Friday, March 11, 2005

Trade of the Month....

I have been watching Euribor futures. Recently I shorted them with no success. My thinking was that interest rates globally were going up and although I felt Europe would lag I felt they would raise rates at their first opportunity. I still feel that way but think that the "first opportunity" is month's away. I went long June 05,Sept05 and Dec05 contracts yesterday. The upside for June is limited (6 pips) and I will be looking to sell at 97.85. I will stay long these futures until a fundamental change in the markets occurs. I do not see that happening in the near term.

Good Luck to all !

Thursday, March 10, 2005

New Zealand Raises...U.K. Does Nothing...

New Zealend raised its benchmark rate 25 basis points to 6.75%. This was not a total surprise, but rather the comments afterward were clearly more bearish then the market anticipated. This morning the U.K. kept rates steady at 4.75%. The market has had a muted reaction so far. Short Sterling has ticked slightly higher and the pound has dropped marginally.

The big news of the morning came out of Japan where it was stated that Japan was going to start moving reserves out of dollars. I think this is big news. Japan is the largest buyer of dollars and dollar debt in the world. This will continue to put steady pressure on the dollar. Best bet be short dollars perferrable against higher yielding currencies.

Monday, March 07, 2005

Questions...Comments...Opinions...Let us know

Dollar struggles after Employment number

The dollar after a stronger(slightly) non farm payroll number on friday sold off aggressivly against all currencies. The market seemed to take the news as clarification that interest rate rises will conytinue at a "measured" pace and that there will be increase in the speed of rises. I feel the dollar will be in a range near term and will look to sell Euro 1.34(ish) level and buy it at 1.30(ish) level. higher yielding currencies (Aud,Nzd,Gbp)should out pace the market in the coming days.

Friday, March 04, 2005

Employment Number

This is all that matter.....Strong number futures sell off, dollar rallys. Weak number the opposite. Market looking for a strong number. Emerging currencies starting to get squeezed. If a strong number I will be buying Usd/Mxn,Usd/Brl,Usd/Sgd,Usd/Twd,Usd/Krw.....They will move the most....

Thursday, March 03, 2005

Follow the Leader, ..Oops I mean EUR

For those of you out there in the individual investor world that have little or no exposure to the FX markets, this little truism can cut through the confusion that is currency trading. Analyst 's can bombard the markets with talk of current account deficits, interest rates, jobs growth, etc. But the simple fact is, if you can figure out what direction Eur/Usd is heading then you can pick the direction of most of the G7, G20, or G-infinity (I forget how G countries there are now). So, if you think eur/usd is going higher or lower, you can bet with high probabilty that the others will follow suit. For example, if you see eur/usd is up 100 pips, and aud/usd is flat on the day, buy it, because its going up.

Whats the moral of this story.........correlation!!!!!!

FX markets are very highly correlated and in my opionion Eur/Usd is the leader.


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Dollar Stable looking toward Employment number

Little movement overnight as the market awaits the U.S. employment number tomorrow morning (expecting 225,000). Weaker numbers in the U.K. (U.K. services survey) and Australia (poor Retail Sales) allow me to continue to look for these currencies to weaken against the dollar over time. I would not be aggressively long U.S. dollars presently, but rather I am waiting to see tomorrows number before taking any sizable positions. For today I will be looking for a level to short Aud (.7855-65) and Gbp (1.9125-35). I am not looking for any big moves today. Good Luck.....

Wednesday, March 02, 2005

Australia raises rates 25 basis points

As expected Australia raised interest rates 25 basis point to 5.5% last night. The currency initially made a small move higher then came off hard currently settling at .7800. I feel this is just the beginning of the move. Recently they have reported weak GDP numbers as well as an extremely worrying current account number. Also the housing market which have propelled growth in recent years is showing increasing signs that it may be topping out. Couple all this with an improved outlook here in the states and I see Aud falling further in the coming weeks.

I also would be watching closely any high yielding currencies. Those will be under the most pressure as rates in the states continue to drift higher.

Tuesday, March 01, 2005

Questions ? Comments ?

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Look out for stocks.....

The U.S. stock market traded lower yesterday. Keep an eye on the Emerging Market Stock markets. WHEN they come under pressure the Dollar WILL do better against their currency. A great deal of the dollars weakness over the last year or so has been attributed to interest rate differentials. This is changing. Also the purchasing of currency to buy foreign stocks has been a consistent theme. WHEN their stocks come under pressure fund manager's will run for the exit. Unfortunately that exit is small and it will be crowded. Tonight is the Australian interest rate decision. I am expecting 25 basis pts. I will be short Aud/Usd as I think they are coming close to an end to their higher rate cycle. See below story for more flavor.

http://www.iht.com/articles/2005/02/28/business/gfcolumn.html