The Dollar is on STEROIDS....
Dear Friends/Fellow Traders,
If you've been keeping watch of the currency markets this week, especially this morning, then I'm sure you could agree with me when I say: "Darn, the Dollar is on STEROIDS!". Yes it's true. On the back of the Dollar rally last week before the long weekend, we all thought (well, at least I did) that the Dollar was due for a short-term correction against the major currencies. The EUR/USD rallied back above 1.2600 yesterday and the GBP/USD rallied back above 1.8600. The USD/CHF also corrected down to mid 1.26's and the USD/JPY almost dipping under 1.19. Wow were we all in for a surprise this morning, the U. of Michigan Confidence survey cranked out a stronger than expected number at 92.3, reflecting the optimism in the US consumer. The Dollar consequently rallied against the majors, wiping out stops on short-term dollar bear positions and breaking key supports/resistances. The USD/JPY printed new highs at 119.90, but failed to test the 120.00 level (a break of this level will see the pair rally some more beyond this). The EUR/USD ran through and broke the 1.25 resistance level, which was heavily guarded by the bulls, and printed a low of 1.2485 before bouncing back up above 1.25. Having said that, I see this to be an excellent opportunity to make a profit immediate-term, let me explain why. The 10-month average volatility on the EUR/USD monthly charts is at its lowest level since February of 1980 (The Deutsche Mark was used in place of the Euro before 1999), and often, very low volatility is a precursor for a big market move. The EUR/JPY daily uptrend line has also been broken (taken from mid-May of 2006), which is an indication that the cross may be due for a reversal; on top of that, the Japanese Yen is extremely undervalued based on the fundamentals. We may see a large sell-off of Euros if a reversal does come into play, and will put a downside pressure on the EUR/USD. I will be selling the Euro against the Dollar immediate-term, looking for the pair to run into the low 1.23's before considering to buying back. To get an optimal entry into the market, I'll be selling half my position at market and the other half on a short-term rally. My stop will be placed at 1.2640 for both lots, 10 pips above the September 18, 2006 daily low. If this scenario plays out as expected, the profits will be staggering! Keeping close watch on these two pairs..
Stay tuned for more trading ideas!
P.S. As a side note, today is Friday the 13th! Be careful out there people! (I'm a little superstitious)
To successful trading,
Dickens
If you've been keeping watch of the currency markets this week, especially this morning, then I'm sure you could agree with me when I say: "Darn, the Dollar is on STEROIDS!". Yes it's true. On the back of the Dollar rally last week before the long weekend, we all thought (well, at least I did) that the Dollar was due for a short-term correction against the major currencies. The EUR/USD rallied back above 1.2600 yesterday and the GBP/USD rallied back above 1.8600. The USD/CHF also corrected down to mid 1.26's and the USD/JPY almost dipping under 1.19. Wow were we all in for a surprise this morning, the U. of Michigan Confidence survey cranked out a stronger than expected number at 92.3, reflecting the optimism in the US consumer. The Dollar consequently rallied against the majors, wiping out stops on short-term dollar bear positions and breaking key supports/resistances. The USD/JPY printed new highs at 119.90, but failed to test the 120.00 level (a break of this level will see the pair rally some more beyond this). The EUR/USD ran through and broke the 1.25 resistance level, which was heavily guarded by the bulls, and printed a low of 1.2485 before bouncing back up above 1.25. Having said that, I see this to be an excellent opportunity to make a profit immediate-term, let me explain why. The 10-month average volatility on the EUR/USD monthly charts is at its lowest level since February of 1980 (The Deutsche Mark was used in place of the Euro before 1999), and often, very low volatility is a precursor for a big market move. The EUR/JPY daily uptrend line has also been broken (taken from mid-May of 2006), which is an indication that the cross may be due for a reversal; on top of that, the Japanese Yen is extremely undervalued based on the fundamentals. We may see a large sell-off of Euros if a reversal does come into play, and will put a downside pressure on the EUR/USD. I will be selling the Euro against the Dollar immediate-term, looking for the pair to run into the low 1.23's before considering to buying back. To get an optimal entry into the market, I'll be selling half my position at market and the other half on a short-term rally. My stop will be placed at 1.2640 for both lots, 10 pips above the September 18, 2006 daily low. If this scenario plays out as expected, the profits will be staggering! Keeping close watch on these two pairs..
Stay tuned for more trading ideas!
P.S. As a side note, today is Friday the 13th! Be careful out there people! (I'm a little superstitious)
To successful trading,
Dickens
posted by ForexDragon at 8:24 PM
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