Thursday, August 17, 2006

Dollar fights back

The dollar made a late comeback after the Philadelphia Fed Index came out at 12pm EST. The index came out at a much higher number than expected. Top that with the lower jobless claims and you get a pretty good fundamental day for the dollar. Add to that the weak EU data (CPI, and IP) and you can get an idea of why the dollar was able to gain its ground. I was also reading around and found that another thing keeping the Euro from rising is the fact that there are so many existing long positions right now. If you look at the daily chart (see below) you'll notice that there was a huge rally in the Euro from March to May and since then the dollar has been stuck in a range. Also notice how the price has bounced twice off of the 38% Fib level. This is telling me that the Euro rally may not be over as more traders are buying off of dips.

The widespread sentiment seems to be the at the Fed will most likely pause in rate hikes. The bigger question now is what will the ECB do? With weak data coming out like today for the Euro, the question of whether or not the ECB will raise rates before the end of the year is still up in the air. We are definitely in a range for the Euro albeit a wide range (2950-2500). I think traders will still be buying on the dips of the Euro so I will look at possible long entries on the 00's (i.e. 2700, 2600, and 2500). Short term, I think the dollar will gain a little more ground, but my longer term view on it is bearish.

My AUD/USD trade from yesterday did not trigger as the dollar made a nice gain against the Aussie. I am removing my entry order as I wanted the trade to trigger today. I will keep my eye on it and wait to see what happens before looking for another entry.

I don't really see any good trades right now, so I will not force anything. My goal is to see only what the charts give me and not to let my eyes fool me. I've looked at all my charts and have not seen any good setups for tomorrow so I will continue to wait. Tomorrow, my only trading will consist of the Alba system and I will look at the Cable. I am trying something new on the Cable so I am anxious to see if it will work out.

The only economic report that I will watch out for tomorrow is the University of Michican Consumer Confidence Index which comes out at 9:45 am EST. The number is expected around 83.8. I don't think it will move the market much unless there is a big drop in the index.

The Alba system once again kept us out of the range bound market from 8am-12pm. You can see from the chart that the Euro didn't go anywhere until after 12pm. Unfortunately by that time, I was already done trading for the day. I do feel "left out" as I wasn't able to grab any pips as the dollar made its move but once again, I stuck to my time frame rules and stayed out because it was already past 12pm EST.

Alba result: +0 pips

That's it for me today. Have a great day everyone!

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