Thursday May 11, 2006 - 10:26:01 GMT
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Black Swan Capital - www.blackswantrading.com
One day wonder or something more?
"When I was young I used to think that money was the most important thing in life. Now that I am old, I know it is.â
What part of this âone-day wonderâ move in the dollar is related to any of the following rationales:
A) The Treasury decision not to brand China a currency manipulator
B) The Fedâs ability to inject some murkiness into the transparency
C) A much needed technical correction with a ready rationale
D) The President of Iranâs penmanship skills
E) All of the above
F) None of the above
G) Some of the above
Weâre going with âGâ, some of the above. We know not in which quantities it be either A thru D, but what seemed to be true going into yesterday is that we couldnât find anyone who liked the dollar. We were hearing the phrase âdouble whammyâ facing the buck on the expectation the Fed would be softer and Treasury tougher. So in trading terms, letâs just chalk it up to a mini-price-extreme at this point. I think the financial press uses the ubiquitous term âprofit taking.â Though we know in a zero-sum game, there is just as much loss taking as profit takingâno matter.
Where from here? IF (a big if indeed) the Fed did inject some doubt on the rate front into the market, this dollar move could be a multi-day affair.
1) Bonds finished flat yesterday
2) Metals are higher again this morning
3) We havenât heard the final word from Maria
All reasons to doubt the Fed achieved its goal.
Plus, thereâs that recovery in Europe that Bloomberg is touting and surmising about this morning, something they do quite oftenâŚ
âEconomic growth in the dozen euro nations accelerated in the first three months of the year, reinforcing expectations the European Central Bank will raise interest rates next month.â
This is their lead. But buried at the very end of the story we find this little tidbit of news:
âConsumer spending also remains fragile with unemployment above 8 percent, almost double the U.S. level.
ââIf the euro and oil prices keep on rising, companies are going to struggle,â said Steve Webster, chief European economist at 4Cast Ltd. in London. âThere are a lot of risks out there.ââ
Thank you Steve!
Jack Crooks, Black Swan Capital
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