What can i say about Trichet other than it is breath of fresh air to have at least one central banker in the world who is both not afraid to speak his mind and does it very clearly too boot!  Trichet has told us exactly what he intends to do in the near future which is NOTHING!  So he is telling us that he is done moving rates in any direction in the near term.  What a wise man!  This will effectively put a bottom in on the EURO for the near term.  In my recent posts I mentioned that we are looking for the Dollar to begin weakening again and this is the Fundamental catalyst that will facilitate this next wave down in the Dollar.  This will not be a one way street of course, it never is, but overall we expect that the Euro will hold above the 1.25 level.  We continue to buy major dips in most of the majors against the Dollar.  Even though the US has rates at zero we can still go lower!  How you ask?  The same way we got here in the first place…simply by printing more money!  While rate will not actually go below zero the effective rate can and as it does we will see the Euro continue to appreciate against the Dollar.   

Hello again everyone.  I just wanted to do a quick post and alert you to the fact that my models are indicating a high probability that the Dollar strength we have seen post NFP is waning already and could turn lower again this week.  We are exiting any remaining long Dollars, with the exception being the USD/JPY pair, and beginning to look at short Dollar trades against the majors.  Lots of reports still to come out this week so lots of data for the markets to digest.  

That is really all one can say about yesterday’s FOMC decision.  I have seen a lot in my time but i must admit i did not see that one coming.  So now it presents us with a new challenge…on one hand they are willing to do whatever it takes to fix the current situation and on the other hand they have now exhausted their traditional ways of managing these crises.  So will their new and untried can of tricks save the day?  History shows that it is not likely.  Even though we did not expect this extreme action by the Fed we do see Dollar strength coming on the back of this move.  We are looking to accumulate Dollars these next few days that we expect to hold into the first week or so of 2009. 

So this week we have the FOMC meeting which should set the tone for the rest of the year.  Everyone expects them to cut rates down to .50%.  This is really not the main story.  The main story will be what new “tricks” they try and create now that they have run out of their traditional “ammo”.  This foolishness should continue until at least the inauguration.  Once Obama takes over and begins opening up all the “books” the game is likely to shift dramatically again.  This week we are expecting a counter intuitive rally in the Dollar after the FOMC cuts rates.  This flies in the face of Econ. 101 but has been the case in all other major rate cuts.  Look at how far the Euro has rallied since the ECB cut for example.  We are expecting something similar to come out of the FOMC meeting though we expect it to be short lived and basically a sucker rally in the Dollar.  Look to continue to sell Dollars on rallies as we have consistently said in this post these last few weeks.   

Hello again everyone.  I just returned from speaking at the Forex Traders Association in Houton on Saturday.  I want to say thank you to every one there for hosting me and having such a great event.  I want to especially thank Mona and Anton.  I hope to see you all again soon.

So this week we are faced with digesting the worst   NFP report since 1974 and at the same time anticipating the FOMC meeting next Tuesday.  I have been and continue to talk about the turn back down in the Dollar and that overall theme remains in play. I continue to look at Dollar rallies as selling opportunities.  Also I am going out on a limb and saying this about oil…we will see $125 a barrel again before we see $25…if i am right it has huge implications for all markets but especially the Canadian.  Stock markets are expected to be choppy at best this week a they too begin to anticipate the next FOMC meeting and more importantly the implication of the next cut…

It’s great to be back. Here’s the next trade.

Here’s a baseline on the EUR/USD:

The
green baseline will be our profit target on a buy trade.  How do we
know when we’re going to take the buy trade?  We wait until a blue
entryline has been broken.  Specifically, we want to see the currency
pair close above the blue entryline on this 30 minute chart:

The
stop loss is going to be put below a recent low before the blue line
was broken.  In this case, as of now that would be down in the 1.4450
area.  But I’ll get a more specific level once the trade is close to
opening.

Here’s the 15 minute chart and a baseLine. This is going to be our profit target.

And
here’s the EntryLine.  If the pair closes above this line, on this 5
minute chart, I am going to buy the pair, with a stop loss 15 pips
below the lowest low it has made so far, and use the BaseLine as the
profit target.

Not many of you can even see this pair on your trading platform; I am getting ready for a possible trip to Signapore to do a seminar, and I’d like to update this pair more often to get myself ready, and to put the pair in your mind as a possible pair for trading (if your broker offers it, of course).

Here is the 4 hour chart, showing a nice baseLine:

And here is the 1 hour chart.  If the pair can close below this blue EntryLine, then I would be willing to sell the pair, with a target of the BaseLine.

The AUD/USD is breaking above a short term trendline, and I think it’s a reasonable by trade right now.

Here is the chart:

The pair has been in a severe downtrend for a few days and could really use a nice correction, at least temporarily.