Tuesday June 6, 2006 - 23:37:08 GMT
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Tricom Futures and Foreign Exchange -
Forex: Good markets for watching, rather than trading
The dollar is broadly higher late Tuesday, advancing versus its major counterparts as investors focused on comments from Federal Reserve officials highlighting the possibility of further U.S. rate hikes. From its peak for the day, the euro fell more than a cent versus the dollar, while the greenback posted gains of Y1.5 versus its Japanese counterpart. The U.S. currency had won back nearly all the ground it lost in the wake of Friday's disappointing U.S. employment report for May. The dollar owes its strength to comments from Fed officials that have outlined a concern over inflation and resuscitated waning expectations that the Fed might raise interest rates.
Trading this market is fast becoming a toss-of-the coin situation, and that's too risky for this little monkey. Basically, it's a good market for watching at the moment. In terms of the Fed's hawkish stance on inflation, they have to be aware of how further rate hikes will impact on the US asset classes, in particular, the housing sector. There is a real danger that too many hikes could see the US go into a stage of stagflation (benign growth, with high inflation), and thus force the Fed into cutting rates sometime down the track in order to re-stimulate the economy. Bernanke should talk to the NZ Reserve Bank, this could him to avoid repeating the mistakes that the kiwis have made by hiking too much.
Some levels to consider: Looking for USD/JPY to top out between 114-115, EUR/USD to be well supported around 1.2700, USD/CHF to be capped around 1.2300, AUD/USD to be well supported around 0.7320. Gold to be supported around 610-620 (if there is inflation, then gold has been an historical hedge against inflation)
Intra-day trading is proving difficult at the moment, and as i said above, it is becoming a case of toosing a coin, or throwing a dart on either buy or sell. There is little rhyme or reason to the market's movements at the moment. My suggestion for small acocunts would be to continue to watch from the sidelines, and keep some powder in the gun for when the market gets back into some sort of trend.
Today's Economic Release:
AUS: RBA Interest Rate Announcement (no change expected)
EU: Retail Sales
Ger: Factory Orders
Today's Top Trades
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