Aussie, Loonie Parity

The Aussie has now passed parity, is worth more than the US Dollar.

And the Loonie (Canadian Dollar) is close to reaching parity.

Aussie Dollar Touches Parity With US Dollar

It has backed off a bit this morning, but this appears to be an omen -- an ominous one for America!

Reserve Bank of Australia Raises Rates, Shocks Market

Dumping Dollars: Russia Diversifies Reserves

Russia may add the Australian and Canadian dollars to its international reserves for the first time after fluctuations in the U.S. dollar and euro.
“Adding the Australian dollar is being discussed,” Alexei Ulyukayev, the central bank’s first deputy chairman, said in an interview at an event hosted by Bloomberg in Moscow last night. “There are pros and cons. We have added the Canadian dollar but haven’t yet begun operations” with the currency.

Dollar Drubbing

The Dollar is taking a beating today.

Dollar
EuroAussieBritish Pound

Commodity Currencies Take Off Too!

Aussie Dollar Skyrockets

Three More Currency Trends

Here are three more downtrends. This time they represent reversals of sentiment in three of the worlds strongest currencies. Two, the Australian Dollar and the Canadian Dollar, are tied to the downtrends in commodity prices in recent weeks. The Aussie and the Loonie, as the two are known among Forex traders, are known as "commodity" currencies for this reason. The Loonie also seems to be hit by its close relationship to the U.S. economy, according to a Bloomberg article this evening. Note in the charts the engulfing patterns on the Loonie and Kiwi charts.

The third one, the New Zealand Dollar, has had the highest interest rates among the developed nations of the world, but economic weakness has forced the Central Bank of New Zealand to recently begin lowering interest rates for the first time in several years, and the Kiwi's strength has begun to wane as a result.

One reason why I am always scanning the financial markets for existing trends is that once I find one, one of the easiest ways for make money in futures is to find an existing trend and then position myself to enter that trend. One must first find a trend, before one can trade it. Lately, I have set a goal for myself to scan more broadly to locate trends, so that I can ride those trends like a surfer rides a wave. Here was a post from a few weeks ago on the subject:

Don't Just Trade With the Trend. Find It!

Australian Dollar (Aussie)

Canadian Dollar (Loonie)

New Zealand Dollar (Kiwi)

Dollar Drubbing

The US Dollar is taking a bit of a beating tonight in active Asian trading. Here are the Euro, Yen and Australian Dollar (Aussie) in overnight trading, all rising steadily against the US Dollar. One certainly must wonder if the Dollar's dip is due to market reaction to the huge bail-out engineered over the weekend by the U.S. Congress. More crippling debt doesn't inspire much confidence in the greenback, or the capability of the U.S. economy to manage the debt burden that is growing exponentially. This should send a message to the Congress, but chances are, they won't listen.

Euro
Yen
Aussie

If grains won't cooperate, then...

let's short the Aussie!

Saving Money Trading Forex

The Chicago Mercantile Exchange allows futures traders to trade Forex with tighter spreads and lower commissions.

Most of the Forex brokers claim that their trading is commission-free, but this isn't entirely truthful. Weren't they ever taught by dear old Mom to tell the whole truth? Instead of charging a commission, they just widen the bid/ask spread and make their profits that way. It is much more expensive for a trader to trade that way, because that bid/ask spread ultimately comes out of of the trader's pocket! There is no free lunch, and we traders are paying for the lunch!

I have come to learn that it is to the benefit of traders for orders to be processed through a centralized exchange like the CME. Since all orders are processed through the exchange, spreads are generally only 1 tick for liquid futures contracts. With a commission of only about $4 per trade, the break-even point is only 1-2 ticks.

Contrast that with the typical Forex broker. They charge no commission (so they say), but instead, they widen the bid/ask prices to 3-5 pips. Thus, your cost is at least $30-$50 just to break even. You must make from 4-6 ticks/pips before you can make a profit. And that's assuming there is NO slippage! This is the dirty little secret that the brokers of the retail Forex industry hope traders will never learn. They make their livelihoods from trader ignorance! But ultimately these brokers shoot themselves in the foot; because the churn in retail Forex traders is so high, they must constantly replace their client base. Their marketing costs sky-rocket, and they spend astronomical amounts of money seeking to constantly bring in new business. No wonder they widen their spreads so much!

Which would you rather do? Trade the retail Forex market, where you must make $40-$50 just to break even, or trade the currency futures through the CME, where you need to only make 1 tick ($10-12.50) to break even? The answer should be obvious!

As an example of this, my own broker funnels their Forex trades through one of the world's largest, most prominent Forex brokers. If I trade Forex (major crosses) through my broker, they charge me $2.67 per trade with a bid/ask spread of about .5-1.5 ticks (pips). However, if I trade directly with the same Forex broker at the retail level, instead of through my own at the wholesale cost, that same Forex broker widens the bid/ask spread to 3-5 ticks (ticks=pips), a difference of at least $30 in cost to the trader! The orders are both processed through the same company!

That's why I trade Forex through the Chicago Mercantile Exchange, where I pay about $4 plus 1 tick spread on futures processed through the CME exchange, rather than trade Forex through a retail Forex broker. I can also trade through my futures account rather than open a separate account just to trade currencies. It all comes down to MONEY - MY money!

In a business in which most people lose money, I'm not going to throw money away by spending more than I need to. The bid/ask spread is of critical importance in trading profitably. The tighter the spread, the more money in MY pocket.