Forex and the GDP's

Earlier this week in forex news, Germany reported huge numbers in terms of its' GDP. And inasmuch as Germany is the economic engine that powers the EZ, one would be inclined to think that we should look for big numbers out of Europe when its' time to report. At the same time, Germanys' export numbers were huge, but the admin stoutly declared that the economy is more than just exports. HMMM...something sounds a bit fishy there. But until they can show us otherwise, exports is where their action is.

On this side of the pond, we have rapidly deteriorating numbers. Housing down, durable goods down, unemployment up (with new weekly numbers out tomorrow). Think they will be encouraging? I have had my doubts about this latest USD strength being a real flight to safety. After all, gold is off it's high, and not putting in new ones daily. This should indicate that a flight to safety may not be what is happening.

Perhaps it is only a retracement from a technical perspective. We shall see. For now the USD is getting dumped in anticipation that the GDP numbers they will present on Friday will be less than stellar, and may not even reach the forecasts from the Advanced reading. Remember, when it comes to GDP, there is the advanced or 1st reading, the second reading and the final reading. If you are looking at a forex news calendar, they will often be denoted by an A, S or F. And as a rule, they move the markets less with each reading...unless there is a notable departure from the previous reading.

I have a hard time believing that Friday's second reading won't be a disappointment. The real question will be, "How will the market respond?"

Will it see a deteriorating US economy as a sign to succumb to rising fear of an all out depression? Or will the Euro currencies, led by robust Germany, simply take the lead? Will all these austeriy measures be deemed a positive while the US is seen as extending more stimulus insead of tightening it's belt?

These are uncertain times in the forex. The most treacherous trading I've seen in some time. I am thankful for the nice return we've seen this month, more than most interest bearing accounts pay out in a year! And I am encouraged to have so many of you write to me and let me know that you have fared much better than our official numbers. That's great!

Let's continue to be cautious. Nobody ever suffered from being careful. Lastly, for those who wrote in today, and asked what I meant by "making money by standing aside", that is drawn from an old Jesse Livermore quote in his classic trading book, "Reminiscences of a Stock Operator". It's well worth the read. But he says there that he made more money by staying on the sidelines than by jumping in on every trade or price movement. As he finished very, very wealthy, his advice is worth paying attention to!

Happy Trading,
Bill