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Strategies & Market Trends : LET'S PLAY IN THE FOREX..AND NOT GET LOST!
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To: RockyBalboa who wrote (119)5/6/2007 6:25:01 PM
From: RockyBalboa  Read Replies (1) of 247
 
This week has high expectations in volatility. A big bang for central bankers, US, EU and UK central banks are announcing their decisions and outlook. BOJ minutes are due in a couple of hours as well.
For the pound it is a make-or-break situation. The selling of pound was hard to break with some covering into the weekend close.

The nuke scenario for the dollar is evidently a decoupling of the rate decisions in US and EU/UK. That could put the dollar even below recently traded highs in both currencies.

Of course, with the currencies in shouting distance to the chart tops and selling pretty muted after the prolonged run, a technician would buy on strength. The European rhetoric is not helping the case here: The economies are strong, the currency relation still no cause of concern, etc...tough times for contrarians.

Program assumptions:
1) Yen - the BOJ won't go into the way of money flows. They seem to want a cheap yen, too. Possibly, we see some perturbations which are quickly bought. The carry trades could suffer but both want evidently new highs, so it really could end up in a dramatic spike. Nothing to leave unattended.

2) EUR - here the central bankers pointed to the strong business conditions and the ongoing rate hike campaign which is warranted as for the double digit monetary growth - for now.
They needed to add some percents to choke that off, not the homoeopatic 0.2 hikes here they prescribe the wrong medicine - if they wanted the currency lower. As a result the currency could rise to the point where the economy begins to stall in earnest. in Dec 2005 the rise to the 1.36 level was outright crazy and it indeed faded within the next few months to 1.18 but this time it looks much more stable.

3) UK - commercial bankers describe the business as brisk and especially housing and mortgages as unbroken. Money supply issues apply here too and thanks to good tax returns, the governments are not borrowing any money either.
The big question mark is the change in leadership and some political risk - Iraq Alliance etc.
The solid play still appears to buy the cross on weaknesses and look for a 0.70 retest. For now it got stuck at 0.68 and some.

4) US - and here is some unrelated issue. SOX critics mention that sarbox caused a lot of investmentbanking activity to take place outside the US. It could hamper the USD relevance and hence the exterior value as well as money is flowing out of the US to be used in banking activities and only some returns via acquisitions. Any sarbox amendments could be the catalyst to revert flows in that context.
The currency could possibly follow the path of economic (read: financial) activity outside US.

Example: the botched quantas story already hurts the austral short-term. It lost many points vs the GBP and also JPY.
When the ABN story unravels than this will be a drag in UK and EU.

Caveat emptor: If one thing becomes too obvious it is likely no longer there.
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