The Falling Dollar

Word has it that China, Russia, France, and Japan are working behind closed doors to take down the all mighty US dollar. The deal seems to be revolving around the energy sector and pushed heavily by the Arab corner. You probably guessed it by now, oil for the Euro. Or perhaps, oil for gold?

This is speculation, but the recent demand in gold is quite unexplainable. Inflation is not rampant, retail gold sales are actually declinging, but gold price is rising? The only knowledgeable explanation is institutional buying or some kind of unkown demand. Gold can’t rise without demand, and people are having a tough time figuring out where that demand really is. The Independent in the UK has quickly jumped onto this bandwagon and has written a great article worth reading: http://www.independent.co.uk/news/business/news/the-demise-of-the-dollar-1798175.html

Now the big question is, will the US dollar fail? Personally I don’t believe so but with pressure from around the world as a united front, it certainly can. But it is also important to note that months before the US invaded Iraq, Saddam dropped the dollar for oil. Roughly 1 month ago, Iran has done the same and coincidentally criticism on Iran has climaxed. I’m not sure if I can say this is a coincidence, but its worth noting.

On a personal note, I have been short on the USD/CAD since about 1.28 and have made a hefty profit on my currency trading (I use QuestradeFX for my currency trading). All in all, the US dollar is going to get a lot worse before it gets any better. Enjoy trading everyone!

At this point, technicals have me very interested in the commodity markets, where I will slowly be taking positions once again.

Direction: Neutral

Okay, I hope everyone had a good ride with gold and followed my stops. If so, you should be on the sidelines waiting until gold makes up its mind. Right now we can either break up to $1025 or crumble into the $970 range. We might see some see-saw action until next week. Big events to consider will be the meetings with US and Iran, which should have significant impact on oil and dollar markets this Thursday. That being said, gold could follow suit depending on what the dollar decides to do. Keep your eyes open and keep trading!

On another note, it looks like the US government has no care for the USD and inflation is the clear goal. With that being said, I’ve shorted the USD/CAD at an avg of 1.28 and I have fairly decent positions in GDX, HGU, NGD. I’ve been extremely busy lately with work so I haven’t been able to keep everyone updated as much as I hoped for, but I’ll do my best.

In a move to more accurately reflect market pricing, forex fixed pricing will be replaced with variable pricing at the close of trading on February 13, 2009.

Why are we eliminating fixed pricing?
The dynamics of forex liquidity have changed dramatically in the last six months, so much so that fixed spreads are no longer representative of what the market is really pricing.  For currency traders, variable pricing offers:

• More realistic pricing and therefore better execution
• Spreads that typically narrow during periods of increased liquidity.  During these periods the spreads will be marginally better than the legacy fixed spreads and can get as low as 1 pip
• More precise order entry – you can specify your limit and stop prices in 10ths of a pip.

What is the difference between fixed and variable pricing?
In fixed pricing, the difference between the buy and sell price remains the same and the currency pairs are priced to the 4th decimal place (except for JPY pairs which are priced to the 2nd decimal place). 

In variable pricing, the difference between the buy and sell price fluctuates, and the currency pairs are priced to the 5th decimal place (except for JPY pairs which are priced to the 3rd decimal place). The fluctuation in variable pricing is caused by changes in Interbank liquidity.

The chart below outlines our new tier one pricing. If you are a casual trader, this is the pricing you will likely use.

Currency pair	As low as	Currency pair	As low as	Currency pair	As low as
EUR / USD	1.9	USD / JPY	1.9	GBP / USD	2.3
USD / CHF	2.3	USD / CAD	2.3	AUD / USD	2.3
EUR / JPY	2.3	EUR / GBP	1	EUR / CAD	3.5
EUR / CHF	1.2	GBP /JPY	3.8	AUD / JPY	4
CHF / JPY	3	EUR / AUD	4	GBP / CHF	4
NZD / USD	2.3	NZD / JPY	4	CAD / JPY	3.5
AUD/NZD	4.5	AUD/CAD	2	GBP/CAD	3.5
GBP/AUD	4.5	EUR/NZD	7.5	GBP/NZD	17
AUD/CHF	5.5	NZD/CHF	6	NZD/CAD	7.5
CAD/CHF	6	USD/HKD	4	USD/SGD	5.5
SGD/JPY	4.5	USD/NOK	24.5	USD/SEK	25
USD/DKK	8	EUR/NOK	23.5	EUR/SEK	25
EUR/DKK	4

Tier two pricing, previously referred to as volume based spreads, is for more active traders and requires an initial deposit of $10,000 USD. There are no changes to tier two pricing.

Currency pair	As low as	Currency pair	As low as	Currency pair	As low as
EUR / USD	1.4	USD / JPY	1.4	GBP / USD	1.8
USD / CHF	1.8	USD / CAD	1.8	AUD / USD	1.8
EUR / JPY	1.8	EUR / GBP	1	EUR / CAD	3.5
EUR / CHF	1.2	GBP /JPY	3.3	AUD / JPY	3.5
CHF / JPY	2.5	EUR / AUD	3.5	GBP / CHF	4
NZD / USD	1.8	NZD / JPY	3.5	CAD / JPY	3.5
AUD/NZD	4	AUD/CAD	2	GBP/CAD	3.5
GBP/AUD	4	EUR/NZD	7	GBP/NZD	16.5
AUD/CHF	5	NZD/CHF	5.5	NZD/CAD	7
CAD/CHF	5.5	USD/HKD	3.5	USD/SGD	5
SGD/JPY	4	USD/NOK	24	USD/SEK	24.5
USD/DKK	7.5	EUR/NOK	23	EUR/SEK	24.5
EUR/DKK	3.5

More about forex pricing
As a reminder, forex pricing comes from the core of the market through Interbank, the 15 largest banks in the world.  There is a natural spread already in the market that fluctuates depending on liquidity. Questrade includes its commission in the spread displayed.  Important: Questrade does not earn revenue from the entire spread and cannot quote spreads lower than what is received from its banking partners.

Banks do not deal directly with the retail market unless an individual has extensive credit, collateral, and a certain level of trading volume. Questrade provides the retail public with access to a market in which they otherwise wouldn’t be able to participate. As a rule, Questrade continually seeks new partners to offer attractive spreads to our clients.

We value your business. Please feel free to contact us if you have questions.

As you can see, the only real benefit here is the opportunity to trade in the 10ths of a pip. They claim tighter spreads during peak hours of liquidity, but frankly I haven’t seen it. I’ll keep my eyes open in the next few weeks to see if things change. In the meantime, I’ll have to use FXCM or Forex.com.