Friday April 6, 2007 - 10:36:22 GMT
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Black Swan Capital - www.blackswantrading.com
Breakout or fake out?
â€˘ The U.S. may file a complaint at the World Trade Organization as early as next week over what it calls China's piracy of copyrighted movies and books, according to four people briefed by the Bush administration. (Bloomberg)
â€˘ An investment agency that is expected to manage part of China's foreign exchange reserves will probably reduce its holdings of dollar assets only gradually, a government economist said Thursday. (The Standard)
â€˘ Key Reports Due (WSJ):
8:30a.m. March Nonfarm Payrolls. Expected: +142K. Previous: +97K.
8:30a.m. March Unemployment Rate. Expected: Unch. Previous: 4.5%.
9:40a.m. Mar ECRI Inflation Gauge. Previous: 118.7.
10:00a.m. Feb Wholesale Trade. Previous: +0.7%.
3:00p.m. Feb Consumer Credit. Expected: +$4.5B. Previous: +$6.4B.
â€śThe fact that general prices were more or less stable during the 1920s told most economists that there was no inflationary threat, and therefore the events of the Great Depression caught them completely unaware.â€ť
FX Trading â€“ Breakout or fake out?
Yesterday, everyone was watching the 13411 level in EURUSD; they are probably still. We got a breakout above there yesterdayâ€”which technically suggests to some a new high in EURUSD may be very close at hand. But thatâ€™s the worrying part of the tradeâ€”it seems everyone is thinking the same way.
Itâ€™s not always bad being ensconced within the consensus, as we know they are right in the middle and wrong at the ends. But for a natural skeptic, as we plead terminally guilty, when itâ€™s recognized you are so ensconced its uncomfortable. Itâ€™s like the adage, after 15-minutes at the poker table, and you havenâ€™t identified the patsy, itâ€™s probably you. Sadly, the fact is, we are always part of the consensus just by participating in the game. And that small part we play skews our objectivity, no matter how hard we try to remain â€śopenâ€ť to new information.
Today, maybe we get some new information in the form of U.S. non-farm payrolls that hints whether we are somewhere near the middle, or end of this euro move against the dollar? But then again, in this market, we increasingly endorse the view of Woody Dorsey who says the â€śfundamentalsâ€ť are nothing more than â€śtransient investment themes.â€ť Is it any wonder why most of us have all become such short-term price-led creatures in forex? Maybe stepping back, using wider stops and wider targets is the answerâ€¦but then again, maybe we skip one or two themes in the process, only to be captive to othersâ€¦hmmmâ€¦ Itâ€™s not an easy game we play. If you think itâ€™s easy, Iâ€™d like to invite you to a poker game.
The currency pack traded in a very tight range overnight. The economics seem to favor euro, no doubt. But it seems traders continue to be weary about the surprising staying power of the U.S. consumer. That weariness could easily evaporate if the job market deteriorates.
So thatâ€™s the game. Strap on your rally hats, or crash helmets, depending on your perspective. The checkered flag will be waved at 8:30 a.m. EST.
Take care and enjoy your weekend.
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