Friday September 24, 2004 - 19:26:55 GMT
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The dollar flexed its muscle today after initially tripping stops down to 1.2510. The Durable Goods came in -.5% after expectations of -.3%, yet ex-transportation came in +2.3% after expectations of +.8%, this led to a wild ride in the market. On the initial figure we saw the dollar take a beating down to 1.2510 lows and the euro ripped thru the 1.2350 option that had capped the market for so long. Once word got out regarding the number with ex-transportation, the dollar snapped back to 1.2580 and the euro slowly grinded lower after a high was put in at 1.2363. Talk of more option related selling in front 1.2375 and 1.2400 had the market buzzing as we awaited the Existing Home sales figures. The expectations was for a number 6.3 and came in at 6.54 for August, this was down from 6.72 in July. This sent the dollar on a steady climb to 1.2652 high just short of technical resistance at 1.2680. The euro meanwhile slowly grinded down and eventually took out stops that started at 1.2290 and ended at 1.2250, with a low in NY at 1.2238. There has been little rebound from the low and there should be good resistance now at 1.2280. The market is confused as a lot of traders buying euro over the last few days have been hurt. The old theory of buying even at the highs, especially after the 1.2350 was taken out has been stomped on. Traders are now very tepid and cautious when trying to go with the trend, clearly the trend looked like you should be buying euro and selling the dollar yet after 40-50 points, it snaps right back as most take profit and eventually reverse positions and along with that there thinking. Overall we are still in the wide range of 1.2100-1.2400 and until either side is broken we should be contained in this range. The DOW was up slightly and the S & P and the NASDAQ seem to be ready to finish this quarter with losses and this is what has many traders confused. The crude oil prices once again reached highs near 50 a barrel but some traders are saying the right price of oil should be in the $30-40 range and from $40 to $50 as skeptics taking it higher just to see what happens at $50. Obviously the threat of another hurricane hitting Florida has the market thinking what possible costs this will be to insurance companies as well. The reemergence of Ivan in the gulf has many worried as well with oil production and this is most likely the cause for oil be higher as well.
Technically Speaking: The euro has shown it can not sustain any rally now for quite some time and although it has mainly been option related we have seen some options be taken out and the euro can still not maintain its momentum. Along the same lines every time the dollar looks ready to return to bearish tones it fights back.
Gain an Edge: We look to sell all rallies in the euro to 1.2400 and place a stop at 1.2470 just above the high made in mid July of this year. Our take profit is for 1.2100 to eventually break and make a new low 1.1860.
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