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One of the lighthearted discussions that have been going on at Currensee alludes to what traders listen to when they are trading.  Some obviously prefer music, while others have financial channels on in the background.  Still some prefer having the financial channels on but fully utilizing the mute button, which is one way to avoid outside opinions from influencing your trading.

Obviously, right now many of us have the World Cup matches on in the background.  You can’t help it. How many times do you need to hear either, “We think there is value in the markets right now” or, “Gold, the US Dollar and the Yen are gaining because markets are risk averse!”

The one thing that you will notice about a World Cup striker is when they have a chance to score a goal, they will try without fear.  Meaning that when the ball leaves their foot, it is headed towards the keeper as hard and as fast as it can possibly get it there.  Sometimes the ball is shot errantly, but still, everyone knows what the objective was for the striker.

Traders learn that when an opportunity knocks, you have to be as quick to enter that trade as you possibly can.  Waiting for confirmation that your idea was correct will often times cost you valuable pips, and potentially have you caught in a squeeze play.  Sometimes traders will enter a trade and it will turn out to be a loser, yet still everyone knows what the objective was for the trader.

Those are two straightforward examples of having an objective and believing in it.  Can we say the same about the FOMC right now?  Have a look back at the FOMC statement from Wednesday:  “Financial conditions have become less supportive of economic growth on balance, largely reflecting developments abroad.”  Come on, blaming Greece and others for the lack of economic growth in the US? You can’t be serious.  Isn’t China’s economy bigger than Greece’s? And didn’t they just revalue the CNY because their economy is growing at a solid clip?

Unlike its peers that solely focus on inflation, the Fed’s job is to also maximize employment.  How many more jobs would have been created in the US if the markets had just left Greece alone?  I dare say that more jobs have been impacted by China of late than by Greece.  If anything, yields are lower, which should make it attractive for those that can access credit to borrow money right now.

Traders don’t go around blaming others for their losing trades.  They blame themselves, they recoup and start over.  Why is the Fed blaming “developments abroad” for their inability to restart the economy and create jobs?

Many of us still point to the Fed’s reluctance to withdrawal policy from 2004 to 2006 as the catalyst that started the current recession.  As outgoing Fed member Donald Kohn said recently “I don’t think we know enough at this point to answer with any confidence the question of whether monetary policy should include financial stability along with price stability and high employment in its objectives”.  That is the complete opposite of trading without fear, right now it sounds as if the Fed needs an objective to believe in again.

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.

Author Bio

In South Africa they are entering the final week of the group matches.  Around the globe fans are rooting for their home teams and complaining about the officiating.  Even if you are not watching closely you can appreciate the fact that the matches are being decided on the field (or the pitch) and not in some corner office, through a popularity vote or dictated by the media.

As the World Cup begins the round of 16 matches, governmental leaders from around the globe will be meeting to discuss the global economy.  The G-20 meeting this time around takes place in Toronto before heading back to Seoul in November.

Per usual, many countries offer preliminary comments and China was the first to have their say.  They repeated what they had said earlier last week which is they are not interested in hearing complaints from the US or any other country regarding their Yuan policy. The central bank has since stated that they will allow for more flexibility in the CNY but have not offered a timeframe for the change.  It didn’t take long for Obama to form a rebuttal and state that he was looking forward to discussing how to fix the global imbalances (which means more flexibility in the CNY from an American political point of view).

Let’s journey back as to why the G-20 meetings were constructed in the first place.  In 1997 fears grew that Thailand would not be able to repay its debts and months later the Asian crisis was in full swing.  The crisis spread throughout the Pacific Rim region.  China did not contribute to the crisis, in fact in retrospect by not revaluing the CNY China was one of the reasons why the markets would eventually settle.  By 2000 it was evident that the G7/8 was too small to cope with the global economic issues and the G-20 has gained in stature ever since.

Now post the 2001/2 recession, the 2007/8 credit crisis and the 2010 European crisis our political leaders are still pressing China on their currency!  Hmmm, China’s rebuttal should be very easy to form indeed.  For one they could point to growth rates in the old G7 countries.  All of which are being downgraded by the second as discussion on the potential for double-dip recessions increase.  They could also point to inflation levels as from Japan to Germany inflation is not a threat and core levels of inflation are in negative territory in many cases right now.  They could also point to confidence levels as consumers in China are very confident right now while surveys such as the US Consumer Confidence survey or the ZEW survey in Germany point to a lack of confidence at the consumer and business level.  Of course China could also ask the G7 countries what would happen if they stopped investing in our bond markets, where would the next crisis be!

Currency traders also know not to listen to the old G7 leaders but pay more attention to the emerging leaders.  Currensee.com shows that (and I hope that I do not jinx these traders) that currency traders are profitably short USD/HKD, short NZD/JPY and half the positions in USD/MXN have been short for quite a while.

In the World Cup emerging countries have been outplaying the developed nations.  During the G-20 meetings expect the developed nations to have their say in the press but when it comes time to trade the markets listen to what the emerging countries are doing.

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.

Author Bio

Fans from across the globe will be glued to their television sets later this week as the World Cup gets underway. The host country will literally kick things off when South Africa matches up with Mexico. On Friday you might expect a little less liquidity in the foreign exchange markets as traders in London will be getting ready to root for their home team to not only beat the USA, but avoid any and all embarrassment that could certainly follow.

The atmosphere will be electric and everybody thinks they have a chance for success on the first day of the competition. Shouts of “goooooooaaaallllll” will ensue and everyone will go crazy.

This is an event that no country will miss if they are lucky enough to qualify; even Greece will be there! They have the unenviable task of facing Argentina, Nigeria and South Korea, so in reality they may not be there for long. This is probably a trip that they could pass on since their debt levels sparked the European crises this year.

Argentina may have the best team in this bracket, but both Nigeria and S. Korea have two of the lowest debt loads of any country. By my score: Emerging markets 1, Europe 0.

Let’s take a look at that US/England bracket. In the US there is constant talk on how much debt we are leaving the next generation, but as currency traders have showed, the US is in better shape than the UK. This as the UK had a higher debt to GDP ratio than the US did at the end of 2009. The other members of this bracket are Algeria and Slovenia. It should come as no surprise that both countries have drastically less debt than either the US or UK. Updated score: Emerging markets 2, Europe 0.

Back to that opening match with South Africa and Mexico. The other members of this bracket are France and Uruguay. France stands a very good chance of winning the World Cup, but they have done little themselves at reassuring investors that their debt is under control. I wonder what Trichet is thinking right now. He has been pleading for years to the Euro zone members to control their spending. The last time the World Cup was played, the average debt-to-GDP ratio for Euro zone members was 56% – basically on par with the US. Now each country has added approximately a 10% debt load to their burden. Ireland and Greece have been the yellow card offenders with France and Germany – the so-called ‘Mom and Pop’ of Europe – with debt loads that are approximately 20% higher than what the US is carrying. Updated score: Emerging markets 3, Europe 0.

When the World Cup is over, look for people to be on the streets of Europe. One of their member nations may even win the World Cup and bring home the trophy. They will either be celebrating or protesting their civic duty to cut expenses. By my score, a safe trade will be to continue selling the European currencies and look for safer haven which may just be in the emerging markets.

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.