February 25th, 2009

Forex Reversal Again? FXE (Euro) and FXA ($Australia)

I’ve written frequently here about my hopes, frustrations and disappointments with the foreign exchange ETF’s:

In those I’ve said the following:

“If I believed in conspiracy theories and thought it was even remotely possible, I would think that major central banks acted in harmony to stem the “commodities speculative bubble” by propping up the $US, depressing their own currencies and pushing gold and silver down…What other explanation could there be for everything happening just as the Fed was saving the US mortgage lending industry and housing market?”

or

“The $US started weakening along with everything else priced in $US’s like precious metals and gold. However, that could have been a flash in the gold pan (pun intended) since after surging for four months, the $US has done a 180 degree turn and is taking along with it, again, hard commodities. Perhaps the other central banks gave the Fed five months to the end of the year to “fix” the US economy by year-end before they ended their support.”

But today, others have been commenting about the strength of the dollar, the weakness of international economies and the U.S. being seen as a safe haven for funds from around the world. I can’t opine on what others write other than to say it seems to me like a totally unbelievable reversal from the sorts of things that were said and written just 6 months ago. As such, it can’t possibly be totally true and accurate.

In the light of the surprising rise in precious metals prices, I revisited some of the foreign exchange ETF’s and believe I now see the start of an important impending change – the Currency ETF’s seem to be trying to now form bases soon leading to another change of direction. The most far along is the Euro (FXE)

and the other is the Australia Dollar (others are FXF, Swiss Franc and FXB, British Pound)

I’ve taken a small position in the Euro so I can watch to see if this turn does pick up some significant momentum. I’ll report back to you if it does.

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