Dollar Back From The Dead
Posted on March 24, 2008
Filed Under US Dollar |
It is said that “a week is a long time in politics” but last week’s turmoil across all markets felt more like a lifetime! While secretive traders in Singapore were busy trying to take down a leading UK bank the commodity bubble temporarily burst as gold, silver, oil and soft commodities all fell sharply. Silver, in particular, was down over 25% and even oil dropped back below $100 a barrel. The reason? Probably a combination of profit taking and dollar strength kicking in, although with so many traders and investors having recently rushed into this sector of the market we can expect further falls.
Despite thin holiday markets adding extra volatility the charts for the majors are beginning to show evidence of dollar strength returning. In addition this morning’s better than expected existing home sale figures have added to dollar optimism. Existing home sale figures measure the annualized number of existing residential buildings sold during the previous month. A rising trend has a positive effect on the nation’s currency because large purchases tend to be made by consumers who are optimistic and confident in their financial position. The sale of a home also triggers commissions for real estate agents, and often home owners will purchase goods such as appliances and furniture shortly after purchasing a home. Traders watch this report closely as it’s the month’s first demand-side housing indicator to be released.
The most interesting chart of the majors to consider is the dollar yen where we see the dollar has managed to fall to levels not seen in over 10 years. Given the Japanese deep worry about a strong yen and Japanese banks due to report this month the next few days will be critical for this pair. A deep downthrust last week could be the start of a slow climb back for the dollar and an opportunity for some decent long trades (at last!!).
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Hi Anna,
Yep I was considering the dollar yen too. When do you think the right time to enter to be, wait for……………….
In fact how about letting us know via you blog when you enter this trade, from what you say it is going to be a long one!
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