Monday, September 08, 2008

The Big Dollar

I wanted to put a few thoughts forward on the "Big Dollar". These ideas are for the medium term 3-6 months, but with the way the market is trading could occur alot fast, assuming of course that I am correct.

Euro. The Euro has been in free fall for the past few weeks. We closed on Friday at 1.4260. Looking at the market I have determined a few key levels which I will be watching.

1.4300, if we need to get above this level then I am looking for the market to trade to 1.4600. From there we could head higher up to 1.4900. I think this would be a healthy retrace of the down move and from here the Euro would turn negative again. A close above 1.4915 would signal to me that we could make a run at new highs, but this scenario I find highly unlikely.

Sterling. If the Euro is in free fall then Sterling is in free fall times 10. There has been really no retrace in the GBP since it began its descent. We closed on Friday at 1.7658. I am looking for the market to fill a gap on the daily charts from Aug 28. To accomplish this we need to trade to 1.8179. I think we will do this as we have had no significant retrace in the market and all markets need some sort of retracement.

Yen. The have written about the Yen recently and I think my scenario still has potential. We closed on Friday at 107.70, I think there is potential to trade lower to the 103-104 level. From there i think we will reverse and head higher eventually getting to 110.66.

When achieving breakout levels (I.E. Euro 1.4300) I like to see a close 2 days in a row to establish it as a real breakout.

Lets see how this plays out, as readers of this blog know my last few currency trades have been pretty poor (Clp/Cop and Jpy/Krw). Luckily I take much more risk in interest rates then currencies.

Good Luck and Good Currency Trading

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