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We provide investors with valuable alternatives in the Forex marketplace. These include innovative educational opportunities, comprehensive research, superior analytical tools and state-of-the-art electronic trading capabilities.Overnight, the ratings agencies added fuel to the fire in the Euro zone by claiming that further downgrades of Greek debt could be forthcoming.  In addition, the market is catching on to the fact that in the UK, the debt situation is on par with that of Greece, making it vulnerable


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Overnight, the ratings agencies added fuel to the fire in the Euro zone by claiming that further downgrades of Greek debt could be forthcoming.  In addition, the market is catching on to the fact that in the UK, the debt situation is on par with that of Greece, making it vulnerable as well.  Because the UK is not governed by Euro zone policy, they have been flying under the debt radar as there are no other member states to complain about their economy.

Combine this with disappointing European consumer confidence figures and rising unemployment in Germany, and you have a potentially explosive situation.
What this all adds up to is risk-aversion, which means that we’re seeing Japanese yen and US dollar strength, to go commodity currency weakness.  Equity markets are lower across the globe and both gold and oil are trading lower.



In the currency market:

Aussie (AUD):  The Aussie is down this morning on risk-aversion despite the fact that business investment rose 5.5% on China demand.  This bodes well for the Australian economy and has increased the chances that the RBA will hike rates again next week, marking the fourth time in 6 months they have raised.  However, global risk themes are heavy today and the un-wind of carry trades has the Aussie down 2.5% vs. the Japanese yen.

Kiwi (NZD): The Kiwi is down today as well on risk even though business confidence surged to a 10-year high in February, further fueling economic recovery.  Now either residents of New Zealand are completely “off their rockers” or there actually is a good growth and recovery story going on there.  I’m going to go with the former.  As long as the entire global financial system doesn’t collapse, I’m looking to buy Kiwi on pullbacks.  It will however be a challenge to overcome global risk themes.

Loonie (CAD):  Well I guess everyone’s not quite as enamored with the Loonie as I am as futures trades are indicating that the Bank of Canada may be less aggressive with its interest rate policy in light of the weakening global recovery.  In addition, the Olympics end this weekend and there is usually an “economic hangover” as the stimulus provided by this one-time event is effectively removed from the Canadian economy.  With oil prices lower and general risk-aversion, the Loonie is now at a two-week low.  I still like the Loonie to strengthen later in the year, but we may need to deal with some global risk first.  Today the Loonie buys 93.5 US cents.

Euro (EUR):  The Euro is down today on German unemployment and economic sentiment, yet is higher against the commodity currencies as risk-aversion is dominating the market today.   We know about Greece and I mentioned the possible downgrades above which could move them closer to default, if the Euro zone actually allows that to happen.  The Euro is fast approaching 1.34 vs. USD.

Pound (GBP):  The Pound is lower this morning, as deficit fears and political uncertainty are shedding light on the dire economic situation in the UK.  The delicate balance between reigning in spending and stunting economic growth may too much handle going into upcoming elections.  The Pound is at a 9-month low to the Dollar trading at 1.5275.  There was a note out yesterday that the Pound could reach parity with the Euro if economic conditions worsen.

Dollar (USD):   Thank you risk-aversion is what the US dollar is saying this morning, as unemployment came in higher than expected.  The durable goods numbers came in higher, which is positive for manufacturing.  However, the economic picture is still not rosy here in the US.  The Dollar is higher against all but the Yen.

Yen (JPY):  Demand for Yen is much higher today as carry trades are un-wound due to global fears about economic recovery.  The Yen has been strengthening as of late, and it will be interesting to see what the Bank of Japan does to prevent this from getting out of hand.  The Japanese are no strangers to intervention in their currency; and they will not be making any moves on interest rates anytime soon.  A strong yen hurts Japanese exports, which in turn will hurt economic recovery.

Stock markets are down across the globe, gold is trading at 1093 and oil to 77.75, down roughly 2.75%.

It was only a matter of time before all of the risky elements floating around the market converged and today might be that day.  While there is definite fear in the marketplace, there are some growth stories out there.  So be patient, and remember that in general, you want to own the currencies of strong economies, and sell those of weaker ones.

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!

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