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Wednesday, July 27, 2005

Greed is Good?

Missed writing about the market at the beginning of the week. Nevertheless, I'll start from mid-week. My trades are predominantly based on the USD, so I'll only be writing about the GBP/USD and the EUR/USD pairs. I tend to use a mix of fundamentals and technicals in my trades (rojak =P)! Mid-week USD outlook: Bullish A further tightening of the US monetary policy is expected. Greenspan's clear announcement last week that the tightening rate will continue (i.e. increasing interest rates thus giving the USD a firm tone, reinforcing the USD's yield advantage), underpinned by waves of bullish data this month (e.g. today's Durable Goods data was stronger than expected) has made traders to be in favour of the USD. Also news that IBM is planning to repatriate about USD$9B usd in foreign earnings, taking advantage of the temporary repatriation incentive from the American Jobs Creation Act is holding the USD up. Today's US Federal Reserve's Beige Book is expected to paint a rosy picture of economic conditions across the country, and to cement expectations of further interest rate hikes to come. Watch out for this Friday's Real GDP figures though! Now to the currency pairs, outlook for this mid-week onwards: GBP/USD - Bearish! Recent terrorist attacks, expectation of an interest rate cut in August, slowdowns in UK spending, stagnating housing market prices, cooling in the labour market and contracting manufacturing sector - things don't look too good for the mighty British economy! Analysts have expected the rate to go under 1.70 in Auguest if this conditions continue. Technicals seem to suggest the same sentiment as well. EUR/USD - Neutral The pair was fighting it out at the 1.20 level yesterday and even with a strong German IFO business sentiment survey (which suggested that the worst may be over for the EU economy) which causes a sharp hike for a moment resulted in a drop down again to the 1.20 zone. Also somewhat in an odd way, the ECB reported a substantial forex reserves decline of EUR$1.2B without any explanations - huh? Could be the summer effect, traders get a bit disoriented during this harsh period =) Hard to pinpoint any direction from technicals/fundamentals, so I'll have to say it's neutral. On the Ringgit issue, read this well-written article: Link Finally to end on a funny note, with the Yellow/White/Pink/Purple bands you see around to promote something, check the Greed Band out! Yes - like Gordon Gecko said "Greed is Good"! DISCLAIMER: All this are only boringest's views/opinions and do not qualify as investment advice/recommendations. It is not a production of my employer, and is unaffiliated with any FX broker/dealer. The information on this site is provided for discussion purposes only, and are not investing recommendations. Under no circumstances does this information represent a recommendation for FX trading.


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