Monday, September 11, 2006

Yen is clear, Euro is foggy

What I mean to say is that with today's big drop in Japan's machinery orders, it's becoming more and more clear that Japan's rates will stay put. Japanese machinery orders came it at a shocking -16.7% while the forecast was around-7.5%. With such a negative number, the Yen dropped like a rock against both the USD and the EUR. But I didn't need to tell you that. All you have to do is open up a chart and you can see it for yourself.

With a clearer direction of the Japanese economy, traders were selling the Yen up the wazoo and buying currencies with potentially stronger economic futures. The USD and the EUR were the 2 that stuck out the most. Although the common consensus is that the Fed is pausing their ferocious rate hikes, it is not a complete understatement to say that the Fed could still raise rates as shown by the past few economic reports which showed dollar positive numbers. The ECB is also expected to raise rates 2 more times this year which made the Euro another good currency to purchase against the Yen.

However, if you take a look back at the EUR/USD, the most liquid currency pair in the Forex, you'll notice that the Euro made a jump back above 2700 which means that the uncertainty battle between the Fed and ECB is still not over. On Friday, we saw a drop down to 2650 in this pair which was something we haven't seen in a long time. Well now we are back at the 2700 level and once again we'll have to wait for a clearer fundamental picture.

Alba saw no action today as there was a wide EU range which meant that there was little chance there would be a breakout. That was exactly the case today as the pair simply traded within the EU range.

Longer term I am waiting for some retracements before looking at possible entries. Many currencies have been making 20 day highs and lows such as the Yen, Euro, and Pound. I like to wait and see if there will be any profit taking and once the retracement occurs, I want to see if that 20 day high/low can be broken. This would give me a good confirmation that the trend is actually a trend and not just a short term fluctuation. So no specific entries yet but I'll know in a couple days whether or not anything pops up.

On a final note, although Roger Federer (a Swiss) defeated Andy Roddick (an American) in the US open it still looks like our currency is still beating them.. YEA! Go dollar! Sigh...first we lose in the FIBA World Basketball championships and now the US Open. What's going on?!

Hope you all had a great weekend and let's get ready to rock this week!


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