A Forex View From Afar

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U.S. Trade Balance Overview

Written by A Forex View From Afar on Tuesday, August 12, 2008

The US trade balance came much better than expected, having a read of 56.8B, beating even the most optimistic analysts, which ranged from $58 billion to $65.7 billion. The market did not have a strong reaction to the release, and after news that should have been very dollar positive the euro managed to post some gains. The trade balance had a very strong influence over the markets in the 80s when economist actually believed a currency will depreciate until it managed to cover the trade deficit. Well, those economists still waiting for the trade balance to be covered from a weak currency, 3 decades later, will still probably have to wait some more years.

Oil prices made their presence felt in the news release, since both the import and export of petroleum products rose to a new high. It is no surprise, since June crude oil has posted some very strong gains. Overall, the trade deficit fell 4.1% in June; exports rose by 4.0% from one month earlier and rose 21% year-over-year. Over the same period imports also grew 1.8% from May and 13.5 percent from June 2007. Despite the strong advance in exports, the goods balance did not improved significantly. The goods deficit is running $2 billion above the average of 2006 and 2007, which shows improvement can still be made.

If this number is not be revised next month it seems that the second quarter number will be adjusted, since exports and imports are included in the GDP numbers.

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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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