| What Makes Forex TIC? |
 The U.S. Department of the Treasury releases the long term Treasury International Capital (TIC) data in the middle of each month. TIC data measures transactions of all long term securities minus domestic purchases. The remaining money leftover is foreign investment in US long term securities [1]. Many economic drivers of a nation's currency are global, and having insight into where global money is flowing into gives the Forex trader a signal where to invest his/her money.When analyzing TIC data, it's important to remember the United States' Dollar and Treasury Notes role in the global investing landscape. US backed securities are seen as a safe haven in a tumultuous environment. Assets such as oil futures and stock shares of individual businesses are viewed as “risky” assets because they require a growing global economy to appreciate in value. When times are good, more trucks are on the road, machines run longer, more jets are in the sky and more money flows into businesses. Oil demand is up, so the price of oil follows. The Forex market has its own risk assets, namely the Euro, Australian Dollar and Canadian Dollar. These three currencies are the barometer of risk appetite when compared to the US Dollar, and the ultimate safety hedge, the Japanese Yen. The Australian Dollar and Canadian Dollar have earned their risk merit badge by being major global producers or crude oil and precious metals. Their GDP is influenced by the price gold, oil and silver. Therefore, the currencies' value is closely tied to the prices of these risk commodities. Upon the Euro's inception, it was seen as a counterpart to the US Dollar, but its reputation is more psychological than the other two. The TIC flows gives Forex traders an insight into where global money is headed, and therefore what the global sentiment is on the economy. US Dollar/TIC price deviation could be the first sign of a possible reversal. For example, if the US Dollar is in the midst of a strong rally, but TIC flows have been trending down or even out of US securities, a reversal back into risk might be in the works. Conversely, foreign cashflow into US securities in the midst of a US Dollar selloff could be a clue of a “flight to safety.” It is important not to get “tunnel vision” when analyzing TIC data. Instead, look for trends in the data for indicators. For example, from March 2008 to June 2008, heavy cashflow into long term US securities occurred just prior to the Lehman Brother's bankruptcy in September. Once news of the Lehman bankruptcy broke, foreign purchases decreased, and some months even reported an exodus out of long term US securities. Faith in the US debt was temporarily shattered, but once the US Dollar resumed its role as a safe haven, TIC flows into the US returned. The immediate impact of the news release on the Forex market is mixed. A swoon of volatility is common, but the release may also make minimal market impact. Source: US Department of the Treasury, http://www.forextradinghq.com/tic-treasury-international-capital.html [1]. |
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