dollar strengthening against Euro?!?!?

Discussion in 'Forex' started by scriabinop23, Aug 8, 2006.

  1. A lot today does not make sense to me, namely the drop in the Euro.

    I bought 50k euros after the fed announcement at 1.28750 and now the value is almost 1 penny less. What gives?

    I would've only expected this behavior after a rate tightening.
  2. naz9403


    i would have to think that a failure to rally on in the euro today indicates this move may be out of gas. Also its hard to get a monster trend going in august. Look back in your charts to see all the major moves did not start until late september or october.
  3. StreamlineTrade

    StreamlineTrade Guest

    Dont trade off of opinion and you should do okay.

    Economics follows the market. Markets predict economic situations which can become self-fulfilling prophesies - not the other way round. Experience oil.

    Put the text book down!

    Good luck......
  4. How true...

    To concur, its amazing to me how traders following prevalent technical analsysis techniques actually create breakouts and momentum. The more time passes, the more I realize TA guides the markets just as news does.
  5. StreamlineTrade

    StreamlineTrade Guest

    Looking at the wider complex could give us some clues.....

    BP is leading, and expecting to near $2. This will bring strength to the Euro, but BP/Euro levels are already looking high. The CRB index is also looking good.

    The SF is the weakest, but also shows signs of strength.

    But you are right - August can be quiet. Maybe prices are being subdued in these quiet times with little effort, so as to be accumulated for higher prices come the fall.....along with BP flirtations at $2, but not quite getting there - getting ready for the volume at the fall.... maybe we are just seeing long term holders pushing the nfp longs out for a further move back up.

    im euro positive. take arab diversification into the euro out of $ and there is further demand - most of them are waiting for a decline though. Will this come? Will they get impatient as the market moves ahead?

    Just my 2c
  6. StreamlineTrade

    StreamlineTrade Guest

    You could be onto something there - but wise traders always say it is better to fade the (TA?) public. Some funds also use TA remember in conjunction with FA. And that guides the market when we think about it.
  7. Terrible up and down movements!
  8. With that said, I fundamentally believe this weak dollar policy will eventually sink in the the dollar/euro price.

    When I asked myself today whether I thought they would pause or raise rates, my gut said they would pause - since everything done in connection with this Bush administration seems short sided and some form of placation. And that, fundamentally, leads to a devalueing dollar.

    From the overeasing of rates from Greenspan years again to placate 'tough' times from the tech bubble pop, allowing a housing bubble to easily occur, to the response now ... just one word again, placation (for the housing market especially)

    Now I know my opinion doesn't equate to trading strategy, perhaps its more detrimental to it. But this is a long position, and I can't imagine the dollar strengthening off this news. Any other response seems superficial and likely profit taking for the previous round of long traders.

    My explanation: perhaps the USD bears haven't woken up yet.
  9. Some say EUR/USD, the others dollar/euro. No wonder why the same market can move up and down so often and so much, even when everyone says long! :D
  10. haha.
    by the way. the bloomberg explanation. I don't buy it. If the fed were 'strong dollar', they would have raised the rates. They realize all they really can more easily control, in terms of inflation, is the housing market and its related economies. If they can support the housing market, they do it to save the economy at the expense of the dollar. That is fed policy.

    If they are attempting to control commodity based inflation, they would be raising rates .50 per session until we're deep in recession and energy demand slows to a crawl. They clearly are not.

    Dollar Climbs After Federal Reserve Says May Raise Rates Again

    Aug. 9 (Bloomberg) -- The dollar gained as the U.S. Federal Reserve said it may raise interest rates again after yesterday keeping them on hold for the first time in two years.

    The Fed left room for further increases by saying inflation has been ``elevated'' and remains a risk. Its benchmark overnight lending rate for banks of 5.25 percent is still 2.25 percentage points higher than borrowing costs in Europe and 5 points above those in Japan, helping maintain demand for the higher returns available on dollar-denominated financial assets.

    ``The Fed suggested additional possible rate hikes,'' Yuji Saito, a senior currency dealer at Societe Generale SA, said in Tokyo. ``For investors who believed the Fed was done, this is a big surprise. They're now scrambling to buy back the dollar.''

    The currency traded at $1.2776 against the euro as of 9:32 a.m. in Tokyo from $1.2833 late in New York yesterday. It bought 115.66 yen from 115.31.

    Gains accelerated after the dollar broke through $1.28 to the euro and 115.60 yen levels, where traders had orders to buy the currency, Saito said. The dollar may rise to $1.27 versus the euro and 116 yen today, he forecast. Traders sometimes place automatic orders to limit losses in case bets go the wrong way.

    U.S. interest-rate futures show traders are pricing in a 53 percent chance the Fed will push key rates to 5.5 percent by year-end, up from 50 percent on Aug. 4.

    ``Some inflation risks remain,'' the Fed's statement said. ``The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth.''

    `Weather The Storm'

    Policy makers' decision to keep key rates on hold at their highest level since March 2001 may reduce some traders' concerns the Fed had damaged the economy with 17 straight increases.

    Gross domestic product last quarter slowed by more than a half to a 2.5 percent annual rate.

    ``People are now dollar positive because they believe the Fed is doing the right thing for the U.S. economy,'' Darren Heathcote, head of trading at Investec Australia, said in Sydney. ``The economy looks as if it will now weather the storm and this will support the currency.''

    The dollar will trade between $1.2550 and $1.30 per euro and 113 to 118 yen in the next month, he forecast.

    Financial markets in Singapore are closed for a public holiday today, with trading expected to be ``60 percent to 70 percent'' of a usual day in Asia, said Kotaro Kunimochi, director of the currency team in Tokyo at Barclays Plc.
    #10     Aug 8, 2006