Forex rebates on every trade - win or lose!

NEW YORK (Dow Jones)-- The euro will fall versus the dollar next week as investors flee riskier assets again due to continued financial-market risk and despite government aid packages.

The common currency advanced versus the dollar Friday, along with other currencies that typically gain when market sentiment turns up, after the U.S. government announced an aid package for Bank of America Corp. (BAC)and the Senate voted to release more funds from the Troubled Asset Relief Program.

But market analysts say that cheer will be fleeting.

"A particular concern is that government capital injections do not address the core problem of erosion of asset quality on bank balance sheets, which in turn impedes their ability to lend," said David Woo, global head of foreign exchange strategy at Barclays Capital in London.

Euro zone data scheduled for release next week will add momentum to the euro selling.

Germany's ZEW business sentiment current-situation index is expected to deteriorate. The flash releases of the January euro-zone purchasing managers indexes for both the manufacturing and service sectors are expected to decline. French consumer spending numbers for December are also expected to drop, as is French industrial sentiment.

While recent data in the U.S. have also disappointed, the euro has been exceptionally sensitive to the perception of risk recently.

Barclays Woo found the euro has been particularly sensitive to short-term interest-rate movements and increasingly sensitive to swings in stock markets.

A "10% decline in the MSCI World (stocks index) has been associated with a 1% decline in the euro versus dollar in the past year but a 3% decline in euro versus dollar in the past 50 days," said Woo. "This last development suggests that the dollar's supposed safe-haven status remains intact."

He notes that the options market is forecasting a 38% chance that the euro will trade below $1.20 and a 13% chance that it will be below $1.10 in three months.

Next week, analysts expect the euro to start off carrying through on Friday's rally, heading for near $1.34, before declining back toward the $1.31-area.

Friday afternoon in New York, the euro was at $1.3251, compared with $1.3145 late Thursday, while the dollar was at Y90.35 from Y89.71. The euro was at Y119.85 from Y118.00. The U.K. pound was at $1.4691 from $1.4651, while the dollar was at CHF1.1173 from CHF1.1225 late Thursday.

Meanwhile, the dollar is expected to trade between Y92.0 and Y89.0, as risk appetite continues to wane during the week.

Traders and domestic Japanese investors who used the yen to buy other assets when the global economy was healthier reverse those bets during periods of market uncertainty. This deleveraging process drove the yen higher in 2008 and has still to run its course, analysts said.

The "rapidly deteriorating Japanese economy encourages local investors to retrench further. The yen should see more appreciation in the weeks ahead," said Ned Rumpeltin, a currency strategist in London at Morgan Stanley, which has bet against the euro versus the yen.

The Bank of Japan meets next week on Thursday to decide on its main lending rate, reduced last month to 0.10%. On Friday, the BOJ downgraded its core economic assessment of the nation's regional economies for the second straight quarter. With rates already so low, many analyst say there is little room for the BOJ to cut again to answer these concerns. Instead, the bank is expected to outline other strategies to pump cash into the domestic economy.

Investment Biker Jim Rogers urges sell Sterling,get cash out of Britain!

It's hard to disagree with him Falco!

From another site, late last night:

Markets are putting in a massive reversal today, led by the dollar index which sky-rocket to its highest levels since early December only to reverse course and put in a low lower than yesterday on the daily charts, an outside day to technicians. Coming at a top, outside days can be especially cataclysmic. Note, there is is a gap on the USD index chart that could be filled in tonight, taking the pair from around 85.98 to 85.50 if filled.

EUR/USD, cable, EUR/JPYtheyve all seen massive shifts in fortune this afternoon as have many of the asset markets. With any luck, risk aversion will melt away and well all have retirement accounts worth owning again. Hope and change!

A Sterling bull...(quite a rare species)
http://business.timesonline.co.uk/tol/business/columnists/article5580642.ece

Why is the ECB supporting the euro? Where there’s smoke there’s fire


For the second day running we’ve heard reports of members of the Eurosystem of central banks protecting the euro. Friday they were rumored to have bought EUR/USD in the 1.2850 area and today when prices returned to that level they were rumored to have called around and “checked rates”, letting banks know that they were snooping around.

Why would a “country” that is dependent on exports try and shore up its currency amid a global economic slowdown? Shouldn’t they let the euro fall as far as it can? In ordinary circumstances, yes. But these are anything but ordinary circumstances. It looks as though the ECB is trying to avoid a Lehman-style run on the euro. In the Lehman case, investors would short the stock and buy the credit default swaps. In the euro case you would sell the currency and sell the bonds of the weak European credits like Greece (which yields over 300 bp over Germany today) and Spain.

By supporting the currency, they are trying to paper over the very severe crisis in European credit markets. My guess is that this may work for a few days, but the longer-term result will be to alert the market that where there is smoke, often there is fire. This one bears close watching.

Which is the best pair re. shorting it...yen/usd?

That will very much depend upon the diameter of your gonads, Falcothou.

But whichever one you chose, I'd wait until it starts falling first. This has the makings of an up week for the time being.

:o)

Diameter in nanometers when it comes to forex, so go for the steady eddy

For mouseticles it'll be chunnel then.

Ah yes my old friend eur/gbp better for the ticker!

Ah yes my old friend eur/gbp better for the ticker!

You can say that again, Falcothou.
Flavour of the month for me :o)

Edit: oh blimey you did :)

Fwiw, I think it'll take a German bank and/or a German car manufacturer to say they're in sh!t before the Euro really starts to sell.

I know Greek Eurobonds are off 300bp against their German equivalents, but nobody cares about the Greeks, the Spanish or the Irish for that matter. I also know that the French wine producers can't shift their stocks, but nobody cares about the French either. This is all about Germany and history shows that it normally takes years before they decide to surrender.

D, just sent you a PM.

Iceland's government falls

What d'you reckon are the chances Hiltops ...
perlease :)

........ of Gordon falling over his fat, Chocopops?

No carrots for him, Hiltops - just heaps of neeps.

Ta, Timbo - just chucked one back.

Pound strengthens against dollar but Jim Rogers predicts further falls

edit - fat finger syndrome

Dontcha just lerve this Rogerism:

They wouldn't be politicians if they knew what they were doing.