US Interest Rate Cuts to Record Low

[pectceo]

The US bank to bank interest has been cut to 0% and the prime lending rate to consumers also cut to 0.25% lower than the Japanese interest rate.

This current status of the US interest rate brings the US interest rate to the lowest in the world at the moment. The implications are very obvious. This will signal a FREE fall in the US Dollar against other currencies. The mode of the dollar at the moment is a strong Short.

SELL USD/CHF at a bounce.
BUY NZD/USD at a dip
BUY EUR/USD at a dip
BUY AUD/USD at a dip

USD/CHF will definitely hit parity before the close of the second quarter of 2009 which is over 1300pips movement. Hold positions a little longer and add more positions as you see more dips and bounce depending on the position of the dollar (ie counter or quote position).

[oniyideseun]

@ Cliff,

Thanks for the signal given. However, it will be most appreciated if you can just explain in lay man voice what you mean buy placing order at Bounce and at Dip. Can you pls give us an example on how to place our order, pls for the sake of we newbie in the forex world.

[ejogheneta]

Hi Onyi & ALL,

Dips : Buy at the Lows because the markets will move upwards against the dollar.NZD/USD, EUR/USD and AUD/USD have the dollar in the Counter position and scince we can only make money when the markets go against the dollar (From the STRONG short signal Cliff Gave),we just ignore any sell signal in any of these pairs.

Bounce is the opposite :in pairs where the dollar is in Base position,ignore ALL buy signals and place Sell Orders when it looks like the dollar is gaining.The signal predicts that it is just temporary. $ Will come back crashing/moving  down again and you see "Greens' in you balance!


This will signal a FREE fall in the US Dollar against other currencies. The mode of the dollar at the moment is a strong Short. So go with other currencies. That is going against the dollar in ALL your trades.

Oga Cliff, is this what you mean?

[pectceo]

@ejogheneta

somewhere around that. I will try to draw up some articles or post about dips and bounce soon.

At the moment GBP/USD is at a dip and it is a good BUY position.

[oniyideseun]

Oga Cliff, Pls we will be glad to read the articles soonest............

[donlucky]

Dollar Falls Most Against Euro Since 1999 Debut After Fed Cut


The dollar declined the most against the euro since the 15-nation currency’s 1999 debut and sank to a 13-year low versus the yen after the Federal Reserve cut its target lending rate to as low as zero.

The pound fell to a record against the euro after a government report showed U.K. unemployment rose last month at the fastest pace since 1991. The yen remained higher even as Dow Jones Newswires reported that Japan’s finance minister said he’s ready to take steps in the currency market.

“This move is historic,” said Russell LaScala, New York- based head of North American foreign exchange at Deutsche Bank AG, the world’s biggest currency trader. “It’s just going to keep going until the last bit of pain stops. I would not be shocked to see $1.50.”

The dollar fell as much as 3 percent to $1.4437 per euro from $1.4002 yesterday, before trading at $1.4294 at 10:49 a.m. in New York. It was the biggest intraday drop since the euro’s inception. The U.S. currency decreased 1.4 percent to 87.82 yen from 89.05 yesterday and reached 87.14, the lowest since July 1995. The euro increased 0.7 percent to 125.51 yen from 124.71.

Ecuador’s default on $3.9 billion of international bonds means it’s only a matter of time before the country drops the U.S. dollar as its currency, according to Goldman Sachs Group Inc. The use of the dollar gives President Rafael Correa no outlet for providing credit to the economy as access to foreign financing dries up, said Alberto Ramos, a Latin America economist at Goldman in New York, in an interview. Ecuador adopted the dollar in 2000 to help curb inflation.

Weaker Pound

The pound fell to an all-time low against the euro for an eighth day after the Office for National Statistics said the number of people receiving jobless benefits rose by 75,700 to 1.07 million. Bank of England policy makers voted 9-0 to cut the nation’s benchmark on Dec. 4 to 2 percent, minutes showed. Sterling weakened as much as 2.3 percent to 92.07 pence per euro. The pound fell 1.1 percent to $1.5402.

The ICE’s Dollar Index, which tracks the greenback against the euro, the yen, the pound, the Canadian dollar, the Swiss franc and Sweden’s krona, fell 2.2 percent to 78.944. The dollar has fallen 14 percent from a 2 1/2-year high of $1.2330 per euro reached Oct. 28.

The Fed lowered its target rate yesterday to a range of zero to 0.25 percent, from 1 percent, below the Bank of Japan’s 0.3 percent rate. The central bank reiterated plans to buy agency debt and mortgage-backed securities and said it will study buying Treasuries, a policy known as quantitative easing.

‘Uncharted Waters’

“The market is focused on exceptionally low rates in the U.S. and the move by the Fed into uncharted waters,” said Stephen Malyon, co-head of currency strategy at Scotia Capital Inc. in Toronto. “Between now and year-end, we are likely to see this current weakening trend in the U.S. dollar continue.”

The target lending rate was cut to below the BOJ’s rate for the first time since 1993. Japanese policy makers struggled in the 1990s to revive growth as the combination of deflation and recessions stranded the nation in the Lost Decade.

Japan’s Finance Minister Shoichi Nakagawa said the government is ready to take steps in the currency market to help the economy, Dow Jones reported. Nakagawa earlier told reporters he isn’t considering intervention now.

The Japanese government needs to take action on the yen “swiftly,” Honda Motor Co. President Takeo Fukui said at a press conference today. The country’s second-largest automaker cut its operating profit forecast for a third time for the year ending March 31 to 180 billion yen ($2.03 billion) from a prior estimate of 550 billion yen as the currency’s gains pushed up prices for overseas customers.

Intervention in 1995

Central banks intervene when they buy or sell currencies to influence exchange rates. The Group of Seven, which comprises the U.S., Japan, Germany, the U.K., France, Italy and Canada, propped up the dollar in 1995, when it declined to a post-World War II low of 79.75 yen.

The cost of borrowing in dollars for three months in London fell today after the Fed’s rate cut. The London interbank offered rate, or Libor, that banks say they charge each other for such loans dropped 0.27 percentage point to 1.58 percent, the lowest level since July 2004, British Bankers’ Association data showed.

The U.S. currency depreciated 21 percent against the yen this year, the most since 1987, as more than $1 trillion of credit-market losses sparked a seizure in money markets and threw the U.S. economy into a recession.

[pectceo]

I am a great fans of good fundamentals when it comes to trading Forex. I have followed the historical pattern of interest rates differentiations and how it affects currencies. It may shock if I say this, the US Dollar will weaken further beyond the Yen if rates are not tightened next year. The Dollar will drop at least 1000pips against the CHF and at least 500pips against the EURO and also another 1000pips against the NZD.

I have been following the trend and I have been putting new and new trades daily as the signals comes. I spoke about obeying the market mode and why I is most effective when trading the Forex market. The GBP/USD has been giving beautiful signals for the past week and I have been greatly rewarded from this market. The USD is on a strong downward mode and that is all you need now to pick out your trades. See chart below:



Because the GBP/USD is on a strong upward trend, the trading mode at the moment is Long. So all you do to pick your signals is to look out for a dip signalled by the bollinger lower bollinger band. You can also use trendlines and other indicators to pick out your dips.

Just today, I have more than 500pips gained from USD/CHF alone and I am monitoring the market closely for any dip or bounce to consolidate on my positions.

[pectceo]

You can see that the market has been bouncing off the dips higher from every points it touched the band. Not on any occasion has the band failed. Trading Forex is not gambling or trial and error. It is all about patience and picking only professional signals.

Many who I have given signals before can testify to this that my signals hardly go to loss, and this is the secret with which I do it. Pay attention to the market mode and you will be glad for it.

[oniyideseun]

Thanks cliff for the wonderful illustration.... We need more of this.

[pectceo]

The Forex market is very interesting at the moment. Picking profitable trades can be done blindly without much strain if the trader knows precisely how these economic policies around the world is affecting the currencies.

USDollar:
The value of any currency relative of other currencies is a factor of its interest rate. It means currencies with the lowest interest rates are usually the weakest on board. With this said, it means the dollar is far from being the weakest and over the course of the next three months, we are going to see more dollar weakness. So having a short position against the dollar at the moment is a good positioning.

Japanese Yen:
The Japanese economy draws its strength from its weak currency. The Japanese economy loses about $3billion for every 1yen gained against the dollar. Honda Motors alone, loses about $250million for every Iyen gained against the dollar. The strength of the Yen at the moment is way too sharp and this is slowing the economy. All attempts most be put in place by BoJ to weaken their Yen.

The Yen is at its all time low against the GBP and see major pull back within the first quarter of 2009. Positioning now is a great option. See chart below:

[pectceo]

The exchange rate the GBP/JPY is now is the rate the Yen was exchanging to the Pounds in 1994. I see the GBP/JPY bouncing back to at least 200.00 before the close of the second quarter of 2009.

After taking a deeper look at the charts for having USD and JPY. I blindly took some long term trades against next year 2nd quarter. To avoid swings and sway, it is very wise to use small volumes. I invested just $100 per position and several of them are already doing fine. If you must take your positions now, it has to be fast.. Cos corrections is on the way. Yesterday alone CHF move over 500pips against the dollar and today I am already up another 130pips. Massive profit taking will some set in drawing prices lower for another rally.

See my blind trade performance below:

[russy]

@russy,

I don't see the BoE dropping rates as low as the US economy. The british economy is more conservative and far tighter than the US economy. Their rate is currently at 2.0 and I see the rate not falling below 1.50 before the close of the first quarter of 2009. Lots of the damage to the US dollar will be at the wake of heavy trading in January.

The BoJ is already heavily under pressure to intervene in the sudden Yen strength. More factories in Japan are being shut down daily due to the continious advance of the Yen against the dollar. Expect intervention soon from the BoJ, either verbal as they are already doing or actually intervention.

[blesso]

Hey Pect, you don't seem to use PA in your analyses. Does your trading system favour the use of indicators instead of PA related systems like fibs? I really hail your consistence use of BB.
One love.

[pectceo]

I think every trading system or indicator works just fine. The main purpose of every trading system is to signal a Buy or Sell signal when some sequence is met.

The most important thing to note in your trading strategy or indicator is how to filter fake signals.

[blesso]

I agree with you Pect, but what's your favourite system? I guess you have some secret missiles in your trading ansenal, don't you? I'm just curious. Who wouldn't want to know the secrets of the masters?
When I first opened Marketiva platform, I was innitially angry about their poor fib and trendlines tools since I like fibs and trendlines alot. Well, I began to give a second thought to Marketiva since I overheard you saying on this forum that you use marketiva. At least I can use it now for news breakouts.... But I know you use Mt4 platforms as noticeable from your recent posts.
Well done for your good job.