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Shopping is fun when you don't pay with your money

Written by A Forex View From Afar on Friday, January 11, 2008

Shopping is fun; can you afford it?

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The Trade Balance was released in the US; and it's bad, very bad. US consumers spend more and more, without having any pocket limits in place it seems.
A $5b increase in Trade Balance deficit, in a time when the Markets expected $1.5b decrease it is huge. That is over 9% on a month-to-month basis, by far the biggest gain this year. Add to this that the Markets see a weak US dollar as an Exporters Paradise, what this number would be without the weaker Dollar attracting foreign buyers of US products that seem cheap, does not bear thinking about..

Yes, Exports have reached a never heard level at $142b. But get this, in 2005 the annual export growth rate was 11%, in 2006 the same rate was 11%, and now, in 2007 guess what the rate is? If you're thinking 11% you're right. How does that work?
The numbers released are for November, but at the current growth rate of Exports, around $1b each month, the overall percentage won't go to far from 11%.

In 2005 the Dollar Index closed at 90.00 points, now it is trading around 75.00. This is a loss of US Dollar strength of 13%.

Getting to the Import problems, except the fact they are getting bigger and bigger as we speak, there is one thing that probably caught the Market Player's eye: the seasonally adjusted Petroleum import actually got cheaper in November 2007 then in January 2007. Remember Oil in January, opened at $60$ and reached its low at $51. On the other hand, in November Oil reached its 2007 high of $98.70. Is this not ironic?

TheLFB Team Released released an internal article that showed while Imports are getting more expensive, Exports are getting even more expensive. Mostly, this is because Taxes, Services, and Commodities are priced in US Dollars. As Dollars gets cheaper, there is a general rise in prices. TheLFB Economic Article Archives.

In all of this the Markets should see a positive point; US is running a positive Service Balance. This is mostly good news, but, Traders should note Services Exports are in the most part related to the Banking industry, that industry today does not know in what account to hide its losses, and what foreign investors to attract. Service Exports may not be a reliable thing to bank of anchoring the Trade Balance where it is right now. This Trade Imbalance really may have a long way to run.

On a year to year basis, even the Trade Deficit with Europe has grown

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Fundies and Trading
There is a constant question from some traders as to why anybody would ever need to consider the ‘F’ word when trading. Fundamentals: what is so damaging at looking at both Technical charts and having a Fundamental filter to gauge how many Lots to put on? Why is it that accepting that Technicals give us price points to trade, but Fundamentals determine the direction that we travel is so difficult for some traders to accept? Without a Fundamental Filter very few pure Technical traders would have seen this Dollar move coming today.

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