Federal budget figures were released couple of days ago. Finally last night I found some time to read up on it. No surprises, really, most of this stuff was known before. Current year brings the biggest hole in history, with deficit projected to be at $1.84 Trillion. Next year, 2010, is expected to produce $1.26 Trillion shortage. After that, deficit is expected to start dropping more, to about $500 Billion in 2013 and then starting to soar again as the costs of government health care programs and Social Security increase. Big, big hole with no bottom in sight. These figures are based on meeting certain economic numbers, in order to produce revenue for government. Most economists call these assumptions rosy and not realistic. For example White is projecting that economy will shrink 1.2% this year, followed by 3.2% expansion next year. Survey of economists sees much grimmer picture with 2.6% decline in 2009 and only 1.8% growth in 2010. If this is the case, budget deficit is likely to revised higher.
Administration is proposing new taxes in order to narrow the gap. Among many potential new duties, one touches trading community. Income derived from trading futures and options will see changes in the way it is treated for tax purposes. White House expects this measure to bring extra $2.6 Billions annually. With Forex trading becoming more and more popular, I will expect a bill aimed specifically at currency traders. Not this year, but with administration looking everywhere for additional funds, one could be realistically expected within 2-3 years.  Focusing on foreign exchange is not without precedent. Few years ago proposal was floated in United Nations to impose world wide tax, or fee, on each and every money exchange operation, including Forex trading. I don’t remember details of the top of my head, so might be mistaken, but I believe proceeds were meant to fund some environmental issues, mainly plugging the ozone hole. Would come as no surprise to me in our government also singles out Forex traders to provide badly needed revenue. Well, some of it.
Last post discussed a buy order in EUR-NZD. This order was filled and trade is under way. Also, I wrote about JPY using NZD-JPY as an example. Charts were to follow today, so here they are.

Yesterday NZD-JPY was lagging behind other Yen pairs moving down. Sell level was at 57.90 and another one at 58.85. Price did indeed go down, but not before moving sideways for some time.

Second sell order was not filled, few pips too high, but price did catch up to all other JPY crosses. Once the move started it was fast and met objective of 57.00 just few hours ago.
Zooming out to 4H chart. Even though Kiwi is under pressure now, I don’t think NZD-JPY has much more down potential. This applies to all Yen pairs.

I expect to see support at around 56.40 or so.  Not too far away from here. I have no plans of buying a number, but want to watch it on hourly chart. Once next minor high is formed, getting in above it is a real possibility. Most of the time it takes a day or so for price to develop a reversal set up that I like. With any luck, by this time tomorrow one might be ready.
EUR-NZD had a nice run over last hour. My target was met at 2.3063. Chart tomorrow.

Mike K.