Euro Forex Trading Forecast: $1.50 by September?

The euro is heading higher in forex trading on the currency market lately. Indeed, with risk appetite running high, it is little surprise that the euro is doing better as demand for the U.S. dollar as a safe haven dwindles.

Today's news that risk appetite has improved markedly is sending the euro much higher in forex trading against the greenback. And, there is speculation that the euro might hit $1.50 before September.

It would require a significant recovery in the global economy in order for the euro forex trading forecast to reach that point, but it is possible -- provided sentiment remains favorable toward economic recovery.

Kathy Lien says Ben Bernanke is walking a fine line right now

Appearing in front of the House Financial Services Committee Tuesday, Bernanke did very little to help assure us that the U.S. economy is on the right track.

"Bernanke has to walk a fine line right now. He has to weigh the possibility of the downside risks to the U.S..economy," said Kathy Lien, director of currency research at GFT, a foreign exchange and futures brokerage firm in New York. "Even though the global economy is recovering, it's most likely going to be a recovery that nobody feels. There are still a lot of problems with consumer spending."

Bank of England Keeps Rates Unchanged

Yesterday, the U.K. pound dropped in currency trading on the FX market, thanks to concerns over the budget deficit. Earlier today, though, the sterling got a boost in forex trading as the Bank of England announced its rate decisions. GFT's Boris Schlossberg reports on FX360 on the BOE decisions about rates and quantitative easing:

The BoE voted 9-0 to keep rates unchanged at 50bp and noted that GDP contraction in Q2 will likely be smaller than it originally thought. More importantly MPC members decided to keep the present level of the quantitative easing program at 125 billion GBP and made no commitment to increases it in the future stating that they will reassess the situation in August.

The news is somewhat encouraging, and provided the pound with a bit of a rebound earlier. However, the sterling is down again in forex trading -- but not by much. So far, currencies have been reasonably steady today.

China's Spending Spree Could Benefit Commodity Currencies in FX Trading

Commodity currencies may soon see a boost in FX trading. China is considered one of the major economic up and comers, and with it comes vast amounts of money to spend. China has already expressed an interest in diversification, and that country's new investments could especially benefit commodity currencies.

Kathy Lien describes the possibility that China will boost commodity currencies in FX360:

To go out means to look for investment opportunities abroad and by making these comments, China has officially announced that they will be embarking on a spending spree. For investors looking for buying opportunities, they should buy what China buys. In terms of currencies, the most basic need that China has is commodities and their demand could provide support for the Canadian, Australian and New Zealand dollars.

Because of their reliance on commodities, such as oil, gold and other tangible assets, down under currencies and the Canadian dollar do well when trade centers around these things. And with China looking for better returns and a more diverse investment portfolio, it might mean better news for commodity currencies -- and a weaker U.S. dollar in the future.

Buy What China Buys

Last week, China reported that their foreign exchange reserves exceeded $2 trillion and it is under this environment that the U.S. and China will begin their Economic and Strategic Dialogue on Monday. As forex traders and investors look for opportunities in the second half of the year, we encourage everyone to buy what China buys. On Tuesday, Premier Wen Jiabao pushed Chinese companies to hasten their “going out strategy” and for the first time ever, he said the government could use foreign exchange reserves to help companies invest abroad. In other words, the Chinese government has basically given domestic firms the political and financial support to go on a spending spree.