Foreign Exchange (FX) watching Stocks

Markets yesterday were extremely lackluster with no new economic numbers and dealers looking ahead to the weekend.

In Currencies
Yesterday I added to my short dollar Mexico position looking for a break of 11.00. We did but bounced right back and with no change inthe Corto the market grinded slightly higher. Late in the day very good inflation and growth numbers were announced and surprisingly the market jumped again. I will be watching this closly on Monday as I do not like the way Mexico reacted to the strong numbers (seems alot of shorts out there). I also sold Usd/Jpy and took it home over the weekend. This mostly on the back of the strong talk by the Bush administration and Greenspan for China to adjust is currency. Although I do not think it will happen this weekend I think near term something will happen(next 3 months). Saying all this I am afraid that my timing may have been alittle off and we may "squeeze" higher into monday.

Dollar rates are very closely watching Stocks. I am convinced that U.S. rates are going to continue higher. BUT if stocks suffer (and I think they will) look for a flattening of the curve. The FED does not want this but it will happen (unless China revalues then the back end of Treasuries will collapse). On the U.S. economy. I believe inflation is a problem for most American's. Fill up your gas tank (50 dollars for me to do it yesterday), pay your water bill, your monthly bus or train ticket....all of these things have gone up for me (and I am sure for most American's). This is money right out of your pockets. Money you cannot spend on dinners out, movies etc etc....So I do believe that the economy will slow down (maybe just a soft patch?) near term. Stagflation....I would not worry about that yet.

These are my FX Trading Ideas for Today.....

Good Luck to all