Forex Signals

Yes, I am speaking about the forex market!  For starters, yesterday’s rebound from the fear in the market was nothing short of remarkable.  Apparently the SEC voted “along party lines” to formally charge Goldman Sachs with fraud.  Two thoughts on this: 1) it is beyond me why a supposedly independent watchdog agency would have “party lines” to begin with, and 2) the case against Goldman must not be that strong which means this amounts to nothing more than political pressure to get the financial reform bill passed.  Time will tell.

Regardless, the markets have rebounded from that news and are pushing higher this morning, as risk-taking is in the air.  And that’s what I mean by “traders paradise”.  One day it looks like we are going to fall off a cliff with all of the doom and gloom, and the next we are high-fiving over how great things seem to be.  All you have to do is be on the right side of sentiment and keep your trades shorter-term in nature, and you can ring that cash register day in and day out.

A couple of pieces of news to consider today: 1) CPI came in less than expected in New Zealand last night, 2)  Consumer prices came in higher than expected in the UK, 3) the Canadian interest rate decision is due out today, and 4) Goldman Sachs has thumbed its nose at the government and reported blowout earnings.

What this means for the forex market:

Aussie (AUD):  The Aussie is higher on improved market sentiment and the minutes from its central bank’s policy meeting were released overnight, showing that the RBA was concerned that a mining boom might stoke inflation.  Should inflation figures come in higher the next time around, expect the RBA to remain hawkish.  Concern over Chinese demand is a factor to consider, but I believe that the RBA will act on what is and not on what might be.

Loonie (CAD):  The Loonie is higher this morning as oil prices have rebounded and the Bank of Canada is meeting on interest rates today.  Speculation in the market is that they will use this opportunity to foreshadow a rate hike in June if they increase their forecasts for inflation and economic growth.  There is virtually no chance they will change rates today, though stranger things have happened.

Kiwi (NZD):  The Kiwi is slightly lower this morning as consumer prices came in lower than expected, showing a rise of 2% vs. an expectation of 2.3%.  Recovery in NZ has been more tepid than expected, and this may allow the central bank to keep rates at a record low 2.5% for a longer period of time.  The central bank will be holding its interest rate policy meeting next week.

Euro (EUR):  Wow, horrible news isn’t dominating the headlines in Europe!  In fact, there is actually some encouraging news, as German Investor Confidence levels came in higher than forecast to seven- month highs.  This comes in contrast to the fear over the economic impact of Greece and the volcano and shows that the economy in Germany is still very strong despite all of the structural problems of the Euro.

Pound (GBP):  The Pound is higher this morning as inflation in the UK surged 3.4%, higher than expectations of 3%.  The BOE rate policy meeting minutes are due out tomorrow and are expected to be dovish, though this figure comes in outside of the BOE mandate to keep the inflation target rate within 1% of its target.  What this means is that should this pattern continue, we could start to see rate hikes despite the uncertainty over the May 6th elections.

Dollar (USD):   US corporate earnings are higher this morning, prompting the futures to trade higher and the Dollar to trade lower as risk appetite is back to the marketplace.  Goldman Sachs reported earnings much higher than analyst expectations, practically laughing at the government and the SEC. There’s no real news for the Dollar until Thursday, when PPI and initial jobless claims are reported.

Yen (JPY):   The Yen is lower across the board as risk-taking is back in play.  Carry traders sell yen and buy higher yielding currencies when risk appetite is high.  In addition, the Japanese Finance Minister says that the BOJ should shoot to have an inflation target of “1 or 2%.”  Now I’m not sure that this is even possible from a monetary standpoint, as Japanese interest rates are at .1%.  Sure they increase bond buying and quantitative easing, but right now they are in a deflationary spiral and adding to the deficit is a fool’s folly.  Perhaps the government should impose a “non-consumption tax” to discourage savings and get the domestic economy moving by encouraging consumption.  Good Luck with that.

As you can see, one day it’s doom and gloom and the next day it is pizza and ice cream for everyone!  That is why the forex market is the ultimate trader’s paradise.  There is literally trillions of dollars flowing through this market on a daily basis, and savvy investors are taking advantage of these moves to reap financial gains.

The basic risk-on, risk off theme is one of the most basic plays in financial markets.  Traders with a marginal sense of timing but with superior money management skills are raking it in.

Isn’t it time you see what the excitement is all about?

To learn more about how you can take advantage of world events through the currency market, be sure to check out our currency trading courses!

To follow these events live with a free, real-time practice account, click here!  Don’t miss out on the world’s fastest growing market!

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