EURUSD

Congrats! However, i am confused why trading short term at 20 pips would seem to be scalping. Smooth sailing in the volatile market now, it feels couple hours to even gain couple pips.
Gatorinla, would you think of letting it touch 3950 be safe to short on sunday?

Oh ok now I do see you said short term is your preference but you trade long and short.

But now why is it you state an opinion on EU but advise against trading based on it and won't provide anything to back it up. Is there a point to that? Or did I not read everything clearly on this point as well. Just trying to understand.

Nice trade. I had a similar feel for that range as well. After the news, it has increased my risk appetite which I closed in to short at 3934 and closed it at 3895. Only if i had waited 15 minutes, I'd taken the position you have as well. Instead, I scalped.

What position will you take a short on sunday, perhaps monday iii?

gator-inla is presently in the doghouse. Seems he used a certain word one too many times that someone rightfully took offense the other day.

He will be back when suspension expires I assume.

I state it here as a way of psychological commitment to myself. It is a practice that I use. I would not advise anyone to follow my advice because they are not likely to get the same entry as myself and the entry I post here is delayed quite a bit because I watch the price action for about 15-30 minutes after my fill to ensure that I am indeed correct regarding my analysis.
As far as not posting my analysis here: I use 6 different time frames and analyze each, some chart aside from these (related markets, which in my opinion are correlated to eur/usd I simply cannot post as I use both electronic and floor trading for those {not a pastable version}), the patterns/setups that I use are highly subjective and I do not think that those will be of much use to you, and will take far to much space to explain. Finally I do not want to reveal my system to anyone (even if it is subjective) because a mass usage would demean my returns.
Hope this helps to explain my ways.

I have my shorts set as of Thursday last week, no fills yet. I am looking to short at 1.3929 levels, but this still has to be confirmed by pa. I will be watching markets like a hawk come sunday to confirm that the level stated above is indeed a good level to short. But I have a feeling that it will go slightly higher and I will end up taking a short at a better price.

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Here's a viewpoint from Morgan Stanley;

Currencies
2009 Dollar Outlook
December 19, 2008

In 2009, assuming that the global economy finds a trough by summer, we see the dollar rallying further into the trough, but underperforming most other currencies as the world recovers in 2H. The swings in the global business cycle will likely be the dominant driver for the dollar. Other factors such as US government debt sustainability and the US inflation outlook associated with the Fed’s QE (quantitative easing) operations will likely be secondary considerations, mainly because we believe that US Treasuries will remain well-supported and a flare-up in inflation is not a probable risk.
There is no official change to our forecast and we continue to look for EUR/USD to dip to 1.10 by 2Q, before recovering to 1.20 by end-2009. USD/JPY will likely exhibit a similar U-shaped trajectory, dropping to 85 by 2Q before rising to 100 by end-2009. Most EM currencies will likely experience intense depreciation pressures vis-à-vis the USD in 1H. Differentiation at the EM country level will likely be unproductive in the sell-off phase. But in the recovery phase, country-specific factors will likely drive a wedge between the currencies of the ‘good’ from the ‘bad’ economies.
Resurrecting our ‘four seasons’ framework. In thinking about how currencies might be affected by large swings in the global business cycle, it is important to consider both the real economy and the financial side (the buoyancy of global equity markets). In other words, exchange rates are not only functions of relative economic growth, but are also sensitive to general levels of risk appetite, which are correlated with the buoyancy of world equity markets. Since financial markets tend to be ‘forward-looking’ and anticipatory, when the world plunges into a recession, earnings forecasts are cut, risk-taking curtailed, and equity prices decline ahead of the actual contraction in economic activities.
To help us think about the implications for currencies, we first calculated the historical correlations between various currencies (vis-à-vis the dollar) relative to economic growth and the equity markets. Different currencies tend to perform best in different ‘seasons’, or ‘comfort zones.’ We suggest that high-beta currencies such as many of the AXJ currencies belong to summer or the spring quadrants, while the currencies of large capital-surplus countries, such as JPY and CHF, should be in ‘winter’ or ‘fall’. By and large, simple correlations of exchange rate performance relative to global growth and global financial market buoyancy are consistent with these broad prejudices. The distance of these currency cells from the origin denotes the size of the elasticities.
We believe that EUR and CHF should underperform the dollar as we enter the ‘winter’ quadrant, due to European and Swiss banks’ exposure to Eastern Europe. JPY, on the other hand, could be supported by acute repatriation flows as we head into ‘winter’.
Call 1 — The dollar to strengthen first, and weaken later. At the turn of each year, there is a temptation for analysts like ourselves to make one call on the dollar for the entire calendar year (i.e., a strong or weak dollar ‘year’). However, more often than not, currencies don’t change trends on January 1. 2008 is a good example: The dollar did not begin to show strength until May against AXJ currencies and until July against the EUR. In the first few months of 2008, the dollar was extraordinarily weak. For 2009, we see the opposite trends: dollar strength in the first months, followed by possible dollar weakness in 2H. We see the world toggling through ‘winter’ and ‘spring’ in 2009, with a risk that ‘winter’ may last longer than 1H, and ‘summer’ may come in 2010 or later. Thus, we will be buying dollars and JPY into 1H, but with a view to flip our positions some time in 2Q in anticipation of a global economic recovery.
Call 2 — EM currencies will be stressed in 1H. The global EM currency ‘moment’ is not over, in our view. In fact, the process is roughly halfway complete. We see weaker Latam currencies in 1H09. Pressures on AXJ currencies will likely persist, as these countries’ exports collapse and their central banks cut interest rates. We believe that even the CNY will be allowed to weaken against the dollar in coming months. Eastern European currencies may come under intense balance of payments pressures. While Russia especially deserves investors’ full attention, the familiar structural fragilities of EE will expose the broad region to possible discrete changes in the RUB, in our view. When the global economy bottoms, we would be keen to buy back KRW, BRL and MXN. Our view on the commodity currencies (AUD, NZD, CAD) is broadly similar to that on the EM currencies.
Call 3 — We remain bearish on the EUR in 1H. Though the EUR is no longer overvalued, it is still over-rated and over-owned, in our view. The sell-off from 1.60 to the high 1.20s merely puts EUR/USD closer to its fair value: EUR/USD was massively overvalued at 1.60. The EUR is no longer expensive, but it is not cheap. Further, the only reason why the dollar could have rallied so sharply since July was its hegemonic reserve currency status. The fragmentation of the European sovereign bond markets helps preserve the superior reserve status of the dollar. Finally, the negative feedback from possible fractures in EE could cause material damage to the EMU, and weigh on EUR.
Two main risks to our dollar view. The two key risks to the dollar are inflation and an unsustainable federal debt profile. The Fed’s QE operations need an exit strategy. The latest talk of the Fed issuing its own debt may be one way the Fed could unwind its balance sheet in time to stabilise inflation expectations. The dollar’s performance will be driven by inflation expectations, in our view. Similarly, the super-sized US fiscal deficits will be a risk for the dollar, though our central case view is that US Treasuries are more likely to be a preferred safe haven asset in a global recession relative to other sovereign debt..

Lets see what the charts reveal over the next few days and weeks.....

A

Personally, I can not be offended. It's just not possible. It cannot happen.
More likely that the earth will revolve around the moon for several days.

But the infraction was not the "F" word. Not the "S" word. Not the "B" word.
It was the dreaded "R" word. Holy Shit, not the "R" word. Oh the shame.

I don't think he realized (or maybe forgot) how many folks from around the entire world are
readers and participants on the Forex Factory and what is common conversation
for some folks might not be well received in mixed company. No different than in real life.

Here is the real rub. Put the same comment, word for word verbatim on the air of any talk show,
and there will be 1,000 calls and letters from likeminded people in support of the comment
and then another 2,000 calls and letters from people so offended that they jam the circuit boards
and then complain to the FCC for good measure. The radio station even fears for their license.

So, moral of the story is to not yell fire in a crowded theatre
and just to be safe, don't yell fire in an empty theatre either.
Don't light matches and keep the lighters in the pockets during the show.
Just enjoy the movie.

BTW: if you smell smoke and see flames, crowded or not, please yell FIRE !!!

Peace in the Middle East.


And about the Euro:

Man, if I lived in Europe, should I be offended ?
(although, like I said, that's not possible)

Over-rated ?? Over-owned ??
Why don't they just wipe their butt with some euro notes
over at Morgan Stanley. They're talking their book.
They've gotta be short yards of single currency.

I agree, great post.

Hi there, nice to meet you too!
So what is your suggestion about the Overrated overowned for the Morgan Stanley news? Are you saying that in 1h09, Dollar will actually be opposite of what they stated, and the same for 2h09? Basically do you think it will mirror off of the beg of 08? Morgan Stanley feeding the media with the highly improbable?

If a firm like Morgan Stanley placed a large position in one currency, we would not be seeing 1.4 levels in eur/usd. With the amount of money that they have they can move the markets, hence it would not surprise me if they decide to put a large position, its just that I do not think that they have done so yet.

Something as large as they are capable of is commonly done thru an options trade on PHLX (now nasdaq).
So it's not likely we'd see something like that going across the interbank boards (spot), so to speak.

I think they're short. I think they're HEAVY short. Maybe even from the 120's. They want out.

A good way to check this would be to compare last year's release from MS.
Can anyone dig that up from Jan '08 ?

Options contracts are accounted for in foreign exchange. Bill Lipschutz is one of the participants that I know of that deals directly in options. Its just that options contracts sizes are generally larger than 100,000 per lot.

Nobody, repeat nobody, can move the forex markets by themselves for very long.

Because if they do, others will smell it like blood in the water triggering sharks. And either pile on or take the opposite side and drive it against them.

I agree with you there, but few days of rally like we have seen in eur/usd does not constitute as very long time.

What I mean is I'm not looking at the FX spot market for a clue on what Morgan might be doing.
I just think the opinion is biased, EVEN IF I were in agreement with that opinion.
If my money's with Morgan and they've got me short a bunch of euro, naturally I'm supposed to
feel good when I read how much money they plan to make shorting euro in '09, those sly foxes.

Right now I'm looking at Open interest in the March 120 Puts at over 21000 contracts
and the June 120 Puts with almost 28000. That's alot of Euro at one barrier.
I think Morgan Stanley's (could be) in there with some of that for their own prop trading and mabey
a good size group of clients. We're not looking at their book, so we don't know.

I just think they're really short.

Any opinion is biased, hence it is an opinion. They may or may not be short, either way it will not affect my trading decisions.

I agree. You are correct. But, I'm afraid that's only my opinion

The price is 1.3920 at http://www.forex-markets.com/quotes.htm