Wednesday, October 11, 2006

Wednesday, October 11, 2006

The Now:

After having some nice volatile days in the market, things seemed to quiet down today. There were no major economic reports to push the market except for the release of the FOMC minutes.

The minutes basically confirmed the fact that the Fed is still paying close attention to inflation and that interest rates will probably remain high for a while.

The dollar did make a small push after the minutes were released. The move probably could’ve been bigger but it seems that a small aircraft crashed into a building in New York City. The fears of another terrorist attack (even though the crash was ruled to be completely accidental) may have stunted the dollars push after the minutes.

A couple days ago I mentioned that the Euro would hit 2500. That prediction came true today after the minutes were released. I don’t see the dollar making another push right away unless something drastic happens. For now, I think the dollar bulls have taken their foot off of the gas pedal and are in neutral right now. I think we could see a slight retracement in all the dollar pairs.

Coming Up:

US Trade Balance
8:30 am ET; 12:30 GMT
Traders are expecting the trade balance to improve, especially with the drop in oil prices. The consensus for tomorrow’s report is -66.5bn compared to the previous -68.0bn. If the trade balance report shows a lower number than this, watch for the dollar to make another push.

US Jobless Claims
8:30 am ET; 12:30 GMT
This will most likely be overshadowed by the Trade Balance, but any positive US data right now will just add fuel to the dollar’s hot run. The consensus is 310,000 and the previous number was 302,000.

US Beige Book
2:00 pm ET; 18:00 GMT
Watch for continued statements regarding high inflation or anything to suggest that rates will have to remain steady. This should be more kindling to the Dollar flame if the report shows inflation worries.

Chart Analysis:


2500 is going to be a strong support. You can see that it lines up with the 200 SMA. The Euro got down to 2500 on June 22 and July 18 and both times, price bounced back up. I expect the same to happen again. Even if this does happen to be a new bullish dollar trend, I think we will at least see a retracement as the Euro is showing oversold conditions in both the daily and the 4 hr. chart.


The Cable is taking a pause right now as you can see from the range bound movement between 8500-8600. It’s still near the oversold conditions but we’ll have to wait and see what happens with this pair.


Nothing seems to stop the Swissy right now. It just keeps pushing higher and higher, breaking through resistance like nothing. Both the 4hr and daily charts are showing extreme overbought conditions, and with the huge run it’s been making, I’m thinking about shorting this pair soon. The Swissy hasn’t been past the 2700 level since way back in April. Expect to see a retracement very soon.


There wasn’t much changed in the Yen. I still think this pair will spike to 120.00 before heading back down. Yesterday I mentioned a trade idea to go long at 119.50 and target 120.00. This trade is still in play at the moment. Coincidentally this leads me to another trade idea, which is to fade the 120.00 level.

Trade Idea:

Enter short at 120.00; Stop Loss=120.45; Target=119.50

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