Monday June 27, 2005 - 10:25:55 GMT
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Black Swan Capital - www.blackswantrading.com
Is Fed news already in the dollar?
All successful trading comes down to three things, “knowledge, nerve, and the ability to lose money.”
Joseph Siegel, from The Innergame of Trading, Koppel & Abell
The Fed (FMOC) rate announcement this week: The consensus is for another ¼ point hike taking Fed Funds to 3 ¼%. But the question is: What will the Fed say/imply/telegraph about its future intentions? That’s where the focus will probably be. Most players in the market believe the Fed is near the end of the road for a while – one this week, and one at the next meeting (another ¼%) and they are done, seems to be the view. They will be listening for anything that supports that view.
We have long held the rising US dollar yield differential represents the primary catalyst for the dollar rally we have witnessed since Dec. 31st 2004. We continue to believe yield will represent a key support for the dollar. But we also believe, much of this view is already “in the price” of the dollar. It is why we continue to believe, at least on a multi-week basis, the best opportunities will come playing against the buck. Our Weekly Wave charts support that fundamental view at this stage.
There is a view lingering out there that says the Fed hikes 50 basis points—otherwise how do they send a signal to the housing market. Possible! But we think it’s unlikely given the background global growth scenario. The Fed no doubt must focus domestically, but Mr. Greenspan understands if he craters US consumer demand (which could stem from a sharp fall in the housing market), there’s no other demand out there to carry the load.
Black Swan Capital
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