Trade Team Update – – 7/24/08

July 25, 2008 at 5:44 am Leave a comment

By FX Insights Moderator

Today’s market action can be summed up in one word: weird… all markets were off kilter as we got nasty data out of both Europe and the U.S.

The euro was kept under pressure by the abysmal growth data and the dollar was kept under pressure by weak fundamentals and by commodities finding support and making a move back up. 

The Dow was used and abused today as the housing data showed it’s worst readings in 10 years. Gold and oil stopped their downward slide and managed to claw their way back up. 

As I noted in the chat, the key downside price levels were between 1.5650 and 1.5620. We stopped seven pips short of breaking the 1.5620 level, so the only way to go was back up… funny how that works, huh?

Basically, the EUR/USD was rather out of sync with the market correlated variables and the market correlated variables were out of sync with each other and that just makes for a some weird price action… but, the range trading today was fantastic and I know many of our FXI members took advantage of this and profited well. 

Tomorrow:

Tomororw is a make or break day for the USD. If the USD fundamentals print at or below expected I see no reason the EUR can’t win the day. I’ve been so busy this week I haven’t had any time to do my normal research for tomorrow’s fundamental events but lets just say I’m not bullish on the data.

EUR/USD:

I’ll call myself a euro bull for tomorrow’s trading. As I indicated in the chat I was buying the euro at the 1.5660 level and all price points lower. I’m also holding euro longs from above these levels 

We made attempt after attempt after attempt to sustain a break of the 1.5650 level and failed each time. The closer we got to the 1.5620 level, the faster we bounced and moved back up. Those price patterns should be noted headed into tomorrow’s trading session. 

I’m not ruling out another test of the 1.5650 – 1.5620 level after London opens, but should we bounced up again I see no reason we can’t move on to 1.5700+. 

Of course tomorrow’s fundamentals and the market correlated variables will be key in the EUR/USD’s direction. Should we get weak USD data this will likely set the market correlated variables in motion to work hand-in-hand to give the euro a boost. 

No matter what I’m shorting the rises. I will keep shorting all the way up to 1.6000 if I have to. I don’t care. No drawdown on any euro shorts will even make me blink an eye. I’m strongly bearish on the euro. It can go as high as it wants to and I will keep adding shorts. 

Once the market masses all get on the same page and realize there’s an economic armageddon within the Eurozone and once the Fed and ECB physically begin their respective shifts in monetary policy the euro will take a whipping unlike the markets have seen in recent memory. 

The ECB is not raising rates. I don’t care what kind of crap comes out of Trichet’s mouth, his hands are tied on future rate hikes. Of course, the Fed can’t raise either but the Fed has the much high probability of rate hikes and the ECB has the much higher probability of rate cuts in the near-term. Do the math on that one… 

Look at today’s euro Current Account data: ugly as sin. Look at today’s Manufacturing PMI data: beat up from the feet up… 

I’m patiently waiting for the wheels to be put into motion to push the euro over the side of the cliff. Until then I’ll remain strongly bearish on the euro and almost nothing will cause me to flip flop on this overall view. 

I will depend strongly on the EUR/USD real time price action once London opens to get a clear picture of how to trade today’s market action. Be smart and do not take any knee-jerk trades you’ll get stuck in over the weekend. Do not overleverage and pay close attention to what the market is telling you between now and closing. 

-FX Insights

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Trade Team Update – – 7/23/08 A trade I took

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