(Read: Excellent Shorting Opportunity!)

Home CDs ETFs Options Futures/Spot The Dollar Crisis Is Coming... Could Be the Opportunity of the Decade. Full Details in FREE REPORT >> Currency Capitalist >> Global Currency Options >> The Money Trader >> Exotic Forex Alert An Inside Look at Our Best Trades: Now Is Your Chance to Get On the Early Bird List for Ashish’s Latest Trade Secrets. Click Here for Details. FX University Daily: Wednesday, June 24, 2009 A Tipping Point for Russia (Read: Excellent SHORTING Opportunity for the Ruble) Also In Today’s Letter… Why the Ruble is Headed South It’s Fed Decision Day… Real: Best Performer of the Majors This Week! I love sitting back and watching exotic currencies when they near a tipping point. By that, I mean that they could easily (and quickly) go either way, depending upon how investors perceive the global economy in the near-term. So what’s going on? Russia’s Micex stock index has now dropped just over 20% from its 2009 highs, which technically puts it back into bear market territory. If this trend continues, it could really scare investors back out of Russia…its stocks…and of course, its ruble! In fact, you can see this story already starting to play out on the chart below… The Ruble Nears Another “Tipping Point” If the scare continues on, then the USD/RUB pair will bounce back upward off of that green uptrend line as traders sell rubles and buy dollars. On the other hand, if the pair traded down into the bottom circled area, below the uptrend line…then it means that investors are willing to stick it out and hold onto their rubles for the time being. But honestly, I just don’t see that happening. The 22% drop since its June 1st peak has been swift. It’s scaring the pants off of many investors right now. That’s what makes this ruble story so interesting. You see, formerly this Russian index of 30 companies roared upward 135% since last October and that caused the USD/RUB pair to dive. However, if this downdraft continues onward, then rubles will be sold, as investors flee Russia for greener pastures in other currencies abroad. The first stop out of Russia’s ruble will most certainly be the U.S. dollar. It turns out that my colleague Ashish Advani agrees with me. He posted his own bearish views on the ruble on his blog this morning. Let’s listen in… Why the Ruble Is Heading South… The recent drop of over 20% on the Russian stock market has me thinking about Russia and what’s coming next for Russia in the coming months and quarters... The Russian Central Bank has been trying to help with the liquidity crises. They’ve been slashing interest rates in a big way. Of course, that’s also caused the ruble to drop dramatically in value. The recent economic data suggests some tough times ahead for Russia (even with oil climbing higher!) Andrei Klepach, Russia's deputy minister of economic development, just announced that real GDP contracted by 11% year-over-year (YOY) in May. Real GDP also contracted by 10.2% YOY over the first five months of this year. That’s not all. It’s expected that Russia’s second quarter GDP number will decline about 8%. For the whole year 2009, economists are saying GDP could contract by 6-8% year-over-year. Meanwhile the IMF has forecast the drop to be around the 6% mark. All of this seems to clearly indicate that the recession is deepening in Russia. Let’s see what other indications we can get on the economy: Industrial output fell by 17.1% YOY in May. Output also dropped by 16.9% YOY in April, and 15% over the first four months of this year. Retail sales dropped by 5.6% YOY in May, after falling 4.5% YOY in April, and after falling around 1.4% YOY over the first four months of the year. The only silver lining on the horizon is that unemployment rate eased back to 9.9% in May, from 10.1% the month earlier. The trade deficit has slowed down to $9.8 billion in May. For the first five months of 2009 this put the trade surplus at $36.3 billion. It stood at S$83.3 billion one year earlier. Exports were lower by 47% YOY over the first five months of the year, with imports down by 40% YOY. The combination of the weak real economy outlook, plus the dramatically lower trade surplus suggests a coming weakness for the ruble. Thanks Ashish! Okay, back to me… Here’s Why I’m Watching the Ruble Right Now I bring the focus to the ruble because of the BRIC nations that have rebounded so well…Brazil has only fallen about 8% off of its 2009 peak. India has dropped about 7% and China is roaring on and is at its higher levels for 2009. So Russia’s currency would be the first to “feel the pain” if investors panic and head for the hills. Keep an eye out on this one to see what traders and investors alike do with the ruble from this point. Get out your popcorn, folks…it should be interesting. Happy Trading! Sean Hyman, aka Professor FX P.S. If you haven’t checked it out yet, I urge you to visit Ashish Advani’s new blog. He’s answering reader questions, uploading FREE trading videos, and he just finished his latest letter to all his readers. You can view it all here FREE right now. Internal Sponsorship Attention Traders: Free Training Videos As you probably know, Exotic FX Alert (aka "Big Game Hunting") has been sold out since December. Maybe you've signed up for the waiting list. As of this morning, more than 2,000 people have. Anyhow, after 6 months of being closed, we're re-opening it June 25th. In anticipation, Exotic FX editor, Ashish Advani has created several training videos to help you make an informed decision. Video #2 - Militant Risk Control To KEEP Your Profits More GREAT stuff to come Special Comment: It’s Fed Decision Day And the Real and Commodities Are Reacting Accordingly… By Chuck Butler Well, overnight, the euro climbed as high as 1.4140, only to sit at the cusp of 1.41 as I write this. Of course, 1.41 certainly looks a lot different from the 1.35-1.40 range we've seen in recent days. Once the euro got going, or the Big Dog jumped off the porch, the other currencies (little dogs) were also on the rise vs. the dollar in the overnight markets. And after spending Monday circling the bowl, commodities came back with a vengeance! And we all know that when the commodities rally, so do commodity currencies including the Aussie, kiwi, Canadian dollar (loonie), Brazilian real, and South African rand! Speaking of Brazil... this currency can definitely give you whiplash! Recall that my colleague Ashish was saying “buy the real!” on Monday? That same day, the Brazilian real moved back above "2” (i.e. the real was not doing so hot in dollar terms). But since then, the real has posted the best performance of any currency on earth! In fact, Brazil's real just had its biggest gain in more than a month, as commodities rallied. The currency also bounced back after investors "overreacted" yesterday. At first, they believed that Brazil’s Central Bank would intervene to keep the real at "2," but as I said, it turned out to be an overreaction. Instead, the real gained 2.7%! The real took “best performer in the world” for yesterday with its biggest gain since May 4, to 1.9794 per U.S. dollar. Not to mention, the real has gained 17% this year, making it the best performer overall among the 16 most traded currencies. “Hey! Isn’t There a Fed Meeting This Week?!” With commodity prices rallying like this, it looks like it finally “occurred" to traders that the Fed’s FOMC meeting is this week. Also, the Fed will probably signal that they’re holding rates to near zero in the U.S. for the rest of the year. Now why would that be a feather in commodities' hat? Ahhh, grasshopper... You have to remember that the underlying fear in the markets is that the Fed will NOT be proactive in removing their stimulus when inflation begins to knock at the door. Making a statement that interest rates will remain near zero for the rest of the year will only add to that fear in the markets. And what will people flock to when inflation is racing toward double digits? Commodities! Of course, tomorrow will be a different story should the Fed not make an interest statement like that! So, the Fed's FOMC is today... I just can't see them doing anything but trying to calm the markets' fears about inflation, while keeping rates Steady Eddie. It’s a Wonder Those Fed-Heads Still Have a Job… You all know that I'm not a fan of the Fed. I just don't see how those Fed-Heads can keep their jobs, when their main task is protecting our currency’s value – and the dollar has lost over 90% of its value since they took over in 1913! I mean, the Fed is NOT a government agency, folks... It's supposed to be an independent entity. But now, the Fed has their hands in all kinds of things that aren't in their job description. They’re also in cahoots with the U.S. Treasury. Before we know it they will be regulating all the banks and financial institutions... All from doing such a good job at protecting the dollar’s value! I shake my head in disgust... And I should NOT be the only one doing so! So, while I'm on my soapbox, and ranting at the Fed, and the people making the decisions… let’s talk about Bernanke. Big Ben Bernanke is up for reappointment. If I were the one reappointing him, I think I would like to see Big Ben come out and say... "I'm in favor of Ron Paul's Bill to audit the Fed." Now, that would cause me to fall out of my chair from the shock of disbelief! Speaking of the bill to "audit the Fed," I believe every voting citizen should contact their representative and let them know you support the bill to "audit the Fed"... While I'm up here on the soapbox, I might as well get this rant off my chest too... Folks, I think we're in for yet another stimulus package. Yesterday, during a press conference the president was asked about that very thing, and his reply was "not yet." Now you know me... I said after the first $150 billion in the spring of 2008, that there would be more. I also said after the $787 billion this past winter that there would be more. Does a "not yet" from the government that loves to spend money, give you a warm and fuzzy feeling that they won’t spend another hundred billion? I didn't think so! That’s it for today! Have a Wonderful Wednesday! Chuck Butler Chuck Butler, Editor of Currency Capitalist and President of EverBank World Markets Taking the Long View of the Currency Markets Chuck Butler focuses on the factors that affect a currency’s value over the long run - from trade and fiscal balances to interest-rate policy and credit expansion. Because of his concentration on the fundamentals, he has correctly called the dollar’s demise and the euro’s rise since 2001, as well as many other important long-term moves. Internal Sponsorship “Scoop up your share of the world’s biggest cash pile (4.1 trillion) — without all the soul-crushing, time devouring, work…” Make your life easier, happier and more fulfilling. Stop staring at your computer screen, your technical analysis manuals—and purge all that unnecessary time consuming work. 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