US Currency Outlook -- Forex Currency Pairs

Forex Forecast of Major Currency Pairs

The Global-View.com Month Ahead Currency Outlook is prepared weekly by the trading professionals at GVI Forex. For information on the GVI Forex Service Click Here Forex markets have become comfortable with the oil to EUR/USD relationship as long as it suits them. Trading at the current time is being distorted by concerns about Hurricane Gustav, which is seen as a possible threat to a significant portion of U.S. energy production and refinery capacity. Energy traders are positioned defensively into next week, and have been taken out of their shorts. This has been supportive of the EUR/USD. Recently some journalists and equity traders have been saying that oil moves in response to EUR/USD changes, but we have observed that oil has been moving first and the EUR/USD has been following.

Click on chart for two year history The past week saw the release of the closely-followed German IFO sentiment data, which were considerably weaker than expected. The data reinforced the view that a slowing global economy, an overly tight monetary policy and an overvalued EUR have been taking their toll on the Euro-zone. This makes the upcoming Thursday ECB policy board meeting a major event. Interestingly, heading into this meeting numerous top ECB officials have been sending very clear signals that the central bank is not even going to consider a rate cut. Dealers see this approach as a potential major negative for the currency. We remain fundamentally positive the USD against the leading European currencies (EUR, CHF and GBP). The JPY has been playing the role as an anti-EUR currency and can�t be counted on any more to trade closely with the European currencies vs. the USD. Demand for the commodity currencies (AUD, CAD and NZD) is driven by market perceptions about demand for commodities. Such demand is thought to be generated by the global economic growth. As the global economy slows, its hard to see how this bloc of currencies can only weaken against the USD. Click on chart for two year history As for market dynamics, dealers are no longer on the fence for EUR/USD, and still lean in the direction of a higher USD in a longer term time perspective. Our best guess is that the current correction phase is temporary. Click on chart for two year history Click on chart for two year history

John M. Bland is a co-founder and partner of Global-View.com. Prior to Global-View.com, he was a Vice-President and senior dealer in a forex inter-bank and futures trading arm of a subsidiary (ContiCurrency) of the Continental Grain Company in NYC. Previous to that, he was one of the early members of the Chemical Bank corporate advisory service in NYC, and also worked in international liability management for that bank. John holds an MBA from the Hass School at the University of California at Berkeley and a bachelor�s degree in International Economics from Berkeley.