Forex technikal and fundamental analysis: Forex Crunch Healthcare Reform Weighs on the US Dollar

Mar 22, 2010

Forex Crunch Healthcare Reform Weighs on the US Dollar

Healthcare Reform Weighs on the US Dollar

Posted: 22 Mar 2010 02:05 AM PDT

The healthcare reform passed the final hurdle in the American House of Representatives. I’m not going to enter the heated debate about the reform – I’m just going to deal with the implications for forex trading.

There are different sides to this story:

The Upside – Strong Government

The historic healthcare overhaul is a great victory for US president Barack Obama. This was one of the pillars of his policy. Although he had a hard time passing it through the complicated legislative system, a hard time winning support for it when there were lots of protests and more than a few compromises on the way, it finally passed.

This strengthens the notion that the country and the economy are under control and that future economic policy can be realized, getting the US and the world out of the current crisis sooner than later. So one hand, this success is positive for the dollar.

The Downside – High Cost of the Bill

The other side is the bill itself – the healthcare reform bill means an additional expenditure of 940 billion dollars that will be spent on the course of a few years. The US government already has a huge deficit. It will have to print more money – devaluing the dollar, or borrowing more.

The US, together with the UK, already risk losing their AAA credit rating. More debt raises the risk for defaulting. Although such a scenario seems imaginary now, this bill could result in a credit downgrade, that will hurt the dollar.

Greenback Depends on Jobs

I think that the high cost of the healthcare reform bill will weigh on the dollar. Similar to Obama’s stimulus package of $787 billion, or Ben Bernanke’s bond buying scheme of one trillion dollars, this program will also have a negative impact on the dollar.

In the long run, a lot depends on employment. If the American economy gains more jobs, prices will rise as well and the Federal Reserve will move on the rates, sending the dollar higher. A continued jobless recovery will hurt the dollar.

What do you think? How will the healthcare reform impact forex trading?

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Forex Daily Outlook – March 22nd 2010

Posted: 21 Mar 2010 01:00 PM PDT

The calendar is light on Monday. Trading will be mostly affected by Friday’s dollar strength and by speeches from key figures: Geithner, Trichet and King. Let’s see what’s awaiting us.

Don’t worry. The action returns on Tuesday with major releases all around the world. Check out the forex weekly outlook details on the major events. Anyway, these events are with us today:

Australia’s New Motor Vehicle Sales fell last month by 3.4%, and are now expected to rise. Will the Aussie resume the uptrend? Check out the AUD/USD forecast for more.

In Switzerland, the SNB Quarterly Bulletin might move the strong Swiss Franc. Interventions weren’t recently felt by the SNB.

Jean-Claude Trichet, president of the ECB, will make a public appearance in Brussels, and could move the Euro. EUR/USD is currently trading around 1.35. For more on the Euro, read the EUR/USD forecast and Casey Stubbs’ latest analysis.

Also Britain’s Mervyn King will make a public appearance today, speaking at the Royal Society in London. King has a tendency to hurt the Pound each time he meets a microphone. Will he do that today as well? The Pound is already under 1.50.

For more on cable, read the GBP/USD forecast.

A day after Ben Bernanke’s speech focused on bank bailouts and didn’t provide any comments about monetary policy, US Treasury Secretary Timothy Geithner might elaborate on the economic situation and move currencies in a speech late in the day.

Just before the day ends, Japan’s Monetary Policy Meeting Minutes are released. This might shake the Japanese Yen.

That’s it for today. Happy forex trading!

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