$ For The Week Of 11/27-With Trade Ideas

Actually, I have no idea when the bubble could burst-actually I see the $ weaker anyway-but the bubble will burst eventually-I thought it might be possible Bernanke could say something really $+ but that didn't happen...

GDP should be interesting tom morn...further weak $ fundamentals, if they turn out that way, could be very good to trade since the momentum is for weakness anyway...

Anyone play golf or bowl or something like that? You know when u feel like u got it goin on and everything u do works out and ur on a roll? Works the same in trading-when ur on a roll u go with it-but when u lose that feeling...

There's a lot of $ long automatic positions set to trigger to catch the move down (I'm talking E/U and G/U), just like they were set to trigger into $ short positions on the way up. Those triggers can really move the market.

Why are those triggers there? Well the last time before Feb of 2005 that the Euro was this strong was Oct of 1995. That's 11 years! The GBP? Aside from Nov 2004, the last time the GBP was this high was around July 1992-yeah 14 years ago!

All it takes to get the feeling back is to stop trading and do some research. Let's see what happened off the GDP.

The revision number for the 3rd quarter came out higher then expected. A bunch of triggers go off. No one wants to miss the ride down, cause they know it's gonna be big, if and when it happens. Then the analysis starts to kick in as traders realize the number was really $ negative (See the BB article below). Both the EURO and GBP return to the pre-GDP levels within 25 minutes.

Both weaken against the $ off the housing number, but the brakes got put on again as both are edging a bit higher now.

Or look at it this way: With many traders set to short the EUR and GBP as certain levels are reached-you know those orders have to be sitting there-if the market interpetation really was $+, surely more and more tiggers would have been hit and the $ would be gaining momentum now.

Everyone has to be thinking "the markets too high it's gotta correct, the $ has to come off the lows and get stronger. Eventually that does have to happen. Everyone is tryin to figure out the timing. No one knows for sure when that's gonna occur. No one wants to get caught with their pants down.

I'm just throwin an idea out here-and I welcome your opinion-but here's a thought. There's a lot of programmed trading in the Forex market. Just as we saw automatic positions get triggered on the way up-the same thing is set to happen on the way down. That 40 pip move after the GDP number could have snowballed off some programmed positions. Then everyone took a look at the number and said whoa, that's really bad so they start buying Euro's an pounds again.

http://www.bloomberg.com/apps/news?p...ZPE&refer=news

http://www.bloomberg.com/apps/news?p...5oE&refer=news

If you look at both articles-the only thing you'll see is $ negative interpetations. If someone can show me why the $ should strengthen for some reason other then it's at a really low point so it has to, please do so. Thanks.

Upon further research-there are some good reasons for $ strength.
Consumer spending is good-with no evidence as of yet that the slowdown in housing is affecting consumers. This could be due to rising wages and incomes-which is another concern of the Fed.

Much of the recent $ weakness was due to traders pricing in a Fed rate cut in March. So far, there's no reason for a rate cut at that time. Bernanke did not mention the possibility at all in his speech yesterday.

For now, the economy is moving ahead about as the Fed predicted back in July. Grow is moderate and inflation shows early signs of easing. Tomorrow's corePCE should add some further fuel to the fire, so we'll see how it goes.

Fundamentally the US Dollar is negative...

Technically there is a rebound......
there is a double top between the 2nd week of Dec '04 (1.9556) & high this week (1.9550) although premature to say so but still worth considering....

I would say 9550 is a significant level. There's gonna have to be a pretty strong $- fundamental to see it break to any serious degree. This may shed some light:

http://bloomberg.com/apps/news?pid=2...7_RtA&refer=uk

GBPUSD just hit 14 year high. Its currently trading 1.9570 breaking the 1.9550 psychological resistance. Next high is 1992's 2.0090.

USD is hitting all time low vs GBP.

Sitting here looking at the anno. to come out I realized something I don't know. ...Make that one of the many things I don't know.

Today we have the USD Personal Spending m/m coming out and others. Is the m/m Nov./Sep. or Sept./Aug. Seems a little early to have the Nov. #'s.
But maybe it runs the 15th to the 15th. Anybody?

If the core PCE comes out at 0 or even negative-I would hold a long GBP position for a while as the move will be considerable-the ride might get bumpy...but 9700 on the GBP could get hit in a couple of hours...

9700 is huge man, even if the chicago pmi is bad i couldnt see much more than 9650 coarse my oppinion not much good Walmart recorded loss for fist time in 5 or do years thats gotto be an indicator for PCE

Did u get in News?

Man I've been in and out of the GBP so many times in the past few days...not just on the news. Last night when GBP was around 9570 I had a buy order @ 9620 and a sell order @ 9480. I got in @ 9620-I was lookin for a break over 9600. Now I'm gonna check where it closes NY, check all the analysis etc...everyone thinks GBP and EUR is still goin up and who am I to argue?

Let's see what happens with the London close-maybe some profits will go out...that's what I'm hopin for. I would love to see GBP down to 9570-80 again when NY closes...I'll put a buy order back @ 9620 and a sell @ 9480 and try to catch it either way...I've done that a few times the last week or so...why try to predict and make bets on that?...let the market dictate the move and go with it.

IMHO the "00's" are psychologically powerful...if they get to 20 then they're broke and that's a good time to get long...but u gotta take market sentiment into consideration too...and the fundamentals which means interst rate expectations in the pairs you're trading...

If GBP closes around 9660-80 or so...I'll try another set of orders...long @ 9720/short @ 9580...it's been working good and the sentiment is still very bearish on the $..check BB for some further info, but that Chi PMI below 50 is really significant. Also the reports from Wal-Mart and some other retailers...remember that consumers are like 70% of US economy...if growth stays low or the consumer starts to really tank...we could even see 2200 on the GBP...who knows...

I'll tell you the main reason I'm interested int he GBP-no word whatsoever from the UK that the pound is too high...no verbal intervention at all signalling a top...the silence is speaking volumes to me...

Is a Fed Rate Cut Possible?

Given where the core CPI is, is a rate cut possible with core CPI at theis level?? If you look at some history, you'll see why it's possible, or at least why there is some opinion in the market that it is possible.

The Fed began a round of rate cuts in 2001, 5 months after the Chi PMI came out below 50. The core CPI was mostly a few tenths of a percentage point above where it is now. So it has happened. CPI is given as the annual rate for the 3 months prior. The Chi PMI was below 50 during this time of rate cuts.

Fed Rate coreCPI
2001-01-01 5.98 2.9
2001-02-01 5.49 3.1
2001-03-01 5.31 3.5
2001-04-01 4.80 3.1
2001-05-01 4.21 2.2
2001-06-01 3.97 2.6
2001-07-01 3.77 2.4
2001-08-01 3.65 2.8
2001-09-01 3.07 2.4
2001-10-01 2.49 2.4
2001-11-01 2.09 3.0
2001-12-01 1.82 2.6
2002-01-01 1.73 2.6

Tommorows ISM does have the potential to show a decrease given today's Chicago number, so we could see some buying in of a lower ISM reading happen tonight.

Still, the most important clue might be what Central Banker's are NOT saying...We've heard comments from various ECB officials and at least publically, there is some concern regarding the Euro and the speed of it's assent. What we've NOT heard, is any comment from the Fed or the BoE regarding the USD and GBP. Perhaps that means they are more comfortable with the direction of things then the ECB is. From Reuter's:

KING STAYS COOL


Bank of England governor Mervyn King kept alive the possibility of British interest rates moving above their current 5.00 percent, saying inflation had picked up and been above the bank's 2 percent target.

He appeared unruffled by sterling's current strength, pointing out its stability against the broader currency basket. "Our effective exchange rate against an average of all other currencies has not risen in any way near the way we've risen against the dollar," King told members of parliament.

Something to think about...

NewsFx-
This is an article from another thread but I didn't want you to miss it.

http://comment.independent.co.uk/le...icle2026773.ece

Nice article thanks-

There may be a couple of points that are up for debate though...

"Some will argue that none of this is anything new. A similar currency imbalance resulted from the massive Japanese economic expansion of the 1980s. Two decades ago, the US and Japan managed to get their central banks to work in concert and succeeded in managing an orderly descent in the value of the dollar. It is a moot point whether a similar deal will be possible this time".

I'm not sure that Japan saw this as an "orderly descent". The masive crash of the $ vs the Yen caused a Japanese recession with stagflation that lasted for years and led to them having the lowest interest rate of all industrialized nations. This is one of the main reasons China does not freely float it's currency; they're well aware it could happen to them.

The current account problem is serious and the funding of it does depend on our economic growth. It is a delicate balance. What's working in our favor is hopefully the best financial minds...Right now, Paulson is probably the 3rd most important person in the world behind the President and the Fed Chairman.

How Might The ISM Look?

There's another index called the Business Week production index, which has about a 70% correlation to the ISM. It shows that production has declined for 9 straight weeks and is at it's lowest level in over 2 years. There are several other clues for how the ISM might look; inventories are building and employnment in the manufacturing sector is down.

If it does turn out the ISM is down to around the 50 level or even below, it should be a good oppurtunity to get long in the Eur or GBP. The GBP did hit 9750 last night and got strongly rejected, so it's possible that action could get repeated. Let's see how it goes.

Well that was a dream trade. If they all went like that, we'd all be filthy rich in no time. Good way to end the week! See ya...