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Reminiscent of when China used to announce their monetary policy decisions during the North American trading session Germany indicated on Tuesday afternoon that they are looking into banning short-selling on certain securities. Yet another reason to trade foreign exchange. If you want to short the Euro then just find your preferred FX broker and short the Euro against any currency that you want. If you want to discuss which currency that you should have shorted the Euro against then hop on Currensee and discuss it with the community or your team members.

Why is Germany making such a decision in the first place? Debt. It has been all about debt since the credit crisis began in 2007 and right now the worry is over European debt and one can only guess when it will end. At the moment countries with large fiscal deficits and debt to GDP ratios are being punished or should I say that these countries are hampering the global markets right now. This begs the question on why the US Dollar is doing so well when we all know that the US is laden with debt itself. Furthermore why is it so important for these countries to rectify their debt problems now and not leave this pile of debt for the generation behind them?

Lets first take a look at the US population. The reason will be evident later. In 2001 the UN projected that the US would have 321m people at the end of 2015. Per the US Census the US already has 309m thus it is well ahead of the forecasted pace. In 2050 the US is projected to have 397m, so a 28% growth rate from current day. The fact that the US has doubled its population since 1950 I’d guess that the forecast of 397m is well on the conservative side. More likely to be 425m – 450m by then for many well known reasons.

Compare that population growth to the well known European countries that are having trouble with their debts right now. Greece currently has just over 10m people living there. That is expected to decline by 16% in 2050. Italy has close to 60m people and that is expected to fall to nearly 40m. Talk about needing tourism. Portugal and Spain have similar UN forecasts in terms of declining population although they should each receive a bit of assistance from those that that bought 2nd dwellings in their countries over the past decade and with the proliferation of cheap airfares to these locals. Ireland is the only country where growth is expected and that is at a whopping 39% for the tiny country of 4m.

How about the country that seems to be paying for Greece’s miscues, Germany? Their population growth is expected to decline in the future. These are forecasts so they are doomed for error but unless the current trends change the respective tax bases in Europe will be declining. The US has a chronically high debt to GDP level as well but as mentioned its tax base is expected to grow quite substantially. As long as these trends remain in place and markets are worrying about debt then the US will remain a safe-haven and parts of Europe will be in need of assistance.

This report is for your information only and does not constitute investment or business advice or an offer to buy or sell securities.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.

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Last week’s comment circled around the outlook for the Dollar and saw how various macro events were negative for Canada, Australia and the Euro, whilst being positive for the Dollar and Yen.  Pretty much all of this has panned out so far, but what was the key point last week and what is the focus for the coming week? For me, the highlight was the minutes from the FOMC (Federal Open Market Committee) meeting, where inexplicably all reference to the woes of the housing market were completely removed. This, in a week when the stats from Case Shiller Home Price Index continued to drift lower and the 4 week average of mortgage applications made fresh lows since the downturn began. The key to any economic recovery is personal spending and consumption, and with a jobless recovery combining with falling wage growth, it is difficult to see how recovery can accelerate. The huge stimulus can be likened to pushing on a piece of string, and any hint of removal can lead to an overreaction in negative sentiment. It seems that the Fed’s statement was more of a political than an economic one, and was duly punished with equity weakness once the statement had been digested the following day. Whilst the GDP numbers appeared strong, a large percentage of that increase was due to a rise in inventories, which simply don’t correlate to the business inventories for October and November (December still has be released). The rise shown in the 4th quarter inventories implies a complete reversal of the previous 4 quarters’ decline, which seems unlikely.

After sharp falls, equity markets find themselves at a critical juncture with support weak and distant across many indices, meaning that the new month needs to see a swift recovery that overcomes the huge blocks of time that are above.

For currencies it has been a relatively subdued week with the trends hinted at last week slowly continuing. In fact, the lack of volatility has been surprising with Cable the notable exception. It has been pushed up and down by weak GDP numbers one day, a BOE member saying they were not a true reflection on the U.K’s economic outlook the following day, whilst it was rumoured that much of the strength was due to the conclusion of the Kraft takeover of Cadbury’s, which injected 7 Billion into the market.

For the week ahead, the early focus will be on the Aussie Dollar as there is employment data and an interest rate decision. Regardless of how the market interprets the data, the currency technically remains weak with support distant at 0.8742. Falls could be swift, especially if equities resume their slide. 0.9038 needs to cap any bounce to maintain the negativity.  From there focus will inevitably shift to Non-Farm Payrolls once again, but ahead of that the major support in the Eurodollar at 1.3830 to 10 should cause at least a temporary bounce, such is its power.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.