Monday, January 26, 2009

I am not going to post any chart today. This is more of a commentary on what is going to happen in the US Stock market going forward and its impact on the US Dollar. Now i am not going to convince every body that market has bottomed out, the angels are falling from sky to help investors and the Obama is the superman for a nation in debt. Certainly, nothing has changed since Nov 2008. I believe that market is waiting for another leg down. This time, however, its going to be slow and steady downward trend. I see the DJI level of 8000 as medium term bottom/support. The next leg down should cover another 1000 point of DJI. That is expected to happen when the earnings season is fully over, oil drops again to US $ 35 levels, and Obama administration fails to attract Congress.

Now, on FX, as this forum is focused on Forex moves/charts. I am forecasting a one sided view here and not being Technical for a while. Fundamentals suggest that US dollar will be the superhero for the next 6 months as i see Euro to dive to 1.20 or below, GBP down @ 1.20-1.25, CAD 1.35.

This is based on the following. US has already lowered interested rates to near zero. Other are going to follow that soon. By Dec 09, ALL G7 will have zero percent Interest rates. By that time, i believe that the US will start increasing to tighten inflation issues.

The risk aversion continues to dominate.

Euro and GBP loses their charm as safe deposit Assets. I have a feeling if a European nation goes bust, may be the fate of Euro is in doubt and then a dive to parity may be.

More comments to follow soon.

If you like or even dislike, please do comment.

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Cheers, happy trading


Anonymous said...

thx for your commentary, even if I prefer your charts than big speech ;)
just one thing, you said you waited €/$ at 1.20,
whereas last week, you posted an €/$ count which suggested the end of correction, and a big up.
can you give some precisions on this?
(and sorry for my english!)

Anonymous said...

Hi, thnx a lot for the feedback and question.
As i said in the 'speech' that this view is based on Fundamentals and NOT technicals. Technicals are doing for the moment but you have to keep in mind the core economics behind as well. As Chart is a representation of price action based on events.

My Other collegue i guess Blue Bottle was suggesting a Corection over and being euro bullish. (which is happening 2day).
I am more of a dove and still advocate shorting it.
lets c.

Your english is as good as mine, as long as i understand it. Sweet.TC

Financial Journalist said...

I do not agree that risk aversion continues to dominate.

US Leading indicators shocked to the upside, rising 0.3% against a forecast of -0.2% decline. This was the first positive print for the index in six months as a rebound in financial components outweighed the losses from increased jobless claims and stock market declines.

This has resulted in market buying risker currency like EUR, GBP and AUD and dump safe haven currency like CHF and JPY. I suspect this trend will continue for the rest of the week.