SpotEuro Forex Daily Outlook November 8, 2010

We continue to see market volatility as concerns within the EU continue to weigh on the euro. The dollar had a very bullish rejection of 1.4300 vs. the euro and we are looking for a confirmation and further dollar rally against the European counterpart. We've been discussing the possibility of dollar rally for the past several months and after several rejections above 1.40, we may now see continuation; however, a confirmation of a close below 1.3750 is a must. The market reaction to a doomsday dollar following further monetary easing by the Federal Reserve, in our opinion, has been an over-reaction. Most noteworthy, we want to point out that the United States doesn't have any problems attracting capital at such low interest rates. The problems may arise when the Fed begins to unwind their holdings. At that time, interest rates may have to go up in order to offset the supply. Until we see a major fundamental trend change in TICS data, the market can only speculate as to what will happen down the road. With that being said, anything can happen and the trick to successfully trading forex is the ability to adapt to current market trends.

Courtesy of CNBC: The Biggest Holders of US Government Debt

10. Insurance Companies - $260.6 billion

9. Depository Institutions - $273.7 billion

8. United Kingdom -- $448.4 billion

7. State and Local Governments -- $534.7 billion

6. Pension Funds - $643.8 billion

5. Mutual Funds -- $648.6 billion

4. Japan -- $836.6 billion

3. China -- $868.4 billion

2. Other Investors/Savings Bonds - $1.266 trillion

1. Federal Reserve and Intragovernmental Holdings -- $5.345 trillion


According to WSJ, 15 of world's advanced economies will have to raise $10.2T in 2011 to repay maturing debt and finance existing budget deficits:



- US needs $4.2T (nearly 30% of GDP)
- Japan needs $3.3T (nearly 60% of GDP)
- Debt requirements for notable EU nations: Greece needs $69B, Italy needs $462B, France needs $570B, and Portugal needs $46B - all nearly 20% of GDP


World Bank President Zoellick said leading economies should consider readopting a modified global gold standard to guide currency movements - FT



According to Zoellick, a successor is needed for the Bretton Woods II system of floating currencies, which has held since the Bretton Woods fixed exchange rate regime broke down in 1971.


Don't forget, we will be hosting Live! Trading sessions this week. Premium members may access the direct link in the "Members Downloads" section. The room will be open 15 minutes prior to trading.

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