Tuesday October 4, 2005 - 11:34:31 GMT
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Black Swan Capital - www.blackswantrading.com
Euro due for bounce or capitulaiton?
“The market is governed by fundamental economic forces that are affected by the current state of the political system, which in turn is constantly changed by politicians.”
“With rising oil prices and new political uncertainties in Germany and Italy, we thought business confidence was at risk. We were wrong: September surveys were surprisingly positive. Corporate sentiment turned upbeat in Belgium, the Netherlands, Germany and Italy. Only France and Spain showed stable indicators,” writes Morgan economists Eric Chaney and Javier Rodriguez.
So far, not much of this budding European growth news is being reflected in the price of the euro.
Everyone’s taking about how aggressive the Fed will be going forward. Plenty of Mr. G’s minions will be speaking this week—“It’s inflation, don’t you know?” will likely be the lament.
How much of this dollar yield differential bullish news is in the price? Is a euro bounce in the cards? Or are we close to a major euro capitulation on a move below11870?
One would think the decline in the euro has led to an extreme in bearishness. But the open interest numbers on the CME IMM suggest otherwise:
Point: It would seem there is plenty of firepower on the sidelines should the euro break below key support.
Black Swan Capital
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