggling and unexplainable to me. I am slowly coming to the conclusion that George Bush is the Michael Gorbatchev of America. Under his watch, all crumbled down. What compounds the problem much more this time, is that with globalization, the world has become inter-dependent, a sickness that reaches one country will definitely be contagious and hit the other especially when it hits the mother of them all, the US.
The presidential candidates are being very weary in their approach as they do not want to jeopardize their chances, but meantime the problems of the country cannot wait, they need to be addressed. So it is a catch 22, damned if you do and damned if you don't.
For the Dollar, I still believe that it will become stronger, not because of economic reasons but because of psychological reasons. I have made it clear in previous posts that I believe that markets are manipulated. The US government is and will continue to dish out bad news due to the bad economic policies of the past. But psychologists will tell you that with all the bad news which is expected to come out, try to come up with some positive news even through manipulation to attempt to dilute the bad news, otherwise despair will follow. This is where I believe the dollar will be manipulated to the extent to give a false feeling of some good news. So I still stick with my prediction of a dollar at 1.30/1.32 by year end and a continued strength after new year.

admiral

Wow , the non farm payroll came worst than expected at -159,000 , and the USD appreciated around 100 points afterward.

I believe what is moving the dollar up these last 2 weeks is the major central banks and the big banks around the world.

The fed is printing money like never before to try and save the US economy , it cannot just continue to print money ,what is needed is money from abroad to be invested in the US , no investor will invest in the US bonds , securities ...if the dollar is falling and near collapse , this under the table move by the central banks and big banks to strengthen the dollar encourages the foreign investors to bring their money to the US .

I really feel pitty for the small investors who baught Euros 2 weeks ago , thinking that with the US financial system iin deep trouble , the Dollar will fall sharply .
Unfortunately they became a delicious meal for the big sharks of the market.

J. Abizeid

Voodoo US economics=Voodoo US dollar

J. Abizeid

The house just passed the bailout bill: 263 vs. 171
Market reactions just stared.