Thursday, August 31, 2006

Buy Euro...

Today the ECB held rates steady but in the comments it is clear that they are leaning toward higher rates. Trichet said that "Indicators show significant improvement in Economy" and that strong vigilance is essential. With U.S. numbers clearly slowing (we will see a weaker employment number tomorrow) and Inflation ebbing (PCE deflators and core both lower) the interest rate differential is moving more and more in the Euro's fvor. Sell dollars whereever you can !


Wednesday, August 30, 2006

Inflation story over....

After digesting the markets for the past two days it seems clear to me that dealers are much more confident in Mr Bernanke and are "over" the inflation story. Oil prices have topped (at least for now) and it seems that society is getting used to 3.00 dollars a gallon for gas. This all leads me to beleive that U.S. rates will move lower and the dollar will suffer. I do however believe that certain currency pairs will move more then others. I am looking for:

Eur/Usd to mover higher
Usd/Jpy to move higher

Emerging Markets (particuarly high yielders) should benifit as U.S. rates decline. So I am looking to be short dollars against:

Colombia (not yet I will update when I sell)

and Long dollars against Chile.

These are the FX Trading Ideas for today.


Tuesday, August 29, 2006

Back from Vacation, with few ideas to begin with

Back yesterday from a very relaxing two weeks off. After reviewing the markets I see that although we mat have had some volitility it seems the levels themselves are little changed. It seems that the overall market perspective is that the U.S. economy is slowing and inflation is in check. Bernanke seems to be gaining support from the financial markets and this is always a good sign. For now I think I will be looking for the dollar to (continue)trade under pressure and interest rates to trend lower. No firm trade suggestions yet. I will update later as I get a better feel.


Friday, August 11, 2006

Vacation time has arrived

I will be leaving on Vacation today and not returning till August 28. It feels like a good time to go away. The markets are quiet and I expect little to happen (famous last words). The Bank of Japan did not change rates last night.Usd/Jpy is much higher (as is China which definitly suits me) and I must admit I am a little surprised bythis reaction. Did anyone really think they would raise rates ? I strongly feel that any rate rises will be slow (very slow). After 10+ years of zero to negative growth, Japanese officials will not risk a recover by hiking rates to quickly.

So my trading ideas for today are.......Square up and go on Vacation for two weeks, that is what I am going to do !


Thursday, August 10, 2006

Terror threat disrupted

A terrorist threat originating in London was disrupted today by British police. As London police have reported "A major terrorist plot to allegedly blow up aircraft in midflight has been disrupted". Markets have had a very muted reaction I think for couple of reasons.

1. It was caught before any damage was done.
2. It originated overseas
3. This is another example of the Western world being one step ahead of the Terrorist.

I think this is an important point. Being one step ahead of terrorism has to be looked at positively throughout the world. As I sit here writing this I wonder what Joe Lieberman, Senator from Connecticut, is thinking. Two days earlier and he has a much better chance of winning his primary.

For trading ideas I have not changed my opionion at all. Lower dollar overall. As for rates, the U.S. could be pushed (or at least market perception) further toward a wait and see approach with any marginal numbers being viewed from the dovish perspective.

These are the FX Trading Ideas for today.


Wednesday, August 09, 2006

Stronger numbers out of Japan

A stronger June Machinery order for Japan (8.5% increase against a 2.1% decrease last month) did nothing to help the Yen last night. This is an interesting move from my persective. Other currencies in the region strengthen last night (noteable Korea) and it would have made sense that Yen should have not only followed but led the way. I am thinking the yield baskets are being put on.

Being long:



Being short


Seem like a strong play if you think little will happen. I also think you can be long Usd/China as I think the market is looking for an increased appreciation of the currency and will be disappointed. You can extend this type of trade to other regions too. But I always try to remain Dollar neutral when running these trades.

Under this senerio Usd/Jpy can continue to grind higher (absent any really really really strong numbers).

These are the FX Trading Ideas for today


Tuesday, August 08, 2006

FED holds rates steady

As expected (by just about everyone) the FED kept interest rates steady after raising rates 25bp for the last 17 meetings. The key line to me is:

Core inflation has been elevated but Inflation pressures likely to moderate over time.

This to me is a more dovish statement then anticipated.

I remain in my positions (short Usd) although at the moment they do not look to good.



Announcement day. I am looking for the FED to pause and to keep the statement pretty much as it has been. The FED has done nothing over the last few days/weeks to alter the perception on the street that they are about to pause, and I do not think that the FED wants to surprise anyone. As for the statement, I think the FED will stick with it usual, we will go number to numer speech. It makes sense. The believe the market will take this as being on the more dovish side (although I do not).

For trading ideas.....Always remember the Trend is your Friend......So

Stay short dollars. I like being short dollars against Euro and Gbp as they continue to be in a rate rise environment and we are (at least for now) pausing.

I have also been watching Usd/Cny. It has been widely reported that the Bank of China is about to step up its apprciation of its currency. Maybe, but I am not convinced. I think the apprcaition built into the curve is quite aggressive so I like being long dollars. You can also buy Usd/Cny against selling Usd/Krw.

These are the FX Trading Ideas for today.


Monday, August 07, 2006

FOMC Tomorrw

After Friday's disappointing employment number the market seems convinced that the FED will pause, and I agree. On the back of that number the Dollar took a big hit and in the big picture of things I again agree with this move. The risk that I see going forward is that the market gets a little ahead of itself. The commentary on the back of the FOMC tomorrow will almost certainly contain remarks about being ready to raise again if the numbers dictate. I am certainly looking for relativly bearish statements to balance out the "pause"

Number to number is the way of the near term future and it is the way it should be. I expect the numbers to show a slowing of growth. Inflation, at this time, I do not have a firm opinion on, but I would think that a near term spike followed by a drop would be the most probable course.

I will remain long EM currencies and small short USD, as I am going on Vacation at the end of the week and do not want to have to much on.


Friday, August 04, 2006

US Nonfarm Payrolls

Nonfarm payrolls rose 113k against an expected 144k from most analyst's. Revivsions to last month were slightly higher 124k against 121k. I believe that the July payroll data will support the FED's view of a slowing growth and inflation outlook. Therefore I maintain my view that the FED is likely to keep policy unchanged when the FOMC meets next week. This is not to say that the FED will signal an end to rate rises but rather a pause to allow the economy to digest the tightening already in the system. The dollar got hit hard on the back of this number and U.S. dollar futures rallied. I feel that the dollar will remain under pressure specifically against Europe and the U.K. Those countries as evident yesterday are still in rate rise environments and the interest rate differentials should begin to move in their favors, hurting the dollar. This number should also help Emerging Market currencies. Usd/Mxn and Usd/Brl specifically look like there is some downside in front of them.

Currenctly I am:

Short Usd/Brl
Short Usd/Ars
Short Usd/Clp

And looking for lower rates in


Thursday, August 03, 2006

The U.K. and Europe raise rates

The U.K. surprised the markets this morning raising interest rates 25bp to 4.75%. The BOE cited:
Firm Growth
Limited Spare Capacity
Rapid growth of real money
High CPI

In Europe the 25bp was expected. Trichet (ECB President) was more hawkish then I expected and therefore left the door wide open for future increases in rates. This has caused the U.S. futures to sell off in sympathy but all depends on tomorrows number. As I have said the market (to me) seems to be looking for a weaker number. A stronger number would provide the FED with an excuse to raise rates once again. If this happens I look for the curve to flatten out (as the market should percieve this as the last upward move) and the dollar to get hit HARD.


I expect another Quiet FX session

The dollar recovered a little last night as I believe this is position squaring in front of the Employment number tomorrow. Also this morning we have the announcement from the ECB (25bp expected) and Bk of England (unchanged). It will be the commentary which will be looked at closelt. Just how bearish will the ECB be? I think they will definitly lean that way. I will update my thoughts later today.


Wednesday, August 02, 2006

Market waiting for Umployment Number on Friday

The market is very quiet today as everyone waits for the U.S. Employment number on Friday. Bloomberg is calling for an increase in employment (non-farm payrolls) of 144k after a June number of 121k. All the "predictions" that I have been reading/seeing is that the number will disappoint the market. If I were a betting man, I would certainly be leaning this way. EM currencies have strengthened considerably today and U.S. interest rate futures are slightly higher. I have been looking for lower rates in Mexico and Brazil off the back of a slowing U.S. economy. I think we will (and have been) beging to see the economic numbers begin to show this occurence in a bigger way. I also see this as the defining moment for the FED in the sense it should spell out what they are going to be doing at the end of the month. I am again leaning toward no change but the number on friday will dictate. I will also be going into the number with a few positions

Long Usd/Jpy
Short Euro/Usd
Short Usd/Brl
Short Usd/Clp
Short Usd/Ars
Looking for lower rates in


Quiet night

I has been pretty quiet overnight and I expect more of the same throughout the day as there is basically no U.S. numbers of any interest. I am expecting a slightly positive day for the dollar. I continue to be long Usd/Jpy from 115.68. I will also be looking to sell dollars (for a short term play 1-2 days at the most) against Latam currencies as I think some squaring of existing positions took place yesterday.


Tuesday, August 01, 2006

Adding to my Usd/Jpy Long Position

I am adding to my Usd/Jpy long postion after the weekend where the Bank of China did nothing on thier currency. This was not surprising to me. Usd/Hkd , which was where the rumour began, is back up at 7.7730/35. I will add here (114.68) and leave my stop below yesterdays 114.7 low.