Tuesday November 2, 2010 - 13:59:46 GMT
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Black Swan Capital - www.blackswantrading.com
There seem a handful of things in play today that are influencing rather mixed price action. Hereâ€™s a quick update on how things are going so far today.
â€¢ Aussie powered to a new high on a rate hike by the Reserve Bank of Australia the consensus was not expecting. The Aussie is now trading above par against the buck.
â€¢ Euro following Aussie higher on better than expected Purchasing Managers reports from the eurozone--the reason given for the move today.
â€¢ We donâ€™t want to chase here. But the euro price pattern looks very much like the Aussie, just lagging a bit, and could be the best candidate to ride higher if the Fed does the deed and is very generous tomorrow. A viable target on euro-usd under that scenario looks to be 1.4360-level first (76.4% retracement level), then a chart resistance near 1.4600-area.
â€¢ The pound is the loser today. The news there opposite of eurozone, as its Purchasing Managers Index number fell to the lowest level in eight months. As we told our Members yesterday, we think the pound trajectory going forward will ebb and flow directly with growth expectations. That said, if we see some kind of blow-off move in the euro today, already up 140 pips at this writing, the pound will likely be dragged higher.
â€¢ CHF, CAD and NZD also following the surge in AUD and EUR. The Japanese yen is weaker. S&P 500 futures are pointing to a strong open. Chinese manufacturing and US factory activity are adding to the optimism fueling risk appetite.
â€¢ It seems over the past couple of days we noticed a growing expectation the Fed will indeed be quite generous with a new round of quantitative easy (aka currency debasement in order to create inflation). That sentiment we think is being priced back into the currency pack today.
As mentioned, the patterns in many assets over the last two weeks or so amounts to consolidation, i.e. a mostly sideways move. Such a move could indicate that the trends have let off some steam and are again building up energy to continue the prevailing trends. But an alternative to keep in mind, there is potential for double-tops (reversal patterns) to form if we see failure to break convincingly above recent highs. More on this for CCPRO Members later this afternoon ...
Black Swan Capital LLC
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