Foreign exchange traders buying euros have created breakout to the upside is the real deal and it can extend to 1.3300

Foreign Exchange - Currency Outlook

Hope springs eternal in the human heart. Stocks are rising everywhere--maybe the crisis is over. Such a view accepts that the stock market is a reliable forward indicator of the economy, an old adage that has some weight but not, perhaps, in a special case like the one we have now.

The decisions at G20, if decision is not too strong a word, is that the US will continue to create gigantic public deficits that will accrue to the benefit of all while Europe (selfishly) will ramble on about restoring confidence via stricter regulation. The latest version of European denial and delay is that recovery can’t come until confidence is restored and the path to confidence lies through tighter regs. It's a plausible story but off the point entirely. (Note that Japan committed to spending 2% of GDP in stimulus at G20, and it can least afford the extra debt of all G7.)

Still, the market likes the outcome, as we see from the euro exchange rate rising over 1.3000 easily and quickly this morning. It also likes the Bernanke performance on TV last night. He said recovery is coming and probably this year. Let's see - higher US deficits in the US, the same deficits in Europe. Which does the global investor prefer? On the whole, deficits are not a deciding factor in determining Foreign Exchange levels except when they are. We believe that Foreign exchange traders buying euros have created breakout to the upside is the real deal and it can extend to 1.3300 or so, which is the 38% Fibonacci retracement of the euro slide down from 1.4719 last December.

The market likes Fibonacci numbers, so we have to accept it however basically dumb it may be.

Pounds to US Dollars = 1.4070
Pounds to Euros = 1.0875
Euro to Pounds = 0.8275
Pounds to Australian Dollars = 2.1307

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
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