Thursday March 3, 2005 - 11:18:51 GMT
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Black Swan Capital - www.blackswantrading.com
Dollar momentum positive, for now!
“The global financial markets are speculating in China-related assets, in the belief that Chinese prices will rise to OECD levels. I believe that OECD prices are more likely to fall towards Chinese levels.”
Andy Xie, Morgan Stanley
Yesterday, Mr. Greenspan agreed with the market—deficits are not sustainable and action was needed. But he also said there was little to suggest central banks were diversifying out of the dollar. He giveth and he taketh. But we haven’t seen much reaction out of the dollar following those admissions—a dollar that surged in Asia and Europe before Mr. Greenspan took to the floor.
It’s quiet so far this morning. It appears all are gearing up for the Friday morning release of US non-farm payroll for February. Early in the week, traders believed Friday’s report would be quite bullish for the buck, but that has been tempered because of news from Challenger, Gray Christmas that showed announced layoffs of 108,000 in February, from 92,000 in January.
On a daily basis, euro, Swiss, Aussie and the pound have all turned over against the dollar i.e. broken below their recent three-week trend higher against the buck. Is it a minor hiccup, or something more?
daily charts: euro, swiss, pound, aussie
Given the technical damage to this crowd yesterday, and the relatively tepid bounce (Aussie being the exception, but that bounce was contained so far) I was expecting to see a quick retest of the yesterday’s lows—especially given what you seen in the charts above—the daily momentum has turned in favor of the dollar. It has happened yet.
So, we have a setup for another dollar spike higher on good job news tomorrow. And we have the setup for people, like me, who believe the short-term momentum is dollar bullish to get trapped. I guess if this were easy, we’d all be rich.
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