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Global Recovery Doubts?

Written by A Forex View From Afar on Thursday, June 25, 2009

The financial market continues to trade mixed, as investors raise doubts about the global recovery.

One day up, the other down seems to be the latest trend in both the currency and the equity market, as investors move in and out of risk-aversion. This has made the gains observed in the equity markets come to a sudden stop, allowing the S&P futures to retrace for the first time since the trend started in March.

However, the direct consequence in the foreign exchange market was that the major pairs failed to find a direction to trade over the last few weeks. To some extent, the link between the dollar index and the S&P futures, which could have been used very easily by investors until now, seems to have weakened substantially since the beginning of June. This can be explained by the fact that the market saw more dollar strength than it (ever) needed since the beginning of the credit crisis, and now investors are beginning to back away from the old greenback as the Treasury digs deeper hole for the U.S. deficit.

The dollar is under huge pressure right now, as countries that have noticeable amounts of dollar denominated assets are looking to diversify. To make matters worse, this happens at the time when the Treasury is trying to sell even more assets in the form of debt, something that raises big questions about the future of the dollar. For now, TheLFB-Forex.com Trade Team sees only two solutions: either the U.S. Treasury hires a very good advertising/PR agency to make the dollar look like the king of the market once again, or stand behind the pledge when saying that the Treasury is aiming for a strong dollar policy.

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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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