This one represents the creation of the Euro and its path through time. Will we make history and go from the median channel line all the way to 2X deviation at the top with no pullback at all? Or will we go back and test the median line to be sure that Fed and the ECB is going to do what everybody is "predicting" that it will do. A massive corrective dip, much like the dotcom, the gold bubble, the housing bubble. WHo wants to buy US debt anyway. Load me up on some Mexican or South American debt please. Maybe Mr. Bernake can clear us up on this on Monday. Might be in the CTA textbooks from this day forward.
But DRT, haven't you heard? The US dollar is doomed to collapse because of the current account, the deficit, El Nino, and er....I forgot what else. But it just has to go down, right? That's what everybody who is anybody is saying.
Another View Down River In an effort to get some life back here, I would like to offer the following view. One that will never be printed at Bloomberg or Reuters, etc. Mainly because I can't even really define an economic term, let alone forecast one. I am more of a "scenario" trader or a "theme" trader. I tend to work backwards. Sometimes I have "hunches". Let's call this a hunch. Okay. We all know any real change starts with an underlying change in fundamentals occurring beneath the surface. We all watch as the market trades on emotion and moves in the opposite direction of the way it "should" be headed for a time even after the fundamentals ground swell is occurring. So I ask myself, what would change the direction of this market. Also, is it even time to consider a change. All the technicals that I "see" are telling me that we should move down for a corrective leg. Then it sure looks like a nice move up to levels unheard in the Euro. Up in the dollar index also for a while. It certainly appears time for this. (Throw in 1000 different EW scenarios that I don't understand here). Granted we have not had a real thrust yet (or was that Friday's move?) We are sitting at the 1.61% price extension of the recent move up and are testing it a second time. Now step back and look at the big picture. (I call this the Ocean since the River flows toward it). Is this a new uptrend or is it just a corrective phase from the large dollar strengthening last year? Being a trader and not an economist, I can not come up with anything positive about the dollar at this moment. That is, with the exception of one small and at one time powerful dollar mover. FOMC = 5% ECB = 2.5% I realize there is more to the movement of a currency than interest rates, but will they come back in style soon? What is our "theme" for this commodity like (read Gold like) move up that has occurred? To be honest, I can not determine it. I do not think we are buying Euros, rather we are selling dollars. We are selling them extremely quickly too. Reflect back on the past few weeks. Even very good US data was ignored and the EURO moved up. There is a lot of "stuff" priced in rghit now. Now here is how I see it for this week. Tommorrow Bernake will be hawkish to some media reported degree even if he tries not to say a word. Trichet will cast doubt by not using the word vigalent. BOJ will sit tight also but that is another thread. A good portion of the data coming out of the Eurozone will be moderate to negative this week. Is there really an economic recovery in the Eurozone? (Think about this one hard). There will be rumors leading up to the ECB announcement on Thursday. The finance ministers will be buzzing with rumors. On Thursday, the ECB will not hike. I repeat. Not hike even a 1/4%. This event will cause massive confusion and send the recent emotionally adjusted EURO much lower quickly. Inflation data will begin to heat up and the FOMC will hike again at their next meeting in June and again in August. Soon things will look like this. FOMC = 5.75 ECB = 2.5 Long before this occurs the market will price it in (or take it out of where it resides currently). The F word will begin to creep in. Fear. Now, lets take a high level non economist look at things. China comes to visit Gates (dig) and Bush. No big deal right? Wrong. The G7 thing has been out of whack and was misinterpreted and is (I might add) priced in to the Euro at this moment. Now here is the real story. Look at the Snow situation. Rumors abound. Bush comes out and says he has no intention of replacing Snow. He's doing a great job and the economy is humming along. Then a few days later a China friendly Wall Streeter who may just be strong dollar inclined takes the helm. Why did this occur? Did Bush have a senior moment when he said Snow was doing just fine. Do we have a man with testicles finally in this position? What is one of the main roles of this job? I think this was a huge event that has not been considered in the price of the EurUSD at the moment. Mark my words on this one. There will be a rise in authority at the Sec of Tres level that will come to be fully appreciated by all the world over. Even in China. Could the US finally realize it is in a pickle and finally be ready to make some progress. Paulson was the first move. Do we really think the most powerful economy in the World that has "real" money that can dwarf emerging economies in a single bound will just fold up and go away like a bad dog with its tail between its legs. I will ask you again to lay out the massive recovery for me in the Eurozone. Germany will rise to power again, right? Or is it France? No, its the Brits bless their hearts. Industrial revolution and all. Stare at that monthly chart again. Stare at it hard. Watch the Gold and Copper thing. Any chance this could move south for more than the apparent short term correction. Its a buying opportunity right? Until this begins to develop though, I will trade with my stops in place. Very close in fact. Hell, I may go long tommorrow. DRT
All this talk about a dollar collapse makes me bullish. As does the fact that commercials are significantly bullish on USD. Not to mention the fundamentals are lining up for a potential dollar rally as well as the ECB rate increases should already be priced in and the probability of a long series of rate increases (like the ones US experienced) is low. I have outlined a bunch of points on my report here: (NOTE: There is no commercial service being promoted. I already post this website on my equity journal on ET) http://www.aeroscapital.com/june0406.pdf
Good summary Mahras2. I keep my own graphs on the COT. I was not aware of the $USD index data. I have added it to my tracking. Thank you.
Last month saw the highest volume in history for the Euro FX contract. Looks like highest by over 1.4M contracts. What I find interesting and possibly a message is that if you look at the candle for the month of May you will see it closed near the middle of the range. This indicates to me that there were a significant number of sellers in this group. The COT data seems to somewhat confirm it. If there is lower volume that follows, often this indcates a move down in this situation. I will continue to look for reasons it should go down likely as it moves through 1.40 DRT
You welcome DRT. I personally do not follow fut volume but that info is definitely interesting. Looks like a confirmation of a contrarian play. You know that you should go contrary when you have "experts" telling you the dollar is going to collapse .
I never, for the life of me, could understand why anyone would want to try to front-run or fade the sentiments of any market participant, including "the experts". Particularly for the case of Euro FX, the market is too liquid to be pushed through a major move by anyone. People's sentiments mean nothing. The chart tells all. Follow the chart. RoughTrader
Everyone has there own style. What you describe is the style of a trend follower which I respect. However, I think there are ample traders out there who are profitable by trading market turns and being a contrarian. I doubt there is any great difference between the number of contrarian traders who are profitable to those of trend followers. I do follow what the market tells me. If you notice I have also outlined an intermediate bullish proposition (if it breaks the recent high). However, I also happen to have a macro bias to my trading as well.
does anyone here base any opinoin on COT (commitment of traders) report ? of what the largest traders in the Us are doing ?