Trade Team Update – – 7/22/Key Levels

July 23, 2008 at 7:41 am Leave a comment

By FX Insights Moderator

Trade Team Update – – 7/22/08

As physically and mentally demanding as the Forex market can be, and as stressful as it can be, sometimes you just have to step back and laugh at the interesting cast of characters that make up the retail side of FX…

I had to do this today after dealing with a barrage of private messages and emails asking me why the euro was tanking… you probably don’t even care, but oh well, this is my forum… 

Approximately 1 minute and 36 seconds after Philly Fed Plosser uttered a few choice words I posted his comments in the chat knowing they would move the market… 

Let me cut to the chase because what happened today is completely inexcusable for anybody trading live money in this market — the inexcusable part is not knowing a powerful central banker is speaking and what this powerful central banker is telling the markets. 

I know it was mostly tech traders who were lost in the dark and wondering why the euro was tanking, but being a clueless tech trader is still no excuse because we gave 12-hours advanced warning of what could happen today:

In my view the key event we need to watch is Plosser’s speech. He’ll be speaking about the U.S. economic situation and I surely expect Plosser to talk about inflation. 

If you read yesterday’s update you saw what some of the Fed’s have been recently saying on inflation. Now, what the market needs to see and needs to hear is all of the Fed’s key players singing the same song and reading from the same script, which is hawkish rhetoric on inflation, talk of raising rates, and general optimism for the U.S.’s economic future. 

That’s an excerpt from yesterday’s Team update… can we possibly spell it out any clearer? The other point is, even though we give advanced warning on these events and the possibilities it’s still up to each trader to do their homework and to stay at the top of their game at all times. 

If you want to gamble with techs, fantastic, more power to you, but please at least know when a central banker is speaking. Trust me when I say this… it’s highly unlikely that the Fed and ECB are looking at candlecharts and all the fancy colored lines before they get in front of the mic to make either hawkish or dovish comments… 

Do yourself a favor and learn what really moves markets. If you do, I promise you’ll get out of the herd that loses 95% of their trades and you can join our little group here that wins 95% of the time.

EUR/USD:

A quick re-cap of today:

Plosser said he wants to hike rates no matter how bad the employment and financial markets are and he wants to hike them sooner rather than later. That’s all he really said and that’s all he really had to say.

Those few comments dropped the euro 200 points, dropped gold $35+, and dropped oil $4+. This isn’t rocket science, it’s pretty simple stuff. 

Is the end of the euro as we know it? No, I don’t think so. Plosser is a well-known hawk and his rhetoric’s effect has already worn off. 

Now, what could further beat up the euro is tomorrow’s fundamental data. All signs are pointing to the downside for tomorrow’s data. The market is expecting the worst and will probably get the worst if the truth is to be told because economic conditions in Europe are abysmal. 

Should the key data surprise to the upside, obviously this would be EUR supportive and will help breathe some life back into gold and oil. I’m expecting and forecasting the worst. 

That being said, I did buy the euro on this drop and will hold those positions for a potential move up and over 1.5800 between now and 0200 EST. And then if we get a good rise, I’ll add a new short or two or three… price action will dictate my next moves. 

The fact that the euro didn’t sustain a break of the key 1.5750 level keeps the EUR poised to move back up. Now, should we have another break down and we sustain a break of the 1.5750 level we should be clear to make a move to the 1.5680-1.5650 level. If bad EUR data is the catalyst for another leg down you can expect to see the high to mid 1.5600’s. 

I’m still overall bearish on the euro, just as I’ve been for months and I will continue to be bearish, nothing will change this bias at all. 

That’s all I’ve really got to say at this point… I’ll post my key levels later this evening when things become more clear.

Key Levels

Key upside levels:

1.5823
1.5834
1.5862
1.5881
1.5904

Key downside levels:

1.5754
1.5739
1.5718
1.5703
1.5683

Beware of today’s euro data which is forecasted weak to the downside… keep a watch on oil and gold and of course the euro’s price action as the data is released. 

I will be looking to short any rises I can get my hands on. In order for the euro to gain any upward traction we’ll at least have to sustain a break above the 1.5810 level.

On the downside, a clean break of the 1.5750 level opens the door to run down to test 1.5700 and then points lower. 

Be smart. I expect we see some more shaninigans over the next 14 or so hours.

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Trade Team Update – – 7/23/08

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