A Forex View From Afar

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How Things Are Holding Up

Written by A Forex View From Afar on Wednesday, March 05, 2008

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The credit crunch is affecting borrowers more then ever, with the spread between the e 30-year fixed mortgage rates and the 10 years Bonds, the "penalty" yield for having a mortgage security, having reached 208 points, the biggest since 1986.

The Rate cuts didn’t have any effect in helping the Credit Markets, but they had an effect on the Forex Market, with the dollar reaching its lowest value since the scrapping of the Gold Standard. Commodities get more and more expensive because of a weak US Dollar. Equities are now concern about the Credit Market, but soon they may be more concerned about higher Commodity prices wiping out dividends.

Here is the complete picture; the Credit Market is pushing Interest Rates up, the Dollar lower, and Commodities higher. The same Credit Market, together with very expensive Commodities, are sending Equities lower, thereby creating the demand for more rate cuts. If the wheels of the Credit Markets are not greased soon the whole liquidity issue may implode on itself, cutting Rates however is a bit of a vicious circle, it just seems as though the ‘one last Cut’ is never enough.

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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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