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$ For The Week of 11/20-With Trade Ideas

  • #21
  • Nov 22, 2006 5:25pm Nov 22, 2006 5:25pm
Do you think the market is selling the dollar ,,based on the rumor that China will widen its band ????
  • #22
  • Nov 23, 2006 6:23am Nov 23, 2006 6:23am
Quoting franky
Do you think the market is selling the dollar ,,based on the rumor that China will widen its band ????
I guess it's possible, but I really wouldn't know. I'd like to think the market is selling the $ because the minutes of the last Fed meeting show they expect inflation pressures to be "moderating"...and for reasons such as this:

http://www.bloomberg.com/apps/news?p...d=amf459Elw1Kc

or this:

http://www.bloomberg.com/apps/news?p...d=aCB.fmr3x6.Q
  • #23
  • Nov 23, 2006 6:51am Nov 23, 2006 6:51am
Quoting BurgerKing
No fundamentals this week that can support USD.
Holiday in USA is likewise making it easy to weaken the USD.

However next monday, we'd have USD Durable Goods.

THIS should be the next true test of US economy.

BTW. Boeing is enjoying a HUGE sales the past few months! I bet their sales contracts last October could easily amount to as much as USD10B. This should drive the Durable Goods up! But exluding transportation, its another story.
Do you really think so? What if the American is also loosing confident about their own currency, because fed gonna lower the interrest next year, and make the dollar even worst. Is it possible?
  • #24
  • Edited 9:42am Nov 24, 2006 9:13am | Edited 9:42am
Why the Big Run?

As always, it's the implied direction of future interest rates. It's easy enough to check BB and read all about how everyone now thinks the ECB is gonna rate rates, but could you have known earlier? I think so.

Do you have the FOMC, ECB and BoE websites on your favorites list? You should. The FOMC and BoE minutes and the ECB bulletin should be required reading for any forex trader. Lets look at some quotes.

From the November ECB monthly bulletin:

"If the governing council's assumptions and baseline scenarios continue to be confirmed, it will be warranted to further withdraw monetary accomodation...inflation rates are likely to increase in the next few months and into early 2007...annual inflation rates are projected to remain elevated in 2006 and 2007, with risks to this outlook remaining clearly on the upside".

From the Nov 15 FOMC minutes:

"Core inflation was anticipated to edge down in 2007 and 2008 relative to the second half of this year because of the diminishing impetus from the prices of energy and other commodities and because of the modest easing in resource utilization...Participants continued to expect the economy to expand at a rate close to or a little below the economy's long-run sustainable pace over coming quarters...Most participants expected core inflation to moderate gradually...Most participants expected core inflation to edge lower, in part as the effects of the run-up in energy prices in recent years waned. And shelter costs were not expected to add materially to inflation going forward. Moreover, moderate growth in aggregate demand and the associated modest easing of pressures on resource utilization should also contribute slightly to the slowing in core inflation".

Finally: The Committee's view of the outlook for economic growth and inflation had changed little since the previous meeting. Nearly all members expected that the economy would expand close to or a little below its potential growth rate and that inflation would ebb gradually from its elevated levels.

Here was the core PPI released the day before and the core CPI released 2 days later:


<TABLE class=tborder style="MARGIN-TOP: 12px" cellSpacing=0 cellPadding=3 width="100%" align=center border=0><THEAD><TR><TD class=alt1 align=middle>USD</TD><TD class=alt1>PPI m/m</TD><TD class=alt1 align=middle>http://www.forexfactory.com/forexfor...sc/mi_high.gif</TD><TD class=alt1 align=middle>-1.6%</TD><TD class=alt1 align=middle>-0.3%</TD><TD class=alt1 align=middle>-1.3%</TD></TR></THEAD><TBODY></TBODY></TABLE>

<TABLE class=tborder style="MARGIN-TOP: 12px" cellSpacing=0 cellPadding=3 width="100%" align=center border=0><THEAD><TR><TD class=alt1 align=middle>USD</TD><TD class=alt1>CPI m/m</TD><TD class=alt1 align=middle>http://www.forexfactory.com/forexfor...isc/mi_med.gif</TD><TD class=alt1 align=middle>-0.5%</TD><TD class=alt1 align=middle>-0.3%</TD><TD class=alt1 align=middle>-0.5%</TD></TR></THEAD><TBODY></TBODY></TABLE>

So the ECB expected to be raising rates and the Fed expected inflation to moderate and this view was confirmed by the core readings. Even a relatively inexperienced trader could interpet the minutes as meaning that no rate increase was immenent and certainly the market took it that way. You can go on the Cleveland Fed's website to see how traders are playing the Fed futures rate as traded on the CBOT on a daily basis.

It's pretty obvious that there are diverging interest rate expectations, but the important thing is that the info comes from the CB's. You could have taken a long position in the EURO right after the FOMC minutes were published, or even waited for the core CPI readings 2 days later. In my opinion, CB publications might be the ultimate fundamental to trade from...
  • #25
  • Nov 24, 2006 9:37am Nov 24, 2006 9:37am
Excellent News


Quoting NewstraderFX
Something to Think about:
A friend of mine pointed this out to me. You can check the charts yourself.

In the last 4 years (2002-2005) the EURO and the GBP have made huge gains against the $ from about this time thru the end of December. Since it's a holiday and I'm lookin to get out of here, i'm not gonna go into the details so check it out yourself. I'm talkin about really big moves though, so it's something you definately want to look at.

Happy Thanksgiving
Trade what you see - Not what you think
  • #26
  • Nov 24, 2006 9:41am Nov 24, 2006 9:41am
yes... we are not absolutly at the top of the montain.... perhaps only at the middle...
  • #27
  • Nov 24, 2006 9:56am Nov 24, 2006 9:56am
Quoting NewstraderFX
............ I'd like to think the market is selling the $ because the minutes of the last Fed meeting show they expect inflation pressures to be "moderating"...
Nice info NewstraderFX!
  • #28
  • Nov 24, 2006 10:01am Nov 24, 2006 10:01am
Quoting NewstraderFX
Why the Big Run?

As always, it's the implied direction of future interest rates. It's easy enough to check BB and read all about how everyone now thinks the ECB is gonna rate rates, but could you have known earlier? I think so.

Do you have the FOMC, ECB and BoE websites on your favorites list? You should. The FOMC and BoE minutes and the ECB bulletin should be required reading for any forex trader. Lets look at some quotes.

From the November ECB monthly bulletin:

"If the governing council's assumptions and baseline scenarios continue to be confirmed, it will be warranted to further withdraw monetary accomodation...inflation rates are likely to increase in the next few months and into early 2007...annual inflation rates are projected to remain elevated in 2006 and 2007, with risks to this outlook remaining clearly on the upside".

From the Nov 15 FOMC minutes:

"Core inflation was anticipated to edge down in 2007 and 2008 relative to the second half of this year because of the diminishing impetus from the prices of energy and other commodities and because of the modest easing in resource utilization...Participants continued to expect the economy to expand at a rate close to or a little below the economy's long-run sustainable pace over coming quarters...Most participants expected core inflation to moderate gradually...Most participants expected core inflation to edge lower, in part as the effects of the run-up in energy prices in recent years waned. And shelter costs were not expected to add materially to inflation going forward. Moreover, moderate growth in aggregate demand and the associated modest easing of pressures on resource utilization should also contribute slightly to the slowing in core inflation".

Finally: The Committee's view of the outlook for economic growth and inflation had changed little since the previous meeting. Nearly all members expected that the economy would expand close to or a little below its potential growth rate and that inflation would ebb gradually from its elevated levels.

Here was the core PPI released the day before and the core CPI released 2 days later:


<table class="tborder" style="margin-top: 12px;" align="center" border="0" cellpadding="3" cellspacing="0" width="100%"><thead><tr><td class="alt1" align="center">USD</td><td class="alt1">PPI m/m</td><td class="alt1" align="center">http://www.forexfactory.com/forexfor...sc/mi_high.gif</td><td class="alt1" align="center">-1.6%</td><td class="alt1" align="center">-0.3%</td><td class="alt1" align="center">-1.3%</td></tr></thead><tbody></tbody></table>

<table class="tborder" style="margin-top: 12px;" align="center" border="0" cellpadding="3" cellspacing="0" width="100%"><thead><tr><td class="alt1" align="center">USD</td><td class="alt1">CPI m/m</td><td class="alt1" align="center">http://www.forexfactory.com/forexfor...isc/mi_med.gif</td><td class="alt1" align="center">-0.5%</td><td class="alt1" align="center">-0.3%</td><td class="alt1" align="center">-0.5%</td></tr></thead><tbody></tbody></table>

So the ECB expected to be raising rates and the Fed expected inflation to moderate and this view was confirmed by the core readings. Even a relatively inexperienced trader could interpet the minutes as meaning that no rate increase was immenent and certainly the market took it that way. You can go on the Cleveland Fed's website to see how traders are playing the Fed futures rate as traded on the CBOT on a daily basis.

It's pretty obvious that there are diverging interest rate expectations, but the important thing is that the info comes from the CB's. You could have taken a long position in the EURO right after the FOMC minutes were published, or even waited for the core CPI readings 2 days later. In my opinion, CB publications might be the ultimate fundamental to trade from...
Wow that is some good reading. How come u didnt do this News?
Have u researched this at all or just thought of this from this last experience?
Ghost Swoopen in for my pips while no one is lookin !!
  • #29
  • Last Post: Edited 11:18am Nov 24, 2006 10:13am | Edited 11:18am
I've been in this for a quite a while, but the real key was not just the FOMC minutes and ECB bulliten-it also was the core PPI and CPI readings as the data showed the economy was moving as expected.

Take a look at the Aug FOMC minutes-it had the same statement regarding inflation expectations, but take a look at some of the data:

<TABLE class=tborder style="MARGIN-TOP: 12px" cellSpacing=0 cellPadding=3 width="100%" align=center border=0><THEAD><TR><TD class=alt1 align=middle>USA</TD><TD class=alt1>CPI excl. Food and Energy m/m</TD><TD class=alt1 align=middle>http://www.forexfactory.com/forexfor...sc/mi_high.gif</TD><TD class=alt1 align=middle>0.2%</TD><TD class=alt1 align=middle>0.3%</TD><TD class=alt1 align=middle>0.3%</TD></TR></THEAD><TBODY></TBODY></TABLE>
<TABLE class=tborder style="MARGIN-TOP: 12px" cellSpacing=0 cellPadding=3 width="100%" align=center border=0><THEAD><TR><TD class=alt2 align=middle>USA</TD><TD class=alt2>Unit Labor Costs 2Q</TD><TD class=alt2 align=middle>http://www.forexfactory.com/forexfor...isc/mi_med.gif</TD><TD class=alt2 align=middle>4.2%</TD><TD class=alt2 align=middle>3.6%</TD><TD class=alt2 align=middle>1.6%</TD></TR></THEAD><TBODY></TBODY></TABLE>



<TABLE class=tborder style="MARGIN-TOP: 12px" cellSpacing=0 cellPadding=3 width="100%" align=center border=0><THEAD><TR><TD class=alt2 align=middle>USA</TD><TD class=alt2>PPI excl. Food and Energy m/m</TD><TD class=alt2 align=middle>http://www.forexfactory.com/forexfor...isc/mi_med.gif</TD><TD class=alt2 align=middle>-0.3%</TD><TD class=alt2 align=middle>0.2%</TD><TD class=alt2 align=middle>0.2%</TD></TR></THEAD><TBODY></TBODY></TABLE>



The $ didn't weaken after this-likely due to the persistant core CPI inflation, unit labor costs and some of the other numbers but as we've seen this time, the inflation numbers showed a level of decrease more in line with what the Fed projected.

The October minutes contained the same wording on inflation with a very important statement added:

"Core consumer price inflation was projected to drop back somewhat later this year and next, reflecting the emergence of slack in the economy and lower energy costs".

If you look at the charts from then, you'll see a very big decline in the $.
Further core CPI readings have shown this projection to be accurate.

As always, you can't just look at one thing. The the cumlative effect of the statements and their projections, the data being released as expected and the markets interpetation of what it all means.

At this time, it's pretty obvious that the Fed is on hold (as it has been for some time) and is likely to continue the same way. The ECB is very certain to be raising rates at the next meeting and is fairly certain to do so in the future.

In looking at the data and the charts-taking the appropriate positions often made quite a bit of pips and really lost nothing of significance.
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