I am not an extremely old man, so I have not been exposed to the currency markets for hundreds of years, but this has got to be one of the most prolific battles in history. It is incredible the resilience on both sides at this point and the willingness to keep the range in tact. I guess we are just buying time until the masses are sure which way to go. One thing is for sure, when the market figures it out ..... it cold be historic also.
My guess is we'll see a break to the upside, though I don't understand why people think the EUR should rise like that. We could see a repeat of the 2004 winter where the Euro just kept going for no good reason except people wanting it to.
Right now, my belief is that the break will be to the downside. If not, I'll be out without losing more than 2% of liquid net worth.
I don't know about you guys, but August was a damn TOUGH month for trading the EURUSD for me. Whipsaw moves without any followthrough. I trade on hourly bars, and one of my FX accounts got churned. Hopefully the rest of 2006 wont' be as whippy and unpredictable. RoughTrader
I'm getting short EUR/USD here. I think the recent choppiness signals a change in trend. By now, it's pretty well accepted that growth in slowing in the U.S. while it is robust in Europe. My guess is that a lot of dollar bulls have given up. The COT reports show that large speculators have been massively long the Euro for quite a while now. But the Euro has pretty much stopped appreciating against the dollar. It's mostly range-bound now. I think some of the big guys have been slowly unloading over the past few months, and this has been causing the choppiness. EUR/USD is at 1.2826 on Oanda right now. I'll be the first to admit that my theory is pretty flimsy. I definitely don't see this as a bet the ranch kind of situation. But let's see what happens.
After EUR dropped to 1.2797, I covered (at various points near this level) and even went slightly long. I guess I find it difficult to let my my winners run. I think there may be too many trend-followers in currencies now, so contrarian trading has become more profitable. Of course, risk management with a contrarian trading system is trickier, since the more the trade goes against you, the more attractive it looks from a contrarian standpoint. And if you really are wrong and are very slow to close the trade, you may be facing a disaster. Well, if making money by trading were easy, we'd all be rich. When a trade goes against me, I'm constantly weighing my belief about the direction against the need to manage the risk. I don't really have a strong justification for going long other than a suspicion that we may be in for some more choppiness before the trend finally changes. Pretty tight stop on this one - I don't have a lot of conviction.
I should've let the winner run. At least I used a tight stop when I changed my mind. Re-reading my posts, it looks like I actually had some good reasons for getting short and then I reversed on a whim.