Holidays make for thin markets. Add a good dose of volatility, light the touch paper and stand well back.
Euro dollar touched 1.4963 before forming a substantial upthrust. However, as it does not sit right at the top of the daily chart we may yet see another attempt at 1.5. Weekly and monthly charts do show this as a possibility. However, given the news this morning that Airbus is now facing massive job losses and its chief executive admitting that the company’s business is no longer “viable”. Dramatic words which will have been noted by President Sarkozy. Has the time now come for a dramatic intervention.
Money continues to flow into the eurozone – so much so that purchase of bonds was temporarily suspended earlier this week . Iran, Nigeria, Asia and oil producers all appear to have abandoned the greenback. In my humble opinion, whilst i accept that these flows have been prompted by the sub prime fiasco, the current buyers of euros seem to have lost sight of the fact that eurozone itself is in fact heading towards a substantial slowdown, if not recession. Investors should also remember that before conferring reserve currency or safe haven status on the euro the currency is not backed by any central treasury or government. Europe is like a large quarrelsome family. More worrying is that Belgium has not had a government for over 100 and threatened with fragmentation – hardly a sign of stability and deeply ironic as the EU is headquartered in Brussels.
As a trader i would now be looking to sell any euro assets and either buy back into the US dollar because despite Iran and Venezuela’s deep pathalogical hatred of anything American, or look at the yen which has been strenghening all week. If the yen continues to strengthen the Japanese are not averse to a spot (sorry for the pun) of intervention and could end up buying back into the dollar.
All the markets are starting to look like one gigantic poker table – everyone playing their cards close and trying to interpret the “tells”! Bluff and counterbluff – we shall see.
My recommendations for those of you who cannot bear to stay out of the market are as follows: a further sell on dollar yen – i believe it is running down to 105, which is first significant support level and there is even a chance it could fall to 102 area. So, go short with tight stops.
Continue to sell the pound against the dollar but again aim for small shorts with tight stops. As the market is quite slow use the 5 min charts and be aware of possible support at the 2.04 level.
A glance at the dollar index does show continued dollar weakness – however, be aware that the index has a high euro weight and may be lagging current events.
As always good luck and have a great weekend and please keep your comments coming in – I love to hear from you all.