Wednesday July 13, 2005 - 05:00:21 GMT
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Tricom Futures and Foreign Exchange -
Forex: Get ready, this EUR and GBP rally is about to come to a sudden end.
Over the last 24 hours we've seen further USD softness, largely attributed to the market closing longs ahead of tonight's US Trade data, where the market's looking for a number around US$57Bln. Given that China announced a strong Trade Surplus yesterday, the market is starting to look for a number above $57Bln. USD bulls were also hurt by reports that the United Arab Emirates is considering diversifying some of its assets away from the dollar. That has helped the single currency climb to the new 3-week peak of 1.2203 USD. Reports suggest that the UAE, which is one of the world's leading oil producers, is considering swapping 5 pct of its dollar reserves for euros. Though the UAE's reserves stand at only 20 bln usd, the reports have acted as a reminder that the diversification issue is still in play.
So far today, the market's been fairly uneventful compared to the previous couple of days.
Once this Trade number is out of the way, we can look forward to CPI and Retail Sales on Thursday, and Michgan Consumer Sentiment and PPI on Friday. These numbers are expected to be USD positive, as they should show further signs of economic recovery, and signal further rate hikes.
On the basis of these comments, i think we might see still further upside for the GBP, and EUR, and conversely further downside for the USD going into the Trade data, and immediately after. However, following the data, we maybe in a good position to establish shorts in the EUR and GBP, and/or longs in the USD. I can see the EUR's upside extending another 100 points, where the 1.2340 area should prove too hard to break. Similarly, the GBP should be capped around 1.7880, and USD/CHF will have support at 1.2650-60.
U.S. Treasury debt prices drifted lower on Tuesday in cautious trading ahead of an auction of five-year notes on Wednesday.
However, the market pared losses as crude oil prices reversed Monday's decline to climb back above $60 per barrel.
Trading volumes were slim, with many dealers looking ahead to major reports on June inflation and retail sales due on Thursday and Friday for clearer guidance.
Beyond this week's data, semiannual testimony on the economy by Federal Reserve Chairman Alan Greenspan on July 20 could well set the market's mood for at least the next few weeks.
Today’s Economic Releases:
Today’s Top Trades - Look to get in before the number, and take profit on the reaction to the data.
- Buy EUR/USD around 1.2195-85
- Sell USD/CAD around 1.2085-95
- Sell USD/CHF around 1.2770-80
For more ideas send me an email, [email protected]
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