Thursday brings the first hard evidence of recession in the US in the form of the official Q3 GDP, probably a contraction of 0.5%

Foreign Exchange Outlook : Today seems to be a bit of calm before new storms, and do not doubt for a minute that new storms are coming. We have the probable bailout of the auto companies. We have potential currency and stock market intervention by Japan, Hong Kong, and others. More immediately, we have the Fed cutting rates-or not-this week, with the Bank of Japan on Friday probably following suit. In the current environment, he who cuts rates gets rewarded, not punished. Trichet already said the ECB will join. A major question is whether it’s a joint decision like last time. The markets seem to like coordinated action. A coordinated rate cut would (ironically) be US dollar-negative, because it would imply that somebody is in charge and knows what he’s doing. There isn’t and they don’t, but that would be the knee-jerk reaction.

Thursday brings the first hard evidence of recession in the US in the form of the official Q3 GDP, probably a contraction of 0.5%. The actual number doesn’t matter as much as confirmation of "recession," now no longer the official two quarters of contraction but pretty much whatever the speaker or commentator chooses it to be. The poor NBER-it lost its preeminence on this one after failing to name the last recession until after it was over.

Next Tuesday we have the US election and right afterwards, on Friday, the nonfarm payrolls for October, probably a lot more than 100,000. This week and forevermore we have massive new Treasury issuance. Meanwhile, the commodity bubble continues to deflate and China inches closer to the same global slowdown affecting everyone. The political fallout everywhere from worsening conditions trends to be authoritarian—keep the peace at any cost.

The only thing really supporting the US dollar exchange rate is flight-to-safety and panic selling of emerging market and commodity assets, whether forced by de-leveraging or by choice. This is not over and therefore we assume the dollar rally is not over. But boy, the rally faces a lot of threats, even bottom-fishing among the newly cheap assets. Keep the faith and watch the charts-the instant an intermediate top is seen in the euro exchange rate, we can buy dollars in size some more.

Buy For Now

Barbara Rockefeller
Forex Trading Reports

Buying Euros, Buy Euros at the Best exchange rate visit IMS Foreign Exchange