Eur/usd 02/29/08

Discussion in 'Forex' started by btowntrader54, Feb 29, 2008.

  1. I've sold the Euro and gone long the USD on a short term trade. I expect a minor correction down to 1.5050 - 1.5100.

    Comments? Suggestions? Am I crazy to think the vertical advance can take a minor break?


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  2. There are always retraces. But top/bottom picking on the principle that is has to happen right now is not a smart way to trade.
  3. I agree - it wasn't on the idea that 'it has to happen now'.

    For one, the EUR/USD has seen a somewhat decent directional parity with the stock markets recently. The markets are headed down for a few days in my opinion. People are talking about the USD being the new carry currency.

    It has seen a solid run up on loads of negative news and outlook on the Fed's cuts. I think the market may believe it's time to take some profits and take a breather.
  4. I think even a 38.2% pullback is wishful thinking.
  5. I wouldn't have shorted it.

    At least not until it gets into the 1.48-1.49 range (if it gets there).
  6. I'm waiting to buy pullbacks. There is a lot of strength behind this move. I've heard 1.60 talked about. The fact that EUR/USD isn't lower today with the big drop in equities is significant. Euro zone GDP next week could be a buying opportunity.
  7. I know I'm probably one of the few thinking it, but there is a growing chorus of voices that gets louder and louder in regards to the ECB having to cut. Thompson noted a poll where 25 out of 30 economists now believe the ECB will have to begin cutting as early as June.

    As soon as this comes to play, the Euro is going to drop hard. But before then...who knows?
  8. That has been in the back of my mind too, but from a technical perspective, the chart looks like a continuation. I don't think Trichet will cut unless there is a clear sign of inflation abating, which I don't see happening. If anything, I think euro weakness will come from slowing Eurozone growth rather than rate cuts especially in the context of rising commodity prices. I also think that the dynamics of the EUR/USD trade have changed. Instead of trading based on nominal exchange rates i.e dollar strengthens when inflation rises because the market expects that the Fed will raise rates to curb inflation. I think EUR/USD is trading based on real exchange rates i.e dollar weakens on higher inflation because the market does not think that the Fed will raise rates to curb inflation. dynamics should stay this way until the Fed signals otherwise. Last week when CPI came in higher than expected, EUR/USD pulled back, then went right back up.
  9. Why buck the trend?
  10. For the same reason that anyone who goes against a market that has all participants on one side - profit.

    When sentiment becomes extremely one sided without regards to fundamentals, it's time to rethink one's position.
    #10     Mar 3, 2008