Friday December 24, 2004 - 09:15:52 GMT
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FOREX: US OPEN MARKET POINTS 12-24-04
When in Doubt - Dollar Rout
“Do you really want to be long EURUSD at 1.3450 along with the rest of the world? Is this wise?” asks UBS research tonight in a note from their prop desk. Well… maybe not. Except that the latest readings from our Speculative Sentiment Index continue to show 3 euro shorts for every 1 long indicating that the euro is likely to move higher as most traders are still trying to sell the top and we are nowhere near capitulation of dollar bulls.
We too think the possibility is small for massive further gains in the euro, but it does not preclude us from believing that a run for another hundred points could happen. A test of the 1.3600 handle is quite probable before the year end in order to shake out all the trend faders still looking to catch the turn in the pair.
As 2005 begins, all eyes in the FX Market will be on Bush Administration. Traders will want to gauge the seriousness of Mr. Bush’s pledge to become more fiscally prudent. The end of January sees the President's State of the Union address, followed shortly thereafter by his FY2006 budget proposal and then the G7 Finance Ministers meeting in early February. If the market takes Mr. Bush at his word then the dollar stands a strong chance of a counter trend rally as 2005 begins. If, however, Mr. Bush does not make his case and US economic data begins to falter, the FX market - never known for its restraint - could push the pair to 1.40 much faster than most participants expect.
FX Spot Overnight
- EUR takes out all time high trades 3540
- JPY pokes below 104 but still holds 103.50 support
- GBP lags, but perks up above 9250
- CHF tags 1400 but still far away from record highs
Happy Holidays to our clients the world over.
See you in 2005.
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