EUR/USD for the week of 9/25

As the beginning of the week you may see some profit taking in the EURUSD. The $- reports from last week were worth about 140 pips as the EUR went from about 2660-2800 and people may look to grab something there. Still, I believe that overall, the market is anxiously waiting for the next piece of US info before making another serious move either way. It isn't listed on the Forex Factory calender but there is an existing homes sales report (Bloomberg/Reuter's calenders) being released 9/25 @ 14.00GMT. Bloomberg consensus is for a -2.05% change m/m and the Rueter's sonsensus is for a -2.36% m/m change. Obviously, if these reports show a larger decrease, expect a nice EUR+ move. (See below for a couple of strategies for trading). There might be some moves after Geither speaks on Monday or the CC on Tuesday, but the next potential big US move is likely to be with Wednesday's Durable Goods Orders and New Home Sales.

Trade Strategies

Don't try to trade an immediate spike. For Monday, note where the EUR is just before the news, get the news and watch the market. If the number is on consensus, don't trade. If the number is off consensus and negative and if past trades are any indicator the EUR could spike up and retrace, especially if there has been little movement in it during the Asian and London sessions. Wait for the retrace to bottom and the EUR to rise 15 pips from where it was just before the news. Go long. If it hasn't retraced after 15-20 pips, go long. Reverse the strategy with an off consensus, positive report.

There are many traders and economists who are beginning to think about the R word, especially off the Philly report. Monday's and Wednesday's reports will add fuel to that fire if they're $ negative. Everyone knows that the FED will push the rate down if the economy slows too much and we all know what that means...I don't think it takes too big a brain to figure out that strong $- reports will have big EUR + effects on this market, since they will be building on all the previous $- info, but again, the timing of the eventual move will divide the winners from the losers here. I really believe that the days of linear, predictable spikes are over, at least for a while.

It's obviously important to keep track of how the currency pair you're trading is sitting against the highs and lows, as retracements are more likely to take place when the currencies are at their extremes due to profit taking. Keep in mind that the overall $- sentiment began at the beginning of last week when the EUR/USD opened around 2660 and was confirmed after the Philly Fed, when the EUR was at about 2720, then rose to around 2790. The $- reports this week were worth about 140 pips in the EURO if you want to figure that it opened at about 2660 and closed at about 2800. (The market took the non rate change as a negative, in addition to the PPI, Housing number and Philly Fed).

In summary then, further $- reports will cause strong EUR+ moves. If profits have been taken the pair prior to a $- report, the enevitable move up in the EUR will be that much greater. The timing of the moves remains variable, but the moves will happen. Good Luck,

NewstraderFX

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Truly a awesome report . I like to thank merlin for starting news trading room its getting to be a gold mine of information<o></o>

Nice report. Seems like a prediction. Gambling can work, sometimes (trading prior to reports that is, but retraces are teh safest way to go, sometimes)...

Well, it is a prediction in a sense, in terms of how the overall Eur move will be after an off-consensus US report. I don't see that as any big mystery or revelation, however, it's getting the TIMING right that separates the winners from the losers. In reality, if a strong $- report comes out, you could see a big EUR- move. The reasons are unpredictable; could be anything from profit taking to central bank intervention. My suggestion for a trading strategy is just that, a suggestion.

What i'm basing my opinion on is what has been written in every book that has been written about currency trading: an increase in a country's interest rate (or the market's perception of one happening) will increase the value of that currency (and vice versa) and it's especially true with the $, which is a "safe haven" currency. No mystery there. Again, to paraphrase a famous Clinton quote, "It's the timing, stupid".

If you look at some of the published information from Bloomberg or Reuter's, companies that build houses are reporting that they are building less, their inventories are building and their profits look to be going down.

The real-estate agents in my corner of the USA (NYC) are saying that they are selling less houses, are seeing less new construction and are seeing an increase in rentals (which also means less people are buying). Several friends of mine who live in Conneticut, are seeing houses being offered for lower prices and builders offering insentives. We've already had decreased housing numbers published. Hell, the prices in Manhattan are going down for residential real estate. 2 years ago, everyone and their grandmother were making money in pre-construction of new housing. Where are they now? Miami has tanked-there have been so many builders going belly up it's ridiculous. The major sales are being made by wealthy foriegners, because the the dollar is cheap. My mother's condo in FLA, which had tripled in value, is now worth barely more then what it was 5 years ago.

Now, could the EUR tank down to 2600 off a $- report? Absolutely. Will it? Who knows. But, if we get further $- housing reports this week and the EUR/USD doesn't eventually go higher by the following Asian, London and NY sessions, I might just look for another way to try and make a buck...the whole thing might just be beyond me.

Newstraderfx

My bias is stronger Eur weaker US $ as well. I find it interesting however that the RealEstate Investment Trust (REIT)fund that I follow has been doing better this month than last and has done well during all of this slowdown news over the past several months. I do believe there is a slowdown because I see in my area (midwest) what you describe, but that fund is not showing it.

Reducing the trade deficit with cheaper $ is what I am thinking over the very long term. So a dip to 2650 could easily be in the cards as a somewhat random move, but would not constitute a change in over all thinking of cheaper dollar.

Still a puzzle is what economic results (want to avoid 'news' term) are effecting the $ when you see what should be negative $ actually causes a positive $ move.

Lou

Well, when you're talking about a currency moving opposite what the numbers would indicate-what time frame r u talking about? In the few seconds to minutes after a release-basically anything can happen. The $ spiked down after the rate anoouncement, then rebounded and went down again. After the Philly Fed, an upspike was followed by a retracement-then it gained about 60 pips overall. However-the overall moves were as per the numbers.

The EUR is probably overbought at this time. If it's still sitting around the 2780-2820 level before the first housing report and the report is dollar negative, it's very possible to see a spike, then a retracement. Why? Because there are a lot of $short positions that will be looking to take profits and they will be able to do so because there will be alot of buyers. After that, there is a good chance that the EUR will rise, as the market prices in the $- info and probability of a rate cut in the future. (Traders will also look at the Fed Funds rate, which is definately pricing in a rate decrease). If the EUR has sold off into the lower to mid 2700's prior to the first report-in my opinion that's a better scenario, because there is more "headroom" for a EUR+ move off a $- report.

The exact opposite is true if the report is very $+. If the EUR is still overbought before the report, the many short positions will be looking to get out quickly, so a large spike down in the EUR is likely.

I agree that a lot of news releases should be considered 'noise'. One has to look at the long term. Weeks months. Does not mean you cant make money in the short term however.

Lou

i agree with your take on the game.nice one.keep it up.

The home sales trade was a neutral number. I had a long position and a sell entry 10 pips below that prior to the announcement. My sell entry got hit, I made back what I lost on the long position and wound up about 5 pips to the good.

The EUR has really been sold off prior to the Wed reports, which the consensus says will be very $+. If the reports come out close to consensus and $+, there probably isn't too much room for the EUR to move down further. Perhaps there is still room if the reports are very $+... The best chance to make some pips off the reports is to hope the reports come out $-. The traders who are $ long will look to cover those positions quickly.

I trade the immediate spike on any news, and have been very successful at it. The rest of the day ends up usually being very dull with little price action...I can snooze the rest of the day, and then wake up for the next news day.

It works for me!