Why USD is rebounding

nctree

I found this on a blog

Just got off the phone with a buddy of mine who supplements his primary income pretty significantly by trading FOREX. In fact, he's been talking for the last year or so about leaving his current career and becoming a full-time trader.

So, today he told me that he's been shorting the dollar against the euro for the last few weeks (no-brainer), and that going into friday he had an open trade that was up about 140 "pips". His plan was to let it ride through the weekend.

Unfortunately, he'd misinterpreted some of the finer points of the recent FINREG law. Apparently, one of the provisions of that law took effect Friday. This provision restricts (essentially prohibits) US FOREX traders from operating through foreign brokers. My friend trades through a broker in the UK. So friday morning, he got an email from his broker saying that his open short trade against the USD had been cancelled. So a potentially big gain for my friend was wiped off the books.

Now first, I should emphasize that this is anecdotal. I haven't taken the time yet to investigate the regulation in question. I'm simply restating the situation per my conversation with my friend. But if this is true (and I've got no reason to think that it's not) then a bunch of FOREX traders who've been betting against the USD closed their positions friday, or had them closed involuntarily. This could very well be the root cause of the dollar's sudden rise on Friday and PMs' relative drop.

The question is, how long lasting will this impact be? How long will it take those investors to move their trades to US-based brokers and re-open their positions? Gonna have to meditate on this for a bit while I knock out my sunday chores. But since next week's prospects are an ongoing conversation this morning, I figure I'd throw this out there for everyone's consideration.

ETA: Reference link below

http://forexmagnates.com/fxcm-is-shi...nts-back-home/

When will accounts for US residents be repatriated back to the United States?

All forex accounts for US residents trading overseas will be repatriated back to the US by October 18, 2010.

For US residents with FXCM UK, the switch back to FXCM US will most likely occur the weekend of October 15. The switch will occur over the weekend so that there is no disruption to your trading. The existing username and password you use to login to your account will also remain the same. US residents will receive information very early next week by email confirming the timeline.

This would confirm what my friend had told me. "No disruption" my ass.

greatinter