Thursday July 6, 2006 - 10:23:19 GMT
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Black Swan Capital - www.blackswantrading.com
A confusing equation...
â€śMake your theories fit your facts, not your facts fit your theories.â€ť
Dickson G. Watts
The dollar rally yesterday seemed to be launched on a surprise report from ADP suggesting we could see a blowout jobs report for June. And the global market risk still lingering in the background, brought back into focus by North Koreaâ€™s recent fireworks display, likely helped the dollar buying decision.
There are many unknown key variables still undefined in the currency equation, thus the confusionâ€”we think. Our attempt to define said equation looks like this:
Ifâ€¦FBIP + RRRT > ECBEHEâ€¦then buy the buckâ€¦otherwise buy euro
FBIP = Fed possibly back in play on strong US jobs
RRRT = Risk the risk-reduction trade isnâ€™t over
ECBEHE = Risk the European Central Bank will exceed hawkish expectations
Today we see the ECBEHE sideâ€¦tomorrow the FBIPâ€¦but knowing RRRT and weighting its impact is the real wildcard.
Jack Crooks, Black Swan Capital Black Swan Subscription-based Service
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