World Currency Watch: FOREX Market, FOREX Trading BLOG

Gold weakens as the IMF prepares to sell millions of ounces!

Gold begins to weaken as gold traders know the IMF "gold sale" is nearing.

The technical picture is also breaking down. Gold broke the green uptrend line, traded below the 50 period moving average and has only been able to trade back up to this area and use it as a ceiling.

Meanwhile, the MACD slipped below the zero line for the first time since July of last year. Check out the chart below. Click on it to enlarge it.

Gold breaks down which may give the buck hope in the near term.

So this break down in gold may give the buck a break in the near to medium term. Also, if oil cannot rally and make a new "all time high", it may give dollar traders an excuse to buy into a near term pop.

ECB rates and BOE rates will be out on Thursday morning. The BOE is expected to cut rates by 25 basis points. If they do, there may be furher cause for a near term dollar rally.

It will be interesting to see if Trichet changes his "talk" after he holds rates this time in preparation for cuts in the latter 1/2 of the year.

Don't forget that the G-7 meeting is also this weekend. So I'm sure they'll be talking about supporting the dollar in the future "collectively" if they need to...whether that talk is "on the record or off the record".

Sean Hyman
Currency Director
The Sovereign Society

As both oil and gold correct, it will help the dollar in the short term.

In the short term, oil and gold will continue to correct from an extremely overbought condition. As they do, the moves will be hard and fast.

Since these two commodities are priced in dollars it puts them on the opposite side of dollars. Meaning that as oil and gold go up, the buck plummets. And as oil and gold correct downward, the dollar benefits.

The whole world has gotten way too bearish on the buck in the short run and it will catch most of the world by surprise. As they are on the wrong side of the trade in the correction, it will "scare" many out of their positions. Some will be "forced" out due to margin calls. This will all bring both oil and gold into a healthy pull back within their larger uptrends.

As this happens the dollar will get a short term bounce within its longer term bearish downtrend.

Since oil's direction somewhat mirrors that of the EUR/USD, EUR/USD will pull back in the short term as oil does the same.

So the long term direction is probably not changing but boy are many going to get "forced out" of their positions in this volatile correction. That will only aid the dollar in the very near term.

Sean Hyman
Editor/Trader
www.money-trader.com

The drop in the U.S. dollar definitely affects Americans!

Think the dollar drop isn't helping commodities? Check out the headlines from today alone:

Click on the image to enlarge it.

I love it when Americans say the "falling dollar isn't affecting them because they don't go outside of America". My response is...do you buy oil, gas, gold, silver wheat, soybeans, etc...or any products derived from them? Then you're affected by the drop in the U.S. dollar whether you ever go to Europe and "exchange for euros" or not.

Ben Bernanke has even fallen victim to this. Many economists don't understand it so certainly Main Street doesn't either.

However, the headlines above are the "embodiment" of what I've been talking about.

A falling dollar is bad for most everyone, especially Americans...even the ones that don't travel internationally or make purchases internationally directly.

Get ready for $4 gasoline this summer.

Sean Hyman
Editor/Trader
www.money-trader.com

Gold rose to $982.00 an ounce overnight! Will $1,000 be that far behind?

Gold is only $18 an ounce from the "never hit before" $1,000 an ounce benchmark. If this happens (and it's very likely being that it's only $18 away or 1.8% away)...it will hit the nightly news big time.

This could easily happen just off of the latest dollar sell off as its breaking through the bottom of a trading range and heading lower.

Gold has been one of the few things going up in the world as most assets in the world are on their way down. Soft and hard commodities have been some of the only things to escape this latest downdraft.

Gold has been in a parabolic move lately. Watch to see how it handles the $1.000 an ounce mark. All eyes will be on it even more than eyes were on $100 oil.

Crazy days we're living in but you can never call them dull....that's for sure.

Sean Hyman
Editor/Trader
www.money-trader.com

A new day, many new highs!

A new day and more new highs. EUR/USD hits 1.5220, AUD/USD is a breath away from .9500. EUR/GBP just hit a new high today also.

AUD/NZD just broke out. Aussie is gaining ground on the kiwi.

The Swiss franc is king of the hill right now. It's rising against most anything I can find. The yen is "rocking and rolling" as well. Especially against the British pound. Their Consumer Confidence  were leaked early. That shocked the market...also they hit another low. Even the beaten down buck is gaining on the pound overall. That's how sad the story is for the pound this year.

Canada's currency is beginning to strengthen against the buck also (of course what isn't right now as the US dollar index hits new fresh lows). All the traders just piled into these "anti-dollar" trades.

The dollar isn't rallying much these days. It can only seem to gather some steam against the British pound and the South African rand (shows you how much doubt traders have in their recent power shortages).

Along with this, gold hit another high which really supports the Aussie dollar. Oil hit 102 again which brings renewed strength into the Canadian dollar.

See Canada does somewhat follow the dollar (its biggest trading partner) and that tends to keep it from being so volatile. However, when they're both slowing down and oil is going up, it works against America (a major importer from Canada) and works for Canada (a major exporter of oil to the U.S. and the world).

They pump it out of the ground at their same "fixed cost" but get to profit more from it as oil's price moves ever higher.

Sean Hyman
Editor/Trader
www.money-trader.com

Another day, Another New All Time High in Gold, Thus making AUD/CAD look good!

Wow, gold is on steroids recently. It hit another fresh, all time high today. Right now it sits at $927 an ounce.

This is just one of the winds blowing against the dollar lately.

High gold, high oil prices, lower New Home Sales, the thought of more Fed rate cuts coming as soon as Wednesday and possibly more to come after that....

Where does it end. The buck has held its own very well considering. However, it might go down to re-test its recent lows which are also 30 year lows too.

If so, look for the EUR/USD to go a bit higher as the "anti-dollar" follow's gold's lead.

Also, speaking of high gold and oil.....notice that gold is running off and leaving oil in the dust right now. The two had been a bit more neck and neck formerly.

Since Aussie's gold is shining much better than Canada's oil...the AUD/CAD pair is looking better once again after its recent pull back.

Australia may have to continue to hike rates too because of increasing inflation in the "land down under". However, Canada has already cut rates and will probably continue to follow the U.S. Fed's lead in continuing to cut rates. If so, this will give a yield (interest differential) advantage in the favor of Australia. So there's a pair to consider.

On top of all of the fundamental reasons...there's also a triangular sideways pattern that the pair is about to break out of. It looks like the Aussie is just about to win that "tug of war".

Check out the hourly, 30 day chart below. Click on it to enlarge it.

So look for Australia to win this battle.

Sean Hyman
Editor/Trader
www.money-trader.com

Gold hits another all time high of $922 an ounce, yet the U.S. dollar holds up!

So far the buck has handled all of these new "all time highs" from oil and gold quite well. It has to fight falling interest rates too.

So while the buck may end up retesting its lows at some point...ya gotta hand it to the buck for holding up under a 3/4 point surprise rate cut and high commodity prices.

So the buck isn't going to see a repeat of the last several years. It will either trade somewhat sideways in a very wide range this year...or it will break its downtrend at least for this year.

Keep in mind that in major bear cycles, there are still up years were a currency can rally upward and still stay within an overall downtrend.

So just because the major trend has been downward, don't be fooled into taking a permanent one way bet against the buck like it doesn't have the ability to rally.

Remember that the Euro went from 1.36 down to 1.18 on the last downturn...so that would equal the dollar rallying then and we could see it happen again as the Euro struggles with 1.50. That's a high level to hold.

Personally I don't think it can hold it for long. Sooner or later, Trichet will have to get off of his "inflation fighting" high horse and get real and reduce rates because of a coming slow down that will affect the Euro Zone and the global economy.

Europe isn't as detached from the U.S. like many would love for you to believe. The world becomes more intertwined as the years go by. We do more international trade between each other as the speed of transportation and technologies improve. That will not change...so we'll be more intertwined as time goes by all the more.

So when the U.S. sneezes, most of the industrialized world catches a cold. This was the case even before many of the Dow stocks had international operations...so you know it's true now that they derive much of their profits from their overseas operations. There's the proof that we're intertwined.

So don't believe all of the "de-coupled" crap. It's a smelly load for sure.

So look for more countries to lower their interest rates. This will help buffer the buck's fall. Look for the ECB to start cutting rates at least by the latter 1/2 of the year. Then look for Australia and New Zealand to eventually cut rates thereafter. They will probably be the last to have to cut interest rates since their data is still coming in quite a bit stronger.

In the mean time, give the buck some love and atleast acknowledge it's short term resilience.

Sean Hyman
Editor/Trader
www.money-trader.com